> Even among those earning six figures, 42% said they were living paycheck to paycheck, the survey of more than 3,000 adults found.
I know there are areas with extremely HCOL, inflation, housing crisis... However, sometimes I do wonder though what some people's budgets are like that they are literally unable to save any money (paycheck to paycheck) making >$100k. Do we know what part lack of financial literacy or simply "living above one's means" play here in the grand scheme of things?
I am not in US, but I lived paycheck to paycheck some time ago when I was already in the top 5% earners of my country.
The reason for it:
1. Chronic Health issues that are fairly expensive to treat, coupled with the fact I am too wealthy to get government help (this actually was my biggest money sink).
2. Renting in a place "near enough" of my workplace. (still wasn't that near, and the place was tiny, when I moved out a lot of furniture fit inside a hatchback car).
3. Constant inflation + health issues I mentioned before that require me have a diet of items that are more expensive. (I can't live off ramen...).
4. Thankfully this part is over, but some years ago there was the student debts too, at one point I had to pay to service my debt literally half of all my earnings, and had to pay food and rent with the other half.
I agree for the general population. But shouldn't a job paying 6 figures have decent insurance? I have two dependents with major health issues, hitting out of pocket max every year. Still I am able to save for retirement and not live paycheck to paycheck. I do not earn 6 figures.
Even with decent insurance, a chronic heath issue can easily result in bankruptcy or having to live paycheck to paycheck, especially if you trip up on any of the landmines like going "out of network" or having a procedure that your insurance decides they don't want to pay for. The system is set up to extract the maximum amount of money from the patient they think they can get away with. And don't even get me started on end-of-life care which is undeniably set up specifically to soak whatever savings the elderly have set aside. I think some people, maybe who are generally healthy and don't have to deal with continuously fighting with their health insurance company and hospitals, think that having health insurance is like a magical talisman that makes all your bills disappear.
I'm aware of the BS they pull. I've spend numerous hours on the phone this week trying to get a prescription filled. I have to pay out of pocket, but they aren't able to submit the claim for it to count towards my deductible. Why?
Because they decided to designate a generic medication as a name brand. So even though it was 100% covered last year, now I have to pay 100% ($175/month) until the deductible is hit. I'm also forced to use s specific chain. But they couldn't file the claim toward my deductible because the software system at the chain wouldn't allow for it to be submitted as a brand name (because it's truly a generic). So this whole fiasco is because they decide to designate a generic as a name brand just so they can charge us more, and the geniuses making this change didn't even check to see if their system could handle that new business process.
>But shouldn't a job paying 6 figures have decent insurance?
Parent said he/she isn't from the US where this would be the norm.
Here in the EU (Austria), in most cases you get no extra private insurance even with a high salary, just your public one, which in some cases may not be enough, especially if you optimize for quality doctors/therapists with short waiting times, which are all private, so you end up having to dig into your savings if you care about your health (who doesn't?).
Still, at least even the poor and unemployed have access to half decent healthcare without going bankrupt so there's at least one silver lining.
I guess the interesting part is that many of the people in the US want public healthcare and generally think that the international examples cover everything.
Like someone else here said it, universal healthcare isn't some magical talisman that makes all your health issues go away as long as you pay your taxes.
Sure, if you have life threatening condition that needs to be addressed ASAP or else you'll die, you usually get taken care of without it ruining you financially like in the US would, but since the public system is massively understaffed and underfunded, then many health issues which are not life threatening but still impact your quality of life, can end up being out of packet, which sucks, as most Europeans aren't exactly rolling in disposable income (but at least they're not heavily in debt either).
For example, in Austria, the amount of free care you get in case of an accident depend on where it happened. If it's at work, or on your way to/from work, then everything is fully covered, but if you get injured in your spare time, then only life threatening stuff is covered, for the rest, quality of life issues, you have to pay out of packet to have them fixed or have private accident insurance. Basically the public healthcare covers as little as to get you able-bodied to get back to work again, that's it. If you also want to feel 100% again, then you gotta pay up out of pocket.
