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US Federal Reserve studies indicate that the percentage of US households with no excess income after necessary expenses (as distinct from "ordinary expenses" as

US Federal Reserve studies indicate that the percentage of US households with no excess income after necessary expenses (as distinct from "ordinary expenses" as a term of art) is on the order of 10-15%. This definition roughly matches most people's intuition of what "living paycheck-to-paycheck" means. That isn't nothing but it implies 85-90% of Americans are not actually living paycheck-to-paycheck. There is another 25-30% of households that spend all of their income on ordinary expenses beyond necessary expenses. This includes things like car payments on a new BMW or a mortgage on a big house; "ordinary" is determined by expense category, not expense necessity, so a lot of spending on luxury goods is classified as "ordinary". By implication, there is effectively no ceiling to ordinary expenses. By contrast, the median US household has >$12,000/year in excess income after all ordinary expenses. Technically these households could have expanded their lifestyle to consume that income, but in many cases they are spending it on things that are not classified as "ordinary" and therefore not saving it. The categories of "non-ordinary" expenses (which have a sensible objective criteria) are almost entirely obvious lifestyle flex things, so not particularly controversial. The implications of these statistics are pretty wild. The median household can easily accumulate a million dollars in inflation-adjusted net worth, not including their house, over a 40 year career. And they can do it without being particularly thrifty, since ordinary expenses covers a lot of luxury spending. Americans have very high incomes, both in theory and practice, they just would rather spend it than save it.

