Income and expenses are intricately linked by psychology. It's almost irrelevant what your paycheck is, if you're prone to this problem then somehow expenses will always rise to meet it.
If expenses weren't actually determined by paycheck, the number of people living paycheck to paycheck would be a really small number. Everyone else would either be building a surplus each month or going further into debt.
Same can be said about many expenses. When you don't have the money, you make it work even if you can't. When you do, you gotta balance it out again. Saving your money isn't as important as saving your life. Saving your automobile might be cheaper than having to buy another later. Etc, etc.
So, just because this problem exists among a wide range of paychecks doesn't mean shit really, because paychecks scale with rent and people are suffering to make the rent as it is. I would argue for most people, the trouble isn't their attitude. It's that wages ultimately grow far, far slower than living expenses and inflation, and cuts have been made to essential expenses at the cost of degraded quality of life.
A lot of people harp on others for buying frivolously but frankly an iPhone every year would be a drop in the bucket compared to my medical expenses, maintenance and gas for my car, etc. My monthly rent is more than three iPhone XS Maxes and it's literally within a couple hundred of the cheapest thing I could find in a 20 mile radius. Don't get me wrong, it's great and I'm not complaining, but it still puts things into perspective.
Maybe I'm crazy, but I think everything that needs to be said is already covered by graphing minimum wage vs inflation. That's a lot of folks real realities today.
A lot of corporate jobs these days force people to live like rats in big cities.
This is a problem with zoning: https://www.amazon.com/Rent-Too-Damn-High-Matters-ebook/dp/B..., not with "corporate jobs." If we fix zoning, costs will go down. Los Angeles is instructive. In 1960, it was zoned for 10 million people: https://la.curbed.com/2015/4/8/9972362/everything-wrong-with.... Today, it is zoned for 4.3 million. Has our technology gotten worse since 1960? Have we forgotten how to build multi-story structures?
No: we've just made it illegal to build enough housing.
Seattle is also instructive. About two-thirds of the city is zoned for single-family housing only: https://www.theurbanist.org/2017/10/23/the-path-to-eliminate.... Allow missing middle housing, and prices will stabilize: http://missingmiddlehousing.com.
I recently started working in central London and need to move closer soon; when I check the rent prices every time they just make me want to cry even though I've got a decent tech salary.
I think this is one of the biggest bonuses you get as a technical person; you can live with roommates and drive a beater car, if you want, and it's not a problem when getting quarter-million dollar a year jobs.
A long time ago, I had a roommate who was trying to make it as a realtor. He though his (actually quite nice) not exactly new honda accord was a big handicap for him. I mean, I don't know if it was or not; I know little about the selling side of real-estate, but I can tell you that most people who do sales or management feel that their symbols of wealth are really important to their job and their income.
Devs in SF display status in other ways. HN karma? Exits? Economists call those “hard to fake” status displays.
No, developers display status more directly, by pointing at a thing and saying "I did that" - or on a lower level, simply displaying intelligence and domain specific problem solving ability.
Of course rich people can have such problem, but if you think low wages and the lack of universal health care and free education is not the main issue you are lying to yourself.
1) Poverty, at the level where spending on a reasonable floor of basics (food, shelter, education, leisure) leaves little for savings. This is a resource constraint, and even a perfectly optimally-run household would end up living paycheck-to-paycheck.
2) Severe exogenous financial shocks that exceed whatever buffer you were able to build, and an inability to adjust consumption downwards due to sticky commitments or psychological reasons. For lower-middle and middle-class households, this is possible simply due to bad luck; one thing the US economy is pretty bad at is providing a solid way to derisk tail risks, the obvious example being healthcare. This is naturally less common the more severe the shock, and irresponsible financial management can be a contributor in some of these cases (ie not saving an emergency fund, etc).
3) Consumption rising to meet one's income. The resource constraint is irrelevant here, as above the poverty level, this is primarily about hedonism and jockeying for status. The big caveat here is that people tend to short-circuit cost-benefit analyses when it comes to their kids: neighborhood safety and public school quality can lead to people substantially (and understandably) overextending themselves wrt housing costs. I'd caution against leaning too blindly on this mitigating factor though, as there are lots of differences between living modestly in a good school district and living generally beyond your means.
