78% of Americans live paycheck to paycheck

[nsx5200]

1 minute ago, Luca said:

Sorry, since when is an "engineer" somehow representable for the average worker? 8m net worth for a janitor? I am jealous of your worldview, people just need to buckle up, system works wonderful and you only need to stop buying your Starbucks coffee! Easy! 

 

https://finance.yahoo.com/news/janitor-vermont-amassed-8m-fortune-140000770.html

 

I think engineering is one of those discipline that has a harder-to-get-to path to reach, but has a more known reward path.  Most people don't take it because it's just a harder grind.

 

I'm not saying that everything in this world works great, and I think a lot the 'default modes' needs to be changed such that the 'default mode' is to get people to save instead of spend, which I think is showing up in the 401k systems where companies now default to put in some small amount.  The problem arise is when people see their statement with their accumulated 'wealth', and are tempted to access it to spend again.  Again with the lack of mental muscle to do these now/future tradeoffs.  It would be nice if everybody got some training to build up this muscle as part of their standard education.

 

My father's family actually been in a long period of terrible debt due to, essentially bad business decision similar to Citibank's fat fingering, and the whole family had to grind our way out.  Reading some of the stories about the other members on this board that come essentially very little, and yet able to accumulate to be comfortable, I think speaks to the power of grinding.  So, yeah, those $100 cellular phone bills and $10 Spotify subscriptions goes in my bucket of not-willing-to-grind pile.  Even now, I will balk at paying $10 Spotify for something that is accessible for free. $120/year... who knows how much it really would be compounded over 30 years. 

 

Crawling through some of the reddit personalfinance/povertyfinance's budgeting threads, and you'll find some of those type of spendings... sigh.  If there were some better default modes. 

[SharperDingaan]

Lot of folks think the Europeans actually have it right; drive towards the 'average' where most people actually are. Rich or poor, everyone in the same group/class is pretty much the same, needs to live somewhere, and if you like the culture and want the best work-life balance possible ... it's pretty hard to beat. Doesn't mean the outliers have to make their money there, but once you have your stash; would you prefer to retire to New York/San Francisco, or a Paris/Barcelona/Milan/Brussels etc? 

 

Wealth just gives you options, but to realise that - you either have to be wealthy, or have learnt it from others who are wealthy. If you never learn it, you have no reason to think anything is amiss ('cause the majority of people, that 78%, is just like me!), and ignorance is bliss. So don't tell me how I'm being manipulated .... and get the f*** off my cloud!

 

Key is that you don't have to work in the same place that you retire to, and we have reliable transportation that will quickly get us to/from almost anywhere. We just don't think of a lifetime of working in NA, and a retirement in a different part of the world.

 

Ever the heretic!

 

SD 

 

 

Edited May 26 by SharperDingaan

[james22]

56 minutes ago, Luca said:

I think that 95% of the board thinks that getting wealthy is as easy as you described . . .

 

You confuse easy with achievable. Getting wealthy is not easy, but achievable.

 

56 minutes ago, Luca said:

. . . people who are not wealthy just spend their money on useless junk and its their fault!

 

People who are not fit just don't diet or exercise and it's their fault!

 

56 minutes ago, Luca said:

Why does this thread even exist? To reconfirm your opinions and circle jerk on the dumb fucks that cant save? xD

 

It's not a matter of opinion: people can get wealthy by saving and investing.

[nsx5200]

21 minutes ago, SharperDingaan said:

If you never learn it, you have no reason to think anything is amiss ('cause the majority of people, that 78%, is just like me!), and ignorance is bliss. So don't tell me how I'm being manipulated .... and get the f*** off my cloud!

This is probably apt:

"Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist" - John Maynard Keynes

 

The same concept is probably relevant to the cloud/social media as well.  Except the defunct economists are now the still-alive tech moguls.  Nothing's terribly wrong with ignorance is bliss, as that is the default mode, but there are probably better ways.

[Luca]

1 hour ago, james22 said:

 

You confuse easy with achievable. Getting wealthy is not easy, but achievable.

 

 

People who are not fit just don't diet or exercise and it's their fault!

 

 

It's not a matter of opinion: people can get wealthy by saving and investing.

Everybody can become a billionaire! 

[schin]

3 hours ago, nsx5200 said:

I read somewhere that language provides the framework in which the mind thinks.  A language like Chinese has less focus on time, so Chinese speakers are forced to consider the past, present and future, whereas a language like English with clear delineation for the past, present, and future only considers one of those three states.  So a English speaker will typically think in the now, and not consider their future self, and thus affecting their default savings, which I think shows up in the difference in savings rate.

