Author Topic: The Secret Shame of Middle-Class Americans  (Read 216166 times)

Travis

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Re: The Secret Shame of Middle-Class Americans
« Reply #150 on: April 24, 2016, 12:45:13 PM »
The author complains about not having enough paid work/not being paid enough. Simple solution: he should have cut this thing in half and got paid twice.  That article was about two completely different subjects.  The first was the plight of a lot of Americans struggling with wage stagnation, availability of debt, and financial illiteracy.  That last point was pretty much the only thing common with his personal story.  He barely tied together our debt-financed lives and wage issues.  It was almost three articles (it certainly was in length).

As many others have beat to death already, he's an idiot and completely disconnected from his situation.  He admits to several instances of financial stupidity and generally poor decision-making, then turns right back around and implies it's the "systems" fault.  Dude, it's not Corporate America or Congress' fault you sold off what little retirement savings you had to pay for a wedding!  Ask a Mustachian has a thread full of folks who paid the minimum required to get married and are leading healthy happy lives.  He kept his wife out of the workforce when they desperately needed money and kept their financial problems hidden from her. One wonders if he's still doing it.

The personal side of his story could have been summarized by elaborating on his "keeping up with the Joneses" mentality and his lack of financial education (and the fact he's still doing it).  I was glad to see at some point he cut up his credit cards, but he writes as if he's still entitled to a particular standard of living he was never able to afford in the first place.  His admission that writing is not a high-earning profession should have been a tip off a very long time ago.

I love the Bloomberg review of his article.  It did a far better job of making Gabler's point for him in a fraction of the words.

BTDretire

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Re: The Secret Shame of Middle-Class Americans
« Reply #151 on: April 24, 2016, 01:04:20 PM »
The comment section is pretty encouraging, I don't see a ton of people crying over the unfairness of this guy's suffering.

This guy's situation, along with half the country apparently is reason enough to talk about fixing Social Security and/or figuring out how Gen X and Millenials are going to retire.

  Sorry, fixing Social Security, means you pay more in, you retire later, you get reduced benefits. You might get some additional tax free savings, but what percent
of households take advantage of tax free savings.

Quote
Ya think the shrieks are bad now that the boomers are hitting retirement? Hell, at least Boomers bought houses, us millenials don't even buy houses! Stagnant wages, and growing health care costs are going to decimate this generation upon retirement.

Are we in the classic decline of a democracy?
The people have voted the largess to themselves, and it's not there, it's borrowed.

BTDretire

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Re: The Secret Shame of Middle-Class Americans
« Reply #152 on: April 24, 2016, 02:43:50 PM »
What's' clear to me from the article is that the author needs a complete mental reset.  A paradigm shift, to borrow from Khun.  Until that happens, he'll just keep making different variations of the same mistakes over and over again (as he is still doing).  I know, because I used to be like that.  It took long term unemployment and finding MMM to make that shift for me.  I feel lucky.  And I feel sorry for this guy and his family.

 This guy was born in 1950, so he is 65 or 66 now, so I don't know that he can change
his financial condition much now. Being a writer, maybe he can continue to earn income into his eighties. That would give him 15 years to live under his income.

FINate

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Re: The Secret Shame of Middle-Class Americans
« Reply #153 on: April 24, 2016, 05:15:11 PM »
In 1985, when a new car cost $15,000, college tuition at my state university was about 20% of that cost or $3,000.  In California, public university tuition was about 10% of that cost or $1,500 per year.  Private school tuition was even cheaper than a car - at about $8 or $9,000 per year.  Tuition was even cheaper in the 1960s and 1970s.  In the 60s, 70s and 80s, you could realistically flip burgers and make it through college without any debt.  From 1960-1990, there wasn't nearly as much credentialism that pigeon holes certain majors into certain jobs and mandates (via law or business practice) a diploma to even get an interview as there exists today.  If you borrowed money, you could work it off fairly easily even if you didn't use your degree for a job.  The car example is a good one to demonstrate the impact of higher education inflation on Millennials and Generation Z and how their debt burden is much more significant than previous generations.

Cars aren't a good point of comparison as they've improved a lot over several decades while the minimum standards have also increased. It's not an apples to apples comparison.

Yes, the cost of tuition for higher ed has increased, but it is still doable and the doom-and-gloom about millennials being indentured servants is generally overblown. Unless you spent a fortune at a fancypants university (that's your choice), the expense of college is still largely dominated by the opportunity cost and living expenses. Students can save a large amount of money by doing gen ed at a community college and undergrad at a local state university while living at home. Add in part time work/summer jobs and it is possible to get a degree with little or no debt.

Credentialism for many fields has existed for a long time, nothing new here. However, a large percentage of people currently work in jobs that don't match their field of study. This also is not a new trend.

Things change. The boomers and other generations had some things better and some things worse.  Tuition is more expensive now, but many other things are cheaper/better. Millennials are entering a workforce with more safety nets than previous generations (family medical leave, antidiscrimination protection, whistleblower protections, sexual harassment protections, etc.).  Life in the workplace in 2016 is undoubtedly better for women and minorities.

I don't think this intergenerational competition is healthy or constructive. You're focused on relatively small (and negative) differences. Take a step back and get some broader perspective. We live in unprecedented times with a lifestyle many times better than royalty just 100-200 years ago. We've never gone through anything close to the Great Depression or WWII (the folks who were teens in the 30's and then drafted into the war effort - talk about life being unfair!!). Most cancer is now treatable, whereas just a couple decades ago it was a certain death sentence. Same for HIV and other diseases. Our food is healthier. We lead healthier lives and our life expectancy is longer.

LAL

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Re: The Secret Shame of Middle-Class Americans
« Reply #154 on: April 24, 2016, 08:32:00 PM »
I don't think we can assess how badly people are saving for retirement until we hit the point where pensions are a thing of the past.  Now because people live so much longer pensions have to pay out so much more.  This contributes to the underfunding.  The expectation people would die by 75.  Now it's more like 90. 

And as someone in my mid-30s most people I know save next to nothing and have no pension.  My mom commented she saved nothing and retired with a 401k of $200k at 55.  But she's got a pension and free medical for life for her and my dad.  Her pension is worth around $1.5M since she make around $5k/month and it's COLA.  So you tell me how does a social worker today generate that sort of pension to retire at 55 and free medical premiums for life for spouse and worker?  Is it possible?  Even my mom agrees it's not.  The state doesn't even offer that anymore.  By the way her contributions were 7.5% for her working tenure.  And she ran through that in less than 4 years and now lives off the state. I'm happy for her, but I'm just pointing out that most people (with same jobs now) I doubt will be able to replicate her retirement pension/benefits.

So yes it is harder to live a middle class lifestyle. 

doggyfizzle

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Re: The Secret Shame of Middle-Class Americans
« Reply #155 on: April 24, 2016, 09:25:50 PM »
I don't think we can assess how badly people are saving for retirement until we hit the point where pensions are a thing of the past.  Now because people live so much longer pensions have to pay out so much more.  This contributes to the underfunding.  The expectation people would die by 75.  Now it's more like 90. 

And as someone in my mid-30s most people I know save next to nothing and have no pension.  My mom commented she saved nothing and retired with a 401k of $200k at 55.  But she's got a pension and free medical for life for her and my dad.  Her pension is worth around $1.5M since she make around $5k/month and it's COLA.  So you tell me how does a social worker today generate that sort of pension to retire at 55 and free medical premiums for life for spouse and worker?  Is it possible?  Even my mom agrees it's not.  The state doesn't even offer that anymore.  By the way her contributions were 7.5% for her working tenure.  And she ran through that in less than 4 years and now lives off the state. I'm happy for her, but I'm just pointing out that most people (with same jobs now) I doubt will be able to replicate her retirement pension/benefits.

So yes it is harder to live a middle class lifestyle.

Most people were never able to replicate her pension income.  Does she participate in Social Security?  Many workers covered by state pensions forgo social security benefits, so figure that if she had worked until 62, she would likely be able to earn between 1-2k a month in Social Security benefits.  Factor in some diligent 401k contributions and a 1-5% employer match, and she would have been able to replicate that same 5k/month pension without much sacrifice.  Most everyone qualifies for Medicare at 65, and thanks to ACA, you can get coverage before then if you choose to retire.  If you're willing to defer some gratification, building your own pension from a 401k isn't terribly difficult.

LAL

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Re: The Secret Shame of Middle-Class Americans
« Reply #156 on: April 25, 2016, 10:23:11 AM »
She also gets SS to boot at 62.  I think around $2k/month.  Nope but her pension was common for state workers. Now there is a pension and free medical but only if you work 25 years.  And No medical for spouses.  Now you have to work until 62 or take a hit.  There are  a lot more rules in place.  It's not the same to replicate her pension. I would argue that most social workers would probably kill for what she had comparing apples to apples.  We aren't talking engineers and other lucrative careers.  But a school teacher, social worker, etc low paying professional jobs probably can't make her retirement happen.  Can a well paid engineer?  Yes.  But not a comparable job to hers.  She'd agree and say it's not possible.  Before a lot of people in non college degree jobs like administrative assisstant, janitor, clerks had great retirements.  Same jobs now?  They probably have nothing saved.

stoaX

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Re: The Secret Shame of Middle-Class Americans
« Reply #157 on: April 25, 2016, 10:42:48 AM »
"We live in unprecedented times with a lifestyle many times better than royalty just 100-200 years ago. We've never gone through anything close to the Great Depression or WWII (the folks who were teens in the 30's and then drafted into the war effort - talk about life being unfair!!). Most cancer is now treatable, whereas just a couple decades ago it was a certain death sentence. Same for HIV and other diseases. Our food is healthier. We lead healthier lives and our life expectancy is longer."

