Over at the Huffington Post, there was an article indicating how many people are just one emergency away from facing financial disaster (http://www.huffingtonpost.com/2013/01/30/financial-emergency-report_n_2576326.html?utm_hp_ref=business). I was recently asked what my take on the article was by Anonster on another thread, so figured that article would be a good backdrop to this post.
The article takes its conclusion from the Corporation for Enterprise Development’s 32 page publication “Assets & Opportunity Scorecard” which can be found here: http://issuu.com/cfednews/docs/2013scorecardreport/1
A few of the statistical points of CFED’s research:
- Almost 44% of households, or 132.1M people, do not have a safety net that will help them with emergencies or future needs which include their child’s education or home ownership.
- Approximately 14% (42.2M people) live below the poverty line which is about $23K for a family of four
- Approximately 25% of households earning between $55K and $90K have less three months of expenses saved
- Approximately 31% of households do not have a savings account
- Approximately 8% have no traditional bank account such as a checking account
- Over half of consumers have sub-prime credit scores
- Approximately 26% of households have a negative net worth- liabilities exceeding assets
- An average borrower has almost $11K of credit card debt
The report further defines “Liquid Asset Poor” (LAP) as the 44% of household who have less than $5,763 of savings which is three months of income at the federal poverty level. I presume that this further clarifies the 44% referenced above in the first bullet point which not only includes emergencies but also future needs of education and homeownership. Some other interesting selected figures about the LAP(there are way too many to list):
- 83% of the LAP earn less than $55K
- 75% are employed full-time; 88% are employed
- 19% did not graduate high school while almost half have some college experience
- 36% of the LAP have children while 52% of those who have kids married
- Approximately 44% of Californians are LAP
- Approximately 12% of Californian earn below the federal poverty level($23K for a family of 4)
I am not going to attack any of their figures as I don’t have any reason to believe that they are wrong. I was surprised by a few of them though. Surprised may not be a good term. The ones that really stick out are that only 19% of the LAP did not finish high school and that 25% of those who earn between $55K and $90K have less than three months in savings. The other confusing item is the high rate of the LAP we have in CA compared to those whose income is poverty level.
OK, back to the article which is about folks being one disaster away from financial disaster and my thoughts on the topic. I know that people are staring over the financial cliff. It is a huge problem. I am angry and disappointed that we are in this situation. We are full of smart people in the US. We know that bad things are going to happen. We want the best for ourselves and our neighbors. Why do we let this happen? I am a saver, yes I spend a lot, but before I spend, I save. I spend too much actually…it is a continuous struggle. Obviously first before I can save I have to earn. I personally am quite fortunate to be blessed with good earning power right now…I have no idea how long that will last. Some folks plain just do not make much money for one reason or another. Regardless, the steps are the same…they just may take a bit longer for some. First, you have to have a job which most do even if they are LAP, so I am talking about the 88% of the LAP who are employed here (just like the family in the article). This is going to be hard…hold on.
First, take care of food, shelter, transportation, and clothing needs. These are absolute necessities. You have to eat…you don’t have to eat well, Ramen can actually be pretty good. You have to have a place to put your head…it does not have to be big and comfy. You have to have some sort of transportation…it does not need to be a car. You have to be clothed…for your sake and ours- used is fine, new is overrated. These are necessities and they come first.
Then, comes a starter emergency fund. Do everything you can to get your starter E-Fund funded. This is $3,000 in the bank or in the cookie jar…as fast as you can…attack! Fast, now- don’t wait. This is before any restaurant meal- not just no more splurging, I mean ANY RESTAURANT MEAL. This is before a movie- even Netflix or a $2 show at Main Place Mall. This is before a soda- even if it is just fifty cents. Before you have internet, a cell phone, a gift for the teacher, a 25-cent newspaper, a magazine- you get the idea…live like you have nothing. I told you it was going to be hard.
This is before anything else other than your four absolute necessities (food, shelter, transportation, and clothing) and commitments you have. Commitments being contracts you have entered which have to be paid. Keep paying your cell phone if you are in a contract and can’t break it, but cancel your phone if you are able to. Cancel cable and internet if you are able to (i.e. you can often cancel with the cable company but not with a satellite company for example).
By the way, you no longer use credit cards…cash only. By cash, I mean “cash”…remember the green stuff- yes, that cash. No cards. No reward points. Nope…you will spend less and every time you hand over a dollar to someone you will make a painful decision on whether this is an absolute necessity or not.
Yes, garage sale. Yes, collect cans. Yes, sell your stuff. Every extra dollar of income will help. Do everything you can to get to $1K, then $2K, and then $3K. This is still insufficient savings, but it will be enough so that when Mr. Murphy blows your tire out you can get it fixed. People will find that just by having that first $1K saved, they will feel much better. It seems like a lot right now and it may take a few months to get even that first $1K saved, but you have to commit to it, attack it, and you have to simply start.Now you have your $3K saved in your starter E-Fund. You are still LAP. You still have debt from decisions made in the past. You are still not secure, although it feels good to have some money saved for a true emergency (take out is not an emergency).
Now you are attacking the debt with the same tenacity that you went after your E-Fund. Still no restaurants. Still no soda. Still no new clothes. Still no entertainment that costs money. Still selling everything you can- stop when your kids think you will sell them. Attack your debt. Pay minimum payments on all debt to start. Put every dollar extra towards the smallest debt. Be done with that payment and roll everything you were paying towards that old debt and roll it into your next smallest payment. Continue this until you are knocking off debt payments and you feel so good about it that you can see the light…this may take years. Years of no new clothes, no restaurants, no entertainment, no new cell phone, necessities only!
If an emergency comes up, use your starter E-Fund…then work your E-Fund back up by backing off on your debt payments (remember, you are now paying more than the minimum payment on your smallest debt). You are still larger disaster away from financial crisis, but at least you can handle something smaller. You are still LAP- part of the 44%.
This may not be good for the economy, so don’t everyone go out and do it all at the same time…can you imagine if no one ate at a restaurant except for those who have 3 months saved up? It would be painful for the economy. Oh heck, everyone go for it…I know not everyone will, so we should be fine.
Now, you are debt free. You have your $3K in the bank. You attacked your debt like a lion. You feel good about it. You may have lost weight because you are not eating too much. Your clothes are starting to wear down. You are not done. Now, you have to get to 6 months of liquid savings…that is when you can breathe a sigh of relief and say that you are less likely to suffer a financial disaster from an emergency. You no longer are fine with just a starter E-Fund, you need a full E-Fund. You look at your own expenses and fund 6-months. Still no movies, still no Starbucks, still no meals out, still not much fun that you pay for…yes, you are still on cash. Don’t fall into the credit card cycle again. You take all of that money you used to pay off your last debt with and you throw it to your E-Fund. Funding a full 6-months of liquid savings.
Then, you save for retirement, then you get properly insured, then you splurge on a treat every once in a while, then you save for college, then you save for a home, then off your mortgage early, then you start giving it all away, then you can really live. Not going into how to do those things because I really just want to back people away from the financial disaster that is one step away right now. 44%! That is a lot of people especially with 75% of them having full time employment. This will take YEARS for most people, but those years are going to pass by no matter what…you may as well get after it now. And, no kids parties either!
We have to save, people! We have to sacrifice today in order to have tomorrow. We can do this. Yes, it is hard. Yes, you will get kicked and knocked down. Yes, there are those out there who will take advantage of you. Yes, yes, yes,…all of that which you are thinking- yes. Yes, people (maybe you) are barely making it- nothing left over right now. If you keep doing what you have been doing, you will keep getting what you have been getting. We do not have to continue down this path. We can do it…you can do it.
OK, OK, let me have it. Tell me how unrealistic it is. Tell me how someone making only $X amount can’t do this. Tell me how it won’t work. Tell me how it is someone else’s fault. I am ready for it. This is hard. Not everyone has the desire to sacrifice like this. I know a lot of people have it very tough and they have been dealt the worst cards in the deck. I understand. That is one of the reasons, not the only one, that we are in the situation.
As a coach told me, whether you think you can or can’t, you are right…so true.
Kudos and credit to Dave Ramsey at Financial Peace University for shaping a lot of my thinking…along with my parents.
Government is bankrupt,
Civilians are bankrupt,
China is dictating U.S. Gun Control policy.
Dang, lets get drunk.
