I have been out of college for 24 years or so. I have seen my disposable income fluctuate dramatically, from being single to being married, from living in Houston to living in Mass. and SoCal. Funny thing is that if not careful I was able to spend my entire paycheck and then some. And I grew up lower middle class, so I should have known better. I still do not save 15-20% of my income per year, but am working my way toward that goal. My point is that most people can save but lack the will and foresight to do so. If you think what I am suggesting is impossible, the kids who grew during The Great Depression would disagree. These people tend to save heroically, purchase most things with cash and don't use credit cards (or buy on "lay away").
There won't be serious discussion on this matter until all cheap equity refinancing dries up and the scramble to pay the monthly payments becomes more desperate. Higher interest rates are only the beginning. That's a big reason why certain Asian families look rich. Be rich, live poor.
1. What would that same family do if they made $5000 less a year? They would probably make do and be just fine. Maybe they won't have cable. Maybe they can't see all the latest movies. Move that NetFlix account has to go away. But they'll make do. 2. The fact that America has a zero net savings rate right now says that's how it is. It might sound callous but that's how it is. I grew up lower/middle-middle class and my dad's propensity to spend on luxury items kept us that way. I was that way until I met my wife who is from China, where you don't buy something unless you have the money. Credit is a very new thing to the Chinese. As of now I'm in my lower 30's and have paid off my house and cars. I make decent money but I could have easily spent that on other things. I made a very concerted effort not to. As for the CEO thing, I understand the discprepancy is a disconcerting thing. However, I'm not quite sure how what someone else is making has so much to do with what you make or what you do with that you make? I always think it's funny when someone gets jealous about what a co-worker makes. Did you not agree on your salary when you signed your employment agreement? Was in not a mutual benefit? So what has changed now that you found out Bobby is making more money than you? If you want to make more money, go for it. But don't make it out like someone cheated you. That's just like those atheletes that keep on re-negotiating their contracts every other year when they see someone else get more money.
If incomes have risen, however slightly, after adjusting for inflation, then I don't see how one can say that the middle class is being destroyed or that there is some greeat financial crisis. Who cares what Bill Gates makes. The average worker is ~1% better off today than in 2000. Until there is an actual decline in real wages relative to inflation, as opposed to just a reduction in growth, I don't think people need to grow too concerned.
after reading this thread I think it should be pointed out that saving and how to become rich are two different discussions. my father is a very good saver, a very diciplined man in all walks of life, he is never gonna be rich. not because he didn't save well. so you can rail on the average american for not saving all you want, the discussion of the gap between rich and poor is a discussion of income level. a discussion of the minimum not being raised in 9 years.
However, when you look at the median, rather than the mean, wage figures, they have dropped. The median is the exact middle of the spectrum (50% of the population in number of people are below this number, 50% are above), not the average, and this number dropping while the mean is rising shows that while the average income is rising, that number is inflated by the massive gains of the people at the very top. More families (in numbers) are losing ground than are gaining. This is clear evidence of a widening gap between rich and poor.
But he is probably richer than someone else at his income level who did not save. You are right though. Someone making minimum wage, if they somehow heroically saved 15-20% a year (saving $2000 a year with a 7% return will see $400K after 40 years) they will likely not be a millionaire, unless they were extremely lucky in their investments. But even if the minimum wage earner only saved a fraction of the $2000, he will likely be way ahead of his fellow minimum wage earner who save nothing. The point about saving is that it is one of those difficult life decisions one makes that will significantly shape your financially well being. Another hard decision would be getting a college education versus working right out of high school.
Both income and savings are determinants for being rich. If you make $200k a year and spend all of it (if not more), you will likely have a negative net worth. If you make $50K a year, live below your means, and save 10%, you will have a positive net worth. BTW middle income earners not keeping pace with inflation is a serious problem. I have not heard anyone suggest a viable solution. We are in global economy now. Our standard of living is declining while those in India and China are rising. I don't see how that can be changed in the long term. We might be able to do something in the short term that would slow the trend??? I still posit that saving more and consuming less is a way to maintain one's standard of living in an environment of declining income, in the long term.
let me say this also, I don't think anyone has the right to be rich either. I don't think income levels should be raised so more people can become rich. people who are rich through their own efforts have uusually done something extra to become rich, rather in investing, reaching a high level in their career, or coming up with some great idea, etc. and that's the way it should be, that's how capitalism works. the issue of the disparity of income has more to do with the economy, the more people who have more disposable income is better for the economy. I'm not an economist but that would just seem logical to me. and its a national security issue for the continued growth and progress of this nation, people have to by into the capitalism, that they will benefit, that they aren't working just to make the rich richer.
What is rich to you? I've never met a rich person in my life because everybody I know works for a living, whether it's my cousin who drives a used Mazda 626 or my friend who drives a brand new Escalade. One of them works 9-5 for somebody, the other has his own business, but I don't see any difference in them, because they both have to work.
That was the median, so you are wrong here. The median income, accounting for inflation, has risen 1% since 2000. It isn't that median incomes have declined, it is just that the median has not kept pace with the mean. The super rich have gotten richer faster, making mean income increase 8% while median income increased less than 1%. That doesn't actually hurt the median earner, they are still better off then they were 6 years ago. Comparing this situation to one in which the top is getting better while the rest are getting worse is wrong, and the essence of class warfare.
I think it has less to do with how much disposable income people have and more to do with what most people do with their disposable income. I have VERY LITTLE disposable income, but I make sure to save everything I don't need. That's just the way I was brought up I guess. I work for a 401K administrator and most of our clients are teachers. Most of these teachers have been making 40K or 50K all of their lives, yet when they're ready to retire, BAM...they have 200K in their 401K. That, plus Social Security and what ever other savings they have, equals a pretty fomfortable retirement. That's because they started saving in their 20's. Probably even less than 10% of their income, but they just kept at it for 40 years, no questions asked.
You're applying a naive amount of confidence in the absolute measure of living standards. And oh no, you played the class warfare card. Hint: This country was founded on class warfare, mainly the prevention of the accretion of wealthy and power with a perpetual few. If you don't like it, then move to Russia, where oligarchy is favored.
Public school teachers or private school teachers? If they are public school teachers, they contribute to TRS, the Texas Teachers Retirement Fund. It's mandatory in many, if not all, Texas public school districts. If so, they do not have social security taken out of their checks, and therefore they do not get social security when they retire. The only way they get both retirement and social security is if they taught at a private school that has it's own 401K.
I'm not talking about saving, I'm just talking about the growing disparity in income. that's what this discussion is about. I'm glad you save, congratulations, I'm glad you were brought up that way, but that's not what I'm talking about. that was the point of the first post, the growing gap between rich and poor is a discussion about income, not saving.
1) stay away from credit cards ( don't end up paying for a pizza over 8 years) 2) go to school (college, advanced degree, certifications) 3) save, and invest (real estate) 4) don't buy what you don't absolutely need (aka. that $4500 laptop which will be absolete in 6 months, and using a credit card to buy it.) 5) marry into a rich family