 

 

Uh.. maybe... but, I think the cultural revolution will have a lot do with it.. US and the Great Generation had that trauma of the Great Depression... and the Chinese had the Cultural Revolution and communism -- which was the buzzkill. One could only control their cost... China had their version of the Roaring 20s..... and then, WW1, WW2, and the Cultural Revolution kinda put everything into perspective.... 

[schin]

30 minutes ago, Luca said:

Everybody can become a billionaire! 

 

@Luca - I like what you have to say.. what is your TikTok or Insta? I will heart your posts! LOL.

[Luca]

Our investment gains are someone else's spending. There has to be a mass consumer class for investors to get rich on Starbucks, Apple, and Nintendo investments. If everybody becomes a Ramsey hustler and saver, then one won't have spectacular gains. Yes, you can get rich if you save and invest your money but this depends on circumstances. If you went to a good university, studied something like engineering, accounting, etc, then are able to lay things aside while maintaining a reasonable quality of life with your family->you will make reasonable money over your life. On the other hand, if you come from a family with poor educational background, live in a bad neighborhood, local state school that has low quality, etc, your odds are really not in your favor, and sure, you could pull yourself up and still make a living but over the last 30-40 years society in the west became a lot more gentrified...many people are left behind, family background and networking is more and more a predictor of your financial future then it was in the 60-70s. Corporate America has been and is shifted against the normie worker and politics play a role here for what its worth.

[vinod1]

I always wonder about this: I know a couple of illegal immigrants from Mexico who cannot speak any english, do not have a permit to work legally in the US, are not qualified/employable in vast majority of the available jobs. Yet, they are able to earn enough money to not only sustain themselves, but send money to support their families back home. I believe this is fairly common.

 

How is it then that someone who is born in the US, who is eligible to work, speaks the language, knows the system, yet is not able to support themselves?

 

Outside of physical or mental health issues, I think anyone born and brought up in the US, should be able to live a comfortable life. 

 

On an entirely separate point..

 

Living paycheck to paycheck might be a very rational decision. Maybe those of us on the forum are the suckers? Every year of life counts as much as any other. Your happiness in the year when you are age 27 should have the same weight as your happiness in the year when you would be 77. So if someone is spending their entire salary to optimize for current happiness, why should that be looked down upon? Those of us furiously saving in younger years for presumed happiness from being able to spend in later years, might not be so different when happiness is weighted equally over all years of life.

 

I was thinking about the above specifically from a children's education point of view: should children be working hard, optimizing for college admissions, later career payoffs, etc. but it also seemed applicable to this case.

 

Vinod

[cubsfan]

I believe it was the Manhattan Institute that published their study of poverty, just a few years ago.

 

Want to stay out of poverty OR rise out of poverty?

 

Do these 3 things:

 

1- Finish High School

2- Don't have children out of wedlock

3- Start working right away

 

Your success is pretty much assured.

 

None of this is hard at all. But it does take discipline and losing the "victimhood" complex.

 

 

[RedLion]

I think an interesting point that @Parsad alluded to above while referring to his family’s story, is that  though 22% of the population are savers, there are still savers in even the lowest 20th percentile of earners. 
 

I’m sure there’s a lot of overlap between the top 22% of earners and the top 22% of savers, but I’d love to see those statistics. I bet there are a fair number of savers across all income spectrums. 

Edited May 26 by RedLion

[Gregmal]

6 minutes ago, vinod1 said:

Your happiness in the year when you are age 27 should have the same weight as your happiness in the year when you would be 77.

Nope. Happiness IMO at 27 is worth multiples more than at 77. For one, when you’re 27, 77 is not guaranteed. 2, your physical capabilities at 27 easily allow for higher quality engagement than at 77. Three, the opportunity set at 27 is far greater. Four, you have plenty of time to earn the money back. 
 

Think about anything worth doing. Sports, partying, fucking, crazy trips with friends and family. No way in hell 77 is the same as 27 with regards to the quality of any of those activities. People need to have balance but skew their resources to where they are in life and appreciate both the opportunities and the limitations. 

[cubsfan]

Actually - it was the Brookings Institute - from 2013:

 

https://www.brookings.edu/articles/three-simple-rules-poor-teens-should-follow-to-join-the-middle-class/

 

-least finish high school,

-get a full-time job

-wait until age 21 to get married and have children.

 

Our research shows that of American adults who followed these three simple rules, only about 2 percent are in poverty and nearly 75 percent have joined the middle class (defined as earning around $55,000 or more per year). 

[blakehampton]

1 hour ago, Gregmal said:

Nope. Happiness IMO at 27 is worth multiples more than at 77. For one, when you’re 27, 77 is not guaranteed. 2, your physical capabilities at 27 easily allow for higher quality engagement than at 77. Three, the opportunity set at 27 is far greater. Four, you have plenty of time to earn the money back. 
 

