The Secret Shame of Middle Class Americans

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BRUTE
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Re: The Secret Shame of Middle Class Americans

Post by BRUTE »

first they ridicule an idea, then, they violently oppose it... jacob knows the drill.

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Sclass
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Re: The Secret Shame of Middle Class Americans

Post by Sclass »

Oh man, I went back to the Atlantic link in the OP. There are a bunch of follow up stories.

Really sad stuff. Scary too. I think I'll stay home and count my pennies today.

IlliniDave
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Re: The Secret Shame of Middle Class Americans

Post by IlliniDave »

At least one of the followups leans toward the hopeful side--at least the writer has applied a little common sense rather than continue doing something that wasn't working and somehow expecting the results to change.

http://www.theatlantic.com/business/arc ... fe/480612/

I've lived all but about 2.75 years of my like in flyover country, and expect to spend the rest of my life in it. It's not the answer to all of life's difficulties, but it makes the playing field easy to navigate.

At this point I'm beginning to wonder if the widespread prosperity in the US during the 50s and 60s wasn't just a case of catching lightning in a bottle that has set an expectational bar in the culture that's too high to overcome most of the time. What I anticipate for my kids and grandkids could be described as a mean reversion back to the conditions my grandparents started off in, with the big difference being that my grandparents and most of their generation had humbler material aspirations than what is preached today. The new normal is the old normal. I attribute more than a little of my "success" when it comes to having a stable financial life to values I adopted from my grandparents.

jacob
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Re: The Secret Shame of Middle Class Americans

Post by jacob »

IlliniDave wrote:..., with the big difference being that my grandparents and most of their generation had humbler material aspirations than what is preached today.
The other big difference was that the grandparent-generation were much more skilled in terms of being able to manipulate their personal environment. How many people today (boomer and younger) know how to butcher a chicken? What's the fraction of people who can cook from staples? How many can pour concrete?

To illustrate: A few years ago I read a popular survivalist book. Somewhere near the end the author quotes a list of woodworking tools from an old (1920 or whatever) book and then says, and I paraphrase here, "I don't know what some of these tools are or do or where to get them, but you should figure this out". Mindblowing! Now, I'm somewhat of a woodworker and I mainly use handtools, so I did know the listed tools, how they work, and I even own them. That's not the point though. The point is that my grandfather was not a woodworker and yet he also owned these tools and occasionally worked with wood. I interpret this as us having moved from a point whether woodworking was a common knowledge skill to a point where most people don't even recognize half the tools anymore but if you do you're considered some kind of enthusiast or expert---all in a span of two generations.

To set some absolute standards, it wasn't like they had advanced skills. It's more than they have average skills but that the following generations have practically none having outsourced everything to the market place. This is evident from how common FIRE blogging now/still sees everything as a financial solution: instead of earn-buy of pre-2010, it's just become invest-buy in 2016. There's still very little doing.

Tyler9000
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Re: The Secret Shame of Middle Class Americans

Post by Tyler9000 »

jacob wrote: This is evident from how common FIRE blogging now/still sees everything as a financial solution: instead of earn-buy of pre-2010, it's just become invest-buy in 2016. There's still very little doing.
Very true.

And even in investing, there's very little doing these days. Between the proliferation of robo advisors and ER blogs advocating for "unlearning" investing and putting all your money in a single fund, I find it a little concerning that a decent chunk of the FIRE community today may not even know how a bond works or what asset allocation even means. (And that's really simple compared to legit stock trading skills). They rightfully ditch expensive money managers but do not bother to replace the knowledge base with their own financial education. That information is just piled in the basement with grandad's mysterious woodworking tools.
Last edited by Tyler9000 on Sun Aug 14, 2016 11:09 am, edited 1 time in total.

enigmaT120
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Re: The Secret Shame of Middle Class Americans

Post by enigmaT120 »

Come on Tyler, maybe they're busy under the car removing the gas tank in order to swap out a bad fill vent valve, or changing a timing belt.

Tyler9000
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Re: The Secret Shame of Middle Class Americans

Post by Tyler9000 »

Mechanic skills? Nah - cars are also passé. More likely they're playing Pokemon Go. ;)

BTW, my apologies for the grumpy old man moment. I must have finally reached "that" age. :roll:

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Re: The Secret Shame of Middle Class Americans

Post by jacob »

@Tyler9000 - "So why do you hate index funds now?" :lol:

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Sclass
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Re: The Secret Shame of Middle Class Americans

Post by Sclass »

IlliniDave wrote:At least one of the followups leans toward the hopeful side--at least the writer has applied a little common sense rather than continue doing something that wasn't working and somehow expecting the results to change.
s.
Agreed. I detected a bit of unwillingness to adapt in the follow ups. I got worried because the people were all educated and proud of their schooling even though it wasn't getting them paid in today's market like it did in their glory days.

Some of these People had invested in education where education was no longer as useful while still trying to hold on to what they had previously won. I mean these folks seemed to have difficulty returning gracefully to poorer lifestyles which would be better suited to their new incomes. Did they forget to how be poor, or did they just want to stick to the past?

