5 ms·

> 78% of Americans live paycheck to paycheck, and most Americans would struggle to cover an unexpected $400 expense. > How did we get here? > Why aren’t we doi

by danans 7y ago

> 78% of Americans live paycheck to paycheck, and most Americans would struggle to cover an unexpected $400 expense. > How did we get here? > Why aren’t we doing better? > Managing Money is Hard We aren't here because millions of Americans didn't manage their savings optimally. They went to work, played by the rules, and saved what they could. We're here because the gains due to productivity growth for the last 40 years have increasingly gone to the to top wealth and income percentiles. That is the result of tax and trade policies changes that began in the 1970s and were cemented by the 1990s. Meanwhile, concurrent with those changes, the cost of things that used to be "basics", like health care, higher education, and housing, have skyrocketed, while previously "universal" rights like good public primary education have been turned into lotteries. Society's capital has been sold to the highest bidder, and most of us have had no choice but to be part of that auction. None of this is to excuse banks extracting revenue from savers via fees, or other similar practices pointed out in the article, but better management of personal financial capital won't be effective in helping people who can't cover an unexpected $400 expense, because those people have no financial capital to begin with, and due to tax policies designed to keep wealth in dynasties, their children likely won't have any capital either.

uoaei 7y ago
> better management of personal financial capital won't be effective in helping people who can't cover an unexpected $400 expense, because those people have no financial capital to begin with One of the biggest tells for who is on what side of the "the economy is strong! what's the big deal?" debate is whether they have invested capital. The economy being strong only helps people who are literally invested in the economy. This is not the case for a large swath of American citizens because they have no capital to begin investing. The pundit/technocrat/plutocrat/professorial-managerial classes of people all take it as a given that investment is even a thing. It's the fish-asks-what's-water of armchair economics. If everyone's a shareholder of something, then sure, the economy being great means everyone is benefiting. But if that money is limited to circulating among people with financial instruments working for them (in a literal sense), then obviously there's a large portion of the population who is being left out.
bluGill 7y ago
there are doctors making $500k/year living paycheck to paycheck. There are people working fast food who manage to save money. It is a spending problem. The things you list do not help either group, but the fact is most people spend every penny.
- sdnlafkjh34rw 7y ago
  I don't believe it's purely a spending issue when things like childcare, education, and healthcare are growing at 2x the inflation rate. We have basic infrastructure costs in America that are spirally out of control that are really eating into wages.
- gapo 7y ago
  > there are doctors making $500k/year living paycheck to paycheck. Can you provide a source for that please ? Also, it would be interesting to find how much of their expenses are paying back their insanely high tuition-fees.
- danans 7y ago
  > there are doctors making $500k/year living paycheck to paycheck. There are people working fast food who manage to save money. It is a spending problem. The existence of a statistically insignifcant number of counter-examples on either end does not negate the broader societal trend toward greater wealth/income disparity.
- tmh79 7y ago
  > there are doctors making $500k/year living paycheck to paycheck This isn't true, at least in any sense of the word we would agree with. (Wife works in medicine, is a doctor at this level, we run in these circles). They are "living paycheck to paycheck" in the sense that they've set their stock brokerage to automagically deduct 10k usd/month from their bank account, and they pay 10k/month on a mortgage (which accumulate equity) and their checking account doesn't grow in size and their monthly float is the same. Some of them pay for private school which means they only save 3k/month instead of 10k/month, how oppressive. Their checking account "funny money they allow themselves to spend on anything" isn't growing and is the same, but their net worth is growing 15k/month.
Shivetya 7y ago