Thanks FINate, that was spot on.   

My takeaway when I read the article is that he thought the finances would just take care of themselves - that's not a good plan....

mm1970

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Re: The Secret Shame of Middle-Class Americans
« Reply #158 on: April 25, 2016, 11:44:17 AM »
Quote
The higher ed system that boomers and Gen X had did not overburden students with debt and could be solved by small sacrifices - like eating ramen noodles and living with roommates for a few years out of college or graduate school.  As result, boomers and Gen X had more freedom to take risks and make mistakes in their youth and more opportunity to explore different career paths.  Millennials and Gen Z, unless the system changes, will have to pay much more to obtain their educations than prior generations and their opportunities and freedom to fail will be highly restricted.  Is this fair?  Hell no.  More importantly, is this dumb policy?  Hell yes.  We are just starting to see the negative ramifications of unaffordable higher education costs and gigantic student loan debt: delayed home buying, delayed marriage, less children, less wealth building, less opportunity, less social advancement, more insecurity, more inequality, and more anger.   When you combine these macro problems with our nation's DIY retirement system, it is truly a recipe for the erosion of the middle class and eventual financial disaster.

I don't want to argue too much about your basic premise that unaffordable higher education is a problem - it totally is.  But your details of Gen X really don't match my experience, and it's something that I think someone below has mentioned.

I ate ramen noodles and mac and cheese.  Unlike some, I lived on campus (couldn't convince roommates to move off campus, which was cheaper).  I always had roommates.
I did not own a car until I graduated and got a job.  And it was a small used car with no AC (I should have thought that through, as I was moving to DC).
I worked.  I worked every summer (the first summer, 60 hours a week at two jobs). I worked 5 out of 8 semesters.  I worked on my winter breaks (back to bagging groceries).
I had roommates after college - first, renting a cold basement that was never warmer than 58 degrees.
(I was also in the military.  I was a poor kid, and it was the best way to pay for college.  My classmates who were not in the military had similar experiences however.)
I only had my own studio apartment for 2.5 years total.  Then I got married.

My husband opted for grad school on the 7 year plan. So I worked, he went to school, and we had one car.
We didn't buy a house until our mid-30s.
We didn't have kids until mid-30s to mid-40s.


When I look at the millenials that I have worked with their experiences are...similar, really.  Same amount of penny pinching, same amount of ramen noodles.  Same delay in home buying and children (though the savvier ones are ahead on that).

The difference that I see is that a college degree is almost a requirement for a decent "middle class white collar" job.  So while my sister works as an office manager, that's a job that requires a degree now.  So there are *more* students going into debt.  In my circle, it was uncommon to borrow a lot of money for a degree, unless you were getting  a STEM degree.  If you wanted a non-STEM degree, you worked to pay for it, or your parents paid for it, or the military paid for it.  A lot of people just didn't get degrees.

And this degree requirement is something that is affecting the late boomers and early X-ers - a lot.  I have a number of friends and coworkers from my age (mid 40s) till mid-50s.  Without degrees.  They have a lot of experience.  Get laid off?  Good luck getting a new job.  Most companies require a degree.  Given a choice between a 50-year old with 30 years experience and a 30 year old with a degree?  80% of the time, that 50 year old's resume doesn't even make it to the hiring manager's desk.  Then it's years of unemployment or under employment.  That's no fun for sure.

mm1970

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Re: The Secret Shame of Middle-Class Americans
« Reply #159 on: April 25, 2016, 11:55:35 AM »
Quote
In 1985, when a new car cost $15,000, college tuition at my state university was about 20% of that cost or $3,000.  In California, public university tuition was about 10% of that cost or $1,500 per year.  Private school tuition was even cheaper than a car - at about $8 or $9,000 per year.  Tuition was even cheaper in the 1960s and 1970s.  In the 60s, 70s and 80s, you could realistically flip burgers and make it through college without any debt.  From 1960-1990, there wasn't nearly as much credentialism that pigeon holes certain majors into certain jobs and mandates (via law or business practice) a diploma to even get an interview as there exists today.  If you borrowed money, you could work it off fairly easily even if you didn't use your degree for a job.  The car example is a good one to demonstrate the impact of higher education inflation on Millennials and Generation Z and how their debt burden is much more significant than previous generations.

Your car quote is WAY off base unless you are talking larger luxury cars.

The base price of a Honda Civic in 1985 was $5400

In 1992 I bought a used Escort for $6300.

While tuition has gone up, it is going to vary a lot on where you go:
1985:
Civic: $5400
Tuition at Penn State: $2555

1992:
Escort: $6300
Tuition: $4350

Today:
Civic: $18640
Tuition: $16570

So yes, Tuition has gone up since 1985 by a factor of 6.5
A civic has gone up by a factor of 3.4

(but the car's going to last longer)
Civic

randymarsh

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Re: The Secret Shame of Middle-Class Americans
« Reply #160 on: April 25, 2016, 01:19:46 PM »
Quote
In 1985, when a new car cost $15,000, college tuition at my state university was about 20% of that cost or $3,000.  In California, public university tuition was about 10% of that cost or $1,500 per year.  Private school tuition was even cheaper than a car - at about $8 or $9,000 per year.  Tuition was even cheaper in the 1960s and 1970s.  In the 60s, 70s and 80s, you could realistically flip burgers and make it through college without any debt.  From 1960-1990, there wasn't nearly as much credentialism that pigeon holes certain majors into certain jobs and mandates (via law or business practice) a diploma to even get an interview as there exists today.  If you borrowed money, you could work it off fairly easily even if you didn't use your degree for a job.  The car example is a good one to demonstrate the impact of higher education inflation on Millennials and Generation Z and how their debt burden is much more significant than previous generations.

Your car quote is WAY off base unless you are talking larger luxury cars.

So yes, Tuition has gone up since 1985 by a factor of 6.5
A civic has gone up by a factor of 3.4

(but the car's going to last longer)
Civic

The wage premium college graduates command is higher today as well.

Wexler

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Re: The Secret Shame of Middle-Class Americans
« Reply #161 on: April 25, 2016, 03:08:46 PM »
This is an interesting response.  Mustachian! 

http://www.vox.com/2016/4/25/11503040/midwest-savings-atlantic

If 15 percent savings feels out of reach, you should make bigger changes

If you're over 30 and have been consistently failing to reach your savings goals, it's worth treating that as an emergency in its own right. I live in Washington, DC, one of the more expensive metropolitan areas in the United States. And in the last couple of years I've had two different friends move from here to Midwestern cities St. Louis in one case, Minneapolis in the other after a few years of living in Washington, DC.

Seppia

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Re: The Secret Shame of Middle-Class Americans
« Reply #162 on: April 26, 2016, 01:52:48 AM »
There is soooo much fail in the article, my goodness.
If I were a writer I would live somewhere in nature, cheap and beautiful, like the area around Yellowstone, or some pets of Utah for example.
If you have a job you can do from anywhere and choose to live in one of the SINGLE MOST EXPENSIVE PLACES ON THE PLANET you cannot really blame anybody but yourself.

I'm always amazed though how people with similar destructive financial habits seem to find significant others with the same problem.
If I started spending above my means my wife would probably start hitting me very hard with a broom multiple times per day until she beat some sense into me.

Drifterrider

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Re: The Secret Shame of Middle-Class Americans
« Reply #163 on: April 26, 2016, 05:54:47 AM »
So yes it is harder to live a middle class lifestyle.

Only if one thinks middle class means a huge house, several cars, several TVs, rooms for clothing (walk in closet), multiple phone "plans", etc.

Which, some people do.

exterous

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Re: The Secret Shame of Middle-Class Americans
« Reply #164 on: April 26, 2016, 06:39:20 AM »
I don't think we can assess how badly people are saving for retirement until we hit the point where pensions are a thing of the past.  Now because people live so much longer pensions have to pay out so much more.  This contributes to the underfunding.  The expectation people would die by 75.  Now it's more like 90. 

And as someone in my mid-30s most people I know save next to nothing and have no pension. 

