"Nearly half of Americans can’t afford the basics of life anymore"

[APowers]

Here I go again, a glutton for punishment, I guess. Saw this article posted on facebook:

Half of Americans are Effectively Poor

Tl;dr-- "the majority of Americans now have a negative net worth. In short, 'asset limited' is a polite way of saying: indebted for life, with no real way of ever not getting out of the trap. It’s a nice way of saying: broke."

"American incomes haven’t risen for half a century. But the cost of living has exploded..skyrocketed..gone supernova. Healthcare and education didn’t cost as much as a house in the 1970s, or even the 1980s. And houses didn’t cost more than the average person would ever make in their lifetime. If 'asset-limited' is a polite way of saying “broke and indebted”, income constrained is a polite way of saying 'poor.'"

"Are Americans really becoming 'poor'? What else would you call people that struggle to afford food, housing, childcare, and healthcare? You can’t call them rich, and you can’t call them middle class. They are poor in the sense that they are deprived of the basics of life, and deprivation is what poverty is."

--------------------------------------------------------------------------

I commented on the friend's link, so we'll see where that goes. I didn't think I had seen it posted here for discussion, so I thought I'd inflict it on you all as well.

Yes, there are major systemic problems with much of the U.S.'s approach to poverty and housing/healthcare-affordability. But you don't have to twist the facts to make that point... so....why? Why write this? It's so easy to see how false these statistics are, if you do 5-10 minutes of mediocre research on the internet. Median houshold net worth is $91k (less than 10% of the U.S. has a negative net worth); median household income has gone (inflation-adjusted) from $44k to $61k over the last 50 years.

[RWD]

The median net worth for US households is $97k. How do the majority of Americans have a negative net worth?

[APowers]

The median net worth for US households is $97k. How do the majority of Americans have a negative net worth?

I don't know! The statistics are so easy to find. Maybe the author doesn't understand what "majority" means?

[Bloop Bloop]

I assume these articles are just written by idiots who lack the skills (as reflected by their sloppy language and poor numeracy) to get a real job.

[use2betrix]

Good luck finding a single, actual study that would back up his statement that, “American incomes haven’t risen in half a century.”

That is absurd..

While the cost of many items have become expensive, our standard of living is incredibly higher than it was 50 years ago. Housing sizes have nearly doubled, while average family size has shrank. 50 years ago people did spend $1000 on a cell phone & laptop. We do now and think nothing of it, but it’s also not a “requirement” for living.

[SachaFiscal]

Thanks for doing the fact checking.  This is a valuable post as it reminds us that anyone can publish anything on the internet and say that it is true.  It's exhausting, but important to do some fact checking for these types of articles.

[BTDretire]

 Lot of statements in the article that are not true. Some of the comments point these out, 
but because of the readership, most posters seem to want to support the article.

[Tuskalusa]

Actually, I don’t think this article is as bad as all this. We do know that the majority of wealth is held by only a shall percentage of Americans. We know that safety nets like pensions are slipping away. We know that college is way more expensive than it was in the 80’s. We know that healthcare is skyrocketing.

Yes, for those of us with good educations/job training, good jobs, and benefits, it is inexcusable for us to fritter away our money on consumer crap. That’s why I read this blog. It’s a reminder that we shouldn’t waste our earnings and privilege on useless crap, ridiculous clown cars, and McMansions.

However, there is a whole demographic that is getting left behind. People who work hourly with employers who cut their hours short so they don’t have to pay benefits. People with employers who only offer shitty health plans and 401k.  Teachers who spend their lives in a profession only to have their pension go bankrupt.  It’s easy to sit back and say, “find another job.”  But for some folks, the cycle of poverty is strong.

So yeah, I believe that a lot of people are limited. A lot of them are limited by their own wastefulness. They should read this blog and stop the flaming volcano of waste. But there are others who haven’t seen the wage growth and benefits to get ahead. Those are the people I think of when I read this article.

[Peachtea]

The median net worth for US households is $97k. How do the majority of Americans have a negative net worth?

I don't know! The statistics are so easy to find. Maybe the author doesn't understand what "majority" means?

I’m not agreeing with the author’s statistics or statements, but I also think that $97k median net worth deserves a fairly large asterisk. It included primary residence and vechicles and it seems self reported, if I’m reading the feds publication right. The same survey shows the median household financial assets is only 23.5k. I’m no data expert, and so maybe I’m understanding this wrong, but the description of the methodology also makes it sound like that 23.5k is of the households who had financial assets, not representative of the median financial assets of all the households in the survey. Same with that net worth number.

The principal detailed tables (tables 1 through 4) describing income, net worth, and asset and debt holdings focus on the percentage of various groups that have such items and/or the median and mean holding for those who have them.

https://www.federalreserve.gov/publications/files/scf17.pdf

[Buffaloski Boris]

The US is the only country I can think of where poor ’people often own cars, TVs and cell phones.

[SemiChemE]

I do wonder what fraction of these, so-called "poor" Americans are high-income / high-debt individuals, who are poor because they live in a 2500+ sq. ft. house and drive a $30K+ car that they replace every few years.  Banks are more than happy to engage in the new American slavery, where suckers pay 25-50% of their income in interest, just so they can live in a slightly nicer neighborhood with a luxury car, cable, premium cell phone service, etc...  Loans are a powerful tool, but can easily become a noose around one's neck, especially in these days of easy credit.

[Bloop Bloop]

Actually, I don’t think this article is as bad as all this. We do know that the majority of wealth is held by only a shall percentage of Americans. We know that safety nets like pensions are slipping away. We know that college is way more expensive than it was in the 80’s. We know that healthcare is skyrocketing.