No, no, no…liquor is not in the budget until after you have your 3 to 6 month E-Fund established!
So, in the face of all the evidence, the stagnant wages, the more expensive housing, costlier medical and insurance coverage, the huge jumps in education costs and all the ways we’re nickeled and dimed to death, you still believe that it’s individual moral failing that leaves so many americans on the precipice of a financial cliff?
That all we need to do is suck it up and start saving?
That nothing has really changed from generation to generation except that now we just spend too much?
I want to walk people back away from the financial disaster that so many are facing…the most effective way IMO to do it that will actually work, is listed above. I deal with the individual reality of all that you just stated (stagnant wages, housing, insurance,…) and how to get them away from that cliff. If someone wants to walk back from their own potential financial disaster they can- regardless of the cause. I don’t think it has anything to do with anyone’s “moral failing”.
A lot has changed from generation to generation…we have to deal in the reality of those changes or we can sit around and argue about it- waiting for it to change. Even if it changes and everything is great for everyone, the above still holds true…it is sound financial advice, IMO.
I think the difference between your position and mine is one of (and I’ll use your terminology) macro vs micro solutions.
You see the solution as one where individuals do everything they can to live within their means and eliminate credit card debt. Of course people should do that.
Personally, I have never, ever paid one dime of credit card interest, I have always lived within my means. Now some of that can be chalked up to restraint on my part because as we all know anyone can go into debt, but some (most?) of it can also be attributed to good fortune.
I have never been in the position of being forced to choose between debt or fixing the car. For most of these folks there is no choice.
I think your characterization of these folks as just living too large doesn’t really give the full picture. I think most of these folks would love to be debt free and if giving up lattes and kiddie parties would do the trick, I think it would’ve been done.
This is now a world that no matter how hard you work and how little you spend, you’re still going to have to depend on debt to survive.
Let’s say someone does budget down to the last nickel and then suddenly gas goes up a buck a gallon like it did last year, where does that extra money come from? People still need to drive to work and don’t give me “public transportation”, it really isn’t practical or even existent in many parts of the country.
Last year there was the big hullaballoo about whether birth control should be covered (i.e. free) under people’s health insurance and I think our media acted as if it was a moral issue rather than a financial one. Birth control costs (copay) anywhere from 150 to 600 dollars a year, now that is nothing to the Rush Limbaughs of the world, but we can see from this article that that kind of money is a very big deal for at least 44% of families.
I think some overspending by these families can be chalked up to giving up. I think they realize that no matter how much they scrimp and save they will still fall behind and the truth of the matter is they will. Cars don’t last forever, kids get sick, someone gets laid off etc..
You also talk about saving, but you didn’t mention how ‘saving’ doesn’t do much for people now, as interest on savings accounts is less than the inflation rate. I’d really be interested on your opinion of what the article meant by banking not working for average people.
Fifty years ago people were able to live a middle class life on on usually one income, postmen, plumbers, delivery men and they weren’t scraping every dime.
Something changed.
Micro vs macro…in deed.
My characterization is that people need to live to their means in order to achieve their goals- live your wage. I think most people don’t like being in debt, not saving, having no emergency fund, being a slave to credit card companies. If they are living too large for their income, then they have to make choices- tough and difficult choices, no doubt.
When you say that if things would have worked (i.e. giving up lattes and parties) then it would have been done…well, people keep spending on those choices and putting it on credit cards- they cannot afford it. They need to first, stop the bleeding. If they follow the above, it will work over time…it is not just one little thing- it is lots of little things followed by likely some large ones too!
“This is now a world that no matter how hard you work and how little you spend, you’re still going to have to depend on debt to survive.” Whether you think you can or can’t, you are right. When you cut up the credit card and say that you are not going to use them anymore (or at least put them in the freezer in a bucket of water), then you often will realize that it can be done. One does not have to be a slave to the finance companies. If someone follows the plan, which millions have, one can get out of debt and stay out of debt.
Re budgeting to the last nickel- that is the importance of the E-Fund and funding it fully. One has to not only budget for today’s expenses but also budget for tomorrow’s expenses. Mr. Murphy (the managing partner at Murphy’s Law) always comes knocking–usually when we are least prepared for him. The “extra money” comes from yesterday…they have to plan for these items- we know that they will happen. Cars break down, windows get broken, fridges break, tires need replaced, kids need new shoes, heating bills go up in the winter, gas prices fluctuate and generally always go higher, etc…these all need to be incorporated into the budget. Every nickel should be accounted for, but one of the “expenses” in that budget has to be planning for tomorrow.
I agree that some people have given up…and they just spend more- often it is almost their coping mechanism as it feels good to get something new and exciting, especially when everything else around you is bad. However, when you realize that you will be paying for that item with your credit card for years to come, that high wears off. We complain about how financial institutions are taking it to us…if we want to really take it to them, stop feeding them! Pay them off and call it quits with their credit cards.
“Cars don’t last forever, kids get sick, someone gets laid off etc..” Exactly why one has to do EVERYTHING they can to have a fully funded E-Fund and budget for future expenses. We know all of those things will happen, so why are we so surprised when they do? Let’s hope they don’t and pray that the magnitude is small, but something bad will happen.
Re Savings…I will have to revisit the banking not working, but the E-Fund is not meant to be a money maker. You are not doing it to make interest. This is your EMERGENCY FUND…its purpose is for EMERGENCIES. It is not an investment, that comes later in the plan after debt is gone and the E-Fund is fully funded. Sure, I would like to get my half % on my E-Fund, but that is not the purpose of it…it is there when I need it.
Something has changed- in deed it has. I personally would not wait for it to change back and recommend that others don’t either…I would rather control what I can in my “micro” life rather than wait for others to change the “macro”. That does not mean that we cannot work towards the macro change, but everyone needs to start with their own household.
I don’t think we will ever have a meeting of the minds on this one.
You still believe that this is a problem of overspending by individuals, that if they just “lived within their means” they would be alright.
I think people aren’t being paid living wages, that they can’t get ahead, that they are losing ground through no fault of their own (not in all cases,of course) that those rising housing costs,car repairs, illnesses and lay-offs etc., in other words REAL LIFE, are keeping them permanently behind the eight-ball.
It wasn’t always this way, we used to have a government and unions that promoted policies that strengthened and protected the middle class. Good jobs with good wages built the middle class.
And then along came Reagan and union busting and corporatism and Clinton with free trade as opposed to fair trade and the elimination of the Glass-Steagall Act and the Bush years where we cut taxes and waged wars at the expense of fiscal sanity and on and on.
Our governing policies changed, our commitment to the middle class was replaced with a commitment to the ruling class and now we’re suffering the results.
Fairly stated Anonster.
I do believe that if everyone just lived within their means, they would be alright. I would be surprised, if you did not think this. Sure, we would like to raise everyone’s means (i.e. wages) and the cost of living (especially housing, education, and healthcare), but the fact remains, that if we just lived within our means, we would be alright. I know this is playing semantics, but hopefully the point is made.
I guess, the item that I am having trouble grasping, is that you seem to think that this is permanent and happened over a long period of time (i.e. 30+ years since Reagan now), which I am not disputing, yet don’t want to adjust to that new reality. I can see how one would hate that new reality and desire to make changes to reverse the trend, yet I would also think we should all make changes today to adjust to that reality.
The problem with your E-Fund, is one, that that is hard to establish when you’re already unable to make funds last till the end of the month (a reality for a lot of these people) and two, that most of these folks are going to experience an “emergency” more than once.
Older cars tend to need more repairs, when you can’t afford regular dentistry you’re more likely to need expensive emergency dentistry and low wage, at will employees tend to get their hours cut or get “furloughed”, laid off, or fired more often. Any of these things or events like them, could be devastating. Even a short stretch of unemployment can play havoc with precarious finances, maybe their car gets repossessed or their utilities get shut off, eviction or foreclosure begins, etc..
I understand where you’re coming from, it’s good advice, I just think that a lot (not all) of these people JUST DON’T MAKE ENOUGH MONEY to be able to take it.
Found this article while researching my response to Carl and I think that it backs up my argument. These folks, the 44% are living in poverty, they may be above the government poverty level, but in real life terms they aren’t making a livable wage, meaning exactly that; they can not live on it.
