
Many Americans who live paycheck to paycheck blame debt - hhs
https://www.cnbc.com/2019/07/20/heres-why-so-many-americans-cant-handle-a-400-unexpected-expense.html
======
pessimizer
I honestly must be missing something about both this article and this
discussion thread.

> The Survey of Household Economics and Decision Making asks people how they
> would pay for an unforeseen $400 expense. If a respondent said they simply
> wouldn’t be able to or would have to borrow money, sell something or neglect
> other bills to do so, they were included in the share of people for whom
> coming up with the money would be a challenge, which added up to that
> alarming 40%. Yet the Survey of Consumer Finances, which asks respondents
> for their bank account balance, found the share of households who have less
> than $400 in their checking or savings accounts was closer to 20%.

> For some reason, many people who had $400 on hand still said they’d struggle
> to come up with the money. “We were scratching our heads,” Chen said.

What if that $400 (or even $1400) were for rent, or utility bills? Wouldn't it
be obvious that you have to borrow money, sell something, or not pay a bill in
order to use $400 of it? What's the confusing part? Also, I guess you could
call your utility bills (but not your rent) debt, but that wouldn't be a
normal usage.

This article, and the vast response to it (which I can't connect to the fairly
empty content) is confusing to me. Are they saying something I'm not seeing?

edit: I mean, more than once in my life, I've had more than the money I've
needed to cope with an unexpected event in the bank, and I sold something in
order to pay for it, because no money fairy was coming before the end of the
month to keep me off the street.

~~~
soVeryTired
> What if that $400 (or even $1400) were for rent, or utility bills?

I guess the key word here is unexpected - as in, outside of what you've
budgeted for.

~~~
cowsandmilk
I think parent was saying that the people who have over $400 in their account
may already have it earmarked for rent or other bills.

If my monthly rent is $1200 and I have $600 in my account, it doesn’t mean I
have $400 I could spend in an emergency

------
11thEarlOfMar
For some reason, I am reminded of the paradox of more hard disc space. Or more
lanes on the highway. Any time to capacity is increased, it seems to get
consumed and before long, you're out of space again.

This presents a difficulty that perhaps researchers and pollsters can tease
out: How many of these cash-poor people genuinely are earning enough to live
comfortably vs. don't know enough or don't care enough to build savings, and
instead, spend up to their income? Increase their income and they'll just
increase their spending and be back where they started.

It seems likely that we could take these numbers down substantially by
improving financial management education. Or, simply accept that a large
percentage of Americans want to live their life to the fullest that their
income can allow.

~~~
dougmwne
I have been developing another mental model of this. I think that we naturally
measure our own lifestyles by looking at the people around us. We want to feel
like we're beating the average or at least not too far below average. People
we encounter in our lives will try to present themselves as positively as
possible, so we end up thinking that their lives are a bit more prosperous
than they really are. I think this is where most of the pressure to increase
our standard of living comes from.

Then you bring in competition for resources. If everyone makes similar amounts
of money and everyone is trying to have a similar quality of life, we will
tend to spend 100% of our incomes on our cost of living. Just like how
perfectly competitive companies will naturally compete away all profits,
competition for housing, education, healthcare, etc. will naturally compete
away all personal savings until the average savings rate is near zero.

The only way out of this competition trap is to find some way to escape the
average. Either find a way to make much more money than normal, be much more
frugal than normal, or be much luckier than normal.

~~~
kgwgk
The average is not really that important. As long as your income is not at the
lower end of the distribution it’s a just a matter of choice to live as if
your income was lower than it is (except in the cases where you would have
access to subsidies if your income was actually lower).

~~~
oposa
I have found this to be distinctly not true. I don't know of many places were
living a more modest life is a good choice. It seems like most people who says
this have already benefited from cheaper education, real estate, their partner
or career. In many countries average savings doesn't keep up with the increase
in property values, especially not in attractive job markets. If you don't
have wealth, or go into debt, you are falling behind. I really don't see it,
maybe you have some example?

~~~
CWuestefeld
I think the kind of things you're talking about are more exceptions, and
probably don't matter as much to a given family in the long run. For example,
once I've managed to buy a house, that's a stake in the ground; it doesn't
matter that property values continue to rise beyond that, since you've already
got the housing you need.

But so many other things really are choices. I see lots of my colleagues
replacing their new cars every 3 years; mine is five years old, having
replaced the car I previously owned for 12 (and they were a Hyundai and
Subaru, respectively, even if I could afford a Mercedes). Having cable TV with
all the movie and sports channels is very much a decision that anyone can pass
by. How often and where you eat out makes a big difference in expenses.
Clothes, shoes, jewelry, furniture, matching stainless steel appliances with
wifi, ... the list goes on and on.

~~~
oposa
Maybe a couple can survive changes in the housing and job market well enough
that it they don’t mind the changes to their quality of life. But it very
likely will be noticeable to their kids when other families have stronger
finances and better access to housing and job markets. If you can’t save more
than the difference to such markets what you get for the money is de facto
less. It is sort of inflation by inequality. Then the theory doesn’t really
hold and the frugality has just been to try and keep up.

I am all for frugality but in many places it hasn’t worked out in the last 10
years because you haven’t had the same access to growth. Unless you already
had assets in the first place.

