The Secret Shame of Middle Class Americans

[chiguirre]

Tabloidy title, but very interesting article about the middle class' lack of savings for even minor emergencies:

 

http://www.theatlantic.com/magazine/archive/2016/05/my-secret-shame/476415/?utm_source=nl__linkcoverstory1_041916

[Ravin]

Yes, because the middle class has been getting poorer for decades, while the amount of stuff we are supposed to buy as good consumers "keeping up appearances" has constantly increased.

[prairiewindmomma]

Thanks for sharing this!

[Murphy101]

Yes, because the middle class has been getting poorer for decades, while the amount of stuff we are supposed to buy as good consumers "keeping up appearances" has constantly increased.

Yep. I don't even know if it's all about keeping up appearances per se, but absolutely that plays a factor. As my dh has noted on business meetings, looking poorer will absolutely affect the networking. Whether it should or not, or people even do it on purpose, there's no denying that it just does.

[JustEm]

This doesn't surprise me. I've heard so many people's excuses for needing this thing or that thing while asking me for financial advice or complaining about money. When I reply, " well you don't need X or you could forgo doing Y until your finances are better" they look at me like I have 2 heads and say they can't give those things up. People's ideas of what

truly are necessities are quite skewed.

 

Of course there are also tons of people who can't pay for those emergencies because they simply don't make enough for all their necessities and extra for savings.

[EmilyGF]

One night, my husband was up working, and he saw our neighbor's car get repossessed. Now we live in a middle-class neighborhood and they both have higher degrees from top schools.

 

We never would have known if he hadn't been up. Makes me wonder how many other people we know are in such shape.

 

OTOH, we went to cash-based purchases in January and it has been very good for us.

 

Emily

[Murphy101]

Did you read the article?

 

I don't think he was particuliarly unhinged in his spending or how he got into debt. He admits that in hindsight he would have changed some things, but the reason why he did it at the time wasn't some idiotic crazy idea either. And sometimes the cheaper thing to do without is NOT the best thing necessarily. For him, it was his kids' education.

[myfunnybunch]

Interesting.

 

We were just going over our budget. Dh makes a decent income. We try to live on his paycheck and use my meager earnings as backup savings and to pay for the kids' activities. I was so baffled and a little frustrated. I asked him, "How does everyone else manage this?" We don't remodel the house, buy new furniture, hire a housekeeper or landscaper, go out to eat regularly like so many of our friends/neighbors. We drive our old cars. We did splurge on a big vacation, but only because we had a once-in-a-lifetime windfall and decided to enjoy some of it instead of socking it all away.

 

But our only debt is our house. We've got emergency savings, retirement fund, and several separate saving categories for things like college funds and a car down payment ('cause we're getting past the point of costly repairs) when our cars conk out.

 

So....whew. I thought we were doing something wrong. I guess we're just keeping our cake instead of eating it, since we can't do both, at least not indefinitely.

[Scarlett]

Interesting.

 

We were just going over our budget. Dh makes a decent income. We try to live on his paycheck and use my meager earnings as backup savings and to pay for the kids' activities. I was so baffled and a little frustrated. I asked him, "How does everyone else manage this?" We don't remodel the house, buy new furniture, hire a housekeeper or landscaper, go out to eat regularly like so many of our friends/neighbors. We drive our old cars. We did splurge on a big vacation, but only because we had a once-in-a-lifetime windfall and decided to enjoy some of it instead of socking it all away.

 

But our only debt is our house. We've got emergency savings, retirement fund, and several separate saving categories for things like college funds and a car down payment ('cause we're getting past the point of costly repairs) when our cars conk out.

 

So....whew. I thought we were doing something wrong. I guess we're just keeping our cake instead of eating it, since we can't do both, at least not indefinitely.

Yep sounds like the conversation Dh and I have often.

[Murphy101]

I'm rather tired of the credit card demonizing.

 

I HATE credit cards and loans in general.

 

But we have also never used either for some shopping spree crap either. Every time we used them, it was for reasons stated in the article. An emergency came up we couldn't afford and we also couldn't just not do either.

 

The number one thing on bankruptcies is medical and credit accrued to pay medical expenses. And most of those filing bankruptcy for medical reasons have insurance. It's just nuts.

 

The article mentions 47% not being able to pay even a $400 emergency. $400 emergencies happen on a very regular basis! A car repair. A copay/deductible. A house repair (plumbing can easily hit that). A flight to visit a very ill close relative. (Dh is an only child. So yeah, when his dad had a heart attack, he coughed up a flight ticket. Was it a waste? Probably. If money is the only thing being factored.) We have had ALL of those things happen within a 6 month span. And I don't think we have particuliarly awful luck. It's just... Life. Crap happens. Regularly. That's why it's so crazy easy to fall economicly and so crazy hard to recover. Because regardless of why you fell, life keeps on happening while you try to recover.

[NorthwestMom]

Did you read the article?

 

I don't think he was particuliarly unhinged in his spending or how he got into debt. He admits that in hindsight he would have changed some things, but the reason why he did it at the time wasn't some idiotic crazy idea either. And sometimes the cheaper thing to do without is NOT the best thing necessarily. For him, it was his kids' education.

 

Well, he undermined his argument when he drained his 401K to pay for his daughter's wedding. That's a pretty unhinged/idiotic/crazy thing to do, in my opinion.

 

But outside of that particular item, I think the article resonated with a lot of people trying their best to stay afloat. What a sad state of affairs.