savingsPossible 2y ago
Can you provide some links? Searches understandably are finding more 'ordinary/necessary' expenses for business than for families
- pembrook 2y ago
  America blows past the rest of the developed world on disposable income per capita and it’s not even close: https://en.m.wikipedia.org/wiki/Disposable_household_and_per_capita_income https://en.m.wikipedia.org/wiki/Disposable_household_and_per... And before someone chimes in “that’s because of the billionaires throwing off the average!” Look at the median disposable income chart. America is still at the top. The median American is far wealthier than the median European person, even after accounting for things Americans normally complain about like healthcare, education costs, and retirement contributions. This results in some crazy stats, like the fact the median Mississippi resident has more disposable income than the average UK resident (and that includes financial hub London). And again, this is AFTER accounting for healthcare, education, etc costs.
  - jorvi 2y ago
    > When taxes and mandatory contributions are subtracted from household income, the result is called net or disposable household income I don’t understand why Americans always have such a fetish about bragging about their disposable income. Once you allocate for payments into the welfare state, the difference becomes a lot smaller. And that’s not even mentioning the stark difference in quality of life, beyond “quality of life” graphs. Those graphs don’t account for having to wait 25+ minutes for the store to unlock steaks or vitamins from a security case. Or for mass tent camps in cities. Or Mmss drug deaths. Uncertainty of potable water. Access to and education on safe sex, abortion, etc. Walkability of cities. Whenever I meet Americans traveling Europe, they virtually always rave about how much better life seems over here.
    - deleted 2y ago
      [deleted]
    - pembrook 2y ago
      OECD disposable income per capita numbers already account for the benefits of the European welfare state vs. self funded ones in the US.
      - jorvi 2y ago
        > over the dominant anecdotal narrative > updating priors is hard [Upthread commenter edited his comment removing some stuff] It’s trivial to find complaints on the epidemic of security cases in American stores, and especially the fact that there’s not enough personnel in stores leading to long waiting times. In a similar vein, are you really going to claim with a straight face that America isn’t extremely car-centric anymore? > As someone who actually moved there, I can tell you the numbers are also anecdotally felt on the ground if you go outside of wealthy tourist capitals. Then you should travel more. I got these remarks even in smaller Croatian towns. I live in The Netherlands myself, and I’ve heard similar things said in mid-sized cities in Ireland, Spain, Portugal, Gdansk, Poland, Denmark, Sweden Bulgaria, hell even in Italy in a place like Naples. And if you’re gonna claim that wasn’t small town / countryside enough, do you really think quality of life is going to be higher in a hick town in Mississippi rather than a countryside town in Portugal? Not to mention the sliver of vacation days Americans have. Money isn’t life.
BobbyJo 2y ago
> This includes things like car payments on a new BMW or a mortgage on a big house This also includes car payments on a used honda, and a mortgage on a small condo no? Why the exaggeration?
- aidenn0 2y ago
  Because they were using those examples to illustrate the difference between necessary and ordinary expenses?
  - Arainach 2y ago
    Doubtful. What metric determines between a "big house" or a "necessary house"? $400000 will buy you 3 bedrooms in some areas and not even an EPA-condemned quarter acre in some others.
    - tjbiddle 2y ago
      You're arguing the counter, but all you did was prove their point that these expenses can be classified according to a situation.
      - Arainach 2y ago
        I do not believe this Federal Reserve study can classify such things. It either has a metric which is so incorrect as to be worthless or a biased human judging a dataset so small as to be worthless. There are families which cram 3 generations and a dozen people into a few hundred square feet. There are people in Hong Kong living in spaces smaller than most American kitchens. By those metrics are we ALL in excessive lodging? Is it excessive to be in a 1600 square foot house whose mortgage is lower than rent for a 500 square foot studio because you bought when interest rates were far lower?
        rohansingh 2y ago
        The point is that the Fed isn't classifying those things. "Ordinary" includes all primary mortgages, whether for a modest home or a luxury pad. It includes all personal car payments, whether for a shared Honda or a Maserati.
giantg2 2y ago
Are retirement savings considered ordinary expenses? If not, that could be a huge gap in this understanding.
- Dalewyn 2y ago
  Any reasonable argument should classify retirement savings as an ordinary expense, since those savings come out of your income stream and become inaccessible until retirement age unless you either pay hefty penalties or qualify for very specific exceptions.
- jandrewrogers 2y ago
  The criteria that makes a category of life expense "ordinary" (IIRC) is that the majority of households spend income on it, so it includes things like taxes, healthcare, and mobile phones. Typical American life as revealed by actual expenditure patterns, and BLS breaks each category down by income decile. I can't find precise data on retirement outflows and there are many possible ways to account for it (e.g. is Social Security contribution considered saving for retirement?) but what I can find seems to indicate that the majority of Americans do save for retirement, which would suggest it is an ordinary expense. The only category of "non-ordinary" that I recall being surprising was eating out at restaurants. I should know better, almost no one ate out at restaurants when and where I grew up, but my perspective has clearly been skewed over time by my own lifestyle.
bmitc 2y ago
> US Federal Reserve studies indicate that the percentage of US households with no excess income after necessary expenses (as distinct from "ordinary expenses" as a term of art) is on the order of 10-15%. This definition roughly matches most people's intuition of what "living paycheck-to-paycheck" means. That isn't nothing but it implies 85-90% of Americans are not actually living paycheck-to-paycheck. There is absolutely no way I believe those numbers unless they have defined necessary expenses to be unreasonably narrow.
- SideQuark 2y ago
  The good thing about well sourced data across millions of sample points that are prepared by professionals over decades of collection is that one should believe that data over anyone’s uninformed beliefs based on no carefully measured data over even a single person.
  - bmitc 2y ago
    That's all well and good, so where's the link to the studies and the studies' parameters? It's not like I'm denying well presented findings. In absence of those, I can hold skepticism about the claims. My definition of paycheck to paycheck would be that if you lost your source of income you would not be able to afford living (housing, food, healthcare, insurance, etc.) within a certain window of time. The data can be easily manipulated depending on what you consider essential. I would be surprised if findings by the Federal Reserve include healthcare as a necessity or essential. It's easy to say it's not an essential if a family or individual never had it.
    - chii 2y ago
      > within a certain window of time. that's a big caveat. Most people are not able to live without a source of income through working. And this _should_ be the norm - most people _should_ be working in their adult lifetime. It should not be possible to live indefinitely without having to produce output that somebody in society needs (and thus is paying you to do so). The welfare state is to prevent the negative outcomes of someone in destitute, by preventing (or trying to prevent) crime, etc. It isn't there so that one can live free.