~~~
CWuestefeld
Huh? I guess I'm really not following your reply. It seems like you're saying
that my willingness to keep a car for a dozen years and to bring my lunch
rather than buying, and my wife having a $30 purse rather than a designer one,
hasn't actually helped my financial situation. That seems a rather silly
claim.

~~~
wolco
You also close the door on opportunity. Your wife with a better purse could be
making unboxing videos bring in thousands.

Bringing vs buying could be an opportunity cost. I've worked in places that
provided food perhaps a job change could help pay fof the lunch.

~~~
CWuestefeld
Apparently I'm wrong, and there's no point in trying to be economical. The
evidence is wrong, and people who spend wantonly actually end up with _more_
net available funds. Who woulda thunk it?

~~~
wolco
Life is not black and white and studies study only certain things. Don't
consider yourself wrong because certain use-cases may lead to other outcomes.

Being economical will save you money. At some point being too economical will
mean you have to accept lower quality/value. There is a tradeoff.

If your parents were being economical they might not have purchased a computer
in the 80s.. It was seen as an expensive toy and not purchasing one would have
saved them thousands. Long term the opportunity cost would outweigh the
purchase cost.

Buying a cheap kettle it might last 6 months paying a little more and you
don't need to replace it for 5 years.

There is an old British saying. Penny wise / pound foolish.

~~~
kgwgk
Sure, and you can also buy an expensive kettle today and replace it with an
even more expensive Alexa-commanded kettle next-year.

It’s silly to say that not going to Hawaii for a week or not buying a $1000
handbag is going to cost you more money down the road...

Where is the opportunity cost in bringing your own lunch to work? Would he
increase his chances of getting a better job if he stopped doing that in his
current job?

~~~
wolco
The person who throws out working stuff for something newer always has a pulse
on what is hype and has the first mover's advantage. You can't be the first to
write an amazon kettle app if you don't own the product.

The bringing a lunch eating alone vs eating with the group does matter. A lot
of company information gets shared during lunches, friendships are made and
sometimes you get to interact with people from other parts of the company.
This does give you a leg up when promotions come and or layoffs.

Not going on vacation ever or not buying a purse doesn't seem like it would
matter. It could if you are looking to join a social group where everyone goes
and shares vacation photos or if the group goes purse hunting together.

The point is any path could save/cost you as long as it fits with your goals
and your situation. Saving that college money instead of spending it and going
could allow you to buy a home sooner but it also could limit your career
growth. Everything is a tradeoff.

~~~
kgwgk
It also makes sense to buy lots of kettles and designer handbags when you're a
merchant of kettles or luxury goods. You could make a case for anything, but
some of those scenarios may be more relevant for the general population than
others. I'm sure that for most people spending in real estate or education may
be better than spending in fine wines, holidays or luxury cars.

> Everything is a tradeoff.

Absolutely. You trade work against money and money against stuff. You could
have more money and less stuff. Which means having less stuff now and more
stuff (or less need to work) in the future. Because money and debt are tools
to move consumption between the present and the future. That's the point. It's
a choice and nobody is limiting your capacity to consume in the future by
forcing you to consume today.

------
WalterBright
My father was career Air Force. Once he was ordered to help privates who were
having trouble with their finances. They were paid every 2 weeks, and it was
embarrassing to the AF for them not being able to pay their bills in the wider
community.

My dad phrased it as half the privates had no trouble, the other half had
steak and alcohol the first week, beans and begging for handouts the second.
All the privates had the same pay, lived in the same base housing, etc.

He said the feast/famine group simply could not control their spending
impulses.

~~~
jopsen
While I'm sure some in the feast/famine group "just" need to get their act
together. It's not always that's simple.

Most people have a limited number of good choices in a day:
[https://en.m.wikipedia.org/wiki/Decision_fatigue](https://en.m.wikipedia.org/wiki/Decision_fatigue)

Maybe other concerns/issues were causing some of them to run out of good
decision bandwidth.

Note. I'm not claiming that all poor decisions can be explained this way.

