It has been reported for years that most Americans could not afford an unexpected $400 cost without borrowing or neglecting other payments, thus living paycheck-to-paycheck. Motley Fool said the percentage was about 50% this past year.
What surprised me was to see a report in Bloomberg indicating that this lack of financial flexibility also extends to upper-income earners (chart at top).
The share of Americans who say they live paycheck-to-paycheck climbed 3% last year, a likely reflection of the growing strain on household budgets. But it’s not just the lowest earners feeling the squeeze. Most of the newcomers were people earning more than $100,000 a year, according to a Pymnts.com and LendingClub survey. It all points to weaker consumer spending in the months ahead.
As a life-long compulsive saver, it's hard for me to comprehend the mindset that spends to the max to own the biggest possible house/car, newest phone, latest fashion, trendiest vacation.
I ran through a financial health tool provided by my bank and it gave me a little wink emoji animation every time I said something nuts like, yes, I can afford a $1000 unexpected bill. Or, no, I don't have any revolving credit card debt. I couldn't figure out if it was trying to be cute, or let me know it thought I was lying.
ReplyDeleteBetween us we've never hit six figures, but her money management skills mean we basically never feel pinched.
My theory: the number of high earners who SAY they live paycheck to paycheck is climbing. What we are witnessing is not a rise in precariousness, but a rise in poormouthing.
ReplyDeleteThe problem is that the financial industry does not discriminate by income in its desire to rip everyone off.
ReplyDeleteWant to buy a house? Here's an enormous mortgage twice the size you should afford.
Buying a car? Here's a 0% loan you can't afford to pay off for that shiny bigger vehicle you don't need.
Investing? Try Crypto, can't go wrong!
Opening a credit card? Here's a credit limit of $35,000 with 28% interest and a small annual fee of $356. But no worries about that fee, here's 0.01% cash back on items you'll never buy!
Trying to build some retirement? Give us more of your paycheck, or you won't be able to afford dry bread!
Trying to save? Here's 0.001% interest, while inflation is 15%. BTW, why not invest in crypto? Can't go wrong!
The more I have to deal with the financial industry, the more I notice how predatory they are. They want your money, and they want it all.
And the fast food industry makes us fat, Jack Daniels makes us get drunk, the automobile industry makes us kill each other, blah, blah, blah…
DeleteFortunately you and I are too smart to fall for their tactics.
Always refreshing to hear retirees/baby boomers taking the moral high ground about how other people struggle to live in a world largely built for and by the boomers. Compare housing prices, college tuition, car prices, and the need for services (cell phones, internet) that previous generations couldn't imagine and the hypocrisy becomes more visible. But go off, I guess.
ReplyDeleteIt's no doubt true that part of the problem is profligate spending. But, it's also true that workers are being squeezed and consumers bled. And the wealth gap is growing. In many parts of the US (both coasts) a family income of 100K is a break-even income at best. On the cost of shelter alone, the working class is against the wall. I compare the present situation with what my WW2 generation parents had available in the 1950s. My neighborhood was blue collar (California, near San Francisco), one income per household, everyone had an affordable mortgage. I pity the young family of 2023. Bernie Sanders was one of the few politician in the last 20 years who understood and engaged on these issues. I think this may be the point at which our failure to grasp the economic reality will lead to exponentially more of the same; and an authoritarian response as social problems spin further out of control. I'm already seeing this in the response to the growing (or exploding) problem of homelessness in California. Instead of fixing poverty with affordable housing (a national-scale issue which needs a federal fix, along with medical care, transportation and education), we're criminalizing poverty in ever more creative ways. The US already has the highest incarceration rate on the planet; mostly poor men. I don't see us "getting it" anytime soon.
ReplyDeleteThe Motley Fool has a great idea for boosting your cash reserves to fight emergency expenses... get a second job/side hustle. Gosh, why didn't I think of that.
ReplyDeletexoxoxoBruce
Yeah, a second job on top of your 70h/week mid level management job that gets you to 70k a year, that'll do it. /rollseyes.
DeleteI am so tired of the lazy 'personal responsibility' argument that utterly ignores that societal incentives is generally pointing the other way. It generally means "I don't care, it doesn't affect me but here's a lazy slogan making it your own fault".
Yes, instead of two jobs per household, why not three or four or five? Children can meet their parents after they retire, if they ever can...or in the afterlife. In the meantime, the upper 10% gobbles ever more of the national wealth. There's just no alternative.
DeleteA family I know brings home $250k a year and lives paycheck to paycheck. Why? They have two houses, four cars, a $15,000 club membership, a boat, and four kids.
ReplyDeleteAnother person I know lives with their mother because they can't make rent anymore. Why? Because they decided college was too much work, and they can't manage to do the hard labor a blue collar job often entails so they keep getting fired.
While there are many structural problems with American society, I'm not sure they are at fault in either of these cases.
It’s partially a social problem in that people have been brainwashed to exclude anyone from their social circle who’s kid doesn’t go to college. They in turn drum it into the kids head they’ll be disowned without that degree.
DeleteSo the kid goes into sizeable debt for that white collar job paying $45k. I’m not badmouthing college but only if they know where they’re going so pick the school and curriculum to get them there, instead of going just to go.
Meanwhile my buddy has 8 plumbers working for him that make over $100k every year and can’t get enough of them. The building trades have been declared low brow, but shortages guaranty employment as the current force is retiring in droves.
xoxoxoBruce
This kind of stuff reminds me of the old Cadillac welfare queen stories of the 1960s.
Deletehttps://www.npr.org/sections/codeswitch/2013/12/20/255819681/the-truth-behind-the-lies-of-the-original-welfare-queen
DeleteHere's how we know it's not all about speed boats and trips to Disney World: https://www.marketwatch.com/story/a-record-number-of-u-s-renters-spent-more-than-30-of-their-income-on-rent-in-2021-11675356907?cx_testId=22&cx_testVariant=cx_1&cx_artPos=1&mod=home-page-cx#cxrecs_s
ReplyDeleteNeither person is living off the state. One of them probably pays $50k in taxes every year, all in. Both are essentially living paycheck to paycheck.
DeleteIs a defense contractor "living off the state?" Regardless, the link is to an article suggesting that rent payers, a class of have-nots, is being squeezed ever harder. Governments can take a powerful role in making housing more available through social housing programs. Instead we have a 40 year failure in that economic domain. One of may examples of the erosion of the common welfare and a prime example of why so many people are living on the edge.
Delete