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* Student loans being factored in. I'd guess that most people in that income range have some sort of degree. Loan payment can easily be more than housing cost.
* Daycare services. In our area for two children its over $2000 per month. That's actually will be our largest expense.. more so than housing.
If daycare is 2K per month, just forget about it. Why pay someone that much to raise your kids? I just don't get it.
I see the wealth disparity as a result of a deeper cause. With globalization, cheaper labor overseas made companies send more and more jobs away. First, manufacturing and then anything that can be done offshore and digitally and then put together the pieces. This led to the decline of many low to middle level jobs. It also led to stagnant wages since it's so much cheaper to do it offshore.
Meanwhile, insourcing also happened by exploiting undocumented immigrant labor. The wages Americans don't want are in fact very low, only wanted by those who are desperate.
Lower labor cost and expanding markets overseas sent profit to American companies. But because of the lack of jobs, most of that profit went to the managerial class and those with marketable skills in the right professions. Wealth disparity is inevitable in this case. The tax cuts certainly helped fatten the rich, but without them, the conditions are still here. Even a tax raise on the rich would still see the rich getting richer and the middle class gone because of labor arbitrage.
People give too much credit to socioeconomic policies and activism in order to explain ups and downs. It was WWII that pulled us out and put us on top. The war destroyed our economic competitors and seriously delayed their rise. Communism held back what would have been enormous labor competition. Globalization enriched our existing competitors, created new ones, and seriously speeded up their rise. These are the much broader, profound events. We are in fact lucky in that globalization would have become so way back had there been no WWII and or no massive labor force held back by communism. Arguably we would have not been nearly as much, and would have to adapt to a global economy. The destruction of Europe and communist dictators did a big favor to the American middle class. That chapter is over.
I can certainly understand why you are worried about your son. My take is that a young person of ordinary background today should know and do the following for their well being.
-Get marketable skills, including at least one foreign language proficiency. That language must be a marketable language widely used in the chosen trade.
-become educated about personal finance and its relationship to important life decisions such as college, career, relationship, marriage, and retirement.
- save for retirement as soon as one can. Be persistent and consistent.
- have a general "life plan" regarding milestones, interests, desired lifestyles. Tailor college and career to that life plan.
- network network network. Know more people.
- live below one's means. Avoid debt.
- travel a reasonable amount, outside the USA.
- read books on personal finance, success, and communication skills.
- make the most out of college. Use the library. Talk to professors. Ask them for industry connections. Do internships in the summer, winter, all the time if possible. Start in year two, not four. Do not spend too much time taking courses and studying subjects that are not very targeted at building career competency. Make notes of those things you wish you could study. One day you will come back to them, only with more money to study them better.
- practice contraception. Enjoy youth time. Do not get married before career gets on the right track. Do not have children before marriage. A good age range for marriage is about 28 to 32, when both are mature, established, know each other well, have shared plans, and have a decent financial base.
- do stuff as a couple before having kids. Things like travel, adventure, gap year, epic bike rides, eat pray love stuff. You need to have that when you are young.
I pretty much agree with all of this. I would want to emphasize the point about avoiding having kids out of wedlock. That and divorce are financially devastating and are definitely contributing to the income/wealth gaps.
You know if the overall consensus leans to the fact that the ' American Dream' is no longer a viable option for Americans it certainly has to be a matter of great considerable importance for how the country will develop down the line.
More and more it is evident every day every waking moment that we are a 'consumerist' culture. Hey nothing wrong with that. But the dark best of incessant advertising and the occupation of spending arguably takes the population into some dodgy economic situations which indeed works against that goal of achieving the 'Dream'.
One poster noted it has 'evolved'. If it has I'd be curious to what? In my opinion it looks like the gerbils are on the treadmill and they can't get off. If they stop they'll never get it started again. Sometimes we are a very unforgiving society.
If daycare is 2K per month, just forget about it. Why pay someone that much to raise your kids? I just don't get it.
There are multiple sides that each couple must consider in a decision like this.
On one hand, you are correct. Why pay someone to raise your children? It is a once-in-a-lifetime experience that I know many do regret once the kids are older.
On the other hand, there is a long term financial impact of a parent choosing to stay home. Retirement contribution, investments, contributions to college etc.
Then there is that notion of proper socialization and a planned structured learning experience that many day cares are more equipped to provide than a typical parent.
Then there are personal considerations. My parents are such an example. I was raised in a day care. My parents were among the newly immigrated and they needed to establish themselves for the a future in their new country; father was just getting started, mother was studying nursing. I turned out just fine. We as a family wouldn't be were we are today if my mother chose to skip nursing studies to be a stay at home mother.
In my case, we had the option of supporting ourselves on a single income. Not everyone has that option. My wife also works with children as her profession. So I have no doubt that not only will she be a good mother but also has the background to provide the learning experience. Cost wise, placing twins in daycare would pretty much consume almost her entire net pay. Finally, it truly is a once-in-a-lifetime experience. As such, it was our decision to have her stay home but I can't say its been easy financially.
You know if the overall consensus leans to the fact that the ' American Dream' is no longer a viable option for Americans it certainly has to be a matter of great considerable importance for how the country will develop down the line.
More and more it is evident every day every waking moment that we are a 'consumerist' culture. Hey nothing wrong with that. But the dark best of incessant advertising and the occupation of spending arguably takes the population into some dodgy economic situations which indeed works against that goal of achieving the 'Dream'.