~~~
wisty
Ego depletion is questionable -
[http://www.slate.com/articles/health_and_science/cover_story...](http://www.slate.com/articles/health_and_science/cover_story/2016/03/ego_depletion_an_influential_theory_in_psychology_may_have_just_been_debunked.html)

I think this meta-myth (that some people just can't make good decisions) is
becoming a hysterical epidemic -
[https://en.wikipedia.org/wiki/Mass_psychogenic_illness](https://en.wikipedia.org/wiki/Mass_psychogenic_illness)

I think there's a mass nocebo (evil placebo) effect. "I can't, because of ego
depletion / decision fatigue / not enough spoons". This then becomes a kind of
self fulfilling prophecy - people do give up more easily when they have an
excuse, and don't have to admit they're just making a bad choice because
they're (relatively) greedy and short-sighted.

~~~
jopsen
> "I think..."

Yet, many studies show how poverty and decision fatigue (or some variant there
of) goes hand in hand, often in a negative feedback loop.

_I think_ it's likely that poor people don't read these studies, and, thus,
are not subject to your nocebo effect.

Note. I didn't say it explained all behavior.

------
Edmond
One perhaps not so hidden cost of American life that I wish someone prominent
would seriously investigate is the cost associated with car ownership.

I suspect over the course of a lifetime car ownership could easily be the most
ruinous financial baggage that a lot of people incur.

~~~
MuffinFlavored
Doesn't America offer some of the most affordable car prices?

This might be a bad example, but I am pretty sure that luxury German cars like
Mercedes/BMW are cheaper to purchase/register in America than
Netherlands/Denmark due to taxes.

~~~
ngngngng
Yes, but cars are more of a necessity here than in Europe. No matter how poor
you are, a 20 minute drive can still take over 2 hours by bus in some areas,
and that's nearly impossible to work with.

~~~
namdnay
Depends where in the US, and where in “Europe” (it’s a pretty big place you
know...)

------
proee
Two of my friends surprisingly told me they live paycheck to paycheck on
salaries well into the six digit range. When I asked why, they both said
"that's just how they've always lived." So having the discipline to save a
little is clearly a challenge for them, despite having a very good income.

~~~
cletus
That blows my mind, actually, for two reasons:

1\. If you're a single person, even in the Bay Area, I have no idea what
you're spending that money on; and

2\. In 10-20 years when those same people are no longer a "culture fit" I
wonder if they'll rue their frrivolous ways.

So being poor or being close to it affects people in different ways IME. For
some, this means spend as soon as you have it or it'll just go away (eg there
is a noticeable uptick in large TV purchases around the EITC). Others will
live ridiculously frugally. Some will be super-driven. Others almost
defeatist.

In my case there was a time growing up when we were "poor". This is Australian
"poor" not American "poor", which is a whole different thing. I don't mean
homeless either. Just money was really really tight, as in baking bread
because we couldn't afford to buy it, that sort of thing. This actually wasn't
obvious to me at the time.

Many who have been "poor" IME never escape the feeling that even in times of
bounty everything may still disappear tomorrow. There is much less sense of
security. I really think this is one thing that many people who have always
had money just don't understand. And I don't mean "wealthy". I just mean they
never grew up in an environment where they had serious money worries.

Anyway, the income potential in Australia in software is substantially lower
than the US. I was fortunate enough to get a job in Big Tech (NYC) some years
ago. I noticed that I'd feel "bad" when I "wasted" $20 on something, like a
shirt I didn't end up liking.

A few years ago I ran the numbers on how much I'd saved since coming to the US
and honestly I was shocked, as in up until that point I had no idea just how
little of my income I was actually spending. And this is a holdover from that
psychological lack of financial security. To put this in perspective after
paying all living and food expenses, my discretionary purchases and so on that
I was still saving 30-40% of my gross income (including 401k). I'd say my
income is pretty typical for Big Tech, nothing extraordinary.

Thing is, I actually have no idea what I'd the rest on if I decided to live
paycheck to paycheck. So when I hear stories like yours I'm honestly
befuddled.

~~~
GlennS
Funnily enough I had the same thing thing moving from Bristol in the UK to
Sydney in Australia. My salary jumped more than 2x, I've got no idea how to
spend it all despite my best efforts to drag everyone to the pub, and so at
current rate I'll be able to retire at 45 or sooner.

~~~
cletus
I'm honestly surprised to hear that about Sydney because the cost of housing
in Sydney is insane. Or is it just the case that salaries in Bristol are
horrible?

So if I were looking at how to maximize my take home income and retire in the
shortest amount of time and I was just picking a place on the globe to do
this, I'd pick Seattle, hands down.

------
gridlockd
The definition of "couldn't handle" is wrong. Most people _could_ handle it,
it just would mean extra debt - but so what? Average US credit card debit is
_over $5000_. Who cares about savings when you can just get more debt?

The fact that credit card debt is at 18% during a historically low interest
rate environment also implies that a lot of people simply don't pay back their
debt.

The flip side of it is that people are willing to work for lower wages,
because a steady income - even if it is low - means you can _get more debt_!

Finally, of this money that shouldn't even exist in the economy drives up
prices for everything, the best example for this of course is student loans
versus the cost of education.

------
dgzl
I think when people come across extra funds they just use it to upgrade their
life. Maybe they buy the nicer soft drink and snack, they spend more time at
the bar with friends, they decide to buy audio equipment or another computer
monitor, or they incorporate an extra prepared meal into their regular
routine. There are so many small ways to spend money that make us feel like
we're living a better life, but when the dust settles the improvement was only
temporary.