 

[LisaKinVA]

We've been caught up in a vicious cycle...we have (three years in a row)...scrimped and saved to pay off an unexpected $15,000 in debt, only to get stuck with another $15,000 the following year for something else.  We have not made much headway on the debt we were supposed to be paying off as a result (most of which was medical, or a car accident, or something else).  We saved extra (or I took some extra jobs) to pay for the swimming trips this past year -- but we're cutting back on those next year, again.  We've never been to Disney -- and I'm glad to we can take the enjoyment of simply walking around Venice, or driving the coastline vs. not enjoying it unless we pay extra to do something.  I'm also grateful that driving certain places in my area make me feel like I'm on an adventure.  There's nothing like looking up at a hillside and spotting a home you know could be over 2,000 years old...and just marvel at that.

 

Once we sell our house, we should pay off a HUGE chunk, and consolidate what's left onto one or two accounts, and not having that $800-$1200 a month loss will be helpful too.  But, we still won't be rolling in dough, because we have to pay off the rest of this debt.  My retirement fund tanked, there is nothing really left.  My dh's tanked 3x in 20 years.  My oldest son's college fund is worth less than when it was started...dh is making about the same money he was making 21 years ago (not in adjusted dollars).  Wages are stagnant, but costs are increasing.  Praying our house sells...being shown for the 4th time today (first couple had horses...wasn't sure if they wanted a small lot...3 acres is small...or a small farm; second couple are in no hurry; third couple really liked our house, but they really want to live in the city? That one boggles my mind a bit...you want to live in the Old Town City, so you go look at a house 15 miles away to a house most definitely in the country? But, it's a Wednesday appointment, these people are serious...right?)

[Pawz4me]

I'm rather tired of the credit card demonizing.

 

I hate it, too.  But for a totally different reason.

 

If you have a good credit score and can get a good rewards card and IF you use it wisely you can make money on it.

 

Between DH and I we "earn" well over $1,000 a year in cash back rewards just by charging our normal expenses (groceries, gas, pretty much everything we buy) and paying it off promptly.

 

We aren't the target audience of that article, but for someone struggling those cash back dollars could pay for two or three $400 emergencies in the course of a year.

 

But of course it does require self-discipline to not go out and buy things on a whim just because you have available credit. 

[DawnM]

N/M will respond later.

Edited April 20, 2016 by DawnM

[Guest]

I hate it, too. But for a totally different reason.

 

If you have a good credit score and can get a good rewards card and IF you use it wisely you can make money on it.

 

Between DH and I we "earn" well over $1,000 a year in cash back rewards just by charging our normal expenses (groceries, gas, pretty much everything we buy) and paying it off promptly.

 

We aren't the target audience of that article, but for someone struggling those cash back dollars could pay for two or three $400 emergencies in the course of a year.

 

But of course it does require self-discipline to not go out and buy things on a whim just because you have available credit.

Right. This is us, too, except not cash back but other rewards. I do understand how some people are better off not using credit cards (I had a sister for whom this was true), but we have not had difficulty using credit cards to our advantage and not our harm. I just paid my credit card yesterday and happened to glance at the available credit. I thought - "good Lord! I cannot imagine charging so much!" It would be like charging one person't annual salary.

[creekland]

Living in a lower COL area has helped us tremendously over the years.  I can't even count up how much we've been able to save (or use elsewhere) by not needing it for housing or taxes, etc.  

 

There was a time we couldn't have afforded a $400 emergency.  I'll admit to being glad we're past that stage.   :grouphug:  to those who aren't.

[Guest]

I did not read the whole article, but I read some, and here's where I have an issue: my perception is that a very large proportion of middle- to upper middle households spend a ton of unnecessary and frivolous money mindlessly because they simply perceive it as normal and what everyone else does. If this were not so, it wouldn't be a thing to have your teenage daughter's hair ombréed or dress your 10-year-old in head-to-toe Under Armour. I used to think it was extravagant when families took yearly trips to Disney, but now I have many middle- to upper middle friends who are taking their family of five to Europe or New Zealand. Keeping up with those darn Jonses is still alive and well, which leads me to think MANY people do not prioritize having any savings cushion, let alone a decent cushion. They prioritize the excesses of family life because they think that is normal.

 

On of my friends on FB made a remark about realizing how much Under Armour she had bought over time for her three kids (the oldest is 14). The way she phrased it, she clearly thinks "everybody" does this. So, she's acting shocked at all the money she has spent on just this one brand of clothes, but she *thought* that's what "everybody" does. She expressed complete astonishment at the few responders (myself being one) who said they own no clothing of this brand, or just a few pieces mostly obtained second-hand.

 

So while, yes, sometimes you might have credit card debt because your transmission in your 13-year-old car just tanked or you have to fix your son's four front teeth because he had mouth trauma when he was eight and ruined them, I have to strongly suspect that there are also charges because your daughter "had" to have her hair ombréed, or your son will not wear Keds because they aren't Nikes.

[HomeAgain]

Well, middle class pay is terrible compared to previous decades.

 

That said, middle class decisions are, too.

 

We are firmly middle class.  I think dh and I were in awe when we realized we are no longer "lower middle class" but just reached the threshhold that made us "comfortable".  We carry a modest house and car payment.  I thrift shop like mad for clothes and necessities.  We do without quite a bit of luxuries that our friends carry - sports for children (often multiple a year), yearly vacations, cable, weekly dinners out, going to the movies more than once a year, etc. Heck, even pre-packaged individual servings of foods.  Even our curriculum comes free or dirt cheap at this point.  It is because of all those small decisions that we have savings in the bank and can have the luxury of choice when it comes to issues that arise.  10 years ago we were in a totally different place and it scared us. 

 

[Garga]

I did not read the whole article, but I read some, and here's where I have an issue: my perception is that a very large proportion of middle- to upper middle households spend a ton of unnecessary and frivolous money mindlessly because they simply perceive it as normal and what everyone else does. If this were not so, it wouldn't be a thing to have your teenage daughter's hair ombréed or dress your 10-year-old in head-to-toe Under Armour. I used to think it was extravagant when families took yearly trips to Disney, but now I have many middle- to upper middle friends who are taking their family of five to Europe or New Zealand. Keeping up with those darn Jonses is still alive and well, which leads me to think MANY people do not prioritize having any savings cushion, let alone a decent cushion. They prioritize the excesses of family life because they think that is normal.

