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The secret shame of the middle-class
- Thread starter johnsmith
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Kite
Member
People are just terrible to saving their money. I was in the Army, the epitome of the steady paycheck. We get payed twice a month and most people have already blown it all by the weekend, pay their bills late and have tons of late fees and penalties.. even thought they had the damn money, more than enough to pay it off on time. Personal finance needs to be mandatory in high school.
I tried YNAB a bit after hearing about it... here, probably? Seems like it might be good if you need serious help and have serious patience for getting your finances in order. Turns out all I really wanted was an app to make me pay attention to expenses and see where my money goes each month. I've been using Spendee, which is just super basic, letting you enter the expenses yourself and assign each one a category of your own. Turns out I spend more money eating out than on utilities, so that's something to keep an eye on.
God Dayumm
Banned
Some people have that emergency happen before they even got the chance to save
RoadHazard
Gold Member
1.8 on a savings account is very good in the current low interest climate. I haven't been able to find anything above 1% here in Sweden that doesn't require me to lock my money up for 6 months or more. And that's obviously not something I want to do with my emergency funds.
TheWarrior
Banned
Though middle class taxes have remained fairly steady, the cost of living has increased significantly in urban areas. Living in the suburbs and working in a major metropolitan area has become ridiculously expensive. Income tax may be low but property taxes, mass transit, and tolls have ballooned out of control. All to cover the costs of shady quasi government agencies.
Omegasquash
Member
Maybe I'm coming into the conversation late, this post being top of the page and all, but there are tons of reasons why a person hasn't saved for an emergency. It was paycheck-to-paycheck for me for awhile, despite having a full time job. Only when I started making more money was I able to save more, costs of living being better covered and all.
That aside, those with income and a sense for balancing a budget would and likely could benefit from taking a look at their expenses and coming up with ways to save, if they're able.
TangoAlphaLima
Member
I read this last week when it came out in The Atlantic. Definitely interesting piece, as I'm very fiscally sound myself, but see plenty of people around me that struggle with their finances for various reasons.
The author's personal story seemed a bit of a cop out in some respects. Such as his wife not being able to get back into her field of film production after taking many years off to raise their children. I understand how that happens, but I didn't understand why the author's wife didn't retrain herself for a new career, or even settle for an undesirable job to make ends meet. If the family is in bad financial shape, then take a job working retail or something. Just a little extra money coming in would have been helpful to them.
People overestimate the risk of stock markets IMO. Individual stocks would be a bad idea, but an index fund generally goes up over time w/ the market and it would be silly to keep anything excess of 10K out of it longterm IMO. I got a house recently, most of the down payment came from me offloading stocks that was starting to get top heavy, and index funds. I actually ended up selling at the minor dip during Jan-Feb, but the 5%? hit I took there is nothing compared to profit and divident I accrued over a few years.
teruterubozu
Member
Because people usually have more than one emergency during their lifetime.
Abstrusity
Member
51% make less than 30k/yr before taxes, so about 27k(quick math) after taxes and deductions from said taxes. Half of that is generally rent, with rents between 800 and 1500 being the norm. Best case scenario, 18400 after rent alone. Another 1200 per year for electricity, 1200 a year for gas for a car...You need internet! Try 80 bucks a month. And if your heating comes from gas instead of rolled into your electric bill, that's at least another 80/mo in some places, higher or lower in others. If you have a mortgage, then you're also paying an exorbitant amount per month for that, and then you have food costs...
Tentative numbers aside, it's VERY easy to realize that many people don't have thousands left over after mandatory spending, yet alone to save, and one flat tire at a bad time, one fender bender, one water pump dying, well...that just makes it worse, doesn't it?
It's expensive to be poor at that point. Many live beyond their means because there isn't much of a way to live below your means without suffering proper. Rent is too damn high, but realistically, it's less that in most places and more "wages are too low."
They ought to be 50% higher almost across the board just to deal with currency inflation (not price inflation a la c-cpi, because this is subject to volatile goods). The hitch is that they ought to be 50% higher TODAY. Now "by 2020," but today. So when someone comes up with a plan to raise wages to 10.10 by 2020, they're still going to be behind the curve. It'll do some good, but not as much as you'd want. That's why I favor a $15 minimum wage, by 2024. Then we can link it to inflation.
This higher minimum wage is going to put a lot of upward pressure on wages above that level. Who would work skilled labor for $15/hr if someone could man a cash register for the same? It's all about providing LEVERAGE to workers.
The generally low wage has contributed to the growth of economic dead zones, where unemployment is high, food availability is low, poverty is higher, and drug use and crime become ever more rampant in those particular areas.
