The folks who believe the world would be a better place with fewer people in it are succeeding with their agenda. Hopefully, more people will push for better healthcare and UBI before we reach a tipping point - when there aren’t enough voters left to force changes in policy.
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In the first two cases, a lot of people are buying those items on high-interest consumer credit that allows for minimum monthly payments (as the debt’s balance grows and grows, of course).
Cable TV or Internet service are seen less as luxuries than as utilities for the information age, and spread across a multi-person household can be accommodated (at least at basic rates) into a paycheque-to-paycheque budget.
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You hit the nail on the head. We are really discussing internal vs. external economic forces. Personally, I don’t vilify ALL lower and middle class people, just as I don’t think ALL rich people are patently corrupt. It’s a very tough call to say there is something genetically or psychologically or behaviorally inherent in SES.
However…all up and down the spectrum of SES, I know people who are savers and people who are spenders. I know people who think about others and people who are utterly selfish, self-absorbed bastardos. People who think about the future vs. people who really don’t give it second thought. People who are attracted to and compelled to shiny and new and people who pay little regard to flash and are inclined to utility. The lists go on…
Similarly, there are countries that try to smooth out SES differences and countries like the USA who, on the balance, continually find ways to accentuate and enhance differences in SES.
The point is, there are both internal and external forces happening at the same time, in varying degrees in different people, countries and time periods.
Right now, the dominant economic force in the USA is corporations, not individuals. I think we should definitely talk more about this. We should also talk more about how people respond to these forces as individuals.
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I would think the 78% figure is a bit high, but not unreasonably so.
To your other question: it does not quite work that way that the poor would simply lead a frugal life. One main aspect that you forgot is the cost of debt, which is very high. The less money one has, the more likely one is to be indebted, of course. But part of the problem is that costs which are regular but difficult to predict like a major car repair or a washing machine which needs replacement are likely to take the poor off-guard and require borrowing.
An unfair aspect is that it is much easier to get a better deal on plenty of things when one is relatively well-off: when one has some savings, one can planify purchases to take seasonal or quantity discounts into account, for example. One can also decide to invest in things like insulation for the house, which tend to pay up relatively quickly.
Last but not least, the poorer segment of the population tends to be less educated than the rest and may be more susceptible to the pressure of marketing or less able to recognise and defend themselves against unfair practices. As an example, I bought a new car some time ago. I was offered a credit or a leasing and could understand how much more these options would have cost because I understand legalese and am pretty good at maths. I assume some other people would have chosen the low monthly payment or the option would not exist.
Please note that you will find people able to understand how much a lease will cost in all segments of the population. I just said that there are less of them in the less educated segments of the population, which is enough to skew the numbers in one direction.
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In my view this is less about individuals as it is the system in which they live. If you allow a less than living minimum wage by law then employers will attempt to hire workers at that minimum wage. That’s not a reflection of the worth of the employee or the employer but simply a matter of course.
If you tax lower incomes at nearly the same rate as the highest earners, your lower incomes will suffer under that system and the higher income brackets will not. If you compound the problem by not taxing certain investments then the investment class will benefit at the cost of fewer services being paid for by our taxes and greater burdens being laid upon those with the least ability to shoulder those burdens.
While individual outcomes may vary due to the differences between those individuals, the gross and general outcome will remain consistent. So you are correct in saying there are both internal and external forces at play, however we must understand that it is the external forces which are the greatest driving forces at work here. Outliers like the low income family that squeezes every bit of value from every dollar earned make for great stories but they do not represent a significant enough percentage to effect the greater overall picture of the economic state of our nation.
We should be very wary of any thoughts of strategies for low and middle income earners which promise to provide a path to economic security since none of them will be effective for many people yet they will be proffered as a solution. This lays not only the blame for these problems on the individual but it also provides a distraction from the real systemic problems which need to be addressed for the benefit of us all. In other words, these suggestions of what we should be doing to prepare for a difficult retirement age completely miss the mark and are little more than victim blaming.
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I agree with everything you said, and I regret if the tone of my post came off as blaming the poor for being poor. There are a LOT of factors stacked against people at the lower end of the income spectrum, and being poor is expensive for the reasons you described. My main point was that many (not all) of the people at the 77th income percentile who say they literally have nothing to put away towards retirement could perhaps find that, if they prioritized it above certain types of discretional spending, they could find that it is often possible to save something. But I’ve always been a notorious cheapskate, never having had cable TV in my life, for example, so I get that it’s easier for some people to forgo certain comforts than it is for others.
This is a major reason most people don’t have savings… It’s not great for Gen X, since about the time we came into the job market, the shift away from a general pension system was already underway, millennials are also going to have to deal with heavy student debt for college. It’s depressing.
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But it’s not just about being financially sensible. There are other factors at play, especially for millennials, that put them at a disadvantage. The cost of a college education is rising (and has been for the past 2 decades) at the same time that the private sector has stepped in to administer the majority of student loans, while programs that have typically helped lower income students pay for college has been taking hits from the US government/state government paying out less for merit scholarships and various private endowments taking hits from volatility in the stock market. One can be sensible, and still be unable to sock money away for savings.
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When my daughter was 3 or 4, we opened a kids savings account at our credit union. It was some time after the Great Recession crash, so she was getting like 0.1% on her couple hundred dollars that we gathered for her. But trying to show her how she is “making money” on the money she already has was laughable. “Look honey! You got three cents in the last quarter!” I mean, really? I got so pissed at financial people that I called out the CEO of the CU, who called me on the phone one early Friday evening after I had a couple of beers. Boy, did she hear my rant on the ‘shameful’ interest that was being paid, not just by that CU on kids’ accounts, but in general (I used that word a lot, shameful).
