Paycheck to paycheck

[rennigade]

The book Nickel and Dimed is a good read on how hard it really is.

I havent read that book in a long time. The only job I can remember that girl doing is the housekeeper one. She always had to cheat and use her savings from her real life job. Its a good read.

There are so many factors in play when it comes to your status and the opportunity you have in life. This whole mentality of pull yourself up by your bootstrap crap...those people may want to shut their mouths...those times are all but over, go back to using your rotary phone. You think everyone starts life from the starting line? pfftt...think again.

I try not to even judge people anymore when it comes to finances. Yeah my wife and I both have decent jobs and we're good at living below my means. We are just straight up really really fortunate. I cant imagine a world where I couldnt take a trip to Hawaii every year. Not any different than those who are living paycheck to paycheck imaging they WOULD have the opportunity to take the same vacation. It sucks.

[greenskeeper]

This is super judgmental. If you want to know about their circumstances then ask them. You might be surprised by people's personal struggles.

Maybe one of them is banking the majority of their paycheck to build wealth quickly and retire long before their boss!

[LivingAlmostLarge]

living paycheck to paycheck and taking out loans to pay for a trip? BTDT. That was my mom and I. But you can change but it's not easy. And my mom now isn't a spendthrift. But life happens and even with a job paying minimum wage it's not easy to get out of paycheck to paycheck. I know that's how we definitely lived before. My mom counted on every paycheck. She cut up credit cards for awhile after her divorce and we did have financial help from family who I can't say were easily able to help. But now look where she is and I am. It can be done.

As for my DH? His parents were never really in debt, but they worked at jobs most would consider minimum wage like chinese takeout delivery, taxi driver, bakery, and dry cleaners. They ended up doing very well.

[docstudent]

It's systemic....

I think it's important to look at the financial literacy level of the people in question as well. I grew up in a lower income household and the language of financial literacy was limited or non-existent. I'm assuming most of the women in your office are not high wage earners or hold a college degree. I'm under the impression that they are clerical or support staff....which provides another layer of insight to the discussion. If people don't understand compounding interest...or basic principles of savings, then nothing else really matters. I watched my parents live paycheck to paycheck.....many people do because of things out of their control...poor school, which equate to limited or no opportunities...then they are stuck with low wage jobs/ and limited skills.....you can't live beyond paycheck to paycheck with limited opportunities. It took a few years for me to learn a different way of functioning per money management and worldview was expanded via educational opportunities and meeting people with a solid understanding of finances....Have you ever thought once about hosting a finance workshop during your lunch break? Just saying....it might alter their viewpoint or way of thinking about money.....

[FLA]

I think it's important to look at the financial literacy level of the people in question as well. .

I would love to see basic financial classes in high schools. I approve of pretty in depth sex ed in my kids' school, I think it would be not nearly as difficult to convince parents of a need for kids to be taught the basics, just a one semester class, perhaps take out home ec or whatever our school calls that now. How many kids actually take up sewing after home ec? I would've loved a financial planning class instead.

[Joan.of.the.Arch]

"Home ec," ---It is home economics, after all--- used to include personal finance. In my days that class had little emphasis on investing, I would guess partly because there were fewer easy modes of starting investing with small amounts of money. But some interest-earning savings vehicles were addressed, as were lots of other topics.

When I was in high school, the regular "Economics" class included personal finance, too.

It is hard for me to see how people fail to even apply their grade school math to their real lives. Tons of grade school math work has to do with prices, percentages, making change, interest, discounts, prices per unit/ weight/ volume/ yard/ meter/ gallon/ liter/ etc (and also converting between SI and imperial measures). Uh, even negative dollar numbers should have real meaning in personal life by the end of grade school.

There must be some kind of disconnect or mental block for it not to occur to some people that their grade school math is worth putting into practice as an adult. Or maybe there is just some flat out denial that any work at personal finances is necessary at all, as if it will just all work out in the end.

[Singuy]

The house across the street from us is in foreclosure. I can barely see the foreclosure sign because there are about 95k worth of luxury cars sitting in the driveway. They bought the house for almost 650k. If they were responsible, their income would be around 300k/year but I highly doubt that. In fact, I am sitting in a foreclosed house in which the original owner paid 850k for. I don't understand how one decides to buy such a beast without the income to back it up.

