Living paycheck to paycheck (article)

[SHP]

4 hours ago, Faith-manor said:

The concept of cutting back is not an option. Already people are rationing healthcare, kids with life threatening allergies without epi pens because they are so unaffordable, the state of Michigan has the highest car insurance rates in the nation by a WIDE margin and drivers are mandated to carry insurance, people are literally duct taping their cars together, and the $680 one bedroom apartment is a roach infested, drafty, freezing cold, tenement style slum lord crap heap. These same folks are already eating ramen noodles, and they are NOT making bad decisions. This is devolving into The Hunger Games for District 13 and the odds are not in their favor!

The hate on young people gets old. I have not yet even met a twenty something who was being irresponsible with their money. They are working their a$$es off, being taken advantage of by employers, being fleeced by the insurance and housing industry, and then told by their better off elders that they are morons for not being able to do better despite Panem screwing them over and over and over. 

It should also be noted that many GenZ not only believe, and not incorrectly, that home ownership is out of reach, but that they will never be able to retire no matter how old or infirm. They aren't wrong. All of their social security contributions are going to go to their parents and grandparents, and since congress has kicked that can down the road for 50 years, it isn't going to be fixed. So a lot of them are prioritizing travel now, experiences now, because they will never have a time of not working like a dog before they drop dead. At some point, life should at least be worth living. 

According to Justice Gap.isc.gov, (I cannot get my kindle to copy and paste the link), 15% live in poverty, 1 in 5 children. The income level required to constitute low income would be mean homelessness in my county.

By every metric, the middle class has been shrinking steadily for the last 50 years. Gen Z is well aware of their predicament so their decision making is going to look very different, with good reason, than that of the Boomers and Xers who talk about them negatively all the time. Maybe they do indulge now and again. Why not? They can't get ahead, their future is very bleak by every measure, the planet is being wrecked. They may as well have a little fun now because hell is their future. Deprivation now will not translate to comfort later.

I am going to call a spade a spade here. It is immoral, literally disgusting that Boomers and Gen X talk like this about Millennial and GenZ. 7.5% of their gross income is stolen from them to support the generations that malign them constantly. Literally, two generations are committing mass theft from, and then calling them character deficient. The current talk is to make THEM work to 70, many calls for this, even 72. Meanwhile the thieves get to retire at 65 even 62. Look in the mirror before you call out the younger generations.

I love you for taking the time to type out everything my brain was in a knot trying to say.

[Heartstrings]

21 minutes ago, SKL said:

I don't think they're saying "I paid 10% and it was fine."  I think they're saying "life wasn't so easy back then either."  My parents struggled mightily trying to pay that house payment at 11.75% (the house itself cost 68K).  They had 6 kids and my dad had to drive over an hour each way to get to work until he found a new job nearer our new home.  There was absolutely nothing good about the economy back then, or in the following decade.  We couldn't even afford the natural gas to heat the house - filling the wood stove was one of my chores.  We used to bring blankets and sit around the living room since it was the only room in the house where we wouldn't freeze.  I could go on and on.

It would be a joke to try to compare our 1980s lifestyle to what young adults are being taught to expect today.  But not in the way you seem to be thinking.

Same lifestyle, just pretend that there is at least 1 couple out there willing to live EXACTLY the same lifestyle, they are tough and determined and the only 24 year old couple left in the US with that kind of ethic, just for funsies.  Adjust the income to today, adjust the house price to today, make it an 8% interest rate.   Is that barely squeaking by still possible or would it have put even that modest lifestyle out of reach?    Just curious. 
 

Not directed at you but I really don’t get this idea that young people aren’t willing to suffer a bit.  So many young people today are full time RVers, van lifers, homesteading in a shed with an outhouse, converting buses or living in tiny houses.  I see so many younger people living in these rough ways.  I’m sure there are some who wouldn’t even think of it, but I’m also sure not everyone in the 80s was willing to have an outhouse either.  

Edited January 12 by Heartstrings

[historically accurate]

1 hour ago, Heartstrings said:

I’m curious, everyone who bought houses with 8-15% interest rate, what was your purchase price? Have you  checked recently to see how much purchasing power that amount gets you?  Can you still buy a similar house for that amount in thst general area?   If you had that same interest rate today could you have bought that house on the same salary? 
 

I just looked and there are some homes in the same area that could be bought for that price, but all need a lot of time and money put into them, definitely fixers and are all further out and in bad neighborhoods. I wouldn’t have had the extra money to put into rehabbing a house at the time.  Most things in that price range now are plots in new neighborhoods where you would build a new house.  
 

My old house would have been a real stretch on the income we had.  We bought it for $100k with 8% interest and it’s worth $175k now. 

 

 

We bought our first house in 2000 shortly after we got married at just under $125,000. We sold it after I decided to stay home with kid #2. In today's dollars, that house, due to time value of money only, should be about $223,000. Note that $125,000 was well above the median home price in 2000 in my area (it was a hair under $80,000 according to an old census I found online), and the median home price is now well above $223,000 (it's $278,000). I think my home loan was about 8%; I know we refinanced to about 1% lower rate one time.

A 30 year fixed rate at about 7% on that mythical $223,000 home today would be $1,186. Using Dave Ramsey's 25% rule, you are looking at an income level of $4744 take home needed. Note that does not include property taxes and homeowner's insurance; taxes should be included per DR, but I'm leaving it out because they are so area-specific. It also takes into account a 20% down payment of $44,600 leaving you with no PMI to pay.

$4744 take home pay translates to approximately an $80,000 gross annual salary according to this site: https://incomeaftertax.com/6700-a-month-after-tax-us (although my state tax is 4.95%, so take home would be a little less).

