
The Secret Shame of Middle-Class Americans - snowmaker
https://www.theatlantic.com/magazine/archive/2016/05/my-secret-shame/476415/?single_page=true
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jbob2000
The secret shame of the middle-class isn't their credit debt, it's that they
are poor decision makers. The author completely glosses over this, only
dedicating a single line to the elephant in the room:

> "I made choices without thinking through the financial implications"

That's it. Full stop. You bought a car without having a stable job. You bought
a house way outside your earning ability. You bought fancy clothes and gadgets
without having the cash to pay for them. Don't blame credit, you did this to
yourself.

~~~
mattmanser
Are they poor decision makers, or were they poorly taught financial concepts?
Were they ever taught how to budget, how to see the actual cost of borrowing,
etc.?

~~~
overcast
Does buying something you don't actually have money for, something that
requires education? I mean, that's just self explanatory.

~~~
nlawalker
Understanding "don't actually have money" is something that requires
education.

With the way things are, it's very easy for someone who hasn't been explicitly
educated otherwise to look around and just assume that buying all you can and
making minimum payments is just how things work.

~~~
CWuestefeld
I think understanding this is a big part of it, and is something Megan McArdle
mentions sometimes in her columns.

The idea is that we see lots of people around us who we think are very much
like us. And we see that lots of them have a house with 3000+ square feet. And
lots of them drive an Escalade. And lots of them have their kids on travel
sports teams. And lots of them have this and that and the other thing. Every
time we see that people around us _tend to_ have such a thing, that suggests
to us that we can afford it too.

The thing is, we make each of those observations independently. We don't
generally take a complete inventory and see that Family A is paying for those
sports activities, but doesn't have the top-of-the-line cable TV package;
while Family B has the cable TV but goes without the annual vacation to the
Caribbean.

We tend to want _all_ the things that we observe that _much_ of our community
has, without thinking too deeply about the fact that none of them actually
have all of it.

 _EDIT - spelling_

~~~
ethbro
It's not just people making these choices on the basis of what they observe:
they're actively being influences to make poor financial choices.

Advertising spending is at around $200B/yr in US media alone.

... And how much of that would you say is targeted at getting people to make
good financial choices for themselves?

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randomf1fan
I'm always baffled by one thing in these sorts of articles - the belief that
paying the minimum due on your credit cards is the right thing to do.

I'm not going to pontificate about living within your means or whatever,
obviously people have reasons for doing what they do. But I don't understand
how so many people are cheerfully paying the minimums and treating credit as
basically an extension on their salary.

I have seen this at work as well, people making low six- figure incomes paying
minimums. I've even had someone tell me that paying in full is bad for your
credit score.

Is this a generally held belief? Do most people pay the minimum?

~~~
graedus
My understanding is that having 0% credit utilization is slightly worse for
your credit rating than having 1%-10% credit utilization. That doesn't mean
that you should only pay the minimum. My approach is to regularly pay them
down to a $10 balance; it's possible this is pointless because it's rounded
down to 0% in their calculations anyway, I'm not sure.

~~~
sokoloff
If you carry a $10 balance, you're probably giving up the free float. Since I
pay the card off each month, I get between 31 and 61 days of free float on
purchases. If I don't pay it off in a given month, finance charges accrue from
the date the charge is posted.

As to having utilization on the card, normal usage is enough to ensure that
there is always a balance due on the card anyway. (If you spend money on the
card regularly, the payment you send in August is for things you bought in
July and by the time it posts, you have more August charges on the card,
meaning the balance is only ever zero if you do a massive return or if you
have a multi-week spending embargo hit at just the time the credit company
pulls your report.)

~~~
graedus
> If you carry a $10 balance, you're probably giving up the free float.

Not sure what the mechanics are behind the scenes, but I keep an eye out for
interest charges and I haven't seen any for years.

> meaning the balance is only ever zero if you do a massive return or if you
> have a multi-week spending embargo hit at just the time the credit company
> pulls your report.

I think I implemented the $10 policy because I wasn't using my cards very much
at the time. Your system makes the most sense for anyone who uses their card
regularly.

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Sleeep
>“You are more likely to hear from your buddy that he is on Viagra than that
he has credit-card problems,” says Brad Klontz, a financial psychologist who
teaches at Creighton University in Omaha, Nebraska, and ministers to
individuals with financial issues. “Much more likely.”

What!? This... Isn't even remotely true. Maybe it's just my peer group and
family but complaining about money problems is extremely, extremely common.
Other than my coworkers I know more people who talk about lack on money then
don't.

It kinda gets old though because I see the complainers complain then go out
and make terrible financial choices. I have a friend whose always complaining
about money yet he's buying expensive clothes for his wife, bought two brand
new cars (one for the wife), and a motorcycle. While complaining he can't
afford groceries. Then goes on several vacations. These people actually have
enough money to fund a pretty decent lifestyle if they just worked to get out
of debt then worked to budget.

Seems people just want to buy the things they want no matter their ability to
pay for them. And banks are happy to lend money to finance this lifestyle. So
we have more advertising, more credit, and more things to buy.

I think there's a cultural expectation of perpectual debt. Like everyone
always has multiple "car payments" and a "house payment." Need something? No
need to save for it, just take out a loan and add it to your monthly payments.
That's how people get in trouble - leaving no cushion.