Since medical school is basically free, Austria has 3x the doctors per capita than the US, yet waiting times for specialists or some procedures are far longer. Why is that, you ask? Because most doctors here don't like being burned out in the understaffed public system, so once they served their "minimum sentence" in the public system to cover their "debt" for their public education, they go into private practice, which means that despite having 3x the doctors than the US, the public system is in a perpetual shortage of personnel.
The state just doesn't have enough money to pay for every heath issue for everyone, but only the gravest of heath issues, and with our ageing population and stagnating economy, the situation is getting worse by the year. I heard Sweden, Finland and other rich EU countries have similar issues in their public system.
>I guess the interesting part is that many of the people in the US want public healthcare and generally think that the international examples cover everything.
In the US, the left assumes (and usually operates as per) that all healthcare plans outside the US are "100% free", single-payer like the UK NHS or Canadian Medicare, as opposed to the actual norm being something closer to that of France, Germany, Austria, or the Netherlands.
France = 30% copay is the norm
German/Switzerland/Netherlands = Everyone chooses from one of dozens of competing insurance plans. Basically Obamacare, except there are no loopholes like the ones that allow 9% of Americans to not get insurance
Austria = Like US, but you don't get to choose the plan (no equivalent to US annual shopping period)
Australia = Both private and public insurance. Those on public are strongly encouraged to move to private
A better way to understand our problems is that our medicaid and medicare programs are the most generous in the world - so much so that extending it universally is so friggin expensive.
>so much so that extending it universally is so friggin expensive
I laughed out loud at the idea of the US thinking universal healthcare would be expensive considering all the trillions spent without blinking to pay for two pointless wars, the 1.7 trillions to be spent on a stealth plane that can't fly in the rain, and the trillions printed in the last couple of years and dumped on the stock market.
To be fair, the rampant insane cost of healthcare in the US is due to lack of any regulations on costs and spending, meaning big pharma, doctors and hospitals, etc. will shake down as much as they can get way with from the insurance companies and patients, in borderline fraudulent ways, without any accountability. Plus the expenses of becoming a doctor in the US and the high cost of management and bureaucracy in the US system.
Also, hospitals in the US don't need to be decked out like an oil-sheik's mansion with expensive frivolities. In Europe, they're really spartan on luxuries as they're just places where you go to get treated, not art galleries.
My point is, a lot of the massive costs in US healthcare is just down speculation and waste, both of which could be reduced of desired without sacrificing quality.
Sure, but it's a different conversation about how wasteful American medical expenditures are.
I've been on state Medicaid in the US. I've also been on a single payer in Europe. People really have no point of comparison on how much more luxurious Medicaid is. You are still visiting the oil-sheik mansion, but with no out of pocket and no limitations on how much or often.
Hospital will still shake you down for all your money, but the government has no problem footing the bill.
>I've been on state Medicaid in the US. I've also been on a single payer in Europe. People really have no point of comparison on how much more luxurious Medicaid is.
I don't doubt it. In the US, doctors and hospitals are incentivized to treat you like a cash cow and to do as many tests or procedures as possible, even unnecessary ones, knowing that your insurance company or the government will foot the bill no questions asked.
Whereas in Europe, the doctors and hospitals in the public system are incentivized to do as much cost cutting as they can by doing as little tests and procedures as necessary, to reduce costs and waiting times, and have strict regulations on when they can refer you to specialists or more expensive test, needing to justify it when they do.
This means that sometimes you can end up with some undiagnosed condition going chronic on you because the public doctor didn't want to, or wasn't allowed to refer you to an MRI scan when you first showed some light symptoms, because your light symptoms weren't severe enough to warrant such an expensive test. I sh*t you not, this happens more than I'd like to hear. It's why health tourism is booming in Europe, where people from richer EU countries go to the Eastern states for private tests or treatments since preemptive care in the European public system is failing people big time and they can't afford the private system in their wealthy countries.
Sometimes, having a fully private health system, really does have its benefits.