Yes, for those of us with good educations/job training, good jobs, and benefits, it is inexcusable for us to fritter away our money on consumer crap. That’s why I read this blog. It’s a reminder that we shouldn’t waste our earnings and privilege on useless crap, ridiculous clown cars, and McMansions.

However, there is a whole demographic that is getting left behind. People who work hourly with employers who cut their hours short so they don’t have to pay benefits. People with employers who only offer shitty health plans and 401k.  Teachers who spend their lives in a profession only to have their pension go bankrupt.  It’s easy to sit back and say, “find another job.”  But for some folks, the cycle of poverty is strong.

So yeah, I believe that a lot of people are limited. A lot of them are limited by their own wastefulness. They should read this blog and stop the flaming volcano of waste. But there are others who haven’t seen the wage growth and benefits to get ahead. Those are the people I think of when I read this article.

None of that changes the fact that the article's statistics are incorrect, arguments are flimsy and writing is poor. It may argue for a conclusion you agree with, but the article is still misleading, erroneous and written in complete bad faith. Perhaps the only thing that the article properly demonstrates is that many Americans without employable skills are having to resort to useless work (e.g. writing that article) in order to feed themselves.

[APowers]

The median net worth for US households is $97k. How do the majority of Americans have a negative net worth?

I don't know! The statistics are so easy to find. Maybe the author doesn't understand what "majority" means?

I’m not agreeing with the author’s statistics or statements, but I also think that $97k median net worth deserves a fairly large asterisk. It included primary residence and vechicles and it seems self reported, if I’m reading the feds publication right. The same survey shows the median household financial assets is only 23.5k. I’m no data expert, and so maybe I’m understanding this wrong, but the description of the methodology also makes it sound like that 23.5k is of the households who had financial assets, not representative of the median financial assets of all the households in the survey. Same with that net worth number.

The principal detailed tables (tables 1 through 4) describing income, net worth, and asset and debt holdings focus on the percentage of various groups that have such items and/or the median and mean holding for those who have them.

https://www.federalreserve.gov/publications/files/scf17.pdf

The Census Bureau reports almost $82k median household net worth in 2014, so I don't see the $91-97k number as too far inflated. Certainly none of the numbers that I could find indicated anything near negative net worth.

[Bloop Bloop]

There is a real risk in getting caught up in sweeping sentiment that people are struggling.

The numbers show that the top 40-50% of the population is going just fine, and the top 20% are doing extremely well.

If you're falling behind, it can be tempting to take solace from articles like this one, which say that everyone is in the same boat. The truth may be that you're just falling behind.

[nancyjnelson]

I'm actually a big fan of the author - Umair Haque - who regularly posts on Medium.  Yes, his writing can be exaggerated, but his overall message is that the majority of people are not paying attention to what's happening in their country.  I agree with that.  Haque continually points out that the widely trumpeted economic indicators showing the country is doing well are actually a reflection of how the stock market is doing, not how Americans are doing in general.  The idea that a rising stock market broadly lifts the fortunes of all Americans is untrue; the Dow shouldn't be confused with the underlying economy. 

Haque also spends a lot of time arguing that the US is in danger of becoming fascist (he connects this with the financial system).  I also agree with this.  Although I've spent most of my life in the U.S., I've lived (i.e., for longer than a year and less than five years) in six foreign countries, including a socialist democracy, post-Soviet Eastern Europe, and four Latin American countries, three of which could be classified as being ruled by "caudillos."  So I've experienced several different types of governments and, yes, I can see fascism coming (sooner rather than later) should we continue down our current path.   

Truth is, people on this forum are outliers; we understand how the system is rigged ...or at least understand that the "work hard, do your job and you'll get ahead" is no longer a path to healthy finances, and we are willing to do the work to find a different way.  Good for us, I actually consider Mushtachians to be financial heroes.  That said, I'm not going to denigrate those who have bought the storyline hook, line and sinker.  *Except for those who appear in the Mustachian Wall of Shame and Comedy. ;)* People shouldn't have to be heroes in order to enjoy a good life.

Haque's posts are not for the majority of people who are on this forum.  They are for those who are working hard at their jobs, doing what society tells them they should be doing, believing the stories spun by the media, and then finding themselves without options, both financially and politically.  His message is that people need to wake up and take responsibility for what's going on around them. 

 

[FIREstache]

None of that changes the fact that the article's statistics are incorrect, arguments are flimsy and writing is poor. It may argue for a conclusion you agree with, but the article is still misleading, erroneous and written in complete bad faith. Perhaps the only thing that the article properly demonstrates is that many Americans without employable skills are having to resort to useless work (e.g. writing that article) in order to feed themselves.

I just read the article, and it was pretty much non-sense.  More click-bait for suckers.

[APowers]

I'm actually a big fan of the author - Umair Haque - who regularly posts on Medium.  Yes, his writing can be exaggerated, but his overall message is that the majority of people are not paying attention to what's happening in their country.  I agree with that.  Haque continually points out that the widely trumpeted economic indicators showing the country is doing well are actually a reflection of how the stock market is doing, not how Americans are doing in general.  The idea that a rising stock market broadly lifts the fortunes of all Americans is untrue; the Dow shouldn't be confused with the underlying economy. 

Haque also spends a lot of time arguing that the US is in danger of becoming fascist (he connects this with the financial system).  I also agree with this.  Although I've spent most of my life in the U.S., I've lived (i.e., for longer than a year and less than five years) in six foreign countries, including a socialist democracy, post-Soviet Eastern Europe, and four Latin American countries, three of which could be classified as being ruled by "caudillos."  So I've experienced several different types of governments and, yes, I can see fascism coming (sooner rather than later) should we continue down our current path.   