~~~
Waterluvian
I knew someone like this. At the risk of being super rude, in a post bragging
about their tax return and new Playstation, I asked why they weren't paying
down the debt they were recently complaining about.

I forget the exact words but it was basically, "I'm paying down the debt on
misery and depression."

It reminded me of some of the sadder parts of my time in university. Sometimes
you need a little injection of joy and you try not to burst into tears as you
type your debit PIN in, knowing this is basically all you've got left.

------
gingabriska
I am living in India now and I realize how many things are very hard to get
here. If India had a market like America, I am pretty sure most people in
India would love to go into debt to experience the products and service which
market has to offer.

Here if I've to get something, either I've to import and pay import duties and
IGST which effectively doubles the price of product and it's headache to deal
with customs. Often it's not possible to find interesting products on local
market as a techy.

~~~
thekingshorses
> living in India now and I realize how many things are very hard to get here.

What are the things is hard to get in India?

There are tons of people in India spend/go into debt to buy a fancy
motorcycle, card or cloths or house. Millions of people are in Debt. Thousands
of farmers suicide every year because of debts. They may not buy the same
thing as Americans, but a lot of people do live paycheck to paycheck.

------
frankbreetz
I would struggle to pay an unexpected 400 bill and would definitely put it on
my credit card. This seems like a smart decision to me. When I put that bill
on my credit card it affords me an extra 30-60 days to come up with the money.
I am in the process of paying off debt, acquiring money generating assets. I
would eventually like to be in situation to pay a bill like this, but it seems
better pay off as much debt as possible. I guess if I lost my job I would be
in bad situation, it is hard to start making money without taking some risks.

------
tracer4201
I posted in a different thread on a similar topic the other day about how
recent tax policy shifts helped me increase savings and pay less than 10%
effective tax last year. My post was downvoted and flagged.

If you already have wealth, the economy is working pretty well for you. If
you’re in a low paying job, often times with irregular schedules and less than
even 20 hours a week, you’re in a world of pain.

I’m not sure what the solution to the problem is. Just discussing it at all
has become so controversial.

~~~
MuffinFlavored
> If you’re in a low paying job, often times with irregular schedules and less
> than even 20 hours a week, you’re in a world of pain.

Who is to blame if you are only working a low paying job only 20 hours a week?
By all means, it's not an easy world out there. But... wealth + opportunity
isn't going to just fall from the sky?

Maybe I am guilty of looking at things the wrong way? Curious to hear your
thoughts. Hope I don't get downvoted... :/

~~~
zbentley
> Who is to blame if you are only working a low paying job

I'd argue that it doesn't matter. Whether you take the position that it's the
fault of parents/colleges/the education system/predatory lenders/politicians,
or the position that it's primarily the fault of the individual, the reality
remains that most people are staggeringly unable to change their
circumstances.

In general, income/class mobility in the US remains extremely low, especially
when someone's first jobs are low income and they have no secondary assets.
This is a life-long condition for many (and, arguably, often a multi-
generational condition).

Anecdotes to the contrary are a favorite conversation topic, but the lack of
mobility remains. What (precious little) applicable information is present in
up-by-your-bootstraps stories is either not actionable or not acted upon.

I'd argue that "what if someone is to blame for their circumstances?" and "if
I/$self_made_person_of_the_week got out of poverty, why can't you?" are both
pointless questions. They attempt to find root causes for a symptom which,
when addressed, makes discovery of the root cause a moot endeavor.

People overwhelmingly don't get out of poverty. With a very few ascetic
exceptions, there is not an affirmative choice being made to be poor--even in
the most conservative interpretation, people are "irresponsible" rather than
pro-poverty. Poverty causes suffering (to poor people and to many other layers
of the social fabric, including non-poor people). Alleviating or removing
suffering is within the power of the state and affluent people as a whole
(from donations to social welfare/education programs to moonshots like UBI and
a million other proven or plausible strategies).

Who is _culpable_ is not pertinent to the removal of the proximate suffering
of poverty, and I suspect that after removing that proximate suffering, the
culpability question would no longer be as relevant/interesting
(historically/sociologically, maybe, but not as an answer to a widespread
social need).

To be clear, mobility (and the severity of poverty) used to be much, _much_
worse in the US (and is still quite bad in many places). But the suffering
remains. "You make your own problems" is as useless to point out to
financially suffering people as "you just eat too much" is to point out to
someone who has been 100kg overweight for 30 years. Solving the immediate
suffering has an effect.

~~~
MuffinFlavored
If I was in poverty and I wanted to get out of it, I'd go get 2 jobs and make
a lot of sacrifices. It wouldn't be pretty, it wouldn't be fair, it wouldn't
be fun. But it's not impossible.