From the NYT’s;
“We wanted to recognize that there was a cumulative impact that would affect one’s lifelong economic security,” said Joan A. Kuriansky, executive director of Wider Opportunities, whose report is called “The Basic Economic Security Tables for the United States.” “And we’ve all seen how often we have emergencies that we are unprepared for,” she said, especially during the recession. Layoffs or other health crises “can definitely begin to draw us into poverty.”
According to the report, a single worker needs an income of $30,012 a year — or just above $14 an hour — to cover basic expenses and save for retirement and emergencies. That is close to three times the 2010 national poverty level of $10,830 for a single person, and nearly twice the federal minimum wage of $7.25 an hour.
A single worker with two young children needs an annual income of $57,756, or just over $27 an hour, to attain economic stability, and a family with two working parents and two young children needs to earn $67,920 a year, or about $16 an hour per worker.
That compares with the national poverty level of $22,050 for a family of four. The most recent data from the Census Bureau found that 14.3 percent of Americans were living below the poverty line in 2009.
Wider Opportunities and its consulting partners saw a need for an index that would indicate how much families need to earn if, for example, they want to save for their children’s college education or for a down payment on a home.”
http://www.nytimes.com/2011/04/01/business/economy/01jobs.html?pagewanted=1&_r=0
Anonster, see below as I started a new comment string.
I am one of the Americans with over $10,000 in credit card debt. I have to put my share of cost for medical expenses on it or I won’t get services. We do not have a landfline phone, we do have a cell phone that is 5 years old. Our cable comes with our rent. We have to have internet. We do have a car. We need it because I cannot take public transportation…bus travel and walkers are not a match. We do not have a savings. We did before I got sick. We had to spend it in order for me to qualify for state aid. My son is grown but said he is not having kids, he cannot afford them. We buy in thriftshops (always have because I never liked paying reatil for clothes) but never shoes and undies. I have to buy those new. Our furniture is used, but I like it that way. Yard sales are my friend! But I always liked looking for and buying old stuff.
Its harder for those with kids. Kids are teased and sometimes beat up for wearing 2nd hand clothes. Kids can be brutal. Most kids have cell phones and a friend who is a teacher told me that high school kids have to have a computer to turn in assignments, although I know some households have several, which is a waste of money.
I don’t know how families feed their kids. Our food bill is over $350 a mth for 2. We do not eat Ramen! Eating food that is processed and junk…like Ramen will eventually make you sick…either pay at the grocery store or at the emergency room! Most Americans suffer from malnutrition from eating processed junk. We have to spend money on healthy food! These days we do have to think outside the box and I suggest our representatives be forced to live a month on an average workers pay before they are elected!
I agree we all have to do our part to survive in this economy, but many people, especialy over the age of 50 are without jobs and no prospects. They have to live on their savings to pay for rxpenses, including pricey health insurance premiums. The money they thought would supplement their social security is being used up before that starts. Those who had 401ks lost at least 30% in the 2008 crash.
Inge, I am sure that was not easy to write. So you know, since you did not ask for any help or comment, I am not going to offer or give anything unsolicited. It is a good reminder though that the LAP (not using it as a derogatory term, just the defined term above) are not just “over there”, they are “here” and are our “friends”- even if just on-line.
“We had to spend it in order for me to qualify for state aid.” This exact item was actually mentioned in the above report. I will have to look into that more as it does not seem to be good policy to me as I doubt you were rolling the high life before.
anonster,
We have a spending problem.
We don’t have an income problem.
We all need to learn to live within our means (minus some for the future) that never changes.
It no different in our personal lives than it should be with the govt.
You can’t continually spend more than you take in and you have to save for the future.
I wish I had learned that earlier in life from a personal perspective, learning too late, really has been tough. Having been through a couple of financial disasters in the last few years, I learned. But as luck would have it, I did have some savings to fall back on, as well as enough credit to see us through the storm.
I almost have the credit cards paid off, but that has taken a lot of hard work and budgeting. I’m certainly not as spartan about it as I could be, but then that’s my choice.
and that KFC sure tasted good tonight… I needed more bones mon! 😉
Actually, we do have an income problem;
http://www.cbo.gov/publication/42729
KFC? What about Pollo Loco? You could’ve contributed to healht care savings in the long run, and made the pizza police happy….
I would venture to say that is just your uninformed opinion. Did you even read the article we’re discussing?
If you had you’d KNOW that it isn’t that simple.
FYI;
http://www.nhc.org/media/files/LosingGround_10_2012.pdf
Yes, Anonster, I did read it and the background information they used to write it as well.
And you concluded from an article that has as its premise; that average wages aren’t keeping up with inflation, that people are just spending too much or do you just dismiss the data all together?
Average wages NEVER keep up with inflation. Never have, never will.
Cost of living increases are after the fact and most of us in the private sector at least, don’t get them anyway, unless your part of a collective bargaining agreement.
Living on credit, as we have grown to accept as a method to live by, as a society is killing us. We routinely live beyond our means and that just exacerbates the problems.
Legislative overspending is a prime example of our hubristic behaviors as a society. They have systematically used our collective credit so they didn’t have to do the job they were elected to do and in that process reduced all of our net value.
Denial of the problem isn’t going to help any of us get out of this mess. At some point the bills have got to get paid. We only have so much money to go around and if that all gets sucked up by those who print it, they can only inflate their way out. That just makes it worse on those on fixed & semi fixed as well as median and below median incomes.
Carl,
Sorry, this is going to be lengthy.
Actually, during the 40’s, 50’s and 60’s wages did keep up with inflation, people made livable wages. Ordinary people, with ordinary jobs could live a middle class lifestyle. I’m not saying there weren’t poor people, there were, too many, and there were rich people, but the disparity was less.
More people were in the middle class, almost everyone I knew growing up was, neighbors, friends and family. Basically everyone who had a job was middle class or at least lower middle class.
That is not true today.
And that begs the question; what is middle class? I like the following description because that’s what it meant when I was a kid growing up in the sixties.
From Peak Prosperity blog;
Are you middle class? Surprisingly, most people who think they are middle class, are not middle class.
Being middle class is being able to afford what most would expect a middle class family of 4 or 5 can afford:
*Income (from job and/or investments) to financially support yourself and your family of 4 or 5 without resorting to government assistance when it comes to rental housing, food stamps, etc.
*Reasonable health insurance/health care for your family (with affordable co-pays and deductibles, assuming no major debilitating conditions).
*Reasonable dental insurance/dental care for your family (cleanings, the occasional crown, braces for a kid or two, etc. with affordable deductibles).
*Paid off all student loans within 10 years of graduating college.
Savings for retirement, around 10% to 15% or more of income put into a 401(k), IRA, or other investments to cover retirement at age 65, medical expenses, possible nursing home care, etc. (With or without Social Security or Medicare, your choice, depending on if you think it’ll be there.)
*Savings for both short- and intermediate-term goals (such as one replacement computer/notebook, television, or home appliance a year; a gently-used replacement vehicle every 7 years for each spouse).
*Savings for long-term goals (having a 20% down payment towards the purchase of a house near where you currently live within 10 years of entering the job market, having public college expenses at least half-covered within 18 years of each child’s birth).
*Kids’ stuff: school clothes, tricycles/bicycles, inline skates or other sports equipment, uniforms or musical instruments, allowances, help with a used car when they reach driving age, etc.
*A family vacation for a week, at least once every year or two; a family vacation for a week at least 2,000 miles away, at least once every 5 years.
*Taking the family out to a decent restaurant (not Denny’s) at least once per week.
*Some new clothes and shoes each year – no need to shop for second-hand clothes.
*Debt-free except mortgage – i.e. credit cards completely paid off every month (or at most three months).
If you’re on government assistance, if you’ve delayed health care or dental care because of costs, if you can’t save 10% to 15% of your income towards retirement costs, if you aren’t able to save the equivalent of a 20% down payment towards a house (yes I understand you may not want to own, but y’know what I mean), can’t afford to take vacations, aren’t able to pay off your credit card every month, etc. – then you’re really not what traditionally would be defined as middle class. You’re struggling or you’re working class or lower middle class. Even if you might have an iPhone or some of the latest fashions, you’re really deluding yourself.
This goes double if both spouses work and such a lifestyle still can’t be afforded. Over 50 years ago, most middle class women didn’t even work outside the home.
http://www.peakprosperity.com/blog/are-you-middle-class/57730
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I wonder how many americans today fit that profile? I doubt it’s even 20%. Shocking.