While its great that your family has access to pensions I think people have this notion that they were much more common than they really were. Pensions have only ever covered a minority of people - having reached its peak of 46% coverage in 1980. That means that those today without pensions share that commonality with the majority of Americans over the last century

https://www.russell.com/documents/institutional-investors/research/defined-benefit-plans-a-brief-history.pdf

Personally I think a strong argument could be made that the retirement savings and overall investment options are better today given the array of tax deferred options, index funds, low fee ETFs etc

prof61820

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Re: The Secret Shame of Middle-Class Americans
« Reply #165 on: April 26, 2016, 06:45:33 AM »
The United States has always provided the freedom for people to "put on airs" or live beyond their means through easy credit and by not saving for future expenses like retirement or health care.  It has become even easier as of late because credit cards, for many, have obviated the need for even a cash emergency fund.  For some it is a business plan as well as an excuse for living beyond their means.  Have you ever seen a realtor driving a crappy car?  MMMers might still hire that realtor (if they knew that the realtor was also an MMMer) but others that don't share our philosophy might not.  Because of this reality, most realtors don't take the chance of showing up at a home in a substandard vehicle.  And for some, it works out really great because over their lifetime they grow to a point that their early spending - and hard work - makes up the difference for foregoing early savings and compounded interest.  The writer of the article, after all, is a writer and NY and the surrounding area is no doubt a sweet spot to live, work, get inspired and, most importantly, land new business.  I'm not sure how folks in his industry would have felt about hiring him to write books - and giving him hefty advances - if they knew that he was living below his means (smaller house in blue collar neighborhood, used cars, public schools for the kids) in order to have an emergency fund, college savings and retirement savings.  The decision makers - who can be very snobby and judgmental - in his industry may have been turned off.  He chose not to find out and put on airs and delivered a facade that he believed his bosses wanted to see - even if they were not paying him enough money to maintain that lifestyle and save for retirement.  His mistakes were that he choose to portray himself outwardly as a writer that made much more money than he - and his family - made through borrowing and not saving for the future.  When he failed to generate larger paydays, and expenses for college and health care grew at rates higher than inflation, it all came crashing down on him and he's frustrated and angry.

Now, and before everyone gets worked up here, I'm not arguing that he was correct in what he did.  I'm not arguing that society should tolerate his actions and bail him out of his predicament.  All I'm saying is that we should not be shocked or surprised when we allow people the freedoms to make really dumb financial decisions (and make it extremely easy for them via easy credit card access and student loans) because history shows that they will make these dumb decisions and then they will fail en masse.
« Last Edit: April 26, 2016, 07:16:58 AM by prof61820 »

Metric Mouse

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Re: The Secret Shame of Middle-Class Americans
« Reply #166 on: April 26, 2016, 06:51:26 AM »
The United States has always provided the freedom for people to "put on airs" or live beyond their means through easy credit and by not saving for future expenses like retirement or health care.  It has become even easier as of late because credit cards, for many, have obviated the need for even a cash emergency fund.  For some it is a business plan as well as an excuse for living beyond their means.  Have you ever seen a realtor driving a crappy car?  MMMers might still hire that realtor (if they knew that the realtor was also an MMMer) but others that don't share our philosophy might not.  Because of this reality, most realtors don't take the chance of showing up at a home in a substandard vehicle.  And for some, it works out really great because over their lifetime they grow to a point that their early spending - and hard work - makes up the difference for foregoing early savings and compounded interest.  The writer of the article, after all, is a writer and NY and the surrounding area is no doubt a sweet spot to live, work, get inspired and, most importantly, land new business.  I'm not sure how folks in his industry would have felt about hiring him to write books - and giving him heft advances - if they knew that he was living below his means (smaller house in blue collar neighborhood, used cars, public schools for the kids) in order to have an emergency fund, college savings and retirement savings.  The decision makers - who can be very snobby and judgmental - in his industry may have been turned off.  He chose not to find out and put on airs and delivered a facade that he believed his bosses wanted to see - even if they were not paying him enough money to maintain that lifestyle and save for retirement.  His mistakes were that he choose to portray himself outwardly as a writer that made much more money than he, and his family made through borrowing and not saving for the future, and when he failed to generate larger paydays and expenses for college and health care grew at rates higher than inflation, its all now crashing down on him and he's frustrated and angry.

Now, and before everyone gets works up here, I'm not arguing that he was correct in what he did.  I'm not arguing that society should tolerate his actions and bail him out of his predicament.  All I'm saying is that we should not be surprised when we allow people the freedoms to make really dumb financial decisions (and make it extremely easy for them via easy credit card access and student loans) that we shouldn't be shocked or surprised when a large chunk of society makes these dumb decisions and then they fail en masse.

There's plenty of snobby and judgemental to go around. Just check out this forum!

prof61820

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Re: The Secret Shame of Middle-Class Americans
« Reply #167 on: April 26, 2016, 07:02:45 AM »
I don't think we can assess how badly people are saving for retirement until we hit the point where pensions are a thing of the past.  Now because people live so much longer pensions have to pay out so much more.  This contributes to the underfunding.  The expectation people would die by 75.  Now it's more like 90. 

And as someone in my mid-30s most people I know save next to nothing and have no pension. 

While its great that your family has access to pensions I think people have this notion that they were much more common than they really were. Pensions have only ever covered a minority of people - having reached its peak of 46% coverage in 1980. That means that those today without pensions share that commonality with the majority of Americans over the last century

https://www.russell.com/documents/institutional-investors/research/defined-benefit-plans-a-brief-history.pdf

Personally I think a strong argument could be made that the retirement savings and overall investment options are better today given the array of tax deferred options, index funds, low fee ETFs etc

For the rich and upper middle class you are generally correct.  The one major thing that 401Ks don't provide is any real security because the individual bears the risk and there is always the potential that an epic market downturn could wipe you out or significantly slow you down.  The individual also bears the risk of outliving their retirement savings.  That's why you see so many HENRYs (High Earner Not Rich Yet) push themselves to get to FIRE and live solely off of passive income that, at least in theory, cannot be crushed by an extended bear market.  As an aside, it will be interesting to see how our nation is shaped if we create a passive earning class via 401Ks - that can leave an inheritance to their children - and those that burn up their 401Ks and leave nothing.

For middle and lower middle class earners (that don't have big earning years like MMM and many HENRYs do) that have to choose between a safe neighborhood and decent education for their children and retirement savings, like blue collar Trump and Sanders voters, most of them would probably prefer a pension - so long as it wasn't being paid by Puerto Rico or Greece.

My wife and I - who are HENRYs, savers and realists - are pushing for this passive income goal.  We'd like to have few expenses in retirement (including no mortgage), live a modest lifestyle in a low property tax area, and live solely off of the earnings in our retirement accounts and other non-retirement real estate investments and not tap the principal of our retirement accounts but instead hold it in reserve in case of a medical emergency.  Our goal is to leave an inheritance for our kids and get them through college without any student loan debt. 
« Last Edit: April 26, 2016, 07:33:17 AM by prof61820 »

FINate

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Re: The Secret Shame of Middle-Class Americans
« Reply #168 on: April 26, 2016, 08:28:11 AM »
The United States has always provided the freedom for people to "put on airs" or live beyond their means through easy credit and by not saving for future expenses like retirement or health care.  It has become even easier as of late because credit cards, for many, have obviated the need for even a cash emergency fund.  For some it is a business plan as well as an excuse for living beyond their means.  Have you ever seen a realtor driving a crappy car?  MMMers might still hire that realtor (if they knew that the realtor was also an MMMer) but others that don't share our philosophy might not.  Because of this reality, most realtors don't take the chance of showing up at a home in a substandard vehicle.  And for some, it works out really great because over their lifetime they grow to a point that their early spending - and hard work - makes up the difference for foregoing early savings and compounded interest.  The writer of the article, after all, is a writer and NY and the surrounding area is no doubt a sweet spot to live, work, get inspired and, most importantly, land new business.  I'm not sure how folks in his industry would have felt about hiring him to write books - and giving him heft advances - if they knew that he was living below his means (smaller house in blue collar neighborhood, used cars, public schools for the kids) in order to have an emergency fund, college savings and retirement savings.  The decision makers - who can be very snobby and judgmental - in his industry may have been turned off.  He chose not to find out and put on airs and delivered a facade that he believed his bosses wanted to see - even if they were not paying him enough money to maintain that lifestyle and save for retirement.  His mistakes were that he choose to portray himself outwardly as a writer that made much more money than he, and his family made through borrowing and not saving for the future, and when he failed to generate larger paydays and expenses for college and health care grew at rates higher than inflation, its all now crashing down on him and he's frustrated and angry.

Now, and before everyone gets works up here, I'm not arguing that he was correct in what he did.  I'm not arguing that society should tolerate his actions and bail him out of his predicament.  All I'm saying is that we should not be surprised when we allow people the freedoms to make really dumb financial decisions (and make it extremely easy for them via easy credit card access and student loans) that we shouldn't be shocked or surprised when a large chunk of society makes these dumb decisions and then they fail en masse.

There's plenty of snobby and judgemental to go around. Just check out this forum!

Oh, the irony. Stop judging the people on this forum!