because that number is a lie and the replies made by those questioned keeps getting changed and twisted so as to serve the purpose of certain politicians Go read [0] the entire survey yourself. In particular search for EF5B which is where the number that get misrepresented time after time. People need to quit taking for granted what they read, it is being used more to manipulate you than inform you. It is really distressing how easily people on this site are duped, I know you want to believe it but please just stop. ///* Question EF5B. How would a $400 emergency expense that you had to pay impact your ability to pay your other bills this month Response Percent I would still be able to pay all of my other bills in full 85 I could not pay some other bills or would only make a partial payment on some of them 14 Refused 1 Note: Number of unweighted respondents = 9,670. Question EF5B. How would a $400 emergency expense that you had to pay impact your ability to pay your other bills this month Response Percent I would still be able to pay all of my other bills in full 85 I could not pay some other bills or would only make a partial payment on some of them 14 Refused 1 Note: Number of unweighted respondents = 9,670. ///* [0] https://www.federalreserve.gov/publications/appendix-b-consumer-responses-to-survey-questions.htm https://www.federalreserve.gov/publications/appendix-b-consu...
- Miner49er 7y ago
  What about question EF3? Most people said they would have to sell something, borrow money, or simply not pay it at all.
  - lukevdp 7y ago
    Here are the results to that question: Question EF3. Suppose that you have an emergency expense that costs $400. Based on your current financial situation, how would you pay for this expense? If you would use more than one method to cover this expense, please select all that apply. Put it on my credit card and pay it off in full at the next statement 33% Put it on my credit card and pay it off over time 16% With the money currently in my checking/savings account or with cash 45% Using money from a bank loan or line of credit 3% By borrowing from a friend or family member 10% Using a payday loan, deposit advance, or overdraft 2% By selling something 6% I wouldn't be able to pay for the expense right now 12% Other (please specify) 0 Refused 2
deleted 7y ago
[deleted]
losvedir 7y ago
I really doubt this. It just doesn't pass the smell test to me. You see people living paycheck to paycheck at many different incomes. If someone in a given location in situation is living paycheck to paycheck at $10/hr and someone else is doing the same at $12/hr, guess what? The latter person could have accumulated an emergency fund of $4,000 in a year. No doubt there are people in real poverty, and no doubt some people get struck by a medical emergency, but there's just no way three quarters of Americans are in that situation. I'm old enough that I've seen way too many people living paycheck to paycheck that absolutely shouldn't be. I think this article is 100% on point and clicked through to the services it was mentioning because it resonated so much with me. I was taught to save a percentage of my paycheck no matter what it was, which I began right out of college when I was making $28k/yr in Boston, and so I'm in a pretty great position now, but the article is right that it's hard and often confusing, and I would love for there to be a service that helps me along in this process.
- uoaei 7y ago
  > I was taught to save a percentage of my paycheck no matter what it was This is part of the lottery. You were very fortunate to have been raised such that you are familiar with the ways in which money can work for you. Being born into a situation where this isn't the case is already a huge detriment, not to speak of actual hardships once you're on your way. It's not a stretch to think that even half of those people in paycheck-to-paycheck lifestyles are this way. > but there's just no way three quarters of Americans are in that situation There is. Medical emergencies, as a contained example, are not isolated incidents -- when they affect caregivers, the whole next generation (or two! or more!) can be affected so heavily that the family essentially loses all their wealth in the span of a few years. More broadly, the community steps up to help out those in need, but often those in need are already in communities of need. One chink in the armor can drag down a whole network of people, and the strength of that can be unexpectedly high. If government welfare was more comprehensive and less difficult for poverty-stricken people to access (see: means testing and the time sink of waiting in lines), this would not be nearly as much of an issue. The "free market" sucks people dry if and when it gets the chance.
  - 7y ago
Barrin92 7y ago