Truth is, people on this forum are outliers; we understand how the system is rigged ...or at least understand that the "work hard, do your job and you'll get ahead" is no longer a path to healthy finances, and we are willing to do the work to find a different way.  Good for us, I actually consider Mustachians to be financial heroes.  That said, I'm not going to denigrate those who have bought the storyline hook, line and sinker.  *Except for those who appear in the Mustachian Wall of Shame and Comedy. ;)* People shouldn't have to be heroes in order to enjoy a good life.

Haque's posts are not for the majority of people who are on this forum.  They are for those who are working hard at their jobs, doing what society tells them they should be doing, believing the stories spun by the media, and then finding themselves without options, both financially and politically.  His message is that people need to wake up and take responsibility for what's going on around them.

[re: bolded part] Unless I missed something, the express takeaway from this article is: "American poverty — a middle class falling into ruin, the majority of people now effectively poor — is what gave rise to today’s problems"....but the problem is that his assertion "the majority of people now effectively poor" simply. isn't. true. The basis for this whole article isn't supported by the facts, and in fact, the facts seem to suggest the opposite-- that the majority of Americans are actually better off today than they've ever been historically.

re: people shouldn't have to be heroes-- it's not some kind of heroism to be reasonably careful with one's money management. Working with a median household income, one only has to be "not completely wasteful" to enjoy a great life with such an exploding volcano of cash. If you're literally impoverished, and can't afford even rice/beans or a shanty to live in, then it might take some heroic efforts to change that-- and I agree that no-one should have to be trapped in such a situation-- but that's not anywhere near the case for most Americans.

[MoneyGoatee]

Many Americans can't retire and won't ever retire.  If anyone can retire in their 50s, it is a win, let alone in their 30s.  Considering how important it is to start saving early and diligently, there should really be high-school classes on financial literacy.  I've heard that some grade schools offer such classes as well.

[cloudsail]

Many Americans can't retire and won't ever retire.  If anyone can retire in their 50s, it is a win, let alone in their 30s.  Considering how important it is to start saving early and diligently, there should really be high-school classes on financial literacy.  I've heard that some grade schools offer such classes as well.

A big problem is that there is no "doctrine" about the correct way to invest your money that is accepted by most of mainstream society. We here all know that index investing is the way to go, but this is not the kind of truth accepted by society like scientific laws. You can teach living below your means, but then what do you do with your savings? If you just let it sit in the bank you won't be much better off. But you can't teach something that many people will feel is just your "opinion" about the best way to invest. Not to mention risk tolerance and asset allocation needs to be individualized for each person.

I read an article recently about all the people who lost their life savings investing with the likes of Bernie Madoff, and it's incredibly sad. I really want to run a personal finance club at our homeschool school for the older kids, but I worry that other parents will not like me "preaching" about something that they don't understand and may consider risky or unorthodox. My brother-in-law is a pretty smart guy, and even he said something about people "getting caught with their pants down" when I mentioned index investing. There's so much conflicting information out there that it's hard to convince people which voice to listen to.

[Threshkin]

87% of all statistics are made up on the spot.

[bacchi]

It's perfectly possible for 43% of households to have negative net worth and the median to still be ~$82k.

(-1 -1 -1 10 81.5 82.5 110 120 500 500000)

The mean of the bottom 40% in the above example is 1.75 while the median of the full set is 82 (meaning HALF of the number of households have less than 82).

Looking at the Census, nearly 90% of people have money in a "financial institution" (could be a bank, could be a broker). The median value of assets in those financial institutions was only $4000.

==> 50% of households have less than $4000 in a bank/brokerage/IRA/401k*



* This is self-reported so it's possible people are excluding their retirement accounts and pensions.

[remizidae]

If you're falling behind, it can be tempting to take solace from articles like this one, which say that everyone is in the same boat. The truth may be that you're just falling behind.

I agree. Articles like this are dangerous as well as false. How many times have we heard or read of people saying, "I'm in debt, and I will be until I die"?  Being in debt is a fact; never getting out of it is a decision, and one that is more tempting because of claims that everyone else is fucked too.

[RWD]

It's perfectly possible for 43% of households to have negative net worth and the median to still be ~$82k.

(-1 -1 -1 10 81.5 82.5 110 120 500 500000)

The mean of the bottom 40% in the above example is 1.75 while the median of the full set is 82 (meaning HALF of the number of households have less than 82).

Looking at the Census, nearly 90% of people have money in a "financial institution" (could be a bank, could be a broker). The median value of assets in those financial institutions was only $4000.

==> 50% of households have less than $4000 in a bank/brokerage/IRA/401k*



* This is self-reported so it's possible people are excluding their retirement accounts and pensions.

The article does not state that 43% of households have a negative net worth. It says "43% of American households [...] can’t afford the basics of life anymore." Then it later states "[...] the majority of Americans now have a negative net worth" which implies that the median net worth is negative.

[Bloop Bloop]

I'm tired of reading articles which state how bad the average person is at paying for basic expenses. I would say the median household is doing okay. The figures certainly suggest so. As far as I can see, it is only the bottom 30-40% that are struggling.

Articles which try to make people feel better for their own financial choices, by painting those of (median) others as being equally bad, are incredibly dangerous and disingenuous. One must be truthful, first and foremost.