nielsbot 2y ago
So is your argument that there's no "affordability crisis" in the US?
- Dalewyn 2y ago
  The American economy keeps on chugging despite critics, but that doesn't mean the critics don't have a point. Costs of living (read: gas and eggs) are high, many would argue "unaffordable" even though most will still pay up. This means that: No, there is no "affordability crisis" in the literal sense. But there is an "unhappiness crisis", as in people aren't happy about how much money they have to spend. That crisis, the "unhappiness crisis" fueled Trump's upset landslide victory this election. The Affordability Camel's back isn't broken, yet, but the camel is declaring quite angrily that the point is very close.
  - alwayslikethis 2y ago
    I'm not sure gas and eggs is the problem here. When people say cost of living, most of it is just rent or mortgage. To this end, I'm not sure if either party would be willing to do anything, as it primarily benefits the property-owning (older) class, which is the main part of the electorate.
    - HPsquared 2y ago
      And the politicians themselves tend to be property owners. Their donors, even more so.
    - Dalewyn 2y ago
      >I'm not sure gas and eggs is the problem here. When people say cost of living, most of it is just rent or mortgage. Rent/mortgage is just one part of the cost of living[1]. Even if you have a place to stay and sleep, you still need to clothe, bathe, and transport yourself and eat and drink to live. Cost of living is literally what it costs to live. [1]: https://www.investopedia.com/terms/c/cost-of-living.asp https://www.investopedia.com/terms/c/cost-of-living.asp
onemoresoop 2y ago
Or people crushed by student loans, rent and high costs of living could with a salary of say 100k end up living paycheck to paycheck more or less.
- tmn 2y ago
  That happens but they are presenting a statistical picture
standardUser 2y ago
> The median household can easily accumulate a million dollars in inflation-adjusted net worth, not including their house, over a 40 year career. That sounds like barely enough to retire on.
- djbusby 2y ago
  For reference elder care facility in CA Metro Area is like $20k/MO and in MA suburb is like $11k/mo. At $15k/mo you can get like 65 months of service. Not counting income from savings or SSI
  - refactor_master 2y ago
    That’s pretty damning if life expectancy after retirement is another 15-20 years.
    - deleted 2y ago
      [deleted]
  - alain94040 2y ago
    $20K/MO sounds exaggerated. A quick Google gives me Palo Alto was deemed the seventh most expensive location for assisted living in California, according to a new study by Mirador, a platform that helps people research nationwide assisted living locations. The average yearly cost of assisted living in Palo Alto is $91,177, compared to the state average of $63,927, according to the study. Source: From https://www.paloaltoonline.com/seniors/2024/10/04/study-reveals-palo-alto-assisted-living-costs-soar-above-state-rates/#:~:text=Janet%20Creelman%20and%20John%20Melton,between%20earnings%20and%20living%20costs https://www.paloaltoonline.com/seniors/2024/10/04/study-reve....
  - 0xDEAFBEAD 2y ago
    I think the issue with elder care is about the balance of workers vs retirees, which is an problem (or will be a problem) in most developed countries.
- Spivak 2y ago
uhtred 2y ago
Half your comment reads like chatgpt generated it. What's the point?
swat535 2y ago
Does this also account for things like Healthcare costs?
- Retric 2y ago
  Yes
  - PittleyDunkin 2y ago
    Only some healthcare costs, sometimes, for some people, in some situations.
    - Retric 2y ago
      The vast majority of households don’t have significant uncovered medical expenses. There’s major issues that become rounding errors on these kinds of statistics. ~0.5% of the US population is incarcerated or homeless. It’s a lot of people and a major issue, but the US population is huge.
      - knappe 2y ago
        Yeah, no. "But millions of Americans who owe far more than $500 may not benefit — 1 in 4 U.S. adults with health care debt owe more than $5,000, according to a KFF poll conducted for this project; 1 in 8 owe more than $10,000." https://www.npr.org/sections/health-shots/2022/06/16/1104969627/medical-debt-upended-their-lives-heres-what-it-took-from-them https://www.npr.org/sections/health-shots/2022/06/16/1104969... And this is likely to be a severe undercount. Given that 1 in 4 Americans can't even afford treatment and so they just go untreated rather than take on the debt. https://www.usnews.com/news/health-news/articles/2024-11-21/1-in-4-americans-now-struggling-to-cover-medical-costs https://www.usnews.com/news/health-news/articles/2024-11-21/...
        lovich 2y ago
        You’re switching units with that quote. It says 1 in 4 adults _with_ health care debt, not 1 in 4 adults of the whole population. How many Americans have health care debt?
lmpdev 2y ago
How about the same statistics but for working age population
dgoldstein0 2y ago
... And is $1 million enough to retire on? Practically what probably matters is "how many years do you have to work to take care of your basic needs after you retire, and how does this change if you (a) have medical problems (b) want kids (c) [add your other variants of ordinary life choices people should be able to make]"
- refurb 2y ago
  ** ... And is $1 million enough to retire on?** More than enough. The vast majority retire on less and have comfortable retirements. Despite the narrative, Social Security pays out quite a lot and isn’t going insolvent any time soon. The average payout ($1,900) is more than double that of Canada ($850). A retired couple would have almost $4000/month in monthly income. Add on top a paid off home, Medicare eligibility, and Social Security, most people retire with a few hundred thousand, which is very comfortable in most of the US.
  - harimau777 2y ago
    The big problem is transportation. Many retired people can no longer safely drive. That means that if they don't live someplace with solid public transportation then their quality of life drops. Unfortunately, all of the places in America with decent public transportation are expensive.
    - hollerith 2y ago
      If only there were a service that people who are too old to drive could use to buy a ride where they need to go.
      - db48x 2y ago
        Man, there’s a startup idea right there.
  - Tempest1981 2y ago
    Are you assuming great health? Or rapid death? Nursing home care runs $8k/mo or more per person. And low-end ones can be sketchy... you hear horror stories. That $4k/mo won't be enough as you head into your 80s or 90s. Also consider inflation over 3 or 4 decades.
amluto 2y ago
IMO a major deficiency in this calculation is children. Raising children costs money, and families without enough income may not feel that they can afford to raise children, and they may therefore not have children. This means that their income looks better than it really ought to, and it also reduces the birth rate. And, while the US’s birth rate is not catastrophically low, it is below replacement. This may have some negative long-term consequences for the economy.
- bobthepanda 2y ago
  the thing is, this is happening across any remotely wealthy or developed country, and in that sense the US is actually the ninth highest birthrate in the OECD and well above the average. The only OECD country with fertility rates above 2 is Israel, and that's mostly because the ultra-Orthodox have really high birth rates.
- kortilla 2y ago
  But the birth rate is on par with the rivals it’s being compared to in this article/thread.
- jerojero 2y ago
