While it's kind of unrelated to the overall point of the article, it includes the statement, "According to the Federal Reserve, Millennials in their twenties carried an average debt of $22,135 last summer."
The linked Federal Reserve article[1] doesn't seem to directly support that statement, but does say that ~55-60% of 18-29-year-old's used or are using loans to finance their own education, but that, "Among respondents who report that they currently owe student loan debt for their own education, the mean level of this debt is $30,156 and the median is $12,000." (Note: that doesn't include those who have already paid off their debt.)
The title here seems very inflammatory. The article questions whether some actions (e.g. painting your own home instead of hiring someone to do it) are truly frugal. It goes on to say that the philosophy of frugality is a handmaiden for wealthy.
Maybe so, but why would we discourage good spending habits? For example, choosing to eat one or more meals out each day versus bulk cooking is an option available to most people. Likewise, choosing to spend $800 on rent with roommates versus $1,600 for a studio or one bedroom apartment.
I'm not seeing how millenials or members of the middle class benefit by uncritically opting for more expensive options. My read on frugal culture is spend however much money you want on whatever you want, but do so eyes-wide-open. Break free from all the advertising, inertia, and "keeping up with the joneses".
Frankly I think if more people adopted this style of thinking it would have serious ramifications for the rich and their businesses built on over consumption and debt.
I think the title refers more to the idea that those folks selling this frugality made plenty of money already and that financial freedom is what helped them establish their lifestyle... not the frugality they sell.
I agree the article was attempting to take down that family, but even on that count I wasn't convinced. So they have a home in Massachusetts? That hardly makes them "rich". Nor is being able to hire a painting company the exclusive province of the wealthy.
Perhaps pursuing FIRE is something only available to the upper middle class. That's an interesting argument, but not one put forward in the article. Furthermore, I think it's bordering on class warfare to set the upper and lower middle classes against each other. It reeks of divide and conquer, and who benefits? The people pushing over expensive lifestyles funded with debt.
The audience that these types of blog posts are targeting aren't those of who are stuck making minimum wage, but instead those who are fairly well off but think they aren't because they keep spending yearly costs on $1000 phones, 5+ subscription services, large housing costs, eating out multiple times per week, etc.
I don't know who the target audience is. I'm not sure your issues you address are anymore a path to financal independence than anyone else offers. It's really easy to pick our personal boogeymen that no doubt play a part in things, and make them more of the issue than they really are.
I'm just repeating issues that the blog authors from FrugalWoods, MMM, MadFientist, ERE, ERN, etc, all bring up as their main points for obtaining wealth (Or being financially independent as they call it). And they were merely examples of a large list of things that increase spending, hence the 'etc'.
Each of them typically does three things: They keep their household yearly spending under $35,000 (some even less than this), increase income as much as possible, and invest the savings, taking advantage of tax-deferred accounts whenever possible. Though, the three things are basically common sense when you think about it.
But tons of folks working high-paying jobs don't manage to establish a lifestyle like the Frugalwoods. There's a reason phrases like "keeping up with the Joneses" exist. It's how you end up with "out-of-touch" articles about how a $250k annual income is barely middle-class in NYC or the Bay Area.
Can't we focus on the message instead of the messenger? Or stop assuming that the message is for Millennials alone?
I think there is a legit reason to include the messenger and the message if you think the messenger's advantages are what make the suggestions in the message possible....
There are many people who have the same advantages as the Frugalwoods (education, high-paying jobs) but not the same lifestyle outcomes. Are we going to criticize them for pointing this fact out by showing their own example?
You're missing the point. The 'frugal culture' is selling the idea that this is the road to economic self-sufficiency while omitting or glossing over other significant information, like having a very healthy income stream to begin with.
If you're poor, being frugal is very unlikely to lift you out of poverty. That doesn't mean frugality is bad, but that marketing is as the key to financial stability is deceptive.
Sure, but are people like the ones in this article or MMM seriously advocating that their philosophy will solve poverty? It's always struck me as middle or even upper middle class people revolting against over consumption and debt. Insofar as that's the case it seems like a positive development. And I don't see why we can't do two things at once, address inequality and poverty and reform out-of-control consumerism.
Smartphones are an expensive luxury, not a necessity. I think the expectation is that people on the public dole should be trying to save as much as possible and try to get off of welfare.
A moderately capable smartphone can be had for $100 and up, especially if you're not aiming for the latest model. That makes it very competitive with laptops, and provides the owner with communications, mapping, and access to all kinds of services which will make it easier to get by and considerably easier to do things like job hunting. Dismissing it as an expensive luxury is absurd.
I don't think it's absurd. The $100 purchase price is a tiny fraction of the all-in cost of the phone, and if you're touting its usefulness in lieu of a laptop, you're talking about using a large amount of data, which usually means an expensive voice+data plan ($600-800/yr). Otherwise, a laptop and using the internet at one's local library is a much better option if utility and saving money are the priorities. A prepaid flip phone is usually better for actually making calls.
If you're near poor, being frugal will prevent you from falling into poverty. There are many people who have good jobs, earning $50k-$100k per year, saving nothing (or negative!), and then losing those jobs, and then collapsing into the downward spiral of poverty and homelessness.
You're raising an an interesting point: in the US, it's possible to be near poor without really feeling it... until what you describe ends up happening.
"Collapsing into the downward spiral of poverty and homelessness" is not an appropriate outcome for not being frugal, and a system where this is the case is probably not very good. Again, circling back to the idea that focusing on frugality as a solution to poverty ignores the larger systemic problems actually keeping poor people poor.
But the "frugal culture" doesn't call out low-income people or blame them for being poor. Most of the FIRE community and advice is targeted to middle- and upper-middle-class people - office professionals, small businesspeople, skilled tradespeople. If you're poor it's assumed that you're already a black-belt at economizing - most FIRE advice at those income levels focuses on side hustles and ways to increase income.
Out of curiosity, how long do you think it would take your average "office professionals, small businesspeople, skilled tradespeople" to frugal their way into a 4-bedroom house on 66 acres, free and clear? (https://www.frugalwoods.com/2016/04/06/that-time-we-bought-a...)
I don't have much familiarity with the blog itself but another post says that the property cost $389k[1].
They claim they could've paid cash for it but chose to get a mortgage - so they don't own it "free and clear". Unless they've ended up paying off the mortgage early. Assuming a 25% down payment that's a $310k mortgage. You'd need annual household income of around $80k to qualify for a mortgage that size, which also seems within the reach of a dual-earning household of white-collar/skilled trades professionals.
A household earning $80k annually could save up the $90k down payment for that property in about 3-4 years, assuming a 40% savings rate. I'll admit it's aggressive and ambitious by most people's standards, but not actually impossible.
Now I don't think it's actually a good idea to buy property worth nearly $400k if your annual household income is $80k but it's not an entirely outlandish idea.
I assume the Frugalwoods had annual income well in excess of $80k before they "retired". Their savings rate is also correspondingly huge - 71% according to the article. A brief skim of some other posts suggests they're going to be renting out their current house + putting the new property to revenue-generating uses. They clearly know how balance sheets work and the numbers make sense for their situation.
Pulling back a bit I think we should acknowledge that the Frugalwoods are people who have optimized the heck out of the very good hand that they were dealt. We should be applauding that rather than trying to pick at their story and point out why it doesn't work for everyone. I might not have Michael Phelps' swimming genes but following his workout routine would probably improve my health, even if I never become an Olympian.
It's obvious that having a higher income makes it easier to frugal your way into early financial independence. The vast majority of high-income households don't take that path even though there's not much stopping them.
If you have a $100k/year take home between you and a significant other, and you have a 50%+ savings rate which you invest, not very long at all. If you have a 5% savings rate, on the other hand, it will take a very long time.
Being frugal is incredibly helpful for all but the richest among us, and I'm amazed that people are so critical of it. I see so many people who would be so much better off than they are if they just didn't buy so much unnecessary shit.
They can't choose to "be frugal" when their choices are which kid eats, who gets shoes, gas for work means working overtime while the kids grow up without you, and other typical situations faced by the poor.
When you're living paycheck to paycheck with literally nothing in the bank, being frugal is the difference between a broken washing machine causing debt and life without financial doom from emergencies.
I like to think of frugality as something akin to adding the the "-O2" argument to $CFLAGS. It isn't going to undo fundamentally bad life choices, it won't make much difference if your code is already written in inline assembly, it might help you meet requirements if you were on the edge, it might not be a terrible idea to turn it on when you're building the release binary.
I guess this is the real motive behind the article:
But here’s the thing. Regardless of intent, these Millennials are telling an older generation of elite Americans — the very people whose policies and financial decisions kneecapped the economy — what they want to hear: that everything is more or less okay, and young people just need to be more thoughtful about their money. And that’s a shitty idea to perpetuate. Because whatever happens in the years ahead, penny-pinching will likely remain a lifestyle enhancement for bourgeois Millennials who possess enough money to enjoy the dividends of being thrifty. For most of us, there are no dividends: just thrift.
It's not about the advice itself -- the advice all seems pretty reasonable -- it's about the place that advice has in the story we tell ourselves about young people. I myself practice many of these thrifty tips, but I cringe to think that the blog posts that people write about them will be used to justify continuing to build a world where they are more and more necessary.
I think there’s real value in spreading the message of thrift. The 20th century saw a massive build up of the consumerist lifestyle. It’s going to take a lot of work to back that out, so we might as well start now.
I’ve personally seen people with high five figure student debt go on regular international trips. These people more or less live paycheck to paycheck and save specifically for travel (or use credit cards — if they can get them).
Educating people as to why that might be a bad idea and creating a supportive culture of anti-consumerism seems like a good idea. Sure there are policy decisions at play too, but being “frugal” can hardly hurt.
No doubt. Again: the tips are great and many people would do well to listen to them. However, the larger question of the place that these tips have in the story that we tell ourselves about society is still an open question. There are multiple ways to place these tips in a larger context while still following them and regarding them as worthwhile. It's important to understand that there is a choice to be made here about the story we tell ourselves.
I don’t think there’s a way to place them in the larger context that makes them less useful though. It’s tough out there, try to be frugal, seems like great advice. I like that it’s not political as well. Once you move the discussion to policy, people get territorial.
The “American dream” of the 20th century was never sustainable. We’re just now realizing that en masse. Being frugal is just a natural realignment of culture and reality.
I agree on the first point, but I think part of the point of this article is that there no such thing as "not political" since everything you say in public has a place in the public consciousness which is the engine of democracy.
Regarding the American dream, maybe it's sustainable or maybe it's not, but it's clear that it would be a lot more sustainable if people where willing to create a world with fewer obstacles to attaining it e.g. by implementing universal health care. If we tell ourselves that people who can't afford health care probably deserve to struggle with money because they're not being frugal, then that's a problem.
This is my point. We agree that being frugal is good. Great!
As for universal healthcare, good luck getting everyone to agree on that...
I disagree that every word spoken in public is political. “Don’t touch the hot stove” is great advice. Let’s be free to have those kinds of conversations without dragging them into the political mud.
I guess I should say that everything said in public has the potential to be political. Something that's political, in my mind, is anything that has significance for running the government or the larger social machine. "Don't touch the hot stove" could be political in a world where malfunctioning stoves are burning people. I think that "don't spend too much money" is political in a world that couldn't continue to function without the existence of people who will never have enough money no matter how frugal they are.
Why not? They're screwed by the economy, so might as well go all in.
We need to get to the idea that there are not enough good jobs for everybody. Once we get to that point, we can start to figure out what to do about it.
Most young people do need to be more thoughtful about their money, though. And the economy as a whole is, by multiple different metrics, the best it’s ever been. It’s just that this greatness needs to be spread a bit wider. In the capitalist system with a labor market as tight as we’ve ever seen it this is addressed by getting another job for more money. Now is a good time to do it. You are responsible for your own success.
> In the capitalist system with a labor market as tight as we’ve ever seen it this is addressed by getting another job for more money.
Is it tight?
I see very few occupations with rising wages. That's the REAL test for a tight labor market.
Let me be anecdotal for a moment ...
I was at a conference recently where the companies had a panel session complaining about getting more people into the business. Unlike most software disciplines, they really do have an infeed problem. In addition, they are also getting poached and losing their junior guys from the shop floor.
Okay, think I, I was a hiring manager in the DotCom Boom(tm), I understand getting poached in a narrow field.
So, do you know who their primary opponents are?
Amazon and Foxconn.
Two of the worst employers on the planet. You are losing employees from your manufacturing line to Amazon warehousing and Foxconn manufacturing.
Um, please go bankrupt and may your industry die in a fire if you treat people so badly as to lose them to Amazon and Foxconn.
AstralStorm's point is somewhat divergent from the thread of the conversation. It is that, for playing "catch-up" to years of wage stagnation, this month's wage growth rate doesn't mean much. We need years of high wage growth, not just one month or even one year. In this sense, AstralStorm is right that instantaneous rates do not in fact matter. And you sound like you're going to just label everyone who disagrees with you as having their mind already made up, rather than actually thinking about what they say.
That said, the original discussion was about the rate of wage growth as a measure of how tight the labor market is. In that sense, the instantaneous rate is fine.
So why am I harassing you about your answer to AstralStorm, when AstralStorm was disagreeing based on something that was outside the scope of the discussion at hand? Because of the way you answered, with dismissiveness rather than actually thinking about the point raised. That's not cool.
The economy is the best its ever been, but wealth inequality is the worst its ever been. The cost of living has gone up far, far faster than income has, while wages have stagnated or dropped, meaning people these days are earning less money and have more expenses than before.
To hear someone who was making $10/hour out of college and bought a home for $40,000 say that the reason millennials can't buy a home today is because they're buying avocado toast and not because equivalent homes cost $1.6 million today is infuriating. Relatively speaking, millennials are doing better, frugally, than baby boomers were (saving more, spending less, etc), but the cost of the things that people are complaining about has grown exponentially.
Meanwhile, almost all of the growth of the economy has gone towards the top 1% of people. If you look at, for example, Canada, the average CEO makes as much by January 2nd as the average worker does by December 31st.
CEO pay growth over the last few decades has skyrocketed (compared to inflation, worker wages, or even corporate profits), while worker wages basically track inflation. In other words, people are making the same amount of money as people 50 years ago, even though a lot of things cost more (e.g. housing).
Blaming the economy inequality on the fact that people aren't willing to take on second jobs ignores the fact that wealth and power is all being concentrated in a small number of people and the rest of us are forced to fight over what they're willing to leave behind for everyone else.
Do you actually care about the well-being of the poor, or do you just hate the rich? Because you seem much more concerned about the relative difference between the rich and the poor than you do about the nominal well-being of anyone. Population densities have increased and it's more expensive to live in cities. That's for sure. We opened up free trade which gave the American middle class a minor kick in the pants at the expense of bringing huge swaths of India and China up to a position of basic food security, increased healthcare, education, and just about every other measurement of well-being you can think of.
Your essential argument is that from a relative perspective the American middle class is not as well off as it was during a unique time following WWII during which the American middle class reached the highest levels of relative wealth in the history of the planet. Okay, but they're still nominally better off than they were back then and an almost unimaginable number of people have had their lives dramatically improved across the globe in the process.
No one's talking about hating the rich here but you.
We can all care about societal inequality, and how it probably suggests that the levers of civilization need to be jiggered a bit, without hating anyone.
I think housing in the PNW is way unaffordable but that doesn't mean I hate either the developers, the planners, or the numerous other social and geographical factors that have led to this situation.
In short, please don't bring up things like "hate the rich" when no one else is.
Your primary complaint could have all the wind taken out of its sails if we just magically took all the money away from wealthy people and burned it. Because wealth inequality would go down. It wouldn't actually help anyone, but wealth inequality would go down.
Affordable housing is a problem best addressed by the people who live in the areas that have a lack of affordable housing. It's not something that needs addressing on the national scale.
It might help, actually. Your assumption is that what the rich do with their mmonet doesn't actually hurt the poor; but it can. Itcab be used to purchase narratives and political influence in ways deeply harmful
You're still focusing your attention on supposed bad behavior of the rich rather than the wellbeing of the poor.
If you think the poor need something, like say more funding for inner city schools, then say that and suggest a reasonable tax, perhaps a tax on luxury goods that would disproportionately affect the wealthy. Or if there's a specific bad behavior, such as pharmaceutical advertising, talk about that. But just complaining about wealth inequality sounds more like hating the rich than caring about the poor.
But rich people largely advocate against policies that favor poor people, like generous welfare and equitable taxation. Rich people advocate for policies that protect their status and the value of their properties and investments. They advocate against redistributive inheritance taxes, so that their own children continue to have enormous advantages over anyone else. They advocate policies that guarantee they can continue to extract wealth from rents rather than productive avtivities, dragging down the economic well being of all. And the rich are more likely to cheat on their taxes, try to bribe officials, or flat out disregard the law. And the rich have disproportionate power to do so, and work very hard to make it stay that way.
>But rich people largely advocate against policies that favor poor people, like generous welfare and equitable taxation. Rich people advocate for policies that protect their status and the value of their properties and investments.
Do you suppose it's possible for you to advocate for a specific amount of welfare that you feel is "generous" without attempting to villainize the very people you hope to pay for it?
>They advocate against redistributive inheritance taxes, so that their own children continue to have enormous advantages over anyone else.
First, one of the major motivations of achieving success in life is so that your children will be better off. So all you've established is that rich people are good parents. Secondly, you're still just upset that someone has a lot, rather than focusing on a specific problem that some group of poor people has. You're just hating the rich rather than showing an interest in helping the poor. Third, fortunes generally disappear after 3 generations, so it's not as if huge dynasties are being created that last forever. If you're rich, your grandkids get to go to a nice private school. That's pretty much it.
>They advocate policies that guarantee they can continue to extract wealth from rents rather than productive avtivities, dragging down the economic well being of all.
Yes, things like regulatory capture are a problem. I will hold up a sign and protest it alongside you. But do you see you you're STILL pointing to the "rich" rather than "bad policy?"
>And the rich are more likely to cheat on their taxes, try to bribe officials, or flat out disregard the law.
I've never met a person who worked for tips that didn't cheat on their taxes, have you? But more importantly, we're back at the same place. Rather than advocating for or against a specific policy, you're just slinging mud. You care more about saying mean things about rich people than you do about issues the poor might be facing.