Metric Mouse

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Re: The Secret Shame of Middle-Class Americans
« Reply #169 on: April 26, 2016, 08:38:45 AM »
The United States has always provided the freedom for people to "put on airs" or live beyond their means through easy credit and by not saving for future expenses like retirement or health care.  It has become even easier as of late because credit cards, for many, have obviated the need for even a cash emergency fund.  For some it is a business plan as well as an excuse for living beyond their means.  Have you ever seen a realtor driving a crappy car?  MMMers might still hire that realtor (if they knew that the realtor was also an MMMer) but others that don't share our philosophy might not.  Because of this reality, most realtors don't take the chance of showing up at a home in a substandard vehicle.  And for some, it works out really great because over their lifetime they grow to a point that their early spending - and hard work - makes up the difference for foregoing early savings and compounded interest.  The writer of the article, after all, is a writer and NY and the surrounding area is no doubt a sweet spot to live, work, get inspired and, most importantly, land new business.  I'm not sure how folks in his industry would have felt about hiring him to write books - and giving him heft advances - if they knew that he was living below his means (smaller house in blue collar neighborhood, used cars, public schools for the kids) in order to have an emergency fund, college savings and retirement savings.  The decision makers - who can be very snobby and judgmental - in his industry may have been turned off.  He chose not to find out and put on airs and delivered a facade that he believed his bosses wanted to see - even if they were not paying him enough money to maintain that lifestyle and save for retirement.  His mistakes were that he choose to portray himself outwardly as a writer that made much more money than he, and his family made through borrowing and not saving for the future, and when he failed to generate larger paydays and expenses for college and health care grew at rates higher than inflation, its all now crashing down on him and he's frustrated and angry.

Now, and before everyone gets works up here, I'm not arguing that he was correct in what he did.  I'm not arguing that society should tolerate his actions and bail him out of his predicament.  All I'm saying is that we should not be surprised when we allow people the freedoms to make really dumb financial decisions (and make it extremely easy for them via easy credit card access and student loans) that we shouldn't be shocked or surprised when a large chunk of society makes these dumb decisions and then they fail en masse.

There's plenty of snobby and judgemental to go around. Just check out this forum!

Oh, the irony. Stop judging the people on this forum!

:D  May MMM give me the strength!

Apples

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Re: The Secret Shame of Middle-Class Americans
« Reply #170 on: April 27, 2016, 08:48:04 AM »

This is a very good point.  I can't remember which book it was "The Way We Never Were", or "The Two Income Trap" or ???

Anyway, a book I read at some point talked about how it requires 2 incomes to be middle class now.  In some ways, we spend more - housing is more expensive, particularly if you want a decent school district.  Entertainment is cheaper, and cars are a much better deal.  Cars didn't used to survive past 100,000 miles, for example.

This- Two income trap. We are living almost exactly like my parents did at the same age: same size house (1100 sqf), same two kids, etc. but we do it on two jobs wheres I had a dad that worked and a stay at home mom.

We've run the numbers and we could get by with one us staying home but our standard of living would drop significantly (as would our ability to save). Sure - cars and TVs are cheaper but health insurance is insane.

We are incredibly frugal and savers and we had three years in a row with medical emergencies - we hit our OUT OF POCKET max two years in a row. Another year would have taken us perilously close to draining our non retirement "emergency" savings. Then our 12 year old fridge died, then our water heater leaked, then our cat got sick, then an ice storm put a tree through roof, now our 14 year old car is on it's last legs. It was a rough three years.

We are people that are not making "bad" choices and we feel impoverished all of the time. Because of our good habits I know that we'll be fine but I think if you compare "middle class" now to that of 25 years ago and then 50 years ago many people are not doing better.

I was discussing this with my grandparents a few months ago.  They know young people struggling to get by, but buying TV's and entertainment systems instead of saving money when they get gifts or tax returns.  They have 2 cars instead of 1 (but I live in a rural area and I'll be damned if a SAHP is going to be home with kids without a means of transport, so I'm a big supporter of 2 car families....anyway, tangent) and a few gadgets.  And I point out that yes, a TV is $500 once and that car is $125 month.  But they could save alllll that money and not come close to paying for health insurance if (one of) the parent(s) doesn't have a good deal with it at work.  Let alone if one of them also has student loan payments and didn't take the time to switch to a low payment plan or if the loans are private because they went to a technical training school. 

StarBright

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Re: The Secret Shame of Middle-Class Americans
« Reply #171 on: April 27, 2016, 09:57:55 AM »

I was discussing this with my grandparents a few months ago.  They know young people struggling to get by, but buying TV's and entertainment systems instead of saving money when they get gifts or tax returns.  They have 2 cars instead of 1 (but I live in a rural area and I'll be damned if a SAHP is going to be home with kids without a means of transport, so I'm a big supporter of 2 car families....anyway, tangent) and a few gadgets.  And I point out that yes, a TV is $500 once and that car is $125 month.  But they could save alllll that money and not come close to paying for health insurance if (one of) the parent(s) doesn't have a good deal with it at work.  Let alone if one of them also has student loan payments and didn't take the time to switch to a low payment plan or if the loans are private because they went to a technical training school.

Exactly! $500 didn't even cover my insurance premiums for the month, let alone deductible or out of pocket max (and that's not even counting out of network max - a separate, insane amount). I think a lot of people that pooh pooh young families' expenditures must get a great deal on insurance through their jobs. I know my in-laws and parents were both like that.

FINate

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Re: The Secret Shame of Middle-Class Americans
« Reply #172 on: April 27, 2016, 10:00:47 AM »

This is a very good point.  I can't remember which book it was "The Way We Never Were", or "The Two Income Trap" or ???

Anyway, a book I read at some point talked about how it requires 2 incomes to be middle class now.  In some ways, we spend more - housing is more expensive, particularly if you want a decent school district.  Entertainment is cheaper, and cars are a much better deal.  Cars didn't used to survive past 100,000 miles, for example.

This- Two income trap. We are living almost exactly like my parents did at the same age: same size house (1100 sqf), same two kids, etc. but we do it on two jobs wheres I had a dad that worked and a stay at home mom.

We've run the numbers and we could get by with one us staying home but our standard of living would drop significantly (as would our ability to save). Sure - cars and TVs are cheaper but health insurance is insane.

We are incredibly frugal and savers and we had three years in a row with medical emergencies - we hit our OUT OF POCKET max two years in a row. Another year would have taken us perilously close to draining our non retirement "emergency" savings. Then our 12 year old fridge died, then our water heater leaked, then our cat got sick, then an ice storm put a tree through roof, now our 14 year old car is on it's last legs. It was a rough three years.

We are people that are not making "bad" choices and we feel impoverished all of the time. Because of our good habits I know that we'll be fine but I think if you compare "middle class" now to that of 25 years ago and then 50 years ago many people are not doing better.

I was discussing this with my grandparents a few months ago.  They know young people struggling to get by, but buying TV's and entertainment systems instead of saving money when they get gifts or tax returns.  They have 2 cars instead of 1 (but I live in a rural area and I'll be damned if a SAHP is going to be home with kids without a means of transport, so I'm a big supporter of 2 car families....anyway, tangent) and a few gadgets.  And I point out that yes, a TV is $500 once and that car is $125 month.  But they could save alllll that money and not come close to paying for health insurance if (one of) the parent(s) doesn't have a good deal with it at work.  Let alone if one of them also has student loan payments and didn't take the time to switch to a low payment plan or if the loans are private because they went to a technical training school.

If someone is already in debt and struggling to make ends meet then each additional dollar spent on non-essentials (TV, more car or house than is needed, eating out, etc.) adds to their financial crisis. It's one more dollar spent, perhaps on credit, that could have gone to paying down debt. I really don't understand the "I'm already struggling financially, so I'm just going to spend money 'cause it's small relative to my debts" point of view. While forgoing a TV purchase or a car on credit may not cover the cost of health insurance (though you might find that one of the subsidized ACA plans come close), using these savings to pay off debt improves their financial position slightly instead of making it worse. Do this consistently over a number of years and the crisis is eventually eliminated.

I know we're talking generalities here, and every situation is different, so I will have to rely on what I see anecdotally from millennial acquaintances who are struggling. What I've noticed is that, for them, the term "frugal" is fashionable - they talk about frugality and even shop at secondhand stores for retro finds. But most of them aren't really very frugal, which for them really means avoiding conspicuous consumption of luxury brands...they are frugal relative to the excesses displayed on TV shows, a pretty low bar. Those cool retro finds are often very expensive (because they are in demand). Although they aren't going to fancy restaurants they are eating out very frequently. They buy new cars. They have cable and premium cell phone plans. They travel! (nothing against travel, it's great, but it's expensive) They are prone to buying trinkets (Star Wars merchandise and other gimmicky things). In short, they could be saving a substantial amount of money every month, and this quickly adds up over time.

Now to be clear, I'm not saying this applies to everyone (or to people on this thread), just pointing out that for most people there is substantial room for improvement in their personal finances, and that's a Good Thing! It means they have some hope of control over the situation, which is empowering!

Miss Piggy

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Re: The Secret Shame of Middle-Class Americans
« Reply #173 on: April 27, 2016, 10:14:03 AM »
If someone is already in debt and struggling to make ends meet then each additional dollar spent on non-essentials (TV, more car or house than is needed, eating out, etc.) adds to their financial crisis. It's one more dollar spent, perhaps on credit, that could have gone to paying down debt. I really don't understand the "I'm already struggling financially, so I'm just going to spend money 'cause it's small relative to my debts" point of view.

