this post was submitted on 03 Oct 2024
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It's easy to say "stabilize your finances!" but on a practical level it's almost impossible to do when there's no wiggle room. You can't stabilize any finances if you're taking out payday loans in order to pay rent every month. It's not like there's any money to be put into savings if you're making $2,000 a month but putting $1,000 toward rent, since most people rather like to eat.
I'm thankful to not be in that situation, personally, but it's not something you can just wish your way out of. Even your examples require a certain level of financial breathing room that people don't tend to have when every dollar is spoken for. You can't finance a truck if your DTI is already high. You can't take CDL training or night school if you have to work two jobs just to keep food on the table.
But if you get into that scenario, you can just sell the supercar or downsize your house or whatever. That's not really an option for people who are living paycheck-to-paycheck.
I think income divided by local cost-of-living could be, maybe.
At the end of the day, irresponsibility with money is still a problem for sure. And keeping-up-with-the-joneses is probably a problem for some people. I'm not one of them, and none of the people I know are either, but I suppose some people have that issue. In my experience, though, most people who are struggling financially are not in those situations. They're just trying to keep their heads above water.
Oh, I 100% agree. But in many cases, taking payday loans is a symptom of other serious problems in someone's spending patterns and not necessarily an income problem. Maybe the car payment is too high, or perhaps they're paying too much for food. Whatever it is, that needs to get fixed to end the need for emergency cash.
If you're in the lower middle class or higher, there's no excuse for it IMO. If you're in the lower class, you'll need to get creative (government assistance, co-living, etc).
You say that, but in many cases, they still end up net worth negative. The problem here isn't with income, but spending, and you're not going to sell your way out of a spending problem.
Certainly. Economic classes are very much location-dependent. If you live in NYC or SF, you'd need to adjust the numbers a bit, likewise if you live in rural Mississippi or something. And there are calculators available online to help with that.
Pretty much everyone will say that though, because people are pretty bad at noticing the excesses in their own spending. If you're not standing out as being "weird" for spending so little, then you're probably "keeping up with the Joneses," because the average American is pretty irresponsible.
This is a pretty broad brush stroke to be sure, and I'm sure there are plenty who are legitimately struggling despite a conscious effort to cut costs. I'm just saying that many, if not most, people who aren't "financially stable" could make room in their budget to get financially stable, but instead end up throwing a ton of money down the drain due to interest.
Do you actually know anyone who's in this situation?
In my experience, it's not a choice they've made. Some people are bad with money, to be sure. I'm related to a few. But they don't typically just decide they're going to blow August's grocery budget on a new wardrobe; they have a job opportunity dry up after they already moved for it, or they had a messy divorce because their spouse was abusive, or they poured a ton of money into some career training that turned out not to give them any real, marketable skills. Some bad choices, some unavoidable occurrences, some terrible luck, but nothing that crosses the line to them being frivolous.
Thirty years ago, a family could weather one or two of those, no problem. My dad got laid off not too long before I was born, and he was the sole earner for our family. He got hired fairly soon after, but in the meantime we were fine.
I don't live a whole lot different than my parents did then. We have more kids than they did, but I'm in a higher earning potential career than he was. Plus, my wife and I are both employed. Yet if either of us were laid off, we would not last long on savings.
One thing I've learned as I get older: yeah, people are irresponsible. But the generations are pretty much the same, and trying to pretend otherwise is a good way to get clicks on your article but a bad way to actually get any meaningful insight about people. So if our generation is having more widespread problems than our parents' generation did at this age, it's probably not because we aren't as responsible as they are. Something systemic probably changed.
Those I know personally
Both sides of my family are generally fairly successful (middle class and upper middle class), with most of my cousins having completed a 4-year degree. My family is quite close, vacationing together almost every year, renting large houses in the middle of nowhere so we can spend time together (e.g. this year we had ~20 people in one house in nowhere Idaho).
My in-laws, however, are the opposite. My MIL completed a chef certification, but other than that, neither has completed formal education beyond K-12. They drive nicer cars, wear nicer clothes, and go to nicer restaurants than I ever did growing up (we thought the "cheap Chinese" place was a special treat). Both of them work, while I grew up in a single-income family. I don't know details about their financial situation, and I'm honestly preparing our finances so we can support them when they can no longer supplement their SS income.
My family is largely quite successful (siblings are professor, accountant, actuary, and software engineer), I work in a field with a lot of successful people, and my neighbors are largely fairly successful (mostly middle middle class to upper middle class). That said, I've had neighbors have cars repossessed, coworkers struggle w/ credit card debt, and people making more than me struggle with a house down-payment (and I bought in my late 20s making much less than I do now), and the reason for each is pretty obvious from the outside (they spend way more than me on hobbies, cars, and other lifestyle items).