Your saying that I do doesn't make it so. You should read more carefully. Look at is absolutely as simple as this: the interests of the rich and the nonrich are systematically at odds, yet only one of these groups have any great power to see to it that their interests are served. A society so structured is unjust, fragile, and generally suboptimal. Such societies lend themselves to demogougery and collapse. One needbt even resort to claims of moral and ethical failure on the part of those who have power to conclude this thing, and yet it is also true that power and wealth have deletrious effects on a number of features of that which we might call virtue, including empathy.
>the interests of the rich and the nonrich are systematically at odds
This is not universally true. It is not true across individuals among the rich/nonrich nor is it true across specific agenda items. This caricature you've created for these two groups is called classism. You are no better than the people who think all poor people are stupid or lazy.
>yet only one of these groups have any great power to see to it that their interests are served.
Okay, let's talk about campaign finance reform. Or is making sure there's no rich people more important to you than making sure everyone has equal political power?
Systematically does not mean universally. It means, at a minimum, that their interests diverge non randomly.
Saying that rich and nonrich have different interests is not controversial, except to those intent on denying what is obviously true.
Either you are ill equipped to engage in a discussion on this topic or you are being utterly disingenuous; certainly you have misrepresented what I have said in ways that push a rather tired narrative, one trotted out every time someone pushes back on the status quo of enormous wealth disparity by noting that it has serious negative consequences.
>one trotted out every time someone pushes back on the status quo of enormous wealth disparity by noting that it has serious negative consequences.
You just can't help yourself. Once again you express more hatred for the rich than you do concern for the wellbeing of the poor.
I'm not denying that there are consequences to wealth or income disparity. I just think you don't appear to care about the wellbeing of the poor beyond the minimal lip-service you have to pay it to justify voicing your hatred for the rich.
Your class warfare demagoguery is entertaining. The entirety of notable human civilization is defined by exploitation, and nobody who matters will ever care. Except politicians who will use your whining and vote to do whatever they were planning to do anyways. Vast inequality is, and always has been, the mark of a great civilization.
You're free not to care about inequality, so go for it.
I haven't seen any convincing evidence-based argument that a high degree of inequality is either neutral or good for society as a whole, nor do I have any philosophical leanings that suggest that it is an acceptable byproduct of an otherwise fair and just society.
Going by both evidence (health outcomes, class mobility, etc) and by my philosophical leanings that it don't seem right for so few people to own so much (when ownership itself is a purely fictional thing), I'm going to keep talking about inequality as a Bad Thing to be addressed.
Don't like it? You do you, but telling me I'm focusing my behavior on one thing or another is about the least compelling thing to say.
> The cost of living has gone up far, far faster than income has, while wages have stagnated or dropped, meaning people these days are earning less money and have more expenses than before.
I didn’t say a “second” job. I suggested to merely change the one people have right now. In my experience this is by far the surest way to increase one’s compensation. Do this once every 2 years, it adds up.
> continuing to build a world where they are more and more necessary
My grandmother can still, to this day, recount living in an apartment with no furniture except a mattress, with my grandfather who was employed as an engineer in New York. It took, by her estimate, about two years to have enough furniture before she was willing to invite over any sorts of company.
Today you can furnish an apartment reasonably with about a months worth of wages. I know this because I helped take a friend who makes a bit over minimum wage to IKEA to get all their furniture for an apartment they moved into.
The myth of decline is that - a myth. The economy is better then it has been in decades, violence is at an all time low, and jobs are widely available in many areas of the country.
I have friends who complain about the economy "being destroyed", who max out credit cards to buy brand new cars and buy expensive home theaters. I have one friend who despite making six figures a year, took a predatory payday loan because she had spent her wages on expensive unused tools.
That's not to blame "millennials" anymore than to blame any other generation. Bad financial choices have existed since the dawn of human history, but in many cases today they are choices, not pre-supposed economic outcomes. We can help correct that by teaching good finance skills (budgeting, doing things yourself instead of hiring people, focusing on cheaper hobbies, etc).
So, your proof that decline is a myth is that you can buy cheap, moderate quality, mass-manufactured furniture that didn't exist in your grandparents age? Something seems awry there.
I think GP does have a point while missing the bigger picture. Yes, low to average income people can today afford more stuff to make their life a bit better. But they also can‘t afford an apartment close to work (loosing anywhere from 2 to 5 hours of their day they cannot spend e.g. with their kids) and they cannot afford college tuition. That‘s what‘s creating perpetual poverty, i.e. low social mobility, which is IMO one of the most important aspects of a fully developed nation.
My grandmother couldn't afford a chair. Most people today have reasonably furnished apartments, smartphones, some kind of vaguely functional computer with (low speed) internet access, and probably a car.
Food went from being very expensive (people actually died of starvation not that long ago!) to being so cheap that obesity is a major epidemic among the poor.
Since 1940, the percent of the US with a high school degree went from < 50% to over 80%. The percent of the US population with a college degree went from < 10% to over 20%.
What is your argument that the economy is in decline? That you don't magically get a two story house with a yard, a new car, and the ability to support a family of four? That has never once been the case in US history. It's a great myth in the past that the 1950s were somehow a magical time when everyone had a house and the income for a family, but it's that - a myth.
Not sure how the cost of chairs is relevant, compared to the costs of things like housing, student debt, health care, transportation, you know, the things that are actually keeping people today from saving.
I make about 4X what my parents combined made as schoolteachers, yet my housing costs about 10X what theirs cost. In order to get that great price I had to move about 2 hours from work (and pay for the required transportation), compared to their 10 minute commute. I came out of grad school six figures in debt, whereas theirs was cheap enough that they barely had to finance it. They paid for reasonably priced doctor visits out of pocket, compared to my high deductible "healthcare plan" that still has me dropping $hundreds for a single X-ray.
This is, of course, because technology has brought those costs down. Or in the case of education, government subsidies have made college "free". Not because living wages or the economy have improved.
> Food went from being very expensive (people actually died of starvation not that long ago!) to being so cheap that obesity is a major epidemic among the poor.
Food being cheap is not the reason for the obesity epidemic. It's because food has become of such poor quality. Also, it is engineered to cause you to overeat.
Mass produced goods including furniture is cheaper nowadays but everything else is more expensive. This includes essential things like housing and healthcare.
Further the needs have also grown: without a car it’s impossible for most people to have a job
Yes and no. One thing to keep in mind is inflation, so we always need to compare prices to average incomes. A house is listed as being <10k in 1940, but the average yearly salary was also <2k, and the minimum wage was $0.30 per hour.
However, things have genuinely gotten more expensive in some cases usually due not to the economy, but due to safety. That's a good thing - we no longer have asbestos and lead paint, cars are safer, and working fire alarms are a thing. However, those things do cost money. You can no longer buy an all metal box that goes 80mph without seatbelts or airbags.
I find the car claim to be somewhat of a red herring. Yes, you need a car now whereas before a bicycle might of sufficed. However, a decent car can be had for two thousand dollars - not a pretty one, but a functional one. You might be able to go cheaper if you have any mechanical ability, but we'll assume the average person doesn't have that.
In addition now of course you need drivers insurance, and you probably need to take a drivers ed course before getting your license. Those things do add cost, but they also save lives.
The median home value in 1940, adjusted for inflation to 2000, was $30,600 ($2,938 pre-adjustment).[1] The median income for a man was $9,948, using the same inflation factor of 10.406639 ($956, unadjusted).[2]
The median home sales price in 2015 was about $300,000[3] while median household income was $54,000.[4]
And you need to count in something else, the actual changes in living standards.
Nowadays the cost (for a new house) for "utilities" (water, electricity, heating, A/C, etc.) plants/hardware is a considerable factor, as a rough estimate 20-30% of the construction costs, and a large house in the 40's would probably have had one single bathroom/WC (if any[1]) for a 3 bedrooms home.
jaclaz
[1] In rural parts it was not so unusual to have an external loo
Healthcare is a bit of an apples to oranges comparison from many decades ago. There are definitely serious problems with healthcare, but we are also increasingly getting options in healthcare that were not available 30, 40, 50 years ago and contribute significantly to costs.
With housing, on the other hand, we are routinely seeing people pay upwards of 500% what people were paying for the exact same property a few decades ago with few or no changes, even with the effect of inflation removed.
My grandparents also lived through the depression. And how did they cope with it? Joined a labor union, joined the socialist party. Maybe not such a bad idea?
As a counter-anecdote, my grandmother is still alive: she was born in 1918. She just voted for Trump, to give you an idea of where she stands politically. She coped with it by scrimping and saving every penny. She literally washes saran wrap to reuse it, despite having enough pension these days to get by. She saves grocery-store bags. She eats every crumb on her plate. She never wastes leftovers, ever. She went to college at 40 years old, which was not thought of highly in her time, and had a 20-year career as a schoolteacher. She still corresponds with some past students, who are her last living friends.
My grandfather's college fund (to be a dentist) was wiped out, the bank closed. He worked at a GE factory his whole life, work that I will say was far beneath his potential. He never complained. He once traded his easy job on the line for a much harder one, where he had to lift each engine block twice to inspect some fiddly bit on it. He traded to get a 5-cent raise. If you offered my grandfather a government subsidy, he might not have been able to conceal his contempt.
I don't think the decisions of any of the individuals we've mentioned are great indicators of what's correct or incorrect, but the depression didn't influence everyone the same way.
A five cent raise in today's currency or back then? Per hour or week?
Assuming it's hourly, if it's from "then" could you convert it to modern currency, or present it as an percentage increase so we can understand what kind of relative increase that was?
Five cents sounds like nothing today, but 70 years ago it would have been significant.
Figuring out a percentage increase is a bit complicated without knowing how much mod's grandfather earned. According to https://www.archives.gov/publications/prologue/2012/spring/1... in the 1940 census average (yes, not median) annual income was $1368, which works out to $24,505 in 2018 dollars, or $12.25/hour assuming 40 hour weeks and 2 weeks of vacation.
So at a guess, $0.05/hour was less than a 10% raise, but more than 1%. I expect it was /hour, not /week, because weekly wages would have been in the ballpark of tens of dollars.
Disclaimer: I am not mod, and this is not my grandfather we're talking about.
This happened when my father worked at the same factory, so it was all the way in the 60s. My father passed up on the same job because he didn't think it was worth the raise. He's the one that tells the story--the entire thing was not noteworthy to my grandfather.
Nobody's denying that the world has improved. The relevant question is "where are we relative to where we could be, given all that we have to work with?" One answer, in the opinion of many informed people, is that we (Americans) haven't done nearly as much with what we have as we could have potentially done.
It took, by her estimate, about two years to have enough furniture before she was willing to invite over any sorts of company. ... Today you can furnish an apartment reasonably with about a months worth of wages.
You do understand there's a difference between a month of wages and having a month of wages saved to spend, right?
Considering most people live month to month... saving an entire month would take many people more than 2 years.
Really shows how some people in HN have never experienced poverty. If a households main income earner is making minimum wage they will not be making shopping trips to IKEA to furnish their whole apartment lol. IKEA is cheap but the $50 you have left over after bills won't get you much. Many months you will have a negative balance after you've paid for essentials.
Personally I agree that in modern society its a good idea to wait to have kids until you can provide for them....
But its a little weird that a Caveman's most basic prerogative (To procreate), is not something many people in modern society can afford to do.
It's also something that is fairly important to the continuation of our species, so hopefully we can figure out a way more people can responsibly afford to have children.
My grandfather retired at 67 due to failing health. He was primarily supported by his military pension, and to a smaller extent by a pension from working at a major grocery store. My grandmother only worked odd jobs, but collects a small amount of social security. She's still doing quite well and spends most of her time reading library books and painting (though notice both of those are extremely cheap hobbies).
I'm a distinctly unfair comparison, since I could retire as early as 55 to 60 (I doubt I will, I do terribly when left without something to do, but who knows.) That being said, I recognize my situation is very unlike most of my peers.
My cohort falls into three categories:
+ Those with high income and good financial management. Like me they are capable of retiring without any government assistance at 60ish in most situations.
+ Those with high income, but no financial management skills. Even now with no family to support and no "required" debts, they struggle to remain afloat. Simply throwing more money into the fire doesn't help it turns out.
+ Those with low income. Universally, and not for lack of intelligence, they have no 401k, no major longterm savings. If they retire it will be through programs such as Social Security (assuming it still exists). This is the group that worries me the most, because I don't have any answer for how to improve their situation. They're simply caught in the spiral of not having enough money to make progress on saving.
Please don't take my argument as "Everything is perfect now!". Mostly my argument is, "Things aren't majorly worse and are generally better." Nor am I making the claim that the future will forever be better - Social Security might collapse, pension programs dry up, etc. We shouldn't stop assisting the poor, teaching financial literacy, or behaving intelligently. Simply that the average condition of people is better than it was.
Ok, I earned approximately $18k when I was a research assistant, 20 years ago, and my possessions when I graduated were : 2 pairs levis, 4 t-shirts, 2 sweaters, 1 coat, 2 pairs shoes (trainers, boots), 1 formal shirt, bag of socks and underwear (I can't remember). I had a watch also.
My dad gave it to me - I guess I had privilege.
Ok, ok - I also had a car! Sort of - a citroen BX (look it up and marvel).
I had gone on holiday once in 4 years, also I had my thesis bound and I had many nights at the pub. Also I used not to heat my attic flat (I was tough), my mother came and helped me move out when I got my first job before graduation. She cried.
My point isn't boo hoo, I had a blast, but my point is that I struggled like hell on more than minimum wage 20 years ago. I had no commitments, I was going to earn money in the future (even pre dot.com compsci was a valuable bsc, and even 20 years ago a Ph.D in ML was even more valuable). I had no children, I wasn't french. I had my health (dear god I was a living marvel) I was pretty, I was loved and supported.
It isn't personal sin by people making six figures, it's utter shit poured down on people who are both clueless and helpless, and frankly people (like you, like me) qualify to judge by living it.
I don't qualify, but I can tell you something factual, without all the advantage that my middle class parents gave me (most of which was growing up with the expectation that I would go to University and study science and if I didn't I was a shameful idiot who could go and work as vegetable picker - fear is a motivator) all the financial skills in the world, all the cheap hobbies and all the diy would not have helped.
And by the way if you spend 45 hours a week digging holes how do you think you would contemplate home building projects?
Yes, some people work their way out of it, some people are extraordinary, and some people can have great luck and get the cards to fall for them. But most people are just... most people - everyday people. And most times, you get average breaks. Well, you can do the maths and work out the joint distributions - bad things can happen to good people, normal people don't need much to go wrong, and people who will struggle don't need anything to go wrong.
A wise man wrote :
She came from Greece,
She had a thirst for knowledge.
She studied sculpture at Saint Martin's College.
That's where I caught her eye.
She told me that her Dad was loaded.
I said, in that case I'll have a rum and coca-cola.
She said fine, and in thirty seconds time she said,
Would you please not paste boilerplate into HN threads?
Discussions here are supposed to be conversations. Imagine someone insisting on reading the complete lyrics to Common People out loud in a real conversation. That would be awfully tedious, unless you're an Andy Kaufman and can get away with it.
Wages have remained flat when inflation is taken into account, i.e. real wages are flat, nominal wages continue to increase. We also have seen upward movement in median household income recently, and we should expect that trend to continue. So the idea of flat wages may be coming to an end.
What hasn't remained flat is the wages paid to the top N% which has greatly increased and accelerated the wealth gap. It is this gap that leaves people less satisfied despite being generally better off.
I would qualify: people aren't just dissatisfied because of the "unfairness" of growing inequality. The growth of the wealth gap has some very real ramifications, ie: on the distribution of power in politics.
As if the poor ever had any power in politics. Huey Long might have been a lightning rod for poor people, but it's not as if their votes have been courted since I've been alive.
>Inflation has been 3% a year for decades and wages have stayed flat.
Every time I read this claim and go looking for data, I find data that says that real wages are roughly flat, which means that they have kept pace with inflation. (That's the definition of real wages: that they are in inflation-adjusted terms.) It seems a common journalistic (and often political) talking point to say exactly what you said, which makes the math or reading comprehension challenged assume something quite different. While the author or speaker is not technically lying, they are merely misleading the reader/listener with a confusing (and sometimes confused) combination of nominal inflation and real wages.
It shows that vehicles have not gotten more expensive (even as they've gotten much, much better, safer, more reliable, etc) and that housing and food/beverages have inflated by less than wages and by roughly the same amount as general inflation (which is no great surprise, given that they are a substantial component of the inflation calculation and that it would be difficult to sustain inflation over a long period of time in a consumer-driven economy in the absence of [nominal] wage growth for consumers).
College and healthcare have indeed risen much more quickly than wages or general inflation.
Figure 3: "When it comes to the pace of annual [real wage] increases, the top 1% wage grew 138% since 1979, while [real] wages for the bottom 90% grew 15%"
Figure 4: "Middle-class wages are stagnant—Middle-wage workers’ hourly [real] wage is up 6% since 1979, low-wage workers’ [real] wages are down 5%, while those with very high wages saw a 41% increase"
I wouldn't exactly describe those figures as "misleading". In fact, they're pretty clear: one group is benefiting much more than the others.
As for the second one, is it really saying that real new-car prices have declined by ~50%?
People who knew me early on in certain contexts thought that I was "rich" comparatively speaking.
They didn't see the 10 year old car, 4 roommates (in a cheap city), camping vacations, sale clothes, etc. I was debt free quickly. I'm in a fairly well compensated gig now but kept the habits. The car is a 2003, my house is older, vacations are in nicer hotels but we drive, etc.
That's not to say that people have challenges that are tough... but so did I!
Whether or not a bad financial choice is a out of necessity is highly situation-dependent and the situation doesn't look great for the majority of millennials. I think this point sometimes gets lost among the HN crowd for whom a bad financial decision is most often a choice.
Things like the extraordinary rise in the cost of higher education -- which has become a near defacto requirement to obtain a livable wage -- should not be discounted. The example of student debt is particularly salient because it appears to materially impact the vast majority of millennials. Even those of us fortunate enough to be making six-figure incomes spend many years pouring money into debt instead of retirement or brokerage accounts. In most cases this setback leads delays in home ownership, starting a family, and retirement. This is a problem that cannot be remedied by teaching good financial skills.
> Regardless of intent, these Millennials are telling an older generation of elite Americans — the very people whose policies and financial decisions kneecapped the economy — what they want to hear: that everything is more or less okay, and young people just need to be more thoughtful about their money.
Perhaps the article got that wrong though.
It could be just as likely that the Millennials are saying that they are shunning the crass consumerism that the 'older generation of elite Americans' are steeped* in.
