Author Topic: low income families spend-40%-of-their-money-on-luxuries  (Read 10812 times)


obstinate

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Re: low income families spend-40%-of-their-money-on-luxuries
« Reply #1 on: June 30, 2017, 10:07:04 PM »
"Luxuries are defined as goods and services consumed in greater proportions as a person's income increases."

So, meat is probably a luxury, as is your second pair of shoes.

Ok. Not Mustachianism imo.

Tom Bri

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Re: low income families spend-40%-of-their-money-on-luxuries
« Reply #2 on: June 30, 2017, 10:39:18 PM »
I also noted their definition of luxury. By that definition, anything over bare starvation is a luxury. 'Poor' people around here seem to spend lots on stuff I consider unnecessary, but that's not quite the same.

LPG

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Re: low income families spend-40%-of-their-money-on-luxuries
« Reply #3 on: June 30, 2017, 11:32:37 PM »
I found the comment about people spending money on necessities to regain their sense of control interesting. When I need to regain my sense of control, I buy index funds... It doesn't exactly give me more control today, but every step closer to getting control of my every day life makes me feel goooooooodddd.

FrugalToque

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Re: low income families spend-40%-of-their-money-on-luxuries
« Reply #4 on: July 02, 2017, 07:01:21 AM »
Quote
The Deutsche Bank Research report defined luxuries as “goods or services consumed in greater proportions as a person’s income increases”

Yeah, that's pretty ridiculous and a poor excuse for trying to make poor people look bad.

If they can't come up with a better way to define "luxury", a way that doesn't include "food that isn't on the edge of expiry", I don't feel like we should lend any credence to their study.

Toque.

mre

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Re: low income families spend-40%-of-their-money-on-luxuries
« Reply #5 on: July 02, 2017, 07:35:20 AM »
Quote
The Deutsche Bank Research report defined luxuries as “goods or services consumed in greater proportions as a person’s income increases”

If you are going to compare a person's spending on luxuries vs necessities but you define luxuries and necessities by a person's spending, then your entire comparison is invalid.

It's like comparing groups of people by dietary choices, but defining those groups based on dietary choices.  It makes no sense, unless of course they are trying to invent statistics to generate click revenue.  I'm sure they would never do that.
« Last Edit: July 02, 2017, 07:36:59 AM by mre »

clarkfan1979

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Re: low income families spend-40%-of-their-money-on-luxuries
« Reply #6 on: August 28, 2017, 01:40:57 AM »
From my own personal observations, I see low income families more likely to purchase the battery powered Fisher Price cars for their kids than wealthy families.

When I was a kid about 30 years ago, I thought they were like $500. I think they are much cheaper now with advances in mass-production.

obstinate

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Re: low income families spend-40%-of-their-money-on-luxuries
« Reply #7 on: August 28, 2017, 08:39:11 PM »
What is your work that puts you in a position to observe statistically meaningful samples of both low and high income families?

clarkfan1979

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Re: low income families spend-40%-of-their-money-on-luxuries
« Reply #8 on: August 29, 2017, 09:00:17 PM »
What is your work that puts you in a position to observe statistically meaningful samples of both low and high income families?

Was this comment a response to my comment? If so, I tried to state that it was from my personal observations.

However, from a statistical point of view, it's heavily supported in survey research in psychology and sociology that income is negatively correlated with drug use. As income goes up, drug use typically goes down**. I think it would be fair to consider cigarettes and alcohol as luxuries.

**It's actually a curvilinear relationship, because once someone becomes super wealthy drug use starts to go back up again.

I have a Ph.D. in Applied Social Psychology and have worked on a few projects that measure drug use and income with survey data. Income was never a focal point of any papers because the data typically followed the normal trend and thus wasn't interesting.

When my dad was in his late 30's and early 40's he would spend about 25% of his tax home pay on alcohol, gambling and tobacco. He earned a good paycheck as a union construction worker. However, he was always broke and never saved.


« Last Edit: August 29, 2017, 09:04:00 PM by clarkfan1979 »

WhiteTrashCash

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Re: low income families spend-40%-of-their-money-on-luxuries
« Reply #9 on: August 30, 2017, 01:07:53 PM »
That article had a stupid definition of luxury. It reminds me of those Fox News infographics hooting about how many poor people have "luxuries" like refrigerators, even though that's a piece of technology that has existed for about a hundred years.

GenXbiker

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Re: low income families spend-40%-of-their-money-on-luxuries
« Reply #10 on: August 30, 2017, 01:20:03 PM »

Poor people wasting money while I subsidize them with my high taxes.  What a surprise... or not.