  One interesting thing about birthrates that I think most people haven't really looked at is the data segregated by age groups. In most countries with falling birthrates (save some exceptions like Japan) a huge part of this decrease is in the 15-25 age group. There is usually also a decline in the 25-29 but there's an increase or the same rates as we've had historically on the 30+ range. What this mean is basically that we've eradicated teen pregnancy, and that's definitely something desirable in a developed society.
  - Vanclief 2y ago
    I am all for preventing teen pregnancy, but the data sounds more like young people can't afford having children so they are waiting longer.
    - 2y ago
harimau777 2y ago
The problem that I see is that a million in net worth isn't enough to have a good retirement anymore now that rent is $2-3k a month in most major cities.
- xenospn 2y ago
  Save in America, retire elsewhere
  - silisili 2y ago
    Ah yes, let's burden some third world nation with an entire class of people who produce no value, and raise the costs of housing and goods for everyone around them. I'm not saying it's not smart, it's just not very savory, and isn't a great solution for the longer term.
    - xenospn 2y ago
      What do you mean? They literally bring in money for free. It’s the best type of value.
      - listenallyall 2y ago
        Retirees don't earn income, so don't pay income tax. Increased demand for housing raises prices for everyone including natives. And typically, retirees require healthcare services well above the population average.
        xenospn 2y ago
        Counterpoint: all they do is consume, pay sales tax, and quite possibly fly home for healthcare.
        listenallyall 2y ago
        Yes, some do. But others don't, and your earlier assertion "they bring in money for free" is certainly not universally true.
PittleyDunkin 2y ago
> households with no excess income after necessary expenses (as distinct from "ordinary expenses" as a term of art) is on the order of 10-15%. Any chance to translate to plain english? The keywords "neccesary" and "ordinary" indicate rhetorical bullshit is afoot.
- acchow 2y ago
  A $700/mth new-ish car is quite ordinary for many Americans, but they probably only "need" something about half that price. A Netflix subscription is ordinary but not necessary.
  - PittleyDunkin 2y ago
    Ok I understand it's possible to use these terms as if they have meaning to some demographic somewhere, but what is the point of using them without actually referring to the necessary figures to figure out what they actually mean to the rest of us? Also: fuck me, if americans have a 700/month car payment on average most americans you're likely to interact with on a daily basis will be deep under the poverty line. Like, the actual poverty line of "struggling to survive", not the bullshit metric used to cut people off from welfare.
    - acchow 2y ago
      It’s quite common in the middle class and below in the US to spend every extra dollar you make as your income rises. This means, despite getting promotions or raises, your a savings rate remains zero (or negative). One primary way to increase spending is a vehicle upgrade. Most vehicles sold are used vehicles. But if you consider only the new vehicles, the average monthly payment for new vehicles is about $740/mth.
ulfw 2y ago
I'd be careful with statistics like this. Who defines what car is "necessary" (or is no car necessary in car-centric America?) vs "ordinary"?
abenga 2y ago
Why would we assume that "people across the economy reduce spending" == "people across the economy will have more money"? Don't at least some (I would say many) of the people in the economy make income from this unnecessary spending?
dataflow 2y ago
> There is another 25-30% of households that spend all of their income on ordinary expenses beyond necessary expenses. > This includes things like car payments on a new BMW or a mortgage So you're not accounting at all for how much of your income goes toward e.g. interest on the loan vs. the principal? Isn't that kinda important? Also, do car loans for cheaper cars somehow not fall in this picture? Why do you portray people as buying new BMWs when all cars in general have gotten so expensive?
ProxCoques 2y ago
Also by the Fed: 4 in 10 Americans lack enough money to cover a $400 emergency expense: https://fortune.com/2023/05/23/inflation-economy-consumer-finances-americans-cant-cover-emergency-expense-federal-reserve/ https://fortune.com/2023/05/23/inflation-economy-consumer-fi...
- 0xDEAFBEAD 2y ago
  Perhaps because 4 in 10 Americans are bad with money. As jandrewrogers stated, Americans are not good savers. (I believe this is a big contributor to our trade deficit as well.)
  - xvector 2y ago
    To be honest, you don't really want people saving too much in a healthy economy. You want them spending.
    - Joker_vD 2y ago
      But then where would the investment come from?
- CalRobert 2y ago
  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? Response Percent Put it on my credit card and pay it off in full at the next statement 37 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 7 I wouldn't be able to pay for the expense right now 13 Note: Number of unweighted respondents 11,400 from https://www.federalreserve.gov/publications/files/2023-supplement-economic-well-being-us-households-202405.pdf https://www.federalreserve.gov/publications/files/2023-suppl...
  - n4r9 2y ago
rbanffy 2y ago
If 10-15% of American families live from paycheck to paycheck, it means pretty much everyone knows someone who’s struggling. Another aspect of these numbers is how much of the ordinary expenses are not luxury items but things like a car (because public transport is terrible), childcare (because people need to work to pay for it and the car that’s needed to shuttle kids around) and some healthcare (because public healthcare is nonexistent). Americans pay a lot of money for things other developed countries would say is a basic human right.
- PeterStuer 2y ago
  "If 10-15% of American families live from paycheck to paycheck, it means pretty much everyone knows someone who’s struggling" Not really. Most social groups are fairly homogeneous. Even those that view themselves as knowing a wide swat of people from all sorts of live are unaware that beyond some superficial diversity they tend to have unconsciously selected for commonality of outlook and context. I learned this at a young age when due to circumstance I elected to do my back then obligatory military service year before going to university as opposed to all my friends that first finished their studies and then (mostly) opted for the 'conscientious objector' route and spend 24 months in civil service. Going into the army without a degree you get to spend a lot of time with many people that can't read or write, could not finish high-school, never had opened a book or seen any of the films or heard the music your mates loved. Often violence and making baffling poor health and safety decisions were a very frequent occurrence. What I'm saying is that unless forced by circumstances beyond your control, your circle of acquaintance is probably less a cross cut of society than you imagine.
  - rbanffy 2y ago
    That’s a very good point. Some people will know nobody who’s struggling while others will know many. Opening eyes and ears to the suffering of others is a deliberate choice.
michaelmrose 2y ago
Paycheck to paycheck means what it says on the tin that these households consume as much as they earn. Its unlikely that necessary per the government actually captures all that is truly necessary let alone what folks consider necessary to live a reasonable life much of which is certainly either uncaptured or classified as ordinary. Redefining pay check to paycheck to a definition literally nobody but yourself uses and then concluding few fit this definition isn't useful.
insane_dreamer 2y ago
A car is not a luxury in America, but a necessity, due to the way US cities are constructed and low availability of public transport.

