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[Wvrs]

Finances are important. I was raised by an unskilled, single mother: working-class as you can get, we went hungry sometimes, went cold in the winter, and missed birthdays. I moved out when I turned 18, and I've been living independently since. I don't get any help from family, and have to work alongside studies.

I still manage to keep a couple of grand in a savings account at any one time. People seem to love living in excess. I shop at cheap supermarkets, forgo the £3 daily coffee for a flask I make in the morning alongside a packed lunch. I try to keep my going out to a minimum, and wait for sales before I splurge on luxury items.

I don't intend to have children until I'm at least 30, and financially secure. That's not to say I'm tight-fisted; growing up with money for me meant that, whilst I appreciate its necessity, I don't need it to feel content. I don't really care about designer clothes, or new models of phone, or better cars. I save, keep some as insurance, and spend the excess on travelling.

I'm on a student budget now, supplemented by a paltry minimum-wage income on the side. I imagine that when I graduate and go into a well-paid job, I'll be quite comfortable. Don't understand how you can earn $50,000 a year and still struggle; that's more than 3 times the income I was raised on -- live within your means.

 

[Nabbis]

With how little of financial literacy we teach in general education growing up, I'm honestly shocked the percentages aren't higher.

It's not like anyone teaches finances here either. It's a cultural problem, not an educational one.

 

[Salamando]

Honestly that sounds like a scam to me...

In the 70's, congress was worried that recent grads with great income potential (doctors) would immediately declare bankruptcy to skate on paying their debt. They made the debt inescapable for 5 years after graduation, even though it rarely happened. In the 90's, the banks asked congress to expand that 5 years...

Put it all together, we have a culture that tells students they need a degree, regardless of what they want to do or how much it'll increase their earnings, and a system that has no reason to not give students money.

Something that explains a lot of this crisis - There's a fortune spent on advertising telling us what we need. Consider the American Dream - a house in a nice neighborhood, a car for each adult, and a yearly family vacation to Disneyworld...

 

[RoadHazard]

Don't forget exorbitant medical bills, also. Right now the biggest three things most people are paying for is:

A) Student Debt
B) Mortgage
C) Medical Bills

Plop a car loan on top of that (and you need a car in the US, sadly) and baby. you got yourself indebted for life.

Out of these, only B is really an issue here in Sweden.

Student loans here, which you get from the state, are the best loans you'll ever get. Currently the interest rate is 0.6%. That's the one loan you pay off as slooowly as you're allowed (which generally means over 25 years), and instead invest your money. Also, higher education is free, so the loans are just for living expenses.

Healthcare is free-ish. You do pay a small fee for ever doctor's visit, but nobody's going to go millions into debt because they get sick. Income loss can be a real issue of course, as it's only partially covered by social security, but yeah.

You don't need a car if you live in any larger town or city, as we have good public transportation and our cities are otherwise generally build for people (meaning you can walk or bike anywhere). I live in Gothenburg, Sweden's 2nd city, and have absolutely no plans on getting a car. That would be lunacy IMO.

Of course, because of all of this our taxes are much higher instead. But that's what we're used to, and we live accordingly.

 

[SlickShoes]

I keep spending my emergency money on holidays, then starting again saving when I get back, then once I save up a decent amount I want to go on holiday again....

 

[entremet]

These are middle class?

Yikes?

How many own homes? This home buying obsession is really hurting us. This sounds like house poor people.

 

[kinoki]

I don't consider myself above the middle class but since I've had three emergency $500 expenses in the last month and seeing as I would still be able to handle a couple more: I should consider myself lucky.

 

[ahoyhoy]

Is it typical that in America most people have credit cards and non-mortgage/student loan debt?

Most of my peers in the UK don't even own a credit card, or paid it off after university
*

*granted, our cost of going to university is tiny compared to yours.

Credit cards are common. They give them away like candy here (I get at least one in the mail each week).

A lot of people just use them for their rewards (like me) and pay the balance off each month. A lot more people barely meet the minimum payments and try desperately to stave off baloooning interest payments.

 

[Shake Appeal]

Is it typical that in America most people have credit cards and non-mortgage/student loan debt?

Most of my peers in the UK don't even own a credit card, or paid it off after university
*

*granted, our cost of going to university is tiny compared to yours.