Steve is right, this is definitely a behavioral problem. I had a post about people going into debt because they want that "middle class" lifestyle. This lifestyle includes decent cars, a decent house, vacations and going out to eat.

Packing your lunch, buying a car under 5k, shopping at Walmart, going to Save a Lot, Big Lots, Aldi, spending 2x your pretax salary on a house..these are all behaviors of the poor. Who wants to be labeled as poor? No the middle class hangs out at Target and Whole Foods in their entry level class Mercedes or loaded new Toyota SUV. I have a single mother pharmacy technician making 13/hr who just bought a slightly used Cadillac sport coupe. Her reasoning? "You got to move on up in the world"

This statement really makes me believe that life for most people is a grind like in MMORPGs. You do the same thing day in and day out so you can buy better gear..and better gears=purpose of life.

[amastewa93]

I think this forum posting brings up a lot of interesting questions about our society in general. Obviously, there are always going to be people just "scraping by," but it should not be the vast majority of people. There are so many people out there that (if they just lived within their means) could have money saved, could one day be able to buy (and keep) a house and car.

I am, by no means, rich, but I still have money to fall back on at all times. If I missed a paycheck it would definitely suck (because my savings would take a hit). I think a lot of people, sadly, have to be at their lowest point before they really step back and take a look at what they are doing wrong. They have to lose the shirt on their back before they say, "Hey, maybe I didn't need to buy the name brand clothing, fancy cars and more expensive home."

[JoeP]

It would not surprise me if this boiled down to priorities. I could see where people may prioritize incidentals above certain larger-ticket items. So they may decide to spend money on coffee every morning, or some app for their phone, or lunch every few days, instead of letting the money accumulate.

[Nika]

It would not surprise me if this boiled down to priorities. I could see where people may prioritize incidentals above certain larger-ticket items. So they may decide to spend money on coffee every morning, or some app for their phone, or lunch every few days, instead of letting the money accumulate.

I think lattes and lunches out are becoming scapegoats and something we as a society accept as a comforting reason for middle class struggling. But I think it is the rising cost of housing, education, health insurance and food while stagnating wages for a majority of population (not the top, the most educated ones, but the lower 50%). There is desperate competition for housing in good school districts that drives up prices, and cutting out morning coffee or lunch out will not fix everything.

Besides, isn't life about little pleasures too? How many decades does one go without lunches out and how big is the prize for that?

I would cut these things if situation was desperate but I certainly do not think that they are the main reason for middle class struggling.

[disneysteve]

I think lattes and lunches out are becoming scapegoats and something we as a society accept as a comforting reason for middle class struggling. But I think it is the rising cost of housing, education, health insurance and food while stagnating wages for a majority of population

I think the real answer lies somewhere in the middle. Yes, certain costs of living have risen faster than wages but there has also been a good deal of lifestyle inflation.

You're right that cutting the daily cup of convenience store coffee wouldn't fix most people's budgets, but when you add up all of those little conveniences, niceties, and luxuries, you start talking about some real money. How many people say they "can't afford" to fund a Roth but eat out for lunch every day, go out to dinner a few times per week, get a mani-pedi every couple of weeks, go to a fancy salon to have their hair done, belong to a gym that they hardly ever visit, lease a nice car, have a big screen TV, etc? Sure, the coffee might only be $500/year, but put it all together and it might be $5,000/year or more that they could be saving.

I recently had a conversation with someone who was all excited that his job started offering life insurance to all employees. I said that was a nice little perk but to make sure he also has his own policy since the job coverage is usually minimal, goes away if you leave/lose the job, and term insurance is dirt cheap. His response was that the folks he works with "can't afford" life insurance. I said that a good term policy can be had for maybe $15/month but he still said folks working there don't have that kind of money to spend. Really? How many of these guys smoke (he does)? That's the cost of 2 packs of cigarettes around here. Smoke one or two fewer cigarettes per day and you'll have $250,000 of life insurance coverage (yes I realize smokers will pay more for insurance - just making a point here). How many of those guys buy coffee every morning? That's probably $40-50/month. How many of them order out for lunch every day? How many of them lease their cars?