savingsPossible 2y ago

Can you provide some links? Searches understandably are finding more 'ordinary/necessary' expenses for business than for families

pembrook 2y ago
America blows past the rest of the developed world on disposable income per capita and it’s not even close: https://en.m.wikipedia.org/wiki/Disposable_household_and_per_capita_income https://en.m.wikipedia.org/wiki/Disposable_household_and_per... And before someone chimes in “that’s because of the billionaires throwing off the average!” Look at the median disposable income chart. America is still at the top. The median American is far wealthier than the median European person, even after accounting for things Americans normally complain about like healthcare, education costs, and retirement contributions. This results in some crazy stats, like the fact the median Mississippi resident has more disposable income than the average UK resident (and that includes financial hub London). And again, this is AFTER accounting for healthcare, education, etc costs.
- jorvi 2y ago
  > When taxes and mandatory contributions are subtracted from household income, the result is called net or disposable household income I don’t understand why Americans always have such a fetish about bragging about their disposable income. Once you allocate for payments into the welfare state, the difference becomes a lot smaller. And that’s not even mentioning the stark difference in quality of life, beyond “quality of life” graphs. Those graphs don’t account for having to wait 25+ minutes for the store to unlock steaks or vitamins from a security case. Or for mass tent camps in cities. Or Mmss drug deaths. Uncertainty of potable water. Access to and education on safe sex, abortion, etc. Walkability of cities. Whenever I meet Americans traveling Europe, they virtually always rave about how much better life seems over here.
  - deleted 2y ago
    [deleted]
  - pembrook 2y ago
    OECD disposable income per capita numbers already account for the benefits of the European welfare state vs. self funded ones in the US.
    - jorvi 2y ago
      > over the dominant anecdotal narrative > updating priors is hard [Upthread commenter edited his comment removing some stuff] It’s trivial to find complaints on the epidemic of security cases in American stores, and especially the fact that there’s not enough personnel in stores leading to long waiting times. In a similar vein, are you really going to claim with a straight face that America isn’t extremely car-centric anymore? > As someone who actually moved there, I can tell you the numbers are also anecdotally felt on the ground if you go outside of wealthy tourist capitals. Then you should travel more. I got these remarks even in smaller Croatian towns. I live in The Netherlands myself, and I’ve heard similar things said in mid-sized cities in Ireland, Spain, Portugal, Gdansk, Poland, Denmark, Sweden Bulgaria, hell even in Italy in a place like Naples. And if you’re gonna claim that wasn’t small town / countryside enough, do you really think quality of life is going to be higher in a hick town in Mississippi rather than a countryside town in Portugal? Not to mention the sliver of vacation days Americans have. Money isn’t life.

BobbyJo 2y ago

> This includes things like car payments on a new BMW or a mortgage on a big house This also includes car payments on a used honda, and a mortgage on a small condo no? Why the exaggeration?

aidenn0 2y ago
Because they were using those examples to illustrate the difference between necessary and ordinary expenses?
- Arainach 2y ago
  Doubtful. What metric determines between a "big house" or a "necessary house"? $400000 will buy you 3 bedrooms in some areas and not even an EPA-condemned quarter acre in some others.
  - tjbiddle 2y ago
    You're arguing the counter, but all you did was prove their point that these expenses can be classified according to a situation.
    - Arainach 2y ago
      I do not believe this Federal Reserve study can classify such things. It either has a metric which is so incorrect as to be worthless or a biased human judging a dataset so small as to be worthless. There are families which cram 3 generations and a dozen people into a few hundred square feet. There are people in Hong Kong living in spaces smaller than most American kitchens. By those metrics are we ALL in excessive lodging? Is it excessive to be in a 1600 square foot house whose mortgage is lower than rent for a 500 square foot studio because you bought when interest rates were far lower?
      - rohansingh 2y ago
        The point is that the Fed isn't classifying those things. "Ordinary" includes all primary mortgages, whether for a modest home or a luxury pad. It includes all personal car payments, whether for a shared Honda or a Maserati.

giantg2 2y ago

Are retirement savings considered ordinary expenses? If not, that could be a huge gap in this understanding.