Think about anything worth doing. Sports, partying, fucking, crazy trips with friends and family. No way in hell 77 is the same as 27 with regards to the quality of any of those activities. People need to have balance but skew their resources to where they are in life and appreciate both the opportunities and the limitations. 

I can do all of those listed activities for cheap/free. The only one that I couldn’t is the crazy trips but flying sucks anyways.

 

A backyard fire with friends and some beer is where it’s at.

[Gregmal]

31 minutes ago, blakehampton said:

I can do all of those listed activities for cheap/free. The only one that I couldn’t is the crazy trips but flying sucks anyways.

 

A backyard fire with friends and some beer is where it’s at.

There’s correlation. People who work too much and are frugal for some far down the line purpose are often not maximizing the quality of life aspect. I’d much rather be 30 and on the more liberal side of spending and experiencing life than 50 with financial freedom but a tedious previous 30 years of existence 

[Jaygo]

2 hours ago, Gregmal said:

Nope. Happiness IMO at 27 is worth multiples more than at 77. For one, when you’re 27, 77 is not guaranteed. 2, your physical capabilities at 27 easily allow for higher quality engagement than at 77. Three, the opportunity set at 27 is far greater. Four, you have plenty of time to earn the money back. 
 

Think about anything worth doing. Sports, partying, fucking, crazy trips with friends and family. No way in hell 77 is the same as 27 with regards to the quality of any of those activities. People need to have balance but skew their resources to where they are in life and appreciate both the opportunities and the limitations. 

yeah but fucking is free, rock climbing, camping and drinking beer floating on a raft in a river is free. The best things in life are free. Its the idiots who cant figure that out who spend all their money. 

 

Id rather be poor at 27 than poor at 77 so id say work hard, play hard but dont kill your future by spending every cent for "fun" 

 

Drugs are fun too but do too many at 27 and the rest of your life will be degraded. Spending is similar

 

[boilermaker75]

11 hours ago, cubsfan said:

The opportunities in the US are tremendous, even today - especially in the tech business, those opportunities are off the charts. I'd encourage any young "naysayer" to read a book like Outliers.

 

No shortcuts, no easy way, only commitment.

 

Or read "Keys to Learning: Unlocking Your Brain's Potential"

 

Seriously, if you followed the advice in this book starting in your teens you would end up in the top 2% and probably be able to do at 77 90% of what you could do at 27. I'll let you know in 6 years.

[RichardGibbons]

7 hours ago, cubsfan said:

But it does take discipline and losing the "victimhood" complex.

 

The negative outcomes from having a "victim complex" has substantial scientific support from locus of control studies.

 

People with an internal locus of control have both higher savings rates and higher earnings. In contrast, people who believe that the world is largely responsible for their outcomes or that outcomes are just a matter of luck tend to have lower savings rates and earnings.

[Luca]

7 hours ago, Jaygo said:

yeah but fucking is free, rock climbing, camping and drinking beer floating on a raft in a river is free. The best things in life are free. Its the idiots who cant figure that out who spend all their money. 

 

Id rather be poor at 27 than poor at 77 so id say work hard, play hard but dont kill your future by spending every cent for "fun" 

 

Drugs are fun too but do too many at 27 and the rest of your life will be degraded. Spending is similar

 

Haha well said, sometimes I go fishing in the nature reserve around the corner, and I pay 30 USD a year for a license, it's fucking free and absolutely stunning when the sun goes down, just me and nature, the silence, some good pikes...

 

Right now the opportunity set in the US and West is different than in the 70s, GDP is growing slower, the West faces birthrate crises, the market is expensive and more efficient, housing is comparably more expensive, the market has become more concentrated...nonetheless, the ones who want to find opportunities will find them. 

[mattee2264]

The challenge because of the way humans are wired is that for most people the only way to get rich is SLOWLY. 

 

That is why for most people buying a house and pension salary sacrifice schemes do the heavy lifting.

 

A mortgage is a form of forced saving and the human desire to buy as big a house as they can possibly afford also means they end up "saving" a high percentage of their income in the form of mortgage payments. 

 

Pension salary sacrifice schemes aren't anywhere near as generous as final salary schemes (which were predicated on most people not living long after retirement!) and most people only do the minimum salary sacrifice but there are tax benefits, returns are juiced a bit by any employer match and as it is automatically deducted from your salary you cannot spend the funds.

 

With the above in place even living pay check to pay check even on a middle income you can still hope for a comfortable retirement assuming long term returns on stocks aren't too far from the historical average and real estate prices keep up with inflation as they have done historically.