"treat you like a cash cow and to do as many tests or procedures as possible, even unnecessary ones, knowing that your insurance company or the government will foot the bill no questions asked."
One slight addition. They might be medically unnecessary, but have become legally necessary in some cases. Either because medical protocol has adapted to try to charge more, or because if you don't you might get sued because "Every other doctor would have run that test", etc.
But it is still very much about the money. When I got my wisdom teeth extracted, I had to go in for a 10 minute consult with xray on one day, then go in on a second day (even though it could be done on a single day). Why? Because insurance will not pay for a consultation if it happens on the same day as the extraction.
As for the government footing the bill in the US. Some procedures are deprioritized by hosptials of the patient is on Medicaid. The Medicaid reimbursement rate is generally lower than that of other insurance, so they prioritize the people/insurance that pay more.
"You are still visiting the oil-sheik mansion, but with no out of pocket and no limitations on how much or often."
I generally agree. But I have heard that they will push lower priority (non-life-threatening) operations to the back in order to get other insurance holders to the front of the line. Basically because the reimbursement rate from other insurance tends to be higher than Medicaid.
The part that tends to be left out (maybe unaddressed or I'm uninformed) is, is there a single payer component to it like actual Medicare? In general, you spend several decades of your life working and paying in to collect for maybe a couple decades. And the more you make or pay in, the more coverage you have.
So would we just end up with a government plan that we still need to pay premiums, deductibles, co-pays, etc on? And where are the systemic savings (providers still need to have billing agents to deal with this and private insurance, government overhead peobably isn't that much better than business overhead)? Do the people who can't afford it go on Medicaid to cover the balance like they do if they can't afford current Medicaid? Or are the suggestions really just misnamed and are totally different?
To be fair, all three are expensive, and the returns/merits of each could be argued to varying degrees. If we adjusted the tax structure and spending to arrest or reverse the ever increasing debt, then it could be feasible. Personally, I'd like to see them start responsibly addressing the fiscal situation caused by their past decisions before adding in new programs.
I think that depends on exactly who you talk to. Quite a few people I've discussed this with believe it would be a complete replacement, even for employer based insurance.
There a certainly some areas of interest to be address, like how to protect from bankruptcy even when someone has insurance, or what edge cases many of these uninsured people fit into that aren't covered by employers, the exchange, CHIP, Medicaid, and Medicare. Although in many discussions this is glossed over or not touched on at all. It would be interesting to see if requiring coverage for part time and contractors would affect anything. Especially if that would help pull people into the middle class (no idea if it would).
>There a certainly some areas of interest to be address, like how to protect from bankruptcy even when someone has insurance
Only 4% of US bankruptcies are because of medical bills (<https://www.washingtonpost.com/blogs/post-partisan/wp/2018/0...>). A tipoff that [insert large percentage here] of bankruptcies aren't actually because of medical costs is that only 6% of bankruptcies by those without health insurance are because of that cause. The biggest cause of bankruptcies is lack of income, which health insurance doesn't affect regardless of country.
I agree that it's not a big issue, but it's certainly something I would like to see addressed. If I'm paying for protection from crushing costs by buying insurance, then I would hope that would protect me from any cost associated with lifesaving actions that would bankrupt me, and have tools to ensure the less urgent stuff is going to be covered.
Of course sometime to comes down to people making medical coding issues on a bill. I've been dealing with that for 6 months now.
This is easy, assuming an average American family size:
- $8,333 gross ($100k)
- call taxes 25% (this is aggressive) leaves $6,667
- housing expense of $2k leaves $4,667
- minus 2 auto expenses (used car average payment is $465) brings us to ~$3,400
- childcare (which: is not free even when your kids are in school) of $1,500 yields $1,900
- frugally feeds the family on $1,000 per month
- $900 remaining for everything else. This includes all the one-off incidentals (car tires, physician co-pays, etc.).
The astute reader will have noticed that I was generous in my tax, housing and childcare estimates. The more astute reader will note that I have omitted student loans, any healthcare or dental expense, vacations, etc.