[APowers]

I'm tired of reading articles which state how bad the average person is at paying for basic expenses. I would say the median household is doing okay. The figures certainly suggest so. As far as I can see, it is only the bottom 30-40% that are struggling.
[snip]

You could argue that the middle class is struggling too, but not from lack of financial resources. Lack of education, poor role models, bad advice... peer pressure even, but not because of financial poverty.

[EngagedToFIRE]

I'm tired of reading articles which state how bad the average person is at paying for basic expenses. I would say the median household is doing okay. The figures certainly suggest so. As far as I can see, it is only the bottom 30-40% that are struggling.
[snip]

You could argue that the middle class is struggling too, but not from lack of financial resources. Lack of education, poor role models, bad advice... peer pressure even, but not because of financial poverty.

That's right!  Lack of financial education is probably the biggest issue at play.  You see it all the time.  The lowest income workers with $500 - $1000 phones, they eat expensive fast food every day (thinking it's cheap), etc.  Then articles are written about how they can't afford the basics.

[EngagedToFIRE]

While the cost of many items have become expensive, our standard of living is incredibly higher than it was 50 years ago. Housing sizes have nearly doubled, while average family size has shrank. 50 years ago people did spend $1000 on a cell phone & laptop. We do now and think nothing of it, but it’s also not a “requirement” for living.

Correct!  The luxuries are far cheaper now than ever.  So even if wages were stagnant, we have more stuff.  Think about buying a color TV a few decades ago, and now you can get a big screen 4k TV for $200.  I had this discussion with a friend the other day, as they were complaining about how awful air travel is now.  It was just so much better in the 80's.  Seats are smaller, extra fees for everything, etc.  But what these people miss is that air travel is a fraction of the cost, it's not more expensive, even with the extra fees.  To the point where domestic first class today is what coach cost 30 years ago, inflation adjusted.  So sure, if you want the 1980's experience, pay for first class.  Else, enjoy your savings, watch the seatback entertainment, and chill the hell out.

It's an interesting psychological thing you are pointing out.  No matter how much more we have, we constantly think we have less and somehow have it worse than before.

[RetiredAt63]

Think about buying a color TV a few decades ago, and now you can get a big screen 4k TV for $200. 

It is a lack of a longer term memory.
My first computer was $2000 in the 80's.  It was really hot, it had an 8088 chip instead of an 8086 and 2 floppy disk drives instead of one.  No hard drive, we added that later. 
My first finance book was Your money and how to keep it (Brian Costello) - it had interest rate tables in the back, that started at 7% and went up from there.  This was before the days of cheap hand-held calculators.  Now my cell phone is also my hand-held calculator and my camera and my notebook with everyone's phone numbers and addresses.

[BTDretire]

  I had breakfast with several 70+ yr olds this morning, one of them (the complainer)
saw the sign that said $5 breakfast and started complaining about how ridiculous
paying $5  for a meal is.
 I call that the curse of aging, you remember when prices were much lower.

btw, when I was 17yrs old working in a gas station, a gallon of gas was 18.9¢.

[JestJes]

Truth is, people on this forum are outliers; we understand how the system is rigged ...or at least understand that the "work hard, do your job and you'll get ahead" is no longer a path to healthy finances, and we are willing to do the work to find a different way.

This really spoke to me. Now that I understand how to live the mustachian way it seems so simple but all the advice I got growing up was terrible. Not to blame my parents because they didn't know what they were doing either but they told me things like "Work a job you love and you'll never work a day in your life."  Or that money doesn't matter. Or that college loan debt is "good debt." They encouraged me to take out debt for school. I distinctly remember my mom beaming and saying how proud she was of me when I financed a new car right out of college.

Now I know these things are stupid and I can break the cycle by changing my life and teaching my kids better but I understand the frustration of thinking you did everything "right" and still struggling.

I still have to be vigilant as my family still give me terrible advice. Like I mentioned to my Mom that my boyfriend and I only go out once a month for a date night and she said I am putting my relationship as risk, like we can't have a good time in the back yard or at a local park. Or the whopper of suggesting I steal from my retirement for a down payment on a house.

 

[mm1970]

  I had breakfast with several 70+ yr olds this morning, one of them (the complainer)
saw the sign that said $5 breakfast and started complaining about how ridiculous
paying $5  for a meal is.
 I call that the curse of aging, you remember when prices were much lower.

btw, when I was 17yrs old working in a gas station, a gallon of gas was 18.9¢.

Yeah, the teenagers up the street are working as lifeguards this summer for $13.70 an hour, and I mentioned my first job (in the 80s) was minimum wage at $3.35.  "Life was different back then!"  I guess???

Back when I was making it to the Y to swim in the morning, with all the old retired guys...there were a couple of guys who were just SHOCKED I tell you that I was a working mother.  At this point in his life, he was around 80...had two pensions and 3 concurrent medical insurances (Medicare plus supplemental from his military time and his time at the post office).  I had a hard time explaining to him that most people don't have two pensions.

He did suggest that I go back into the Navy as a reservist and "get your 20" by the time I hit 60 or 65.  All I could think was "on top of a full time job and 2 elementary aged kids?"  Plus, I drove a desk for 5 years, what do they want a middle aged LT for?  (Not that it's not a great path, plenty of my buddies retired from the military).

On a plus note, my sis is retiring this week in her late 50s.  That makes almost half of my siblings who are retired.  Who is next?  (I'm almost the baby, not gonna be me!)  This sister has a pension - she's the only one, though my eldest sister's husband has a pension.  And this sis's husband is still working.