 

On of my friends on FB made a remark about realizing how much Under Armour she had bought over time for her three kids (the oldest is 14). The way she phrased it, she clearly thinks "everybody" does this. So, she's acting shocked at all the money she has spent on just this one brand of clothes, but she *thought* that's what "everybody" does. She expressed complete astonishment at the few responders (myself being one) who said they own no clothing of this brand, or just a few pieces mostly obtained second-hand.

 

So while, yes, sometimes you might have credit card debt because your transmission in your 13-year-old car just tanked or you have to fix your son's four front teeth because he had mouth trauma when he was eight and ruined them, I have to strongly suspect that there are also charges because your daughter "had" to have her hair ombréed, or your son will not wear Keds because they aren't Nikes.

I have friends who are very frugal and don't spend on anything extra, but I also have friends like you've said above. Christmas is out of control for them. They say things like, "Well, I just *have* to buy X, Z, Y plus A, B, C, D, E, and F for the kids!" Or birthdays. Oh my. The money they spend on presents is just stunning.

 

A number of years ago, my dh and I went with a friend (who was in deep debt) to the beach for the day. When we were there, she saw a sweatshirt with the beach name on it and said, "Well, I guess I have to get this." I said, "Why? You have 10 of them at home." She said, "But...I'm at the beach. Aren't you getting anything?" I told her no and she was surprised. It was a new idea to her. I mean, like a life-changing new idea to her. The idea that you can go to a tourist spot and not buy a souvineer. You can just look and walk away. Like a new convert she said, with sparkling eyes, "I won't buy the sweat shirt! I'm going to just look at it and walk away! This will be the first time I've come to the beach and not bought anything!" It was a wild and crazy concept to her.

 

The things is, we've always (always) had a bit of money left over each month to sock away for those emergencies. But once my son had braces and we had to buy two new (used) cars at the same time, those monthly bills (braces and car payments) made it so we didn't have anything left to save. We'd built up soooo much savings prior to the cars/braces that we still had plenty for emergencies, but it was almost impossible to contribute back into the savings fund.

 

Finally one car and the braces got paid off and we can save again, but for those 2 years it was scary. Every month we'd be like, "What did we spend all the money on??"and it wasn't on anything except food and basics of life. We're the misers of our group, so we're known for being cheap and not overspending. It can be scary how just a couple of long term bills can stop someone from being able to save. If we hadn't had that cushion ahead of time when we bought the cars and the braces, we'd have been in trouble.

Edited April 20, 2016 by Garga

[SemiSweet]

I did not read the whole article, but I read some, and here's where I have an issue: my perception is that a very large proportion of middle- to upper middle households spend a ton of unnecessary and frivolous money mindlessly because they simply perceive it as normal and what everyone else does. If this were not so, it wouldn't be a thing to have your teenage daughter's hair ombréed or dress your 10-year-old in head-to-toe Under Armour. I used to think it was extravagant when families took yearly trips to Disney, but now I have many middle- to upper middle friends who are taking their family of five to Europe or New Zealand. Keeping up with those darn Jonses is still alive and well, which leads me to think MANY people do not prioritize having any savings cushion, let alone a decent cushion. They prioritize the excesses of family life because they think that is normal.

 

On of my friends on FB made a remark about realizing how much Under Armour she had bought over time for her three kids (the oldest is 14). The way she phrased it, she clearly thinks "everybody" does this. So, she's acting shocked at all the money she has spent on just this one brand of clothes, but she *thought* that's what "everybody" does. She expressed complete astonishment at the few responders (myself being one) who said they own no clothing of this brand, or just a few pieces mostly obtained second-hand.

 

So while, yes, sometimes you might have credit card debt because your transmission in your 13-year-old car just tanked or you have to fix your son's four front teeth because he had mouth trauma when he was eight and ruined them, I have to strongly suspect that there are also charges because your daughter "had" to have her hair ombréed, or your son will not wear Keds because they aren't Nikes.

I agree with this, when was in the lower classes I made some terrible financial decisions and they were compounded by various emergencies, but after my divorce, even being a single mom, lower enlisted military (quite low pay), I wasn't as poor as many firmly middle class people seem to be. I have seen more people than I can count make terrible financial decision after terrible financial decision and then complain about money.

 

When dh and I got married we made the decision that we didn't want to be in debt, he's never struggled financially so it doesn't affect him as much, but for me, knowing I have enough to pay off our one car any time we want is really important.

 

Now we still don't always make the wisest decisions, but we fund a few savings accounts every month. We do prioritize travel over other luxuries so it may look to others like we probably have a lot of debt. We go on international vacations with the kids, but they don't wear name brand clothes, or participate in every opportunity/sport.

[Bluegoat]

I don't feel like I can be too critical of people who are just trying to provide what they think is "normal" to their kids, even if it seems crazy to me.

 

I've never cared much about what other people think is important - but then people I know think I am crazy for staying home to homeschool rather than working, and it does make our financial situation more limited.  I don't much spend on fancy clothes for kids or myself but I do spend potentially more than I should on music lessons for the kids.

 

There was a time when their was a fairly firm cultural taboo around spending too much or going into debt, and strong cultural approval for saving and living within means.  And there wasn't this idea that somehow you had to make sure your kids developed all of their potentialities fully or you were a bad parent - it was really ok if they turned out as good citizens holding down a similar to their parents job that fed their family.

 

That has pretty much gone, but I think there was a reason that wasn't just about individuals making good choices - there was a reason it was something that was encouraged by cultural values.  OUr expectations and what we think is required, and to some extent what is required, is just really influenced by what we see around us.  That seems to be part of being social animals, we need these social signals to see how to live.