My bank has 'investment funds' you can drop a monthly amount of money in. They promote it as an active form of saving money. I was thinking of using that service as a tier 2 method of saving, after I get emergency savings filled up to an amount I would consider comfortable.
Are these investment funds worthwhile? I have no idea how index funds work. Can I invest in those through the bank as well?
I wish I knew more about stock market economics and how they work practically. People in my family think of the stock market as a casino.
But that's just a lack of foresight because of an obsession with stock prices and dividends, not some evil plan to take over the world (that they already control anyway) and put everyone into slavery.
Abstrusity
Member
Well, yeah. But the general trend remains. Profit over sustainability is what made the recession in 2007 worse than it should've been if it were "just" a bubble popping.
Pagusas
Elden Member
Bad luck, debt, people living pay check to pay check, etc. etc.
Mr Nash
square pies = communism
Worse still is it's still a problem. Nothing was really solved, just lipstick slapped on a pig, and now a lot of can kicking as people try to make sure the poop doesn't hit the fan on their watch.
Usually these will be heavily managed funds with insane fees. Most of the time they underperform a broad market index while costing more in maintenance.
Some people treat the stock market like a casino. You can go all the way from treasury bonds to day trading junk stocks in terms of risk/reward.
There is a dedicated investing thread that is a great read for advice and questions http://m.neogaf.com/showthread.php?t=176332
Bluecondor
Member
From my experience, one of the hidden drivers of the lack of wealth in America is the cost of housing.
In my case, I live in Pittsburgh, which has very low housing costs in relation to many other American cities. I live in a 4 bedroom house that is located 15 minutes away from downtown Pittsburgh. I bought the house for $82,000 in 2001 and completely paid off my mortgage in 2012. As such, I have been able to save a lot of money for emergencies as I no longer have to pay any rent or mortgage (only about $4,500 a year in property taxes and insurance).
But - I have friends of mine who have recently bought $300,000+ homes in other parts of the city. Their current financial situation is much more like what is described in the article.
I can't even imagine what things are like for people who have to pay rent or pay off mortgages in DC, NYC, LA or Boston, where a $500,000+ mortgage and/or $2,000 a month in rent is part-of-life.
In my case, I live in Pittsburgh, which has very low housing costs in relation to many other American cities. I live in a 4 bedroom house that is located 15 minutes away from downtown Pittsburgh. I bought the house for $82,000 in 2001 and completely paid off my mortgage in 2012. As such, I have been able to save a lot of money for emergencies as I no longer have to pay any rent or mortgage (only about $4,500 a year in property taxes and insurance).
But - I have friends of mine who have recently bought $300,000+ homes in other parts of the city. Their current financial situation is much more like what is described in the article.
I can't even imagine what things are like for people who have to pay rent or pay off mortgages in DC, NYC, LA or Boston, where a $500,000+ mortgage and/or $2,000 a month in rent is part-of-life.
Reading that depresses me.
I am definitely in that group who lived beyond their means and am desperately trying to rein it in and start getting some savings up. Mentally, it is draining. Having someone depend on you and not able to do something nice for them because you dont have the money makes you feel completely worthless.
Something this article doesnt touch upon is the mental state some people are in when they are struggling. No one enjoys living paycheck to paycheck, and to say my mind has gone to some dark places because of it would be a vast understatement.
I am definitely in that group who lived beyond their means and am desperately trying to rein it in and start getting some savings up. Mentally, it is draining. Having someone depend on you and not able to do something nice for them because you dont have the money makes you feel completely worthless.
Something this article doesnt touch upon is the mental state some people are in when they are struggling. No one enjoys living paycheck to paycheck, and to say my mind has gone to some dark places because of it would be a vast understatement.
Looking back, I do wish I was a hell of a lot more frugal with my money. While we enjoyed spending some of my bonuses, or increasing the mortgage to pay for extending the house etc, there was tons I could have saved (20:20 hindsight of course)
I have an 18 year mortgage that I estimate could have been down to 10 years and maybe half the amount of the current one if we didn't replace our cars as often or go on so many holidays.
We will still be ok, but I'm starting to see how much more comfortable we could have been now, if we'd been a little more careful earlier
I have an 18 year mortgage that I estimate could have been down to 10 years and maybe half the amount of the current one if we didn't replace our cars as often or go on so many holidays.
We will still be ok, but I'm starting to see how much more comfortable we could have been now, if we'd been a little more careful earlier
If you're middle-class and you don't have $400 in savings, you seriously fucked up somewhere. That must include not having anything in a retirement account, since you can withdraw from those in an emergency.