That said, I do admit I have limited personal experience with people in this situation. However, I personally choose to live like I'm a level below my means so I have a cushion in case something goes wrong. And one of my life goals is to leave my career early to actively help people with spending problems at all income levels to break that cycle, hence why I'm so interested in this.
At the risk of sounding callous, this sounds like symptoms of the same underlying problem: lack of diligence. And no, I'm not saying they didn't "work hard enough" or they should "pull themselves up by their bootstraps," I'm saying they could have mitigated these problems by making different decisions:
Breakdown of those problems you mentioned
I fully appreciate that many people don't have the training or experience to avoid manipulation by others, which is a common thread here, so we absolutely need to improve our education system. But blaming others for your choices is a recipe for failure and isn't going to help you move forward.
I have made my fair share of mistakes, some of them have cost me a lot. But I refuse to blame others and instead choose to point the finger back at myself, and I think that has made all the difference. And that's what I'm getting at here: you can't change your present, but you can make choices to change your future.
Personal anecode about losing my job
And that's the same today. I lost my job at the start of COVID right after my daughter was born (she was born in March, 2020, so we saw lockdowns come into effect while we were in the hospital). So I had a ton of medical expenses, few opportunities for work (I was a consultant at the time), and an uncertain economic future. But what I did have was 6-12 months expenses in cash. So we were fine, and it took me most of a year to find a new job because companies had frozen hiring (ended up w/ W-2 position because I couldn't network due to lockdowns).That set us back a couple of years, but we were already ahead because we were living below our means. Fast-forward to today and we're back to being ahead because we continued to live below our means.
Here's an interesting article about household debt over time, which goes back to 1995 (so almost 30 years). A quote:
I read this as: debt got cheaper, so people got more debt. So people are in more debt today, but they're paying about the same to service that debt. So people are spending more than they used to, but they're able to do that because borrowing rates are lower.
The solution, then, isn't necessarily that people don't have enough income, it's that their expectations of what that income can buy is out of whack. In my experience, people largely paid for things w/ cash 30 years ago, whereas today paying with credit is a lot more common. People don't save up to buy things as much, and instead buy now pay later. So the real issue here is discipline, at least for those in the middle class and above.
My argument is that systemic change is access to credit, which has gotten a lot easier in the last 10-20 years where you can get a new CC or personal loan on your computer instead of actually having to go talk to someone at a bank. That means being irresponsible with money is easier, which I think encourages more people to do it.
So I do think younger generations (including my own, I'm a millennial) are more irresponsible with money and have higher expectations of what that money can buy than previous generations. Over the last 30+ years, real wages have increased consistently (i.e. after taking inflation into account), and we're back to the peak of the early 70s before the stagflation of the 80s. Yet people claim we're getting poorer, so I have to take that as people having unrealistic expectations instead of an income problem.
You and I have had remarkably similar lives, actually.
Same. I was a cashier and then a pharmacy tech.
Close. I think about half of my cousins have a degree; the other half went into trades.
—same, but—
Here's where we differ. My neighbors are not poor, but the neighborhood is not yet completely gentrified. We have some K12 teachers, some construction workers, a few military people, alongside some people in more white collar high-earning-potential professions.
Same. And it's happened enough that there's no way I can attribute it solely to bad decision making.
Same, though I had access to down payment assistance.
Thank you for being honest about this. I would personally suggest that you talk with some people who are in situations like you're talking about. Some of them knowingly made poor choices that led to their current struggles, but more often they were dealt one major blow or a series of minor blows at a time of high risk.
I say this without malice: many (if not most) people who are struggling have never been able to make that choice meaningfully. I'm glad to have been able to, but it's not common.
I wish you luck in that, I truly do. Please consult with people who have been in the situations you're talking about before you draw up a wonderful, shiny plan for their finances.
Sometimes, maybe. But the point I'm making isn't that no one ever makes mistakes. It's that one or two such mistakes can end up catastrophically for people who don't have far to wiggle. A person who is generally attentive to their finances but makes a couple of bad calls before they have a safety net can end up on the back foot for the rest of their life.
Hindsight being 20/20, you're always going to say you'd make different decisions when you have perfect vision as to the outcomes of the bad outcomes. But to avoid these in the first place, you'd have to have perfect view of the future.
I've been in a position several times where the job opportunity I accepted was the only one I was offered. Having a "doo doo plan" is great, if you have multiple options to begin with.
I agree with this to a point, but (hyperbole) nobody has ever gotten married truly thinking that they didn't know their spouse well. Even family and friends can be wrong.