I guess there was a selection bias for journalists. However many of the stories were about writers who were hell bent on writing even after they themselves had said the industry had collapsed.

I cannot put my finger on it but I feel there is this over investment made in education that the individuals cannot walk away from. Kind of like how a business owner cannot walk away from a failing business that they spent years building.

Tyler - working on cars is becoming an old man's hobby.

Tyler9000
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Re: The Secret Shame of Middle Class Americans

Post by Tyler9000 »

@Jacob -- LOL. Thank goodness you guys know me.

I really like Harry Browne's advice to never invest in something you don't understand. I guess I just sometimes get frustrated when people interpret that as a warning to avoid things altogether (bonds, gold, etc) rather than an invitation to learn so that you can understand. I imagine you feel the same way about trading. ;)

The same can be said for woodworking, fixing cars, and any myriad of skills. One thing I really appreciate about ERE is the Renaissance vs. specialist mentality.

BRUTE
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Re: The Secret Shame of Middle Class Americans

Post by BRUTE »

IlliniDave wrote:At this point I'm beginning to wonder if the widespread prosperity in the US during the 50s and 60s wasn't just a case of catching lightning in a bottle that has set an expectational bar in the culture that's too high to overcome most of the time.
+1

there was probably a similar one-time shift with computers/internet being introduced, but its profits were far less equally spread among the population.

Dragline
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Re: The Secret Shame of Middle Class Americans

Post by Dragline »

Sclass wrote: I detected a bit of unwillingness to adapt in the follow ups. I got worried because the people were all educated and proud of their schooling even though it wasn't getting them paid in today's market like it did in their glory days.

Some of these People had invested in education where education was no longer as useful while still trying to hold on to what they had previously won. I mean these folks seemed to have difficulty returning gracefully to poorer lifestyles which would be better suited to their new incomes. Did they forget to how be poor, or did they just want to stick to the past?

I guess there was a selection bias for journalists. However many of the stories were about writers who were hell bent on writing even after they themselves had said the industry had collapsed.

I cannot put my finger on it but I feel there is this over investment made in education that the individuals cannot walk away from. Kind of like how a business owner cannot walk away from a failing business that they spent years building.
Its a combination of the "sunk costs" fallacy and basic cognitive dissonance.

Faced with the reality that whatever they "invested" in their educations is not paying off and is not likely to do so in the future, they would rather ignore that fact so as to continue justifying their current course of action. At bottom, they also like to think that their educations make them qualitatively "better" than others who might have gone to community or state college and can't accept that their financial outlook is worse.

Contrast with the children in the wapo article who do not seemed to attach their self-worth to their educational achievement levels.

A foolish consistency indeed.

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Re: The Secret Shame of Middle Class Americans

Post by 7Wannabe5 »

Sunk-cost sucks. KISS. Body to body. Job to job.

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Bankai
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Re: The Secret Shame of Middle Class Americans

Post by Bankai »

http://www.bbc.co.uk/news/business-37504449

More than 16m people in the UK have savings of less than £100, a study by the Money Advice Service (MAS) has found.
In five areas of the country, more than half the adult population has savings below that level.


From original study:

https://www.moneyadviceservice.org.uk/e ... ncial-risk

Non-Savers

People in this saver type have the lowest average income; are least likely to be
economically active; and, perhaps as a consequence, are least likely to be satisfied
with life or their financial circumstances. They are least confident about managing
money and about making financial decisions.

Non-Savers are the most anxious about their finances, and the most likely to feel that
there is nothing they can do to improve the situation
, so it is perhaps not surprising
that they are also the most likely to ‘live for today’ (49% agree with this statement vs.
30% overall). They are least likely to save instead of borrow, and the most likely to save
only for a specific purpose (rather than for saving’s own sake). They are least likely to
have financial goals for the next five years and where they do have a goal, it is most
likely to be simply making ends meet. They are also least likely to have plans in place to
meet these goals: 46% of Non-Savers have plans vs. 64% overall.

This lack of planning extends to retirement and end-of-life planning: only 38% of
Non-Savers have a pension that they have paid into vs. 59% overall; 34% expect to
depend on the state pension; and a further 31% don’t know how they will fund their
retirement
. They are also least likely to have made a will or planned for the costs
of care.
(...)
Those Non-Savers who do have credit cards are most likely to be paying off only the minimum every month.
They are also least likely to be protected from financial shocks by insurance, such as home insurance
(held by 27% vs. 46% overall), life cover or critical illness insurance.
(...)
Compounding the difficulty of building up a savings buffer, as for all saver types, is the
pressure to spend
.
(...)
Understandably, they are focused on the short term. When
asked a hypothetical question: “Would you rather have £200 now or £400 in two
months’ time?” 35% (vs. 21% overall) chose the quick win
, rather than waiting for the
bigger prize. The risk for this saver type is that an unexpected bill of £300 would have a
serious impact on their financial wellbeing: 18% would not be able to pay at all,
14% would resort to credit and 19% would have to borrow from friends.


So basically every second person I pass on a street should have a red, flashing banner "I'm broke" above their heads. I wonder how much of this is self-imposed and how much could be improved with proper financial education?

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