And this isn't a bootstraps argument, since I'm assuming "middle-class" means earning somewhere around the median income for your location and family size.
Edit: Now that I've read the whole thing, this guy is so hilariously entitled.
"Well, I deserved the American Dream!"
"We were living full-time in East Hampton like the poor people!"
And this isn't a bootstraps argument, since I'm assuming "middle-class" means earning somewhere around the median income for your location and family size.
Edit: Now that I've read the whole thing, this guy is so hilariously entitled.
"Well, I deserved the American Dream!"
"We were living full-time in East Hampton like the poor people!"
It does talk about that. Part of it is in the last paragraph I quoted.
Ugh I remember this article, surprised we hadn't had a thread before this.
This has to be the perfect "woe is me" article, because the guy sunk himself. Piling on credit card debt, too proud to have his wife work, letting his parents destroy their retirement because he wasn't willing to tell his kids no about colleges and weddings... there are examples of how working hard isn't enough in our country, and to a point that's a bad thing... but this guy certainly isn't the example I'd use. Fiscal responsibility and security was within his reach, and he just pissed it away.
Should college be more affordable? Should we have a better and more progressive tax system? Hell yes. Does our health care system need more reform than Obamacare? Indeed. Minimum wage that should be tied to inflation rather than being allowed to stagnate for years? Certainly. Minimum income guarantees? I'm definitely intrigued.
But all those fixes wouldn't stop people like this from spending more than they have.
Since I'm moving soon I'm going to have to rebalance my cost estimates, but my wife and I are basically living frugally on one income as best we can so whatever the other one makes can be considered pure savings.
This has to be the perfect "woe is me" article, because the guy sunk himself. Piling on credit card debt, too proud to have his wife work, letting his parents destroy their retirement because he wasn't willing to tell his kids no about colleges and weddings... there are examples of how working hard isn't enough in our country, and to a point that's a bad thing... but this guy certainly isn't the example I'd use. Fiscal responsibility and security was within his reach, and he just pissed it away.
Should college be more affordable? Should we have a better and more progressive tax system? Hell yes. Does our health care system need more reform than Obamacare? Indeed. Minimum wage that should be tied to inflation rather than being allowed to stagnate for years? Certainly. Minimum income guarantees? I'm definitely intrigued.
But all those fixes wouldn't stop people like this from spending more than they have.
Yep my CC has those for yearly periods, although since I have multiple credit cards and accounts it's a bit more tedious but much more helpful to crunch the numbers myself with an iPhone app that visualizes things for me and allows me to export out spreadsheets.
Since I'm moving soon I'm going to have to rebalance my cost estimates, but my wife and I are basically living frugally on one income as best we can so whatever the other one makes can be considered pure savings.
entremet
Member
Interest and living off credit--which many people post home purchases, weddings, emergencies.
Funky Papa
FUNK-Y-PPA-4
"wow, people are so bad at budgeting"
You will find that while some poor people are indeed poor because of bad choices, most strapped folks pinch pennies like crazy to get themselves through the month.
Having a family and finding yourself earning minimum wage (or nothing at all) after losing your "normal" paying job out of the blue is a real motherfucker. So is losing it well into your 50's. Or having a crap divorce. Whatever reserves you have, they will evaporate. Fast. And the more you work/less money you have, the less opportunities you'll have to get yourself out of the rut.
"Get back to school" is no longer an option when you can't even efford it or you are working two jobs just to pay rent and feed yourself.
You will find that while some poor people are indeed poor because of bad choices, most strapped folks pinch pennies like crazy to get themselves through the month.
Having a family and finding yourself earning minimum wage (or nothing at all) after losing your "normal" paying job out of the blue is a real motherfucker. So is losing it well into your 50's. Or having a crap divorce. Whatever reserves you have, they will evaporate. Fast. And the more you work/less money you have, the less opportunities you'll have to get yourself out of the rut.
"Get back to school" is no longer an option when you can't even efford it or you are working two jobs just to pay rent and feed yourself.
ViewtifulJC
Banned
so what I got from this thread is:
-Dont go to college
-Dont have kids/get married
-Dont buy a home
-Dont treat your credit card like a get out of jail free card
got it
-Dont go to college
-Dont have kids/get married
-Dont buy a home
-Dont treat your credit card like a get out of jail free card
got it
AbsolutBro
Member
Actually, we do. It just doesn't often make the news. The Consumer Financial Protection Bureau, while it is still in its infancy, has some decent victories under its belt. Prior to the CFPB existing, the FTC (where I work) has done what it can to protect consumers for over 100 years. The issue for the FTC at least, is staffing. We're around 1,000 people trying to protect 300 million plus. Not to mention the legal leverage that large companies have.