I spent the weekend with a very good friend and her husband. Both are quite overweight; he is morbidly obese. I came home and talked to my husband about how amazed I was at how much this guy eats. I don't think he has any idea he eats so much more than the average person. I kind of equate this to what you said above, but it's more like "I'm already struggling with my weight, so I'll just eat a bit more...it won't make that much of a difference..."  That said, he's also talking about the possibility of gastric bypass, so he clearly knows he has a big issue and feels like he's in it so deep that he can't get out on his own.

Guses

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Re: The Secret Shame of Middle-Class Americans
« Reply #174 on: April 27, 2016, 10:58:23 AM »
Quote
In 1985, when a new car cost $15,000, college tuition at my state university was about 20% of that cost or $3,000.  In California, public university tuition was about 10% of that cost or $1,500 per year.  Private school tuition was even cheaper than a car - at about $8 or $9,000 per year.  Tuition was even cheaper in the 1960s and 1970s.  In the 60s, 70s and 80s, you could realistically flip burgers and make it through college without any debt.  From 1960-1990, there wasn't nearly as much credentialism that pigeon holes certain majors into certain jobs and mandates (via law or business practice) a diploma to even get an interview as there exists today.  If you borrowed money, you could work it off fairly easily even if you didn't use your degree for a job.  The car example is a good one to demonstrate the impact of higher education inflation on Millennials and Generation Z and how their debt burden is much more significant than previous generations.

Your car quote is WAY off base unless you are talking larger luxury cars.

The base price of a Honda Civic in 1985 was $5400

In 1992 I bought a used Escort for $6300.

While tuition has gone up, it is going to vary a lot on where you go:
1985:
Civic: $5400
Tuition at Penn State: $2555

1992:
Escort: $6300
Tuition: $4350

Today:
Civic: $18640
Tuition: $16570

So yes, Tuition has gone up since 1985 by a factor of 6.5
A civic has gone up by a factor of 3.4

(but the car's going to last longer)
Civic

1985:
Number of Channels on TV: 6
Cost of tuition: $2555

2016:
Number of Channels on TV: 600
Tuition: $16570

Channel inflation is 100 FOLD whereas tuition has only gone up by a factor of 6.


mm1970

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Re: The Secret Shame of Middle-Class Americans
« Reply #175 on: April 27, 2016, 11:04:53 AM »
Quote
I was discussing this with my grandparents a few months ago.  They know young people struggling to get by, but buying TV's and entertainment systems instead of saving money when they get gifts or tax returns.  They have 2 cars instead of 1 (but I live in a rural area and I'll be damned if a SAHP is going to be home with kids without a means of transport, so I'm a big supporter of 2 car families....anyway, tangent) and a few gadgets.  And I point out that yes, a TV is $500 once and that car is $125 month.  But they could save alllll that money and not come close to paying for health insurance if (one of) the parent(s) doesn't have a good deal with it at work.  Let alone if one of them also has student loan payments and didn't take the time to switch to a low payment plan or if the loans are private because they went to a technical training school.

Quote
Exactly! $500 didn't even cover my insurance premiums for the month, let alone deductible or out of pocket max (and that's not even counting out of network max - a separate, insane amount). I think a lot of people that pooh pooh young families' expenditures must get a great deal on insurance through their jobs. I know my in-laws and parents were both like that.

Or...they don't have insurance.  I did not have insurance as a child.  Like, ever.  For a large part of her life, my sister's family did not have insurance either.

Several of my friends right now are self-employed or work for small companies, and they don't have insurance either.  (Well, they might now, with ACA.)

In my family, you paid needs before wants.  So that means, we did not have cable TV or new cars or whatever.  You say "that's not enough for insurance" - that may be true.  And I think insurance is very important for many many people. 

However, my parents paid out of pocket.  Yes, we went to the dentist every year or two, not every 6 months.  Yes, that means our annual trips to the doctor were not annual.  (And that also means that the surgery I had at age 12, and ensuing 2 weeks in the hospital, were paid out of pocket, at $100 a month, for 5 years, plus whatever tax refunds we got).

"I can't afford it so I might as well not save for it" is pretty lame, in my opinion.  People locally complain about stuff like this all the time.
"I'll never afford a house" - so they buy a BMW SUV.
"I'll never afford health insurance" - so they have a iPhone on contract.

And yes, in many many cases, no amount of saving is going to buy you a house in Santa Barbara.  Just somewhere in the last few decades, we've lost the separation between "wants" and "needs".  I'm solidly middle class/ upper middle class now, and I'm quite surprised about the complaints about the cost of health insurance.

Even 14 years ago - our insurance was pretty cheap. But it started going up annually.  A little bit here and there, but people would complain about the co-pay, or about the premiums being all of $100 a month back then.  And in my experience, it was cheap!  I didn't have insurance at all until college, and then had a (glorious?) 5 years in the military.  Nobody wants to pay $25 for an annual checkup? 

I can understand the complaints when insurance premiums get to be thousands a month.  But people complain about the cost of insurance and/or health care even when it's not expensive.

Gondolin

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Re: The Secret Shame of Middle-Class Americans
« Reply #176 on: April 27, 2016, 11:57:18 AM »
Quote
Given a choice between a 50-year old with 30 years experience and a 30 year old with a degree?  80% of the time, that 50 year old's resume doesn't even make it to the hiring manager's desk. 

Yep - automated keyword screened resume intake systems are the worst thing to happen to the HR industry....ever.

randymarsh

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Re: The Secret Shame of Middle-Class Americans
« Reply #177 on: April 27, 2016, 12:03:17 PM »
Insurance is really a crapshoot. A former employer's plan wasn't bad at all for an individual: $80/month. But for families it was insane. Self + Spouse + Children was minimum $800. This was an org where making 50K+ meant you were one of the higher paid employees! A lot of people were in the 35-40K range. 27% of gross income on health insurance is nuts IMO and would definitely reduce the ability to save. 

Cassie

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Re: The Secret Shame of Middle-Class Americans
« Reply #178 on: April 27, 2016, 12:07:05 PM »
Health insurance has gotten out of control. Many people that have the ACA can't afford to use it with 6k or higher deductibles. Our health insurance through my former employer costs 10K/year since I retired. It is much cheaper for those still working. 

FINate

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Re: The Secret Shame of Middle-Class Americans
« Reply #179 on: April 27, 2016, 12:10:27 PM »
Insurance is really a crapshoot. A former employer's plan wasn't bad at all for an individual: $80/month. But for families it was insane. Self + Spouse + Children was minimum $800. This was an org where making 50K+ meant you were one of the higher paid employees! A lot of people were in the 35-40K range. 27% of gross income on health insurance is nuts IMO and would definitely reduce the ability to save.

At $40K income a family of 4 in my area can get a subsidized "silver" plan from Covered California (our ACA marketplace) for $159/month. Without the subsidy the price would be $821/month.

Apples

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Re: The Secret Shame of Middle-Class Americans
« Reply #180 on: April 27, 2016, 12:34:25 PM »
Quote
I was discussing this with my grandparents a few months ago.  They know young people struggling to get by, but buying TV's and entertainment systems instead of saving money when they get gifts or tax returns.  They have 2 cars instead of 1 (but I live in a rural area and I'll be damned if a SAHP is going to be home with kids without a means of transport, so I'm a big supporter of 2 car families....anyway, tangent) and a few gadgets.  And I point out that yes, a TV is $500 once and that car is $125 month.  But they could save alllll that money and not come close to paying for health insurance if (one of) the parent(s) doesn't have a good deal with it at work.  Let alone if one of them also has student loan payments and didn't take the time to switch to a low payment plan or if the loans are private because they went to a technical training school.

Quote
Exactly! $500 didn't even cover my insurance premiums for the month, let alone deductible or out of pocket max (and that's not even counting out of network max - a separate, insane amount). I think a lot of people that pooh pooh young families' expenditures must get a great deal on insurance through their jobs. I know my in-laws and parents were both like that.

Or...they don't have insurance.  I did not have insurance as a child.  Like, ever.  For a large part of her life, my sister's family did not have insurance either.

Several of my friends right now are self-employed or work for small companies, and they don't have insurance either.  (Well, they might now, with ACA.)

In my family, you paid needs before wants.  So that means, we did not have cable TV or new cars or whatever.  You say "that's not enough for insurance" - that may be true.  And I think insurance is very important for many many people. 

However, my parents paid out of pocket.  Yes, we went to the dentist every year or two, not every 6 months.  Yes, that means our annual trips to the doctor were not annual.  (And that also means that the surgery I had at age 12, and ensuing 2 weeks in the hospital, were paid out of pocket, at $100 a month, for 5 years, plus whatever tax refunds we got).

"I can't afford it so I might as well not save for it" is pretty lame, in my opinion.  People locally complain about stuff like this all the time.
"I'll never afford a house" - so they buy a BMW SUV.
"I'll never afford health insurance" - so they have a iPhone on contract.

And yes, in many many cases, no amount of saving is going to buy you a house in Santa Barbara.  Just somewhere in the last few decades, we've lost the separation between "wants" and "needs".  I'm solidly middle class/ upper middle class now, and I'm quite surprised about the complaints about the cost of health insurance.