This is obviously not an estimate for a HCOL area, this is what the math looks like in much of the country.
Edit: _The Two-Income Trap_ is a good read on this. IIRC it points out that most of the big costs are fixed, where financial gurus often tell people to cut the variable expenses (cut down on avocado toast, or make coffee at home). When obviously tweaking inside the $900 left over won't fix this budget no matter what.
Also worth noting that even if they could halve their housing expense, they still would only be in a position to put away $12k annually. Which, given what we know about unexpected expenses, would probably put them right at actual break-even and prevent them from taking on consumer debt.
- That entire $900 for "everything else" ends up all going to your monthly employee contribution to have a family health insurance plan through your employer. Luckily they're only making you pay about a third of the premium.
[EDIT] For anyone from outside the US who's getting a bit lost in all this US-centric budgeting, the TL;DR (and trend which you may have noticed in all this) is that it's insanely expensive to have kids in the US. The main reasons are healthcare costs (including insurance), housing, and childcare. Costs can easily approach $100,000 to take one kid from conception to age 5, with no extravagant spending, and no major health problems.
I was intentionally being very generous. The thing about the cost sharing you mention; it's the kind of change that companies make all the time. An extra $200 out of a family's monthly check can be ruinous.
Yeah, and those numbers only ever seem to go one way, with no end in sight considering that (last I checked) insurance premiums are still increasing faster than base inflation.
Between the savings crisis in every generation past the Boomers (worse with each subsequent generation), and healthcare costs going ever-upward, I have a hard time seeing how we're going to have a strong economy in 20 or so years as more and more of our consumer base gets ground into paste by the wheels of The System and can no longer drive the economy with spending, yet we still don't seem to be anywhere near fixing any of that.
A large part of what's left over probably goes to service consumer debt, as the average American carries about $6k in credit card debt. Paying for yesterday's stuff makes it hard to save for tomorrow.
The hypothetical family I described above would easily end up with $6k of credit card debt after a few years on that budget, simply because $900/mo is not enough to cover all the remaining expenses and therefore they will need to tap a loan at some point. A single auto wreck, temporary job loss, physician visit, etc. can create long-term financial problems for this family because they don't have an extra $3k or whatever to cover a short-term expense.
(I take an agnostic point of view on the debt itself. The alternatives to not having some kind of financial cushion -- even burdensome consumer debt -- are often worse. Think: "can't get to work because the car is dead and I don't have an extra $750 so now I lose my job and then my housing" as the realistic alternative. The real problem is compensation has not paced inflation for 2 generations, and that the $100k family should be earning much more for the same jobs.)
Not saying it's the main reason, but if you have to pay for your own health insurance, and you have a family, that can eat up a whole lot of even a low-six-figures household income. Then there's the cost if you actually need to use any healthcare....
Actually, even if your insurance is employer provided but you still have to pay a significant percentage of the premium, that can be a problem. $12+k/yr on top of what the employer's paying isn't uncommon. Most employers aren't as generous as FAANG and such.
Doubt that's the case for most, but it's one way for that to happen.
(I'd expect that poor spending choices are the main reason.)
[EDIT] Oh, childcare. It can easily be the case that your household income is $120,000 but $25,000 of it goes to childcare—but your household income would be $80,000 without the childcare, so you're still coming out ahead.
A charitable way of framing it would be "Up to 42% of Americans making 6 figures are so confident in the job market, the economy, etc. that they don't even bother saving money at all because they're confident they can handle an unexpected expense through other means than paying for it with cash savings." I think the 61% stat is kind of so broad as to be useless. A better way of understanding the issue is by breaking down how Americans claim to be able to deal with an unexpected expense [0].
Yes, it's doable for nearly everyone to stash some amount of money away, sub-$1k or whatever.
However, if you're in the zone b/t $100k/yr and say $250k/yr, it's entirely possible to have your act together financially, and not be able to save a relevant amount due to the cost of basically existing, responsible student loans and a simple social life. The amount of money you're able to save vs the general cost of living means that your small savings is basically meaningless if something happens.