 

What we have now is in many ways the opposite of good financial management.  We are encouraged to spend and go into debt - sometimes it is even our duty to support the economy.  Examples of the successful and wealthy (Trump, or here his Canadian equivalent) when you look closely did not get where they were by being financially responsible, they did it by risk taking, cutting corners, getting paid running things into the ground. 

[J-rap]

Yes, because the middle class has been getting poorer for decades, while the amount of stuff we are supposed to buy as good consumers "keeping up appearances" has constantly increased.

 

Yes, I think so too.  I don't know if people are consciously thinking they have to keep up appearances though.  I just think there are many more products and services these days which are far more expensive than bygone days, and these are products and services that society has been persuaded to believe are what everyone has a right to and needs. So people just get them, whether they can really afford them or not.  

 

For years, as our family walked around with our one "dumb" phone that we shared among six people and had just two channels on our non-cable television, I was absolutely baffled at how everyone else seemed to be able to afford a smart phone for every member of their family and cable TV.  And my dh had a good job too.

 

Now don't get me wrong, I'm pretty sure we did things that baffled other people (we went on some fun trips!). But I do think in general, the products and services that have come to be expected within the middle class have just gotten so much more expensive, and incomes haven't kept up.

 

In the end, I think what has helped us a lot is living in a very low-cost area.  (We bought our home for $16,000!).  We'll stay here until our youngest graduates from college.

[Katy]

I think the concept that some predictable costs are emergencies is strange.  Cars and houses need maintenance. Illness and deaths and college tuition happens. It seems like these "unexpected" catastrophes do happen in groups, especially when your savings account is nearing empty, but not planning on them happening on a regular basis when you are employed seems irresponsible.

 

Having said that, I think comparing people now to those in the 1950's and 1960's isn't exactly fair.  In those times adults would have lived through the depression, and there is nothing like literally not having enough to eat to snap someone into reality regarding what is a luxury and what is not. The fact that people aren't afraid of basic needs being unmet is a sign of how rich we are as a society.

 

It is troublesome though, because refusing to live within your means won't help you get rich.  It will keep you poor.  Perhaps that is worth it if your children choose lucrative fields and study at expensive schools that also have great networking.  The daughter going to medical school at Harvard will most likely find their investment worth it. The one who became a social worker at a state school most likely should have gotten an undergraduate degree at an inexpensive school as well.

[Mimm]

Ok, this might sound extremely naive or something... But when it talks about being unable to take care of a sudden $400 expense, does that mean they are unable to charge it? They mention having to borrow money from friends or family for basic expenses.

 

We have debt and we're slowly working to pay it off (and might have it paid off in a year or so... hopefully!) but if we had a sudden expense, no problem, we have tons of unused credit. But we might not have that money just sitting in the bank ready for an emergency. Why would we? We have credit cards to pay off, that's a better use of that money. :)  (We actually do keep some cash on hand, I'm not sure how much.)

 

I didn't read the entire article, just kind of skimmed here and there. I'm precoffee and I can't deal with numbers and statistic and blah blah blah right now. :)

[G5052]

There was a time when their was a fairly firm cultural taboo around spending too much or going into debt, and strong cultural approval for saving and living within means.  And there wasn't this idea that somehow you had to make sure your kids developed all of their potentialities fully or you were a bad parent - it was really ok if they turned out as good citizens holding down a similar to their parents job that fed their family.

 

That has pretty much gone, but I think there was a reason that wasn't just about individuals making good choices - there was a reason it was something that was encouraged by cultural values.  OUr expectations and what we think is required, and to some extent what is required, is just really influenced by what we see around us.  That seems to be part of being social animals, we need these social signals to see how to live.

 

I agree with this. My grandparents didn't feel that they had to provide "everything." My parents got some of that. Growing up, I remember saving for several years to go see my grandparents many states away.

 

Now? I think people through caution to the wind at times. They go out-of-state with nothing in the bank and high credit card balances. They borrow huge sums of money for college when a decent education can be received for less. It often seems to become a habit.

 

As an example, we hired someone to do our taxes this year for the first time in years and years. This round we could afford it, and I felt like the complexity of issues required it. In the process we got some tax advice that more than paid for the fee. It was a unique year, and I'm glad we went.

 

DH said, "We should have done this earlier." Well, we could have. We would have had to charge it though, and prior to this year I felt like doing it myself was better than charging and hoping we could pay the bill later. For 10-12 hours over a weekend, I got it done and saved hundreds of dollars. Our return in the years I did that was relatively simple. That was a choice. Just because we could didn't mean we should.

 

It's sad, but there it is. I think that our generation is going to struggle as we age. Many will not be able to retire with some security.

Edited April 20, 2016 by G5052

[mom2scouts]

I get a bit annoyed by the people who congratulate themselves for how well they have managed their money while not "keeping up with the Joneses". It really doesn't take much to put you into debt and into a shaky position. We are pretty frugal and at one time we had a healthy savings/investment and little debt. We have never had cable TV,  dh's car is 14 years old and has rolled over miles, my kids don't wear new or expensive clothes, gifts are practical, we haven't taken a vacation in years and before that our vacations were camping trips, we all get our hair cut at a cheap walk-in place, our furniture is 15+ years old and has holes in it, we rarely eat out, our TVs are 15 years old, I took the kids to a movie theater this year for the first time in 5 years. We do spend money on some kids activities and homeschool materials, but otherwise we're pretty frugal. When the economy took a dive, our investments (not aggressive at all!) lost a huge amount of value and we hoped we could ride it out and recoup some of it. Instead, my dh lost his job and because of his field and age, it took him FOUR YEARS to find anything beyond very low wage temporary jobs with no benefits or time off. My education and background is the same as his, so I couldn't be much help. We considered selling our house and moving, but houses were practically being given away at that time in our neighborhood and we have adult children and elderly parents in this area. We ended up having to take the rest of the investment money out just to pay basic bills and when everything (refrigerator, washing machine, car) starting breaking and dh had an injury that put him out of work for a few weeks, we put repairs and medical bills on credit cards. Now we are in debt and it's going to take us a while to dig out. There's NO money to put in savings. We need to put every spare cent to debt reduction right now.