People want what they can't have which I don't think will ever dissolve. Therefore, the idea that advertising has any bearing on this is flawed.
Keeping up with the joneses is less about having the same thing and more about having the joneses quality of life. They aren't the same if you look at them.
Having a fancy car for example is a status symbol, what is the status? The status is that this car has nicer features, butt warmers, more comfortable seating, better safety. Taking that status symbol a step further, I can deduce that if the joneses can afford that fancy car they also have other fancy things.
Most reduce this logic down to the following: The more individual items I have that the joneses have the closer I'll be to their quality of life.
I think this is a really interesting dynamic though because the more money I make I am not proportionally happier. In fact, my happiness stopped increasing with salary increases the moment I was able to afford bills and have leftover for savings. Since than my salary has grown many times over and I am still the same person I was fresh out of college getting by. My wife and I are still the same couple, we are no happier with the weather we have achieved over the years.
There are so many things you cannot tell by looking at how other people appear to be living their lives. Or whether the car is valued for utility, features or perceived status.
First, you can't tell from looking at their car how well-suited their finances are to paying for it. They could have a 12.99% 72-month loan that doubles the actual cost (plus higher insurance premiums, premium fuel, etc). Or they bought it cash, self-insure, and have money invested that compounds over time and pays their insurance and gas bill for them.
Second, you probably don't know how they are using it. If you're a master salesman with an excellent income, selling 7-figure deals to executives, you might actually get utility out of perceived status! But if you're a coder who walks a quarter mile from parking and works in the basement of the building, the brand name on that car is worth nothing. And most of those comfort features can probably be found in a Mazda for $20K less. Or a ten-year old luxury car. (Personally I love the hatchback which combines all those features with utility and fuel economy! No need to buy the luxury sport sedan.)
Finally, wait, why do you think advertising isn't doing its job? People know what they can't have because of advertising. Then they want it.
> There are so many things you cannot tell by looking at how other people appear to be living their lives. Or whether the car is valued for utility, features or perceived status.
This is the perspective people need to have to stop comparing themselves against others. When I learned this I stopped comparing myself and try to buy based on the value add a product gives to me in my use case.
Here's the question: if you were to "cut back on things like eating out at restaurants and taking public transportation to work," would you be able to save 71% of your income? How long would it take you, just in cutting back on lattes and painting your own home rather than hiring a contractor, to buy a 4 bedroom house on 66 acres in Vermont?
I don't really like doing plumbing, but I've replaced quite a few faucets and toilets. Not because I wanted to be "frugal", but because I could not afford to pay someone to do it; if I didn't, it wasn't getting done. I didn't blog about it; I didn't tell everyone, "Hey, lookit me! I'm saving money!" because everyone else I knew was also doing their own plumbing because they were also broke.
(Now, of course, I could pay someone. But that ship's sailed. Besides, it's really hard to find good contractors.)
The McFrugals, according to the article, aren't talking to millenials or anyone else who needs to be frugal; they're talking to the wealthy, saying "all those people you think are whiney, spoiled kids, really are spoiled, whiney kids."
> Here's the question: if you were to "cut back on things like eating out at restaurants and taking public transportation to work," would you be able to save 71% of your income?
No, because my taxation burden alone is well above 29%.
I'm pretty sure they're calculating that they're saving 71% of their earned income, but they're almost surely not saving 71% of their earned income plus gross rent receipts.
I realize that TFA is a critique of these silly people, but somehow reading the first two paragraphs seemed to be as much as I would ever need to know about them.
So some people in a particular generational cohort write books and blogs about their financial independence, but this is bad because it trivializes the actual struggles of other people in their cohort who aren't financially independent? Oh, the horrors!
Here's the takeaway: the frugals/similar bloggers are bad because they, "are telling an older generation of elite Americans — the very people whose policies and financial decisions kneecapped the economy — what they want to hear: that everything is more or less okay, and young people just need to be more thoughtful about their money."
While it's debatable whether everything is "more or less okay", and -- to some degree -- there are definite systemic issues preventing people from being where they want to be financially, I guarantee you that adopting this attitude ("it's not my fault I can't get ahead, the system is messed up") is going to make you worse off financially vs believing/focusing on what you can control and your own agency.
For example, I do think there are some current millennials who sort of got unlucky with the student loan/college bubble and "were told" (or believed) that they could just borrow whatever they wanted to study whatever they wanted, and it'd all turn out OK. But I'm not sure people graduating high school now nec have that excuse. And if you are graduating high school and reading this, for gods sake, please take it upon yourself to think a bit about what you might like to do and take a long, hard look at what exactly borrowing the median 10's of k's of debt might get you before you do it.
What I missed was the part where their blog says "Millennials only! Everyone else is absolved of blame!".
To hear people tell it, large swaths of the American population has a retirement savings crisis, not just Millennials (who actually have time on their side to build wealth). Their advice is universally applicable, regardless of age or income.
I've know a woman who's worked at University of Phoenix for a significant part of my adulthood. In that time, I've heard some terrible stories about who University of Phoenix targets for recruiting into their gov't borrowing scam.
The folks who were targeted are largely unable to pay, and desperately wanted the airdrop of money they got from Financial Aid to attend.
American salaries are difficult to make sense of from a European perspective. The referenced average salary of $36,000/year for millennials with only a high-school diploma would be a normal entry-level salary for a software engineer in most of Western Europe, and a very good salary for experienced engineers in Eastern Europe.
Tax burden is higher here as well, and while the cost of housing is exorbitant many parts of the US, so it is in cities like Dublin, London and Paris, but without the salary adjustments you see in San Francisco, New York, etc.
This makes it difficult to understand why frugality is impossible for an American making triple the average salary of an average Czech or Croatian.
City-based salary adjustments are really something only educated professionals get, low-wage earners are screwed in big cities. I think also it will shock you how much every day items are compared to Europe. For one, public transportation is not available to most of America. So you have to have a car and car insurance, thats hundreds of dollars more per month right there. Cellphone service costs 3x as much as anywhere in Europe. And yes, the housing is absurd as a percentage of wages compare the the EU. Health insurance is really expensive as well; the employee's contribution to a company sponsored health plan is often as much as 20% of a minimum wage workers wage.
Very few of the big cities in the US have public transit that's even sufficient for most people to get to work, let alone to sustain the rest of a reasonable lifestyle.
I'm saying this as someone who previously had a 1 hr 20 min commute via public transit just to go 16 miles, and that was with the relatively good public transit in the Portland metro area and me literally living a block away from main downtown transit hub.
5 can probably be done. (assuming "average" is average for that city, not national average). NYC, DC, Seattle, SF, Boston, Chicago... Naming 10 is probably way harder.
Seattle can be tough at least. Really depends on a lot on where you live and where you work. Almost any commute can be done but it easily gets to 2h+ which is just ridiculous.
Seattle is the only one I have personal experience with and I've found it to be pretty good. Usually walking < 1 mile total is reasonable. If you live out in King county things are a little different of course. Are the other cities better than that?
Hence why I mentioned "average-wage" in GP; usually you can avoid owning a car only by living in housing that is out of reach for anyone making <$6k/month.
Most places in the US, housing near transit options is pretty expensive. Further out, where you get to housing being affordable, is nowhere near transit.
If you are making $36,000 per year, you are not making minimum wage. People that make around this much, their salary doesn't vary drastically like a software engineer's does city to city.
I can think of maybe 2 or 3 cities where minimum wage is anywhere near that high. And at least one of them that's coming close, Los Angeles, you absolutely need a car. New York, maybe San Francisco or Portland, you could reliably get around without a car.
Cell phone service in the US can be cheaper than Europe. I have had Project Fi for over a year now, and it's $24/month including taxes. This includes voice, text, international texting, data, and international data. You pay per MB so I don't watch videos on my phone, but use it for everything else.
That doesn't sound right to me. Both UK and Netherlands' most expensive plans are cheaper than most plans in the US I've seen. Looking at Three, now it costs £15 for 12GB (reduced speed afterwards), but 4 years back I had an £8 unlimited (or maybe I just never hit the limit) plan.
Now I spend ~$80 with Google Fi, but I could rely exclusively on wifi and reduce that to ~$20/30. Every other american company seems to want to extract >$80 per month from you.
Agreed. For context, in the Netherlands you pay about $100 in monthly healthcare insurance. You pay about $160 a month for college tuition. You don't need a car, and transport to work (by public transport, car or indeed bicycle) is generally paid for by your company. Student loans are available at 0% at the moment. There's housing and healthcare subsidies for lower-incomes. (<$34k)
I'm not sure about housing though. There's a few crazy cities in the US, NY, SF, LA etc. But by and large, the median American pays a substantially lower square footage price than citizens of somewhat similarly rich European countries like the UK, Netherlands, France, Germany, as far as I'm aware. And we also have our outliers in London, Paris etc where the price-income ratio is off the charts. The US has far more land and is far less dense than Western-Europe, with land prices as a function of density (demand for land) I'd say Europeans have less real purchasing power on housing.
American salaries are listed as pre-tax figures. Lower end jobs often don’t include health insurance at all, and those that do will usually require the employee to pay for a substantial portion of it.
State income tax is not generally the important part. From a quick search, the highest rate in the nation is 13.3% in California. The Federal income tax rate tops out at 37%, and there's also 7.65% Federal payroll tax.
Yes it is because that 13.3% is on top of your federal taxes (which don't change). A Californian making $150k is making $20,000 less than a Texan making $150k. That's sizeable! And Californians pay more in property taxes!
The 13.3% bracket starts at around a million dollars a year. Where do you get $20,000 from? A single person with no dependents with that income would pay about $11,000 in state income tax and $37,000 in federal income tax.
We don't have adequate public transportation (so car + car insurance + car maintenance). And our cities were never really designed to be walk-able or bike-able.
While we have compulsory health insurance not dissimilar to the German system, most areas only have one or two providers (vs. 130 of Germany) whose prices have been going up like 30% every year. We still pay out of pocket for most medicine, dentistry, emergency (like ambulances), and psychological services.
Some utilities are ridiculously expensive. Like internet can be 80$ a month for basic 2 mbps.
A large number of people are employed as contractors these days (the gig economy), which adds a 15% tax (that the employer would pay for employees) for a social security service we will likely never see, so I'm not sure the tax burden is higher. Contractors also have to pay for all their own health insurance (and our cutoff for public assistance for health insurance is like 12k, not the 50k Euro like in Germany)
Which brings me to: we have to pay for our own retirement, even if not contractors most companies don't assist with that anymore, especially for entry level jobs.
You forgot the housing/rental situation too. In my area, renting is 33% - 50% of _take home pay_ (after withholding taxes), without utilities or property tax.
I pay $75/month for 10mbps upstream, 1mbps downstream DSL. That's the advertised speeds, I get lower speeds in practice.
I'm not complaining. I'm happy to have those speeds as I live in a very rural area (South/Midwest). I can stream netflix or youtube without hitches, almost all the time.
All good points, but student loans are important too. Many people who went to college are paying between $200-$500/month for the foreseeable future, which is a large additional cost that seems less common for Europeans.
As a fellow non-American, it took me years the realise there is no America. It is the Unites STATES of America, where the states are all very, very different.
As an example, last I looked the GDP per capita in San Francisco is $48K, whereas in Miami it is $24K. That is a pretty massive difference, and leads to very different outcomes in a lot of areas.
The best way to think of the USA - and China BTW, which has an even worse demographic spread - is to compare it not to one country like England, or Croatia or the Czech Republic, but to the EU as a whole. Luxembourg is Washington DC, Switzerland is Connecticut, London is New York, Seattle is Berlin, Croatia is Alabama and New Orleans is Barcelona. Those are not exact comparisons, but just a framework for understanding how aggregate US results are so weird.
Because even healthcare, if you combine the population Conneticut and Massachusetts, it is the same as Sweden's with very similar outcomes. Alabama and Mississippi, on the other hand, aren't doing quite as well.
TL;DR, The average for the USA is really misleading, as the spread is much larger than it is in smaller (area and population) countries.
I honestly don't understand how enjoyably living in Europe is possible. The class divide seems to be much greater over there.
My wife and I were in Barcelona a few weeks ago to celebrate our honeymoon. Prior to going, I did some research on what life was like there. The max salary for most people in tech in the area is about €75,000 (~$USD 93.5k). This is considered a great wage over there. The rents within the city are similar to NYC (studios >€1000k, etc). Barna has a pretty good transit system, but living farther out requires a car. Also, employees get taxed HARD all over Europe and the cost of goods (groceries, entertainment, etc) aren't cheaper than their US counterparts.
AFAICT, based on my visits and the people I know there, it's a pretty different lifestyle, people seem much more frugal. People eat out less frequently. Owning a car is much less common, and those that people own are usually much less luxurious (many more very compact cars). Housing is generally much more modest (this is almost universally true), Europeans seem a bit flabbergasted at the gigantic houses we live in when they visit. A lot of things like transit and healthcare are heavily subsidized, so low earners can still get around and get medical attention. The top tax rates are fairly high, but I believe not that much higher than the cumulative tax rates for a high earner living in CA or NY, once you consider fed income+state income+sales tax+payroll tax.
Basically, Europeans on average have much lower incomes than Americans, and they seem much more frugal.
Cheap public transport, cheap medicine, cheap food, cheap housing (mostly) and people live without shit in the head like "I should own giant house, pick-up or other giant car and eat only in restaurants". That's how normal people live.
Eastern european living in San Francisco now. It's the lifestyle. Back home I would go out once per week, drink 2 beers max, walk-to-and-from (4-5 euro total cost of a whole week's entertainment. Bang for your buck!). If you wanted to drink more you 'd pre-game at home, drinking unlabeled homebrewed vodka! Food? You cook it yourself (or mom would since I lived with my parents), put it in the refrigerator and warm it up every day at the week.
Now in SF, I order sushi twice per week. Go out at least 3-4 times per week and lots of times pay for drinks for friends etc, never walk when going out always rideshare. And it's not only about alcohol and food of course.
I could be saving way way more if not for this lifestyle. That's how it goes. Everyone who tells you otherwise are lying to you and worse themselves. Basic human nature. The moment you make more money, you want to take your girlfriend/boyfriend to a fancier restaurant. You want to buy the nicer phone. Except for rent prices which are insanely high, the regular cost of living is not that much higher than living in eastern europe. Actually funny enough when I first moved here, I was shocked at how cheap everything seemed - of course taking into consideration the high salaries. In many cases actually eastern europeans pay more for certain things because for some unknown reason 1 dollar turns to 1 euro, instead of 0.75 of a euro or whatever the price at the moment is. Our petty $350 salaries can sure take it!
Mate, people here have a favorite whisky!I now have a favorite whisky. And as any self-respecting adult it needs to be fancy, not the cheap stuff. Ardbeg, tastes smoky, like swalloing in dim campfire and most bars here will charge you $16 for a glass. There you have it, how people aren't saving money.
It adds up. But I also have a friend here who on a 120k engineer salary and saved 100k in 2 years. Only eating at work, living on a shared room with 3 more people in treasure island. Reimbursing bus fares to work etc. The other side of the coin. Almost everyday I say to myself that soon I will do the same, and sure enough every day I don't. Just like not going to the gym and forgetting to call mom again.
(Mr. Money Mustache isn't too different from the FrugalWoods. They never made quite so much money, but they did have good careers. Still, there's a similar message to be heard.)
I get that the high income and extravagant Vermont estate are a turn off for median-and-below earners, but that doesn't mean you have to have their income to benefit from their frugality. After all, MMM and FW have the time to write about frugality because of their financial independence. But they are able to live the lives they want due to the choices they made with their money.
It isn't hard to find counter-examples. How often do you hear of people that make $300k/year, yet fail to accumulate wealth and achieve financial independence? How often do they continue to be held to wage slavery to support their chosen lifestyle?
Anyway, while you can't save money by not painting your kitchen, you can improve upon your self-sufficiency, and you can certainly become more mindful of your values and the choices you make with your money. It takes education (self or otherwise), and financial bloggers can serve as source of education. But you still have to learn how to filter and apply knowledge to your own situation. You can't pluck fruit from an orchard in your 600 sq. ft. apartment, but you can track your spending, and figure out where money is being spent on things that don't line up with your values and long-term goals.
The important thing is to figure out what you can do to improve your situation. Complaining about people being more successful than you doesn't improve your situation. (I do get that income inequality is a whole other issue to address, but I think that muddies this specific message.)
Remember that you can probably find ways to be more frugal and mindful, and know that doing so alone will not get you a 66-acre homestead at the age of 30, but it can improve your life and get you to your goals faster.
beware of "frugal / FIRE bloggers" because they make their money blogging, and aren't financially independent (last time I checked, MMM was a working carpenter/contractor, while claiming he's "retired" because he "enjoys his work"), which is not an avenue open to their entire audience.
He is a carpenter because he saved enough money as a software engineer to do whatever the fuck he wanted and he wanted to build shit with his hands. Does financial independence somehow only count if you opt sit on your ass all day?
Financial Independence = Living Expenses < Stream of Income From Assets You Own
That's it.
What you choose to do with your time, whether that be work, or whatever, does not enter into that equation. If you think MMM is lying about being financially independent, then that's a different story. But that he chooses to work has no bearing on his financial independence.
I would also make the economic argument that a rich person that is still frugal is actively exacerbating income inequality.
If Warren Buffett is indeed still paying only $3 for breakfast every day, that's giving a big middle finger to the economy. Money is half of the circulatory system of the economy. When it pools too long in one spot, it clots, and then a thrombosed clot can cause damage somewhere else.
He really needs to spend more on breakfast. As one of the richest individuals on the planet, even if he just wants a sausage muffin, it should really be made from only the highest quality agricultural goods, with a lot of personal services added. If he can't manage to swallow that level of ostentation, buying thousands more of the consumer-grade item than he could eat personally would also work.
The only reason for poor people to permit rich people to continue existing is that concentrations of wealth allow for the development of novel classes of goods and services. There would be no luxury yachts if nobody could afford more than a fishing reefer. There would be no Acura if nobody could afford more than a Honda; no Lexus above Toyota; no Cadillac above GM. The luxury goods and services are the early adopters. Without them, some technologies would have died at inception, never to make it to consumer-grade products, because they were too big and expensive.
Anyone can spend small. Everyone else needs the rich folk to spend big, whenever they can. If you don't buy the best, you are not doing your job as a rich person. If you aren't spending on someone's wage, you aren't really "creating jobs". If you can afford to have your cabinets painted instead of doing it yourself, hire someone for that and get back to being the QC/beta-tester for humanity's R&D. This crap where you "retire" and pretend to be rustic and homey isn't helping anyone. If you want to live like a poor person, that's easy; just get rid of all your money. Give it to someone more willing to spend it.