Yes and yes. Most Americans live under thousands of dollars of personal and student debt.

It's actually bad to not have a credit card here because 1. they use your "credit score" to gate access to capital (and further exacerbate inequalities) and 2. credit cards offer lots of great deals that save you money if you use them responsibly.

One of the challenges with moving here from Europe was convincing my bank to give me, first of all, a secured credit card. It was a Catch-22 situation where I had no credit history so they wouldn't give me a card to start building a credit history. My wife and I had to sit down with our branch manager and give them about five forms of ID, including my passport, as well as looking through my accounts and pay packet. And it still took several weeks with the manager in our corner to get approved.

Edit: Of course, once I paid the card off in full for about six months, plenty of credit card offers started magically flooding my mailbox. Now I have two credit cards!

 

[Bit-Bit]

Us poor unfortunate fools.

 

[old manatee]

The dissolution of the middle class is actually the secret shame of the upper class.

 

[Fei]

Excluding home equity seems like a lousy way to do it. Many middle to low income families' only real asset is their house, so this result isn't nearly as surprising.

Granted, a house being your only real asset is of course a problem.

 

[Ensoul]

This was my life about 3 years ago. It was brutal. I was on such a tight budget that even paying 30 bucks for an inspection sticker for my car would put me behind the 8 ball. It took me almost six months to save 700 bucks for Christmas. Then again my wife was only working part time while she was going to school to become a nurse.

At this point I have saved up money but it took a few years. It's really not much money (15K) but it's better than nothing.

 

[M3d10n]

Wage stagnation is partly to blame for this. Not to mention capitalism's unwavering dependence on rabid consumerism.

This. I'm sure we'll have posters blaming it all on individuals for living beyond their means and that they could solve their problems by accepting they are paupers and adjusting their (and their families') life arrangements accordingly.

That isn't incorrect, but if 47% of Americans suddenly voluntarily switch into the living conditions of a 18th century factory worker in order to save some money for their children before they die, the economy (which became dependent on vast amounts of people spending to their very last penny on goods and services) will simply collapse.

Of course, people suddenly making life altering choices that goes contrary to their surrounding peers out of their own volition en masse isn't a realistic solution for anything because it simply doesn't happen in reality.

 

[outunderthestars]

With how little of financial literacy we teach in general education growing up, I'm honestly shocked the percentages aren't higher.

This right here. I have managed to put together a healthy nest egg (low -mid six figures) before turning 40 while averaging pay in the mid 30's. This isn't because I am somehow smarter than anyone else, or have had any huge lunky breaks. It was that I grew up in McDowell County WV, one of the poorest countries in the US, and was taught from a young age that saving combined with a frugal lifestyle will generate long term financial stability.

It still blows my mind that basic home ecomics is no longer taught in most schools.

 

[Vincent Grayson]

These are middle class?

Yikes?

How many own homes? This home buying obsession is really hurting us. This sounds like house poor people.

Thing is, renting sucks in a lot of ways too. For one, every time a lease renewal comes up, you could end up having to move, which is stressful and expensive.

At least in a home, if you pay your mortgage, you've got it for life.

 

[Pagusas]

And I thought I was doing bad lately with only keeping 10k in the emergency fund. I couldn't imagine not having that safety net, I'd be a panicking mess every night before sleep. As it is my wife and I both agree we need to get our liquid savings account up to 50k before we feel easy.

 

[Shake Appeal]

Thing is, renting sucks in a lot of ways too. For one, every time a lease renewal comes up, you could end up having to move, which is stressful and expensive.

Our solution to this has been for my wife to befriend and bake bread for the people in the building office.

Our rent has gone up by an average of $10 the last two years!

 

[Kintaro]

That's a troubling piece. Not surprising though. I racked up CC debt in college but consolidated quickly and paid them off. Luckily, I had no student loans. My father used to teach me to pay myself first after getting paid, so I did after I picked up jobs after school. I have a healthy savings account and healthy checking. That said, I also turned into a minimalist of sorts and even with my savings, shit happens (liver transplant) that nothing preps you for.

My advice is to consolidate your debts and loans to get things into manageable payments and get that shit paid. I don't have experience with student loans though so I have no idea if those can be worked into consolidation programs. Good luck to you guys with them.