Anon in Alaska

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Re: low income families spend-40%-of-their-money-on-luxuries
« Reply #11 on: September 04, 2017, 05:29:52 AM »
They're using the classical economic definitions of economic goods, not an "X good is a luxury" definition.

An inferior good is a good whose quantity demanded decreases as income increases (hamburger helper).

A normal good is a good whose quantity demanded increases proportionately when income increases, and decreases proportionally when income decreases (most things).

A luxury good is one whose quantity demanded increases _more_than_ proportionately as income increases (Cadillacs).




Chesleygirl

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Re: low income families spend-40%-of-their-money-on-luxuries
« Reply #12 on: September 20, 2017, 03:32:07 PM »
What is considered luxuries? If someone drink a soda (or any other beverage) instead of a glass of water, is that considered a luxury?

Michael in ABQ

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Re: low income families spend-40%-of-their-money-on-luxuries
« Reply #13 on: September 20, 2017, 03:46:37 PM »
I just toured some apartments today that are in a lower-class neighborhood. 1BR/1BA units that rent for about $550-575/month. Most of the tenants would probably be considered poor. All the occupied units had flat screen TVs, most larger than the one I own. Is that a luxury? Perhaps. Then again a 40” TV these days is only a few hundred dollars.

One common theme I’ve noticed after being inside dozens of occupied apartments, from very nice $1,300+ month units to ones that were renting for under $500, is that everybody has a lot of stuff. I would say the cheaper apartments tended to have more clutter but I don’t really trust my memory to not be biased on that point. Whether it’s stuff on the walls and other decorations or just junk/clutter, most apartments I go into seemed to have too much stuff.

WhiteTrashCash

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Re: low income families spend-40%-of-their-money-on-luxuries
« Reply #14 on: September 20, 2017, 06:06:08 PM »
I just toured some apartments today that are in a lower-class neighborhood. 1BR/1BA units that rent for about $550-575/month. Most of the tenants would probably be considered poor. All the occupied units had flat screen TVs, most larger than the one I own. Is that a luxury? Perhaps. Then again a 40” TV these days is only a few hundred dollars.

One common theme I’ve noticed after being inside dozens of occupied apartments, from very nice $1,300+ month units to ones that were renting for under $500, is that everybody has a lot of stuff. I would say the cheaper apartments tended to have more clutter but I don’t really trust my memory to not be biased on that point. Whether it’s stuff on the walls and other decorations or just junk/clutter, most apartments I go into seemed to have too much stuff.

Flat screen TV are better known as simply "TVs" in the 21st century. I haven't seen a CRT TV in years now. A local hotel was selling off their old room flat screen TVs for $40 each. 40", so they were average-sized for a modern 21st century TV. It's funny what some people consider luxuries.

Clutter in poor households is due to fear. Poor people are afraid to throw anything away because they are constantly trying to stock up for the next catastrophe. They stockpile absolutely everything they can get their hands on, even things that have no intrinsic value. It's a very common behavior for people who have suffered psychological trauma.

gggggg

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Re: low income families spend-40%-of-their-money-on-luxuries
« Reply #15 on: September 21, 2017, 12:16:24 PM »
Like most of you, I am friends with several "poor" people. Something I've noted about them, is that they have to have the "top stuff". I guess it's a psychological thing. They tend to spend on short-term material items; where the more well-off guys I know have modest material items, and put the balance into paying off debt, or investing.

WhiteTrashCash

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Re: low income families spend-40%-of-their-money-on-luxuries
« Reply #16 on: September 21, 2017, 12:29:38 PM »
Like most of you, I am friends with several "poor" people. Something I've noted about them, is that they have to have the "top stuff". I guess it's a psychological thing. They tend to spend on short-term material items; where the more well-off guys I know have modest material items, and put the balance into paying off debt, or investing.

We tell poor people in the United States that being poor means they have no value as human beings, so why wouldn't they waste their money on luxuries they can't afford? Who wants to be labeled as worthless?

Chesleygirl

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Re: low income families spend-40%-of-their-money-on-luxuries
« Reply #17 on: September 25, 2017, 07:34:55 AM »
Like most of you, I am friends with several "poor" people. Something I've noted about them, is that they have to have the "top stuff". I guess it's a psychological thing. They tend to spend on short-term material items; where the more well-off guys I know have modest material items, and put the balance into paying off debt, or investing.