Even 14 years ago - our insurance was pretty cheap. But it started going up annually.  A little bit here and there, but people would complain about the co-pay, or about the premiums being all of $100 a month back then.  And in my experience, it was cheap!  I didn't have insurance at all until college, and then had a (glorious?) 5 years in the military.  Nobody wants to pay $25 for an annual checkup? 

I can understand the complaints when insurance premiums get to be thousands a month.  But people complain about the cost of insurance and/or health care even when it's not expensive.

I agree with your sentiments.  I was mostly pointing out that for people who made upper middle class income (and the perks of those types of jobs, like good insurance) can see the TV purchase and think that "those poor people" are idiots.  The people I was sort-of defending/explaining about are the type who sound like your parents.  Health care is mostly out of pocket (though nowadays our state covers kids pretty well for low income families, thankfully), the co-pay on the insurance from work is high or they have to pay some sort of monthly premium for ACA, they own two beater cars, if they have a smart phone it's several years old, they have one possibly two televisions and whatever tv package allows them to watch the particular sports they're fond of*.  I live in a very LCOL area, very working class, so the purchases are more like 1 tv/gadget/couch/expensive thing per year.  And that purchase itself is usually less than health insurance for the year, or kid's activities for a few months, etc.  Many of these people I'm referring to cash their checks and might possibly have a single savings account.  Otherwise it's all cash, maybe one secured credit card. No vacations, or maybe 1 to go visit family.  The student loans are $10,000 or $12,000 usually after 18 months of technical school that didn't get them a very high-paying job.  The $500/year of a television or gadget will certainly speed up paying it off, but not so much so that maybe the TV is worth it for them anyway.  So this probably doesn't belong on a middle class thread, because they're the types to finance a SUV and take showy vacations usually, not the people I wrote about.  But all of them could do with a dash of financial responsibility sometimes! 

*About half the working class population around here hails from Central America.  The white guys in this situation just use the basic satellite package, and the hispanic guys get whatever gets them Telemundo.  That and beer seems to be their only indulgences in life on a frequent basis.

+1 to insurance craziness.  A lot of my coworkers make $30-$50k and it's not the monthly premium that gets them, it's the copay.  $30 for the doctor, $75 for ANY specialist**  $300 to show up in the ER because we live in the middle of nowhere and you injured yourself kinda badly on a Sunday.  Run 3 tests while you're there?  That's another $150-$240 depending on what tests they were.  That's all before the deductible.  My company uses an HRA and the employees only pay the first small portion of the deductible, then the employer reimburses them for costs after that.  They pay little in the way of monthly premiums, so if you're healthy it's really cheap insurance.  But I feel bad for the guys with kids from about 5-15 that have at least 1 get injured or a mystery illness 2-3 times a year.  This plan counts as a "silver" plan.

**My gyno is considered a "specialist" by my insurance, and my annual exam included that copay.  Which just felt wrong.  I called to try to find out why, and they reduced it to $60, which still seems wrong. 

randymarsh

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Re: The Secret Shame of Middle-Class Americans
« Reply #181 on: April 27, 2016, 12:45:06 PM »
Insurance is really a crapshoot. A former employer's plan wasn't bad at all for an individual: $80/month. But for families it was insane. Self + Spouse + Children was minimum $800. This was an org where making 50K+ meant you were one of the higher paid employees! A lot of people were in the 35-40K range. 27% of gross income on health insurance is nuts IMO and would definitely reduce the ability to save.

At $40K income a family of 4 in my area can get a subsidized "silver" plan from Covered California (our ACA marketplace) for $159/month. Without the subsidy the price would be $821/month.

My understanding is that if your employer offers coverage, then you qualify for 0 subsidies. So this hypothetical family is stuck paying $800+ no matter what avenue they choose.

FINate

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Re: The Secret Shame of Middle-Class Americans
« Reply #182 on: April 27, 2016, 12:57:48 PM »
Insurance is really a crapshoot. A former employer's plan wasn't bad at all for an individual: $80/month. But for families it was insane. Self + Spouse + Children was minimum $800. This was an org where making 50K+ meant you were one of the higher paid employees! A lot of people were in the 35-40K range. 27% of gross income on health insurance is nuts IMO and would definitely reduce the ability to save.

At $40K income a family of 4 in my area can get a subsidized "silver" plan from Covered California (our ACA marketplace) for $159/month. Without the subsidy the price would be $821/month.

My understanding is that if your employer offers coverage, then you qualify for 0 subsidies. So this hypothetical family is stuck paying $800+ no matter what avenue they choose.

Wrong. The premiums from the employer must be considered affordable, which is defined as no more than 9.5% of annual income ($316/month for $40k income). Now this affordability test is only for what the premiums would cost the individual employee (not spouse or dependents). This discrepancy in the ACA subsidy eligibility test is known as the "family glitch" - some people will be hit by this, other won't. It depends on the details of each situation.

StarBright

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Re: The Secret Shame of Middle-Class Americans
« Reply #183 on: April 27, 2016, 02:05:48 PM »

Wrong. The premiums from the employer must be considered affordable, which is defined as no more than 9.5% of annual income ($316/month for $40k income). Now this affordability test is only for what the premiums would cost the individual employee (not spouse or dependents). This discrepancy in the ACA subsidy eligibility test is known as the "family glitch" - some people will be hit by this, other won't. It depends on the details of each situation.

This is exactly the hole my family falls into - both my DH's and my employer offer affordable individual rates but costs for spousal and child coverage are above the "affordable" percentage.  I looked into it fairly extensively when the exchanges opened. We pay about the same for coverage now as we would unsubsidized on the open market. And even then, those silver plans tend to come with high-ish deductibles.

Going back round to the article that inspired this thread - Yes the guy made bad decision after bad decision, and while I appreciate his willingness to publicly discuss his problems I do not think he is a good example to illustrate the issue.

BUT - someone at the very beginning of the thread introduced the idea of "does the middle class today have a harder time" and that is how I've been framing this conversation since. I would agree with those that say the baseline existence is probably better than it was 30 or 50 years ago (better technology, health innovations etc). But then I diverge and come to this from a fairly personal place: I'm frugal and I was raised by parents who had the knowledge and took the effort to give me a strong financial background.  Because of this I have been making the "right" decisions since I was teenager and they have enabled me to weather financial storms in my 30s.

BUT, should you have to have an almost perfect record of "right" decisions just to not meet financial ruin? I think if you are putting 40-50 hour weeks of skilled/any labor and living like a moderately responsible citizen then you have earned the privilege of not facing a financially life ruining emergency (due to markets, health emergencies, weather, etc) - even if you have made some "wrong" choices in the past. 

I'd like to see some changes made to the current system to either give people a stronger safety net or help them not get in that situation in the first place. Some of these changes might be the following: being able to declare bankruptcy on student loans, subsidized healthcare, subsidized childcare, changing the exemptions on overtime for salaried employees (which I believe might actually be happening this year), bring back unions, raise the cap on social security, and on and on and on. A cocktail of some of these options might help - because I think the issue with the "Middle Class" is that life wouldn't be so bad if just some of these issues were a concern but for many people, all of them are.

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Re: The Secret Shame of Middle-Class Americans
« Reply #184 on: April 27, 2016, 03:45:07 PM »
A Facebook acquaintance of mine (a classmate of my older sister from High School) shared this article with the comment "#Truth"  She's 36 or so and is a single mother to a tween (which I am sure is financially difficult).  This is about 2 days after she posted a picture of an "Uber driver starter kit" with the comment, "Need to pay for daughter's braces and my nose job" 

.... wuuuut?

I guess at least she's not financing those things?

FINate

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Re: The Secret Shame of Middle-Class Americans
« Reply #185 on: April 27, 2016, 04:03:44 PM »

Wrong. The premiums from the employer must be considered affordable, which is defined as no more than 9.5% of annual income ($316/month for $40k income). Now this affordability test is only for what the premiums would cost the individual employee (not spouse or dependents). This discrepancy in the ACA subsidy eligibility test is known as the "family glitch" - some people will be hit by this, other won't. It depends on the details of each situation.

This is exactly the hole my family falls into - both my DH's and my employer offer affordable individual rates but costs for spousal and child coverage are above the "affordable" percentage.  I looked into it fairly extensively when the exchanges opened. We pay about the same for coverage now as we would unsubsidized on the open market. And even then, those silver plans tend to come with high-ish deductibles.

Going back round to the article that inspired this thread - Yes the guy made bad decision after bad decision, and while I appreciate his willingness to publicly discuss his problems I do not think he is a good example to illustrate the issue.

BUT - someone at the very beginning of the thread introduced the idea of "does the middle class today have a harder time" and that is how I've been framing this conversation since. I would agree with those that say the baseline existence is probably better than it was 30 or 50 years ago (better technology, health innovations etc). But then I diverge and come to this from a fairly personal place: I'm frugal and I was raised by parents who had the knowledge and took the effort to give me a strong financial background.  Because of this I have been making the "right" decisions since I was teenager and they have enabled me to weather financial storms in my 30s.