So what happened? You stated that “We only have so much money to go around ” and you’re right, but who really has all the money? If you looked at the CBO report that anon linked to you’d see it’s gone to the 1%.
Our money isn’t getting “sucked up by those who print it”.
It’s getting sucked up by the banks who charge us outrageous fees and interest, it’s getting sucked up by CEO’s who make obscene money by slashing wages and eliminating jobs, it’s sucked up by insurance companies that charge huge premiums and then deny coverage and it’s mostly sucked up by corporations and billionaires who don’t pay THEIR fair share of taxes.
Carl, I would venture to say that we have both a spending and an income problem. It is two fold IMO. You are correct in that we should not spend more than we make (private and gov’t), but sometimes you have to figure out a way to make more and spend less in order to be at peace.
Fair point, but please note you did not reference “get a better job” in your action plan above.
During a time when good manufacturing jobs have been disappearing at a record rate and those lucky enough to find a new job find that they’re usually a lower wage service job, “get a better job” doesn’t sound like such an easy solution.
Do you think these people were just too dumb to figure that one out?
Did you ever think it might, just might, have a little something to do with our trade and tax policies?
Thanks for that.
I’m highlighting the obvious hypocrisy in stating that we can tax our way out of public debt while limiting our spending to control our private debt.
“Getting a better job” really has nothing to do with the core of Boutwell’s piece. It’s just an observation about the previous comment.
Nothing more and nothing less, but as always anonster– thanks.
“I’m highlighting the obvious hypocrisy in stating that we can tax our way out of public debt while limiting our spending to control our private debt.”
That was clear as mud Ryan, but as always-thanks.
This is why I can’t have nice things, anonster. They get broken every time you reply to a comment I make.
It’s a good thing you have Boutwell. Great exchanges and unlimited tolerance.
I did not reference get a better job or get a better paying job…I did indicate that “Every extra dollar of income will help” which I figured was pretty all encompassing. It does not even have to be a better job, which is not always in our immediate control (maybe long term, but not this weekend)…garage sale, mow lawns plant flowers for the neighbors, babysit…yes, thinking like a high school kid trying to earn extra money can be helpful. EVERY extra dollar (after tax, of course) earned is a dollar that you can put towards your starter E-Fund, then your debt payments, then your fully funded E-Fund.
There’s a topic for you. What assets should the government sell to get out of debt?
Oh man, first I would have to figure out what we (i.e. the gov’t) actually own of value that would not be trashed if sold. I would hate for Yosemite to be sold to a theme park operator.
For giggles:
Monuments: Mt. Rushmore, the USS Constitution, Statue of Liberty
Might be lively.
These days most Americans are working jobs with less pay, at least those lucky enough to even find work. Its an employers market and they pay as little as they can. I know someone who has to live in his motorhome (a small older model) because the only job he could find pays him minimum wage and its part time. Since he is a part time employee, he is one the first ones to be taken off the work schedule when business is slow. This last time it was a full 3 weeks before he was back on the schedule. Since he was hired part time, he cannot claim unemployment benefits to make up his lost wages. During the time he was off the schedule he applied for 200 jobs in person and over the Internet. He doesn’t have a computer and has to use the one at the library that limits his time to one a hour a day…so he visits more than one library to get more time.
So how is it that he has a spending problem????? He has an under employed problem. There are no jobs out there for someone who has been working for a long time and has been laid off. He is told he is either over qualified or under qualified and its my understanding there are 4 people for every 1 job available.
I almost bought a book by Dave Ramsey this weekend, but then I remembered Boutwell’s advise on saving from a previous thread, so I didn’t buy it as I may borrow it from the library.
Today I listened a radio program hosted by an OC professor, at jonwiener.com, and one of his guests was historian STEVE FRASER. He talks about the politics of debt in America, from debtor’s prison to our present debtor nation. A longer written version is at TomDispatch.com: Another Day Older and Deeper in Debt .
I have not read the entire piece yet., but it provides a good framework to analyze Boutwell’s take.
An excerpt : After months of an impending “debtpocalypse,” the dreaded “debt ceiling,” and the “fiscal cliff,” Americans remain preoccupied with debt, public and private. Austerity is what we’re promised for our sins. Millions are drowning, or have already drowned, in a sea of debt — mortgages gone bad, student loans that may never be paid off, spiraling credit card bills, car loans, payday loans, and a menagerie of new-fangled financial mechanisms cooked up by the country’s “financial engineers” to milk what’s left of the American standard of living.
Ramsey’s advice is not earth shattering…it is probably more the way he says it which likely comes out loud and clear in the spoken word (he has a lot of free stuff on his website btw). Essentially, you have to account for every dollar that comes in the door otherwise it will just leak out of your financial life…easy in philosophy but difficult to implement without full committeemen to it. I will try to look into tomdispatch.com as time allows.
Anonster: “I’d really be interested on your opinion of what the article meant by banking not working for average people.”
Huff Post Article: “This group is also navigating a banking system that subsidizes wealth-building programs — like homeownership and retirement accounts — that are geared towards the wealthy but don’t offer the same boost to poor and middle-class savers, the report noted.”
I can’t seem to locate where CFED report speaks about this, so I will just base my thoughts upon the short, yet complex, statement made in the HP article. There are two very large subsidies that I can see in the banking system for more financially stable people compared to most of the LAP. First, lower interest rates, and second tax breaks. Possibly third, would be access.
Any financial institution is going to price its product according to the risk that they are taking- other industries do the same. They are going to try to make money on a group while taking a measured amount of risk. They are going to give lower interest rates to the lowest risk borrowers. Low risk often is measured by income levels, net worth, and credit scores…all of which the wealthy are going to be a far better risk than the LAP. A financial institution is going to lend money at a much higher rate to the LAP than a high net worth individual, if they will lend at all (sometimes the risk is too large for the possible reward). This is why it is so important for the LAP to do everything that they can to get out of debt…to not let the banks charge them high rates. To not let credit card companies charge insane rates because they know that a certain % are just not going to pay their balances, ever. If that means you drive a beater car, then do it. Get out of debt. Don’t be a slave to the lender.
Credit scores only mean something if you need to borrow. I would love to have a zero credit score because that would mean that I have had no debt over a long period of time. The LAP have a much higher propensity of having sub-prime credit scores. Low credit scores coupled with low net worth, it tough for a lender. Some (actually, few) LAP make good income, but when you have two dings, it is likely you will not get very favorable lending terms. But, I can’t really blame the lender for having higher rates for higher risk lenders. Predatory lending is a different story and that is not what I am speaking of.
The gov’t rewards certain behavior. It gives tax breaks for retirement savings, owning a home, saving for college, having kids, giving money to charity, employer provided health insurance, daycare, energy efficient improvements, health savings accounts, holding periods on assets, certain investments, selling a principal residence…and on. I personally would like to see the gov’t lessen its guiding hand towards certain behaviors, but that does not seem likely at this point in the game. A lot of the financial rewards of home ownership, charity, saving in tax deferred manners, etc…have a higher reward for the high income due to the progressive tax rates we have. The person in the 35 % tax bracket who saves $3K in their 401K receives a higher benefit than someone in the 15% tax bracket. The higher income earner loses some benefits moving forward due to the Pease Limitation on itemized deductions, but not on the income deferral items. The higher income earner also does not participate to the same extent as a lower income earner on certain items (kids, daycare, etc…).
Access…just as any business, I would think that banks treat the customers that make them the most money the best. Extra perks, best rates, access to people instead of phone trees, etc…The wealthy would presumably make a bank the most money due to the economies of scale that they provide. They give away free checking because they know they will make it up with investment fees, for example. Again, can I blame them for doing that? Not really. Does it suck for the LAP, yes. Fortunately, with technology it does seem that some banking is becoming more affordable (for example, ING savings and checking accounts- on line only) and credit unions have also really expanded.
Overall, the banking system is geared towards those with money. It favors them. It is a business for the most part. They desire to make money and reward investors. There are other options available on the savings and investment side. On the debt/lending side, well, I think you know my feelings on how to deal with that…
A personal example might highlight how the “macro” is weighing on the “micro” these days.