I wonder if some of them did not learn financial literacy from their parents. Without that example, it keeps going on from one generation to the next.


trollwithamustache

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Re: low income families spend-40%-of-their-money-on-luxuries
« Reply #18 on: September 25, 2017, 08:34:23 AM »
This seems like a pretty weak CNN article... They never really tell us how luxuries are defined, but I bet housing and cars aren't considered luxuries. Is the rich guys 5 million dollar penthouse mortgage expense really making the % comparisons valid to the rent the poor bastard is paying on his tenement?

ixtap

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Re: low income families spend-40%-of-their-money-on-luxuries
« Reply #19 on: September 25, 2017, 08:46:59 AM »
This seems like a pretty weak CNN article... They never really tell us how luxuries are defined, but I bet housing and cars aren't considered luxuries. Is the rich guys 5 million dollar penthouse mortgage expense really making the % comparisons valid to the rent the poor bastard is paying on his tenement?

"For its part, the Deutsche Bank report explicitly defined luxuries as goods or services consumed in greater proportions as a person’s income increases and necessities as those goods or services that make up a smaller proportion of spending as a person’s income increases."

Seems like a pretty crappy definition, but there you have it.

grmagne

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Re: low income families spend-40%-of-their-money-on-luxuries
« Reply #20 on: September 26, 2017, 03:28:42 PM »
"For its part, the Deutsche Bank report explicitly defined luxuries as goods or services consumed in greater proportions as a person’s income increases and necessities as those goods or services that make up a smaller proportion of spending as a person’s income increases."

Seems like a pretty crappy definition, but there you have it.

Yes, they gave two examples in the article that makes you question the validity of the study:

"It’s worth noting that by the specialized nomenclature of the dismal science, even eating at McDonald’s is a luxury — that is, we do it more as our incomes rise — while smoking and lottery-ticket buying are categorized as necessities."  [italics are mine]

trollwithamustache

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Re: low income families spend-40%-of-their-money-on-luxuries
« Reply #21 on: September 26, 2017, 04:20:32 PM »

[/quote]

Yes, they gave two examples in the article that makes you question the validity of the study:

"It’s worth noting that by the specialized nomenclature of the dismal science, even eating at McDonald’s is a luxury — that is, we do it more as our incomes rise — while smoking and lottery-ticket buying are categorized as necessities."  [italics are mine]
[/quote]


well, Europeans did the study so the smokes are a necessity! :)

kite

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Re: low income families spend-40%-of-their-money-on-luxuries
« Reply #22 on: November 06, 2017, 09:35:51 AM »
The classification of goods as either inferior, normal and luxury is defined in Economics, based on  (YED) or Income Elasticity of Demand.  It is a measure of how demand for a good changes with an increase in income.

There is no value judgement or poor bashing in the study, but plenty of hair trigger offense taking based on ignorance of standard economic terms. 

Chesleygirl

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Re: low income families spend-40%-of-their-money-on-luxuries
« Reply #23 on: November 07, 2017, 11:52:30 AM »
Like most of you, I am friends with several "poor" people. Something I've noted about them, is that they have to have the "top stuff". I guess it's a psychological thing. They tend to spend on short-term material items; where the more well-off guys I know have modest material items, and put the balance into paying off debt, or investing.

What kinds of things of short-term material items do they buy?

trollwithamustache

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Re: low income families spend-40%-of-their-money-on-luxuries
« Reply #24 on: November 08, 2017, 08:22:32 AM »
The classification of goods as either inferior, normal and luxury is defined in Economics, based on  (YED) or Income Elasticity of Demand.  It is a measure of how demand for a good changes with an increase in income.

There is no value judgement or poor bashing in the study, but plenty of hair trigger offense taking based on ignorance of standard economic terms.

so you're saying Economists are now as bad as Lawyers!

MrsPete

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Re: low income families spend-40%-of-their-money-on-luxuries
« Reply #25 on: November 15, 2017, 04:05:14 PM »
Clutter in poor households is due to fear. Poor people are afraid to throw anything away because they are constantly trying to stock up for the next catastrophe. They stockpile absolutely everything they can get their hands on, even things that have no intrinsic value. It's a very common behavior for people who have suffered psychological trauma.
I don't know.  I have a friend whose husband is kind of a slum lord.  He owns a slew of small, old houses, which he rents to people on subsidized housing.  A frequent, frequent occurrence in his life:  His renters disappear in the night, and they take nothing with them.  Even people who don't disappear in the night tend not to take things with them.  I mean, sofas, clothing, frying pans, canned goods -- stuff we all have around our houses.  She says they "aren't all that well set up in the first place", but apparently a fairy large number of poor people just walk out and leave everything.