 

Although without the tailwind of 40 years of falling interest rates which has only just started to reverse and the phasing out of final salary pension schemes  there aren't going to be many people who will be retiring rich. 

 

Basic financial maths tells you that all things being equal long term equity returns are going to be lower from high starting valuations than from low starting valuations and real returns are likely to be more disappointing because stock markets are still pricing in a low inflation environment (just as in the early 80s they were still pricing in a high inflation environment). So rather than 6-7% real returns you'd probably get half that. And while historically you could usually get about 2% real on long bonds for that to be the case today you have to be confident that the Fed can get inflation back down to target and keep it there which seems highly unlikely when there are very strong political incentives to engineer financial repression to help ease the government debt burden and continue to encourage people to take equity risk.

 

Lower expected returns from a typical 60/40 portfolio can be offset by taking more equity risk and 80/20 is gaining popularity. And a lot of retail investors are using leveraged S&P 500 ETFs and made money buying call options on popular tech stocks. But it is called equity risk for a reason and eventually those risks will materialize and most people overestimate their risk tolerance and risk capability especially during a period where returns have been generous and downturns have never lasted more than a year and been quickly reversed. 

 

Lower expected returns can also be offset by saving more. Most people even in today's climate can still find a way to save 10% of their income just by avoiding impulse buys, budgeting sensibly and so on. But with housing now unaffordable in most of the country and prices of most things 30-50% higher than pre-pandemic (while wages increases after the tax cut are a fraction of that) to save much more than that does require a good dose of frugality which doesn't come naturally to today's generation. 

 

Most people saved a lot during the pandemic because they couldn't travel, couldn't go to restaurants or bars etc. and no-one else could which meant you were forced to socialize in the park or at each other's homes. But those times were pretty miserable for most. 

 

As for the idea that sex is free. That may be true when you are young when there is a hook up culture and girls care more about your looks and popularity than your bank account. But for most men dating is expensive especially in big cities and the more attractive the woman the more high maintenance she is likely to be. 

 

 

[SharperDingaan]

After automatic deduction of pension contribution and mortgage; living paycheck to paycheck is quite normal, and just not a problem. Your job is to just stay employed, and have a large enough 'emergency fund' (credit line/savings) to cover your outflows between jobs. Pay down/eliminate your mortgage, and your 'emergency fund' can be a lot smaller. Do whatever you want with your net take-home, and just let your nest egg keep building every month.

 

The press 'yapping' on most people being < $X away from financial disaster .... ignores their access to credit lines, credit cards, etc.; it's factoids being quoted out of context to create a story. And of course ... 'frames' an asset collection game!

 

Now, should the press/bookie also be prone to sipping the cool aid .... an enterprising lad/lass could expect quite the opportunity from time to time! Even a GS/UBS will reliably screw up every now and again .... but as they are far more valuable alive than bankrupt, it really just comes down to the fire sale price for the ticket; cheap today, but expensive next year!

 

SD

 

 

 

Edited May 28 by SharperDingaan

[Paarslaars]

19 hours ago, Jaygo said:

yeah but fucking is free, rock climbing, camping and drinking beer floating on a raft in a river is free. The best things in life are free. Its the idiots who cant figure that out who spend all their money. 

This!

 

There is nothing I can think of that I would buy if I had 10M tomorrow that I can't buy today... Maybe little more Wagyu every once in a while.

 

The only thing it would buy is freedom/time, that's where they value is for me.

[Cigarbutt]

On 5/26/2024 at 10:40 AM, james22 said:

That's the best spin on it, that consumers are simply pursuing the American Dream.

Their spending evidence of their confidence in certain opportunity.

...

You confuse easy with achievable. Getting wealthy is not easy, but achievable.

When does optimism become blind optimism?

And why such low consumer 'confidence' numbers when the masses are questioned these days?

The American Dream is still possible, it's just becoming costlier:

 

Correction/update for 2024: not 126, more like 148.

-----

If the argument becomes that it's still possible for 1% of the population to make more than their parents, when does it become inappropriate to suggest that it is better late than never?

Index of social or inter-generational mobility:

[james22]

14 hours ago, mattee2264 said:

As for the idea that sex is free. That may be true when you are young when there is a hook up culture and girls care more about your looks and popularity than your bank account. But for most men dating is expensive especially in big cities and the more attractive the woman the more high maintenance she is likely to be. 

 

So much this.

[james22]

4 hours ago, Cigarbutt said:

When does optimism become blind optimism?

 

 

Optimism is always better than pessimism.

 

And generational comparisons are never very meaningful.

 

A 1940s (post-war) home wouldn't be acceptable today (too small, without a garage, etc.).

 

And you had to survive a war to buy one.