It always comes back to priorities.

[LivingAlmostLarge]

I think DS has a point but so has Nika. My thing is that when people come on here for help the big issue is that usually they are in debt but what causes it is too much house and too much car or too much student loan.

Yes they are in debt with credit cards or not making ends meet. But usually the big ticket items are like 40% of the budget for a house. How can they save for retirement, live when the biggest items are out of line? Sometimes they are living more frugally because of the house or car or student loans, but the item in question is ridiculous. A $1k student loan payment on $4k income.

Just something to think about. Cutting all the lattes which often is $20/month or even cable $100/month isn't going to fix a $2000 house payment on a $4k income. We've had that scenario here MANY times. The only way to fix it is that you can't afford the house, car, staying at home, cable.

The hard to change items on the budget that need to be less are too high period.

[disneysteve]

I think DS has a point but so has Nika. My thing is that when people come on here for help the big issue is that usually they are in debt but what causes it is too much house and too much car or too much student loan.

And you have yet another point. Those 3 items - house, car, and education - are the source of many problems. However, they aren't so easy to fix. We can tell someone to sell their house but we all know that isn't a simple matter. Selling a car is easier but still somewhat involved. And student loans are what they are. The only options are to earn more and/or spend less. That's why we tend to focus on the spending. If someone can free up $200 or $300 per month from their budget by cutting cable, packing lunch, skipping the store-bought coffee, etc. that can go a long way to repay debt at a faster rate and improve the situation even though the overall numbers are still out of whack.

[Nika]

And you have yet another point. Those 3 items - house, car, and education - are the source of many problems. However, they aren't so easy to fix. We can tell someone to sell their house but we all know that isn't a simple matter. Selling a car is easier but still somewhat involved. And student loans are what they are. The only options are to earn more and/or spend less. That's why we tend to focus on the spending. If someone can free up $200 or $300 per month from their budget by cutting cable, packing lunch, skipping the store-bought coffee, etc. that can go a long way to repay debt at a faster rate and improve the situation even though the overall numbers are still out of whack.

There is also a disconnect in our society between luxury and necessity that is more troubling than cable TV. Quality education is a glaring example. Something that a parent sees as a necessity but in reality, in our society it is a luxury reserved for the affluent, and few others that are both very resourceful and very lucky. I've toured some of the best private schools in NYC, and the difference in how these kids start out, vs. what they get in overwhelmed public schools is astounding. It is depressing to know what your child could be benefiting from if only... and how much behind those kids they will be, not matter what you do at home as a parent.

As far as housing is concerned, there is a prevailing idea that middle class family is supposed to be able to own a house. That is something culturally ingrained, and even though the economic reality has been changing, the cultural expectation has not been, so it is also viewed as something that you "should" have and therefore desperately want. So when people overstretch to get a foothold in the market, it is not that they want to live above their means, but they are trying to do what they are "supposed to" do - a milestone step that defines them as a middle class, even if they are overstretched like crazy, they think that this is what they "should" be able to afford, and therefore necessity.

Cars... there I have less sympathy, it is an ego thing in too many examples.

[docstudent]

Special circumstances...

I'm in a unique situation like many others enrolled in special repayment programs via the federal government. As noted in a previous post, I owe over 180K...seems like a lot because it is....as a public service employee, I must repay for 10 years, and I can't pay anything extra. Will I pay back 180K,? no, I will pay back approximately 80K, and the other portion will be written off. If you live in the right part of the country...with respect to home values, it presents another special circumstance. I know the rule of thumb, 20% down, well in the LA, it's easier said than done. I opted against it and purchased with 3.5%....in less years or so I made a nice profit. I ended up doing the same thing a year ago and was able to get another deal....and I'm up over 150K per my recent appraisal. Though, I'm able to take these risk bc I don't have a family and my job is more stable than most, and I can make more or less money....it depends on how much I want to work. Over the next six months, I can earn an additional 15K, but I don't see the upside if I have to pay more money on the student loan payment bc it is income driven. Some things look far worst on paper....