78% of Americans live paycheck to paycheck

[mattee2264]

Post-pandemic I can definitely understand the issue.

 

Official government statistics claim that the price level has risen about 20-30% since the pandemic. But in the real world it is probably more like 50% especially for items such as groceries, entertainment, restaurants, travel etc. and salaries haven't even kept up with official inflation rates. 

 

You are seeing the cost of some items such as groceries come down. But a lot of companies have been able to get away with jacking up prices using the pandemic supply chain disruptions as an excuse and when these disruptions eased and their costs came down didn't pass on the lower costs to consumers. And got away with it because consumers had excess savings from the pandemic, unemployment is low, in many cases mortgage payments are low as people refinanced during the pandemic, and consumers have credit cards that allow them to live beyond their means at least in the short term. You also have some criminal buy now pay later schemes (phantom debt) to trap consumers. 

 

Wouldn't be the worst thing in the world if we did have a recession, a lot of credit card defaults, and companies were forced to lower prices (and margins are still close to record highs) so they can easily afford to do so. 

 

Edited May 17 by mattee2264

[Castanza]

54 minutes ago, mattee2264 said:

Post-pandemic I can definitely understand the issue.

 

Official government statistics claim that the price level has risen about 20-30% since the pandemic. But in the real world it is probably more like 50% especially for items such as groceries, entertainment, restaurants, travel etc. and salaries haven't even kept up with official inflation rates. 

 

You are seeing the cost of some items such as groceries come down. But a lot of companies have been able to get away with jacking up prices using the pandemic supply chain disruptions as an excuse and when these disruptions eased and their costs came down didn't pass on the lower costs to consumers. And got away with it because consumers had excess savings from the pandemic, unemployment is low, in many cases mortgage payments are low as people refinanced during the pandemic, and consumers have credit cards that allow them to live beyond their means at least in the short term. You also have some criminal buy now pay later schemes (phantom debt) to trap consumers. 

 

Wouldn't be the worst thing in the world if we did have a recession, a lot of credit card defaults, and companies were forced to lower prices (and margins are still close to record highs) so they can easily afford to do so. 

 

While true to some degree it still doesn’t account for poor personal finance decisions. In fact it highlights it. People spent more than they had pre and post pandemic.
 

The middle management couple with matching BMWs sitting in the driveway pre pandemic probably aren’t springing for 5 year old Accords post pandemic. 
 

Live below your means, save at least 20%. Don’t go shopping for things you don’t need. 

[boilermaker75]

4 hours ago, Paarslaars said:

Well daughters are a hell of a lot more expensive than women. 

 

That is for sure. We were just in LA and my wife took our daughter out shopping for a rain coat. The result? Burberry $2,200. At least it has two D-rings for hand grenades!

[boilermaker75]

4 hours ago, Paarslaars said:

Well daughters are a hell of a lot more expensive than women. 

 

That is for sure. We were just in LA and my wife took our daughter out shopping for a rain coat. The result? Burberry $2,200. At least it has two D-rings for hand grenades!

[Castanza]

5 minutes ago, boilermaker75 said:

 

That is for sure. We were just in LA and my wife took our daughter out shopping for a rain coat. The result? Burberry $2,200. At least it has two D-rings for hand grenades!

 

Does she at least live in the PNW? 

[boilermaker75]

14 minutes ago, Castanza said:

 

Does she at least live in the PNW? 

 

No, and I thought it never rains in southern California, LOL.

 

She goes to NYC and England for work a lot so the need. Plus in her business she has to "dress" the part.

 

 

[Castanza]

5 minutes ago, boilermaker75 said:

No, and I thought it never rains in southern California, LOL.

 

[Eng12345]

19 hours ago, Castanza said:

 

Rich is somewhat relative to your peers income and areas cost of living. 2-5k a month in savings is not a negligible amount and at an average market return would could net you upwards of ~13m at 65 if we assume you're around 30. 

 

Personally I think people spend too much, buy too much house, drive too nice of vehicles and in general finance too much. I see a lot of 250k houses with 125k worth of vehicles parked in the driveways. 

 

I think we say the same thing Castanza. 

 

To my friends and family I appear rich - my house is nice and we go on vacation 1-2 a year. What they don't see is that I will work 2800 hours in a year on average  and she does overtime as well. My truck is 11 years old and only has 100k on it. I think its too rich for my blood to be honest. I miss the old ford ranger of college days. 

 

Decisions have consequences and half the population is below average intelligence, so its not surprising that half of Americans (taking the survery results lightly) have made a series of decisions to live paycheck to paycheck

[SharperDingaan]

The reality is that most people just can't apply what they know; a good many of the financially very literate also live paycheck to paycheck. Way back in the day a crusty old gent (and very good smuggler) pointed three things out to us .....