Edited April 20, 2016 by mom2scouts

[MotherGoose]

I read the article, and I can't get through the the idea that a fancy private school education is worth all the extra dollars. If you aren't rich enough to pay for it or smart enough to get scholarships, then you just should not go. Maybe it's because of the area of the country in which I live, but I don't know people who went to private schools, but yet I know plenty of successful people. They aren't working at some elite New York law firm, but they have money to spend, jobs with which they are content, and are doing just fine. My kids won't be going to a fancy private school unless they get scholarships, and I have no guilt about that. I have a Masters in Social work, like the author's daughter, and unless she knows something I don't, she won't be making enough money anywhere anytime soon to make up for the financial damage done to her grandparents and parents. She could have gone to a basic state school and done just as well. Working with traumatized children does not pay well. It's a wonderful calling, absolutely--it's what I did! But it never never would have occurred to me that any family members of mine should pay for it, or that I should go into enormous debt to pay for it. I remember seeing that Harvard had a social work program when I was going to get my masters. I thought it was insanity that anyone would go there for a MSW.

Edited April 20, 2016 by MotherGoose

[Guest]

Yep. I don't even know if it's all about keeping up appearances per se, but absolutely that plays a factor. As my dh has noted on business meetings, looking poorer will absolutely affect the networking. Whether it should or not, or people even do it on purpose, there's no denying that it just does.

Yep. DH needs a new car. We can't get him a Dave Ramsey beater car because that absolutely negatively impact his career. We'll be fine but we weren't in this same situation at the beginning of his career.

[marbel]

I don't feel like I can be too critical of people who are just trying to provide what they think is "normal" to their kids, even if it seems crazy to me.

 

I've never cared much about what other people think is important - but then people I know think I am crazy for staying home to homeschool rather than working, and it does make our financial situation more limited.  I don't much spend on fancy clothes for kids or myself but I do spend potentially more than I should on music lessons for the kids.

 

<snip>

 

Yep. 

 

We don't spend a lot on big vacations, clothing, cars, etc., but we spend a lot on homeschool materials.  We pay for dual enrollment at our community college, and people with kids in high school say "but they could take the same class at the public school for free." (Actually dual enrollment is free for certain classes for kids enrolled in school, but most people don't know that.)  They think we are spending money stupidly. 

 

So, they send their kids to the local high school and go to Florida every year for winter break.  Who is making the better financial decision?   

 

Everyone has their own idea of wise spending vs. stupid spending.

 

 

 

 

[marbel]

I get a bit annoyed by the people who congratulate themselves for how well they have managed their money while not "keeping up with the Joneses". It really doesn't take much to put you into debt and into a shaky position.

 

<snip>

 

:grouphug:

 

I agree.  I was once a bit smug about my financial position, until my house lost 30% of its value in 2008 (we bought it in 2007) and my 401K lost 40% of it's value the same year.   Lesson learned.

 

:grouphug:

 

[SKL]

I am an odd duck in these conversations, because of becoming a parent later in life.  I led a frugal life while I paid off all my debts including my mortgage, and then saved a comfortable nest egg, while giving liberally to others in need.  I shared living expenses and still do.  I drive a non-fancy sedan and try to keep it as long as it can last.

 

Now I'm one of "those people" who travel internationally because they want to.  But it has nothing to do with the Joneses.  If I were trying to keep up with the Joneses, I'd be buying too much house and car and paying it off for the rest of my life.

 

I send my kids to Lutheran school for $7k-$8K/year (total), and put them in activities and summer camps that total some more $Ks annually.  I have my reasons, some of which are difficult to articulate to people who are not in my shoes.  Because of time constraints, I spend money (on my kids) that others avoid spending by taking more time.  Raising kids is a season and really just a blip in the long term, at least for people like me with just a couple kids close in age.  That said, I don't believe I'd make the same choices if I were in debt.

 

Over the many years when I was digging myself out of debt, I kept using the buzzword "delayed gratification."  I didn't need to have all those experiences *now,* I would enjoy them more when they were coming out of my savings vs. creating financial stress.  Now, however, I am OK with spending current earnings on current pleasures, because waiting until my declining years seems unwise and unnecessary.  So I do what makes sense for me.  Now if other people see that and say, "we need to do that too to keep up with the SKLs," I don't know what to say to that.  People who have kids before they have a chance to save a nest egg are probably young enough to wait until their kids launch before they do their world tour.

 

As for how I'd find $400 for an emergency, I'd put it on my credit card and pay it off ASAP (i.e., before the next statement due date).  Yes, I have savings, but more importantly, my regular monthly expenditures are way less than a typical middle-class salary.  When I was paying down debt, after the first [very difficult] year, I structured things so my required payment was less than my income, but then I paid extra as I could.  I always had credit cards and paid them off as I could - usually before any interest accrued, but when necessary, it was nice to be able to pay more slowly without harming my credit.  So far I've never had to ask for financial help, but if I did, I have people who would help me in a pinch.  Having helped these same people in the past, I would not feel guilty asking.

[chiguirre]

Sorry, I haven't been online much and I kind of posted and ran. There is another Atlantic article in the same edition that explores economic theories about our low savings rate. Number 5 explores why people feel the need to spend money on visible signs of wealth. It was very eye-opening to me because I tend to be a cheapskate.