Not everybody gets to be healthy, naturally beautiful, natively speak English,
work 40 hours a week with full benefits, and get paid thousands/tens of
thousands/millions of dollars a month. I'm sorry that people dealt the worst
card in life in terms of net worth (those in poverty) are staring up at a
proverbial mountain to climb, but I don't really see another solution other
than work + sacrifice. Wealth and opportunity aren't going to fall from the
sky for them.

> "if I/$self_made_person_of_the_week got out of poverty, why can't you?" are
> both pointless questions.

Are they though? There's a recipe to get out of poverty. Start exchanging as
much of your time/mental health as you can for more money, and don't inflate
your lifestyle. Why can't people in poverty be bothered to have to sacrifice
more than those that are wealthy? I have no idea. Why do 18 year old
supermodels get to date and live off of millionaires while I have to work for
a living? Life isn't fair.

~~~
zbentley
> If I was in poverty and I wanted to get out of it, I'd go get 2 jobs and
> make a lot of sacrifices. It wouldn't be pretty, it wouldn't be fair, it
> wouldn't be fun. But it's not impossible.

Overwhelmingly that seems not to be occurring. It either does not work as well
as you think it does or is not undertaken. People, as I said, do not want to
suffer economic hardships.

This isn't an appeal to fairness or egalitarianism, but to the reality that
intense suffering is endured by the poor, and that it can be alleviated from
the outside _regardless_ of whether or not you think they are responsible for
their own suffering. This is an obvious thing to want if you don't like others
suffering and acknowledge that most people, no matter how much they want to,
do not leave poverty on their own.

> Why can't people in poverty be bothered to have to sacrifice more than those
> that are wealthy?

That's . . . incredibly insensitive. I understand that ad-hominems are frowned
upon here, but that statement is both callous and makes some _seriously_
flawed assumptions about who is sacrificing/suffering, and how much. It also
reflects a very "fuck you, I've got mine" mentality, which is not conducive to
the formation of functional, compassionate, good-to-inhabit communities at any
scale.

~~~
watwut
One reason for why it does not happen is that two full time jobs are possible
only if st least one of them allows you slacking. The issue is not just lack
of fun, but being too tired to function properly. And also when you have no
outside of job duties.

~~~
barry-cotter
Jobs that don’t allow slacking pay well because otherwise they have comically
high turnover. I worked night shift in one service station and a day shift in
another one for over six months and I’ve worker bar with a day job in a
supermarket. Working 60 hours a week is easily within reach for any able
bodied person under 40, even on a construction site. Over 60 hours or once
your body starts to go you’ll be more restricted but once you have a few years
in any job you can do the average work that you do on autopilot basically in
your sleep.

------
ericd
Largely a result of NIMBYism keeping home construction figures near economic
centers low, resulting in a huge demand-supply imbalance, forcing renters into
a bidding war for access to those markets, causing much of the surplus to go
to landlords.

Also, the treatment and legislation of housing as an investment asset class
rather than as a life necessity.

And then there's the healthcare industry, swallowing much of the real wage
gains in recent decades in the form of rapidly rising insurance costs
(cleverly decoupled from peoples' paycheck, so they feel like it doesn't cost
them anything).

And, of course, designing most of our cities to require that people maintain
enormously expensive personal cars, or waste hours per day navigating sub-par
mass transit systems.

There are myriad other causes (advertising, consumer culture, extremely
expensive infrastructure, government writing blank checks to universities, etc
etc), but I think these are the majors.

------
mdorazio
Looks like this article is trying to reconcile the multiple conflicting
studies on this topic, especially around some of the wording of the questions.
Here's the key takeaway:

"Many of the people who have $400 or more available to them likely have
already earmarked that money for another obligation (and so, in other words,
the cash isn’t really available to them)."

So if you're not in a good position, what little money you have in savings is
already going to go somewhere else by the end of the month, and adding an
expense on top of that would require an additional debt of some kind. It's
still not clear to me, though, how credit cards factor into this since many
people put any significant expense on their credit card rather than writing
checks/handing over cash.

------
adrianmonk
This research seems pretty obvious, or at least it doesn't tell me anything
that's surprising.

All I get out of it is that if your policy is to ride really close to the edge
(between income and spending), and if you have credit available to you, then
there will be times when you take on debt.

OK, but what else would you expect? Some people are meticulous about finances,
and some people aren't. Do you expect the people who aren't meticulous to
constantly track both credit card balance and bank balance, then stop making
credit purchases the moment they don't have the cash to back it? By
definition, it's the sort of thing they don't typically do. With no process to
prevent it, of course sometimes the credit card balance will grow larger.

In other words, this doesn't really show that debt is the cause of the
inability to come up with $400. It might be, if someone _cannot_ reduce their
expenses or increase their income, which of course is true for some people.
But in general all it means is that they haven't, not that they can't.

------
vgaldikas
>For some reason, many people who had $400 on hand still said they’d struggle
to come up with the money. “We were scratching our heads,” Chen said.

What exactly made them scratch head? I mean if you have 400 in account,
doesn't mean you can just willy nilly spend it on unexpected expense. Maybe
this 400 have to last you till the end of month

------
RickJWagner
Americans are tremendous spenders. Pay someone 100k a year, they'll spend 101.
Then complain it's their student loans that are weighing them down.

Seriously, since the great recession the American economy has absolutely
boomed. If someone hasn't made money in these last few years, it's most likely
going to be their own fault.