 

[outunderthestars]

Our solution to this has been for my wife to befriend and bake bread for the people in the building office.

Our rent has gone up by an average of $10 the last two years!

$10 is an absurdly low rent increase. I was renting in Charlotte for two years and each year the rent increased by 20% and 25% respectively.

 

[klonere]

The double whammy of student and mortgage debt in America seems totally insane.

Y'all better keep borrowing and staying in massive debt to spend tons of money on consumer goods though cos if you don't the rest of the world will suffer.

 

[Hari Seldon]

I think the OP left out some of the critical information from this article:

1) The author's chosen career is a freelance writer leaving in New York with no predictable income;

2) Purchased a home in the Hamptons;

3) Had his wife quit her job, giving up a steady income source;

4) Paid his children's college tuition;

5) Surrendered his 401(k) with penalties to pay for a wedding!


Income stagnation is a serious issue, but it shouldn't be co-mingled with the author's sheer stupidity. No government entity or school is going to care as much about your personal finances as you. 'Capitalism' isn't forcing anyone to make choices like these; your income should determine your lifestyle choices, not some amorphous American Dream.

Yeah I don't have much sympathy for him at all if you are going to make those kind of financial blunders.

 

[Shake Appeal]

$10 is an absurdly low rent increase. I was renting in Charlotte for two years and each year the rent increased by 20% and 25% respectively.

Yeah, I know, and this is inside the beltline of Raleigh.

 

[SummitAve]

I have to thank the How to Save for Retirment thread for getting all my finances in order. I'd be lost at sea without it right now.

 

[outunderthestars]

The double whammy of student and mortgage debt in America seems totally insane.

Y'all better keep borrowing and staying in massive debt to spend tons of money on consumer goods though cos if you don't the rest of the world will suffer.

At the same time the average cell phone bill for a single person is close to $100 ($111 for iPhone owners), average cable bill is $99, internet is averaging close to $50. Now, factor car payment which averages $480, with insurance avering $70 a month.

Now, before we get to housing, food, utilities, etc we have people spending $10,000 a year on these items. With the average person in the US making roughly $27,000 a year, you can see how these items, while each not being a huge deal, collectively stop people from ever getting ahead of their bills and building up savings.

Now of course these numbers are national averages and are subject to local market conditions, but to me it illustrates how easy it is to find yourself in a bad position.

 

[Hari Seldon]

Easy access to credit is why our economy can boom like no other. Want to start a business? Easy to raise the funds in the US for that. The major downside is that if you have no discipline or self control you can get yourself into major trouble. Also we have an extreme culture of entitlement. If you don't make much money, why are you financing weddings from your 401k? Recognize what your income is and realize that you are not some temporarily set-back millionaire and live within your means. The boomer generation that had huge incomes relative to the rest of the world after WWII didn't get married in $50k+ venues.

I feel like young people these days are much better being frugal than the baby boomers or GenX.

 

[Snkfanatic]

I'm struggling to save up $1000 for emergencies, but even now I don't know how I'd covera $400 emergency. More debt on my credit card, maybe?

That's what I had to do recently when something as simple as a pothole hit cost me a wheel, tire, and alignment.

Had to put it on the card I just worked my butt off paying off. Oh well.

I think I could probably pull together $40,000 before having to turn to credit or my wife's parents. We're saving for a house, though.

Oh jeez...lol 40k in my account would be incredible. I have never seen more than 2k in my account at once.

 

[outunderthestars]

Also, in regards to the author, I found this sentence rather telling.

I like to think I appear reasonably prosperous.

This is another huge problem in our society. I wonder how many decisions the author made because they felt like they were supposed to have _______ now that they have a degree and are supposed to be financially successful.

 

[Kintaro]

Also, in regards to the author, I found this sentence rather telling.

This is another huge problem in our society. I wonder how many decisions the author made because they felt like they were supposed to have _______ now that they have a degree and are supposed to be financially successful.

Keeping up appearances / Keeping up with the Jones' is still a thing I suppose. A terrible thing but a thing. =x

 

[FoxSpirit]

I'm glad that money has not been any question for me besides luxury spending.