 

When millions of people can't live paycheck to paycheck anymore, should something go wrong there are way bigger economic problems than their ineptness; and the authorities will go to extraordinary lengths to bail everyone out. In financial circles we know it as the fed 'put', and 'too big to fail', at the retail level we know it as helicopter money outside of the usual social services net. It's an entirely rational approach, and an individual only needs to be a little bit better than the other guy; not the propaganda fed by the financial press. 

 

Every investment portfolio has three outputs: (1) dividend income to live on, (2) growth > inflation to maintain purchasing power, (3) trading gains to pay for the bucket list. Within a tax deferred portfolio (RRSP, etc.), over the course of a year a reasonably enterprising lad/lass should be able to a net a 10% swing trading gain on a 500K portfolio, over/above the net buy/hold growth requirement of the portfolio itself. Trading gains are 'house' money, systematically take them off the table, pay the tax, and enjoy yourself - while you still can. 

 

Inflation is a pyramid; 2% x the square base of the pyramid x money turnover, divided over the much smaller collection base at the top of the pyramid, is a clever trick. The more economic activity the higher the money turnover, the more economic activity affected the larger the pyramid's base, and the much more the collection at the top of the pyramid. Recognise how the game works .... then help yourself.

 

Sadly the man has now passed, and we're all the poorer for it.

 

SD 

 

 

Edited May 20 by SharperDingaan

[schin]

Maybe, that the natural order and balance in life. Most people will not get it.

 

Thoreau's quote is spot on:

"Most men lead lives of quiet desperation"

 

I keep telling my friend, I wasn't born to be a feeder fish..... 

[Santayana]

12 hours ago, DooDiligence said:

George Best enters the conversation.

Is this your way of answering the how old are you thread?  I got to see him play a couple of times in his later NASL days.

[rkbabang]

Unfortunately the average person has a high time preference and there is nothing you can do for them. The relatively rare low time preference individuals turn out fine, the rest are just hopeless.  There really isn’t anything that can be done as high time preference people will always make the wrong choices regardless of their situation and regardless of their education or any advice or handouts they receive. 

 

https://jamesclear.com/delayed-gratification

[schin]

1 hour ago, rkbabang said:

Unfortunately the average person has a high time preference and there is nothing you can do for them. The relatively rare low time preference individuals turn out fine, the rest are just hopeless.  There really isn’t anything that can be done as high time preference people will always make the wrong choices regardless of their situation and regardless of their education or any advice or handouts they receive. 

 

https://jamesclear.com/delayed-gratification

 

 

Strange -- I did a broccoli experiment with kids and they didn't eat it when I left and when I gave them twice as much afterward, they passed.. hmmm...

[rkbabang]

30 minutes ago, schin said:

 

 

Strange -- I did a broccoli experiment with kids and they didn't eat it when I left and when I gave them twice as much afterward, they passed.. hmmm...

 

 

It doesn't work with brussels spouts or math homework either.  I think it needs to be something they actually want. 

[Parsad]

17 minutes ago, rkbabang said:

 

 

It doesn't work with brussels spouts or math homework either.  I think it needs to be something they actually want. 

 

I loved both!  Probably one of the few kids to eat brussels sprouts.  Cheers!

[AzCactus]

I think the four biggest drivers here (nothing mind blowing) are:

• Expenses- Necessary expenses like rent, food, utilities etc.  If this is a higher % of overall budget saving is hard.
• Income-Probably more obvious then expenses but similar mindset.  The less you make the harder it is to save.
• Behavior-Probably underrated.  I see most things falling into needs, wants and desires.  We need to eat-$4/meal, we want Chipotle-$10/meal and we desire the steakhouse at $40/meal.  Too many people get this wrong not only with food but other things like autos, houses, clothes etc.
• Time allocation-kinda ties income income.  The way that people spend their discretionary time is critical.  If you don't have money maybe Ubering, Instacarting or other second jobs are better uses of time than going to a bar and watching rich athletes do their job.  

[james22]

To be fair, there's a boating forum I frequent that has convinced me some really do understand the costs but choose to spend when young when they can best enjoy it and because no one can take their memories away.

 

The older members don't regret their decisions at all.

 

 

[SharperDingaan]

4 hours ago, rkbabang said:

Unfortunately the average person has a high time preference and there is nothing you can do for them. The relatively rare low time preference individuals turn out fine, the rest are just hopeless.  There really isn’t anything that can be done as high time preference people will always make the wrong choices regardless of their situation and regardless of their education or any advice or handouts they receive. 

 

https://jamesclear.com/delayed-gratification

 

A lot of it is also natural shrewdness/strategic planning; our gent had it in spades and while I thought I was pretty good at this, I quickly learnt that I was playing hockey against a Gretzky. At the time, I was practised at playing multiple simultaneous games of chess and keeping everything straight, but had to sweat like a pig to match him, even after he'd had a few drinks.

 

One of those people who probably invented game theory by trial and error, whereas Nash just wrote it down. Fortunately there aren't too many of these folks, so it leaves enough crumbs for the rest of us mere mortals!