~~~
war1025
I find that the people who complain about the economy and how the rich are
taking all the money while the poor get nothing, are the same people who don't
bother to buy any stock.

If the rich are getting all the real gains in the market, do what they do.
Which is buy into the stock market and make money off equity and not time.

~~~
siphon22
Damn, if only I knew I just had to have 50k laying around to invest in stocks
to not be poor...you figured it out! We have to let the world know about this.

~~~
mlguy456
TBH, 50k wouldn't help. It's a petty amount of money when it comes to
investments. On average you can aim at 3% per year. That should be enough to
support your lifestyle which is 30k if you are ok with being frugal. Would you
live like a homeless if you had 1M in your investments accounts? No, you'd be
paying off mortgage on a nice house while figuring out how to make more money,
deal with inflation and rapidly rising property taxes, so you won't end up on
streets when you retire. If 50k could solve your problems, I'd give it to you
now because I believe that fixing someone's life is worth way more than 500
hundred dollar bills.

~~~
RickJWagner
You don't need 50k all at once. You need a little bit of money from each
paycheck, saved and invested for years.

Here's an example, a low-paid guy who ended up with a big pile using just that
plan. It really works!

[https://www.goodnewsnetwork.org/frugal-carpenter-cut-
corners...](https://www.goodnewsnetwork.org/frugal-carpenter-cut-corners-to-
give-full-college-scholarships-to-33-strangers/)

------
superkuh
Debt literally is the problem. Specifically the creation of the money supply
only by a select group of corporate banks. The practice of fractional reserve
banking means they literally create money out of thin air as debt when they
"give" out loans. This means that there will always be significantly more debt
and money owed than money in circulation. And literally _all_ of the value of
the newly created money goes to the corporate banks.

The problems in our society stem from this universal basic income for
corporate bank persons.

------
tempsy
If you take a look at the top finance apps there’s a disturbing number of
“bridge loan” apps that are meant to front you money between paychecks.

------
TomMckenny
The article repeatedly mentions credit cards as debit but not mortgages (or
rental expense). But it seems unlikely that credit cards are the biggest
debt/financial-obligations people hold.

~~~
whatshisface
Mortgages tend to be equal to rent in the long run due to efficient market
reasons. Credit card debt is especially ruinous because unlike mortgages and
car loans, there's no asset for the bank to go after if you default. As a
result the interest rates are naturally higher because the people who roll
over their balance month to month have to pay for the people who go bankrupt
at a casino.

~~~
TomMckenny
I do not claim credit card debt is smarter than a mortgage. I claim it is a
far smaller percentage of personal debt.

For example, reducing housing cost by a few percent would have a vastly
greater effect than reducing any other source of debt by the same percent.

If a person is in debt, it's not primarily because they bought a latte, it's
because housing cost are high.

So if we're looking at debt per se, then it's housing we should be looking
look at.

------
ponzifighter483
Living paycheck to paycheck?

1\. Downgrade everything you own. Car and house are the main things. You don’t
need that BMW. Get a shitty Toyota.

2\. Sell the house and move back in with your parents. If you have too much
pride, then downgrade to a smaller place. Pocket the savings.

3\. Pay off all your debt and student loans if you have any. Ask your parents
to help you out. Swallow your pride.

4\. Work towards a better job. Go back to school if necessary. For example,
you could get an MBA.

Laziness is your enemy. Take advantage of your resources and network. If I can
do it, so can you.

~~~
gridlockd
> Pay off all your debt and student loans if you have any.

Paying back student loans seems like a bad idea, what if the Democrats win and
forgive student loan debt?

You'll be left holding the bag.

> For example, you could get an MBA.

With _another_ student loan?

> If I can do it, so can you.

Perhaps, but if I was living paycheck to paycheck, I'd be in "good company"
with the federal government, local governments, corporate America and the
majority of the general population. That's a pretty big interest group. I have
a feeling there's a big debt jubilee coming up...

~~~
bilbo0s
> _Paying back student loans seems like a bad idea, what if the Democrats win
> and forgive student loan debt?

You'll be left holding the bag...._

This is an extremely bad way to think about handling your financial future. I
feel like too many people engage in these risky bets not only with student
loans, but also with investments. But consider, what if student loans _are
not_ forgiven? Here you would sit at, what? 40, or 45, not having paid
anything on your loans. That's a horrible idea.

With all gambles like that, what's foremost in your mind should be:

"The market can stay irrational much longer than you can stay solvent."

