The New York Post
September 28, 2016
It’s an election year so buzzwords like “income inequality,” “the working poor” and “American dream” are ubiquitous. But there’s one thing politicians aren’t brave enough to say to the American people: Stop spending your way to the poor house.
Indeed, amid all the debate over the pace of the economic recovery since the housing bubble burst leading to the Great Recession, we’re arguably ignoring the financial crisis building right under our noses: Americans aren’t saving. And all that squandered cash adds up.
Polly Mosendz writes in Bloomberg about a new study that found, “Close to half of those who earn from $100,000 to $149,999 a year have less than $1,000 in their savings accounts. Some 18 percent of them have socked away absolutely nothing.”
It’s hard to feel sorry for someone who makes six figures and doesn’t manage to have savings, but this is a problem happening in every financial bracket in America. We talk a lot about a “living wage,” but it turns out Americans don’t seem to be able to live on their wage almost no matter what that wage is.
In a May story for The Atlantic, Neal Gabler wrote about the fact that despite being a fairly successful writer, he would be unable to come up with $400 in an emergency. “I never spoke about my financial travails, not even with my closest friends — that is, until I came to the realization that what was happening to me was also happening to millions of other Americans, and not just the poorest among us, who, by definition, struggle to make ends meet,” Gabler wrote.
He’s right: 47 percent of respondents to a 2013 survey by the Federal Reserve Board said the same thing. Gabler quotes research by NYU economist Edward Wolff, who discovered that the average family making about $50,000 a year would be able to keep up their lifestyle for a total of just six days should they suddenly lose their income streams.
The most startling thing was that this included liquidating all of their assets. People are literally living paycheck to paycheck. That the paychecks are sometimes quite large doesn’t seem to change that dynamic at all.
What’s going on?
Gabler attributed his financial woes to ignorance — not knowing how to save or invest money when he had it. Economists continually point to credit-card debt as the culprit for America’s empty bank accounts.
But credit-card debt doesn’t just materialize out of nowhere. And what these explanations miss is that we’re addicted to spending. A 2013 FINRA Investor Education Foundation survey found that 41 percent of Americans admitted to spending more money than they make each month. A Pew study from the same year showed 39 percent of Americans report having unpaid credit-card balances. Meanwhile, the average American household has more televisions than people, nearly 70 percent have smartphones and nearly 90 percent of US households have at least one car.
Gabler disagrees that he was keeping up with the Joneses, but admits, “like many Americans, I wanted my children to keep up with the Joneses’ children.” With college costs being what they are, keeping up with the Joneses’ children might be the most fatal financial mistake Americans can make. The average student who graduated college in 2014 had nearly $30,000 in student-loan debt and many had far more.
No wonder Americans frequently report feeling uneasy about their economic prospects. And they’re not getting much help from politicians who keep insisting that economic stability is purely the product of good luck. The idea that there is little we can do to make ourselves economically secure is a myth that Americans desperately need to shake.
To those wracked by economic anxiety, politicians keep offering income redistribution. But we’re living beyond our means at virtually any income level. Far more beneficial than spreading the wealth would be teaching financial literacy as early as high school, so young adults can hang on to that wealth.
This week a Hudson Valley mansion said to have belonged to Elizabeth Schermerhorn Jones, the original “Jones” of “Keeping up with the Joneses,” was sold. It had been unoccupied for years and had fallen into disrepair. The Joneses had long ago abandoned the house they couldn’t afford, either. Perhaps we should all take their lesson and stop trying to keep up with them.
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