There's a degree of freedom around consumption that's likely a lot more significant than your comment assumes; this seems to follow directly from the fact that someone living beyond their means at percentile X would substantially improve their financial security if they spent as much as percentile X-10 (or whatever). For all but the lowest percentiles, this is completely feasible, and yet these low-savings studies consistently find a much larger swathe of people in these categories.
The model that makes the most sense to me is that, excluding the lowest quintile, the habit of clamping consumption to income is one of the biggest factors in our low savings. As mentioned above, the US systemically tends to put a lot more risk on the individual than a lot of societies do; you can be better off if you manage this responsibly (and aren't in the lowest income brackets), but financial illiteracy is IME rampant, even among generally well-educated people.
[1] Lack of access to quality education likely is, but through the mechanism of low numeracy/personal finance skills/critical thinking skills.
This is spot-on.
It's worked for me -- I didn't have a solid handle on my finances when I moved out of my parents' place, so I lowballed and found a place I knew I could afford even with a pretty pessimistic view of financial discipline.
Nine years later I'm living in the same place, and I've gotten a raise every year, so I'm making quite a bit more than I was back then. Driving an even more economical car. Eating better -- buying groceries instead of eating out all the time.
I could fritter it away, let my ISP bleed me dry with a $162 cable+internet+whatever+modem plan when the $30 plan works just fine and I bought my own modem. I could shovel $95/mo to Verizon, but I'm on Ting and I use wifi whenever possible, and my bill averages $26 and I own the phone.
I could send $8/mo to Hulu and $15/mo to HBO and $11/mo to Netflix and $13/mo to Amazon and $10/mo to Spotify and $10/mo to Pandora and.... how many more are there?! But I don't feel like my life would be improved by having all those. (I do Spotify, but none of the others. In the event that I feel like rubbing my nose in a pile of TV, there's this thing called broadcast.)
I feel like there's a never-ending stream of these things, with their pundits on the morning show and Weekend Edition making you feel like you're missing out on life if you don't watch at least one show on every such service. And Disney+ is coming...
To me, it's that incremental monthly spending that inexorably, insidiously, increasingly, gobbles up every spare dollar the middle class can scrape together. I've been literally counseling my friends on how to talk their cable providers into a lower rate.
Many of them didn't know that was possible.
Cancel your shit, people.
The only point you missed was saying that you only spend $5 a day on food.
Tell me this dear sir or madam...
1) How many kids do you have?
2) How much did you spend on healthcare in the last 5 years?
Financial shocks exceeding savings coupled with a system which requires drawing on high APY credit in order to absorb those shocks I think is a more likely culprit.
Just one event like that can have a family struggling to stay afloat and carrying thousands per year in interest payments on top of everything else.
The point that person is making is, if a person who makes more than the minimum wage is to reduce spending to 90% of the current spending they would be better able to absorb these unforeseen financial shocks.
> How many kids do you have?
This is another thing I notice (outside and in the article too). A lot of people who live paycheck to paycheck have 3 or more kids. Naturally more kids increase costs. Now I am by no means saying people shouldn't have more kids, but that number should depend on their financial situation too.
Like huge medical bills?
This was a big reason that drove our move out of NYC. No matter how much you made, unless you were a billionaire (good luck with that), you were on a treadmill. Nothing you had would be enough. You could spend yourself broke trying to fit in, even if you make a lot of money.
Dallas, where we currently live, has this too, but it's a much bigger city, so you have to want to find those hotspots.
so, certainly, that's not all of it. we all have the wealthy friend who lives paycheque to paycheque.
But... let me tell you, saving money is a whole lot easier when you make 10x the minimum to support yourself in the area than it is when you make 1x the minimum to support yourself in the area.
Furthermore, paycheck to paycheck living outside of poverty and disability is rarely the result of a one time mistake, it's usually due to an inability to budget and save day-to-day. Which is the reason they end up with more debts than assets.
Not to mention people who can't afford their house can often not afford to take care of their house, which reduces its value.
Rents finally started to skyrocket where I live, so buying finally made sense for us to try to lock in our housing exoense. But even then, the upkeep occassionally makes me wonder if I did the math right. Like can I put off buying a new roof another year? Or will that eat up my maintanence budget for the next couple years?
Plus many people want to live in an already established neighborhood.
Also both new homes I’ve bought were in existing neighborhoods. Not all new homes are in new developments. I’m fact, I would avoid those like the plague. HOA hell + possible mello roos if in California.
https://www.trulia.com/research/new-home-smell/
Portland happens to be among the metros with the smallest new house premium at 14%. Thats still $28,000 premium on a 200,0000 house.