I'd like to push back on that somewhat. While it's true that the cost for a lot of basic necessities has gone up there is a lot wrong in American culture when it comes to lifestyles and savings. The size of the average American home has approximately doubled since the 70s. This has driven up prices, increased energy cost, increased travel distance due to the constraints it imposes on density and so on. There is no real explanation for why any given American would be worse off by doing away with this kind of consumption. The same is true for say nutrition. American healthcare costs are high, but Americans also live exceptionally unhealthy lives. They commute too much by car, they walk too little, they are too obese. Americans also appear to love going out to eat much more than people in many other places, buy a new phone frequently, have a lot of subscriptions, and it adds up. Elderly parents are often placed in expensive care rather than taken care off by families, students go to expensive colleges and pay rent instead of living at home and attending a local public university, and so on. You can talk a long time about the inequality in the American economy and the fruits of labour, which are indeed less evenly distributed than in other places, but this doesn't change the fact that given the standard of income and wealth of the average American household, everyone could live insanely more sustainable and financially secure lives by adopting a different culture.
- danans 7y ago
  > this doesn't change the fact that given the standard of income and wealth of the average American household, everyone could live insanely more sustainable and financially secure lives by adopting a different culture. I wholeheartedly agree, but the reality is that, today, unless you are willing and able to pay a large premium for "luxuries" like walkable neighborhoods and workplaces, the average American gets market segmented into the excessively large housing and excessive long commutes with no transit options. The best way to address the underlying lifestyle issues is to make healthier lifestyles more affordable, but there are a large set of interests, from advocates of exclusionary zoning in city councils, to the fossil fuel industry lobbying heavily against good public transit, who are arrayed against any of the positive changes you suggest.
  - SQueeeeeL 7y ago
dcolkitt 7y ago
> Meanwhile, concurrent with those changes, the cost of things that used to be "basics", like health care, higher education, and housing, have skyrocketed, The economic data simply does not support your argument. In aggregate healthcare only constitutes 8.1% of US household expenditures. Education only constitutes 2.3%. It's simply infeasible that inflation in segments constituting less than one tenth of household expenses has crippled the majority of US households. Especially given strong deflationary trends in autos, apparel, furniture, appliances, consumer household goods, electronics, phone service, natural gas, toys, and media. Which in aggregate represents over 30% of household expenditures. Shelter at 19.2% is a major expenditure item. But you're wrong that there's been significant inflation. The median price per square foot of American housing has not increased in real terms since 1992. (HN tends to be grossly misinformed on this since the community is heavily concentrated in the ultra-expensive Bay Area.) And this doesn't even account for mortgage rates falling by 60% since 1990. It's true that Americans on average spend more on housing. But that's because modern homes are substantially larger than they were a few decades ago. Moreover the price per square foot metric doesn't reflect significant aggregate quality improvements like central A/C, better fire safety, higher capacity electrical circuits, more bathrooms, higher ceilings, better insulation, attached garages, and swimming pools. Altogether the housing story does not reflect your broader thesis. If Americans were feeling overwhelmed by out-of-control housing prices, they wouldn't keep buying bigger and bigger homes. Other statistics tell similar stories. A record number of people are getting cosmetic surgeries. If healthcare costs were crushing US consumers, we wouldn't expect huge growth in Americans choosing to have elective medical procedures. It'd be like claiming there's an ongoing food shortage, while obesity rates are rising. [1] https://www.bls.gov/cex/2018/combined/age.pdf https://www.bls.gov/cex/2018/combined/age.pdf [2] https://www.census.gov/const/C25Ann/soldmedavgppsf.pdf https://www.census.gov/const/C25Ann/soldmedavgppsf.pdf [3] https://www.aei.org/carpe-diem/new-us-homes-today-are-1000-square-feet-larger-than-in-1973-and-living-space-per-person-has-nearly-doubled/ https://www.aei.org/carpe-diem/new-us-homes-today-are-1000-s... [4] https://eurekalert.org/pub_releases/2019-03/m-nps030719.php https://eurekalert.org/pub_releases/2019-03/m-nps030719.php
- SQueeeeeL 7y ago
  Big houses are all that's built and is on the market. You can't buy apartments in anywhere except New York and Seattle. They also cant't build mixed housing that isn't single family homes in most cities because of zoning laws.
ksec 7y ago
And there was a Ted Talk on this Topic https://www.youtube.com/watch?v=th3KE_H27bs https://www.youtube.com/watch?v=th3KE_H27bs