But seriously, the whole financial system needs an overhaul. The roots in farming and production are completely lost and you can have people starve in the streets while throwing away tons of food. You can have a ton of empty houses like in Spain but noone has the money to life inside. The basic system of produce food-produce housing-produce goods is completely detached from the financial representation of it.

Just wait for the robots, we can produce even more goods, more food but still have less people being able to afford both.

 

[Skellig Gra]

These are middle class?

Yikes?

How many own homes? This home buying obsession is really hurting us. This sounds like house poor people.

My thoughts exactly. Living paycheck to paycheck is not how I define middle class.

My wife and I are in a great place financially. A fully funded emergency fund. However we don't own a home or drive fancy cars and really have no interest unless one of us gets a huge promotion at work. My wife is currently on maternity leave and we've been able to get by on just my salary by dropping a lot of luxuries. If we had a mortgage/expensive car payments it would be brutal.

 

[outunderthestars]

My thoughts exactly. Living paycheck to paycheck is not how I define middle class.

I remember a few years ago reading an article that showed that pretty much everyone thinks of themselves as middle class.

 

[klonere]

At the same time the average cell phone bill for a single person is close to $100 ($111 for iPhone owners), average cable bill is $99, internet is averaging close to $50. Now, factor car payment which averages $480, with insurance avering $70 a month.

Now, before we get to housing, food, utilities, etc we have people spending $10,000 a year on these items. With the average person in the US making roughly $27,000 a year, you can see how these items, while each not being a huge deal, collectively stop people from ever getting ahead of their bills and building up savings.

Now of course these numbers are national averages and are subject to local market conditions, but to me it illustrates how easy it is to find yourself in a bad position.

Some of those figures seem hard to believe. I spend $28 on my phone a month (10GB plan), don't have cable about that $50 for internet (split three ways). The big thing is I don't have a car and don't need one thankfully - but I realize having a family or living in North America in general demands having one. Hell I have no student debt either and can afford private health insurance while having plenty of discretionary income - while having a very modest wage.

Like we shoulda known shit was fucked after the last financial crisis was caused by unsustainable levels of personal debt, a system that pushed everyone to be loaded up with as much credit as possible and the voracious need for constant spending on frivolous goods from the vast majority of consumers.

But I guess we'll sleepwalk into the next economic disaster and just take it on the chin because the average person is totally disassociated from the processes that lead to these situations.

Spoiler

eat the rich

 

[Baron Doggystyle von Woof]

5K emergency fund. You never know.

 

[Rbk_3]

I have 10k in my account and my wife has 55k so we are luckily not part of this now. We just bought our first house and once we plop down the down payment that will change.

 

[outunderthestars]

Some of those figures seem hard to believe. I spend $28 on my phone a month (10GB plan), don't have cable about that $50 for internet (split three ways). The big thing is I don't have a car and don't need one thankfully - but I realize having a family or living in North America in general demands having one. Hell I have no student debt either and can afford private health insurance while having plenty of discretionary income - while having a very modest wage.

Like we shoulda known shit was fucked after the last financial crisis was caused by unsustainable levels of personal debt, a system that pushed everyone to be loaded up with as much credit as possible and the voracious need for constant spending on frivolous goods from the vast majority of consumers.

But I guess we'll sleepwalk into the next economic disaster and just take it on the chin because the average person is totally disassociated from the processes that lead to these situations.

Spoiler

eat the rich

You would be amazed how much non-savvy consumer gets screwed. Last winter I found out that my mom was getting billed for AOL dialup service even though she had cable internet through Comcast. I started going over her plans with her and she was paying Attention $124 a month for an iPhone and a "free tablet", and over $180 to Comcast for TV, internet, and digital phone even though she barely uses any of those services.

 

[Skellig Gra]

5K emergency fund. You never know.

That's better than nothing but you need way more than that. Especially as you get older.

 

[teiresias]

I feel like I do a decent job with my finances even though I really could stand to do a more formal budget. I max out two retirement accounts and have automatic cash savings every month for emergencies. My credit card debt is a below the $5,700 in the quoted part of the article, but is currently higher than I generally like, but that's mainly because I'm in "just bought a house now I need furniture" mode - and don't want to pull cash from my emergency funds to pay for those so despite the interest on the CC I'd rather use it to amortize those costs out a bit. I'm lucky though in that I'll have it paid off in three months or so now that the furniture buying has slowed.