Frugality stops once you can pay all your bills from your paycheck and still have some left. After that, it's called stinginess or miserliness.
He is fundamentally correct. If you are rich and decide to stop hiring people from your community to build extensions to your already large house, then the money is just going to be pooling in your over-sized bank account: potentially just being deployed by a bank to create profit for other rich people.
Although you are correct that money I don't spend remains in my possession, I disagree that there is any morale obligation to spend as much as possible. Overconsumption is not a viable solution to many problems.
Why do you think spending more than he needs or wants to on breakfast is the most valuable use of his money? Surely re-investing it or other expenses will help far more people.
As a sidenote, if you are spending all of your money after paying your bills off, it sounds like you're not saving anything, which is a recipe for disaster. You should most certainly not consider such a person to be miserly.
Consumption is the most valuable use of money. Saving is trading consumption now for consumption later. The later you delay your own consumption, the longer it will be until the person eventually providing your goods and services will actually be paid for them. Investment is somewhere in between, where you pay something in advance for the consumption to occur later.
I don't really care if Buffett spends on one $3000 breakfast sandwich, or 1000 $3 breakfast sandwiches, or 10000 $0.30 vaccinations, so long as he spends. He certainly has ample savings and investments for himself, and doesn't seem to intend to support his own descendants in a lavish lifestyle. That spending is what pays other people's living expenses. It is up to him to spend in a way that reflects his personal values and preferences, but if he chooses to accumulate wealth, rather than circulate it, that benefits only him, and no one else. Spending only $3 on a breakfast signals that Warren Buffet does not greatly value breakfasts, or the cultural practice of breakfasting.
That's fine. I'm not a big fan of it myself. But when I skip breakfast, I may be signaling that I don't have $3 to spend on breakfast.
Strictly speaking, hardly anyone does genuine saving anyway. Most people with money to save will deposit it in a bank, which then invests it and just pretends it is being saved through mathematical fictions. The recipe for anti-disaster is to spend on insurance and to buy financial instruments that promise a steady income. Burying your gold just makes you worry about where your gold is buried.
Once you have that $X in your portfolio, and are living comfortably on the 3% return from it that you can safely spend annually, then in my opinion, it is then your economic responsibility to spend that whole budgeted amount on things you like. If you aren't spending more, you must be entirely satisfied. And if you are entirely satisfied, you don't need more money to spend. If you don't need more money to spend, you don't need to buy additional income. And if you don't want to spend and don't need to invest, then what are you saving it for? If you continue past that point, you are crossing a rich-person event horizon where you can't send money out as fast as it comes in. You will start sucking ownership out of the economy and asphyxiating businesses that would otherwise be viable. In the end, you will either have to start frantically giving away money, people will have to start stealing it from you on a massive scale, or you will become a wealth singularity as everyone around you starves.
I think you're discounting the utility of an extremely wealthy person's capital as a vehicle for greater change.
That is, Warren Buffet probably can't move the needle much through consumption of goods. Even if he replaced his $3 breakfast with a $300 breakfast it's just not going to have a huge net effect.
Instead if he manages his finances carefully and leaves himself capital for investments then he's able to influence entire markets at once. This is a lot more effective use of his leverage than simple consumption because it drives innovation, fosters competition, etc.
There's certainly something to be said on your points of wealthier consumers pioneering technologies and solutions for the rest of the world. I believe it's more realistic to look at the upper-middle-class for that sort of thing than the ultra-wealthy though, as people like Warren Buffet are the 0.1% of the 0.1% of the 0.1%.
Musk is being far more productive with his accumulated wealth than Buffett (my opinion). Once he can buy his breakfast sandwich for $3 at a restaurant on Mars, I will revise my opinions on how he chooses to spend his money. Until then, I will continue to believe that thrift and frugality are the domains of the poor, and when the rich dabble in it, they are essentially forcing the truly frugal to become more so.
~I sort of imagined more of a kinetic sculpture, like Buckingham fountain in Chicago, except filled with silver pennies and tiny rails and springs and flippers and catapults. And he'd just stand in it wearing a hard hat, letting the little coins fall all over him and roll back into the hopper, to be thrown up in the air again.~
He buys companies with it. He invests and invests and invests during the day, and at night, he sits in his $150k house, with all the lights turned off except the room he's in, with the mechanical thermostat set low in the winter and high in the summer, mending his own socks.
He's an octogenarian, and it doesn't look like he has any plans to support the luxury goods and services industry any time soon. Nor does he seem all that interested in starting new, risky ventures with a lot of R&D. Instead, he has pledged to leave the majority of his fortune to the Gates charity, so they can spend it for him. He literally can't think of enough ways in which he'd like to spend his earned wealth, and has to give it to someone else.
It's not quite leaving it in a money bin, but there's a luthier out there severely disappointed that the best ukulele never made won't be bought by the richest ukulele player that ever lived, because he's just fine with the same $15 model they sell to elementary school kids. There's a professional cook out there severely disappointed that after all those years in school and as a sous chef, the guy that could give someone a break on the way to their own restaurant is still eating his breakfast at McDonald's. And there's a Patreon dependent only one $10/month subscriber away from making rent. And a Lyft driver that would rather be a personal driver. And a landscaper that is one big account away from buying another truck and hiring more employees. And a TaskRabbit peon that would rather be an executive assistant. And a gym teacher that would rather be a personal trainer.
He's just not doing what everyone expects from people with enough money. He's selling underwear and insurance policies and Dilly Bars, and not buying anything fun and expensive from any of the people who would desperately like to sell something fun and expensive, to anyone who could afford it.
Gates is buying malaria and parasite eradication. Musk is buying a Mars colony. Buffett is buying all the same old boring crap that poor folks can buy.
Whoa, I just realized I've been retired for four years now! Words used to mean something. If retired is a full time job and self employment, no one told me. It's not bad but it's way overrated and certainly not happiness. My mom is retired. She can literally do nothing all day every day. These people are not retired, they're lying.
And referencing Warren Buffett's shit breakfast advise without considering the money needed to budget for the inevitable health disaster of eating a sugary breakfast at McDonald's every day is frankly ridiculous.
I'm glad the wouldn't let something as Patently Right Wing as "being thrifty" to escape their journalistic gaze.
it's super important to make sure that no stone goes unturned in the constant battle to find out who's keeping them down over there on "The Great Left".
if any portion of success can be explained by patterns of behavior, then portions of "systemic" income inequality can as well.
I'm emphatically NOT suggesting that poor people are only poor because they don't understand how to balance a checkbook, avoid predatory loans, and how to use the tax system to their advantage.
The word missing from this discussion is "structural" - there are deep structural changes to how the job market and economy now works that limit the economic prospects of millennials (as a group) in ways that can't readily be overcome with thriftiness and hard work.
Here's an excerpt of the article that really clarified this for me:
"Thirty years ago, she says, you could walk into any hotel in America and everyone in the building, from the cleaners to the security guards to the bartenders, was a direct hire, each worker on the same pay scale and enjoying the same benefits as everyone else. Today, they’re almost all indirect hires, employees of random, anonymous contracting companies: Laundry Inc., Rent-A-Guard Inc., Watery Margarita Inc. In 2015, the Government Accountability Office estimated that 40 percent of American workers were employed under some sort of “contingent” arrangement like this—from barbers to midwives to nuclear waste inspectors to symphony cellists. Since the downturn, the industry that has added the most jobs is not tech or retail or nursing. It is “temporary help services”—all the small, no-brand contractors who recruit workers and rent them out to bigger companies."
The specific example you bring up seems to be a result of increased liability on the employer for employees. Hotels etc would rather contractors carry those liabilities, especially I imagine when it comes to possibly illegal immigrants.
Sure, but that's not some kind of neutral, organic development. It's something the rich choose to do, in collusion with politicians, to increase their own wealth and power.
Shifting all the "liability" onto workers, creating an economy where everyone but the wealthiest are fungible serfs, is a specific set of values and decisions advanced by these people because it benefits them.
It is _partly_ organic, or rather, technological. General Motors did everything in house (partly) for the same reason the hotel did: the computers needed to keep track of today's supply chain / subcontracting payments & management didn't exist. The efficient thing was to have one centralised payroll department cutting checks.
But politics played a big role too. It deserves to be noted here that almost all the employees at this (1960s NYC, say) hotel were born Americans. While today a large proportion would not be, a factor which tips the balance of power towards their managers.
Businesses like Costco have supply chain dynamics as complex as any hotel chain, if not moreso, and they still manage to treat their employees better and more equitably.
I don’t disagree that technology has changed these dynamics, but the way power and wealth has been distributed in response to these changes is almost exclusively upward and to fewer and fewer people. Nothing about that is neutral or organic, unless you’re talking about the trajectory of wealth and political power under some Marxist analysis of Capital accumulation.
> It's something the rich choose to do, in collusion with politicians,
So legislation purportedly for employee protection backfires by making direct hires uneconomical and you call this " something the rich choose to do, in collusion with politicians"?
By an reasonable comparison to other wealthy economies in the developed world, no such labor protections exist in the US. What little protections are in place have been systematically under attack since at least the 1970s.
If we we're talking about somewhere like France, perhaps this argument would hold water. Otherwise, seems like a strawman.
Yes, I do. Because it's something they do specifically to avoid responsibility. And the rich are adults, who are perfectly capable of taking responsibility for their actions.
Realistically, you need a couple thousand dollars at an absolute barest minimum to open a company and strike out on your own.
Incorporation paperwork and filings, even for an LLC in an inexpensive state will be a few hundred, with an Inc generally more. Annual filing fees run $800 minimum in my state; that's if you do all the calculations and paperwork yourself.
Then, you need adequate capitalization for the company (to avoid it being regarded as under-capitalized should the question of piercing the corporate veil ever come up).
This must be used for working capital for inventory, WIP, raw materials, utilities, salary/living expenses, perhaps rent or transportation and needs to cover you between the time you start and when you are cashflow positive. You may need a license or permit from the town/city/AHJ to operate.
Telling someone living paycheck to paycheck to "just go start a company" is fairly unrealistic I think.
A factor for courts to consider: Significant undercapitalization of the business entity (capitalization requirements vary based on industry, location, and specific company circumstances)
We all have exactly the same amount of time every day. How you spend it is up to you. You can choose differently, especially if you're on HN discussing it in the first place.
Disagree with what? That there are 24 hours in a day?
They choose to spend that time working 2 jobs. I've done the same in the past. I've decided between buying dinner or getting gas to drive to work to earn enough to cover the commute in the first place. Eventually you make decisions to get you out of that life and into a better one. There's luck involved sure, but I absolutely reject any excuses as if it's completely out of your control.
I highly doubt you did those things you claim, because if you did you wouldn't say people "choose" to work two jobs and that it's just a matter of "deciding" to stop being poor.
You don't think choices matter in making your life better? This is just as sad as thinking that things can also change overnight. No you don't just stop being poor, you plan and get yourself out of it, over a decade if that's what it takes. Either way it's still up to you.
This is tired sentiment. Yes, make a plan and get yourself out of it.
Situations don't change instantly which is why there are always comments about how it seems impossible - but like any other large goal you only get there with slow steady progress. No matter how bad you think you have it, many others have climbed out of worse. So it's not about choosing to starve but about making those tiny decisions that build up to will eventually get you out of that life.
I'm not blaming anyone. I'm saying that life is in your control and your personal responsibility. Things happen to you, but you can always choose how to react and thereby overcome obstacles.
Interestingly, you seem to saying that nobody in that position is at fault and are instead blaming everything else and "reality" which I find rather disingenuous at best. You either have control over your life or you don't, and if you think you don't then there's nothing to discuss and you can pontificate on the lack of free will I guess.
It is a fantasy because the way the real world works means that people operate under constraints such that they do not actually have productive uses of their time, or that their time is already allocated toward necessary obligations, such as caring for children, or for parents.
Wow, just... really???
Sometimes it doesn't take any decision at all. I leave it to you to imagine all the ways in which someone might get pregnant without wanting to.
This is nonsense. You have to know how to open a company, to have an idea for what it will do, have some way of building your product initially, etc. This knowledge (or the time to find it out on one's own) is itself a resource. Being able to take the risks inherent in opening a company is a resource that your average person might not have for many reasons, including needing immediate returns to support dependents or satisfy immediate and important expenses.
There is more to it than that. And what's more, knowing things theoretically is very different that having to take a decision while you are exhausted, trying to take a decision before a big deadline, in the commute between work and the family, while your balance sheet is worrying you and you have social pressure from your workers, investors and colleagues. Also knowing they all will be affected by whatever you choose to do in many different ways, short and long term.
That's why living the experience is important. It gives you perspective on the decision process, which is more than just numbers.
Vote for candidates who will make healthcare a right and college affordable. While young people are bleeding out financially, rich people are getting a tax cut and they're running up the debt on the younger generation.
This is nitpicking a bit, but college is affordable, it's just very expensive.
A side effect of the government guaranteeing student loans is that universities could charge basically whatever they want, knowing that students would still be able to pay it. It funded massive expansions, but instead of universities taking on the debt, students did.
What I had in mind was an education system where people generally felt more financially free and stable after they had completed their college education. In short, tuition wouldn't go up faster than the value the education provided and hopefully it'd go up a bit slower.
In my view, the product hasn't improved at the rate of tuition increases and I'd just follow where the money went to know where the problem lies.
Sorry, if you have to take out 10- or 20-year loans to pay for even state colleges, college is NOT affordable. Unless you're working with a different definition of "affordable".
I agree with you that government-guaranteed loans have had the paradoxical effect of being one of the primary contributing factors to increased tuition costs.
> A side effect of the government guaranteeing student loans is that universities could charge basically whatever they want,
This is only true of private for-profit universities, not private nonprofit universities nor public universities. For public universities, the main cause of rising tuition is state funding cuts:
Support businesses where workers are in unions or, better yet, support worker-owned co-operatives. Get involved in grassroots organisations in your community that are working on solutions to fight homelessness, poverty, gentrification, etc. and putting pressure on local government and businesses.
Except they also had less. This is the ... I'm not sure of the right word, paradox? duality? ... anyway, the problem/benefit of globalisation, that it leads to cheaper stuff. We all have more today, even on less money. Thought experiment: ask yourself when it was better to be poor: 1950, or 2018. In 1950 you could... go to the library? In 2018, even the very poor likely have a mobile phone, the internet, a games console, and an near endless world of entertainment.
The problem is not with income as much as costs. The NIMBYism of a lot of places inflates the cost of the main expenses like rent - where most people's money goes - and the cost of getting around, as people are forced to live further away from jobs. That was the big finding from the minimum wage hike in Seattle, that poor people where forced to travel further for work, and it cost them more. Ironically, I think that is pretty much how all cities work since crime went away. The days of the poor occupying prime real estate near a city is pretty much over.
Even sans better employment opportunities, fixing the zoning laws in most cities would lead to better lives for many people. Sadly, this NIMBYism is really hard to fight against, and often the people it hurts fight hardest for it.
The plummeting costs of technology over time make it a poor barometer for measuring wealth.
Instead of mobile phones and TVs, look at bigger items like health care, housing, and education, all of which have gotten more expensive (in the case of education, astoundingly so) even as inflation-adjusted wages have decreased.
Ignore manufactured goods and focus on labor intensive ones?
No, I think it all matters. And the fact that technology is getting cheaper IS an improvement in our standard of living. People who can find anything within minutes and talk to anybody anytime ARE wealthier than those who have to spend large amounts of time to do the same things.
Potentially wealthier. If they find within minutes where their opiate supplier is, the new cat video and talk to anybody about what the Kardashians (sorry, Kardashians) were up to... are they really wealthier than when these sorts of things took longer?
So, let's say that their choice of media consumption indicates, or creates, their not-wealthier.
If they can tap into the entire universe of education and experience an Internet connection implies, and pick cat videos... what would you say is the critical link in their paupery?
I mean, horses to water and all that, and it's a matter of choice.
The Internet contains information, not education. Even the free academies are not as good as community college.
>I mean, horses to water and all that, and it's a matter of choice.
No, it's not. Claims like "education" should be based on reliable expectations of effects, not "possibilities" that ignore actual human behavior. The Internet has not actually made people more educated, with few exceptions.
Food and shelter are more important than Internet access. Having a house and a steady income in the 1970s is wealthier than sharing an apartment with roommates and working irregularly in the 2010s; we know this because people prefer it, which is the only actual measure of economic anything.
>Here I am, having this largely pointless Hacker News conversation, instead of completing a Deep Learning course or something.
so... there is something deeply addictive about hacker news... but I personally think? it's the same thing as talking to someone for hours at the pub. same reward mechanism. I mean, the pub closes, and that helps; and most people at most pubs are... difficult to relate to. but I can remember just last month I was hanging out front of my local computer club talking to someone until like 4am.
I think the difference here is that hacker news is more like my computer club than it is like a random pub, just because the people I meet are more likely to hold my interest.
Perhaps wealth can be described as a measure of being able to adapt to new market demands. Acquiring new skills or refactoring existing ones takes effort, money, time. Those considered poor are devoid of that, bogged down...
There's a simpler test here. If you weren't sure what color your skin would be, what income bracket you'd be born into, what level of health you'd have at birth, or even what country you'd be born in, would you rather be born in 2018 or 1950?
I don't think it's that simple. When I was 15 without a doubt I would have said today.
And now at 30 I'm pretty convinced that I would have liked 1950 better. Why ? Because the space and that I know that for 30+ years my life would consistently improve, maybe even 50+ or 60+, including an actual pension etc, even if I was born black. The basic standard would be different, but the constant improvement wouldn't. I mean I'd miss my PS4 and iPad, except of course I wouldn't, not really.
71% of the world's population lives on less than $10/day. You won't be getting a pension if you happen to be born black in South Africa in 1950. The world is still experiencing constant improvement. Every day across the world some 130k people achieve basic food security for the first time in their lives. The UN estimates extreme poverty will be gone across the globe by 2030. Not to mention improvements in healthcare, human rights, etc.
What about the idea that pride is the most important value to certain people and pride sometimes comes from your wealth, achievements, and performance relative to the rest of society? The paradox would then be that as society becomes wealthier, the gap between the wealthiest people and average people widens in absolute terms, broadly increasing negative emotions.