BUT, should you have to have an almost perfect record of "right" decisions just to not meet financial ruin? I think if you are putting 40-50 hour weeks of skilled/any labor and living like a moderately responsible citizen then you have earned the privilege of not facing a financially life ruining emergency (due to markets, health emergencies, weather, etc) - even if you have made some "wrong" choices in the past. 

I'd like to see some changes made to the current system to either give people a stronger safety net or help them not get in that situation in the first place. Some of these changes might be the following: being able to declare bankruptcy on student loans, subsidized healthcare, subsidized childcare, changing the exemptions on overtime for salaried employees (which I believe might actually be happening this year), bring back unions, raise the cap on social security, and on and on and on. A cocktail of some of these options might help - because I think the issue with the "Middle Class" is that life wouldn't be so bad if just some of these issues were a concern but for many people, all of them are.

We should fix the family glitch because it is idiotic in that it's arbitrary and produces perverse outcomes.

That said, I'm not convinced about the other things you mention. The problem is that our society ALWAYS invents ways to create demand and absorb additional money. As long as people prioritize wants before needs they will always spend themselves into a hole, so this money will be used to increase consumption: a car that is bigger/more expensive than they would otherwise buy, or more house than they need, more clothes, and such.

Personal finance as similar to physical fitness. Most people don't pack on large amounts of weight over a short period of time and then suddenly wake up one day with metabolic syndrome. Instead, most people make a large number of small and seemingly inconsequential choices day-to-day that are unhealthy, putting on several pounds a year while remaining sedentary working in an office and watching TV. By middle age this catches up with people, at which point you start hearing things like "when you hit middle age your metabolism changes!" Uh, no it doesn't, you're just starting to notice the cumulative effects of your choices for the past 20 years. Personal finance is the same: $5 lattes, cars on credit, carrying debt, cable TV, over spending on food, not saving for retirement, or any number of other things discussed on this blog. Any one of these decisions, in isolation and at any single point in time, is relatively harmless. But do this over decades and before you know it your finances are a disaster.
« Last Edit: April 27, 2016, 04:36:19 PM by FINate »

LiveLean

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Re: The Secret Shame of Middle-Class Americans
« Reply #186 on: April 27, 2016, 04:19:44 PM »
I have been a freelance writer since the end of 1998, when I left a full-time journalism job. My wife and I are a few years to FIRE. We're 47. Here's the difference.

1. NYC? Please. We're DC-area natives and saw the future. We moved to Florida a year before I went freelance. COL much lower, quality of life much higher.

2. Private schools? Get out of here. Our sons (10 and 13) go to public schools. Yes, in Florida.

3. Stanford or Emory? No way. Our guys will go to Florida public universities for little-to-no cost between Florida's pre-paid college tuition plan (which we bought years ago) and Bright Futures scholarships available to Florida kids on a sliding scale based on academic performance in high school.

4. Pay for weddings? Hell no. Yes, we have sons. But my old man refused to pay for my sisters' weddings. He thought it was part of being a grown-up, since he and my mom, at 29, paid for theirs (in 1968) and my sisters didn't marry until 34 and 38. I knew better than to ask if he wanted to chip in or host my rehearsal dinner.

I've written books, too, but I'm still waiting for Scorcese to call. Judging by his subject matter, he's earned a lot more in advance money than I have. I've worked in TV a bit, too, but not as a freakin' fill-in for Siskel and Ebert. My wife has not been a freakin' film executive, but a low-paid graphic designer, school teacher, and stay-at-home mom.

He's not in that situation because he chose to be a freelance writer. That's not in the top 10 of his bad decisions. Being a freelance writer is a blessing because the irregular income forces you to be Mustachian.

Or at least it should.

« Last Edit: April 27, 2016, 04:21:36 PM by LiveLean »

stoaX

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Re: The Secret Shame of Middle-Class Americans
« Reply #187 on: April 27, 2016, 04:40:52 PM »
I have been a freelance writer since the end of 1998, when I left a full-time journalism job. My wife and I are a few years to FIRE. We're 47. Here's the difference.

1. NYC? Please. We're DC-area natives and saw the future. We moved to Florida a year before I went freelance. COL much lower, quality of life much higher.

2. Private schools? Get out of here. Our sons (10 and 13) go to public schools. Yes, in Florida.

3. Stanford or Emory? No way. Our guys will go to Florida public universities for little-to-no cost between Florida's pre-paid college tuition plan (which we bought years ago) and Bright Futures scholarships available to Florida kids on a sliding scale based on academic performance in high school.

4. Pay for weddings? Hell no. Yes, we have sons. But my old man refused to pay for my sisters' weddings. He thought it was part of being a grown-up, since he and my mom, at 29, paid for theirs (in 1968) and my sisters didn't marry until 34 and 38. I knew better than to ask if he wanted to chip in or host my rehearsal dinner.

I've written books, too, but I'm still waiting for Scorcese to call. Judging by his subject matter, he's earned a lot more in advance money than I have. I've worked in TV a bit, too, but not as a freakin' fill-in for Siskel and Ebert. My wife has not been a freakin' film executive, but a low-paid graphic designer, school teacher, and stay-at-home mom.

He's not in that situation because he chose to be a freelance writer. That's not in the top 10 of his bad decisions. Being a freelance writer is a blessing because the irregular income forces you to be Mustachian.

Or at least it should.

+1

CNM

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Re: The Secret Shame of Middle-Class Americans
« Reply #188 on: April 27, 2016, 04:50:05 PM »

Wrong. The premiums from the employer must be considered affordable, which is defined as no more than 9.5% of annual income ($316/month for $40k income). Now this affordability test is only for what the premiums would cost the individual employee (not spouse or dependents). This discrepancy in the ACA subsidy eligibility test is known as the "family glitch" - some people will be hit by this, other won't. It depends on the details of each situation.

This is exactly the hole my family falls into - both my DH's and my employer offer affordable individual rates but costs for spousal and child coverage are above the "affordable" percentage.  I looked into it fairly extensively when the exchanges opened. We pay about the same for coverage now as we would unsubsidized on the open market. And even then, those silver plans tend to come with high-ish deductibles.

Going back round to the article that inspired this thread - Yes the guy made bad decision after bad decision, and while I appreciate his willingness to publicly discuss his problems I do not think he is a good example to illustrate the issue.

BUT - someone at the very beginning of the thread introduced the idea of "does the middle class today have a harder time" and that is how I've been framing this conversation since. I would agree with those that say the baseline existence is probably better than it was 30 or 50 years ago (better technology, health innovations etc). But then I diverge and come to this from a fairly personal place: I'm frugal and I was raised by parents who had the knowledge and took the effort to give me a strong financial background.  Because of this I have been making the "right" decisions since I was teenager and they have enabled me to weather financial storms in my 30s.

BUT, should you have to have an almost perfect record of "right" decisions just to not meet financial ruin? I think if you are putting 40-50 hour weeks of skilled/any labor and living like a moderately responsible citizen then you have earned the privilege of not facing a financially life ruining emergency (due to markets, health emergencies, weather, etc) - even if you have made some "wrong" choices in the past. 

I'd like to see some changes made to the current system to either give people a stronger safety net or help them not get in that situation in the first place. Some of these changes might be the following: being able to declare bankruptcy on student loans, subsidized healthcare, subsidized childcare, changing the exemptions on overtime for salaried employees (which I believe might actually be happening this year), bring back unions, raise the cap on social security, and on and on and on. A cocktail of some of these options might help - because I think the issue with the "Middle Class" is that life wouldn't be so bad if just some of these issues were a concern but for many people, all of them are.

Starbright, I agree with you that I think health care and long-term care in the US is WAY WAY too high.  And I agree that this needs to change.

However, the author did not have a simple mistake here or there.  A lot of people make a mistake and recover and are fine.  There are a lot of people on this forum (maybe even myself included!) who have crawled out of debt, are solvent, and even are able to accrue enough wealth despite early setbacks.  This is why this article is so frustrating.  It's probably true that wages have been stagnant and the cost of living is higher now than it was, but this guy is trying to use himself as an example.  THAT is the problem.  He is not a good example of this problem at all.  He just lived and continues to live too large.

BTDretire

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Re: The Secret Shame of Middle-Class Americans
« Reply #189 on: April 28, 2016, 01:05:20 PM »

I'd like to see some changes made to the current system to either give people a stronger safety net or help them not get in that situation in the first place. Some of these changes might be the following: being able to declare bankruptcy on student loans,

 That is a free ticket to, borrow all you can, after you graduate, work a year at McDonalds,
go bankrupt and write off $200,000 of student loans. Might as well let Bernie give you *free education.

* free, meaning take money from hardworking taxpayers and give it to students.
Quote
subsidized healthcare,
Hmm, my unsubsidized non ACA family premium is $8500 a year, an ACA policy is $15,700
with a higher deductible, oh, but less then $7,000 with the *subsidy.

*Subsidy, meaning take money from hardworking taxpayers and give it to policy holders.
Quote
subsidized childcare,
* you get the drill. The money has to come from somewhere, and we have borrowed and borrowed and burrowed and burrowed ourselves deeper in debt.
Quote
changing the exemptions on overtime for salaried employees (which I believe might actually be happening this year),
uhm, may just lower their salary to start.
Quote

 bring back unions,
The unions kinda priced their worker out of jobs, especially in the auto industry.
Quote
raise the cap on social security,
In order to save SS, I'm for that, and reducing benefits, reducing COLA, and raising the retirement age.