Ten years ago, I became a sole proprietor. After I left the company I worked for, I was on COBRA for 18 months at about $250 a month. Being single, I had to get an individual policy after COBRA ran out. Having a pre-existing condition, you can imaging how difficult that was. I was finally able to find coverage through CA’s major-risk pool, otherwise known as MRMIP. My monthly premiums now run $625 a month, more than twice what I was paying 10 years ago.
I can assure you I’m not making more than twice as much money as I was 10 years ago. Not many people are.
Hopefully you are more than twice as happy now…I know that I am now after leaving my prior employer just over three years ago.
I would venture to guess that the premiums for the workers at your prior employer are much higher now than they were 10 years ago. Probably in the same ballpark as your $625. I know that is not your point though…
Health insurance costs are definitely a macro item that impacts the micro. Being a sound financial mind, I am sure that you knew ahead of time for the 18 months that you were on COBRA that your health insurance costs were going to go up substantially once COBRA ran its course and that you budgeted accordingly. You were prepared for it. You made some choices to accommodate it. You rightly probably prioritized health insurance over some other items in your life.
I did the same with COBRA…although I did convince others to join me and so we were able to eventually participate in a group plan- still definitely not cheap by any means. For me, I thankfully give away more than I made ten years ago…although likely a bad comparison because I was still quite fresh out of college and am now in prime earning years- yes, I am very very fortunate and I know that others are not in the same boat.
No Boutwell, I most certainly did NOT know that my health insurance premiums would more than double over a ten year period. Are you honestly suggesting to me that I should have known that would happen? Seriously?
Do you agree that, all other things being equal, the cost of healthcare has, at least partially, had a negative impact on my ability to save?
I did not mean to imply that you were the OJB Oracle and would foresee the 10 fold increase…I meant that you likely knew that the cost of your individual insurance policy (i.e. when COBRA ran out) would be higher than what you were paying under COBRA and likely budgeted accordingly. If you were like most people, you likely looked at trying to get quotes while on COBRA and found out how painful it was and then planned accordingly, utilizing COBRA while you could.
Of course, the cost of healthcare has impacted your ability to save- it has more than doubled and your income has not kept pace with that increase. You have prioritized health insurance over other items…it is a priority for you (rightfully so). Priorities…they get in the way of fun sometimes.
So Anonster is right after all, correct?
Umm, I think i said that the cost of your health insurance has impacted the ability to save, yes, you are right on that fact. Just as my saving into a 401K account has impacted the ability of me to purchase a new car (I really could use one since I have over 140K miles on my 12 year old car).
This is just pure math, but missing the point of priorities and budgeting…if you need someone to tell you that you are right on that, I will say it again, Anonster is right that his/her insurance premiums impacts his/her ability to save. So does every other expense that he/she has.
You however, do have the power to adjust other items in your financial life to fit your priorities. Obviously, health insurance is rightfully a priority for you. I don’t know much about your other priorities beyond presumably your 4 necessities (food, shelter, transportation, and clothing) .
If your next most important priority after health insurance was saving, I presume that you would adjust accordingly and make progress toward that priority. If your next priority after health insurance was watching TV or surfing the web, you would fund those priorities before funding your savings. And on and on…
Another example:
California average gas price/gallon in January 2005 was $1.99. Now it’s $3.80.
Almost double. Whereas my income has not doubled over the past 8 years.
Again, the macro weighing on the micro…and negatively impacting one’s ability to save.
Whether you think you can or can’t, you are right. You know that the “system” is stacked against us, yet we still want to focus on the macro instead of the micro.
You can control what you spend and save…you can’t as easily control the price of a gallon of gas. If we focus on some of the micro items, the macro will not be as painful. We know gas will go up too much. We know insurance will go up too much. We know education will go up too much.
Since we know these things, we have to plan accordingly. Unless, you have the power to change the past 30 plus years of actions, our reality today is what we have to work with…I personally am not that powerful. I am powerful enough to make changes to my own life and those in my circle of influence. You can hopefully influence the macro changes, little by little over time just as we got in this situation, but we know that there will not be a massive shift today, at least I don’t think so.
Single examples, such as you have provided, while important and telling can be quite deceiving…for example, why not use the price of a 1GB hard drive from 8 years ago? Obviously, an over the top example, but hopefully you see the point.
Did you just downplay the impact the price of gasoline has had on people’s bottom-line?
Not at all…I just downplayed the applicability to pick individual price points for items at a particular point in time. The same reason why most people look at financial trends adjusted for inflation…instead of 1 item, at 1 point in time.
If you want to imply that I am downplaying it, go for it, but you would be wrong.
The point is, some people are simply running out of things to “re-prioritize.” There are only so many arrows in that quiver. With incomes for many people being nearly stagnant, against a backdrop of soaring healthcare, education and energy costs, it’s actually possible to run out of things to let go of. Some people have run out of things to re-prioritize and let go of and they are going into debt simply because of healthcare needs. When there’s nothing left to cut, how do you pay those bills, by going on a strict boxed mac & cheese diet?
I have to run to a meeting out of town, so this is short. I understand your point and if someone truly has gone through ALL arrows available to them, then it is time to fall at the feet of someone and beg for help I guess. It is possible to go through all the arrows, but I doubt that most have truly does so. Ramen is cheaper btw….
I think I’ll dub it “The Boutwell Solution”…Let them eat ramen!
Dub it whatever you want…at least it has the word solution in it.
Anonster (re prob w/ E-Fund, 1/31 8:37pm)- Yes, yes yes…it is hard and emergencies come- usually when it is most inconvenient. Hence, it is even more important to do everything to establish that E-Fund. Does it have to be $3K? No, start with $100 then move to $300, then $1K, then…
Any emergency is devastating when you are not prepared for it- the goal in my opinion is to lessen the devastation…I feel that we should all be preparing for it.
4 necessities—>starter E-Fund—>Full E-Fund
You can’t start a E-Fund if you can’t pay your rent/mortgage or can’t feed your family.
That’s where these people are, they are choosing every month what bills to pay and what ones they can let slide, where they can supplement their food, at food banks or with food stamps. There isn’t ANY MONEY left at the end of the month.
If that is the case…they are only taking care of their 4 necessities, then starting the E-Fund is more difficult. In that case, there are only two viable choices…
1. Reduce the cost of the 4 necessities. Find a cheaper place to live. Let the lawn go dormant. Drop the cell phone. Drop the internet connection (presuming they have one). Drop cable. No more clothing purchases (they likely already have clothing). Look at ways to reduce transportation costs: carpool (yeah, I know…I hate carpool lanes), bike, bus, move closer to work. Reduce child care costs (neighborhood provider, family, school district). Reduce food costs…plant seeds, NO eating out, meal stretches, food panty, churches, etc…Sell your house if you have a mortgage…if you are underwater, give it back to the bank or short sell it (yes, I know that banks are difficult in this area). Line up every bill and ask yourself is this is one of your 4 necessities. Yes, it takes extremes.
2. Increase the cash coming in…Get odd jobs, adjust tax withholding appropriately, babysit, mow lawns, plant gardens, garage sale, collect cans in the neighborhood, sell your “stuff”. Think like a teenager wanting money for that “thing” that they “have” to have- I remember those days and I am sure you do. Yes, it takes extremes.
If at the end of the day, you have sold all of your stuff that is not a necessity and all you have is your 4 necessities and I mean lean necessities, well, then it is probably time to start looking for help from other resources (i.e. charities, churches).
Anon and Anonster,
What are your solutions and advice for Kevin Price and his wife (the family in the Huff Post article) to help them get prepared for the emergency that is bound to come down the road, probably sooner rather than later?
Let him eat ramen!
Oh fer chrissake, nobody is saying that saving money isn’t a wise thing to do. Duh. What some of us are saying is that it is becoming increasingly difficult to do, for an increasing number of people. And it results in people resorting to things that they never used to do when their back is against the wall…like putting healthcare expenses on a credit card.
No denying that it is increasingly difficult…knowing that does not help Mr. Price, his wife, and two kids in their current situation though. I am curious what you would advise Mr. Price to do?
I’m not a financial adviser and I don’t pretend to be one.
Budget wisely, save if you can, build a nest egg if you can.
What would you advise Mr. Price to do if he does all that you suggest and there STILL isn’t enough money leftover to save?
I would tell him that he needs to send me all of his financial information and I would help him out….I will find the money and create a solution. He may not LIKE it, but it will be there- it is almost (not always) there. It will be tough. There will be tears. There will be decisions that a family of two income earners never thought they would have to make. It will be possible IF they commit. It won’t work unless they do.