One poster noted it has 'evolved'. If it has I'd be curious to what? In my opinion it looks like the gerbils are on the treadmill and they can't get off. If they stop they'll never get it started again. Sometimes we are a very unforgiving society.
It does mean many things down the road. We are sort of a consumerist culture, but consumption is going to decline. That's both good and bad news. The bad news is that our service economy actually depends on people spending money. Less spending will not improve the economy. In other words, we may not be able to have much of a robust consumer economy. Then what do we have? A mediocre depressed economy?
This also has implications in our foreign policy. America used to be the biggest trading partner of many other countries in asia, Europe, etc. Now we are no longer the biggest for many countries. Some trade with china more than they do with America. That's the shift of economic weight. In the long run, this will shift these nations' focus away from America. We are no longer the biggest market for some of our own companies. We are becoming much less important and relevant. We aren't spending as much. Who would pay attention to us? Our own companies are turning their backs.
And you haven't seen anything yet. Right now baby boomers are consuming. In 20 years they are gone. Some will leave money behind. But most of them do want a quality retirement life which means spending their money in their retirement years. What's left after baby boomers? Who are going to shop, eat out, travel, etc. when people can no longer do so?
What's going to happen to the healthcare industry?
Last edited by Costaexpress; 07-13-2014 at 10:29 PM..
Yet another ridiculous article. Reject consumerism and most can be free of the rat race known as the "American Dream". The standard American Dream, is a nightmare, IMO.
I've been doing what this link suggests for about 10 years. I was planning to write a similar "how to get rich slow" article. Now I don't have to. This has been my blueprint for financial security. It's something that ANYONE can do, but not everyone will.
^
Yes, that's how it's been for awhile though I'd think that just might be unsustainable right now for a big chunk of households. Previously we had one-earner households, then two-earners....and it still just doesn't seem to be enough. If it's true as costa express says about consumption declining that might be a good sign that logic is taking over economic thinking among American families. I mean it's self-defeating to continually spend and spend and get its 'fix'.
I guess so. We went from the American Dream of comfort to the new American Dream of excess. No wonder only 1 in 8 households can afford the new American Dream. I say we change the American Dream to add a boat, private grade school and high school and competitive sports for your children year round so we can price out a lot more families. Let's make the American Dream the 1%ers, that will really breed resentment.
LA is 13 million. New York is 20 million. That's 33 million, which is nearly 10% already. Add DC (greater metro counting Baltimore?), Chicago, San Fran, and boston and you will end up closer to 18%.
I was referring to city proper for most of those areas. If you include all surrounding areas yes you are right. I would hope people choosing to live on those areas and expecting the "American Dream" are there for higher income producing jobs. If not, it is a lifestyle choice.
I know plenty of people that just want to live in DC, NYC, Chicago, etc. because they like the idea of living in a big city.
Last edited by mizzourah2006; 07-14-2014 at 08:55 AM..
I guess so. We went from the American Dream of comfort to the new American Dream of excess. No wonder only 1 in 8 households can afford the new American Dream. I say we change the American Dream to add a boat, private grade school and high school and competitive sports for your children year round so we can price out a lot more families. Let's make the American Dream the 1%ers, that will really breed resentment.
I was referring to city proper for most of those areas. If you include all surrounding areas yes you are right. I would hope people choosing to live on those areas and expecting the "American Dream" are there for higher income producing jobs. If not, it is a lifestyle choice.
I know plenty of people that just want to live in DC, NYC, Chicago, etc. because they like the idea of living in a big city.
$250k here in Indy will buy a lot of home. $250k won't buy you much of anything in the major metros, but that's where the jobs are. I do take issues with a few of the numbers.
That $17k may seem like a lot for some people, but it really isn't. In the high cost, high wage, good job states, property taxes alone may run $17k. That $250k home here in Indy (where property taxes are about 1% of the home's value) has around $2500 in annual property tax. In NJ/CT, that same house may be valued at $600-$700k, and property taxes could literally be ten times that of Indiana. There is usually a state income tax in the better states, as well as more fees and miscellaneous taxes. Simply driving from Boston to Portland ME for recreation cost me about $12 in tolls each trip, which was more than my gas. I think the tax burden and housing expenses may be a bit low in the areas where people actually live and work for good jobs. A family could be making $130k in NNJ, but be paying an ungodly amount in tolls, parking fees, public transit passes, property taxes, mortgage payments, and still be dead broke. Meanwhile, that $130k will enable you to live like a little king in Indianapolis. Many of the expenses in the high cost coastal states just don't exist in flyover country, but neither do the good jobs for the most part.
A heat pump, new floors, or a new roof is probably going to run most people a minimum of $5k for each. While these are not frequent expenses, they can be very disruptive to most people.
I strongly think the overall housing costs are understated. Utilities can be electric/water, and natural gas/heating oil. Heating oil in the Northeast is terribly expensive. I think the utilities are also underestimated. I'd also include internet and some form of cell service (as a lot of folks have migrated from landlines) as a utility, and not entertainment.
I'd like to know what these people are eating to consume $16k of food annually. Awful.
The car expenses are just ridiculous. Also, how are two minor children consuming $4k out of pocket in education expenses, assuming they are attending public school?
You don't take that $5k vacation if you can't afford it. It's not required. Also, you don't have children if you can't afford them.
I'd really like to see numbers run on the BOS-WASH corridor and the Pacific coast. That's where the jobs are and where the people live.
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