A normal lifestyle can turn into being the walking dead financially. You make a lot on paper, but one wrong event knocks you out. This is why '08 was especially ugly for NYC finance types, despite being firmly upper middle class.
This doesn't quite jive with my experience living in SF. I have an older but comfortable apartment close to BART and an active social life (had lol). Pre-pandemic my CoL was ~40k. I'm fortunate to be on the higher end of dev salaries so I don't need to spend this little but living a life I enjoy this is just how much I end up spending.
I have friends and colleagues whose experience matches yours, some have come to me for help with their finances. I've found it fairly easy to slash 30-40k/yr from their budgets by simply forcing them to think about which things they're spending money on actually add happiness or utility to their life.
No kids, no dual income. I recognize these costs are not representative if they have a child but OP didn't seem to imply those were the considerations.
With the rise of social media, people feel the need to flaunt things(cars, houses, vacations, jewelry, you name it). Both me and my Wife are making extremely good tech money, shes a director and I am senior+ engineer. And I feel like everyone is living a lifestyle even we cannot afford. We drive Japanese cars (mid level) a few years old. Bought a very sensible house with a payment that if something happened to one of us the other could handle living expenses and not lose the place. We go on somewhat normal vacations, hawaii being an outlier, typically mountain areas in the US and stay at airbnbs and don't wear designer clothes, just t-shirts and jeans etc.
Most of our neighbors(and families in our kids school) drive tesla's and other luxury cars or brand new non-luxury cars, they always have brand new clothes and iphones and a few have rolex watches or other high end brands. I do feel like maybe its a southern california thing to live extravagantly but I suspect most are living way beyond their means and if a partner would lose their job things would drastically change for them overnight.
I can relate. I mean I am in Germany. Living and working here. Last year with my job and freelance on the side I did absolutely not make 6 figures.
We have our house we bought 12 years ago and renovated for 8 years. My SO left her job 3 years ago to study again and in essence doesn't make money. So for the time being it is me. But we value great local organic food and produce and that next to our mortgage is by far the biggest part of our spending. We still put money on the side, but maybe because while we like to spend money (even just for fun) we don't overindulge.
Maybe because we are not as social so that we do not compare and because our values are not in line with spending money to be walking advertisement carriers.
Not sure but when I hear of people in the US with 250k+ living paycheck to paycheck I wonder how that is possible. On the other hand I know people where both make 125 - 150k in Germany and also are living paycheck to paycheck.
So maybe I just can't imagine how this works because living in such a way is something too far from my experience.
some people are genuinely rich, but America is a debt based country so without looking at peoples finances you can't really tell much about how rich they really are vs them being able to afford monthly down payments.
What I find funny about comments like these is that there is clearly a subtle criticism of the very behavior that ultimately pays many of our salaries.
People are encouraged to over spend at ever instance of their life. You go to buy a house, the mortgage company will try to get you spend to the limit of your ability. Every service out there today offers 0% loans to encourage consumer spending so that you can live outside of our means. People are blasted with ads each day encouraging them buy more and more.
It's easy to criticize and make some moral argument about spending, but most of us spend a huge amount of our brain power trying to get people to do more of these things and are paid well for it.
Nearly my whole career I've worked in some part of the marketing world, and when I haven't I worked in e-commerce. Every penny I've made has been trying to get people to spend more and buy more. I worked for a startup that ran ads encouraging people to buy our product rather than have any saving at all. In all my career the concept of "hey what if this leads consumers to an unhealthy spending habits" would be laughed out of the room if brought up.
Now maybe you are one of the few that work in tech and don't either directly attempt to suck money from consumers or spend your day helping other companies doing that, but for the bulk of us it's ridiculous to wave your finger at the spending habits that we, directly or indirectly, work hard every day to encourage.
I tried really hard not to come over as critical. I'm genuinely curious as someone that doesn't live in the US and is financially rather conservative. It wasn't meant as a value judgement at all.
A lot of people on HN don't have families, so let me illustrate some costs. Let's say you are a married couple with 2 young kids and you make a combined $150,000k and you live in Boston.