Honestly, we made probably right around $80,000 in year 2000 money when we bought that $125,000 house - I don't remember exactly but it seems fairly close, both somewhere around $40,000. Note we both commuted 1 1/2-2 hours one way into the city to get that $40,000 salary.

That $80,000 gross salary to buy this house in today's dollars is almost double the median income level of $45,000 in my area. But this house was 150% the median then. Then again, $223,000 is well below today's median.

I just thought to look at the zestimate on this house: $317,500. Sold for $250,000 in 2017.

 

 

 

[Arcadia]

5 minutes ago, Heartstrings said:

Same lifestyle, just pretend that there is at least 1 couple out there willing to live EXACTLY the same lifestyle, they are tough and determined and the only 24 year old coupe left in the US with that ethic, just for funsies.  Adjust the income to today, adjust the house price to today, make it an 8% interest rate.   Is that barely squeaking by still possible or would it have put even that modest lifestyle out of reach?    Just curious. 

just for the fun of replying. My husband and I were still in college as 24 years old and commuting from home. We do expect our kids to be commuting from home to work and/or college (postgrad) when they are 24 years olds.

We bought our first and only home in the states (one bedroom condo) in 2005 for $400k when my husband's pay was $79k and we were 32 years old. Adjusted to 2024 dollars using this inflation calculator says its $127k.  Our floor plan is currently getting sold at around $700k in our complex. A 32 year old and under with $127k annual income would be able to afford the mortgage, property tax and HOA.  My condo complex is mainly one bedroom units and the young couples buying are typically double income no kids. The single income couples buying are typically in the 30s or older.

[fraidycat]

19 hours ago, Bootsie said:

So, in years that a corporation has negative profits should wages be based on the percent of a negative number, and workers receive negative wages?  

I didn't say anything about a year. Maybe it would be averaged over 3-5 years. 🤷🏻‍♀️ The point is that the current pace of low/no regulation or restrictions on capitalism and corporate greed is FUBARing the world exponentially every year it is allowed to continue.

[DawnM]

8 hours ago, Wheres Toto said:

The numbers it that are off for my area.  It says you can get a two bedroom apartment for $1800 and that's not possible.   

I think the creep can be a factor especially if someone has been saving up for something or putting off plans until they were affordable, like fixing up a house or buying a better car (although I'd argue those fall more under putting off things that are important), but I think the increase in the cost of pretty much everything is more of a factor.  

True.

I had some friends in SoCal who were waiting for the housing bubble to burst.   That was when a 1500 house was $250k.   They never were able to buy a house.   That same house is over 1M now.

[DawnM]

8 hours ago, Faith-manor said:

I did some checking on the cost of living locally. I took the median average on several items:  rent for one bedroom apartment, car insurance for full coverage but not optimal coverage, cell phone plan that works in this county (very few options, not much competition), internet (a requirement of nearly all employers now because they post so much online), non-smart, base model phone (built into the monthly cell phone plan payment schedule), health insurance for one person, electric and assuming the apartment is heated with electric (houses here are heated on propane because we do not have natural gas, so $350-700 a month depending on size of place and quality of insulation and windows, efficiency of furnace), and came up with $2400 a month. Average medical  insurance premium was $497 per person.

Not included in that $2400 was food, clothing, car maintenance, fuel (we have no public transportation here), personal care items, etc. The average deductible was $5000 but with many plans sitting at $10,000 for one person. (My brother's company policy is $10,000 per person, $15,000 per family, and $20,000 out of pocket before it kicks in 100% and then only if every single provider is in-network so don't even thing of having a medical emergency outside the network.) $55,000 a year is $3600 roughly in take home pay. One would not be able to eat and still maintain a car, meet the medical deductible, and buy fuel for that car for the work commute. A lot of people in my county go without health care even if they have medical insurance. They simply don't have the cash. My husband's last annual physical in which the nurse practitioner was in the room less than five minutes was billed out at $350 for the office call, and routine bloodwork was $593 at the in network lab. The insurance covered not one cent of that.

Now add for young folks $30,000 in federal student loans which is less than half the actual cost to attend most public universities here for four years, and that is another $319 a month payment.

Setting aside money for the deductible and out of pocket non covered expenses, that is another $1000, annual average cost of routine maintenance $123 a month, and upwards of $500 a month for fuel since jobs that pay $55,000 in this county are few and far between making commute normal, and $100,000 is literally doctors and dentists only, this means that one cannot eat on $55,000 IF they also pay the average in medical costs. And on a rough estimate take home of $6100 on $100,000 salary, $5300 or so in expenses leaving $800 leftover for food and maybe making a 401K contribution. Note the lack of car payment.

The median salary in my county is less than $55,000 a year. Dh works remote for his IT company which is why we can live here and take care of our mothers whose retirement funds would not allow them to live closer to the city. He is in the top 1% of earners for our county. We are very comfortable for sure, and know how lucky we are! Most folks in the area belong to dual income households and still rationing healthcare down to a game of russian roulette with their well being, duct taping their cars together. Average salary is $43,000 ish. A single person on $43,000 has to have two roommates, and eat ramen noodles while praying to never have any kind of medical emergency. It has been noted by police and EMS that often the young folks refuse medical evaluation after car accidents because they are terrified of a huge medical bill they cannot pay. But hey, ya...let's have MORE capitalism where robber barons get even richer while the masses suffer, and definitely more healthcare dictated by a for-profit insurance industry! (Dripping with sarcasm, I hope you caught that!)