~~~
sokoloff
At this point, I think the risk that the student loan giveaway will happen is
quite low. Nevertheless, if my kids were older and in or done with college,
I’d counsel them to pay the minimum on student loans and save the rest that
they might otherwise pay in a taxable account just on the small chance the
student loan forgiveness actually happens.

There’s nothing inherently better about paying down student debt if the
alternative is investing in a broad based equity fund (VTSAX, VTI, etc). There
is something better about paying down debt if the alternative is consumption
with that money.

~~~
leetcrew
> There’s nothing inherently better about paying down student debt if the
> alternative is investing in a broad based equity fund (VTSAX, VTI, etc).

it depends on whether you have a subsidized or unsubsidized loan. the interest
rate on the unsubsidized stafford loans is only a little less than the average
nominal return of the s&p500 over the last ~60 years [0]. the safe bet here is
probably just to pay the loan off; you don't know if the next ten years will
give above or below average returns.

on the other hand, the subsidized stafford loans have only about half the
interest of the unsubsidized flavor. if this is you (and you aren't making
enough money to lose the subsidy), it seems like there would be a perverse
incentive to only pay the minimum and invest whatever is left over.

[0] [https://www.investopedia.com/ask/answers/042415/what-
average...](https://www.investopedia.com/ask/answers/042415/what-average-
annual-return-sp-500.asp)

~~~
sokoloff
If there's even a 5% chance that the Democrats will give you $50K if you wait,
that juices the expected return of not paying off the loan significantly.

I agree with you in general that it's economically nearly a push to invest or
pay off the loan under normal political conditions, and that the certainty of
paying it off has positive value for most people. I also think there's
significant psychological benefit to having no student loans hanging over your
head, so absent the possible handout, I'd lean towards paying it off. Waiting
two or three years to see if the promise evaporates seems reasonable, given
the low average cost of waiting.

~~~
leetcrew
I see your point, although I don't think I would recommend this strategy to a
good friend. there's also an emotional side to it. even if you made the
"optimal" economic decision at the time, it would still feel pretty bad to pay
off your loans in full over the first 5-10 years of your careeronly to see
your peers' debt get wiped out at the end.

~~~
sokoloff
“You did such a good job paying off your own loans, we’re sure you’ll enjoy
paying off everyone else’s loans as well...!”

------
briantakita
Income tax makes it difficult to catch up once you get behind.

~~~
war1025
I never understood this mindset. All of my budgeting / financial calculations
are based on the amount of money that shows up in my bank account each week.
That number is significantly lower than what I"m "paid", but is the actual
number that matters from a financial point of view.

I have friends who like to talk about how much they make per year and how that
means they can afford x,y,z. But it's always the sticker price, not the in the
bank amount after all the taxes and benefits are taken out.

------
GreeniFi
I sometimes wonder how easy it is for the average person to practice prudent
financial management when the entire economy is geared towards getting you to
spend what you can? The advertising sector and one-click buying works out how
to isolate you from your herd and then hunt you down like a lion hunts down a
sick gazelle, and you have little to no chance of hitting your monthly saving
targets, with the big beasts of the digital economy after your last cent.

If this hypothesis is correct, is there a business here? Financial sergeant
major - helping you hit your saving targets. Imagine: “GET THE FUCK OFF
AMAZON, YOU SHAMBOLIC EXAMPLE OF AN OVERGROWN MAN BOY! AT THIS RATE YOU’LL DIE
A POOR VIRGIN”. Business model: pay my automated system a % of the money it
saves you every month. “NOW DOWN AND GIVE ME TEN”.

~~~
ericd
It's not that hard to escape the vast majority of advertising. But I think
culture is a much bigger part of it. My friends tend to be fairly
frugal/easily contented, and I find it pretty easy to be the same way,
probably partly as a result. If we were competing with each other to have the
coolest car/home/boat/whatever, I imagine it would be a lot harder.
Fortunately, we're all pretty unimpressed with people who try to show off by
being spendy, and so we're all pretty frugal, and invest our money in assets
instead of buying nice things. I think if the broader US had a culture more
like that, we'd have much more savings.

~~~
geodel
You made a great point. Though my friends are not like yours. However I
consistently keep reminding myself that I can't and don't need to
compare/compete with their expense level.

Other thing that keep me grounded is thinking about earning potential and not
just total earnings. Things may be going good for now but it can stop sooner
than I expect.

~~~
ericd
Yeah, I don't know how common my situation there is. Absent that, I think what
you're doing (trying to keep mindful) is a good way to stay the course.