Having no car payment at the moment helps as well.

Still, I need to start making use of that YNAB I've had sitting in my Steam Library for a while.

 

[Morts]

It's amazing how this thread makes me feel rich but the Retirement Planning thread makes me feel hopelessly impoverished.

I've saved a pretty decent amount but if I decided to move on from my starter house almost all of it would be gone in an instant for a down payment.

 

[Shake Appeal]

Oh jeez...lol 40k in my account would be incredible. I have never seen more than 2k in my account at once.

I totted it all up (it's spread across a few places) and we actually have about $48K on hand. About half of it is from wedding gifts or my wife's inheritance from her grandmother, though. And a lot of it will end up in a house in the next 12-24 months.

I should also note that we share one hatchback car (paid in full) and rent a small apartment and pay everything off every month. And we live pretty frugally, have no debts at all, and both pay into the state retirement plan. It's easy to save when you don't care to buy most things and don't have any debts or kids. Most people aren't in that situation, so I wouldn't be quick to judge anyone whose finances are more precarious.

 

[Arthr2ShdsJcksn]

I guess I'd be middle class now, but I've eschewed the whole mortgage thing (been there, done that three times prior to a bankruptcy during the financial crisis) after going back to school because of student loans and medical bills.

I have a decent job, and am making awesome strides to paying off debt now, but it really sucks that an appendectomy has put me a year behind my plan of getting back on my feet financially.

 

[Davey Cakes]

I consider myself lower-middle class at best. Maybe flat out lower class.

I have a small cushion in savings for emergency (>$5000 which is only a lot to someone like me). I'm pretty good at saving. I don't really make much even on salary. I can afford to live in an apartment with two roommates, but only after committing to a desire to simplify my life.

Usually I have no credit card debt, as I pay it off each month in full. Right now I'm taking on maybe a thousand dollars or so in credit debt while I build up my savings again, though. I'd rather have the short-term debt than give up the cash. Sometimes you just have to strike that balance.

So, I'm not well off but I'm not living paycheck to paycheck either. I guess I'm "lucky" in that sense. But it's not like I have any real personal assets worth much. Most of my major expenses are things like food, gas and car maintenance, student loan payments, and "social spending" so that I can continue to have a life.

To create a feeling of "comfort" with finances, you really have to make a lot of sacrifices. Unfortunately, some people live like they're invincible for too long, live beyond their means, and don't build up an emergency fund.

Of course, even someone in control of their lives and spending may not have much to show for it in terms of extra money. Life can throw a lot at you, sometimes.

 

[entremet]

That's better than nothing but you need way more than that. Especially as you get older.

There's a difference between investments and savings. For emergency liquid savings, that's pretty good.

3 to 6 months of living expenses in liquid reserves is a good rule of thumb.

The rest should be in investments, otherwise inflation will kick your ass.

 

[ezrarh]

I like it that you guys are talking about systemic issues and not just the dumb decisions the author makes.

While I myself am in a great position (student loans done, got a house, mostly no debt besides mortgage) I realize one bad medical incident could screw me so even I don't feel fully comfortable even though I do have some savings. I also think it's very difficult to teach "financial responsibility" to 300 million people and this is not a "character" issue that came out of nowhere. It's not like the rest of the world are much better at it than Americans - we are just put in the situation where we have easy access to credit and are freely given 100K for student loans at 18. A large part of it is because we are in a growth minded economy. Spend more now and make more later - but that doesn't always happen.

I think the only way out of it is start redesigning these systems as if Americans were poor (and we are). Stop emphasizing single family home ownership - upzone every single housing plot in cities and suburbs especially to allow for increased density. That doesn't mean massive apartment complexes - we could go from SFHs to 4 unit buildings or create granny apartents in our garages. Change land use policies so we're not utterly dependent on cars - imagine how much money we all could have if we didn't need to spend a good portion of it on vehicles? Improve bus systems. Some cultural stuff is already changing - it's becoming more acceptable to live with your parents, and of course roommates.

 

[Pagusas]

There's a difference between investments and savings. For emergency liquid savings, that's pretty good.

3 to 6 months of living expenses in liquid reserves is a good rule of thumb.