Read up on the Guilded Age. Vanderbilts, Astors, Livingstons, Roosevelts, Van Dusens, Van Burens, Stuyvesants, Rockefellers... We are having our second Guilded Age now, just different names. Musk, Bezos, Waltons, Koch, Mars, Hearst, Duncan...There is enough "stuff", enough technology and glitter to make it look more palatable than the last one, and yet, in terms of wages vs. robber baron income, about the same. Exhibit A: railroad workers for a start.

But the article said living paycheck to paycheck on $100k, not "whatever is average in your area."

I agree that many salaries really are difficult to live on, but 100k your area might be sufficient.   

[historically accurate]

$100,000 in my state gives you $6100 take home for single, and $6600 for married filing joint monthly. From here: https://www.gobankingrates.com/money/wealth/take-home-pay-100k-salary-state/

 

Going back to my DR budget on page 2 (single first/married second/family of 4 using the married filing joint amount if one last) Note that the family of 4 would have a greater take home pay due to the child tax credits though:

10% giving - $610 or $650

15% retirement - $915 or $990

Food (averages only) - $350 which is 6% or $685 which is 10% or $970 which is 15%

Utilities (averages only) - $225 which is 4% of both rounded

25% housing - $1525 or $1650

Transportation (averages only) - $300 which is 5% and 4.5%

Medical (averages only) - $130 which is 2% of both rounded

Personal spending (averages only) - $200 which is 3% of both rounded

5% Misc - $305 or $440

At this point, you have 25% remaining ($1525) if you are single making 100K, you have 21% ($1386) remaining as a couple, and 16% ($1056) as a family of four.

Insurance will need to be added here which is wildly variable, so squeeze it in with what's remaining. 

This budget does not account for any debt payments, no daycare, no phone purchases (or service), and no home internet. It also doesn't include any paid-for fun, unless it is coming out of the 5% misc budget. Utilities cover natural gas, electricity, water and other public services in this budget.

DR's article on budgeting percentages & averages: https://www.ramseysolutions.com/budgeting/budget-percentages

Honestly, writing it out, I could see how someone making this fictional 100K might feel paycheck to paycheck if they have 1 or 2 car payments, student loans, kids in daycare/afterschool care, orthodontics, kids' sports fees. They might feel "entitled" to some coffees on the run in the morning or lunches out on work days or a fancy gym membership since they're "doing so well". 

Going back to what a median house in my LCOL area is: $278,000 which translates to a $1479 7% mortgage only payment after 20% down (does not take into account taxes - taxes in my area code estimate makes the total mortgage amount $1662 monthly). So a 100K salary in my area (more than 2x the local median household income) in my area would be maxing out to purchase a median house under DRamsey's rule with a 20% down payment. 

 

[prairiewindmomma]

Thank you for going to the effort to type that out, historically accurate. 

[Condessa]

36 minutes ago, historically accurate said:

$100,000 in my state gives you $6100 take home for single, and $6600 for married filing joint monthly. From here: https://www.gobankingrates.com/money/wealth/take-home-pay-100k-salary-state/

 

Going back to my DR budget on page 2 (single first/married second/family of 4 using the married filing joint amount if one last) Note that the family of 4 would have a greater take home pay due to the child tax credits though:

10% giving - $610 or $650

15% retirement - $915 or $990

Food (averages only) - $350 which is 6% or $685 which is 10% or $970 which is 15%

Utilities (averages only) - $225 which is 4% of both rounded

25% housing - $1525 or $1650

Transportation (averages only) - $300 which is 5% and 4.5%

Medical (averages only) - $130 which is 2% of both rounded

Personal spending (averages only) - $200 which is 3% of both rounded

5% Misc - $305 or $440

At this point, you have 25% remaining ($1525) if you are single making 100K, you have 21% ($1386) remaining as a couple, and 16% ($1056) as a family of four.

Insurance will need to be added here which is wildly variable, so squeeze it in with what's remaining. 

This budget does not account for any debt payments, no daycare, no phone purchases (or service), and no home internet. It also doesn't include any paid-for fun, unless it is coming out of the 5% misc budget. Utilities cover natural gas, electricity, water and other public services in this budget.

DR's article on budgeting percentages & averages: https://www.ramseysolutions.com/budgeting/budget-percentages

Honestly, writing it out, I could see how someone making this fictional 100K might feel paycheck to paycheck if they have 1 or 2 car payments, student loans, kids in daycare/afterschool care, orthodontics, kids' sports fees. They might feel "entitled" to some coffees on the run in the morning or lunches out on work days or a fancy gym membership since they're "doing so well". 

Going back to what a median house in my LCOL area is: $278,000 which translates to a $1479 7% mortgage only payment after 20% down (does not take into account taxes - taxes in my area code estimate makes the total mortgage amount $1662 monthly). So a 100K salary in my area (more than 2x the local median household income) in my area would be maxing out to purchase a median house under DRamsey's rule with a 20% down payment. 

 

I thought that living paycheck to paycheck by definition didn't include things like putting money into retirement and giving and having hundreds of dollars monthly to spend on personal expenses?  I thought it meant it basically taking everything you earn each month to pay necessities, without anything left over or room in the budget for unexpected/intermittent expenses.  Is that not the accepted meaning?  

Edited January 13 by Condessa

[Ting Tang]

I live in rural Illinois, and I could totally understand those with a household net income of $100,000 living paycheck to paycheck.  Though we are self-employed, our health insurance alone is over $3,000 per month.  Braces for the 2-year plan cost us $215, and it would've been more if we did those in two phases for one kid.  

Yes, I believe most people live paycheck to paycheck.  I am blessed, and honestly, I wonder how so many do it, actually.  