 

http://www.theatlantic.com/business/archive/2016/04/why-dont-americans-save-money/478929/

[Guest]

I just wanted to put in a quick note to say I have nothing against buying expensive clothes or extravagant travel or new cars if a family can afford those things while also having savings. My ONLY objection is when people say they are in a precarious financial position, yet they DO buy those things; then they act frightened when SURPRISE! The car exploded. SURPRISE! The kid knocked his teeth out. SURPRISE, whatever.

 

If you have the dough, fill yer boots.

[SKL]

I do see both sides of the "we must not look poor" pressure.  I worked in a big accounting firm where I felt very out-of-place.  I was raised in a low-income family and never taught to value "appearances."  Indeed it was sort of a value not to care about appearances.  But this made me unfit for the professional environment.  Eventually I found a few decent suits on sale (which I still wear decades later, when I need to) and I worked at home or hid in my office as much as possible.  Still, word got back to me that the younger "professionals" in our office were making fun of the socks I wore on weekends.  Seriously.  While all that is petty and stupid, it does impact economic opportunity.  The only thing I know to do about it is to get smart about buying clothes - find good used stuff / deep discounts that look great on you, take good care of stuff and carry yourself proudly.  Investing in work clothes can also be viewed like investing in an education.  You can be smart about it, but you can't really ignore it.

 

I will say that this is not really a US thing.  It is much more of a thing in some of the countries that have higher savings rates.

[Scarlett]

In my first marriage we started out with nothing. Well I had a car I was paying off at $50 a month and Xh had a truck free and clear. We had a few pieces of old ugly furniture given to us by parents. We got a small apartment and simple jobs and we were happy enough money wise. No debt.

 

Then he went back to college in his early 30s. He very quickly began making a lot of money and it absolutely changed him. He suddenly wanted everything. I had endless arguments with him about choosing where to spend your money. He mostly listene to me but he was always irritated at me for pointed out we couldn't afford everything.

 

And I think that is sometimes the problem. People don't prioritize their spending. Some people may choose travel over nicer cars. Or staying home and homeschooling over a fancier house.......but not many can get everything without some serious financial hits.

[Dad 4 Boys]

:grouphug:

 

I agree.  I was once a bit smug about my financial position, until my house lost 30% of its value in 2008 (we bought it in 2007) and my 401K lost 40% of it's value the same year.   Lesson learned.

 

:grouphug:

 

You were in a really big boat with a really big group of fellow passengers.  Although this period of time stunk economically, if you weren't needing to sell your house or retire, these losses of value weren't dire emergencies at the time.  Depending upon your location and your investments, I would think it has all been recovered by now.  I'm not discounting the loss of growth during this period, but nearly everyone went through it.

[Serenade]

 

 

There was a time when their was a fairly firm cultural taboo around spending too much or going into debt, and strong cultural approval for saving and living within means.  And there wasn't this idea that somehow you had to make sure your kids developed all of their potentialities fully or you were a bad parent - it was really ok if they turned out as good citizens holding down a similar to their parents job that fed their family.

 

 

 

 

I think there is a generational gap here, too, with older American more likely to follow this philosophy.  I'm only 52, but my mindset is perhaps more like a generation older than me.

 

I think many people don't see a reason to save anymore, because there are often programs to help people out.  I have a friend who divorced and was so desperate for money, that she went around to churches begging for funds for housing and food for her kids, and yet a couple months afterwards she was taking airplane vacations, multiple ones in the same year, and it wasn't because she got some knock-out high paying job.  I just don't understand it.  Well, maybe I do.  If you're in a spot where you have very little resources, and no hope of ever doing something fun again, why bother to save when you could accrue an experience that you will never forget instead.  I dunno.  It's not the way we operate here, but I guess I understand it.

[Bluegoat]

I think the concept that some predictable costs are emergencies is strange.  Cars and houses need maintenance. Illness and deaths and college tuition happens. It seems like these "unexpected" catastrophes do happen in groups, especially when your savings account is nearing empty, but not planning on them happening on a regular basis when you are employed seems irresponsible.

 

Having said that, I think comparing people now to those in the 1950's and 1960's isn't exactly fair.  In those times adults would have lived through the depression, and there is nothing like literally not having enough to eat to snap someone into reality regarding what is a luxury and what is not. The fact that people aren't afraid of basic needs being unmet is a sign of how rich we are as a society.

 

It is troublesome though, because refusing to live within your means won't help you get rich.  It will keep you poor.  Perhaps that is worth it if your children choose lucrative fields and study at expensive schools that also have great networking.  The daughter going to medical school at Harvard will most likely find their investment worth it. The one who became a social worker at a state school most likely should have gotten an undergraduate degree at an inexpensive school as well.

 

 I think probably the emergency thing is in part a language issue.  We talk about an emergency fund for expenses that aren't fixed.  Some kinds of maintanence are fixed, but others will come in less predictable time - maybe next week, maybe next year, and the price may be unpredictable too.  So - what they seem to be saying is that while their regular expenses are covered, their unfixed expenses aren't.

 

I think for many people what has happened is that credit cards and LOCs have replaced adequate or regular saving for these things, or even for things like vacations or even things like furniture and bikes.  But it is easy to get into a deep hole that way, often without noticing.

[marbel]

You were in a really big boat with a really big group of fellow passengers.  Although this period of time stunk economically, if you weren't needing to sell your house or retire, these losses of value weren't dire emergencies at the time.  Depending upon your location and your investments, I would think it has all been recovered by now.  I'm not discounting the loss of growth during this period, but nearly everyone went through it.

 

Maybe so.  But the point was that those things were out of anyone's control, so it does no good for people to be smug about their good choices when even they can lose a lot in a short time.  That was was I was responding to. 

 

 

[SKL]

I can't say I understand the "we have the money now, so let's spend it instead of saving it."  I don't really agree that low-income people naturally think that way.