I just find it hard to get through this sort of article, making it seem like
average-to-good income earners, someone earning $50,000 a year, are victims of
some sort. I went without for a long time to get myself out of student loan
debt and the get myself to a place of economic security. If I can't afford
something, I don't buy it. It's not hard concept, but it does require going
without. I also don't think paying these people more would help - they would
just spend more.

~~~
shados
Yup. I essentially learnt how to manage my finances by watching my parents
fuck it up over and over. Burning so much money on a wedding that they had to
file for bankruptcy. Carrying balances on their credit cards for years (even
when they could easily pay it off). Finally getting a chunk of money as a
lawsuit settlement and buying a $18,000 TV (yeah, a $18,000 TV. What the ever
living <beep>. They had their share of bad luck, but nothing that couldn't
have been worked around by making even marginally better decisions ($18,000
bucks used the right way can go a loooong way...)

------
twoquestions
If you could have written this article, read every post in this blog:
[http://www.mrmoneymustache.com/](http://www.mrmoneymustache.com/)

I was a spendthrift for years, and even regular raises couldn't get me ahead.
This guy teaches you how to not only save money, but take _pride_ in not
having the latest and greatest everything. This, IMO, is what makes spending
within your means sustainable in a society that looks down on those without
the proper social status markers.

If you're in an economically depressed area where the richest family in town
doesn't have a pot to piss in, your poverty isn't you fault, and we should
have a better safety net that helps people up to more valuable careers. If you
have means, save your money, and take _pride_ in not being suckered in by
people selling you stuff that won't make your life better!

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firefoxd
It's easy to say "they are stupid, they should have thought about it before
making those decisions."

When I think back i was very stupid at 18, but that's the age everyone
expected me to go to college, and everyone told me it's ok to take a loan
because with a great education I'll have the best job, and it will be easy
because I'm super smart. Everyone encourages an young dumb 18 year old to get
in a large debt like it is nothing.

Then, "do you have good credit? Get a good car cause you don't want to be
thinking about fixing it, you want to focus on your studies"

Then, "buy a house, otherwise you are throwing money away every month while
you could be investing in your own home"

This is something totally normal, it's the system. It's so ingrained in us (at
least in the US) that not having these debts is socially shameful.

~~~
ZenoArrow
I'm sure it is partially a cultural thing. What steps did you take to reduce
your debt after you realised it was holding you back?

~~~
firefoxd
I got lucky, i was denied all these things. Sure at that age i was ashamed to
say i dropped out of school cause i could no longer pay out of pocket. My
school mates were uncomfortable when i talked about taking the bus. And when i
couldn't buy food with at lunch with a credit card, i simply didn't eat.

Today i can pay $400 for an emergency, most my friends can't.

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pinaceae
At the heart of it is piss-poor basic education. Math, reading comprehension,
decision making, critical thinking.

Budweiser is the king of beers, it says so on the label. The World Series is
the world championship in baseball. etc etc etc.

However - this is great for the overall economy. The US is breeding the
perfect customer, that can be sold anything at any time.

You can see it in startups too, you can sell product based on a powerpoint, a
"vision". 9 out of 10 with nothing behind it. It would never, ever, fly in
Germany for example. People there assume a scam before anything else.

So, shit for individuals, great for the overall economy. Pick your poison.

~~~
CodeMonkey1
You only need 3rd grade level math to understand budgeting. The problem is
lack of discipline.

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5555624
This article is from May 2016. Previous discussion:
[https://news.ycombinator.com/item?id=11533567](https://news.ycombinator.com/item?id=11533567)

------
losteverything
The best line i heard from a guy in my route is this

When i was 20 i wanted to make 100k by 30

When i was 30 i wanted to make 1m by 40

When i was 40 i didnt care about money

And now in my 60s i want to die $3m in debt.

~~~
curun1r
Put another way (I saw it on a Citibank billboard, but it probably originated
elsewhere):

"Why do we spend our youth chasing money and then our money chasing youth?"

------
CWuestefeld
I don't think it's surprising that as individuals we've allowed the depth of
our safety nets to shrink. After all, we've been telling ourselves for some
time how important it is to strengthen the safety nets provided by the
government (and generally, have actually done so).

Given that we're telling everybody that there's a fallback available for many
kind of problems, we should expect that people will de-emphasize the amount
they sacrifice for their own such purpose.

So the stats quoted in the article, about how much margin people have for
rainy days should be supplemented by information about the net value of the
benefits they will, or could, derive from the government. What's the NPV of
their expected Social Security and Medicare benefits? What can they expect to
get in aid from Medicare or CHIP-type programs? What would their unemployment
benefits be, should it come to that, or food stamp and related programs?

------
pascalxus
Another thing we need to learn from this: just how high Taxes are in the US.
The middle class is getting hit really hard with this. US govt spends 38% of
GDP, so for the average person, they're losing 4/10$ they earn: though it's
not all from income. And it's worse than you think, because it's not just
about the income you make. When you spend that income, the purchasing power is
much less because everything costs much more due to the high taxes. Example:
Day care costs 1500 instead of 1000$ per month, etc, etc. And it's much worse
in states where living costs are high: like CA and New york (where the author
lived).