[Brittany1116]

26 minutes ago, Condessa said:

I thought that living paycheck to paycheck by definition didn't include things like putting money into retirement and giving and having hundreds of dollars monthly to spend on personal expenses?  I thought it meant it basically taking everything you earn each month to pay necessities, without anything left over or room in the budget for unexpected/intermittent expenses.  Is that not the accepted meaning?  

I agree. When they say most Americans are living paycheck to paycheck, they don't mean they struggle to pay the rent or eat while also fully funding retirement. 

[Scarlett]

So poked around the city where we bought our first house in 1987. I calculated our payment back then  at 10% and a comparable house now at 7%.  $400 then $1000 now. 
 

Neither of us could have purchased that as a single person back then. As a couple we did.
 

Our youngest could definitely swing the current day comp with his current salary if he had a wife who also worked. 

[Scarlett]

14 minutes ago, Brittany1116 said:

I agree. When they say most Americans are living paycheck to paycheck, they don't mean they struggle to pay the rent or eat while also fully funding retirement. 

Correct. When we bought our first house in 1987 there was no savings. No retirement. We were 22 and 23 and barely scraped together the closing costs. 

[historically accurate]

46 minutes ago, Condessa said:

I thought that living paycheck to paycheck by definition didn't include things like putting money into retirement and giving and having hundreds of dollars monthly to spend on personal expenses?  I thought it meant it basically taking everything you earn each month to pay necessities, without anything left over or room in the budget for unexpected/intermittent expenses.  Is that not the accepted meaning?  

AFAIK, it means not having an emergency fund. As in if your next paycheck doesn't come in, you're ****ed. 58% of Americans do not have an emergency fund. 38% of Americans making at least 100K annually do not have one. 

I posted Dave's budget at $100K because it is the "ideal". Even with the ideal of no debt payments and the ideal paycheck of $100K, you're not left with a whole lot left over if you  have children in daycare or live in an area where housing is pricier than my LCOL area even if you're not technically scraping the pennies to buy tp this week.

If you have debt, it's going to take the place of giving and retirement and personal spending and etc. etc. 

Some articles exploring this phenomenon:

https://www.bankrate.com/finance/credit-cards/living-paycheck-to-paycheck-statistics/

https://www.lendingtree.com/debt-consolidation/emergency-savings-survey/#:~:text=Our report found that 58,%%2C according to LendingTree data.

https://www.usatoday.com/money/blueprint/debt/average-american-debt-statistics/#:~:text=As of the third quarter,than this amount of debt.

https://wallethub.com/answers/cc/what-percentage-of-america-is-debt-free-2140664784/#:~:text=Around 23% of Americans are,depending on whom you ask.

 

Edited January 13 by historically accurate

[Scarlett]

madeline_pendleton
 

I watch the above creator on TT. I find her mesmerizing for some reason. Maybe it is her various hair colors.  
Anyway, she had one video where she talks about how much of our income we should be spending on a car.  Very interesting. 
 

And she lives in, I think LA on about 75k per year. She gives a break down of how she does it. 

[Condessa]

22 minutes ago, historically accurate said:

AFAIK, it means not having an emergency fund. As in if your next paycheck doesn't come in, you're ****ed. 58% of Americans do not have an emergency fund. 38% of Americans making at least 100K annually do not have one. 

I posted Dave's budget at $100K because it is the "ideal". Even with the ideal of no debt payments and the ideal paycheck of $100K, you're not left with a whole lot left over if you  have children in daycare or live in an area where housing is pricier than my LCOL area even if you're not technically scraping the pennies to buy tp this week.

If you have debt, it's going to take the place of giving and retirement and personal spending and etc. etc. 

Some articles exploring this phenomenon:

https://www.bankrate.com/finance/credit-cards/living-paycheck-to-paycheck-statistics/

https://www.lendingtree.com/debt-consolidation/emergency-savings-survey/#:~:text=Our report found that 58,%%2C according to LendingTree data.

https://www.usatoday.com/money/blueprint/debt/average-american-debt-statistics/#:~:text=As of the third quarter,than this amount of debt.

https://wallethub.com/answers/cc/what-percentage-of-america-is-debt-free-2140664784/#:~:text=Around 23% of Americans are,depending on whom you ask.

 

But not having an emergency fund can be the result of not having room in your budget for an emergency fund, or of choosing not to set aside money in an emergency fund.  Those two groups of people are in radically different positions financially.  

Frankly, your ideal DR budget looks very comfortable to me.

[Bootsie]

2 hours ago, fraidycat said:

I didn't say anything about a year. Maybe it would be averaged over 3-5 years. 🤷🏻‍♀️ The point is that the current pace of low/no regulation or restrictions on capitalism and corporate greed is FUBARing the world exponentially every year it is allowed to continue.

I am having a diffcult time seeing how this could ever be implemented.  Do workers today (who were not working for the company 2 years ago), get a salary based on the average profits of the company for the past 5 years?  Or, do workers get paid 3-5 years after they have worked, once we have an idea of how productive those workers were?  What happens when a worker is with a company for one year?  Do they get a wage based on a an average of years when they had nothing to do with the comapny?  How is all of this split when there is not the same number of workers year-to-year, much less montht-to-month, or week-to-week?  What happens if the 3-5 year average profit is zero?  What about workers in a not-for-profit sector?  

More importantly, is there any evidence that workers, in general, prefer a profit-sharing pay scheme to a contractual wage/salary?  