“Budget wisely, save if you can, build a nest egg if you can.”…whether you think you can or can’t, you are right.
No, odd jobs or other revenue sources…? I will give you the benefit of the doubt and presume you think they are already doing that.
Let them eat ramen!
If that is what it takes! The stakes are too high.
You ask for a lot of sacrifice from Mr. Price and his family. A LOT. Do you think the wealthy and corporations should sacrifice for the good of the country and pay higher taxes, helping to ensure some of the safety net programs we have that could help Mr. Price and his family in times of need?
So you’re OK with a family depriving themselves of proper nutrition?
Would there be any impacts from that on healthcare needs down the road?
Anon, I am not going to respond to the nutrition question as I hope you are joking and know that I believe nutrition is important.
On your stmt/question about sacrifice…
Yes, I am asking a lot of sacrifice for Mr. Price and his family. I would hope that he thinks his family is worth it. I would also probably be asking his extended family to assist if it got to that point.
I feel that everyone should be sacrificing for the good of the country and our neighbors. We are definitely paying higher taxes this year compared to last but taxes are just one part of the solution. I personally feel that family, neighbor, and charity has a big component also.
I know that if Mr. Price were my neighbor and he came to me and we went through all of the above and he still needed help, I would help him out- I hope that the same would be true with you. I know that there are local resources that would also help…for example, in my community of Santa Ana there is food (not just Ramen) that is disseminated at Civic Center for those in need. There are some programs available now that he may not even be aware of.
Actually, I was hoping that YOU were joking. But I don’t think you were.
And thus, my question was completely serious.
Well, now you know.
One of the reasons I am bothering with this argument is that I think that americans have got to acknowledge that this isn’t just an overspending problem by individual families.
What is happening is the systematic shifting of the country’s wealth from the many to the few.
I think that’s why the Occupy WallStreet movement (or the 99%) is so important, we need to acknowledge the problem and find and then act on solutions.
Up above I said corporations and billionaires need to pay their fair share. I don’t think that is exactly accurate, I think we as a society need to create tax and trade laws so corporations actually pay taxes and aren’t rewarded for off shoring and the like.
As for billionaires, we shouldn’t be creating them in the first place. How do we allow the Walton family (6 people) to accrue more wealth than the bottom 41% of americans or 49 million people, all while not paying their employees a living wage? It is wrong and it’s fixable, but we have to recognize the problem first.
I think your advice is good but it is not going to change the fact that most americans are now poor. And they’re going to remain poor until we change our public policies.
I pay my employees a living wage and have accrued more net worth than 26% of American households according to the CFED report- if you have $1 of net worth, you do to. Not nearly like the Waltons, but the fact is over a quarter of Americans do not have any net worth. I understand the desire to change things long term…that does not help the Price Family with the upcoming emergency that is bound to happen in the short term.
What advice would you provide to Mr. and Mrs. Price to get them through the next financial emergency?
Mr. Price and his wife because they both work full time and have a house they sound as if they’re at the very top of the 44%. I’m sure they might be able to scrimp a bit more or they could sell their house and rent (if they’re not underwater) or maybe they’d qualify for food stamps or they could go to food banks, but it is A DAMN SHAME THAT TWO PEOPLE WORKING FULL TIME WOULD HAVE TO RESORT TO THOSE THINGS!
We are one the richest countries in the world and this situation is not only shameful it endangers our democracy.
Kudos to you for paying a livable wage, obviously too many greedy people aren’t.
I note that you possibly give some sort of answer to the question (scrimp a bit more…food banks), but not quite the action items I was looking for, or what would ultimately help the Price family, but probably more than I was expecting.
Yes, it is a shame. But again, if that is the reality today, one has to live within that reality even if one is working on changing it in the meantime. As you state, we are a country that is well off…even those who are LAP are quite possibly better off than a lot of the worldly population- not that it should make anyone feel good, it should not.
BTW, I am not looking for any kudos for paying a livable wage…I know that the only way I can do what I do, is to have great people work with me. It is a win-win.
Actually “selling their house” is quite “actionable”.
Let me turn the tables; what do you think we can do policy wise to change the course we’re on?
Yeah, selling their house, if they are not underwater…you are right, it was one action item.
Since you offered one, I will offer one the first time that it is asked, although this will be a little more complex:
Offer a 15% tax rate on US company’s foreign profits that are currently held outside of the country (i.e. never been taxed inside by the US) and possibly may never come back unless there is an incentive to do so. It is in the realm of a tax holiday for repatriation of profits. It is mainly and exclusively at the corporate level.
Further, offer a tax credit to those corporations which repatriate which would bring their tax rate down to 10%. The credit would be calculated based upon the number of full time employees that are hired at above above $15/hour. Remember, this is “found money” in that this is money that likely would never come back to the US because it is housed in foreign corporations…which will generally pay tax in the jurisdiction that the income is earned.
Further, offer a tax credit to those corporations for another 5% for US investment, so that the lowest rate would be 5%. The types of US investment that I am referring to would be new factories coupled with new jobs.
The goal of both of these is new jobs.
Not done yet…
Specifically, take 25% of the corporate tax collected on the repatriation and allow the IRS to invest in technologies that will lower the tax gap, likely returning a return on that money for years to come.
Take 25% of it and establish a fund that will allow $XX amount of tax credits for companies with fewer than 150 employees for increasing the number of full time hires at higher than $16/hour. If the dollar amount is too small, then rethink it…admin costs cannot exceed the benefit.
Take 10% of it and hire a team that would consist of some of the most successful business people in the US and ask them what they would do in order to increase job creation in their businesses here in the US.
20% goes straight to infrastructure projects…specifically, if we could fix pot holes on Main St in Santa Ana, that would be great.
Take the remaining 20% and put it to the debt…open to other worthy uses too. Open to different figures on the above, but that is just one brainstorm…hopefully you get the idea. Tear apart the details, but the jist still remains.
actually Mr. Price and his wife do not qualify for food stamps. The requirement is…a California household with 2 adults and no children cannot make over $1500 a mth gross, combined income. You can no longer just show up at a food bank for food. You have to fill out an application before they give you moldy bread and damaged canned goods.
I like some of what you wrote, you’ve got some good ideas that really could work.
The one I would quibble with is the spending of 10% on our “most successful business people” (although I guess that’s subject to your interpretation of “successful”) most of our top CEO’s have been part of the problem.
You also didn’t address the problem of our ever widening wealth gap between individuals (like the Walton family),do you not see that as part of the problem?
Thanks Anonster…
The first test of whether the most successful businesspeople should be on that committee is whether they turn down the 10% and self fund any expenses of the committee. Some of that group has added to the problem…there are others who I think could collectively come up with great “country orientated” ideas as opposed to “company orientated” ideas. Often picking the brains of criminals is the best way to stop future crimes.
I feel that we have had prior discussions on the wealth gap…if you really need a reminder, we can revisit I suppose. Specifically, you asked me “Let me turn the tables; what do you think we can do policy wise to change the course we’re on?” which hopefully the above shows some of my thinking. It is one possible part of the solution at the macro/policy level…there are many others out there.
**NOTE: Question asked and no answer given.
I bring it up because it was a good question. What is a good and practical plan for these folks? What should they do (not try to do) that’s completely within their control to improve their situation?
Anon or Anonster (one of you, it’s hard to keep track which anonymous person is which) made a great claim a few days ago: Something has changed in the last 50 years.
I think part of what’s changed is a dramatic shift from depending on yourself, your family, and your neighbors to depending on the government to provide a solution to life’s problems.
Lots of good discussion. More solutions and less complaining, please.
“I think part of what’s changed is a dramatic shift from depending on yourself, your family, and your neighbors to depending on the government to provide a solution to life’s problems.”
Not true. Welfare rolls have been on the decline since the mid-90s (as seen in Figure 1 in the link below)
Yes, since the crash of 2008 there have been increases. Is it your position that every person/family in America that is struggling financially fits in your neat, tidy little solution to financial needs and emergencies and thus has absolutely no need for government assistance?
http://aspe.hhs.gov/hsp/indicators08/apa.shtml#ftanf2
“Is it your position that every person/family in America that is struggling financially fits in your neat, tidy little solution to financial needs and emergencies and thus has absolutely no need for government assistance?”