 

SD

Edited May 17 by SharperDingaan

[nsx5200]

The system's rigged against the common naivete.  IMHO, these are the major input that leads to such poor outcome:

- Bell curve, half of the people are below average intelligence

- Built in cognitive bias thinking they are smarter than others (https://en.wikipedia.org/wiki/Illusory_superiority), AND thinking they can outsmart most people, even when they're below average intelligence.

- Herd mentality/keeping-up-with-the-jones/envy pushes those making less money to keep up with the spending of those making more money in the same group.

- Marketing promotes unnecessary spending due to a side-effect of free market capitalism.  Worse, marketing is one of those things that scales, so the best marketing will take over the lesser marketing, causing greater overall effects that leads to money to separate from people.

- Coupling all the above elements leads to such Lollapalooza Effect.

 

So somebody who, by default, is not trained to see these forces and act against them will lead to the separation of their money unnecessarily.

 

You can see it everywhere... people wanting a bigger/second house, luxury car, mechanical watches, the latest smart phone, Birkin bags, and even Stanley water bottles too.  I remember getting sucked into collecting Garbage Pail cards back in the day.  Get them while they're young.  Looking at Charlie and Buffet, they've pretty much avoided all those (except for the Indefensible).

 

IMHO, this is really the ultimate truth to building wealth:  "you become rich, literally, the moment you don't desire, or have the need for more money".  Reminds of this clip from The Devil's Advocate.

 

But thinking about the alternative if everybody lived like Buffet and Munger... I can see the destruction of many many industries.  I guess we've seen a mini-version of that through cancel culture, but rise of new ones in social media, so it probably have gotten worse.

[LC]

8 hours ago, james22 said:

To be fair, there's a boating forum I frequent that has convinced me some really do understand the costs but choose to spend when young when they can best enjoy it and because no one can take their memories away.

 

The older members don't regret their decisions at all.

 

 

doesn’t just go for boating- I spend a lot on travel and the activities I enjoy. I won’t be able to ski with the same intensity in 10-20 years, so I’ll spend 10k today to maximize that experience while I can. 

[Gamecock-YT]

3 hours ago, nsx5200 said:

"you become rich, literally, the moment you don't desire"

 

 

The Four Noble Truths of Buddhism in a nutshell.

Edited May 18 by Gamecock-YT

[mattee2264]

Reminds me of the book "Millionaire Next Door". To actually accumulate a lot of wealth you need to live at least a socioeconomic level or two below your means. 

That is difficult especially when in this day and age even a middle class lifestyle is very expensive with the spiralling cost of housing, childcare, groceries etc. And even if you are prepared to make those sacrifices your wife and children might not. And the alternative of chasing money by working in well paid jobs with long hours and high stress may allow you to maintain a high standard of living while still managing to save a lot of money (not least because you do not have time to spend it!) but that has its downsides such as not seeing much of your friends and families and slaving away in a job you don't enjoy because let's face it not everyone tap dances to work like Buffett does!  

 

And there is the risk of going to the other extreme. You read a bit about the FIRE crowd who are trying to save half their pay checks in the hope of retiring early. But it doesn't sound like much of a life. And even if it works out who's to say you don't drop dead at 50 from a heart attack or suffer ill health in old age so you end up housebound and unable to enjoy your life much. And when you are old you may end up regretting not spending more time in your youth boozing, chasing girls, going on adventure holidays etc. Whereas if you had a lot of fun in your younger years it may be easier to slow down in your old age and enjoy a much simpler and less expensive lifestyle. 

 

 

[villainx]

14 hours ago, Parsad said:

 

I loved both!  Probably one of the few kids to eat brussels sprouts.  Cheers!

can’t imagine math homework tasting good. 
 

[mattee2264]

 Oh and another thing. Everyone knows that massive amounts of excess savings were built up over the pandemic. In part this was because of stimmy checks and a stock market where retail traders made hay. But another factor was that if you can't travel, if you can't eat out, if you can't party and go to bars, if you spend all your time at home watching Netflix, and none of your peers can do so either then of course you are going to wind up saving a huge amount of money. 

 

 

[DooDiligence]

On 5/17/2024 at 9:52 AM, Santayana said:

Is this your way of answering the how old are you thread?  I got to see him play a couple of times in his later NASL days.

 

Yes. I (62yom) went to Catholic school in Mobile, AL when he was still at Man U. Played soccer at St. Pius X and our coach (Fr. Nicolas) was straight from the motherland. I had nun's all the way to the 7th grade and thought most of them were IRA terrorists. I still get nervous when I hear Edelweiss because of the trauma of sister Gertrude's music class. Was an alter boy, love fart jokes and my Dad grew up in the UK. Dribble on brother!

 

edit: I don't keep up with what's going on in the game now but do catch important matches. Don't care who wins, just enjoy watching the artistry.

Edited May 18 by DooDiligence