Federal tax: ~26k
State tax: ~7.5k
Work covers 20% of health insurance premium, leaving you with 20%: ~4k
OK, now we are at $112,500 take home pay.
2 BR apartment accessible to public transit in Boston and in a safe neighborhood, let's say $3000/month + $250 utilities = 39,000. (you are probably not getting a particularly lavish apartment at this price point).
Now you have $73,500 left.
Daycare for two kids from 8 - 5:30: $15k x 2 = 30k
$43,500 left.
Throw in a reasonable life insurance policy, car + insurance payments for a modest car (kind of necessary if you live in Boston and have kids, unless you spend more to live in the kind of neighborhood where you don't need a car), modest medical and dental care out of pocket costs, basic kids clothing, basic clothing for you, diapers, and groceries and you are already eating pretty substantially into what you have left.
Pretty much everything above is stuff that you need to spend in order to live reasonably comfortably (by US standards). Let's say after all of that you have 30k left.
So you have 30k that you can spend on quality of life improvements, entertainment, travel, etc. You can hopefully save some of the money too, but if you are hoping to save towards a down payment on a house in the boston area, you're really not going to be living a lavish lifestyle on that kind of money either.
Oh, absolutely. All these numbers are pretty conservative. Real life is full of situations like cars breaking, HVAC systems getting too old to repair and daycare closing down for a week and now I need to fly grandpa in with a day's notice to cover for me so that I can go to work.
My point is that HN is full of young people without families who can't imagine how other people aren't saving money. Meanwhile, the cost of raising two or three kids in a high cost of living area would buy a single person a lifestyle that most people would agree is pretty lavish.
I'm the only one from my immediate family that 'escaped' the poverty so about half of my gross income goes for healthcare and living expenses for my parents and sometimes siblings depending.
I won't be taking questions or entertaining discussions about the appropriateness of this arrangement. But it's not that rare and it's why I don't meaningfully save.
I'm a person with MS who is the sole breadwinner for myself and my sister, who has bipolar that prevents her from holding down a job. I also come from poverty. Two people with chronic, lifelong health conditions and a lack of safety nets do mean our savings are much less robust than I would prefer.
What we are doing is good and part of a human desire to care for our social group.
People I know who are earning 6 figures state three things: 1) student loans, 2) housing and 3) health care. (most of these people are single income, dual income house holds can afford a 3000k mortgage or rent easily if its divided) ...a dark horse has recently entered the race and that being inflation which will pressure everything else.
Taxes, healthcare, housing, nothing left. To get average to below average healthcare for my family of 5, I pay around $24k/year for coverage before I've paid any deductible (and the deductibles are all over $10K each). Housing cost is the same (considering deductibles) or more. Taxes take 20-something percent right of the top. How many 25+% hits can one take and have anything left?
With what is left we have to have utilities, food, clothing, etc. There isn't much left at the end of the month, most of what is left goes into retirement accounts that I cannot touch for many years.
In the Bay Area making "six figures" under $200k isn't as much as it seems on paper. Taxes and pre-tax deductions (insurance premiums etc) easily eat a third of your bi-weekly check. Unless you've got a half dozen roommates rent will easily eat a whole bi-weekly paycheck. The other check goes to a car payment (essentially required in the South and East bay), insurance for same, at least a cellular plan if that and a residential broadband plan, utilities and other monthly bills, and then food for the month.
Because rent is always due at a particular time of the month people need to use whatever cash buffer they have to cover expenses until their next check. So there's people living "paycheck to paycheck" that do have a non-zero amount of dollars in the bank but that buffer is constantly being drained and refreshed paying all the non-rent bills. If they don't have a cash buffer then they need to use credit cards which have fees and interest that obviate any savings margins.
There's a wide dynamic range in the "six figures" category of salaries. In HCOL areas it takes a pretty high "six figures" salary to get over the "paycheck to paycheck" living.
> Do we know what part lack of financial literacy or simply "living above one's means" play here in the grand scheme of things?