[Just Joe]

Bad advice! That was one of the best parts of first having the internet at home. Like these forums, I could read-read-read and learn so many things. Along the way I realized some of the advice my elders had delivered was flawed or simply dated. There were new solutions or more efficient solutions. Then two decades later (roughly speaking) I found these forums and things were good. Wish I had found all of you in the 1980s when I was very young (high school) and very dumb and naive. I'd be much richer now (compound interest on investments instead of on debt).

@JestJes My elders say the same thing to my DW and I - our dates aren't shiny enough. Sitting on the porch steps and looking at the stars eating something sweet or listening to the country night sounds around us on a walk just isn't good enough. We need a REAL date. We do those too occasionally. Meanwhile the savings pile up.

[Bucksandreds]

Truth is, people on this forum are outliers; we understand how the system is rigged ...or at least understand that the "work hard, do your job and you'll get ahead" is no longer a path to healthy finances, and we are willing to do the work to find a different way.

This really spoke to me. Now that I understand how to live the mustachian way it seems so simple but all the advice I got growing up was terrible. Not to blame my parents because they didn't know what they were doing either but they told me things like "Work a job you love and you'll never work a day in your life."  Or that money doesn't matter. Or that college loan debt is "good debt." They encouraged me to take out debt for school. I distinctly remember my mom beaming and saying how proud she was of me when I financed a new car right out of college.

Now I know these things are stupid and I can break the cycle by changing my life and teaching my kids better but I understand the frustration of thinking you did everything "right" and still struggling.

I still have to be vigilant as my family still give me terrible advice. Like I mentioned to my Mom that my boyfriend and I only go out once a month for a date night and she said I am putting my relationship as risk, like we can't have a good time in the back yard or at a local park. Or the whopper of suggesting I steal from my retirement for a down payment on a house.

I agree. The biggest "Problem" with America's economy today is the stagnating lower 75% of peoples incomes combined with the constant advertising and promotion that causes most people to have no chance to get ahead. In the "good old days" pre internet and 24/7 tv people made about the same ( in inflation adjusted terms) but were healthier financialy because they weren't being convinced 247 to take on more debt. Saying that they should smarten up isn't realistic because the advertisers are smarter than them and have fine tuned their "attacks" to trick consumers. For net worth reasons it might not be a bad idea for the government to "tax people" a few % more and put that money into a 401k like system that can only be used at retirement or for a downpayment on a house or secondary education expenses.

[MrThatsDifferent]

Reading the comments to this article has been bizarre. That around 40% of Americans are effectively poor seems about right to me. How many people are living paycheck to paycheck? How many people still don’t have healthcare? How many people don’t qualify for a mortgage because their credit is shot? The problem with America is you can look rich, even when you’re poor. How many suicides and divorces and drinking/drug problems are linked to finances alone?

MMM’s whole thrust is how financially illiterate people are and yet we don’t think so many people are effectively poor? Weird. How many people on this forum who have their shit together are still terrified of retiring because of healthcare alone? You can quibble about the numbers all you want, if you don’t think this article is speaking the truth, you don’t know what is really happening in America.

[letsdoit]

we need to teach ppl to not believe ads and salespeople

[EngagedToFIRE]

Think about buying a color TV a few decades ago, and now you can get a big screen 4k TV for $200. 

It is a lack of a longer term memory.
My first computer was $2000 in the 80's.  It was really hot, it had an 8088 chip instead of an 8086 and 2 floppy disk drives instead of one.  No hard drive, we added that later. 
My first finance book was Your money and how to keep it (Brian Costello) - it had interest rate tables in the back, that started at 7% and went up from there.  This was before the days of cheap hand-held calculators.  Now my cell phone is also my hand-held calculator and my camera and my notebook with everyone's phone numbers and addresses.

And you can buy a decent refurbed cell phone that can do (way more than) all of the above for $100.  It's really wild how times have changed.

[EngagedToFIRE]

Truth is, people on this forum are outliers; we understand how the system is rigged ...or at least understand that the "work hard, do your job and you'll get ahead" is no longer a path to healthy finances, and we are willing to do the work to find a different way.

This really spoke to me. Now that I understand how to live the mustachian way it seems so simple but all the advice I got growing up was terrible. Not to blame my parents because they didn't know what they were doing either but they told me things like "Work a job you love and you'll never work a day in your life."  Or that money doesn't matter. Or that college loan debt is "good debt." They encouraged me to take out debt for school. I distinctly remember my mom beaming and saying how proud she was of me when I financed a new car right out of college.

Now I know these things are stupid and I can break the cycle by changing my life and teaching my kids better but I understand the frustration of thinking you did everything "right" and still struggling.

I still have to be vigilant as my family still give me terrible advice. Like I mentioned to my Mom that my boyfriend and I only go out once a month for a date night and she said I am putting my relationship as risk, like we can't have a good time in the back yard or at a local park. Or the whopper of suggesting I steal from my retirement for a down payment on a house.

Maybe I'm misreading, but work hard, do your job and you'll get ahead is still solid advice.  It's the financial education that is missing.  What to do with the money once you do get ahead.  It's unrelated.  No?  I'd just hate to think people actually feel it's "rigged" and working hard to get ahead is somehow a bad path.

[Just Joe]

we need to teach ppl to not believe ads and salespeople

That's the best part of reducing one's media intake. The sales pitches are fewer and hopefully a person's tolerance for the spiel is lower.

Also as someone else noted: financial education. We don't do a good job of that or sex ed in this country. Thankfully what politics and the school systems fail to deliver, the internet has the potential to deliver to the curious.

[Jenny Wren]

Maybe I'm misreading, but work hard, do your job and you'll get ahead is still solid advice.  It's the financial education that is missing.  What to do with the money once you do get ahead.  It's unrelated.  No?  I'd just hate to think people actually feel it's "rigged" and working hard to get ahead is somehow a bad path.