[Clarita]

5 hours ago, Arcadia said:

I do see a different lifestyle creep among my husband’s younger colleagues. The “need” to own high end designer handbags e.g. LV, Prada, Dior for work in tech. That was rare pre-pandemic. I have no idea why.

Those high-end designer handbags are a drop in the bucket compared to how much it costs to put a roof over your head here, that's why. For all the money I dropped on the designer handbags and shoes would not have given me enough money for a down payment on a single family home. 

I could say for me it's because I was making 6-figures with sort of nowhere to spend it. Yes I could be renting a place of my own but how is that more of a waste of money than buying something nice. Looking back from where DH and I are at now just saving money couldn't have gotten us where we are today. There was a bit of luck and some good investments (on DH's part, because clearly I'm not good at finances).

[Arcadia]

3 minutes ago, Clarita said:

Those high-end designer handbags are a drop in the bucket compared to how much it costs to put a roof over your head here, that's why. For all the money I dropped on the designer handbags and shoes would not have given me enough money for a down payment on a single family home.

Considering how near the SF Premium Outlets in Livermore is, the cost is not the main issue. The money spent on DS19’s college tuition and dorm is enough to pay for a pricy bag each quarter. It is just interesting that few years ago, people were turning up to work at the Moffet Park area offices with Coach, Kipling, Fossil if they carry purses. Majority turn up with a company issued backpack. Then we start seeing interns and new employees turning up with Dior, Chanel bags. Like one of them was saying a few days ago that she has to cut back on spending to pay for rent when she moves out of her parents’ home in east bay but is buying another designer bag today. Like I said, its an interesting phenomenon. I would sometimes wait for my husband at his company’s visitor waiting area so I get to people watch as the employees badge themselves in and out.

[Heartstrings]

35 minutes ago, Scarlett said:

madeline_pendleton
 

I watch the above creator on TT. I find her mesmerizing for some reason. Maybe it is her various hair colors.  
Anyway, she had one video where she talks about how much of our income we should be spending on a car.  Very interesting. 
 

And she lives in, I think LA on about 75k per year. She gives a break down of how she does it. 

I adore her.  She has a book coming out soon about how she budget ls and does money while being broke in LA, one year she lived on only $19k.  
 

https://www.amazon.com/gp/aw/d/B0C2P9K391/ref=tmm_kin_swatch_0?ie=UTF8&qid=1705113116&sr=8-1

The way she runs her company is also amazing.  She is the owner but every employee, including herself, makes the same wage and she takes all of the profit and splits it among all of them after reinvesting some into the company instead of just keeping it to enrich herself as she would be entitled to do.  

Edited January 13 by Heartstrings

[Mrs Tiggywinkle Again]

I am kind of curious too what paycheck to paycheck means. I think it means nothing leftover after necessary bills are paid and food is bought. My husband firmly believes we live paycheck to paycheck because there’s usually only about a hundred dollars leftover on the next payday, but we also are putting 35% of our gross into savings/investment.  So I don’t think we are really paycheck to paycheck.

We were making next to nothing when we got married, but I was 27 and he was 25, we’d both lived at home for the most part and worked, so we came into marriage with a lot of savings.  We were able to primarily live off of that savings for the first year while DH finished his training and use it to put a down payment on a house.  Then that house grew in equity, like almost doubled, over the last 14 years.  When we sell it this spring the equity will pay off every bit of debt we have except my student loans, and put us on a good track to retire early. But we had it because we were both privileged to have parents that allowed us to live home rent free and save our money, which we  both did. So many people don’t have that kind of privilege and it is so hard to overcome not having that early assistance and planning.

Edited January 13 by Mrs Tiggywinkle Again

[Heartstrings]

2 minutes ago, Mrs Tiggywinkle Again said:

am kind of curious too what paycheck to paycheck means.

I don’t think it has a set definition.  Paycheck to paycheck to me means squeaking by, with maybe a bit of savings that doesn’t last long.   I agree with you that your husband is using it wrong if you’re saving 35%.  To me that’s more like “crying poor” or maybe feeling the squeeze from so much discipline.  

[Scarlett]

31 minutes ago, Heartstrings said:

I adore her.  She has a book coming out soon about how she budget ls and does money while being broke in LA, one year she lived on only $19k.  
 

https://www.amazon.com/gp/aw/d/B0C2P9K391/ref=tmm_kin_swatch_0?ie=UTF8&qid=1705113116&sr=8-1

The way she runs her company is also amazing.  She is the owner but every employee, including herself, makes the same wage and she takes all of the profit and splits it among all of them after reinvesting some into the company instead of just keeping it to enrich herself as she would be entitled to do.  

I hope her book does well.  She is so interesting.

[Scarlett]

50 minutes ago, Heartstrings said:

I adore her.  She has a book coming out soon about how she budget ls and does money while being broke in LA, one year she lived on only $19k.  
 

https://www.amazon.com/gp/aw/d/B0C2P9K391/ref=tmm_kin_swatch_0?ie=UTF8&qid=1705113116&sr=8-1

The way she runs her company is also amazing.  She is the owner but every employee, including herself, makes the same wage and she takes all of the profit and splits it among all of them after reinvesting some into the company instead of just keeping it to enrich herself as she would be entitled to do.  

I have already pre ordered it.  

[Heartstrings]

6 minutes ago, Scarlett said:

I have already pre ordered it.  

Me too!   I’m hoping I can get my husband to read it with me.  

[Melissa in Australia]

15 hours ago, Katy said:

Daycare costs are a very good point. I honestly think we should follow other developed nations and provide free daycare or at least nursery school from 3-5. 