Well, if your job is somewhere in an extremely HCOL area, you only have two options: rent (or buy) somewhere extremely expensive, or rent/buy for slightly less and spend a boatload of money on transportation.
A large part of the H part in HCOL is, by the way, that banks and other investors (both domestic and, worse, foreign) have been scooping up rental real estate for way over a decade now - it began after the "fire sales" of the 2008ff crisis and now hit record highs in 2022 [1]. If politicians want to combat the poverty crisis, getting rents and real estate prices under control is one of the most important things.
As for "financial literacy" - no amount of that can help you if you get sick or, worse, if you depend with your life on epi-pens or insulin. Both saw exploding prices over the last decade.
There’s a difference between “unable” and “not doing”.
I’ve been in this position from time to time, and it always came down to making expensive choices or recovering from an unexpected necessary large expense.
I might have a few financial regrets but when it comes down to it, spending as much as I made was always just a choice I could have changed at any time.
US government often doesn't recognize your family member as a dependent, so you get taxed a lot and you still get to support your family members that completely depend on you. So your FAANG $200k salary in CA will yield $120k in cashflow(no 401K or medical), and if you have two parents to support - you're screwed by the government and your real income is shared between 3 people.
I mean.... I literally cannot get my mother to be my dependent, even though I fully financially support her.
I totally agree with others that costs for childcare and healthcare can easily eat into even large incomes. And for anyone who is making less than six figures and has a family, yes, you have to manage your finances pretty carefully.
However, for many other people, I think a huge part of the problem is consumerism coupled with borrowing. If you are able to be content with what you have or even to downsize, it is much easier to get ahead. And if you avoid all debt except a mortgage, your income will go a lot farther.
People often think about debt as though it is only the interest that matters. But you still need to pay off the principal, if you ever want to be free of it. A $10k credit card debt that you can only apply $500 to per month lingers for a long time.
> However, for many other people, I think a huge part of the problem is consumerism coupled with borrowing.
I think this is a large part of the problem as well. I see so many people taking out large and lengthy auto loans on a new car as soon as they graduate college.
There are things like debt, obligations, extended family, etc... We're a double income no kids couple....
We haven't saved much money living in NYC, with our parents needing financial assistance and residual debts. Dietary constraints also make it much more expensive to live in US.(celiac and lactose intolerance add to costs)
Taxes are also a big factor. Depending on your location, you could see 35-40% of that 100k disappear in taxes, and anther 40% for hosing in high cost of living areas and you are looking at 20k per year residual location.
Thanks for the acknowledgement. I think tax burden is a valid part of the discussion when we are talking about the affordability crisis. I take it kinda personally because I'm already at 35% and looking at another 10% of my pretax income going to property taxes if I want to buy a home for my family.
It is odd that middle class income taxes are so high, and yet government services are awful, infrastructure is crumbling and you don't even get healthcare.
I still don't think there's an affordability crisis in general though. From what I've seen in this thread it's more of an inability to downsize. Everyone needs a car (sometimes 2), a big house, to live in the most expensive cities, to have kids, and they'd rather go into debt than compromise.
Yeah, you can look at it that way. It depends on your starting position economically. There bottom steps on the economic ladder are missing. Cheap entry level homes near economic centers or good paying jobs in low cost of living areas are both missing. The working poor have tax breaks and see some public benefits, high earners have good tax breaks and no benefits.
I don't know if I agree that the bottom steps are missing. There's a lower step if you rent. There's a lower step if you don't have a car. Some times this is impossible, but in most cases, especially the ones people have been posting about here, it's doable. But people don't want to do this, so they spend more and feel poor.
There might be a big step between poor and middle class though, as you come off benefits and have to pay higher taxes and health insurance. Child care also seems prohibitively expensive.
I know there are areas with extremely HCOL, inflation, housing crisis... However, sometimes I do wonder though what some people's budgets are like that they are literally unable to save any money (paycheck to paycheck) making >$100k. Do we know what part lack of financial literacy or simply "living above one's means" play here in the grand scheme of things?