by danans 7y ago

uoaei 7y ago

> better management of personal financial capital won't be effective in helping people who can't cover an unexpected $400 expense, because those people have no financial capital to begin with One of the biggest tells for who is on what side of the "the economy is strong! what's the big deal?" debate is whether they have invested capital. The economy being strong only helps people who are literally invested in the economy. This is not the case for a large swath of American citizens because they have no capital to begin investing. The pundit/technocrat/plutocrat/professorial-managerial classes of people all take it as a given that investment is even a thing. It's the fish-asks-what's-water of armchair economics. If everyone's a shareholder of something, then sure, the economy being great means everyone is benefiting. But if that money is limited to circulating among people with financial instruments working for them (in a literal sense), then obviously there's a large portion of the population who is being left out.

bluGill 7y ago

there are doctors making $500k/year living paycheck to paycheck. There are people working fast food who manage to save money. It is a spending problem. The things you list do not help either group, but the fact is most people spend every penny.

sdnlafkjh34rw 7y ago
I don't believe it's purely a spending issue when things like childcare, education, and healthcare are growing at 2x the inflation rate. We have basic infrastructure costs in America that are spirally out of control that are really eating into wages.
gapo 7y ago
> there are doctors making $500k/year living paycheck to paycheck. Can you provide a source for that please ? Also, it would be interesting to find how much of their expenses are paying back their insanely high tuition-fees.
danans 7y ago
> there are doctors making $500k/year living paycheck to paycheck. There are people working fast food who manage to save money. It is a spending problem. The existence of a statistically insignifcant number of counter-examples on either end does not negate the broader societal trend toward greater wealth/income disparity.
tmh79 7y ago
> there are doctors making $500k/year living paycheck to paycheck This isn't true, at least in any sense of the word we would agree with. (Wife works in medicine, is a doctor at this level, we run in these circles). They are "living paycheck to paycheck" in the sense that they've set their stock brokerage to automagically deduct 10k usd/month from their bank account, and they pay 10k/month on a mortgage (which accumulate equity) and their checking account doesn't grow in size and their monthly float is the same. Some of them pay for private school which means they only save 3k/month instead of 10k/month, how oppressive. Their checking account "funny money they allow themselves to spend on anything" isn't growing and is the same, but their net worth is growing 15k/month.

Shivetya 7y ago

because that number is a lie and the replies made by those questioned keeps getting changed and twisted so as to serve the purpose of certain politicians Go read [0] the entire survey yourself. In particular search for EF5B which is where the number that get misrepresented time after time. People need to quit taking for granted what they read, it is being used more to manipulate you than inform you. It is really distressing how easily people on this site are duped, I know you want to believe it but please just stop. ///* Question EF5B. How would a $400 emergency expense that you had to pay impact your ability to pay your other bills this month Response Percent I would still be able to pay all of my other bills in full 85 I could not pay some other bills or would only make a partial payment on some of them 14 Refused 1 Note: Number of unweighted respondents = 9,670. Question EF5B. How would a $400 emergency expense that you had to pay impact your ability to pay your other bills this month Response Percent I would still be able to pay all of my other bills in full 85 I could not pay some other bills or would only make a partial payment on some of them 14 Refused 1 Note: Number of unweighted respondents = 9,670. ///* [0] https://www.federalreserve.gov/publications/appendix-b-consumer-responses-to-survey-questions.htm https://www.federalreserve.gov/publications/appendix-b-consu...

Miner49er 7y ago
What about question EF3? Most people said they would have to sell something, borrow money, or simply not pay it at all.
- lukevdp 7y ago
  Here are the results to that question: Question EF3. Suppose that you have an emergency expense that costs $400. Based on your current financial situation, how would you pay for this expense? If you would use more than one method to cover this expense, please select all that apply. Put it on my credit card and pay it off in full at the next statement 33% Put it on my credit card and pay it off over time 16% With the money currently in my checking/savings account or with cash 45% Using money from a bank loan or line of credit 3% By borrowing from a friend or family member 10% Using a payday loan, deposit advance, or overdraft 2% By selling something 6% I wouldn't be able to pay for the expense right now 12% Other (please specify) 0 Refused 2

deleted 7y ago

[deleted]

losvedir 7y ago

I really doubt this. It just doesn't pass the smell test to me. You see people living paycheck to paycheck at many different incomes. If someone in a given location in situation is living paycheck to paycheck at $10/hr and someone else is doing the same at $12/hr, guess what? The latter person could have accumulated an emergency fund of $4,000 in a year. No doubt there are people in real poverty, and no doubt some people get struck by a medical emergency, but there's just no way three quarters of Americans are in that situation. I'm old enough that I've seen way too many people living paycheck to paycheck that absolutely shouldn't be. I think this article is 100% on point and clicked through to the services it was mentioning because it resonated so much with me. I was taught to save a percentage of my paycheck no matter what it was, which I began right out of college when I was making $28k/yr in Boston, and so I'm in a pretty great position now, but the article is right that it's hard and often confusing, and I would love for there to be a service that helps me along in this process.

uoaei 7y ago
> I was taught to save a percentage of my paycheck no matter what it was This is part of the lottery. You were very fortunate to have been raised such that you are familiar with the ways in which money can work for you. Being born into a situation where this isn't the case is already a huge detriment, not to speak of actual hardships once you're on your way. It's not a stretch to think that even half of those people in paycheck-to-paycheck lifestyles are this way. > but there's just no way three quarters of Americans are in that situation There is. Medical emergencies, as a contained example, are not isolated incidents -- when they affect caregivers, the whole next generation (or two! or more!) can be affected so heavily that the family essentially loses all their wealth in the span of a few years. More broadly, the community steps up to help out those in need, but often those in need are already in communities of need. One chink in the armor can drag down a whole network of people, and the strength of that can be unexpectedly high. If government welfare was more comprehensive and less difficult for poverty-stricken people to access (see: means testing and the time sink of waiting in lines), this would not be nearly as much of an issue. The "free market" sucks people dry if and when it gets the chance.
- 7y ago