I have not advocated a solution, nor is the one you just articulated mine. You’ve been asked several times now to provide a solution rather than just tear down someone else’s idea and contribution.
You have a knack for drawing out great knowledge nuggets from Boutwell. Please also provide your solutions to the discussion.
I guess you missed where I said this above:
“Oh fer chrissake, nobody is saying that saving money isn’t a wise thing to do. Duh. What some of us are saying is that it is becoming increasingly difficult to do, for an increasing number of people. And it results in people resorting to things that they never used to do when their back is against the wall…like putting healthcare expenses on a credit card.”
and this…
“Budget wisely, save if you can, build a nest egg if you can.”
Oh, and based on the dramatic declines in welfare rolls since the mid-90s, would you care to retract this statement?
“I think part of what’s changed is a dramatic shift from depending on yourself, your family, and your neighbors to depending on the government to provide a solution to life’s problems.”
No, I didn’t.
First paragraph is just complaining. No solutions.
Second one advocates “trying” not “doing.” <-- Actually wrote my comment above with your two items below in mind. Come on! Cowboy up and give us something bold! What can a family do to better their financial situation? What's completely within their control? Nothing? Should they just try, despair, and hope their government rides in on a white horse with a solution to their problem with a new aid program? And no, no retraction. Your data point is not inclusive of all aid programs, nor does it span the entire span of 50 years that I quoted (i.e., it's too selective to refute a very broad observation. Had I said that the number of welfare recipients had increased since 1990, then your data point would warrant a retraction. I didn't say that. In fact, I didn't even come close to saying that.) I believe my kids and their peers will have a very different expectation of government than your grandparents did.
As I stated above, I’m not a financial planner and I don’t pretend to be one.
I believe people should do their best to budget wisely, save money, and build a nest egg if they can.
You seem willing to disregard that reality that that is simply impossible for some people.
So your solution is do what you can and hope for the best?
That’s it?
A bit existential if you ask me. I think you can do better. Take a risk and offer up something that’s worthy of someone else’s critique.
Like you, I haven’t really offered any solutions on this thread. I’m a bit surprised that you feel so confident to label my position as discarding reality. That’s a pretty large leap of faith.
“Your data point is not inclusive of all aid programs, nor does it span the entire span of 50 years that I quoted (i.e., it’s too selective to refute a very broad observation. Had I said that the number of welfare recipients had increased since 1990, then your data point would warrant a retraction. I didn’t say that.”
Where did you quote a span of 50 years? You just made an overgeneralized claim. Where is YOUR data to back it up?
Mr. Cantor, I’ve offered up FAR more nuance and food for thought than you have on this thread.
You, on the other hand, prefer to pop in and ask people to comment in a certain way.
And we’re supposed to take you seriously because…?
Anon…see below comment on the 50-years he is referring to (11:10am).
Actually, you (or Anonster) quoted 50 years. I was quoting one of you. It’s in the comment. It says 50 years, right there in black and some sort of blue grey.
It’d be pretty inappropriate for me to draft a dissertation to support my general claim that folks rely more on government than they used to in a comment on someone else’s thread. Proving that point would require several months of research and about 100 pages. I offered it up for discussion, not to make a dogmatic claim to which you must either accept or reply in kind.
If you’re content to just sit back, comment, and tear down other folk’s ideas and solutions, that’s just fine. We’re happy to have you here and read what you write. If you want to call that “food for thought”, great. I did concede that you have a knack for drawing out nuggets of wisdom from Boutwell, and that’s certainly a value add.
Perhaps I’m wrong, but I don’t think I’m the one that needs to worry about being taken seriously.
Sorry I made an effort to discover what YOU think is a good solution. I won’t make the mistake again.
“More solutions and less complaining, please.”
Less telling us how to comment, please.
No coffee this morning, Anon? That was a request, not a command. You’re free to ignore it . . . which is what we all expect you to do.
You’re right…I’m going to ignore it.
Good call anon, personally I find Ryan’s comments and points too unintelligible and convoluted to deal with.
Whatever he’s written is not what he meant.
RC ” Something has changed in the last 50 years. I think part of what’s changed is a dramatic shift from depending on yourself, your family, and your neighbors to depending on the government to provide a solution to life’s problems.”
Good point Ryan. I am sure that my grandparents had a much better sense of community. Neighbor helping neighbor. Daughter helping mother. Church helping those in need. Friend helping friend. You did not count on the gov’t for help. Part of that was likely that in part of the agri-society back 50+ years ago, it would take much longer for the gov’t to swoop on in and provide help. Now, we are further away from family. We are somewhat disconnected from our neighbors. Churches and other charities, while still concerned with local outreach, likely are spending more on other countries (i.e. Haiti, Africa, etc…) which shifts money from her to there (same with our govt’t I have to imagine too).
Sometimes the strains of taking care of each other is too much, you seem to ignore the fact that being poor or working poor is now the lot of the majority of americans.
You might be able to help the Price’s, but what about a 100 Price’s or a 1,000?
When poverty overtook americans ability to survive, this is what we did as a nation in 1935; Social Security.
”We can never insure 100 percent of the population against 100 percent of the hazards and vicissitudes of life,” Roosevelt declared. ”But we have tried to frame a law which will give some measure of protection to the average citizen and to his family against the loss of a job and against poverty-ridden old age.”
And because of Social Security older people have weathered this latest recession better than younger people.
Government can help.
I am not ignoring the figures…actually, I point them out in great detail above I feel in the first half of the original post. You may disagree with my responses, but that is far from ignoring the fact of the working poor being a large portion of America. The fact is, I want them to get out of the LAP and want them to do everything they can to get out.
There are millions of Price’s out there. Which is why a plan that is scalable to their own situation as I set out in the original post, is doable in my opinion (yes, I know that you will always find some reason to say why it won’t work).
Nothing will work for 100%, as Roosevelt points out. I don’t think that are too many of the working poor who the above plan, coupled with other comments made by me, would not help weather a future financial emergency. There are many who will choose not to even try.
RC “Anon or Anonster (one of you, it’s hard to keep track which anonymous person is which) made a great claim a few days ago: Something has changed in the last 50 years.
I think part of what’s changed is a dramatic shift from depending on yourself, your family, and your neighbors to depending on the government to provide a solution to life’s problems.”
He is carrying over the 50 years from the paragraph before. Both are referring to change (i.e. something has changed in the last 50 yrs…to…part of what’s changed…)…it is one stream of though separated by that pesky “enter key”.
Ryan,
Are you related to Eric??? And do you keep a copy of “Atlas Shrugged” on an altar lined with gold dust and $100 bills???
I assume you mean Eric Cantor. No.
And, no. I don’t even know what that’s supposed to mean.
Just so you know…
Yes, there is a problem with spending and incomes.
I hear loads of screaming on the income side, I hear very little about how it’s spent. My ranting about the spending side is basically a desire for some sort of balance in the conversation.
My family has seen a huge decrease in income over the last few years since the housing market flushed. I totally understand what it’s like to have 65% of your family income vanish in one day, along with insurance, as well as see your retirement plans drop to levels that are almost worthless. So I do understand that there is only so much you can cut back on.
We have been lucky, and fought back against the tide, some others have not been so lucky.
I do feel for them and do understand some of the complaints. I also know a bunch of people who have just made bad choices and others that have given in to being “taken care of” by the welfare systems we have in place and that’s not right either.
I understand I just don’t think it’s acceptable to give up or give in and I think it’s wrong to enable that as a society if we can help it.
I also have problems with people thinking they have some right to what others have worked for. We all need to pay some taxes in mind, even if it’s just so we have some skin in the game. That said, I know that there are folks who simply don’t have enough to have any of what they do have taken from them.
It’s not an easy problem and there are no easy answers.