The rest should be in investments, otherwise inflation will kick your ass.

Yep, but even then, for an average salaried adult you should do what you can to get 30k into savings (liquid) to support yourself should you lose your job or face a series of unfortunate events (medical cost, funeral cost, job search cost, car blows up, insurance claim issues). After that point, for an average saleries adult (we'll say 60k/year) you should be investing it or find ways to insure that money actually grows on its own and doesnt just sit in a 0.0000008% savings account doing nothing for eternity while the rest of the world passes it by.

My wife and I had about 25k saved up, but over the new year we got hit with a 10k emergency vet bill because of our dog, than 2 weeks later one of our water heaters ruptured (that was another 3k) than our dog had a relaps (that was another 1k) than medical bills suddenly hit (that was a big chunk out of the HSA) and now suddenly our 3 year old car has developed an electrical issue that cant be fixed and we are fighting with the dealership on how to handle its payoff as they are deaming it unsafe to drive. All this has happened in the last 4 months. Suddenly that 25k savings feel back down to 10k, thats how quickly disaster can strike. We are weathering it, but its depressing seeing it fall. We of course have our 401k's and would never touch them, but we wanted to hit that private investment point, and now are 20k off again.

 

[Skellig Gra]

There's a difference between investments and savings. For emergency liquid savings, that's pretty good.

3 to 6 months of living expenses in liquid reserves is a good rule of thumb.

The rest should be in investments, otherwise inflation will kick your ass.

I hear ya. I define my "emergency fund" as I lose my job/can't work for whatever reason and I need to live off that money for an extended period of time. Now that I have a son I've pumped some more in to it.

 

[David Incorporated Esq.]

I really owe my parents a lot for paying for college almost entirely, leaving me with only $2,500 in debt. I paid it almost immediately and it was never a concern again.

My life would have been completely different had I come out of school saddled with the full cost of it on debt. Worlds apart.

 

[Lombax]

My wife and I have been going through a tough financial situation for about a year and a half now.
She lost her job last year, while in grad school and just recently got a new job as a Nurse Practitioner.
We have spent the majority of the past year and a half living off my salary and whatever she can contribute during this time.
While things are starting to look up, my wife still needs to build a patient base so we are not out of the woods yet.

Take this for what its worth, but a while back we set some rules in place for us that have made things a bit easier during this time so this may help others out there:

1. When buying a house we made sure that we could pay the mortgage on one salary.
2. We made sure to have $10,000 in an emergency fund (we had to dip into that over the past 18mo but very glad we had it) prior to buying a house.
3. We have done everything in our power to maintain good credit scores, and do all our banking with a local credit union that charges $0.00 in fees.
4. Learned how to do a lot of stuff around the house ourselves when things break!
5. As much as we would love to live in a major city, we moved to a small rural town with a good public school system, and affordable houses.

We were also forced into a position where we inadvertently started teaching our daughter (she is 5) about budgeting. As a dad it bums me out when I have to tell her "We can't do that right now, because we can't afford it."
More often that not she totally understands and it really makes her appreciate the little things when we are able to do them.

Sorry for the ramble, I just wanted to offer the above suggestions, because I have a lot of friends who live WAY past their means. I recently got a call from a friend who found out they were going to be laid off, and were almost in total panic mode because it turns out they are living off of various lines of credit just to maintain a lifestyle!

 

[ezrarh]

We were also forced into a position where we inadvertently started teaching our daughter (she is 5) about budgeting. As a dad it bums me out when I have to tell her"We can't do that right now, because we can't afford it."
More often that not she totally understands and it really makes her appreciate the little things when we are able to do them.

I think it's definitely helpful to start on that early. My parents certainly discussed that with me and made finances clear since we didn't have a lot of money either. My boss did recommend a slightly better variation of that line though that she uses with her kids. Instead of saying you can't afford it, say "It's not in our budget for the month" since you can afford it but there's other things to spend money on. Just my two cents there but I do agree, it's important to live within your means.

 

[David Incorporated Esq.]

4. Learned how to do a lot of stuff around the house ourselves when things break!

Protip right here! Being able to maintain your own house and vehicles can save you a lot of money, and personally taking care of things is very rewarding.

And here's my advice for single guys: properly taking care of maintenance at a girl's house will drop them panties.