------
bluedino
Title appears to be “Many Americans who live paycheck to paycheck blame debt”

~~~
MuffinFlavored
I think there is an order of "debt" that is acceptable:

1\. Unless you go out and buy a house way out of your budget, or you buy a
house that was in your budget then lose some/all of the income you previously
had, being in debt to a mortgage really shouldn't cripple you under normal
circumstances.

1\. Having a car payment is pretty socially acceptable. Some people get the
latest and greatest every 2-3 years either through leasing or trading in.
Hopefully, there are not tons of people in crippling debt because they want
the latest and greatest $40k-$60k SUV. I'm sure there are plenty of people in
the "I have crippling debt" group who couldn't even afford a car payment.

1\. Medical bills. I'd imagine nobody is going to criticize you if you are
genuinely in debt because you had to pay to stay alive/keep a sane quality of
life that is free from disease/ailment.

1\. Student loans. You don't _have_ to go take out $60k-$80k in loans to get a
degree to get a job, but a lot of people do. Some people take out loans, then
go spend the money on Amazon/vacations/cars. They get to cry they have student
loan debt, but did they do the most efficient things possible with the money?

1\. Credit card debt. On one hand, you have people who need to protect
themselves from financial ruin. With inadequate savings, they turned to their
line of credit. That's fine. Emergencies happen. But... what percentage of
credit card debt holders (which I'd imagine is one of the most
popular/crippling forms of debt in America) are solely in credit card debt
because they only used it in an emergency? How many of those people are making
day to day sacrifices to try to "get back above water"? How many people are in
debt because... they just enjoy being a consumer and spending money.

~~~
war1025
Out of curiosity the other day, I picked up a magazine that said "How to get
out of debt". But the entire contents were basically what you just wrote.
Seems like a defeatist bate-and-switch to sell a magazine specifically on how
to get out of debt and then have it actually say, "just kidding. you'll be in
debt forever. There is no escape"

------
pmiller2
You don't need debt to explain this:

* Median US home price, $227k

* Median US rent, $1400/month

* Median US household income, $61k

* Median US individual income, $31k

All these facts are one google search away, on the front page. No need for a
study to explain it.

~~~
MuffinFlavored
I'm confused. What picture does this paint?

20% of a $227k home is $45.4k down

Zillow estimates that mortgage (with insurance + taxes) to be $1,230. A $170
premium to rent versus own seems like a wonderful price to pay to not have to
come up with a $45k down payment.

Are you saying houses are too expensive, or wages are too low?

~~~
qes
> Are you saying houses are too expensive, or wages are too low?

Median housing cost is 54% of median income. That's.. high. The general
recommendation is 30%.

> A $170 premium to rent versus own seems like a wonderful price to pay to not
> have to come up with a $45k down payment.

On the other hand, you'll be building equity with a house instead of building
someone else's equity with rent.

And housing prices don't always go up, but they mostly do.

11 years into a $210k house and I'm walking with nearly $100k after
subtracting maintenance costs (carpeting, dishwasher, washer/dryer, water
heater, roof, gutters, interior drywall repair, and exterior paint). Total
mortgage payments have been about $190k. So I effectively paid $750/month to
live in a 2000+ sq ft, 4 bedroom, 2 car attached garage house in a first-ring
suburb of our state's metro area (renting it would be well over $2k/month) and
I have a nice pile of cash I otherwise wouldn't have saved.

~~~
_ah
That's nice, but it's important to remember that (regardless of your living
situation) you are really just benefiting from an increase in the price of a
leveraged asset, where the interest is backstopped and subsidized by the
Federal government.

If you had taken your down payment, and all subsequent principle payments, and
invested them at 5x-10x leverage in a stock portfolio over the same time
period, how would the returns compare?

------
sneak
Many millionaires I know would struggle to come up with $400, too, if I passed
them through a strong magnetic field outside of business hours.

~~~
caymanjim
The article has nothing whatsoever to do with the notion of coming up with
$400 in hard currency on-demand.

~~~
PeterisP
If a millionaire has a $400 unexpected expense, then they'd most likely pull
out a credit card to pay it. Which is additional debt, and according to the
article's definition it'd mean that they're "living paycheck-to-paycheck"
since they'd take up additional debt for that expense. Heck, I have reasonable
savings but I'd not touch them for an unexpected large expense because it's a
hassle to touch any long term savings and using short-term credit for that is
simpler, faster and cheaper than breaking a deposit or selling stock or
whatever.

It has everything to do with that notion - the definition used in this
research is ridiculous; having $2000 of unused, readily available credit limit
is the functional equivalent of having $2000 cash under your mattress. A $400
expense is going to reduce your net wealth/increase debt by definition, so if
the answer to "what would you do for a $400 expense" is "duh, I'd borrow 400
because _for me_ being able to borrow 400 on a short notice is simple and
certain to succeed" then that's a quite reasonable answer that doesn't imply
any financial problems whatsoever.