Maybe immersive VR solves this by allowing the mass of people to transition from "lives of quiet desperation" to being rulers of their own miniature virtual worlds.
I think you're too blinded by the US, which is not even close to the majority of the world in terms of population or land mass. Would you rather be a Chinese woman born in China in 1950 or a Chinese woman born in China today? What are the odds you'd have been a victim of infanticide then vs now? How about your potential for education, food security, holding a decent job, likelihood of being victim of violent crime, etc? Do you think that the potential for jealousy overrules all of that?
> look at bigger items like health care, housing, and education
Indeed. Question is, what will a dollar buy you? We have more treatments for illness, we have more educational options, more and more.
There is no silver bullet to be sure, and there is no universal upside option, but surely now is a better time to be almost any income percentile, in almost any place on the planet.
Where geographically it has gotten worse, e.g. Flint Michigan, I am not sure how we make a world where Roger & Me is released in 1989, and 30 years later, the population is 2/3s what it was then. Part of life is change, and making the world better requires that people adapt with the changes.
Instead of mobile phones and TVs, look at bigger items like health care, housing, and education, all of which have gotten more expensive
Indeed. I can do without my TV. In fact, I turn it on only once or twice a week for a few hours. I can do without a flagship mobile. In a pinch, I can get a cheap-o no-name brand for important calls.
Housing, health-care, education - these are all key moneypits that are more expensive, for less in return. Don't even get me started on pensions. For as long as I have been actually aware of pensions as a thing, all I have heard is how the fund was lost, raided, payouts going down, pensionable age going up, and without exception, those tat subside off their pension only live in abject poverty, often making choices between eating or heating.
Yeah, and part of the reason we have cheaper stuff is because of outsourcing/specialized firms like this.
Take the hotel example, it's probably much more costly to hire (and interview and vet etc) all your own bartenders and cleaning crews and all that piecemeal. Then you also have to train them and figure out a replacement when someone calls in sick or something. I'd imagine a company that's specialized in hiring and training bartenders could do it much more efficiently than a single independent hotel owner.
Those efficiencies (you specialize in bartenders and so are able to train them with less resources than other places) result in lower room rates and more money customers can use on other things.
"Ironically, I think that is pretty much how all cities work since crime went away. The days of the poor occupying prime real estate near a city is pretty much over."
This seems backwards. The poor never occupied prime (at the time) real estate, but cities did used to be more compact. The rise of crime (from the 60s) was one of the factors driving suburbanisation, as those who could afford to do so moved to more distant suburbs to be safer. Not just to have bigger lawns.
Their NIMBYism comes in part from this experience. Making sure your suburb stays expensive has the effect of helping it to stay safe, because it will only be occupied by people as rich as you, and will be able to afford plenty of police. Of course this is not the only effect. This protective blanket of high prices is an extremely blunt instrument, there is a lot of collateral damage. Nevertheless I think it's important to realise that NIMBYism isn't coming from nowhere.
> The poor never occupied prime (at the time) real estate
Couldn't agree more! That's the irony. For many cities, crime kept the richer people further away from the inner city, where many jobs are/were. In places like London, Sydney, NYC and SF, it is really hard to find workers for hotels because the people that do such jobs live so far away.
This is the great irony of improving city conditions like reduced crime. In a really scary way, crime was poor people's saviour from long, perhaps even un-profitable treks to work.
EDIT: Poor decisions are poor decisions and it's much easier to be productive today than ever before, if that's what you choose to be. There's no reason you can't "afford" a house, everything is relative.
Not sure I follow the logic, $350 on a passable phone that lasts 5~ years and affords me the ability to save time on banking (paying bills at least) and also connecting them to unimaginable numbers of people potentially while also granting access to the worlds information. Wifi hopping and pay as you go mobile plans mean that any cost outside of the cellphone itself is miniscule.
Why I think the value proposition of a smartphone is completely justified, it probably pays for itself many times over.
I guess my comment is more confusing than intended, but a smartphone and modern living easily lets you be productive enough to afford a house. It's not difficult when half the planet lives on dollars per day.
> Would you rather live in a world with no smartphones where you afford a house/apartment
How rich are your poor? That may seem a silly question, but are poor people really buying houses? Did they ever? You seem to be talking about middle class people - perhaps lower middle class at worst.
The question is where is that threshold? At what decile is the world worse? The bottom 10%? The third bottom? Where?
This is not as clear cut as house no technology/no house technology. This is an issue that affects different percentiles of the income curve differently. There are no doubt some parts of the income curve in some specific locations worse off, but I'm not sure people have a full grasp of how much better life is in general in the 1st world today versus 1960, let alone 1920 or worse, during the Great Depression.
But is this really a tradeoff we're making, or just two trends? It's pretty glib to say "well, inequality is worse, but that's the price of better technology"; inequality is worse and we have better technology. From 1880 to 1950 technology got better and inequality decreased. "Globalisation" becomes a grab-bag term for a lot of different trends and movements, and I wouldn't want to get paralyzed into saying "well, if we hired workers directly and not through contractors, we wouldn't be able to buy cheap consumer goods made in a newly industrialized China."
What's amazing to me is the IRS severely cracked down on contractors to the point where it was nearly impossible to get a contract in IT. Now we see employers abusing the contract system again but where's the IRS this time?
I don't think that's the entirety of the problem. I mean, that may be part of the problem; those temp agencies take a nasty cut, but I am a temp worker going through an anonymous body shop, and I make pretty good money, like I can't contribute to a ROTH IRA good money. I mean, sure, I'd be making another 40% if I were a direct hire, but I interview pretty regularly for that sort of thing, and while I can reliably get contract gigs at top-tier companies, so far it appears that I don't meet the direct-hire bar for top-tier companies, and I'd kinda rather stick with the contract gig at a top tier company than a direct hire at the third tier down. Similar money, and the food and the company is better here. Also, they don't expect you to drink the kool-aid as much as a contractor, and I am kinda bad at consuming company kool-aid. (Note, that is a little bit of sour grapes... I think the primary thing keeping me out of direct hire positions at top-tier companies is my technical ability, which is improving... but the kool-aid factor is a big part of why I'd prefer to contract at a top-tier company than be a direct hire at some place that is not.)
My point is just that the temp agencies are not the whole of the story here; for some reason, there's not enough demand for most kinds of labor to lift wages much above the statutory minimum. Why is this? We've got an oversupply of labor, why hasn't the market figured out how to use said labor?
Living in Eastern Europe, I was able to witness the streamlined shift to a Western consumerist lifestyle in a mere 15 to 20 years. There was a saying in communist Bulgaria, "having money doesn't mean that there is anything you can spend it on". This encouraged people to save and have longer-term goals. Fast forward to today, everyday spending opportunities are beyond every corner, and people prove that they are successful in life with outward and vulgar consumerism which was probably a 70s thing in the West.
I was expecting the article to say how they've inherited a massive amount of money or how their parents paid for their education/first home/etc., which made them deciding to go frugal by achieving financial independence a hell of a lot easier. I didn't see any of that.
Furthermore, the author doesn't fully explain how these two were "rich" before pursuing their journey to frugality aside from purchasing a home in Cambridge (which was a smart decision and is definitely possible with a dual-income tech salary in the area, assuming they didn't have debt to begin with).
There are definitely people that are able to live extremely frugally with sizeable salaries and achieve large goals/financial independence in a considerably short amount of time. However, like building a beach body, the question is always "How much are you willing to sacrifice to get it?"
For many (myself included), the answer is "not enough."
A dual-income tech salary may well qualify as rich. The median household income in MA is about $75,000 (much higher than the national median). That's also about what the median software developer is paid. (https://www.payscale.com/research/US/Job=Software_Developer/...)
And a lucky one. I'm boggled that they found a 4 bedroom in Cambridge MA for $460k in 2012. I was very actively looking for real-estate in Cambridge that same year, and decent 3 bedroom condos started at $500k. I don't think I saw a single 4 bedroom single family home under $1M. Maybe it was a wreck that were able to fix up for not to much $$.
Today their formula can't be replicated here. Any place in that area that can rent for $4400/mo. costs well over $1M so they had great luck AND great timing (interest rates were around 3% also) - on top of smarts and hard work I'm sure.
I get so tired of these narratives that paint anyone who isn't wealthy as just lazy, and I especially get tired of millennials like myself being derided as just not willing to give up enough in order to succeed.
You know what, it's true. If you took a robot and gave it a ground floor job, that robot could work that job 7 days a week, 9 hour shifts, without missing a beat. It would never get sick, it would never need time off, it would just keep working. And it could eat really cheaply, just electricity really, but even if it needed food it could make and eat it's own meals, cutting spending down to pennies per. And it could do this for YEARS and have no problem at all doing so, and buy a million dollar house after doing it for a few decades.
BUT, and say it with me: PEOPLE. AREN'T. ROBOTS. No people are, regardless of which generation they're from. We get sick. We get diseases. We have car accidents. We date. We sometimes have children unexpectedly. We occasionally even, yes, get drunk. We want to go out and party, because you know, we're social animals, and doing nothing but going to work, coming home, and cooking and eating alone is fucking SOUL CRUSHING, and was never ever expected from any other generation to not be.
We're messy, emotional, unstable little things. We make bad decisions. We'll stress about our bills and then go do drugs with friends because it's the only way we can scrape ourselves together to go do it for another day.
The fact that so many politicians and so many pundits just "don't want to deal" with the messy emotional side of being a working student, or just a low-achiever, DOES NOT MEAN THAT THE MESSY EMOTIONAL SIDE IS NOT RELEVANT. To deny any of these things, to deny they exist, to deny they are absolutely warranted, and to deny that they should be allowed because again we are all people, messy little people, is to deny what makes us human, and therefore is to de-humanize the working poor.
The thing is, most humans are not doing those types of jobs for YEARS like robots. Humans can learn on the job and acquire skills and impress their boss and get raises and maybe become the boss and apply to other jobs or find something like better. That's why it's called "ground floor", because you can move up, and most people eventually do.
The % of people making minimum wage at any given time is a snapshot, and it covers people at all stages of their lives. Are there some people working their ass off and not making it a la an Upton Sinclaire book? Sure. But that's not most people. In fact, most people (1) making minimum wage are between the ages of 16-24 and aren't going to be making that forever. And even among those who aren't, most are well above the poverty line.
If an employer expects you to be available at any time for any shift, regardless of the job, then you should be paid enough to live off of that paycheck. Full stop. Whether you’re feeding cats, flipping burgers, tending wounds, or just answering a phone, we have entire lines of work now where despite the fact that you’re expected to always be available and never turn down a shift, you get paid bare minimum wage, and never get enough hours for benefits. It’s disgusting and immoral.
There have long been sort of similar advice gurus in this space. "How to survive without a salary" and "The Tightwad Gazette" come to mind.
Some things they seem to have in common:
1. A married couple on the same page financially.
2. Both worked and saved before having kids.
3. Decided to move to the country to live more cheaply.
4. Developed a source of income that was portable such that moving to the country didn't leave them stuck with some underpaid local job.
If you study history, part of the secret to the success of the parents of the Boomers is they were two income families during WW2 because of the men being off at war and the women taking factory jobs. Savings rates were as high as 50 percent due to basically war time rationing. So there wasn't anything to spend it on. With the guys off at war, babies were mostly not being conceived.
So, if you can marry the right person, get on the same page financially, both work full time at something better than slave wages while not yet having any children and socking away the dough, you, too, can have this American dream. The reality is very few people can check all those boxes and if anything goes wrong at any point, the entire thing can be derailed.
Please note, this sort of assumes that neither partner has serious health problems or any addictions or needs tons of therapy for some reason. It assumes nothing goes drastically wrong while you merrily work towards your dream, such as an unexpected pregnancy that could derail your plans even if you get an abortion.
No matter how bad your situation, there are a few takeaways worth noting. Celibacy, paying down debt and making sure you jibe well with anyone close to you are all excellent choices that tend to benefit the bottom line.
The reason that the rich were so rich, Vimes reasoned, was because they managed to spend less money.
Take boots, for example. He earned thirty-eight dollars a month plus allowances. A really good pair of leather boots cost fifty dollars. But an affordable pair of boots, which were sort of OK for a season or two and then leaked like hell when the cardboard gave out, cost about ten dollars. Those were the kind of boots Vimes always bought, and wore until the soles were so thin that he could tell where he was in Ankh-Morpork on a foggy night by the feel of the cobbles.
But the thing was that good boots lasted for years and years. A man who could afford fifty dollars had a pair of boots that'd still be keeping his feet dry in ten years' time, while the poor man who could only afford cheap boots would have spent a hundred dollars on boots in the same time and would still have wet feet.
This was the Captain Samuel Vimes 'Boots' theory of socioeconomic unfairness.
> The reason that the rich were so rich, Vimes reasoned, was because they managed to spend less money.
This really isn't as crazy as it may sound. When my spouse was working in BigLaw, we rarely paid anything for weekends out. A typical case was a "charity gala" at a downtown hotel. A law firm partners would buy the tickets for an entire table but would inevitably be working and couldn't go. Even if he could, he still needed 6 or 8 other people so his table didn't have empty seats, which would be very embarrassing. So the call would go around - who has time to attend a free party? Me, that's who. The bar would be stocked with top-shelf liquor only, food was provided and excellent. The catch? You have to know people to get invited. And you have to be able to show up in a perfectly-fitting tuxedo with only a few hours notice. So you buy one, and it needs to be pretty good because you're going to wear it 20-30 times a year. Amortized out, an Armani costs a fraction of a rental.
I started saving at about 6. My dad did the numbers to show me how much I could have by retirement. After inheriting a little from my grandparents and saving that too, and after saving as much of my income as possible, it paid off (literally).
You make it sound as if this were an entirely deliberate practice of self control on your part. :) Were there safeguards that protected you from yourself?
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[ 3.3 ms ] story [ 249 ms ] threadThe linked Federal Reserve article[1] doesn't seem to directly support that statement, but does say that ~55-60% of 18-29-year-old's used or are using loans to finance their own education, but that, "Among respondents who report that they currently owe student loan debt for their own education, the mean level of this debt is $30,156 and the median is $12,000." (Note: that doesn't include those who have already paid off their debt.)
Maybe so, but why would we discourage good spending habits? For example, choosing to eat one or more meals out each day versus bulk cooking is an option available to most people. Likewise, choosing to spend $800 on rent with roommates versus $1,600 for a studio or one bedroom apartment.
I'm not seeing how millenials or members of the middle class benefit by uncritically opting for more expensive options. My read on frugal culture is spend however much money you want on whatever you want, but do so eyes-wide-open. Break free from all the advertising, inertia, and "keeping up with the joneses".
Frankly I think if more people adopted this style of thinking it would have serious ramifications for the rich and their businesses built on over consumption and debt.
Perhaps pursuing FIRE is something only available to the upper middle class. That's an interesting argument, but not one put forward in the article. Furthermore, I think it's bordering on class warfare to set the upper and lower middle classes against each other. It reeks of divide and conquer, and who benefits? The people pushing over expensive lifestyles funded with debt.
Each of them typically does three things: They keep their household yearly spending under $35,000 (some even less than this), increase income as much as possible, and invest the savings, taking advantage of tax-deferred accounts whenever possible. Though, the three things are basically common sense when you think about it.
Can't we focus on the message instead of the messenger? Or stop assuming that the message is for Millennials alone?
If you're poor, being frugal is very unlikely to lift you out of poverty. That doesn't mean frugality is bad, but that marketing is as the key to financial stability is deceptive.
It sure looks like that to me:
"My Courses to Help You Make More Money" - https://millennialmoneyman.com
It resonated me with a lot.
They claim they could've paid cash for it but chose to get a mortgage - so they don't own it "free and clear". Unless they've ended up paying off the mortgage early. Assuming a 25% down payment that's a $310k mortgage. You'd need annual household income of around $80k to qualify for a mortgage that size, which also seems within the reach of a dual-earning household of white-collar/skilled trades professionals.
A household earning $80k annually could save up the $90k down payment for that property in about 3-4 years, assuming a 40% savings rate. I'll admit it's aggressive and ambitious by most people's standards, but not actually impossible.
Now I don't think it's actually a good idea to buy property worth nearly $400k if your annual household income is $80k but it's not an entirely outlandish idea.
I assume the Frugalwoods had annual income well in excess of $80k before they "retired". Their savings rate is also correspondingly huge - 71% according to the article. A brief skim of some other posts suggests they're going to be renting out their current house + putting the new property to revenue-generating uses. They clearly know how balance sheets work and the numbers make sense for their situation.
Pulling back a bit I think we should acknowledge that the Frugalwoods are people who have optimized the heck out of the very good hand that they were dealt. We should be applauding that rather than trying to pick at their story and point out why it doesn't work for everyone. I might not have Michael Phelps' swimming genes but following his workout routine would probably improve my health, even if I never become an Olympian.
It's obvious that having a higher income makes it easier to frugal your way into early financial independence. The vast majority of high-income households don't take that path even though there's not much stopping them.
1. https://www.frugalwoods.com/2016/04/22/the-finances-of-our-c...
Being frugal is incredibly helpful for all but the richest among us, and I'm amazed that people are so critical of it. I see so many people who would be so much better off than they are if they just didn't buy so much unnecessary shit.
I actually think the higher-income you are the more frugal (in terms of savings rate) you should be.
It's infinitely more likely to do so than being financially irresponsible.
But here’s the thing. Regardless of intent, these Millennials are telling an older generation of elite Americans — the very people whose policies and financial decisions kneecapped the economy — what they want to hear: that everything is more or less okay, and young people just need to be more thoughtful about their money. And that’s a shitty idea to perpetuate. Because whatever happens in the years ahead, penny-pinching will likely remain a lifestyle enhancement for bourgeois Millennials who possess enough money to enjoy the dividends of being thrifty. For most of us, there are no dividends: just thrift.
It's not about the advice itself -- the advice all seems pretty reasonable -- it's about the place that advice has in the story we tell ourselves about young people. I myself practice many of these thrifty tips, but I cringe to think that the blog posts that people write about them will be used to justify continuing to build a world where they are more and more necessary.
I’ve personally seen people with high five figure student debt go on regular international trips. These people more or less live paycheck to paycheck and save specifically for travel (or use credit cards — if they can get them).
Educating people as to why that might be a bad idea and creating a supportive culture of anti-consumerism seems like a good idea. Sure there are policy decisions at play too, but being “frugal” can hardly hurt.
The “American dream” of the 20th century was never sustainable. We’re just now realizing that en masse. Being frugal is just a natural realignment of culture and reality.