Dalewyn 2y ago
Any reasonable argument should classify retirement savings as an ordinary expense, since those savings come out of your income stream and become inaccessible until retirement age unless you either pay hefty penalties or qualify for very specific exceptions.
jandrewrogers 2y ago
The criteria that makes a category of life expense "ordinary" (IIRC) is that the majority of households spend income on it, so it includes things like taxes, healthcare, and mobile phones. Typical American life as revealed by actual expenditure patterns, and BLS breaks each category down by income decile. I can't find precise data on retirement outflows and there are many possible ways to account for it (e.g. is Social Security contribution considered saving for retirement?) but what I can find seems to indicate that the majority of Americans do save for retirement, which would suggest it is an ordinary expense. The only category of "non-ordinary" that I recall being surprising was eating out at restaurants. I should know better, almost no one ate out at restaurants when and where I grew up, but my perspective has clearly been skewed over time by my own lifestyle.

bmitc 2y ago

> US Federal Reserve studies indicate that the percentage of US households with no excess income after necessary expenses (as distinct from "ordinary expenses" as a term of art) is on the order of 10-15%. This definition roughly matches most people's intuition of what "living paycheck-to-paycheck" means. That isn't nothing but it implies 85-90% of Americans are not actually living paycheck-to-paycheck. There is absolutely no way I believe those numbers unless they have defined necessary expenses to be unreasonably narrow.

SideQuark 2y ago
The good thing about well sourced data across millions of sample points that are prepared by professionals over decades of collection is that one should believe that data over anyone’s uninformed beliefs based on no carefully measured data over even a single person.
- bmitc 2y ago
  That's all well and good, so where's the link to the studies and the studies' parameters? It's not like I'm denying well presented findings. In absence of those, I can hold skepticism about the claims. My definition of paycheck to paycheck would be that if you lost your source of income you would not be able to afford living (housing, food, healthcare, insurance, etc.) within a certain window of time. The data can be easily manipulated depending on what you consider essential. I would be surprised if findings by the Federal Reserve include healthcare as a necessity or essential. It's easy to say it's not an essential if a family or individual never had it.
  - chii 2y ago
    > within a certain window of time. that's a big caveat. Most people are not able to live without a source of income through working. And this _should_ be the norm - most people _should_ be working in their adult lifetime. It should not be possible to live indefinitely without having to produce output that somebody in society needs (and thus is paying you to do so). The welfare state is to prevent the negative outcomes of someone in destitute, by preventing (or trying to prevent) crime, etc. It isn't there so that one can live free.

nielsbot 2y ago

So is your argument that there's no "affordability crisis" in the US?

Dalewyn 2y ago
The American economy keeps on chugging despite critics, but that doesn't mean the critics don't have a point. Costs of living (read: gas and eggs) are high, many would argue "unaffordable" even though most will still pay up. This means that: No, there is no "affordability crisis" in the literal sense. But there is an "unhappiness crisis", as in people aren't happy about how much money they have to spend. That crisis, the "unhappiness crisis" fueled Trump's upset landslide victory this election. The Affordability Camel's back isn't broken, yet, but the camel is declaring quite angrily that the point is very close.
- alwayslikethis 2y ago
  I'm not sure gas and eggs is the problem here. When people say cost of living, most of it is just rent or mortgage. To this end, I'm not sure if either party would be willing to do anything, as it primarily benefits the property-owning (older) class, which is the main part of the electorate.
  - HPsquared 2y ago
    And the politicians themselves tend to be property owners. Their donors, even more so.
  - Dalewyn 2y ago
    >I'm not sure gas and eggs is the problem here. When people say cost of living, most of it is just rent or mortgage. Rent/mortgage is just one part of the cost of living[1]. Even if you have a place to stay and sleep, you still need to clothe, bathe, and transport yourself and eat and drink to live. Cost of living is literally what it costs to live. [1]: https://www.investopedia.com/terms/c/cost-of-living.asp https://www.investopedia.com/terms/c/cost-of-living.asp

onemoresoop 2y ago

Or people crushed by student loans, rent and high costs of living could with a salary of say 100k end up living paycheck to paycheck more or less.

tmn 2y ago
That happens but they are presenting a statistical picture

standardUser 2y ago

> The median household can easily accumulate a million dollars in inflation-adjusted net worth, not including their house, over a 40 year career. That sounds like barely enough to retire on.

djbusby 2y ago
For reference elder care facility in CA Metro Area is like $20k/MO and in MA suburb is like $11k/mo. At $15k/mo you can get like 65 months of service. Not counting income from savings or SSI
- refactor_master 2y ago
  That’s pretty damning if life expectancy after retirement is another 15-20 years.
  - deleted 2y ago
    [deleted]
- alain94040 2y ago
  $20K/MO sounds exaggerated. A quick Google gives me Palo Alto was deemed the seventh most expensive location for assisted living in California, according to a new study by Mirador, a platform that helps people research nationwide assisted living locations. The average yearly cost of assisted living in Palo Alto is $91,177, compared to the state average of $63,927, according to the study. Source: From https://www.paloaltoonline.com/seniors/2024/10/04/study-reveals-palo-alto-assisted-living-costs-soar-above-state-rates/#:~:text=Janet%20Creelman%20and%20John%20Melton,between%20earnings%20and%20living%20costs https://www.paloaltoonline.com/seniors/2024/10/04/study-reve....
- 0xDEAFBEAD 2y ago
  I think the issue with elder care is about the balance of workers vs retirees, which is an problem (or will be a problem) in most developed countries.
Spivak 2y ago

uhtred 2y ago

Half your comment reads like chatgpt generated it. What's the point?

swat535 2y ago

Does this also account for things like Healthcare costs?

