Millenials, we share your pain…
Here’s an absolute must read by Neal Gabler, a professional journalist, film critic and author about how messed up everyone is, not just millenials.
The Secret Shame of Middle-Class Americans Living Paycheck to Paycheck
Nearly half of Americans would have trouble finding $400 to pay for an emergency. I'm one of them. Please consider…
For the TL;DR crowd, here are a few enlightening passages:
Almost half of us don’t have enough saved to handle a small emergency expense:
47 percent of respondents said that either they would cover the expense by borrowing or selling something, or they would not be able to come up with the $400 at all. Four hundred dollars! Who knew?
Well, I knew. I knew because I am in that 47 percent.
This includes young professionals and people making over $100K.
80% of the population is one extended job loss, or catastrophic illness away from financial ruin:
A family in the middle quintile, with an average income of roughly $50,000, could continue its spending for … six days. Even in the second-highest quintile, a family could maintain its normal consumption for only 5.3 months.
This applies to what happens if the family were to lose its income and would have to sell off all financial assets excetp for home equity.
Overwhelming credit card debt is partly attributable to a Supreme Court ruling that exempted nationally chartered banks from usury laws:
Part of the reason credit began to surge in the ’80s and ’90s is that it was available in a way it had never been available to previous generations… That effectively let big national banks issue credit cards everywhere at whatever interest rates they wanted to charge, and it gave the banks a huge incentive to target vulnerable consumers just the way, Emmons believes, vulnerable homeowners were targeted by subprime-mortgage lenders years later.
The targeting of the poor by companies like PayDay are another egregious example of how government does not protect consumers, because…
Not only do our kids not understand the dangers of credit, we don’t either:
A 2011 study she and a colleague conducted measuring knowledge of fundamental financial principles (compound interest, risk diversification, and the effects of inflation) found that 65 percent of Americans ages 25 to 65 were financial illiterates.
Even people who think they understand financial tools can get burned. Years ago, my son had a debit card tied to his checking account. The bank had an overdraft protection package, which was little more than a money tree… for them. If my son used his debit card for a $1.39 drink at 7–11, his account would get dinged for a $30 overdraft charge. So even if he thought he had deposited enough money in his account to pay for his purchases, one overdraft charge would create a financial train wreck, resulting in hundreds of dollars of charges. Fortunately, the law closed up these loopholes. But banks are finding other ones, like charging $8 to cash a check if you don’t have an account with that bank — even if the check is drawn from that bank, so they can withdraw the funds instantly.
College and health care costs have exploded while wages have been stagnant for over forty years:
Real hourly wages — that is, wage rates adjusted for inflation — peaked in 1972; since then, the average hourly wage has essentially been flat.
I wrote an article based on my own family’s history with the American dream, specifically how college and real estate costs in large cities have made it impossible for the younger generation to succeed:
You’ve got to be in the top 5% just to live the traditional middle class life these days:
In a 2010 report titled “Middle Class in America,” the U.S. Commerce Department defined that class… by its aspirations: homeownership, a car for each adult, health security, a college education for each child, retirement security, and a family vacation each year… A 2014 analysis by USA Today concluded that the American dream… would require an income of just more than $130,000 a year for an average family of four.
Yes, I know there are a certain number of people who live on farms or alternative lifestyles who can make it on a lot less by giving up all those things. But it doesn’t bode well for us as a country if the average worker living in a city can’t hope for a better life…
And that’s why the populist messages of Donald Trump and Bernie Sanders have resonated with so many people:
A 2014 New York Times poll found that only 64 percent of Americans said they believed in the American dream — the lowest figure in nearly two decades. I suspect our sense of impotence in the face of financial difficulty is not only a source of disillusionment, but also a source of the anger that now infects our national politics
I’m always reminded about de Toqueville’s “Democracy in America” which stated that democracy worked here (as opposed to France, which had a history of revolutions, restored monarchies and a splintered parliamentary system) because so many people in this country had skin in the game. One of his great quotes: “America is great because she is good. If America ceases to be good, America will cease to be great.” Given the horrors of Viet Nam, and Iraq, and the increase of hate groups and religious extremists, can we still consider ourselves as good?
As the Harvard economist Benjamin M. Friedman wrote in his 2005 book, The Moral Consequences of Economic Growth, “Merely being rich is no bar to a society’s retreat into rigidity and intolerance once enough of its citizens lose the sense that they are getting ahead.” We seem to be at the beginning of just such a retreat today — at the point where simmering financial impotence explodes into political rage.