Regarding the American dream, maybe it's sustainable or maybe it's not, but it's clear that it would be a lot more sustainable if people where willing to create a world with fewer obstacles to attaining it e.g. by implementing universal health care. If we tell ourselves that people who can't afford health care probably deserve to struggle with money because they're not being frugal, then that's a problem.
As for universal healthcare, good luck getting everyone to agree on that...
I disagree that every word spoken in public is political. “Don’t touch the hot stove” is great advice. Let’s be free to have those kinds of conversations without dragging them into the political mud.
We need to get to the idea that there are not enough good jobs for everybody. Once we get to that point, we can start to figure out what to do about it.
Is it tight?
I see very few occupations with rising wages. That's the REAL test for a tight labor market.
Let me be anecdotal for a moment ...
I was at a conference recently where the companies had a panel session complaining about getting more people into the business. Unlike most software disciplines, they really do have an infeed problem. In addition, they are also getting poached and losing their junior guys from the shop floor.
Okay, think I, I was a hiring manager in the DotCom Boom(tm), I understand getting poached in a narrow field.
So, do you know who their primary opponents are?
Amazon and Foxconn.
Two of the worst employers on the planet. You are losing employees from your manufacturing line to Amazon warehousing and Foxconn manufacturing.
Um, please go bankrupt and may your industry die in a fire if you treat people so badly as to lose them to Amazon and Foxconn.
And black unemployment is at historic lows a well.
Does the absolute inflation and purchasing power adjusted value even match 90s?
That said, the original discussion was about the rate of wage growth as a measure of how tight the labor market is. In that sense, the instantaneous rate is fine.
So why am I harassing you about your answer to AstralStorm, when AstralStorm was disagreeing based on something that was outside the scope of the discussion at hand? Because of the way you answered, with dismissiveness rather than actually thinking about the point raised. That's not cool.
Yes: https://news.ycombinator.com/item?id=16682711 for references. (Wages rising slightly faster than inflation over decades long period.)
To hear someone who was making $10/hour out of college and bought a home for $40,000 say that the reason millennials can't buy a home today is because they're buying avocado toast and not because equivalent homes cost $1.6 million today is infuriating. Relatively speaking, millennials are doing better, frugally, than baby boomers were (saving more, spending less, etc), but the cost of the things that people are complaining about has grown exponentially.
Meanwhile, almost all of the growth of the economy has gone towards the top 1% of people. If you look at, for example, Canada, the average CEO makes as much by January 2nd as the average worker does by December 31st.
CEO pay growth over the last few decades has skyrocketed (compared to inflation, worker wages, or even corporate profits), while worker wages basically track inflation. In other words, people are making the same amount of money as people 50 years ago, even though a lot of things cost more (e.g. housing).
Blaming the economy inequality on the fact that people aren't willing to take on second jobs ignores the fact that wealth and power is all being concentrated in a small number of people and the rest of us are forced to fight over what they're willing to leave behind for everyone else.
Your essential argument is that from a relative perspective the American middle class is not as well off as it was during a unique time following WWII during which the American middle class reached the highest levels of relative wealth in the history of the planet. Okay, but they're still nominally better off than they were back then and an almost unimaginable number of people have had their lives dramatically improved across the globe in the process.
We can all care about societal inequality, and how it probably suggests that the levers of civilization need to be jiggered a bit, without hating anyone.
I think housing in the PNW is way unaffordable but that doesn't mean I hate either the developers, the planners, or the numerous other social and geographical factors that have led to this situation.
In short, please don't bring up things like "hate the rich" when no one else is.
Affordable housing is a problem best addressed by the people who live in the areas that have a lack of affordable housing. It's not something that needs addressing on the national scale.
If you think the poor need something, like say more funding for inner city schools, then say that and suggest a reasonable tax, perhaps a tax on luxury goods that would disproportionately affect the wealthy. Or if there's a specific bad behavior, such as pharmaceutical advertising, talk about that. But just complaining about wealth inequality sounds more like hating the rich than caring about the poor.
Do you suppose it's possible for you to advocate for a specific amount of welfare that you feel is "generous" without attempting to villainize the very people you hope to pay for it?
>They advocate against redistributive inheritance taxes, so that their own children continue to have enormous advantages over anyone else.
First, one of the major motivations of achieving success in life is so that your children will be better off. So all you've established is that rich people are good parents. Secondly, you're still just upset that someone has a lot, rather than focusing on a specific problem that some group of poor people has. You're just hating the rich rather than showing an interest in helping the poor. Third, fortunes generally disappear after 3 generations, so it's not as if huge dynasties are being created that last forever. If you're rich, your grandkids get to go to a nice private school. That's pretty much it.
>They advocate policies that guarantee they can continue to extract wealth from rents rather than productive avtivities, dragging down the economic well being of all.
Yes, things like regulatory capture are a problem. I will hold up a sign and protest it alongside you. But do you see you you're STILL pointing to the "rich" rather than "bad policy?"
>And the rich are more likely to cheat on their taxes, try to bribe officials, or flat out disregard the law.
I've never met a person who worked for tips that didn't cheat on their taxes, have you? But more importantly, we're back at the same place. Rather than advocating for or against a specific policy, you're just slinging mud. You care more about saying mean things about rich people than you do about issues the poor might be facing.
This is not universally true. It is not true across individuals among the rich/nonrich nor is it true across specific agenda items. This caricature you've created for these two groups is called classism. You are no better than the people who think all poor people are stupid or lazy.
>yet only one of these groups have any great power to see to it that their interests are served.
Okay, let's talk about campaign finance reform. Or is making sure there's no rich people more important to you than making sure everyone has equal political power?
Saying that rich and nonrich have different interests is not controversial, except to those intent on denying what is obviously true.
Either you are ill equipped to engage in a discussion on this topic or you are being utterly disingenuous; certainly you have misrepresented what I have said in ways that push a rather tired narrative, one trotted out every time someone pushes back on the status quo of enormous wealth disparity by noting that it has serious negative consequences.
You just can't help yourself. Once again you express more hatred for the rich than you do concern for the wellbeing of the poor.
I'm not denying that there are consequences to wealth or income disparity. I just think you don't appear to care about the wellbeing of the poor beyond the minimal lip-service you have to pay it to justify voicing your hatred for the rich.
I haven't seen any convincing evidence-based argument that a high degree of inequality is either neutral or good for society as a whole, nor do I have any philosophical leanings that suggest that it is an acceptable byproduct of an otherwise fair and just society.
Going by both evidence (health outcomes, class mobility, etc) and by my philosophical leanings that it don't seem right for so few people to own so much (when ownership itself is a purely fictional thing), I'm going to keep talking about inequality as a Bad Thing to be addressed.
Don't like it? You do you, but telling me I'm focusing my behavior on one thing or another is about the least compelling thing to say.
Common talking point, not borne out by data.
See https://news.ycombinator.com/item?id=16682711 for references.
My grandmother can still, to this day, recount living in an apartment with no furniture except a mattress, with my grandfather who was employed as an engineer in New York. It took, by her estimate, about two years to have enough furniture before she was willing to invite over any sorts of company.
Today you can furnish an apartment reasonably with about a months worth of wages. I know this because I helped take a friend who makes a bit over minimum wage to IKEA to get all their furniture for an apartment they moved into.
The myth of decline is that - a myth. The economy is better then it has been in decades, violence is at an all time low, and jobs are widely available in many areas of the country.
I have friends who complain about the economy "being destroyed", who max out credit cards to buy brand new cars and buy expensive home theaters. I have one friend who despite making six figures a year, took a predatory payday loan because she had spent her wages on expensive unused tools.
That's not to blame "millennials" anymore than to blame any other generation. Bad financial choices have existed since the dawn of human history, but in many cases today they are choices, not pre-supposed economic outcomes. We can help correct that by teaching good finance skills (budgeting, doing things yourself instead of hiring people, focusing on cheaper hobbies, etc).
Food went from being very expensive (people actually died of starvation not that long ago!) to being so cheap that obesity is a major epidemic among the poor.
Since 1940, the percent of the US with a high school degree went from < 50% to over 80%. The percent of the US population with a college degree went from < 10% to over 20%.
What is your argument that the economy is in decline? That you don't magically get a two story house with a yard, a new car, and the ability to support a family of four? That has never once been the case in US history. It's a great myth in the past that the 1950s were somehow a magical time when everyone had a house and the income for a family, but it's that - a myth.
I make about 4X what my parents combined made as schoolteachers, yet my housing costs about 10X what theirs cost. In order to get that great price I had to move about 2 hours from work (and pay for the required transportation), compared to their 10 minute commute. I came out of grad school six figures in debt, whereas theirs was cheap enough that they barely had to finance it. They paid for reasonably priced doctor visits out of pocket, compared to my high deductible "healthcare plan" that still has me dropping $hundreds for a single X-ray.
But I have a cellphone so I'm a reckless spender.
Food being cheap is not the reason for the obesity epidemic. It's because food has become of such poor quality. Also, it is engineered to cause you to overeat.
Otherwise, I agree with your overall point.
Further the needs have also grown: without a car it’s impossible for most people to have a job
Yes and no. One thing to keep in mind is inflation, so we always need to compare prices to average incomes. A house is listed as being <10k in 1940, but the average yearly salary was also <2k, and the minimum wage was $0.30 per hour.
However, things have genuinely gotten more expensive in some cases usually due not to the economy, but due to safety. That's a good thing - we no longer have asbestos and lead paint, cars are safer, and working fire alarms are a thing. However, those things do cost money. You can no longer buy an all metal box that goes 80mph without seatbelts or airbags.
I find the car claim to be somewhat of a red herring. Yes, you need a car now whereas before a bicycle might of sufficed. However, a decent car can be had for two thousand dollars - not a pretty one, but a functional one. You might be able to go cheaper if you have any mechanical ability, but we'll assume the average person doesn't have that.
In addition now of course you need drivers insurance, and you probably need to take a drivers ed course before getting your license. Those things do add cost, but they also save lives.
The median home value in 1940, adjusted for inflation to 2000, was $30,600 ($2,938 pre-adjustment).[1] The median income for a man was $9,948, using the same inflation factor of 10.406639 ($956, unadjusted).[2]
The median home sales price in 2015 was about $300,000[3] while median household income was $54,000.[4]
[1] https://www.census.gov/hhes/www/housing/census/historic/valu...
[2] https://www.npr.org/2012/04/02/149575704/the-1940-census-72-...
[3] https://fred.stlouisfed.org/series/MSPUS
[4] https://www.census.gov/library/publications/2016/demo/p60-25...
The size of homes has also gotten much bigger.
So the $30,000 home in 1940 (in today's dollar) wouldn't look anything like a $300,000 home today.
I'd be more interested to learn what a townhouse in Manhattan cost in 1940 and 2010.
Nowadays the cost (for a new house) for "utilities" (water, electricity, heating, A/C, etc.) plants/hardware is a considerable factor, as a rough estimate 20-30% of the construction costs, and a large house in the 40's would probably have had one single bathroom/WC (if any[1]) for a 3 bedrooms home.
jaclaz
[1] In rural parts it was not so unusual to have an external loo
With housing, on the other hand, we are routinely seeing people pay upwards of 500% what people were paying for the exact same property a few decades ago with few or no changes, even with the effect of inflation removed.
In parts of the US. For most parts of the Europe, and indeed many cities in the US, a car is not a requirement.
My grandfather's college fund (to be a dentist) was wiped out, the bank closed. He worked at a GE factory his whole life, work that I will say was far beneath his potential. He never complained. He once traded his easy job on the line for a much harder one, where he had to lift each engine block twice to inspect some fiddly bit on it. He traded to get a 5-cent raise. If you offered my grandfather a government subsidy, he might not have been able to conceal his contempt.
I don't think the decisions of any of the individuals we've mentioned are great indicators of what's correct or incorrect, but the depression didn't influence everyone the same way.
A five cent raise in today's currency or back then? Per hour or week?
Assuming it's hourly, if it's from "then" could you convert it to modern currency, or present it as an percentage increase so we can understand what kind of relative increase that was?
Five cents sounds like nothing today, but 70 years ago it would have been significant.
Figuring out a percentage increase is a bit complicated without knowing how much mod's grandfather earned. According to https://www.archives.gov/publications/prologue/2012/spring/1... in the 1940 census average (yes, not median) annual income was $1368, which works out to $24,505 in 2018 dollars, or $12.25/hour assuming 40 hour weeks and 2 weeks of vacation.
So at a guess, $0.05/hour was less than a 10% raise, but more than 1%. I expect it was /hour, not /week, because weekly wages would have been in the ballpark of tens of dollars.
Disclaimer: I am not mod, and this is not my grandfather we're talking about.
You do understand there's a difference between a month of wages and having a month of wages saved to spend, right?
Considering most people live month to month... saving an entire month would take many people more than 2 years.
Maybe you shouldn't start a family when you are making minimum wage, in a city with a high cost of living.
But its a little weird that a Caveman's most basic prerogative (To procreate), is not something many people in modern society can afford to do.
It's also something that is fairly important to the continuation of our species, so hopefully we can figure out a way more people can responsibly afford to have children.
For comparison, when do you plan to retire?
Now do the same run down for your entire cohort.
I'm a distinctly unfair comparison, since I could retire as early as 55 to 60 (I doubt I will, I do terribly when left without something to do, but who knows.) That being said, I recognize my situation is very unlike most of my peers.
My cohort falls into three categories:
+ Those with high income and good financial management. Like me they are capable of retiring without any government assistance at 60ish in most situations.
+ Those with high income, but no financial management skills. Even now with no family to support and no "required" debts, they struggle to remain afloat. Simply throwing more money into the fire doesn't help it turns out.
+ Those with low income. Universally, and not for lack of intelligence, they have no 401k, no major longterm savings. If they retire it will be through programs such as Social Security (assuming it still exists). This is the group that worries me the most, because I don't have any answer for how to improve their situation. They're simply caught in the spiral of not having enough money to make progress on saving.
Please don't take my argument as "Everything is perfect now!". Mostly my argument is, "Things aren't majorly worse and are generally better." Nor am I making the claim that the future will forever be better - Social Security might collapse, pension programs dry up, etc. We shouldn't stop assisting the poor, teaching financial literacy, or behaving intelligently. Simply that the average condition of people is better than it was.
Ok. Peace.
"...average condition of people is better than it was."
My generation (X) griped about student load debt, which seemed crippling at the time.
No comparison with today's kids. Then pile on housing costs, rising insurance premiums, day care & pre school (for anyone choosing to have kids), ...
I despair for the millennials.
My dad gave it to me - I guess I had privilege.
Ok, ok - I also had a car! Sort of - a citroen BX (look it up and marvel).
I had gone on holiday once in 4 years, also I had my thesis bound and I had many nights at the pub. Also I used not to heat my attic flat (I was tough), my mother came and helped me move out when I got my first job before graduation. She cried.
My point isn't boo hoo, I had a blast, but my point is that I struggled like hell on more than minimum wage 20 years ago. I had no commitments, I was going to earn money in the future (even pre dot.com compsci was a valuable bsc, and even 20 years ago a Ph.D in ML was even more valuable). I had no children, I wasn't french. I had my health (dear god I was a living marvel) I was pretty, I was loved and supported.
It isn't personal sin by people making six figures, it's utter shit poured down on people who are both clueless and helpless, and frankly people (like you, like me) qualify to judge by living it.
I don't qualify, but I can tell you something factual, without all the advantage that my middle class parents gave me (most of which was growing up with the expectation that I would go to University and study science and if I didn't I was a shameful idiot who could go and work as vegetable picker - fear is a motivator) all the financial skills in the world, all the cheap hobbies and all the diy would not have helped.
And by the way if you spend 45 hours a week digging holes how do you think you would contemplate home building projects?
Yes, some people work their way out of it, some people are extraordinary, and some people can have great luck and get the cards to fall for them. But most people are just... most people - everyday people. And most times, you get average breaks. Well, you can do the maths and work out the joint distributions - bad things can happen to good people, normal people don't need much to go wrong, and people who will struggle don't need anything to go wrong.
A wise man wrote :
She came from Greece,
She had a thirst for knowledge.
She studied sculpture at Saint Martin's College.
That's where I caught her eye.
She told me that her Dad was loaded.
I said, in that case I'll have a rum and coca-cola.
She said fine, and in thirty seconds time she said,
I want to live like common people.
I want to do whatever common people do.
I want to sleep with common people.
I want to sleep with common people, like you.
Well, what else could I do?
I said, I'll see what I can do.
I took her to a supermarket.
I don't know why, but I had to
Start it somewhere, so it started there.
I said, pretend you've got no money.
She just laughed, and said
Oh you're so funny. I said, yeah?
Well, I can't see anyone else smiling in here.
Are you sure you want to live like common people?
You want to see whatever common people see?
You want to sleep with common people?
You want to sleep with common people, like me?
But, she didn't understand,
She just smiled and held my hand.
Rent a flat above a shop.
Cut your hair and get a job.
Smoke some fags and play some pool.
Pretend you never went to school.
But still, you'll never get it right.
When you're lying in bed at night
Watching roaches climb the wall,
If you called your Dad he could stop it all.
Yeah.
You'll never live like common people
You'll never do whatever common people do.
You'll never fail like common people.
You'll never watch your life slide out of view,
And dance and drink and screw
Because there's nothing else to do.
Sing along with the common people.
Sing along, and it might just get you thru.'
Laug...
Discussions here are supposed to be conversations. Imagine someone insisting on reading the complete lyrics to Common People out loud in a real conversation. That would be awfully tedious, unless you're an Andy Kaufman and can get away with it.
https://dangerousminds.net/comments/andy_kaufmans_sublimely_...
Inflation has been 3% a year for decades and wages have stayed flat.
Your example of home furnishings has been improved by industrialization.
Property value have skyrocketed, vehicle prices have skyrocketed, college, healthcare...
Things you NEED have become way more expensive. Luxury goods have gotten cheaper.
What hasn't remained flat is the wages paid to the top N% which has greatly increased and accelerated the wealth gap. It is this gap that leaves people less satisfied despite being generally better off.
Every time I read this claim and go looking for data, I find data that says that real wages are roughly flat, which means that they have kept pace with inflation. (That's the definition of real wages: that they are in inflation-adjusted terms.) It seems a common journalistic (and often political) talking point to say exactly what you said, which makes the math or reading comprehension challenged assume something quite different. While the author or speaker is not technically lying, they are merely misleading the reader/listener with a confusing (and sometimes confused) combination of nominal inflation and real wages.