Retric 2y ago
Yes
- PittleyDunkin 2y ago
  Only some healthcare costs, sometimes, for some people, in some situations.
  - Retric 2y ago
    The vast majority of households don’t have significant uncovered medical expenses. There’s major issues that become rounding errors on these kinds of statistics. ~0.5% of the US population is incarcerated or homeless. It’s a lot of people and a major issue, but the US population is huge.
    - knappe 2y ago
      Yeah, no. "But millions of Americans who owe far more than $500 may not benefit — 1 in 4 U.S. adults with health care debt owe more than $5,000, according to a KFF poll conducted for this project; 1 in 8 owe more than $10,000." https://www.npr.org/sections/health-shots/2022/06/16/1104969627/medical-debt-upended-their-lives-heres-what-it-took-from-them https://www.npr.org/sections/health-shots/2022/06/16/1104969... And this is likely to be a severe undercount. Given that 1 in 4 Americans can't even afford treatment and so they just go untreated rather than take on the debt. https://www.usnews.com/news/health-news/articles/2024-11-21/1-in-4-americans-now-struggling-to-cover-medical-costs https://www.usnews.com/news/health-news/articles/2024-11-21/...
      - lovich 2y ago
        You’re switching units with that quote. It says 1 in 4 adults _with_ health care debt, not 1 in 4 adults of the whole population. How many Americans have health care debt?

lmpdev 2y ago

How about the same statistics but for working age population

dgoldstein0 2y ago

... And is $1 million enough to retire on? Practically what probably matters is "how many years do you have to work to take care of your basic needs after you retire, and how does this change if you (a) have medical problems (b) want kids (c) [add your other variants of ordinary life choices people should be able to make]"

refurb 2y ago
** ... And is $1 million enough to retire on?** More than enough. The vast majority retire on less and have comfortable retirements. Despite the narrative, Social Security pays out quite a lot and isn’t going insolvent any time soon. The average payout ($1,900) is more than double that of Canada ($850). A retired couple would have almost $4000/month in monthly income. Add on top a paid off home, Medicare eligibility, and Social Security, most people retire with a few hundred thousand, which is very comfortable in most of the US.
- harimau777 2y ago
  The big problem is transportation. Many retired people can no longer safely drive. That means that if they don't live someplace with solid public transportation then their quality of life drops. Unfortunately, all of the places in America with decent public transportation are expensive.
  - hollerith 2y ago
    If only there were a service that people who are too old to drive could use to buy a ride where they need to go.
    - db48x 2y ago
      Man, there’s a startup idea right there.
- Tempest1981 2y ago
  Are you assuming great health? Or rapid death? Nursing home care runs $8k/mo or more per person. And low-end ones can be sketchy... you hear horror stories. That $4k/mo won't be enough as you head into your 80s or 90s. Also consider inflation over 3 or 4 decades.

amluto 2y ago

IMO a major deficiency in this calculation is children. Raising children costs money, and families without enough income may not feel that they can afford to raise children, and they may therefore not have children. This means that their income looks better than it really ought to, and it also reduces the birth rate. And, while the US’s birth rate is not catastrophically low, it is below replacement. This may have some negative long-term consequences for the economy.

bobthepanda 2y ago
the thing is, this is happening across any remotely wealthy or developed country, and in that sense the US is actually the ninth highest birthrate in the OECD and well above the average. The only OECD country with fertility rates above 2 is Israel, and that's mostly because the ultra-Orthodox have really high birth rates.
kortilla 2y ago
But the birth rate is on par with the rivals it’s being compared to in this article/thread.
jerojero 2y ago
One interesting thing about birthrates that I think most people haven't really looked at is the data segregated by age groups. In most countries with falling birthrates (save some exceptions like Japan) a huge part of this decrease is in the 15-25 age group. There is usually also a decline in the 25-29 but there's an increase or the same rates as we've had historically on the 30+ range. What this mean is basically that we've eradicated teen pregnancy, and that's definitely something desirable in a developed society.
- Vanclief 2y ago
  I am all for preventing teen pregnancy, but the data sounds more like young people can't afford having children so they are waiting longer.
  - 2y ago

harimau777 2y ago

The problem that I see is that a million in net worth isn't enough to have a good retirement anymore now that rent is $2-3k a month in most major cities.

xenospn 2y ago
Save in America, retire elsewhere
- silisili 2y ago
  Ah yes, let's burden some third world nation with an entire class of people who produce no value, and raise the costs of housing and goods for everyone around them. I'm not saying it's not smart, it's just not very savory, and isn't a great solution for the longer term.
  - xenospn 2y ago
    What do you mean? They literally bring in money for free. It’s the best type of value.
    - listenallyall 2y ago
      Retirees don't earn income, so don't pay income tax. Increased demand for housing raises prices for everyone including natives. And typically, retirees require healthcare services well above the population average.
      - xenospn 2y ago
        Counterpoint: all they do is consume, pay sales tax, and quite possibly fly home for healthcare.
        listenallyall 2y ago
        Yes, some do. But others don't, and your earlier assertion "they bring in money for free" is certainly not universally true.