When things go mostly as planned, it's solid advice. The problem is that it has caveats and needs fleshing out for individual situations. For example, getting a job isn't always simple. There are people that want to work hard but can't find work. There are people that start of screwed before they know any better (the kid advised into mountains of debt for a degree in underwater basket weaving, for example, or the kid that drops out of high school before she's mature enough to fully understand the repercussions).

Then, these people hear about how unemployment is at an all time low, yet here they are, either unemployed or under-employed, so the system seems rigged. Why bother? If you can't win, then just try to enjoy what you can and rack up debt, right? What they don't see is all the gymnastics that went into making unemployment look low -- people that have been unemployed so long they drop off the rolls, those that are under-employed and not on the rolls, the homeless, which often don't show up on unemployment rolls at all.

And then, there are those that are sold the "American Dream," before they are even old enough to realize it isn't their dream. So they give up everything to buy the house in the 'burbs, the new car every two to four years, private preschool for the kiddos, a Disney vacation every summer. It's not the salespeople and the admen that sell this dream, it's their parents, their bosses, their teachers that give this version of the dream the hard sell. Mentors that these newly minted adults trust. Then, they are terrified to deviate from the path, because they will be judged as failures.

It's hard. By the time most people are experienced enough in the real world to realize that numbers can be manipulated to lie, and that even trusted advisors can be wrong, they are already firmly entrenched on the path of debt and spending to achieve a lifestyle that was sold to us in the 1950s and should have fallen out of vogue as unsustainable and often unfulfilling by the 1970s. It's hard to shake the expectations of society.

[JestJes]

Truth is, people on this forum are outliers; we understand how the system is rigged ...or at least understand that the "work hard, do your job and you'll get ahead" is no longer a path to healthy finances, and we are willing to do the work to find a different way.

This really spoke to me. Now that I understand how to live the mustachian way it seems so simple but all the advice I got growing up was terrible. Not to blame my parents because they didn't know what they were doing either but they told me things like "Work a job you love and you'll never work a day in your life."  Or that money doesn't matter. Or that college loan debt is "good debt." They encouraged me to take out debt for school. I distinctly remember my mom beaming and saying how proud she was of me when I financed a new car right out of college.

Now I know these things are stupid and I can break the cycle by changing my life and teaching my kids better but I understand the frustration of thinking you did everything "right" and still struggling.

I still have to be vigilant as my family still give me terrible advice. Like I mentioned to my Mom that my boyfriend and I only go out once a month for a date night and she said I am putting my relationship as risk, like we can't have a good time in the back yard or at a local park. Or the whopper of suggesting I steal from my retirement for a down payment on a house.

Maybe I'm misreading, but work hard, do your job and you'll get ahead is still solid advice.  It's the financial education that is missing.  What to do with the money once you do get ahead.  It's unrelated.  No?  I'd just hate to think people actually feel it's "rigged" and working hard to get ahead is somehow a bad path.

I do think it depends on what you work hard at at least a little bit. I worked very hard to get a political science degree because it was something I “loved”. First day at the senior year internship the office manager showed me how she lies to the student loan companies because she is 100k in debt and only makes 15 bucks a hour(oh I send the check, I see it wasn’t cashed...). It was only then I realized I was in trouble. Before that I  honestly thought that if I followed my dreams and worked hard the money would just come like a natural by product. It seems silly now but I feel like that’s what the media and my family were always telling me. I also think as the first one in my family to go to college, they had unrealistic expectoration of education. Of course you should buy a new car, you’re a college graduate!!!

It’s a strange thing now that I think about it that people can say that money doesn’t make you happy but then exult large purchases like new cars and boats.

I’m also not saying that frugality is not the best road because it is but it is possible for people to do what they think is right and not get ahead. I’ve been trying to gently get my friends on board and it’s slow going. They really don’t believe retirement is possible just not eating out and saving money.

[EngagedToFIRE]

Truth is, people on this forum are outliers; we understand how the system is rigged ...or at least understand that the "work hard, do your job and you'll get ahead" is no longer a path to healthy finances, and we are willing to do the work to find a different way.

This really spoke to me. Now that I understand how to live the mustachian way it seems so simple but all the advice I got growing up was terrible. Not to blame my parents because they didn't know what they were doing either but they told me things like "Work a job you love and you'll never work a day in your life."  Or that money doesn't matter. Or that college loan debt is "good debt." They encouraged me to take out debt for school. I distinctly remember my mom beaming and saying how proud she was of me when I financed a new car right out of college.

Now I know these things are stupid and I can break the cycle by changing my life and teaching my kids better but I understand the frustration of thinking you did everything "right" and still struggling.

I still have to be vigilant as my family still give me terrible advice. Like I mentioned to my Mom that my boyfriend and I only go out once a month for a date night and she said I am putting my relationship as risk, like we can't have a good time in the back yard or at a local park. Or the whopper of suggesting I steal from my retirement for a down payment on a house.

Maybe I'm misreading, but work hard, do your job and you'll get ahead is still solid advice.  It's the financial education that is missing.  What to do with the money once you do get ahead.  It's unrelated.  No?  I'd just hate to think people actually feel it's "rigged" and working hard to get ahead is somehow a bad path.