[Katy]

Sorry, I haven't been online much and I kind of posted and ran. There is another Atlantic article in the same edition that explores economic theories about our low savings rate. Number 5 explores why people feel the need to spend money on visible signs of wealth. It was very eye-opening to me because I tend to be a cheapskate.

 

http://www.theatlantic.com/business/archive/2016/04/why-dont-americans-save-money/478929/

 

That is interesting. Also, the culture of money among the rich is different than among the poor.  If you're poor,  you might spend conspicuously to not appear poor.  If you were raised with money (or perhaps just an old-money philosophy), it's considered tacky to show off with conspicuous consumption, and proving you don't care about such things by downplaying them, or by duct-taping a crack in your shoe sole rather than getting a new pair, is considered very smart indeed among some people.

[Bluegoat]

As far as the keeping up with the Joneses - I think it often doesn't really manifest itself as "I have to look like I am at doing as well or better than them." 

 

More often I think it is an aversion to looking like, or being, a failure.  Especially with kid related things - people feel if they don't do what is expected, they are not just lame, they are failing their children.  That is a huge motivator.

 

That is how I understood the private school thing.  My understanding is that in NYC, middle class people just don't consider the public schools to be adequate.  You "have" to send them someplace better, or the feeling is, you are dooming them to a poor education and poor university results and then, who knows what.

[Pawz4me]

You were in a really big boat with a really big group of fellow passengers.  Although this period of time stunk economically, if you weren't needing to sell your house or retire, these losses of value weren't dire emergencies at the time.  Depending upon your location and your investments, I would think it has all been recovered by now.  I'm not discounting the loss of growth during this period, but nearly everyone went through it.

 

:iagree:

 

 

 

That is interesting. Also, the culture of money among the rich is different than among the poor.  If you're poor,  you might spend conspicuously to not appear poor.  If you were raised with money (or perhaps just an old-money philosophy), it's considered tacky to show off with conspicuous consumption, and proving you don't care about such things by downplaying them, or by duct-taping a crack in your shoe sole rather than getting a new pair, is considered very smart indeed among some people.

 

This sort of reminds me of an oldish family story.  My grandparents weren't super wealthy, but absolutely very comfy.  This was back in the mid-1970's, long before everybody and their brother drove a Mercedes.  My grandmother had always driven Caddys--and usually a new one every couple of years, paid for in cash--but decided she wanted a Mercedes.  My grandfather, who had made himself quite successful despite having a major disability (blindness), and who usually was very proud to be able to indulge her in anything she wanted, put his foot down and said no.  Because only the newly wealthy drove Mercedes, and (essentially) it would be altogether too tacky for her.  :lol:

[Bluegoat]

I can't say I understand the "we have the money now, so let's spend it instead of saving it."  I don't really agree that low-income people naturally think that way.

 

I think it happens especially when people don't see that saving is likely to help them.  It may not seem like enough to really make them more secure.

[Bluegoat]

I think the concept that some predictable costs are emergencies is strange.  Cars and houses need maintenance. Illness and deaths and college tuition happens. It seems like these "unexpected" catastrophes do happen in groups, especially when your savings account is nearing empty, but not planning on them happening on a regular basis when you are employed seems irresponsible.

 

Having said that, I think comparing people now to those in the 1950's and 1960's isn't exactly fair.  In those times adults would have lived through the depression, and there is nothing like literally not having enough to eat to snap someone into reality regarding what is a luxury and what is not. The fact that people aren't afraid of basic needs being unmet is a sign of how rich we are as a society.

 

It is troublesome though, because refusing to live within your means won't help you get rich.  It will keep you poor.  Perhaps that is worth it if your children choose lucrative fields and study at expensive schools that also have great networking.  The daughter going to medical school at Harvard will most likely find their investment worth it. The one who became a social worker at a state school most likely should have gotten an undergraduate degree at an inexpensive school as well.

 

tHinking about the bit I bolded - it strikes me this is true of the poor, but not so true of those who start rich.

[flyingiguana]

You were in a really big boat with a really big group of fellow passengers.  Although this period of time stunk economically, if you weren't needing to sell your house or retire, these losses of value weren't dire emergencies at the time.  Depending upon your location and your investments, I would think it has all been recovered by now.  I'm not discounting the loss of growth during this period, but nearly everyone went through it.

 

But the fact that everyone went through it may explain why there are now so many people with so little savings.

 

I mean, not everyone, obviously, but on average it has probably had a huge effect on the savings rate in the general population.  There were a significant number of people who did have to sell in that time period.  Or who just lost their houses outright.

[StephanieZ]

I totally understand the economic issues the author is talking about. A couple thoughts I have . . . 

 

+ The economic plight of the author is largely attributable to his poor choices. Living in NYC (as an author of long books? How can that be necessary?) Private schools for his girls. Wife not re-entering the workforce. Paying for pricey colleges and weddings. That's nuts, especially asking his elderly folks to pay . . . (didn't sound like they were wildly wealthy either). 

 

+ Some regions have the "keeping up with the Jones" issues on steroids. In the DC suburbs of VA, I saw this constantly. People just spend, spend, spend. There, having a 100k family income is barely enough to be a poor, young family. Move to WV, even with the same housing expense and basic costs of living (insurance, food, etc), and that same income goes FAR here. People here just do NOT spend like those in NoVA. In NoVA, "everyone" (obviously not everyone, but most folks with decent jobs) went out to pricey dinners (say 80/family) if they didn't feel like cooking. Everyone signed up for multiple pricey extracurriculars for their little kids. Spending 2k/yr for ballet for a 6 yo was routine! New clothes, fancy vacations, etc. Expectations were just very high. Once we moved to WV, we found that even among families with similar earnings, people just don't spend the way they do in NoVA. It makes it easy to feel financially well off and to remain financially well off. Obviously, the NYC area is like NoVA. :) 

 

+ The author really should have moved out of NYC early on, IMHO. He and his family could have had a very good existence somewhere else. 