Sure "not all new homes" are in new developments, but the vast majority of them are. Most neighborhoods simply don't have empty lots to build on, they don't exist, any new homes are teardowns.
Besides, I never said all new homes were cheaper so I’m not sure why you’re even trying to argue it. Shop around and you’ll find a deal.
But yes I do fully agree, I would much rather be broke with a large income than a low one.
That's because our metric for school and school district quality largely is a measure of effects of socioeconomic status of the students, not anything the schools actually produce. So, yes, the schools in areas that have a higher buy-in cost have better marks, because they have on-average students better set-up for success.
That doesn't mean the students in that district, if individually moved to a different district, would do worse, it just means that the students who would do worse independent of district are lesd likely to have parents that can afford to live in the “better” district.
If you have the ability to kick out any student who is disruptive you can turn any school in any area into a high quality school.
The evidence doesn't really support that, though; students in a “bad” district don't have worse performance than students with similar background in a “better” district (whether because of distraction or any other reason), “better” districts just have more students with backgrounds which are correlated with educational success, of which the strongest factor is parental education.
According to that report the important factors are student and teacher discipline and school atmosphere, and on can easily understand why all of these might be better in an affluent suburb.
Sure, but we’re talking about what explains variation between school districts in the same state in the US, not variation among OECD countries. I'm not saying that education policy and practice can't have a difference and doesn't globally, I'm saying there is virtually no evidence that the difference within districts that people in the US might be choosing between is driven by much of anything beyond background.
Do you think smart people would bother to spend a fortune on education (either directly via private schooling or indirectly by housing) if the school didn't matter? Follow the money, not the rhetoric.
More directly I have spent sometime helping out in different schools and I have seen with my own eyes the consequences of a single disruptive child on the learning environment - all the teachers time is sucked out dealing with this one student. I can't imagine trying to teach in a classroom with 3 or 4 disruptive students.
Yes, because smart and well informed are not the same thing, and even smart people who have access to systematic information are not immune to dismissing that information due to cognitive biases, particularly confirmation bias.
Quality of school district is also a well worn socially acceptable cover for avoiding proximity to those disliked for reasons of race or class, and smart people can still be racist and/or classist, and are more, not less, likely to seek socially acceptable cover for that.
Did a lot of people wrongly (as it turned out) think that in the 2008 Great Recession?
Even knowing this plenty of people put themselves in precarious financial situations when buying a home.
People will pay more for the basic needs until they can't any more. Mostly with housing.
I don't know how to fix it, but I guess it would be enormous taxes on land owned but used by somebody else and selling land to someone else. Basically making real estate and finance only viable as charitable institutions (or something at least significantly in that direction). More or less impossible, but that's life.
The market based solution is already present in city streets today with mentally ill, drug addicted, and others (under employed) living in tents and cardboard (or their illegally parked vehicles).
Once their UBI payday loans are properly directly deposited to a bank to repay last week's debt, they can once again return there. The idea that the most downtrodden will be better with their finances than 80% of the rest of the population is laughable.
Rental means paying the costs of property plus paying profit to someone who is already well off enough to front some capital (or at least to get a mortgage) plus paying profits for the bank ... how could renting ever be reasonable priced in a system that requires those without capital to pay those with capital just because those with money already have enough money.
We just about made a profit on the flat - about £10 a week, but we didn’t have any times of no tenant, or any unexpected major bills.
Eventually price recovered enough that we could afford to sell (below what we paid, even ignoring inflation).
Not all landlords are raking it in.
landlords aren't guaranteed to make money. it's true that monthly rent is almost always higher than the monthly mortgage payment on that property, but the landlord can only profit if, in the long run, the difference between the rent and the mortgage is greater than the overall cost of maintenance and possible devaluation of the property.
personally, I could afford to put a down payment on a mortgage if I really wanted a house where I live, but for now I am happy to pay extra for the ability to relocate at the end of the lease and to avoid the risk of actually owning a house.
When rent is taken care of (cause there isn't rent), along with food, water, electricity, communication and more, what is there to 'buy'?
Clothes, cars, boats, planes, watches, electronics, vacations, fancy meals, you name it...
Also, I have to point out, if you had made that list a hundred years ago, electricity wouldn't have been on it. Luxuries have a way of becoming necessities.