Daycare here in Australia is only free for children at extreme risk with DHHS involvement..otherwise it is just subsidised by tax offsets. My brother is paying over $600 per week for daycare for 1 child

[SKL]

4 hours ago, Condessa said:

I thought that living paycheck to paycheck by definition didn't include things like putting money into retirement and giving and having hundreds of dollars monthly to spend on personal expenses?  I thought it meant it basically taking everything you earn each month to pay necessities, without anything left over or room in the budget for unexpected/intermittent expenses.  Is that not the accepted meaning?  

Yeah, I think the saying means you are hoping the milk lasts until payday morning so your kids get to eat that day.  And that you deposit your paycheck immediately kuz it needs to cover the rent check you already mailed yesterday.  And that you budget to the penny on a daily basis.  Zero savings, zero emergency fund, zero charitable giving, zero impluse spending money.

[Scarlett]

50 minutes ago, SKL said:

Yeah, I think the saying means you are hoping the milk lasts until payday morning so your kids get to eat that day.  And that you deposit your paycheck immediately kuz it needs to cover the rent check you already mailed yesterday.  And that you budget to the penny on a daily basis.  Zero savings, zero emergency fund, zero charitable giving, zero impluse spending money.

Or you only have enough  gas to get to work the next week so you can’t drive your kids 10 miles visit friends. 

[Heartstrings]

7 hours ago, SKL said:

Yeah, I think the saying means you are hoping the milk lasts until payday morning so your kids get to eat that day.  And that you deposit your paycheck immediately kuz it needs to cover the rent check you already mailed yesterday.  And that you budget to the penny on a daily basis.  Zero savings, zero emergency fund, zero charitable giving, zero impluse spending money.

My mom would have called that hand to mouth, a bit more dire than paycheck to paycheck.  

[DawnM]

12 hours ago, Condessa said:

I thought that living paycheck to paycheck by definition didn't include things like putting money into retirement and giving and having hundreds of dollars monthly to spend on personal expenses?  I thought it meant it basically taking everything you earn each month to pay necessities, without anything left over or room in the budget for unexpected/intermittent expenses.  Is that not the accepted meaning?  

Interesting question.

What exactly is "living paycheck to paycheck"

 

[Carrie12345]

On 1/12/2024 at 7:42 AM, Katy said:

Daycare costs are a very good point. I honestly think we should follow other developed nations and provide free daycare or at least nursery school from 3-5. 

The Nordic model was a big part of my Sociology of Families course, because the program director does a lot of work in Finland. As much as I want to see us incorporate their successes, I have doubts about their effectiveness in the American (or similar) culture.

It requires a culture that values children and the impact of society on family health over individual enrichment. I truly do not see many people (outside of the social sciences and associated positions) who wish to “sacrifice” for the good of the whole.

[elegantlion]

11 hours ago, Mrs Tiggywinkle Again said:

I am kind of curious too what paycheck to paycheck means. I think it means nothing leftover after necessary bills are paid and food is bought. My husband firmly believes we live paycheck to paycheck because there’s usually only about a hundred dollars leftover on the next payday, but we also are putting 35% of our gross into savings/investment.  So I don’t think we are really paycheck to paycheck.

 

I can see how 100k could be minimal for some parts of the country. In my county (not true for the entire state), you can live comfortably on half of that.

For me, the lived experience of paycheck to paycheck was more brutal. Again, all of these are my (thankfully past) experience. There are three big concerns: housing, transportation, and healthcare. Rents or mortgage aren't paid until that last of the month check comes in. One major car repair could set you back much less a hospitalization. 

Access to credit may or may not exist. If you're living super close to your margin, your credit may have taken some hits or you might have credit cards with low limits. 

Another aspect is that there is nothing to cut back on. Kids aren't in activities because it's too pricey. One parent may stay at home because daycare costs are out of the budget. 

You might be adding a minimal amount to an investment account through employer accounts, but personal savings are constantly being dipped into because of things like car repairs etc. Forget a six month savings buffer or savings beyond that. 

It's very hard to get ahead when there is no buffer. It's also hard when you can't absorb increases of unknowns - like yearly insurance costs, health care costs, rising groceries. We (ex and I when ds was little) tried to get estimates from medical providers - like something simple such as the price of an office visit without insurance. The front desk always acted like you'd asked for the moon or something. Even with insurance in 2020, my hysterectomy expense was nearly 10k. Thankfully SO and I agreed we needed to get that expense out of the way and I didn't contribute to household expenses for months to pay off that debt. Otherwise, I'd still be paying on it. 

Car insurance costs, home insurance costs have risen much less groceries. I can see how all these rising costs are making paycheck to paycheck more of a reality for people. I do think it's a spectrum from the working poor to the working comfortable who want a quality of life that isn't too much to ask for - home, working cars, kids in activities, savings, health care, maybe a vacation once in a while. 

[Bootsie]

"Living paycheck to paycheck" is an expression that means different things to different people and is not a precise economic description.  In general terms, it refers to people who would have difficulty in paying their bills if they lost their employment.  There is no set length of time of how long it would be before the family has difficulty paying a bill.  Someone whose savings would be deplleted after 3 to 6 months of unemployment can still be considered "living paycheck to paycheck". 

In the general sense of the term, if we work for a laving, we are living paycheck to paycheck.  The lifestlye that working provides for us is not really the relevant measure.  

[Brittany1116]

Quick google told me about about a quarter of working Americans have no retirement savings, and about half of adults 55-65 have none. Couple that with 40% or more not having $400 to cover an emergency, and the situation becomes a little more clear. People who are eating Ramen and ketchup sandwiches for the last 3 days of the month, or are putting a new tire on a credit card that has been carrying a balance are not putting hundreds of dollars into a 401k monthly. 