I do think it depends on what you work hard at at least a little bit. I worked very hard to get a political science degree because it was something I “loved”. First day at the senior year internship the office manager showed me how she lies to the student loan companies because she is 100k in debt and only makes 15 bucks a hour(oh I send the check, I see it wasn’t cashed...). It was only then I realized I was in trouble. Before that I  honestly thought that if I followed my dreams and worked hard the money would just come like a natural by product. It seems silly now but I feel like that’s what the media and my family were always telling me. I also think as the first one in my family to go to college, they had unrealistic expectoration of education. Of course you should buy a new car, you’re a college graduate!!!

It’s a strange thing now that I think about it that people can say that money doesn’t make you happy but then exult large purchases like new cars and boats.

I’m also not saying that frugality is not the best road because it is but it is possible for people to do what they think is right and not get ahead. I’ve been trying to gently get my friends on board and it’s slow going. They really don’t believe retirement is possible just not eating out and saving money.

It's clear reading your post and the response by Lichen, that "work hard" has different meanings to different people.  To me, work hard doesn't just mean "I'm willing to work hard, but nobody will give me a job" - that's not hard work.  Many people (most?) don't realize that hard work is more mental than physical.  Physical labor is relatively easy, it's comfortable.  Getting outside of your comfort zone is hard.  Which means pounding on doors, reading books, educating yourself, and constantly looking for better opportunities - this is hard work.  It's also hard to show up to work and bust your ass and have a great attitude.  But the same people who show up with a shitty attitude are the same ones who think they work hard all day.  The truth is, a great attitude, determination, and hard work puts a person squarely in the top 5% and magically, those people usually end up as managers, to the dismay of the long time employees who feel they "deserve" more.

Anyways, sorry for the rant.  My point is, hard work means not stopping to get ahead, being determined.  When a political science degree didn't work out, who cares?  You work hard at the next thing.  It's how I've always approached life and never, ever have I had a victim/system is rigged type attitude.  I didn't get it from my parents.  If I listened to them, I'd be broke right now.  I went my own way.  I'm a high school drop out, but did do some art school because mom thought I had to go to college... quickly realized it was a debt disaster and quit before it got out of hand.  Now?  I'm quite wealthy, employ a 20+ people, and I'm basically retired at 35 as I work when I want and enjoy what I do.

This site is a fantastic resource to get people on the right track.  Just amazing.  I'd be even wealthier now if I got some of my spending under control as I have now.  But when I see "work hard to get ahead" being sold as "rigged" - it just rubs me the wrong way.  That's a horrible, defeatist attitude and exactly the wrong type of attitude to have when trying to actually get ahead and FIRE.  It's really freakin easy to make it in the USA.  Basically a sure thing.  It just takes a little effort.

[JestJes]

Oh sure sure! I never meant to imply hard work wasn’t important to getting ahead. Just that there is a difference between spinning your wheels and actually driving. Finally with this forum I have been able to figure out what I was doing wrong and I’m so grateful. For the first time in a long time I feel that I have control of my life. It’s totally possible for anyone if you know what to do. 

I just feel compassion for the people who have not figured it out yet. I remember thinking I was doing the right thing and feeling lost for not succeeding like I expected. That’s all.

[APowers]

Reading the comments to this article has been bizarre. That around 40% of Americans are effectively poor seems about right to me. How many people are living paycheck to paycheck? How many people still don’t have healthcare? How many people don’t qualify for a mortgage because their credit is shot? The problem with America is you can look rich, even when you’re poor. How many suicides and divorces and drinking/drug problems are linked to finances alone?

MMM’s whole thrust is how financially illiterate people are and yet we don’t think so many people are effectively poor? Weird. How many people on this forum who have their shit together are still terrified of retiring because of healthcare alone? You can quibble about the numbers all you want, if you don’t think this article is speaking the truth, you don’t know what is really happening in America.

"Seems about right to me" is not the same as actual statistics.

Living paycheck to paycheck is not the definition of actual poverty. Poverty is about having insufficient means to procure food, warmth, shelter, basic transportation, or human interaction. There are people with $500k incomes who live paycheck to paycheck-- they don't lack the means, they're just not using them. There are also people with $30k incomes who live paycheck to paycheck-- they don't lack the means either, they just aren't using them.

Articles like this tell people they can't make it, but aren't based on actual facts, and discourage people from learning how to handle their lives successfully. Yes, there are legitimate systemic problems in the U.S.-- but "people don't have enough money to live" isn't one of them*.

*Yes, there are legitimately poor people in this country, and the system to help them IS broken. But they are not anywhere near a majority of the population.

[Bloop Bloop]

Reading the comments to this article has been bizarre. That around 40% of Americans are effectively poor seems about right to me. How many people are living paycheck to paycheck? How many people still don’t have healthcare? How many people don’t qualify for a mortgage because their credit is shot? The problem with America is you can look rich, even when you’re poor. How many suicides and divorces and drinking/drug problems are linked to finances alone?

MMM’s whole thrust is how financially illiterate people are and yet we don’t think so many people are effectively poor? Weird. How many people on this forum who have their shit together are still terrified of retiring because of healthcare alone? You can quibble about the numbers all you want, if you don’t think this article is speaking the truth, you don’t know what is really happening in America.

Even if I accepted your claim that "40% of Americans are effectively poor", there's a huge gap between that statement and "Most Americans have negative net wealth." I am sure you can see the misleading use of statistics and the sheer incorrectness of the latter claim.

As others have said, living pay check to pay check does not mean that you are necessarily poor. You could even have an above-median income. Don't confuse non-frugal, or financially unsavvy, with actual poverty or impoverishment.

And you don't need a mortgage to not be poor.

And the fact that a suicide or alcohol or divorce might be linked to finances doesn't mean it speaks of poverty. Some cases, probably yes. Some might just be due to poor life choices or financial illiteracy.