Boutwell/Inge :
This the link to check the Medi-Cal Property Levels (how much savings you can keep and qualify for Medi-cal).
http://www.dhcs.ca.gov/formsandpubs/forms/Forms/mc007infonotice.pdf
In this link there is a chart of the income levels to determine share of costs
http://www.sccgov.org/ssa/charts/ch-mc.pdf
In a radio program this morning one of the guests was Helaine Olen, former editor of the Money Makeover series in the Los Angeles Times, author of the book “Pound Foolish: Exposing the Dark Side of the Personal Finance Industry”
According to her “ Suze Orman, Dave Ramsey, Robert Kiyosaki and David Bach are just some of the best-known personal finance experts advising and lecturing indebted Americans about their foolish and short-sighted money decisions. Yet these are exactly the individuals that the average person should not be listening to for financial solutions “ Olen says these financial gurus offer either platitudes or “dreadful” advice that don’t apply to most people’s lives or situations.
http://finance.yahoo.com/blogs/daily-ticker/don-t-money-advice-suze-orman-dave-ramsey-122754956.html
“But deciding to take your lunch to work or to cancel your cable television won’t help nearly as much as you’d think. For all the attention we pay to overspending, we struggle with our personal finances not because we spend too much money on small luxuries but because salaries have stagnated at the same time as the costs of nonluxuries have gone up.
Even as the average household net worth plunged by almost 40 percent between 2007 and 2010, the cost of everything from health care to housing has risen for decades at rates well beyond that of inflation. Almost half of us are living paycheck to paycheck, barely able to save a penny.
In fact, it’s long been known that the majority of bankruptcies result from health issues, job losses and fractured families, something no amount of cutting back can protect against.
One of the main reasons we need to borrow money is college loans. Our collective student loan debt is more than $1 trillion, a sum greater than both our credit card debt and our auto loans.
The student loan debt problem is basic: college tuitions have increased at more than quadruple the rate of inflation since the 1980s. If you’re a parent, good luck saving for that expense. It’s a primary reason students who borrow money (some two-thirds of all undergraduates) now graduate with an average of $26,600 of debt. That, in turn, will make it harder for the next generation to save.
Those who do manage to save still cannot save as much as they need. According to the Center for Retirement Research at Boston College, the average baby boomer had $42,000 in his retirement account in 2010. That won’t go far toward meeting an average couple’s future health care costs: $240,000.
And while financial planners often advise older people to work longer, how can they when many leave their jobs because of health problems, or are laid off and, as a consequence of their advanced age, are unable to find new employment?
We seem to want to believe we can budget-cut our way to financial success, maybe because we view monetary setbacks as shameful, nobody’s fault but our own. The personal finance establishment endorses our self-blaming tendencies. David Bach became famous promulgating the idea that by cutting out the daily Starbucks run, people could retire as millionaires. Dave Ramsey has lauded men and women who “refused to participate in the recession,” as if a bad economy is a problem of attitude. Suze Orman told investors who lost money in Bernie Madoff’s infamous scheme that they had “walked right into that financial concentration camp,” suggesting they should have heeded complaints the Securities and Exchange Commission all but ignored.
So let me suggest another financial resolution, one that will do more for our future financial outlook than simply forgoing a few consumer goods: talk about money. It’s not shameful. Pick a cause, and resolve to fight for change. “
http://www.nytimes.com/2013/01/13/opinion/sunday/cant-save-heres-why.html
In the radio interview, she says that Ramsey was forced to declare bankruptcy, but now he counsels people to pay down their debt and not to declare bankruptcy…his message is quite extreme, he does not believe that we should have credit card at all, that income inequality is a myth…she says that it is unbelievable that some take his stuff seriously…
https://soundcloud.com/#sojournertruthradio/sojournertruthradio-2-1-
Boutwell, I need an explanation!! How am I going to get any credit if I don’t have a FICO score…I changed my mind, I will not read Ramsey but stick with Personal Finances for Dummies…
Re FICO score…credit scores are needed if you need credit and don’t have the assets and income to convince a lender that you are otherwise a good risk. They are historical and are one aspect of lending decisions. FICO scores do not take into account assets for example nor do they take into account earnings.
For example, if I were to walk into a lending institution and request a $200K loan to buy a $400K rental property and I had no FICO score because I had say $1MM of assets, zero debt, and $500K of income per year, I can assure you I would be able to get the loan if the property supported it. This is hypothetical and is not “me” btw.
The bigger point of the no FICO score goal is that it shows that you have not had any debt for probably a 10 year span. Totally not likely for virtually any person in America. It is the point that everyone focuses on FICO scores (I do also…) when it does not provide a picture of your financial life, it just shows your past debt history.
Read Ramsey or don’t…even better is probably to listen to your grandparents financial advice about them growing up (I don’t know your age, so I am projecting mine), if that is possible due to obvious restraints. They did not likely use credit other than possibly to buy a home or run a business…that should be the goal IMO.
You will likely get a lot of the same advice from any source…including your grandparents. Save–>Buy–>Enjoy instead of Buy–>Enjoy–>Regret—>Worry. Is it possible 100% of the time? No. Is it the goal…should be in my opinion.
Actually, you will get the same main debt advice from virtually all sources: consistent utilization of credit cards are generally not part of a good financial plan. If you are not paying them off, definitely. The rates are high and the temptation is strong. Using greenbacks puts an emotional wall of- it is hard to depart with greenbacks while using a credit card does not ellicit the same emotional response.
I personally still use credit cards for some items…gas for example. I just pretty much refuse to walk inside to pay. I also use my CC for internet purchases. I could use my ATM card but I don’t like the bookkeeping on it. I pay it off monthly. For most other items, it is a cash “envelope” system for our family. We fund ahead of time the month’s budget…when it is gone, it is gone. There are certain items that are “rollover” type items such as house repairs- we don’t spend that much each month, but we know we will in the future. No, I don’t have to do it this way, but we try to.
***************
Re Ms Olen…I actually saw an interview with her and read an article on her thoughts and book also (I have not read the book). She has excellent points. The financial industry is full of bad advice. I don’t agree with all of them…for example, I am big on the Rich Dad Poor Dad philosophy. I personally like Ramsey because of his basic premise that people should do everything they can in order to get an E-Fund and pay down debt then save. This means that people need to prioritize. This also means that people need to think creatively to earn a little extra…my term is to think like a teenager (mow lawns, babysit, etc…). Every little extra helps.
I don’t agree with everything he says…For example, I would like to see a little larger E-Fund established before throwing everything to debt. I also believe that in today’s environment, credit cards are a virtual necessity but do think that they should get paid off monthly. His advice I believe works best for someone who has a steady source of income and has no debt (i.e. someone just starting out but is lucky enough to have a job and wants to make wise decisions to avoid being LAP) and those with a steady job (if there is such a thing anymore) but has some manage debt such as $5K to $15K of credit card debt. Someone who is soaked up with huge medical debt and the long term unemployed have some bigger problems IMO.
Ramsey did declare bankruptcy…he was doing things that he now teaches against doing. Not all that unusual. Just as the best people to talk to gang members are ex-gang members. The best people to talk to drug users are ex-users.
I do wish everyone a successful financial life…regardless of how one gets there.
Wow, it seems like we’re back to square one. Grandpa’s advice while good, isn’t really all that relevant.
To be simplistic; in Grandpa’s day his rent, transportation, food and necessities cost him 100 bucks, his take home pay was 105, yes, he didn’t splurge and was able to save.
Today, these 44% (or most of them, say 25%) are facing rent, transportation, food and necessities costs of 100 bucks but they’re only making 95, even if they don’t splurge they’re never going to be able to save. The best they can do is juggle bills, go into debt and rely on neighbors or govt. assistance.
That is what not making a living wage means, that’s why these people fall further and further behind.
It is easy to say get a second job (reminds me of GWBush’s glib answer to a woman telling him she had three jobs;
Woman sitting on stage with Bush: “I work three jobs and I feel like I contribute…”
Bush (interrupting): “You work three jobs?”
Woman: “Three jobs.”
Bush: “Uniquely American, idn’t it. That’s fantastic, yuh, you doin’ that. Get any sleep?”)
but I digress, just telling people to get another job, collect cans or learn to eat shoe leather is not a good long term solution. People can’t keep that up forever.
We as a nation have to make sure that people who are working full time can afford a basic standard of living.
Listen to their advice and apply to today…it is up to us to determine how to apply it. Just because their circumstances were different does not mean that it is disregarded. Or, we can just sit back and fund the banks unbelievable profits off of credit while trying to change the system.
It makes me cringe by the number of people who are now struggling to pay off Christmas gifts on their credit cards…even worse is that the recipients may very well be forgetting about them here shortly. Some will be paying for them for months and years to come…others decided to not put it on their cards, which is great.
This will work, if we commit to it…it is not for everyone.