The case in point that I'm thinking about for this one was a person who entered a front end web development training program with the promise of job search assistance upon graduation. Reviews of the school were good, personal anecdotes from graduates were good. It was only after the program that my friend discovered the cracks in the process (as he was falling through one). Due diligence was done, to the satisfaction of most reasonable people. In this case, I think he was taken advantage of. Speaking of which...
100% agree with you here.
I apologize, I was unclear about this. None of the people I've mentioned are complaining or blaming others for their current state. Every single one of them is actively working to improve their situations. I'm saying, as a person who watched the trajectory of their lives from the outside, they weren't the primary cause of their financial troubles.
I realize that it sounds like I'm leaving myself out of that, and I suppose I am blaming others here. But to be clear, I'm probably the most well-off of the people I'm talking about. In comparison to the people I'm talking about, my concerns are very minor. We'll be ok, and we're already working on improving our situation. And even I am not blaming any one person; I think the problem with my finances lies in historic inflation, a global pandemic, and corporate greed.
...if you know what the future holds.
[Ok, Lemmy is saying that this is too long, so I'm going to try to split my reply up.]
[1/2]
And that's where I disagree.
These people having financial problems haven't had some crazy emergency happen (that I know of), but they do have obvious, expensive hobbies and habits. Some of them use tobacco products (cigs and dip), some collect expensive board games, most eat out a lot, and they drive late model cars. Compared to me, they have fewer kids, live in a similar area, and are often dual-income family (we're single income), so the glaring difference is lifestyle. I also look at other coworkers who are more similar to me (single-income, kids, etc), and they have been able to buy a house.
If I do some back-of-the-napkin math, the spending delta is tens of thousands more vs me. So to me, it's more a question of priorities than means, which would constitute "bad" decision making if they're not meeting their goals.
An FHA loan only requires 3-5% down, and non-FHA loans can often be as low as 10% with PMI. Houses in my area are pretty expensive now, many running $500-700k for something near-ish to work (mine isn't). At 10%, that's $50-70k, which is a lot, but people in my office should be making six figs, so saving $10-20k/year should be feasible (so 3-5 years saving). But that's a lot harder if you're paying $500+/month on a car payment (or worse, multiple car payments), eating out multiple times per week, and spending hundreds/month on hobbies.
Agreed, and I certainly intend to. The issue is, most people don't like to talk about finances, even with people they know very well. I would love to lend an objective second pair of eyes (completely free) to help spot areas they may have missed in their budgeting.
Here are my plans (please critique/provide more if able):
My ultimate gold standard
Be involved with a non-profit/charity that:If the org is a credit union, there are a lot more options, and my research shows that a credit union may only need a few hundred thousand dollars to get started.
What I've already done
I actually started working on something like this w/ a family member, the plan was to pull money from customer's accounts and lock it away until they meet their goals. If they withdraw early, they'd lose whatever transaction fees I charged, which would be waived if they meet the target.I would invest the money at rest to recoup the transaction fees and fund any cash bonuses. Once I got that working, I wanted to open an individual consulting part that would offer loans after a budget review, so this app would feed that non-profit.
But after I had a POC, the transaction processing org I was working with changed their pricing and made it non-viable for small transactions. I thought about releasing it w/o the bank account link, but that wouldn't be particularly interesting as an initial product.
I'd like to remove the "able" part of this, which is often an excuse. Yes, some people legitimately get stuck in a negative feedback loop, but a lot of people (perhaps most) could make meaningful changes to free up some cash flow. The difference between people who get out of bad situations and those that don't often comes down to discipline, not luck, yet so many people blame luck.
There are some things we could (and should) do as a society to make upward mobility easier (e.g. I'm in favor of something like UBI), but waiting for that is a fool's errand for those currently struggling and they should evaluate things based on their current situation. That means their choices are:
So when posting online, I always assume there's an opportunity to get out, and I go into any discussions with that assumption in mind.
No, that's a defeatist perspective.
What you need is to learn from your past. Mistakes happen, what matters is what changes you make going forward to avoid those mistakes in the future. For example, let's say your car gets repo'd, the solution isn't to do better at making payments on the next car, the solution is to buy a cheaper car or go without (bus, bike, etc). Cleaning up the mess would probably require some uncomfortable changes, but it is usually possible.
The "doo doo plan" isn't necessarily having a backup job offer, it's just whatever your backup is if the primary plan falls through. A signed offer letter and a start date isn't a job, you only have a job when you actually start. Some ideas:
A legitimate company will never require any form of payment from you for a job, whether that's equipment, uniforms, etc. If you see that, it's a fraudulent job offer.
Sure, but plenty of people get married while ignoring advice from family and friends. Yes, family and friends can be wrong, but they can also see things you don't. In any case, you can always continue courtship until you're comfortable with the other person.