[Katy]

I was just served a YouTube video titled in the image something like “$130k is now middle class” and something about vastly changing financial markets in 2024.  I didn’t watch it, but I thought the topic is timely. 

DH and I had a conversation recently about how rapid inflation always increases bargaining power for workers and unions. Both of which have consistently lost power throughout our lives (we’re 44). But as more boomers die or retire, there will be cheaper housing and more and more jobs. Not having enough employees is already a limiting factor in the economy. Several fast food restaurants near us have closed or switched to limited hours because they can’t keep enough employees at $15-18/hour to stay open. 

I feel like this will lower the prices of real estate eventually. I mean prices in desirable locations will always go up (Coastal areas, cities), but the cost of a large house in suburbs of small and medium cities in the Midwest will definitely go down relative to income in the next 10 years. And with the ability of more & more people to work remotely, eventually more companies will be forced to accept remote workers if they want to grow. So long term I suspect everything will be fine for Gen Z. But that doesn’t mean the economy won’t dominate panicked headlines just like they always have. 

[frogger]

14 hours ago, Bootsie said:

  

More importantly, is there any evidence that workers, in general, prefer a profit-sharing pay scheme to a contractual wage/salary?  

And are they willing to take zero pay when there is no profits? I think there is very little understanding of the risk involved. There is seldom understanding of how often people go years with no pay for hope of a future payout. I personally have little tolerance for such things. 

[Bootsie]

According to the Census Bureau, in 2020, 58.1% of Americans between the ages of 56-64 owned a retirement account.  If a man works and has a retirement account, although his wife may have a claim to benefits from it, he is considered the owner of the account; if the wife has not worked, or has worked without contributing to a retirement account, she is counted in the 42% without account ownership.  it is difficult to determine how many people do not have access to retirement savings because "ownership" of the account is attributed to one person.

[thatfirstsip]

Here, $7k take-home a month is only not paycheck to paycheck if you don't have significant debt or ongoing regular medical costs like therapy or a chronic health issue and don't have to pay for daycare.

We're pretty medium COL. Rent on a 2-bed apartment is $1500. Daycare for one kid, also $1500/month. This leaves $4k - say $500 for utilities (including internet and phone), $300 for a car payment, $200 for gas/car insurance - now you have $3k. 1k of that is food ais d household expenses, $500 is health insurance (of the cheap insurance variety, high deductible), and say another $200/month for healthcare. Now you have $1300.

$1300 a month is a decent margin, unless you have debt, or ongoing medical expenses, or more than one kid in daycare, etc. just one extra kid in daycare or after school care and the $1300 is completely gone; $400 in monthly therapy costs or $500 in debt payments (say student loans) and suddenly everything is quite tight - you haven't been contributing to savings and one bad car repair or other minor disaster and you're in trouble.

[Bootsie]

The interaction between income, wealth, and lifestyle is complex and there are many different situations that individuals find themselves in.  Many people really do struggle to pay medical bills, buy food, pay for childcare, and save. 

At the same time there are a lot of people living paycheck to paycheck who justify spending $10 at Starbucks and $500 on a purse because it isn't enough to matter.  However, if you put $10 per month in a retirement account earning 7% for 45 years (ages 20-65) you will have about $38,000 in the account when you retire (if you earn 8% that increases to $53,000).  That is only about 33 cents per day of savings.  Making those small decisions at the margin, especially when young, can really add up.    

[Heartstrings]

1 hour ago, Katy said:

I was just served a YouTube video titled in the image something like “$130k is now middle class” and something about vastly changing financial markets in 2024.  I didn’t watch it, but I thought the topic is timely.

I think this is interesting.  We know what inflation does to incomes and things but it’s as if seeing it in real time is too mind boggling.  
 

My Dad has talked about thinking he had made it when he got his first paycheck of $35 and unbelievably rich with his first military paycheck of $200, 60 years ago.   We all recognize that $200 a month is no longer a comfortable salary and we seem to be ok with that concept. We all know that means that somewhere along the way “$500 a month is the new $200 a month” could have been a headline, then $1000, and so on, but we’re deeply uncomfortable with the idea of $130k being the new $100k.   I guess it’s just recency bias?
 

It seems inevitable to me that my great grandkids will think $100k is low income, after all you need $500k just to feed yourself and think it’s so crazy , the same way I think about my Dad thinking $200 a MONTH was good. 

I think I always knew that prices and income raise as we go along, but I think I pictured it as a gradual increase over time, but we’re seeing it happen as more of a jump right now.  Which I think had to have also been the case with the inflation crisis in the 80s, so maybe gradual then a jump, then gradual then a jump has always been how it’s worked.  

 

Edited January 13 by Heartstrings

[SKL]

2 hours ago, frogger said:

And are they willing to take zero pay when there is no profits? I think there is very little understanding of the risk involved. There is seldom understanding of how often people go years with no pay for hope of a future payout. I personally have little tolerance for such things. 

Not only that, but are they willing to put up cash when cash flow goes negative?

For that matter, shouldn't they have to buy their job in order to receive a payout from the capital?  (The owners have essentially bought their jobs, after all.)

Should we also have to pay profit sharing to our materials suppliers, landlords, etc?  If not, why not?

Edited January 13 by SKL

[fraidycat]

On 1/12/2024 at 8:01 PM, Bootsie said:

I am having a diffcult time seeing how this could ever be implemented.  Do workers today (who were not working for the company 2 years ago), get a salary based on the average profits of the company for the past 5 years?  Or, do workers get paid 3-5 years after they have worked, once we have an idea of how productive those workers were?  What happens when a worker is with a company for one year?  Do they get a wage based on a an average of years when they had nothing to do with the comapny?  How is all of this split when there is not the same number of workers year-to-year, much less montht-to-month, or week-to-week?  What happens if the 3-5 year average profit is zero?  What about workers in a not-for-profit sector?  