It's one thing to claim a lot of people are financially illiterate. It's another thing to say that they are altogether poor, or have negative net wealth. The latter is a lazy and incorrect notion. Don't conflate the two.

[JTColton]

Reading the comments to this article has been bizarre. That around 40% of Americans are effectively poor seems about right to me. How many people are living paycheck to paycheck? How many people still don’t have healthcare? How many people don’t qualify for a mortgage because their credit is shot? The problem with America is you can look rich, even when you’re poor. How many suicides and divorces and drinking/drug problems are linked to finances alone?

MMM’s whole thrust is how financially illiterate people are and yet we don’t think so many people are effectively poor? Weird. How many people on this forum who have their shit together are still terrified of retiring because of healthcare alone? You can quibble about the numbers all you want, if you don’t think this article is speaking the truth, you don’t know what is really happening in America.

I think you're being a bit dramatic here, almost half of Americans are not poor and the things you list are not the basics of life. I would not consider getting a mortgage or even comprehensive health care (maybe a HDHP, maybe) to be one of the basics of life. Living paycheck to paycheck is more or less a personal choice.

[Bloop Bloop]

I struggle to understand how any one could believe such an apocalyptic stat like "the majority of Americans have negative net worth" or "American incomes haven't risen in half a century". It's just lies. It's not even lies dressed up as the truth.

The reality is, most Americans are doing pretty well. Or if they're not, it's their own fault.

Trying to suggest that everyone's in a literally awful situation and that it's somehow inevitable only cheapens the rule of individual intelligence, prudence and agency.

[MrThatsDifferent]

I struggle to understand how any one could believe such an apocalyptic stat like "the majority of Americans have negative net worth" or "American incomes haven't risen in half a century". It's just lies. It's not even lies dressed up as the truth.

The reality is, most Americans are doing pretty well. Or if they're not, it's their own fault.

Trying to suggest that everyone's in a literally awful situation and that it's somehow inevitable only cheapens the rule of individual intelligence, prudence and agency.

Yes, of course, poverty is their fault.

So where are your facts that most Americans are doing pretty well?

Did you all even read any of the links to the article?

“The figure includes the 16.1 million households living in poverty, as well as the 34.7 million families that the United Way has dubbed ALICE -- Asset Limited, Income Constrained, Employed. This group makes less than what's needed "to survive in the modern economy."

"Despite seemingly positive economic signs, the ALICE data shows that financial hardship is still a pervasive problem," said Stephanie Hoopes, the project's director.

California, New Mexico and Hawaii have the largest share of struggling families, at 49% each. North Dakota has the lowest at 32%.

Many of these folks are the nation's child care workers, home health aides, office assistants and store clerks, who work low-paying jobs and have little savings, the study noted. Some 66% of jobs in the US pay less than $20 an hour.”

Are we to pretend because we have savings, investments, good jobs and education that there aren’t over 51 million Americans who don’t have those things? You don’t believe that? You don’t know any of them? Leave your house and check out the areas you probably avoid or won’t live in or won’t send your kids to school. Go tell all the people on welfare, or living in government housing or who are homeless that it’s their fault their life is how it is.

My god the arrogance and insensitivity of privilege.

[Bloop Bloop]

Don't change the goalposts, mate. The article is about literally over half of Americans having a negative net wealth.

Stick to the stats that the article posted - not the ones that you can find, which go to something else entirely. "Savings, education, investment"? What does that have to do with poverty? What does that have to do with having a negative net worth?

You mention 51 million households - but only 1/3 of them actually live in poverty. The remaining 2/3 are "asset limited, income constrained, employed' - in other words, not in poverty. Not necessarily billionaires, but hardly impoverished, as your own data states.

So, maybe if the article was titled "Nearly half of Americans aren't succeeding" rather than "can't afford the basics of life", or if the article said "the median American household has less wealth than 1/10 of what the top quartile has", rather than "the median American household is underwater", then you might be onto something.

[FIREstache]

If there are Americans that aren't doing well, then they have themselves to blame.  Too many people are making bad choices and not putting in the effort to be successful.  I don't know how many times I've seen a story where someone is picketing for $15/hr working as a french fry tech complaining that they can't feed their family.  They shouldn't have had kids to begin with if they couldn't afford them - bad choices.  Ad we give so many handouts to people that we remove their incentive to work for anything.  Some of the presidential  candidates are offering yet more "free" stuff to people in hoping to get elected, like UBI handouts, baby bonds, free preschool, free college, free healthcare including to illegals, free child care, paid family leave.  It's crazy.

[StarBright]

For those interested in digging into the data:

https://www.unitedforalice.org/home

Have perused it, think the methodology looks solid for what they are trying to do (standardized levels for every county in the country)

Obviously for mustachian intents and purposes, you can always find cheaper than median housing, etc.

But when doing a large scale study researchers can't assume that everyone will find the cheapest housing and childcare.  If "everyone" finds the cheapest housing and childcare, then obviously the costs rise. Supply is limited. Averages and percentiles make sense (for what it is worth the ALICE study appears to use HUD's fair market rent stats and two bedroom apartments for families of three or more).

The original article appears to present most of the ALICE study correctly (based on my quick read through) other than the arguably large percentile leap of equating 43% with "Half". Where it seems to get confusing is by providing context for the ALICE terms with studies and claims that it doesn't cite.

As for the "american incomes haven't risen in half a century"claim - unless I'm missing it, that doesn't appear in the ALICE study. Without sources I'm not sure where the author is getting that. Maybe this? (where wage is equated with purchasing power):
https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us-workers-real-wages-have-barely-budged-for-decades/