The tricky thing is that hormones go crazy for the first few weeks and sometimes months of a relationship, and those hormones can blind you to the faults of the other person. Ideally, you marry someone for more than just "love" (however you define that), and you need to be capable of listing personality defects as well as positives so you can decide if there are any deal breakers. You need to assume the other person won't change the flaws you see, and you need to be okay with that. Essentially, approach it like a business contract (i.e. are you getting a fair exchange), but one where both parties currently like each other.
Of my friends, most of those that got divorced did so because of flaws others close to them pointed out, but they ignored, or assumed the other person would fix. One almost got divorced due to a flaw, but they were able to work through it and rescue their marriage. Those that didn't get divorced either got lucky (fairly common) or did their due diligence before getting married. I've had friends and family end a relationship after considering engagement because they decided those flaws would become deal breakers down the line. Unfortunately, most people don't do that, and for some people, it takes multiple failed relationships to figure that out.
That's certainly possible, and maybe he can seek recourse (lawsuit) depending on what they promised and what they actually delivered.
That said, the thing I think your friend could've done better is to find someone in the business and ask them about the training program. Most of them are complete crap, and a competent FE dev could tell you that you can't just learn to do their job in 6 weeks or whatever. Part of my job position is interviewing and hiring software engineers, and I see a lot of these applicants. Most of the time, their portfolio is only the work they did in that course, and they show zero initiative in exploring beyond it. I'm happy to recommend someone for an internship if they show that initiative (and we have hired a couple that worked out), but so many think completion implies there's a job waiting for them.
Let's look at each of those:
It can take a while for salaries to adjust to inflation, so hopefully the issues with your finances are resolved, or close to resolving. Mine hasn't yet caught up to inflation, but I think I'll be there this raise season.
I think we understand each other, and disagree. And that's fine. I don't need to convince you. Though I would suggest that you start from a more neutral perspective (at least outwardly) when interacting with someone who needs assistance in the future.
Anyway, I don't think I have anything more to add to the conversation that hasn't already been said, so I'll wish you luck.
Thank you for your calm and level-headed discussion. Those are frustratingly rare online. I look forward to talking with you again.
You as well.
And yeah, when someone asks for assistance with finances (almost always online), I definitely wait until I see the details before pointing the finger at where the issue is. But when talking about generalities, it's really not something I can reasonably do, because there's no hard data to actually look at.
[2/2]
Again, same. Though for me, it was December of 2019 and a son, and I was laid off in late January. Wild times.
We had carved away at our cash reserves building a house that our larger family could actually fit in, and they hadn't built back up yet. It was a calculated risk to do that rather than buy, and I wouldn't have changed the calculation in hindsight, but the one-two-three-four punch of house-child-layoff-pandemic within the span of a few months isn't really something you expect when you're doing the numbers.
I'm glad for you. And also: your situation is not normative.
A couple of things to note:
Those numbers end in 2010, which means that they're actually almost as far away from today as the beginning of that study is from the end of that study. A lot has happened in the last 14 years.
Those numbers also end right as the country was digging its way out of the 2008 financial crisis, which was largely caused (as I'm sure you recall) by debt mismanagement (specifically subprime mortgages). Those numbers, in and of themselves, are signposts of the very institutional and systemic changes I'm taking about.
It's impossible to disentangle the chicken and the egg here. Were people in more debt in 2010 because rates were low? Or were rates low because the economy was burning, largely because more people were in bad debt situations?
Actually, the data suggests that private per capita spending in the US has tracked more or less with inflation since at least 1960.
My parents used credit in the 90s. We had car payments and a mortgage (and their mortgage rate was in the double digits, no less—but it was still a smaller percentage of their single monthly income than my 2.8% mortgage is today, in a better field, with a second income.
Again, the chicken and the egg: do people not save up because they don't want to? Or because they can't? If our car dies, I can't save up to buy another. I have to buy now and pay later.
With your caveat, I'm amenable to entertaining your argument for a significant portion of the population. I just don't recognize it in practice.
I just don't see the numbers bearing that out. And anecdotally, it might be easier to sign up for a credit card online, but I was getting junk mail about credit cards on the day I turned 18, in 2003. One of my first jobs included trying to pitch a private label grocery store credit card to everyone who walked in. When I got to college (also in 2003), a credit card company had a booth there and was offering students free pizza if you signed up for a credit card. I didn't bite, but there was a substantial line at that booth. So it might be quicker now, but I haven't received a mailer for a credit card in years.
Me too. I think we might be the same person. This is honestly kind of weirding me out.
Housing costs as a factor of monthly income are back up to 2008 Financial Crisis levels, though; and over the last two decades that growth you're talking about has been concentrated largely at the top. The numbers support peoples' assertion that we're getting poorer.
Thanks for chatting with me about this. It's a really interesting topic.