Quote
and on and on and on. A cocktail of some of these options might help - because I think the issue with the "Middle Class" is that life wouldn't be so bad if just some of these issues were a concern but for many people, all of them are.
                                                   

randymarsh

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Re: The Secret Shame of Middle-Class Americans
« Reply #190 on: April 28, 2016, 03:04:10 PM »

That is a free ticket to, borrow all you can, after you graduate, work a year at McDonalds,
go bankrupt and write off $200,000 of student loans. Might as well let Bernie give you *free education.

Or not. You could make SL debt dischargable with conditions. Probably how it was for decades until bankers bribed Congress. Even now, something like 40% of people who include SL in their bankruptcy get some or all of it discharged. The problem is that people buy into the myth that it is NEVER going to go away and don't even try.


* free, meaning take money from hardworking taxpayers and give it to students.

What are your thoughts on public school? The government takes money from hardworking taxpayers and GIVES it to young immature citizens for 12 years!

Jack

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Re: The Secret Shame of Middle-Class Americans
« Reply #191 on: April 28, 2016, 03:34:02 PM »

I'd like to see some changes made to the current system to either give people a stronger safety net or help them not get in that situation in the first place. Some of these changes might be the following: being able to declare bankruptcy on student loans,

 That is a free ticket to, borrow all you can, after you graduate, work a year at McDonalds,
go bankrupt and write off $200,000 of student loans. Might as well let Bernie give you *free education.

So? Maybe then the lenders would learn to vet their borrowers better! And if that makes student loans less available, then that's good too because then colleges would learn that they need to be cost-competitive instead of just riding the free-money gravy train.

It's all upside!

mm1970

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Re: The Secret Shame of Middle-Class Americans
« Reply #192 on: April 28, 2016, 03:35:24 PM »
Quote
"when you hit middle age your metabolism changes!" Uh, no it doesn't, you're just starting to notice the cumulative effects of your choices for the past 20 years.

Um, no, it totally does change!  Even those of us who manage to stay in shape for the 20 years notice it!

Gosh it makes me worry for menopause (aka "later middle age").

FINate

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Re: The Secret Shame of Middle-Class Americans
« Reply #193 on: April 28, 2016, 03:42:36 PM »
What are your thoughts on public school? The government takes money from hardworking taxpayers and GIVES it to young immature citizens for 12 years!

You mean the public schools that consistently rank near the bottom in OECD rankings, those schools? Where about 19% of high school graduates are illiterate? The ones designed to prepare our children to be factory workers in a country with few factory jobs? Where children are generally forced into districts based on where they happen to live and have little choice to switch to a better school? Yes, those are the schools my taxes have paid for for decades now. Since I have little hope of recovering what I've paid into these, now that my kids are approaching school age I'll take some vouchers for private schools or homeschooling please!

FINate

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Re: The Secret Shame of Middle-Class Americans
« Reply #194 on: April 28, 2016, 03:51:56 PM »
Quote
"when you hit middle age your metabolism changes!" Uh, no it doesn't, you're just starting to notice the cumulative effects of your choices for the past 20 years.

Um, no, it totally does change!  Even those of us who manage to stay in shape for the 20 years notice it!

Gosh it makes me worry for menopause (aka "later middle age").

Of course we slow down with age, but this is gradual process and not a discrete function as some people describe it. About 5 years ago I hit the wall of cumulative effects I described above. I was working too much, not watching my diet, and getting zero exercise. My first instinct was to assume it was because I was getting older, but after some searching/reading I concluded there was hope. It took about 3-4 years of lifestyle change, but it has been worth it. Way more energy now, better sleep, feel so much better all around.

wenchsenior

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Re: The Secret Shame of Middle-Class Americans
« Reply #195 on: April 28, 2016, 05:32:40 PM »
Quote
"when you hit middle age your metabolism changes!" Uh, no it doesn't, you're just starting to notice the cumulative effects of your choices for the past 20 years.

Um, no, it totally does change!  Even those of us who manage to stay in shape for the 20 years notice it!

Gosh it makes me worry for menopause (aka "later middle age").

Of course we slow down with age, but this is gradual process and not a discrete function as some people describe it. About 5 years ago I hit the wall of cumulative effects I described above. I was working too much, not watching my diet, and getting zero exercise. My first instinct was to assume it was because I was getting older, but after some searching/reading I concluded there was hope. It took about 3-4 years of lifestyle change, but it has been worth it. Way more energy now, better sleep, feel so much better all around.

I really think this 'change' is pretty individual...at 45 and 54, my husband and I haven't yet encountered it. The only thing that's changed is it's easier to get injured, harder to bounce back from injury, and a little harder to maintain muscle (though my weeny body has NEVER been good at that, even as a kid).

StarBright

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Re: The Secret Shame of Middle-Class Americans
« Reply #196 on: April 28, 2016, 07:45:36 PM »

I'd like to see some changes made to the current system to either give people a stronger safety net or help them not get in that situation in the first place. Some of these changes might be the following: being able to declare bankruptcy on student loans, subsidized healthcare, subsidized childcare, changing the exemptions on overtime for salaried employees (which I believe might actually be happening this year), bring back unions, raise the cap on social security, and on and on and on. A cocktail of some of these options might help - because I think the issue with the "Middle Class" is that life wouldn't be so bad if just some of these issues were a concern but for many people, all of them are.

That said, I'm not convinced about the other things you mention. The problem is that our society ALWAYS invents ways to create demand and absorb additional money. As long as people prioritize wants before needs they will always spend themselves into a hole, so this money will be used to increase consumption: a car that is bigger/more expensive than they would otherwise buy, or more house than they need, more clothes, and such.


Honestly, I'm not totally sold on my own suggestions either (purely from a funding/taxation standpoint) But I do think if the definition of middle class is white collar or unionized blue collar jobs that allow people to afford a house in the burbs and a little extra time and money and a non-impoverished retirement, and we want to have a large middle class in our country, then systemically we can't keep on the way we are currently going. I think the extra time is a really important factor in defining middle class.

I admit, I'm coming at it from a really personal place. I used to advocate more of a bootstraps mentality but a case of life threatening pancreatitis, an emergency appendectomy w/ complications and and ice storm showed me how easily we could be financially wiped out. And I walked away from that not thinking, "well at least I was a saver all of those years and I'm okay." but "I've been a great saver all of these years and if I could be ruined, how is someone who hasn't had the same advantages even making it?"

Lots of good conversation here and I appreciate everyone's thoughts and insight.

RosieTR

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Re: The Secret Shame of Middle-Class Americans
« Reply #197 on: April 29, 2016, 06:05:31 PM »
The stats are there. This is one guy's story of how he fits into them, and there are millions of others. Probably a few made a lot of mistakes, like him, some made just a few mistakes but were on the edge, and this pushed them over, while a smaller proportion had a lot of really, really bad luck. Still, I appreciated the glimpse onto one person's life who fits the shocking stats. I know a few people IRL that have variations but it would be a bit socially awkward to get the level of detail here.

FireLane

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Re: The Secret Shame of Middle-Class Americans
« Reply #198 on: May 01, 2016, 04:24:09 PM »
A lot of people in this thread have mentioned that health-care insurance costs have gone way up compared to previous generations, and that's true. But one important thing to remember is that the variety of treatments available has also gone way up. Our parents and grandparents spent less on health care not because it was intrinsically cheaper back then, but just because there was less health care to buy. Doctors can cure or treat a lot of conditions that were untreatable a few decades ago. There are hundreds of new drugs, operations and tests that didn't always exist.

That's not to deny that most of our health care spending goes to lifestyle diseases that could be avoided if people led healthier, more Mustachian lives. But this is another example of how we should bear in mind that our lives are hugely better if only we take a step back and look at history. Would you want to be limited to the medicine of a hundred years ago, or even just fifty years ago?

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Re: The Secret Shame of Middle-Class Americans
« Reply #199 on: May 02, 2016, 09:19:06 AM »

If my husband and I are doing twice the "work" for the same amount of comfort I'd say that we are worse off. On top of that, my father had a 40 hour a week job, with a few busy weeks a year. Hubs and I are both working 50 hours a week regularly with many weeks requiring more.

Yes childcare is outsourced 7 hours a day but cooking and cleaning and life management are still handled by us (which would have been handled by my stay at home mother).
 
It's definitely more effort than my parents were putting in at the same age.
[/quote]

This. One reason why people go out to eat so much and spend so much on "luxuries" like instant food is because both parents are working full-time plus commuting and picking their kids up from daycare. I'm not saying it's impossible, but it takes a lot of planning and hard work  to meal-plan for the week, prep for tomorrow night's meal, clean up everything from the day, pack lunch for the kids and ourselves, do laundry, minimally clean the house, and get organized to go to work. All of that unseen, unrewarded work that Marx called "reproductive labor"-- labor that is required for us to go on living. We still have to do it, and now we're both working full-time.