Perhaps a more relevant example: Look at the bottled water industry. Even if all our creature comforts are provided for free, someone will pay for a "premium" version.
These people are going further into debt. It's just that this debt is usually not in the form of cash.
Need an oil change? Well, I can put that off for a while. Need to go to the doctor? Well, I can put that off for a while. Need to renew my license? Well, I probably won't get pulled over for it this month. It's amazing what necessities you can postpone, if you're willing to take on personal technical debt, in the form of risk.
This is how people at the lower end live "paycheck to paycheck". It's not just that they're dumb and spend every penny as soon as they get it. It's that they bend as many of the rules as they can, in order to maximize the cash they have on hand for the rules that can't be bent.
This perfectly illustrates the problem the GP brings up. People have no concept of what agency is.
I would argue $2000/month is a very significant benefit to a survivor. It’s also inflation adjusted.
We aren't bacteria. We don't have to behave like bacteria, irregardless of one's relationship to authoritarianism or social conformity.
And we should not forgive, let alone celebrate, people who do behave like bacteria.
You could, with similar effect, make the same statements about bacteria in response to "People should live" or "People should thrive".
https://cis.org/Camarota/Births-Unmarried-Mothers-Nativity-a...
Everyone deals with these kinds of intrapersonal conflicts and issues on a different breadth and scale, one way or another. It's this coupled with economic distress or anxiety, in addition to a massive income and wealth inequality, that produces the kind of conditions and struggle that people and families go through, like those described in this short article.
Sure, there are varying degrees of this issue. You have costs of living which vary depending on location, wages and salaries which vary by location as well as the occupation itself.
Despite this, it's still a grave mistake to simply pass many of this off as "they should get a better-paying job" or "they are living beyond their means" as some of the comments on the WaPo article itself suggests.
For the former, anyone who uses such an argument has in some form or fashion accepted the belief that some jobs should not pay a livable wage. It does not make any sense that anyone working a wage job full-time is still financially in poverty. This has nothing to do with the individual, but instead has everything to do with economic policy. That is not to say that, for example, fast food workers should not make as much as teachers. OK, then pay the teachers more. The bottom line is that no one who works a full-time job should be in poverty.
For the latter argument, this is mostly part of an ongoing cultural trend of laying all responsibility on the individual, regardless of systemic variables. The idea that in such an unequal society, where people exist who literally make more in a single day than others in an entire lifetime, we should instead scrutinize the people struggling economically, is just plain disingenuous.
The economy is broken and getting worse. More and more people are realizing it.
Somehow, along the way, many people lost all compassion. I am really not sure what do they have to gain from being a-holes to genuinely struggling people. (Not everybody wants to change profession at 40-50 and they should not be forced to.)
As you said, nobody who is working full-time should be below the poverty line. Nobody.
But it does show how far we are from getting there when people can't even agree that people with jobs shouldn't be living in poverty.
What's a "livable wage"? The whole point of assessing whether people are "living beyond their means" is precisely to figure out if they're keeping their expenses within that 'livable wage' threshold. I think you'll find that most people with money-related issues ("poverty" in this context should be reserved for actual, true deprivation, which is vanishingly rare in the US! Social exclusion/marginalization is real, but it's a very different problem, with different ways of addressing it) are in fact not doing enough to keep their expenses in check.
https://en.m.wikipedia.org/wiki/Poverty_in_the_United_States
If 12% of your people are living in poverty as defined by your government then there may be something systematically wrong.
I think a lot of us suffer from this at different scales. I've always found it difficult to work on things that will pay off in the future, even if I plan something I just don't seem to be able to carry through a long term project to the end unless I'm in an environment where there's accountability such as deadlines on projects at work.
I'm very prone to instant gratification, which is why I can easily lose most of my spare time in video games, netflix, youtube etc.
The way I manage it in the short-term is the two-week test. If I want a thing, and that thing is >10% of my remaining disposable income (which I budget every two weeks), I tell myself "if I still want this in two weeks, I will buy it or start saving for it then."
Example: I really wanted the custom truly-wireless IEMs that Bragi makes. However, they are $599; not a cheap purchase at about 50% my two-week disposable. Instead of buying them outright (I could, but that would affect disposable income for going out and stuff), I sat on it for several months while I tried other headphones. The urge to get them didn't go away, so I got them. What would have been an impulse purchase became a planned and extremely-worthwhile purchase.