Barrin92 7y ago

I'd like to push back on that somewhat. While it's true that the cost for a lot of basic necessities has gone up there is a lot wrong in American culture when it comes to lifestyles and savings. The size of the average American home has approximately doubled since the 70s. This has driven up prices, increased energy cost, increased travel distance due to the constraints it imposes on density and so on. There is no real explanation for why any given American would be worse off by doing away with this kind of consumption. The same is true for say nutrition. American healthcare costs are high, but Americans also live exceptionally unhealthy lives. They commute too much by car, they walk too little, they are too obese. Americans also appear to love going out to eat much more than people in many other places, buy a new phone frequently, have a lot of subscriptions, and it adds up. Elderly parents are often placed in expensive care rather than taken care off by families, students go to expensive colleges and pay rent instead of living at home and attending a local public university, and so on. You can talk a long time about the inequality in the American economy and the fruits of labour, which are indeed less evenly distributed than in other places, but this doesn't change the fact that given the standard of income and wealth of the average American household, everyone could live insanely more sustainable and financially secure lives by adopting a different culture.

danans 7y ago
> this doesn't change the fact that given the standard of income and wealth of the average American household, everyone could live insanely more sustainable and financially secure lives by adopting a different culture. I wholeheartedly agree, but the reality is that, today, unless you are willing and able to pay a large premium for "luxuries" like walkable neighborhoods and workplaces, the average American gets market segmented into the excessively large housing and excessive long commutes with no transit options. The best way to address the underlying lifestyle issues is to make healthier lifestyles more affordable, but there are a large set of interests, from advocates of exclusionary zoning in city councils, to the fossil fuel industry lobbying heavily against good public transit, who are arrayed against any of the positive changes you suggest.
- SQueeeeeL 7y ago

dcolkitt 7y ago

> Meanwhile, concurrent with those changes, the cost of things that used to be "basics", like health care, higher education, and housing, have skyrocketed, The economic data simply does not support your argument. In aggregate healthcare only constitutes 8.1% of US household expenditures. Education only constitutes 2.3%. It's simply infeasible that inflation in segments constituting less than one tenth of household expenses has crippled the majority of US households. Especially given strong deflationary trends in autos, apparel, furniture, appliances, consumer household goods, electronics, phone service, natural gas, toys, and media. Which in aggregate represents over 30% of household expenditures. Shelter at 19.2% is a major expenditure item. But you're wrong that there's been significant inflation. The median price per square foot of American housing has not increased in real terms since 1992. (HN tends to be grossly misinformed on this since the community is heavily concentrated in the ultra-expensive Bay Area.) And this doesn't even account for mortgage rates falling by 60% since 1990. It's true that Americans on average spend more on housing. But that's because modern homes are substantially larger than they were a few decades ago. Moreover the price per square foot metric doesn't reflect significant aggregate quality improvements like central A/C, better fire safety, higher capacity electrical circuits, more bathrooms, higher ceilings, better insulation, attached garages, and swimming pools. Altogether the housing story does not reflect your broader thesis. If Americans were feeling overwhelmed by out-of-control housing prices, they wouldn't keep buying bigger and bigger homes. Other statistics tell similar stories. A record number of people are getting cosmetic surgeries. If healthcare costs were crushing US consumers, we wouldn't expect huge growth in Americans choosing to have elective medical procedures. It'd be like claiming there's an ongoing food shortage, while obesity rates are rising. [1] https://www.bls.gov/cex/2018/combined/age.pdf https://www.bls.gov/cex/2018/combined/age.pdf [2] https://www.census.gov/const/C25Ann/soldmedavgppsf.pdf https://www.census.gov/const/C25Ann/soldmedavgppsf.pdf [3] https://www.aei.org/carpe-diem/new-us-homes-today-are-1000-square-feet-larger-than-in-1973-and-living-space-per-person-has-nearly-doubled/ https://www.aei.org/carpe-diem/new-us-homes-today-are-1000-s... [4] https://eurekalert.org/pub_releases/2019-03/m-nps030719.php https://eurekalert.org/pub_releases/2019-03/m-nps030719.php

SQueeeeeL 7y ago
Big houses are all that's built and is on the market. You can't buy apartments in anywhere except New York and Seattle. They also cant't build mixed housing that isn't single family homes in most cities because of zoning laws.

ksec 7y ago

And there was a Ted Talk on this Topic https://www.youtube.com/watch?v=th3KE_H27bs https://www.youtube.com/watch?v=th3KE_H27bs