We also depend, and I do mean DEPEND on tips from the public. Both the FTC and CFPB have sites set up to accept consumer complaints. Believe me, every complaint gets checked and catalogued. People should also utilize the Better Business Bureau, as both the CFPB and FTC work with them directly.
All I'm trying to say is, we're working on it.
Believe me, I'm in that "not sure I could scrounge up 400 bucks without borrowing" camp, as well as the "shittons of credit card debt", because bad shit happens. I would love for the government to have a better handle on banks, so that when they get caught breaking the law there is actual punishment, instead of slaps on the wrist that only encourage them to cheat some more.
Honestly he should of dropped the idea of Ivy League schools once his wife stopped working. I plan on helping my kids pay for school but that is insane to drain the parents nest egg for top tier schools. Yeah there is a chance they could propel themselves into the upper class by attending such schools but that was a huge risk he couldn't afford.
Seems like he was anticipating a huge break in his career that never came.
The guy in the article wanted to live a NYC elite lifestyle on an upper-middle class income.
Funky Papa
FUNK-Y-PPA-4
I'm not commenting on him in particular, but some of the posters in this thread talking in a more general way.
I may have missed it, thanks, going back to reread.
this is some kinda alien world shit to me as someone who has had a wildly unstable (and generally low) income for the past...forever. I guess when you're used to losing your employment randomly for no reason you learn how to live lean. I'm only comfortable when I'm sure that I can go at least a year off of savings alone, and I've had to do just that before.
Liu Kang Baking A Pie
Member
Wild how there can be a widespread problem like this and people still say shit about individual responsibility like "everyone's bad at saving" instead of looking to the bigger, more obvious problems.
Euphoria14
Member
Glad I was and continue to be a cheap ass and plan carefully.
Helped me save up and also keep myself from getting bad credit.
Helped me save up and also keep myself from getting bad credit.
Shake Appeal
Member
I know, and I appreciate that. I'm just deeply cynical because agencies like the FTC are understaffed or underfunded and because somewhere between one-third and two-thirds of the country disapprove of the government doing anything to regulate our glorious free enterprise! Even when free enterprise is parasitic or outright destructive to consumers.
It isn't systemic, It is an individual personal responsibility problem, that tens of millions of people suddenly developed all at the same time.
Euphoria14
Member
While it isn't the primary reason, I see all the time people complaining about not having enough money or things being too expensive all while having to make sure they have a new phone model and a plan with all the bells and whistles.
I know way too many with a cellphone plan that costs them over $100/month for just the one line.
Most Americans could probably do pretty well if their parents bought them houses.
Euphoria14
Member
This probably explains a lot of the bad savings traits for people. You think you're always going to be making more money or doing better year over year, and that mentality makes you slide on stuff—"oh well I can pay that later, no problem."
There can be economic inequality issues we need to address while also pointing out the blatant truth that if you aren't saving on a middle-class income absent some extreme circumstances, you're an idiot. Given that the latter is a personal choice while the former is a structural issue that requires the will of Congress, it's a lot easier to deal with your own flagrant spending.
I often worry about retirement and thinking I'm not doing enough. But then I hear things like these and think I must be so far ahead of the curve compared to the average person. Man it's a scary thing to think about. What's going to happen to these types of people later in life? Can't have the government prop them all up.
Yeah, even if life is unfair, it's still a good idea to control what you can control instead of running your life into a ditch and blaming the system afterward.
There's a happy medium between "bootstraps" and "nothing is my fault, everything is out of my control."
TangoAlphaLima
Member
To be fair, that's what our credit-based economy justifies. You can get all kinds of things you can't afford now, you just pay for it later.
Yep.
...and yet, we're talking about adults who presumably would bristle at the idea of someone coming along and telling them what to do with their lives, or getting involved in their personal affairs. I don't think you get to say you're a free-thinking individual and then blame Madison Avenue for making you spend money. "Man chooses, a slave obeys" all all that jazz. Taken to its objectivist libertarian extreme it's kind of ridiculous, but as a general principle of fiscal responsibility I can't abide the arguments the OP makes. Just because masses of people make the same bad choices as you doesn't mean they weren't bad choices.
David Incorporated Esq.
Member
Yes I find this is more apt when it comes to threads about high income earners complaining about not having enough money at the end of the month to save anything. You know. After thousands of dollars are spent on luxuries and upper class lifestyle choices.
I feel the same. I'm putting $300 in savings a month and maxing my 401k and still nervous about retirement. I think the housing market is what throws me off. I paid X for my house and hoping it goes back to that value or higher when it is time to sell.
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