See figures 3 and 4 here: https://www.epi.org/publication/charting-wage-stagnation/
> Property value have skyrocketed, vehicle prices have skyrocketed
This next chart is in nominal dollars (meaning, not inflation adjusted): http://ritholtz.com/wp-content/uploads/2018/02/pricechanges....
It shows that vehicles have not gotten more expensive (even as they've gotten much, much better, safer, more reliable, etc) and that housing and food/beverages have inflated by less than wages and by roughly the same amount as general inflation (which is no great surprise, given that they are a substantial component of the inflation calculation and that it would be difficult to sustain inflation over a long period of time in a consumer-driven economy in the absence of [nominal] wage growth for consumers).
College and healthcare have indeed risen much more quickly than wages or general inflation.
Do you have contrary sources?
Figure 4: "Middle-class wages are stagnant—Middle-wage workers’ hourly [real] wage is up 6% since 1979, low-wage workers’ [real] wages are down 5%, while those with very high wages saw a 41% increase"
I wouldn't exactly describe those figures as "misleading". In fact, they're pretty clear: one group is benefiting much more than the others.
As for the second one, is it really saying that real new-car prices have declined by ~50%?
I agree that they would likely not refute a different, unmade, point about income inequality.
The second reference is saying that real new-car prices have declined by about 36%. ==> 1-(100/155.6)
Median wealth has fallen by 28% in a decade.
The middle class has been reduced by 11% since 1971.
Even in the chart you posted, things people NEED have become steadily more expensive while wages have remained flat.
Student loan debt has skyrocketed over 200% since 1990 which is needed in most cases for a good job.
How is this not decline?
* http://www.pewsocialtrends.org/2015/12/09/the-american-middl...
People who knew me early on in certain contexts thought that I was "rich" comparatively speaking.
They didn't see the 10 year old car, 4 roommates (in a cheap city), camping vacations, sale clothes, etc. I was debt free quickly. I'm in a fairly well compensated gig now but kept the habits. The car is a 2003, my house is older, vacations are in nicer hotels but we drive, etc.
That's not to say that people have challenges that are tough... but so did I!
Things like the extraordinary rise in the cost of higher education -- which has become a near defacto requirement to obtain a livable wage -- should not be discounted. The example of student debt is particularly salient because it appears to materially impact the vast majority of millennials. Even those of us fortunate enough to be making six-figure incomes spend many years pouring money into debt instead of retirement or brokerage accounts. In most cases this setback leads delays in home ownership, starting a family, and retirement. This is a problem that cannot be remedied by teaching good financial skills.
Perhaps the article got that wrong though.
It could be just as likely that the Millennials are saying that they are shunning the crass consumerism that the 'older generation of elite Americans' are steeped* in.
* Boomers, "You're soaking in it." ;)
Keeping up with the joneses is less about having the same thing and more about having the joneses quality of life. They aren't the same if you look at them.
Having a fancy car for example is a status symbol, what is the status? The status is that this car has nicer features, butt warmers, more comfortable seating, better safety. Taking that status symbol a step further, I can deduce that if the joneses can afford that fancy car they also have other fancy things.
Most reduce this logic down to the following: The more individual items I have that the joneses have the closer I'll be to their quality of life.
I think this is a really interesting dynamic though because the more money I make I am not proportionally happier. In fact, my happiness stopped increasing with salary increases the moment I was able to afford bills and have leftover for savings. Since than my salary has grown many times over and I am still the same person I was fresh out of college getting by. My wife and I are still the same couple, we are no happier with the weather we have achieved over the years.
First, you can't tell from looking at their car how well-suited their finances are to paying for it. They could have a 12.99% 72-month loan that doubles the actual cost (plus higher insurance premiums, premium fuel, etc). Or they bought it cash, self-insure, and have money invested that compounds over time and pays their insurance and gas bill for them.
Second, you probably don't know how they are using it. If you're a master salesman with an excellent income, selling 7-figure deals to executives, you might actually get utility out of perceived status! But if you're a coder who walks a quarter mile from parking and works in the basement of the building, the brand name on that car is worth nothing. And most of those comfort features can probably be found in a Mazda for $20K less. Or a ten-year old luxury car. (Personally I love the hatchback which combines all those features with utility and fuel economy! No need to buy the luxury sport sedan.)
Finally, wait, why do you think advertising isn't doing its job? People know what they can't have because of advertising. Then they want it.
This is the perspective people need to have to stop comparing themselves against others. When I learned this I stopped comparing myself and try to buy based on the value add a product gives to me in my use case.
I don't really like doing plumbing, but I've replaced quite a few faucets and toilets. Not because I wanted to be "frugal", but because I could not afford to pay someone to do it; if I didn't, it wasn't getting done. I didn't blog about it; I didn't tell everyone, "Hey, lookit me! I'm saving money!" because everyone else I knew was also doing their own plumbing because they were also broke.
(Now, of course, I could pay someone. But that ship's sailed. Besides, it's really hard to find good contractors.)
The McFrugals, according to the article, aren't talking to millenials or anyone else who needs to be frugal; they're talking to the wealthy, saying "all those people you think are whiney, spoiled kids, really are spoiled, whiney kids."
No, because my taxation burden alone is well above 29%.
I'm pretty sure they're calculating that they're saving 71% of their earned income, but they're almost surely not saving 71% of their earned income plus gross rent receipts.
Edit: Here's how they do it: https://www.frugalwoods.com/2014/04/10/how-we-save-65-annual...
/s
While it's debatable whether everything is "more or less okay", and -- to some degree -- there are definite systemic issues preventing people from being where they want to be financially, I guarantee you that adopting this attitude ("it's not my fault I can't get ahead, the system is messed up") is going to make you worse off financially vs believing/focusing on what you can control and your own agency.
For example, I do think there are some current millennials who sort of got unlucky with the student loan/college bubble and "were told" (or believed) that they could just borrow whatever they wanted to study whatever they wanted, and it'd all turn out OK. But I'm not sure people graduating high school now nec have that excuse. And if you are graduating high school and reading this, for gods sake, please take it upon yourself to think a bit about what you might like to do and take a long, hard look at what exactly borrowing the median 10's of k's of debt might get you before you do it.
To hear people tell it, large swaths of the American population has a retirement savings crisis, not just Millennials (who actually have time on their side to build wealth). Their advice is universally applicable, regardless of age or income.
The folks who were targeted are largely unable to pay, and desperately wanted the airdrop of money they got from Financial Aid to attend.
Tax burden is higher here as well, and while the cost of housing is exorbitant many parts of the US, so it is in cities like Dublin, London and Paris, but without the salary adjustments you see in San Francisco, New York, etc.
This makes it difficult to understand why frugality is impossible for an American making triple the average salary of an average Czech or Croatian.
That's not entirely true. In many cities, minimum wage is substantially higher ($12-$15/hr) than the Federal minimum ($7.25/hr)
> in big cities > So you have to have a car and car insurance
Not in big cities.
I'm saying this as someone who previously had a 1 hr 20 min commute via public transit just to go 16 miles, and that was with the relatively good public transit in the Portland metro area and me literally living a block away from main downtown transit hub.
Name five big cities where a average-wage worker can get by without a car and car insurance.
No demand, no program. Ride a bus in a large city, and you'll see a majority of bus pass users.
Now I spend ~$80 with Google Fi, but I could rely exclusively on wifi and reduce that to ~$20/30. Every other american company seems to want to extract >$80 per month from you.
I'm not sure about housing though. There's a few crazy cities in the US, NY, SF, LA etc. But by and large, the median American pays a substantially lower square footage price than citizens of somewhat similarly rich European countries like the UK, Netherlands, France, Germany, as far as I'm aware. And we also have our outliers in London, Paris etc where the price-income ratio is off the charts. The US has far more land and is far less dense than Western-Europe, with land prices as a function of density (demand for land) I'd say Europeans have less real purchasing power on housing.
That's still $11k coming out of your pocket for the privilege of living in California.
I don’t dispute that state taxation makes a difference. I dispute that it makes such a huge difference.
As for triple the salary in eastern Europe, well, housing and other big expenses are presumably lower. But so is the standard of living.
You have to compare people to those around them.
Plenty of people in Africa would think a $10k annual salary is exorbitant and unnecessary.
No, it doesn't. It's rent and healthcare.
While we have compulsory health insurance not dissimilar to the German system, most areas only have one or two providers (vs. 130 of Germany) whose prices have been going up like 30% every year. We still pay out of pocket for most medicine, dentistry, emergency (like ambulances), and psychological services.
Some utilities are ridiculously expensive. Like internet can be 80$ a month for basic 2 mbps.
A large number of people are employed as contractors these days (the gig economy), which adds a 15% tax (that the employer would pay for employees) for a social security service we will likely never see, so I'm not sure the tax burden is higher. Contractors also have to pay for all their own health insurance (and our cutoff for public assistance for health insurance is like 12k, not the 50k Euro like in Germany)
Which brings me to: we have to pay for our own retirement, even if not contractors most companies don't assist with that anymore, especially for entry level jobs.
I'm not complaining. I'm happy to have those speeds as I live in a very rural area (South/Midwest). I can stream netflix or youtube without hitches, almost all the time.
And I second @sokoloff—I've never heard of a plan that had an order of magnitude greater for upstream!
As an example, last I looked the GDP per capita in San Francisco is $48K, whereas in Miami it is $24K. That is a pretty massive difference, and leads to very different outcomes in a lot of areas.
The best way to think of the USA - and China BTW, which has an even worse demographic spread - is to compare it not to one country like England, or Croatia or the Czech Republic, but to the EU as a whole. Luxembourg is Washington DC, Switzerland is Connecticut, London is New York, Seattle is Berlin, Croatia is Alabama and New Orleans is Barcelona. Those are not exact comparisons, but just a framework for understanding how aggregate US results are so weird.
Because even healthcare, if you combine the population Conneticut and Massachusetts, it is the same as Sweden's with very similar outcomes. Alabama and Mississippi, on the other hand, aren't doing quite as well.
TL;DR, The average for the USA is really misleading, as the spread is much larger than it is in smaller (area and population) countries.
My wife and I were in Barcelona a few weeks ago to celebrate our honeymoon. Prior to going, I did some research on what life was like there. The max salary for most people in tech in the area is about €75,000 (~$USD 93.5k). This is considered a great wage over there. The rents within the city are similar to NYC (studios >€1000k, etc). Barna has a pretty good transit system, but living farther out requires a car. Also, employees get taxed HARD all over Europe and the cost of goods (groceries, entertainment, etc) aren't cheaper than their US counterparts.
The story is similar in London.
It just doesn't compute for me.
Basically, Europeans on average have much lower incomes than Americans, and they seem much more frugal.
Now in SF, I order sushi twice per week. Go out at least 3-4 times per week and lots of times pay for drinks for friends etc, never walk when going out always rideshare. And it's not only about alcohol and food of course.
I could be saving way way more if not for this lifestyle. That's how it goes. Everyone who tells you otherwise are lying to you and worse themselves. Basic human nature. The moment you make more money, you want to take your girlfriend/boyfriend to a fancier restaurant. You want to buy the nicer phone. Except for rent prices which are insanely high, the regular cost of living is not that much higher than living in eastern europe. Actually funny enough when I first moved here, I was shocked at how cheap everything seemed - of course taking into consideration the high salaries. In many cases actually eastern europeans pay more for certain things because for some unknown reason 1 dollar turns to 1 euro, instead of 0.75 of a euro or whatever the price at the moment is. Our petty $350 salaries can sure take it!
Mate, people here have a favorite whisky!I now have a favorite whisky. And as any self-respecting adult it needs to be fancy, not the cheap stuff. Ardbeg, tastes smoky, like swalloing in dim campfire and most bars here will charge you $16 for a glass. There you have it, how people aren't saving money.
It adds up. But I also have a friend here who on a 120k engineer salary and saved 100k in 2 years. Only eating at work, living on a shared room with 3 more people in treasure island. Reimbursing bus fares to work etc. The other side of the coin. Almost everyday I say to myself that soon I will do the same, and sure enough every day I don't. Just like not going to the gym and forgetting to call mom again.
(Mr. Money Mustache isn't too different from the FrugalWoods. They never made quite so much money, but they did have good careers. Still, there's a similar message to be heard.)
I get that the high income and extravagant Vermont estate are a turn off for median-and-below earners, but that doesn't mean you have to have their income to benefit from their frugality. After all, MMM and FW have the time to write about frugality because of their financial independence. But they are able to live the lives they want due to the choices they made with their money.
It isn't hard to find counter-examples. How often do you hear of people that make $300k/year, yet fail to accumulate wealth and achieve financial independence? How often do they continue to be held to wage slavery to support their chosen lifestyle?
Anyway, while you can't save money by not painting your kitchen, you can improve upon your self-sufficiency, and you can certainly become more mindful of your values and the choices you make with your money. It takes education (self or otherwise), and financial bloggers can serve as source of education. But you still have to learn how to filter and apply knowledge to your own situation. You can't pluck fruit from an orchard in your 600 sq. ft. apartment, but you can track your spending, and figure out where money is being spent on things that don't line up with your values and long-term goals.
The important thing is to figure out what you can do to improve your situation. Complaining about people being more successful than you doesn't improve your situation. (I do get that income inequality is a whole other issue to address, but I think that muddies this specific message.)
Remember that you can probably find ways to be more frugal and mindful, and know that doing so alone will not get you a 66-acre homestead at the age of 30, but it can improve your life and get you to your goals faster.
That's it.
What you choose to do with your time, whether that be work, or whatever, does not enter into that equation. If you think MMM is lying about being financially independent, then that's a different story. But that he chooses to work has no bearing on his financial independence.
and intentionally is the root skill necessary to a place that isn't dependent on "the system".
If Warren Buffett is indeed still paying only $3 for breakfast every day, that's giving a big middle finger to the economy. Money is half of the circulatory system of the economy. When it pools too long in one spot, it clots, and then a thrombosed clot can cause damage somewhere else.
He really needs to spend more on breakfast. As one of the richest individuals on the planet, even if he just wants a sausage muffin, it should really be made from only the highest quality agricultural goods, with a lot of personal services added. If he can't manage to swallow that level of ostentation, buying thousands more of the consumer-grade item than he could eat personally would also work.
The only reason for poor people to permit rich people to continue existing is that concentrations of wealth allow for the development of novel classes of goods and services. There would be no luxury yachts if nobody could afford more than a fishing reefer. There would be no Acura if nobody could afford more than a Honda; no Lexus above Toyota; no Cadillac above GM. The luxury goods and services are the early adopters. Without them, some technologies would have died at inception, never to make it to consumer-grade products, because they were too big and expensive.
Anyone can spend small. Everyone else needs the rich folk to spend big, whenever they can. If you don't buy the best, you are not doing your job as a rich person. If you aren't spending on someone's wage, you aren't really "creating jobs". If you can afford to have your cabinets painted instead of doing it yourself, hire someone for that and get back to being the QC/beta-tester for humanity's R&D. This crap where you "retire" and pretend to be rustic and homey isn't helping anyone. If you want to live like a poor person, that's easy; just get rid of all your money. Give it to someone more willing to spend it.
Frugality stops once you can pay all your bills from your paycheck and still have some left. After that, it's called stinginess or miserliness.
He is fundamentally correct. If you are rich and decide to stop hiring people from your community to build extensions to your already large house, then the money is just going to be pooling in your over-sized bank account: potentially just being deployed by a bank to create profit for other rich people.
As a sidenote, if you are spending all of your money after paying your bills off, it sounds like you're not saving anything, which is a recipe for disaster. You should most certainly not consider such a person to be miserly.
I don't really care if Buffett spends on one $3000 breakfast sandwich, or 1000 $3 breakfast sandwiches, or 10000 $0.30 vaccinations, so long as he spends. He certainly has ample savings and investments for himself, and doesn't seem to intend to support his own descendants in a lavish lifestyle. That spending is what pays other people's living expenses. It is up to him to spend in a way that reflects his personal values and preferences, but if he chooses to accumulate wealth, rather than circulate it, that benefits only him, and no one else. Spending only $3 on a breakfast signals that Warren Buffet does not greatly value breakfasts, or the cultural practice of breakfasting.
That's fine. I'm not a big fan of it myself. But when I skip breakfast, I may be signaling that I don't have $3 to spend on breakfast.
Strictly speaking, hardly anyone does genuine saving anyway. Most people with money to save will deposit it in a bank, which then invests it and just pretends it is being saved through mathematical fictions. The recipe for anti-disaster is to spend on insurance and to buy financial instruments that promise a steady income. Burying your gold just makes you worry about where your gold is buried.
Once you have that $X in your portfolio, and are living comfortably on the 3% return from it that you can safely spend annually, then in my opinion, it is then your economic responsibility to spend that whole budgeted amount on things you like. If you aren't spending more, you must be entirely satisfied. And if you are entirely satisfied, you don't need more money to spend. If you don't need more money to spend, you don't need to buy additional income. And if you don't want to spend and don't need to invest, then what are you saving it for? If you continue past that point, you are crossing a rich-person event horizon where you can't send money out as fast as it comes in. You will start sucking ownership out of the economy and asphyxiating businesses that would otherwise be viable. In the end, you will either have to start frantically giving away money, people will have to start stealing it from you on a massive scale, or you will become a wealth singularity as everyone around you starves.
how do you expect to get to a place that enables you to farm with your comrades if you're all too busy getting a paycheck?
imo, you MUST take care of yourself and your financial needs before worrying about how stingy or miserly you are.
That is, Warren Buffet probably can't move the needle much through consumption of goods. Even if he replaced his $3 breakfast with a $300 breakfast it's just not going to have a huge net effect.
Instead if he manages his finances carefully and leaves himself capital for investments then he's able to influence entire markets at once. This is a lot more effective use of his leverage than simple consumption because it drives innovation, fosters competition, etc.
There's certainly something to be said on your points of wealthier consumers pioneering technologies and solutions for the rest of the world. I believe it's more realistic to look at the upper-middle-class for that sort of thing than the ultra-wealthy though, as people like Warren Buffet are the 0.1% of the 0.1% of the 0.1%.
He buys companies with it. He invests and invests and invests during the day, and at night, he sits in his $150k house, with all the lights turned off except the room he's in, with the mechanical thermostat set low in the winter and high in the summer, mending his own socks.