I wasn’t too hard on her, but in the next couple of months, I closed that account (which was kinda sad since it was the same CU that was affiliated with the light bulb, washing machine and jet engine-making industrial conglomerate that my dad worked for for much of his life (but loyalty is kinda out the window these days, again, sadly)). We took her little savings money and opened a brokerage account and started investing in the low-cost house S&P 500 index fund. Now there’s a whole lot more to talk to her about regarding money.
This, yes. I’ve read and listened to a lot of financial advice, and one piece that makes sense to me is that you can shepherd your kids along, but you shouldn’t be there for them for their entire life. I think it was Suze Orman that said something about if you have to choose between funding your retirement or funding your kids’ college education, your retirement should take priority. Your kids will have a whole lot longer than you to pay back loans (or whatever) than you will.
Also to that point, IIRC, Warren Buffet said he will only fund his kids’ education through undergrad, and after that, they are on their own. And, they’re not getting any of his big bucks as inheritance (not like they’ll need that much money; just being the Oracle’s kid is an asset they lucked into).
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This is something I’ve been thinking about for a long time. I think the fact in the early labor movement there were friendship societies (mutual aid) could be a way of handling that. A single poor person has next to nothing but a hundred or a thousand? Well money adds up and it’s really then a question of what kinds of financial vehicles you would use and how the system would be handled from a contractual basis. That doesn’t mean it’s a magic bullet but it’s something I think if more folks would realize that labor unions originally were about mutual aid and less about “sticking it to the man” then more folks would form unions of this kind with mutual aid as a contractual benefit.
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EXACTLY. We have told our 3…choose the cheapest path for your undergrad. It is not a terminal degree, so more than likely any accredited institution will be the same weight…essentially.
You are better off going to a state college for a BA/BS then get a post-grad via a bigger university.
And absolutely that is what parents don’t think about, that if you take on their educational debt AND you have your own AND your home AND your retirement; that unless you are Buffet you cannot do it all.
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Exactly. I never intended my post to be a blueprint to follow. It’s only about how one person went from zero retirement saving to a decent amount, by making good decisions. Sometimes, you know, good decisions DO bear good results.
Okay. But I really think you’re missing the point we’re trying to make. It’s not about following you or not - as certainly much of what you were able to do was financially smart - it’s about differences in opportunities. Certainly plenty of people can luck into good situations, as well as plan well for the future. At the same time, plenty of people can do their best to plan for the future, and still get screwed over. One of the things you able to do that saved you money in the long run, buying instead of renting, isn’t an option for more people now than it was even 15 years ago. Banks are less likely to lend out for mortgages, especially when the borrower has no money to make a larger down payment. It’s really a very different economic landscape since 2008 that means that less people have less choices. There are structural problems in the economy that are very different from the 80s or 90s.
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I can’t tell you what your experiences have been. I can only tell you what MY experiences have been.
By the way, I’ve tried to explain that when I bought my first home, it was CHEAPER to buy than to rent. I guess I didn’t do a very good job of explaining that.
Sure.
It might still be, but the barriers TO buy are higher now than they were in the past.
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I will take your word for it, because you have always seemed like an intelligent poster. But I know that all my life, I’ve seen people say, “Oh, I could never do that”. Heck I used to say that. But if we try sometimes, we just might find, we get what we need. I just made that up, you know.
Just so you know, I’m not getting this from my own individual experience, but from larger processes that seem to be happening in our world right now. The generation gap is pretty big on this issue and it seems like Gen X and millennials, on average, are doing less well than the boomers, financially speaking. Then again, many boomers find themselves unable to retire, when many of them had their savings that were invested in the stock market crash (Enron for example). It’s one part luck, 3 parts circumstances.
Again, I don’t think you’re saying anything that’s wrong, it’s just that the ability of many people to save money has been restricted, often by circumstances outside of their control. Are there people who are just irresponsible with money now, of course, just that isn’t probably the primary driving factor in lack of savings.
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That was me in 1997.
Most likely this is true. All the luck in the world will not save you (not you @Mindysan33… you in general) if you live in a place like DC or Detroit, where unemployment ragest the hardest in the country. If there are no jobs, a PhD won’t save you. You’ll have to move away, or take a lower employment level.
https://www.bls.gov/web/laus/laumstrk.htm
And if you are like the vast majority of the country, you do not have a bachelor’s level degree:
(report on educational attainment in the USA, as of 2015)
Only 1/3 of the country has a bachelor’s or higher degree. So, that means many jobs are out of contention. You are looking mainly at the trades, which is not in itself a bad thing. The trades are not simply menial labor. They can be mind-intensive, requiring the equivalent of a PhD’s worth of skill and can be very lucrative… again IF those jobs are available in your area.
So, unless you start roving the country looking for work (next to impossible if you have already started a family), then you are stuck where you are and you have to deal with what is available.
Put all of this together: one might be smart and disciplined and saving pennies, but unless income is at a level above basic expenses, and your job offers a way to save for retirement, then you will never be able to save.
That’s the bottom line. I think there ARE internal factors, like who people are, that determines if they are amenable to saving money… but the external CONDITIONS set the stage for whether it’s even possible to save or not.
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