 

+ These things usually come down to choices. NYC or pay for college. Wife at home FT or pay for weddings. Etc. Some of those choices are so expensive as to close all the other doors completely. 

 

+ College costs are insane. I'm glad we never got on the "go anywhere you want" college train, because if we had, we, too, could have been bankrupted by college costs. 

 

+ I really need to make financial literacy a more formal part of my kids' educations. I do a lot informally, but I need to formalize things ASAP. These financial choices we make control a lot of our destiny!

 

 

[Lady Florida.]

:grouphug:

 

I agree.  I was once a bit smug about my financial position, until my house lost 30% of its value in 2008 (we bought it in 2007) and my 401K lost 40% of it's value the same year.   Lesson learned.

 

:grouphug:

 

While we weren't smug about our position, we ended up in a boat like yours. The housing market was especially hard hit in Florida. My mother died in 2008 and my brother and I practically had to give her house away. The fact that it was an elderly person's house in much need of updating didn't help. We ended up selling to one of those We Buy Ugly Houses type of agents.

 

Dh's 401k and to a lesser extent my 403b from my teaching days, both tumbled. 

 

 

 

You were in a really big boat with a really big group of fellow passengers.  Although this period of time stunk economically, if you weren't needing to sell your house or retire, these losses of value weren't dire emergencies at the time.  Depending upon your location and your investments, I would think it has all been recovered by now.  I'm not discounting the loss of growth during this period, but nearly everyone went through it.

 

Yes but recovery and growth are not equal. Our retirement funds did recover and hopefully there won't be another big crash before dh retires in the next few years. I have longer to go before I can touch my 403b without taking a significant decrease, so we have to hope for the long term for me.

 

What's a problem is that although our funds have recovered, if it hadn't been for the crash we would have been much farther ahead at this time. Instead of increasing our retirement fund, we just had to hope for a return to what it once was.

 

I think there is a generational gap here, too, with older American more likely to follow this philosophy.  I'm only 52, but my mindset is perhaps more like a generation older than me.

 

Not necessarily. My grandmother was born, dirt poor, in 1911. She lived through two world wars and a worldwide depression. My mother, her oldest was born in 1934, and she had two more children before WWII started and the full recovery began. This is to give you background and show that not everyone in previous generations thought frugality was best.

 

My grandparents struggled, but my mother and her sisters were formula fed even though breastmilk was free. Actually because it was free, breastfeeding was seen by my grandmother and her peers as being for poor people and country bumpkins. She saved bits of money here and there so she could buy new things - new furniture, new clothes, new time-saving modern appliances. She got rid of so many things that I would just love to own now. To her they were old, and a sign of being poor. Out with the old, in with the new. Her and my grandfather's parents were Italian immigrants who pinched every penny they had. My grandparents wanted to get as far away from that old country mentality as they could.. They were first generation Americans and by god, they were going to live the dream or at least look like they were living it. They died leaving nothing behind but their very small house and a load of medical bills.

 

My mother did not have a much better handle on money, though I think she did try harder and didn't think being frugal was as bad as her parents did. Still, she died with nothing really to her name but the house we couldn't sell due to the housing burst. 

 

I say all of this to point out that people have always had a desire to not let their neighbors see how poor they were. I think where you lived (NYC for my grandparents, a decent sized city in NJ after they married and had kids), where you or your parents came from, and what your peers do (all the poor people in their neighborhood tried to look "not poor") can all have an effect as great as or greater than the era in which you were raised.

 

Fortunately, none of those attributes trickled down to me. Sadly I can't say the same about my brother, who at 55 is only starting to wake up to the choices he made and only starting to worry about retirement.

Edited April 20, 2016 by Lady Florida.

[marbel]

I can't say I understand the "we have the money now, so let's spend it instead of saving it."  I don't really agree that low-income people naturally think that way.

 

I don't know that I'd generalize that low-income people naturally think that way, but I have definitely seen it when people have an opportunity to do something they thought they'd never be able to do, and won't ever get to do.

 

Example:  Where I live, going to Disney (FL) is very popular.  I guess it's popular everywhere but it's a typical winter or spring break thing here.  Say a family has never been able to afford it, but they want to. They come into some money, say a small inheritance or a tax refund.  They think "we should save this" (or pay off bills, whatever) but their kids are getting older, and opportunities to travel with them as a family are dwindling.  So they take that money and go to Disney.  Maybe they go into a little debt to do it - the windfall doesn't cover the whole thing.  But, now they've done this thing they've been wanting to do for years.  Were they wrong to spend that money having this great experience with their kids, instead of saving for retirement that may never come anyway, or paying off bills they can keep chipping away at for years?  (I don't know if I can answer that question.)

 

This is not me, by the way.  I have fond memories of Disney (CA) but my kids have never been there.  My husband and I did have a brief moment of "are our kids missing out on an important American experience?"  We asked our kids; they said they had no interest.  So, no Disney for them. :lol:  

 

[flyingiguana]

One thing I do see is people who are already in debt just don't see the point of either saving or trying to get out of debt.  It seems overwhelming.

 

I'm not talking credit card debt that people ran up to do fun things.  College and medical expenses can put people in a hole so deep that they just don't see themselves ever getting out of it.  So what's the point of trying?  It would be futile anyway.

 

I think it would help our economy a great deal if there were programs to help out people who got into some of these situations.  While trickle down economics may not work, trickle up may be a big driver of our economy.  Currently, people are still spending because they can get credit to spend.  But if that dries up (look at the housing crisis) we would find out that we're all sitting on that house of cards.

 

I also thought the article was an interesting example to set in front of my kids of how not to write.  You say what you have to say.  You don't keep saying it over and over just to fill a word count minimum.