He's an octogenarian, and it doesn't look like he has any plans to support the luxury goods and services industry any time soon. Nor does he seem all that interested in starting new, risky ventures with a lot of R&D. Instead, he has pledged to leave the majority of his fortune to the Gates charity, so they can spend it for him. He literally can't think of enough ways in which he'd like to spend his earned wealth, and has to give it to someone else.
It's not quite leaving it in a money bin, but there's a luthier out there severely disappointed that the best ukulele never made won't be bought by the richest ukulele player that ever lived, because he's just fine with the same $15 model they sell to elementary school kids. There's a professional cook out there severely disappointed that after all those years in school and as a sous chef, the guy that could give someone a break on the way to their own restaurant is still eating his breakfast at McDonald's. And there's a Patreon dependent only one $10/month subscriber away from making rent. And a Lyft driver that would rather be a personal driver. And a landscaper that is one big account away from buying another truck and hiring more employees. And a TaskRabbit peon that would rather be an executive assistant. And a gym teacher that would rather be a personal trainer.
He's just not doing what everyone expects from people with enough money. He's selling underwear and insurance policies and Dilly Bars, and not buying anything fun and expensive from any of the people who would desperately like to sell something fun and expensive, to anyone who could afford it.
Gates is buying malaria and parasite eradication. Musk is buying a Mars colony. Buffett is buying all the same old boring crap that poor folks can buy.
And referencing Warren Buffett's shit breakfast advise without considering the money needed to budget for the inevitable health disaster of eating a sugary breakfast at McDonald's every day is frankly ridiculous.
it's super important to make sure that no stone goes unturned in the constant battle to find out who's keeping them down over there on "The Great Left".
/s
I'm emphatically NOT suggesting that poor people are only poor because they don't understand how to balance a checkbook, avoid predatory loans, and how to use the tax system to their advantage.
Here's an excerpt of the article that really clarified this for me:
"Thirty years ago, she says, you could walk into any hotel in America and everyone in the building, from the cleaners to the security guards to the bartenders, was a direct hire, each worker on the same pay scale and enjoying the same benefits as everyone else. Today, they’re almost all indirect hires, employees of random, anonymous contracting companies: Laundry Inc., Rent-A-Guard Inc., Watery Margarita Inc. In 2015, the Government Accountability Office estimated that 40 percent of American workers were employed under some sort of “contingent” arrangement like this—from barbers to midwives to nuclear waste inspectors to symphony cellists. Since the downturn, the industry that has added the most jobs is not tech or retail or nursing. It is “temporary help services”—all the small, no-brand contractors who recruit workers and rent them out to bigger companies."
from: http://highline.huffingtonpost.com/articles/en/poor-millenni...
Shifting all the "liability" onto workers, creating an economy where everyone but the wealthiest are fungible serfs, is a specific set of values and decisions advanced by these people because it benefits them.
But politics played a big role too. It deserves to be noted here that almost all the employees at this (1960s NYC, say) hotel were born Americans. While today a large proportion would not be, a factor which tips the balance of power towards their managers.
I don’t disagree that technology has changed these dynamics, but the way power and wealth has been distributed in response to these changes is almost exclusively upward and to fewer and fewer people. Nothing about that is neutral or organic, unless you’re talking about the trajectory of wealth and political power under some Marxist analysis of Capital accumulation.
So legislation purportedly for employee protection backfires by making direct hires uneconomical and you call this " something the rich choose to do, in collusion with politicians"?
If we we're talking about somewhere like France, perhaps this argument would hold water. Otherwise, seems like a strawman.
Average people don't really have the resources or connections to open a company.
Incorporation paperwork and filings, even for an LLC in an inexpensive state will be a few hundred, with an Inc generally more. Annual filing fees run $800 minimum in my state; that's if you do all the calculations and paperwork yourself.
Then, you need adequate capitalization for the company (to avoid it being regarded as under-capitalized should the question of piercing the corporate veil ever come up).
This must be used for working capital for inventory, WIP, raw materials, utilities, salary/living expenses, perhaps rent or transportation and needs to cover you between the time you start and when you are cashflow positive. You may need a license or permit from the town/city/AHJ to operate.
Telling someone living paycheck to paycheck to "just go start a company" is fairly unrealistic I think.
A factor for courts to consider: Significant undercapitalization of the business entity (capitalization requirements vary based on industry, location, and specific company circumstances)
Money, for one. Time for two.
They choose to spend that time working 2 jobs. I've done the same in the past. I've decided between buying dinner or getting gas to drive to work to earn enough to cover the commute in the first place. Eventually you make decisions to get you out of that life and into a better one. There's luck involved sure, but I absolutely reject any excuses as if it's completely out of your control.
Because otherwise you'd say they'd "choose" to starve or be homeless?
Situations don't change instantly which is why there are always comments about how it seems impossible - but like any other large goal you only get there with slow steady progress. No matter how bad you think you have it, many others have climbed out of worse. So it's not about choosing to starve but about making those tiny decisions that build up to will eventually get you out of that life.
Or you can choose to ignore all that and give up.
No, it's reality. It's what you choose to ignore while you blame others.
I'm not blaming anyone. I'm saying that life is in your control and your personal responsibility. Things happen to you, but you can always choose how to react and thereby overcome obstacles.
Interestingly, you seem to saying that nobody in that position is at fault and are instead blaming everything else and "reality" which I find rather disingenuous at best. You either have control over your life or you don't, and if you think you don't then there's nothing to discuss and you can pontificate on the lack of free will I guess.
That's why living the experience is important. It gives you perspective on the decision process, which is more than just numbers.
A side effect of the government guaranteeing student loans is that universities could charge basically whatever they want, knowing that students would still be able to pay it. It funded massive expansions, but instead of universities taking on the debt, students did.
In my view, the product hasn't improved at the rate of tuition increases and I'd just follow where the money went to know where the problem lies.
https://www.nytimes.com/2015/04/05/opinion/sunday/the-real-r...
I agree with you that government-guaranteed loans have had the paradoxical effect of being one of the primary contributing factors to increased tuition costs.
This is only true of private for-profit universities, not private nonprofit universities nor public universities. For public universities, the main cause of rising tuition is state funding cuts:
https://fivethirtyeight.com/features/fancy-dorms-arent-the-m...
Unfortunately, most of us only ever work 40 years (if we're lucky), so the budget of a life is, in 99.9% cases, zero sum.
The problem is not with income as much as costs. The NIMBYism of a lot of places inflates the cost of the main expenses like rent - where most people's money goes - and the cost of getting around, as people are forced to live further away from jobs. That was the big finding from the minimum wage hike in Seattle, that poor people where forced to travel further for work, and it cost them more. Ironically, I think that is pretty much how all cities work since crime went away. The days of the poor occupying prime real estate near a city is pretty much over.
Even sans better employment opportunities, fixing the zoning laws in most cities would lead to better lives for many people. Sadly, this NIMBYism is really hard to fight against, and often the people it hurts fight hardest for it.
Instead of mobile phones and TVs, look at bigger items like health care, housing, and education, all of which have gotten more expensive (in the case of education, astoundingly so) even as inflation-adjusted wages have decreased.
No, I think it all matters. And the fact that technology is getting cheaper IS an improvement in our standard of living. People who can find anything within minutes and talk to anybody anytime ARE wealthier than those who have to spend large amounts of time to do the same things.
If they can tap into the entire universe of education and experience an Internet connection implies, and pick cat videos... what would you say is the critical link in their paupery?
I mean, horses to water and all that, and it's a matter of choice.
>I mean, horses to water and all that, and it's a matter of choice.
No, it's not. Claims like "education" should be based on reliable expectations of effects, not "possibilities" that ignore actual human behavior. The Internet has not actually made people more educated, with few exceptions.
Food and shelter are more important than Internet access. Having a house and a steady income in the 1970s is wealthier than sharing an apartment with roommates and working irregularly in the 2010s; we know this because people prefer it, which is the only actual measure of economic anything.
Phones and mobile software are exquisitely engineered to be as addictive as possible. And it works.
Here I am, having this largely pointless Hacker News conversation, instead of completing a Deep Learning course or something.
so... there is something deeply addictive about hacker news... but I personally think? it's the same thing as talking to someone for hours at the pub. same reward mechanism. I mean, the pub closes, and that helps; and most people at most pubs are... difficult to relate to. but I can remember just last month I was hanging out front of my local computer club talking to someone until like 4am.
I think the difference here is that hacker news is more like my computer club than it is like a random pub, just because the people I meet are more likely to hold my interest.
> Here I am, having this largely pointless Hacker News conversation, instead of completing a Deep Learning course or something.
Yes, like that.
And now at 30 I'm pretty convinced that I would have liked 1950 better. Why ? Because the space and that I know that for 30+ years my life would consistently improve, maybe even 50+ or 60+, including an actual pension etc, even if I was born black. The basic standard would be different, but the constant improvement wouldn't. I mean I'd miss my PS4 and iPad, except of course I wouldn't, not really.
Maybe I'll change my mind again.
Maybe immersive VR solves this by allowing the mass of people to transition from "lives of quiet desperation" to being rulers of their own miniature virtual worlds.
Indeed. Question is, what will a dollar buy you? We have more treatments for illness, we have more educational options, more and more.
There is no silver bullet to be sure, and there is no universal upside option, but surely now is a better time to be almost any income percentile, in almost any place on the planet.
Where geographically it has gotten worse, e.g. Flint Michigan, I am not sure how we make a world where Roger & Me is released in 1989, and 30 years later, the population is 2/3s what it was then. Part of life is change, and making the world better requires that people adapt with the changes.
Indeed. I can do without my TV. In fact, I turn it on only once or twice a week for a few hours. I can do without a flagship mobile. In a pinch, I can get a cheap-o no-name brand for important calls.
Housing, health-care, education - these are all key moneypits that are more expensive, for less in return. Don't even get me started on pensions. For as long as I have been actually aware of pensions as a thing, all I have heard is how the fund was lost, raided, payouts going down, pensionable age going up, and without exception, those tat subside off their pension only live in abject poverty, often making choices between eating or heating.
Take the hotel example, it's probably much more costly to hire (and interview and vet etc) all your own bartenders and cleaning crews and all that piecemeal. Then you also have to train them and figure out a replacement when someone calls in sick or something. I'd imagine a company that's specialized in hiring and training bartenders could do it much more efficiently than a single independent hotel owner.
Those efficiencies (you specialize in bartenders and so are able to train them with less resources than other places) result in lower room rates and more money customers can use on other things.
However, I suspect my living costs (in an apartment) are actually somewhat lower than the Frugalwoods in their country villa.
This seems backwards. The poor never occupied prime (at the time) real estate, but cities did used to be more compact. The rise of crime (from the 60s) was one of the factors driving suburbanisation, as those who could afford to do so moved to more distant suburbs to be safer. Not just to have bigger lawns.
Their NIMBYism comes in part from this experience. Making sure your suburb stays expensive has the effect of helping it to stay safe, because it will only be occupied by people as rich as you, and will be able to afford plenty of police. Of course this is not the only effect. This protective blanket of high prices is an extremely blunt instrument, there is a lot of collateral damage. Nevertheless I think it's important to realise that NIMBYism isn't coming from nowhere.
Couldn't agree more! That's the irony. For many cities, crime kept the richer people further away from the inner city, where many jobs are/were. In places like London, Sydney, NYC and SF, it is really hard to find workers for hotels because the people that do such jobs live so far away.
This is the great irony of improving city conditions like reduced crime. In a really scary way, crime was poor people's saviour from long, perhaps even un-profitable treks to work.
Take London. https://www.toptiplondon.com/transport/tickets/underground-t... if you trek in from a zone that is cheaper and further out, the costs as a fraction of income are huge.
This isn't true for a lot of impoverished areas. Most of the students my wife works with at her elementary school do not have any of these.
Would you rather live in a world with no smartphones where you afford a house/apartment, or one with smartphones where you can't?
Why I think the value proposition of a smartphone is completely justified, it probably pays for itself many times over.
How rich are your poor? That may seem a silly question, but are poor people really buying houses? Did they ever? You seem to be talking about middle class people - perhaps lower middle class at worst.
The question is where is that threshold? At what decile is the world worse? The bottom 10%? The third bottom? Where?
This is not as clear cut as house no technology/no house technology. This is an issue that affects different percentiles of the income curve differently. There are no doubt some parts of the income curve in some specific locations worse off, but I'm not sure people have a full grasp of how much better life is in general in the 1st world today versus 1960, let alone 1920 or worse, during the Great Depression.
My point is just that the temp agencies are not the whole of the story here; for some reason, there's not enough demand for most kinds of labor to lift wages much above the statutory minimum. Why is this? We've got an oversupply of labor, why hasn't the market figured out how to use said labor?
Furthermore, the author doesn't fully explain how these two were "rich" before pursuing their journey to frugality aside from purchasing a home in Cambridge (which was a smart decision and is definitely possible with a dual-income tech salary in the area, assuming they didn't have debt to begin with).
There are definitely people that are able to live extremely frugally with sizeable salaries and achieve large goals/financial independence in a considerably short amount of time. However, like building a beach body, the question is always "How much are you willing to sacrifice to get it?"
For many (myself included), the answer is "not enough."
And a lucky one. I'm boggled that they found a 4 bedroom in Cambridge MA for $460k in 2012. I was very actively looking for real-estate in Cambridge that same year, and decent 3 bedroom condos started at $500k. I don't think I saw a single 4 bedroom single family home under $1M. Maybe it was a wreck that were able to fix up for not to much $$.
Today their formula can't be replicated here. Any place in that area that can rent for $4400/mo. costs well over $1M so they had great luck AND great timing (interest rates were around 3% also) - on top of smarts and hard work I'm sure.
You know what, it's true. If you took a robot and gave it a ground floor job, that robot could work that job 7 days a week, 9 hour shifts, without missing a beat. It would never get sick, it would never need time off, it would just keep working. And it could eat really cheaply, just electricity really, but even if it needed food it could make and eat it's own meals, cutting spending down to pennies per. And it could do this for YEARS and have no problem at all doing so, and buy a million dollar house after doing it for a few decades.
BUT, and say it with me: PEOPLE. AREN'T. ROBOTS. No people are, regardless of which generation they're from. We get sick. We get diseases. We have car accidents. We date. We sometimes have children unexpectedly. We occasionally even, yes, get drunk. We want to go out and party, because you know, we're social animals, and doing nothing but going to work, coming home, and cooking and eating alone is fucking SOUL CRUSHING, and was never ever expected from any other generation to not be.
We're messy, emotional, unstable little things. We make bad decisions. We'll stress about our bills and then go do drugs with friends because it's the only way we can scrape ourselves together to go do it for another day.
The fact that so many politicians and so many pundits just "don't want to deal" with the messy emotional side of being a working student, or just a low-achiever, DOES NOT MEAN THAT THE MESSY EMOTIONAL SIDE IS NOT RELEVANT. To deny any of these things, to deny they exist, to deny they are absolutely warranted, and to deny that they should be allowed because again we are all people, messy little people, is to deny what makes us human, and therefore is to de-humanize the working poor.
The % of people making minimum wage at any given time is a snapshot, and it covers people at all stages of their lives. Are there some people working their ass off and not making it a la an Upton Sinclaire book? Sure. But that's not most people. In fact, most people (1) making minimum wage are between the ages of 16-24 and aren't going to be making that forever. And even among those who aren't, most are well above the poverty line.
[1] https://www.heritage.org/jobs-and-labor/report/who-earns-the...
And yet, I know several people who have done exactly that (more quietly obviously). And several who tried and failed.
The difference? It's debt.
If you can avoid debt completely this really does work, but it takes a LOT of sacrifice on your part to get there.
It's basically a real life form of min-maxing in games. Minimize all pleasure and ease at the start of life, and never get into debt.
Then once you are past that part suddenly it's all easier.
Some things they seem to have in common:
1. A married couple on the same page financially.
2. Both worked and saved before having kids.
3. Decided to move to the country to live more cheaply.
4. Developed a source of income that was portable such that moving to the country didn't leave them stuck with some underpaid local job.
If you study history, part of the secret to the success of the parents of the Boomers is they were two income families during WW2 because of the men being off at war and the women taking factory jobs. Savings rates were as high as 50 percent due to basically war time rationing. So there wasn't anything to spend it on. With the guys off at war, babies were mostly not being conceived.
So, if you can marry the right person, get on the same page financially, both work full time at something better than slave wages while not yet having any children and socking away the dough, you, too, can have this American dream. The reality is very few people can check all those boxes and if anything goes wrong at any point, the entire thing can be derailed.
Please note, this sort of assumes that neither partner has serious health problems or any addictions or needs tons of therapy for some reason. It assumes nothing goes drastically wrong while you merrily work towards your dream, such as an unexpected pregnancy that could derail your plans even if you get an abortion.
No matter how bad your situation, there are a few takeaways worth noting. Celibacy, paying down debt and making sure you jibe well with anyone close to you are all excellent choices that tend to benefit the bottom line.
But, you know, much easier said than done.
Take boots, for example. He earned thirty-eight dollars a month plus allowances. A really good pair of leather boots cost fifty dollars. But an affordable pair of boots, which were sort of OK for a season or two and then leaked like hell when the cardboard gave out, cost about ten dollars. Those were the kind of boots Vimes always bought, and wore until the soles were so thin that he could tell where he was in Ankh-Morpork on a foggy night by the feel of the cobbles.
But the thing was that good boots lasted for years and years. A man who could afford fifty dollars had a pair of boots that'd still be keeping his feet dry in ten years' time, while the poor man who could only afford cheap boots would have spent a hundred dollars on boots in the same time and would still have wet feet.
This was the Captain Samuel Vimes 'Boots' theory of socioeconomic unfairness.
— Terry Pratchett, Men at Arms
This really isn't as crazy as it may sound. When my spouse was working in BigLaw, we rarely paid anything for weekends out. A typical case was a "charity gala" at a downtown hotel. A law firm partners would buy the tickets for an entire table but would inevitably be working and couldn't go. Even if he could, he still needed 6 or 8 other people so his table didn't have empty seats, which would be very embarrassing. So the call would go around - who has time to attend a free party? Me, that's who. The bar would be stocked with top-shelf liquor only, food was provided and excellent. The catch? You have to know people to get invited. And you have to be able to show up in a perfectly-fitting tuxedo with only a few hours notice. So you buy one, and it needs to be pretty good because you're going to wear it 20-30 times a year. Amortized out, an Armani costs a fraction of a rental.
Over time, it will make you much richer than you'd otherwise be. It really works.