PittleyDunkin 2y ago

> households with no excess income after necessary expenses (as distinct from "ordinary expenses" as a term of art) is on the order of 10-15%. Any chance to translate to plain english? The keywords "neccesary" and "ordinary" indicate rhetorical bullshit is afoot.

acchow 2y ago
A $700/mth new-ish car is quite ordinary for many Americans, but they probably only "need" something about half that price. A Netflix subscription is ordinary but not necessary.
- PittleyDunkin 2y ago
  Ok I understand it's possible to use these terms as if they have meaning to some demographic somewhere, but what is the point of using them without actually referring to the necessary figures to figure out what they actually mean to the rest of us? Also: fuck me, if americans have a 700/month car payment on average most americans you're likely to interact with on a daily basis will be deep under the poverty line. Like, the actual poverty line of "struggling to survive", not the bullshit metric used to cut people off from welfare.
  - acchow 2y ago
    It’s quite common in the middle class and below in the US to spend every extra dollar you make as your income rises. This means, despite getting promotions or raises, your a savings rate remains zero (or negative). One primary way to increase spending is a vehicle upgrade. Most vehicles sold are used vehicles. But if you consider only the new vehicles, the average monthly payment for new vehicles is about $740/mth.

ulfw 2y ago

I'd be careful with statistics like this. Who defines what car is "necessary" (or is no car necessary in car-centric America?) vs "ordinary"?

abenga 2y ago

Why would we assume that "people across the economy reduce spending" == "people across the economy will have more money"? Don't at least some (I would say many) of the people in the economy make income from this unnecessary spending?

dataflow 2y ago

> There is another 25-30% of households that spend all of their income on ordinary expenses beyond necessary expenses. > This includes things like car payments on a new BMW or a mortgage So you're not accounting at all for how much of your income goes toward e.g. interest on the loan vs. the principal? Isn't that kinda important? Also, do car loans for cheaper cars somehow not fall in this picture? Why do you portray people as buying new BMWs when all cars in general have gotten so expensive?

ProxCoques 2y ago

Also by the Fed: 4 in 10 Americans lack enough money to cover a $400 emergency expense: https://fortune.com/2023/05/23/inflation-economy-consumer-finances-americans-cant-cover-emergency-expense-federal-reserve/ https://fortune.com/2023/05/23/inflation-economy-consumer-fi...

0xDEAFBEAD 2y ago
Perhaps because 4 in 10 Americans are bad with money. As jandrewrogers stated, Americans are not good savers. (I believe this is a big contributor to our trade deficit as well.)
- xvector 2y ago
  To be honest, you don't really want people saving too much in a healthy economy. You want them spending.
  - Joker_vD 2y ago
    But then where would the investment come from?
CalRobert 2y ago
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? Response Percent Put it on my credit card and pay it off in full at the next statement 37 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 7 I wouldn't be able to pay for the expense right now 13 Note: Number of unweighted respondents 11,400 from https://www.federalreserve.gov/publications/files/2023-supplement-economic-well-being-us-households-202405.pdf https://www.federalreserve.gov/publications/files/2023-suppl...
- n4r9 2y ago

rbanffy 2y ago

If 10-15% of American families live from paycheck to paycheck, it means pretty much everyone knows someone who’s struggling. Another aspect of these numbers is how much of the ordinary expenses are not luxury items but things like a car (because public transport is terrible), childcare (because people need to work to pay for it and the car that’s needed to shuttle kids around) and some healthcare (because public healthcare is nonexistent). Americans pay a lot of money for things other developed countries would say is a basic human right.

PeterStuer 2y ago
"If 10-15% of American families live from paycheck to paycheck, it means pretty much everyone knows someone who’s struggling" Not really. Most social groups are fairly homogeneous. Even those that view themselves as knowing a wide swat of people from all sorts of live are unaware that beyond some superficial diversity they tend to have unconsciously selected for commonality of outlook and context. I learned this at a young age when due to circumstance I elected to do my back then obligatory military service year before going to university as opposed to all my friends that first finished their studies and then (mostly) opted for the 'conscientious objector' route and spend 24 months in civil service. Going into the army without a degree you get to spend a lot of time with many people that can't read or write, could not finish high-school, never had opened a book or seen any of the films or heard the music your mates loved. Often violence and making baffling poor health and safety decisions were a very frequent occurrence. What I'm saying is that unless forced by circumstances beyond your control, your circle of acquaintance is probably less a cross cut of society than you imagine.
- rbanffy 2y ago
  That’s a very good point. Some people will know nobody who’s struggling while others will know many. Opening eyes and ears to the suffering of others is a deliberate choice.

michaelmrose 2y ago

Paycheck to paycheck means what it says on the tin that these households consume as much as they earn. Its unlikely that necessary per the government actually captures all that is truly necessary let alone what folks consider necessary to live a reasonable life much of which is certainly either uncaptured or classified as ordinary. Redefining pay check to paycheck to a definition literally nobody but yourself uses and then concluding few fit this definition isn't useful.

insane_dreamer 2y ago

A car is not a luxury in America, but a necessity, due to the way US cities are constructed and low availability of public transport.