My self-control isn't bulletproof, however. Our five-year old vacuum stopped working the other day. I tried repairing it several times, all to no avail. I got tired of having dirty carpet (our apartment is all carpet except for wet areas), so I went to Best Buy and got a new one. While I was there, I saw a Bissell Carpet Cleaner that looked really useful, as our carpets haven't been cleaned since we moved in three years ago. Both combined were about $500, but I impulse-bought it because dirty flooring drives me nuts. While I'm really happy with this purchase (there are few things more satisfying than seeing all of the gunk in your carpet vacuumed up), it was definitely impulsive, and my more responsible self should have waited on it.
For disposable income purchases, we budgeted out income, necessary expenses, savings, travel, etc., everything that requires long-term planning. The surplus (a fairly small portion) we then divided out into a per-person, per-day allowance.
I use a simple Google Form to record discretionary purchases, tracking the results in a Sheet, to account for whether this discretionary budget has a positive balance.
This has the nice effect of translating dollar values into time values, and giving a reference point for trading off the relative hedonic value of small frequent purchases vs. large infrequent purchases.
>This was the Captain Samuel Vimes 'Boots' theory of socioeconomic unfairness
They don't care about security updates and all that shit. They don't care about new features. Just not an efficient use of money.
I have an iPad Pro and a MacBook Pro. I only just switched from an iPhone this year. I'm not anti-Apple. But the idea that low-wealth individuals should buy anything but an older Android is ridiculous. I can still use a Nexus 4. It still works.
Some people are naturally more conscientious than others. Their moral burden is lighter. Life is unfair like that, but the answer isn’t to exonerate the rest of us from moral responsibility for managing our own affairs. On the contrary, those moral sentiments are most important for those who struggle with self-discipline.
Which is not to say that it’s wrong to try to organize society to give people a better chance at succeeding in their moral struggles. But at the end of it all, every man must carry his own cross.
In the allegory, the charioteer is the reasoning part of a person, the base pegasus was the 'appetites'/greed/hedonistic and the more 'limbic' parts of the person, the noble pegasus was the thumos of the person. Thumos is a very different mental model for us moderns, but was common for the ancient greeks. Think of it as 'spiritedness', but the word as used by Plato had elements of victory/political/hotheadedness/manliness baked into it [2]. The pegasuses weren't just 'good vs. evil', as even the thumos pegasus could get out of hand for the 'reasoning' charioteer, and the base pegasus was needed to tell the person to eat, to have intercourse, to react to danger, etc.
I point this out to give the parent commentor another mental model to help process things in life. We're MUCH more than just the 'higher' and 'lower' parts of ourselves. Plato thought of himself as a tripartite soul, and in typical Plato fashion, totally forgets about things like humor that can't be included in his Chariot Allegory. I'd encourage others to look into other traditions and philosophies to see of any other mental models work for them. 'Eudamonia'[3] is something we all should reach for; not every mental tool is one-size-fits-all.
[0] https://www.artofmanliness.com/articles/what-is-a-man-the-al...
[1] https://en.wikipedia.org/wiki/Phaedrus_(dialogue)
Excuse me, but would you mind not repeating this meme in the future? The "limbic system" is actually at the core of human consciousness and cognition, and at the core of what "reasoning" really is. The story of the brain as having a "rational human part" and an "emotional animal part" is a myth and a canard.
If you could rephrase or reconsider, you'd have the thanks of everyone in the neuroscience lab where I work ;-).
Most people are slaves to their limbic systems.
Most people don’t have self-education or resources to seek the help they need to fix these underlying problems.
Society does them no favors. Media and advertising are designed to promote consumption. And not even healthy consumption.
The idea that we are black boxes with private worlds and perfect agency is being eroded by the empirical evidence that, at scale, we are ultimately manipulable.
I know because I wrestle with this constantly. My higher self knows what’s right and how I should spend my time and money. On a daily and minutely basis, my lower self vyes for control and often succeeds in taking the wheel. And I have to catch myself and recognize when my long term efforts are being subverted automatically and mechanistically.
I know that, over the years, my unaddressed early childhood traumas have compounded into deeply-ingrained habits of self-medicating.
It’s a constant struggle.
I am not surprised that there are huge numbers of people who struggle similarly and are not as successful as I am at managing this internal conflict.
edit: why is this article now flagged? :(