More importantly, is there any evidence that workers, in general, prefer a profit-sharing pay scheme to a contractual wage/salary?  

I'm sure you're aware that profits are what is left over after expenses including wages, yes? I didn't say just profits, I said profits and stockholder dividends and that it would be a percentage formula, possibly averaged over 3-5 years and they can't pay megabucks to the CEOs.
 

I wasn't trying to formulate an equation, I was expressing an opinion. Corporate greed is out of control and under-regulated. If companies had to base their minimum wages on a combination of profits, shareholder dividends, and CEO compensation packages, the worker bees would be more fairly compensated for the value they add to the company and the economy.

There's probably a mathematician or two who can create a more fair compensation formula, using various company financial metrics, than the one we currently operate under whether you can imagine it or not. 🤷🏻‍♀️ 

[Arcadia]

@Clarita

https://www.sfchronicle.com/bayarea/article/low-income-median-levels-18164328.php

[bookbard]

On 1/13/2024 at 3:05 PM, Melissa in Australia said:

Daycare here in Australia is only free for children at extreme risk with DHHS involvement..otherwise it is just subsidised by tax offsets. My brother is paying over $600 per week for daycare for 1 child

Actually in most states Preschool is free (in Victoria, this began in 2023; in NSW, it depends where you live). The only problem is that the hours for preschool tend to be the same as school, so it doesn't suit people who need childcare (long daycare). Daycare is subsidised but it is so complicated I have no idea how it works. 

[Melissa in Australia]

58 minutes ago, bookbard said:

Actually in most states Preschool is free (in Victoria, this began in 2023; in NSW, it depends where you live). The only problem is that the hours for preschool tend to be the same as school, so it doesn't suit people who need childcare (long daycare). Daycare is subsidised but it is so complicated I have no idea how it works. 

thankyou for the correction. I was referring to daycare not 4 year old  kindergarten I am now thinking I am out of date

Edited January 14 by Melissa in Australia

[Bootsie]

10 hours ago, fraidycat said:

I'm sure you're aware that profits are what is left over after expenses including wages, yes? I didn't say just profits, I said profits and stockholder dividends and that it would be a percentage formula, possibly averaged over 3-5 years and they can't pay megabucks to the CEOs.
 

I wasn't trying to formulate an equation, I was expressing an opinion. Corporate greed is out of control and under-regulated. If companies had to base their minimum wages on a combination of profits, shareholder dividends, and CEO compensation packages, the worker bees would be more fairly compensated for the value they add to the company and the economy.

There's probably a mathematician or two who can create a more fair compensation formula, using various company financial metrics, than the one we currently operate under whether you can imagine it or not. 🤷🏻‍♀️ 

There are issues such as what is fair compensation and how would it be determined, what is a fair return on capital, what is a fair return for taking risk which raise interesting ethical issues and are worthy of discussion by society.  The answers to those questions are much more philosophical than mathematical.  Those questions must be addressed before any mathematical formula is derived.  Jumping to a formula before the other issues are discussed can lead to odd and perverse outcomes.  

For example, companies do not have to pay dividends.  They can keep the money in retained earnings and the owners of the company then profit from the increase in the stock price (capital gains) rather than receiving dividends.  Dividends are not considered expenses of a company but interest payments are, and dividends are paid out of profits.  Say a company has $1m in profits and pays $250,000 in dividends, paying a % of profits and dividends would mean paying a % of $1.25 million--with the $250,000 being counted twice.  This scheme would change business decision making; companies would be more likely to finance their project using debt rather than shareholder equity.  This would change the capital structure of companies, making them more risky (which would impact the stability of workers jobs).  

 

[SKL]

Also it would become impossible for entrepreneurs to attract employees.  This would further concentrate intellectual property ownership and also remove incentives to innovate.

[Scarlett]

11 hours ago, fraidycat said:

I'm sure you're aware that profits are what is left over after expenses including wages, yes? I didn't say just profits, I said profits and stockholder dividends and that it would be a percentage formula, possibly averaged over 3-5 years and they can't pay megabucks to the CEOs.
 

I wasn't trying to formulate an equation, I was expressing an opinion. Corporate greed is out of control and under-regulated. If companies had to base their minimum wages on a combination of profits, shareholder dividends, and CEO compensation packages, the worker bees would be more fairly compensated for the value they add to the company and the economy.

There's probably a mathematician or two who can create a more fair compensation formula, using various company financial metrics, than the one we currently operate under whether you can imagine it or not. 🤷🏻‍♀️ 

Remember the Ben And Jerry ice cream model?  I was always fascinated by that…..I don’t think it lasted though.  

[Bootsie]

27 minutes ago, Scarlett said:

Remember the Ben And Jerry ice cream model?  I was always fascinated by that…..I don’t think it lasted though.  

Ben and Jerry's was a privately-held company. The salary of the top employees was originally no more than 5 times the lowest salary, then it was increased to 7 times the lowest salary.  When Ben Cohen retired (in 1994), the company could not find a CEO who was willing to come to work for the company at that salary and the salary structure was abandoned.  When the company was sold, the original owners (who did not take a high salary when they were working for the company) received a large payment; thus, instead of taking a high salary while they were working, they delayed the compensation until they sold the company (and the workers did not receive a percentage of that compensation).