Ok, but not to put a too fine point in it, she also lived in a country with a substantially better safety net than the US. i.e. her minimum wage job didn’t stop her from securing health insurance. I also confess that I don’t know how progressive the Canadian tax system is.
But let me say sincerely: good for your Mom!
Well, there were no goverment heath benefits for the first 30 years of her life, but yes, that is a valid point. However, it should be pointed out that Canadians still pay a significant amount for their health care. Aside from increased taxes, we also pay about $800 a year for provincial health insurance, and a lot of services aren’t covered at all, so many Canadians carry supplemental insurance out of their own pockets or through their employers.
And while there is a pretty big safety net in Canada for people who have no jobs at all, there are virtually no benefits at all for the ‘working poor’, or people like my Mother. And, our pathetic Canadian dollar means that we pay about 40% more for our imported good like cars, clothes, etc.
Some of us don’t consider automobiles to be optional. And it isn’t contradictory, it is an unfortunate irony that the things poor people spend money on to feel like they have a life are termed luxury items to you.
We aren’t living in rural China.
Secondly, woe be the single person. Two people can share rent, share automobile expenses, share utilities. 'Bout the only thing they can’t share are food and toiletry costs, which should be about the same per person. That being the case, our frugally saved 3900 a year disappears pretty quickly.
A guy making $8 an hour brings in about 1300 a month before taxes get taken out (unless he should lie on his tax withholdings as a matter of “frugality”). $500 a month rent? Ok. I guess it depends on where you live, but I’ll bite. 800 left over. $100 a month on groceries is plenty for the frugal chap. 700. $100 on sundries? Eh, more like 60. 640. Car payment? Let’s put that at 150 a month for a car that shouldnt’ break down but won’t break the bank. 490. Car insurance? Well, I pay $1200 a year, but hell, I can be generous here, too. Let’s make it $70 a month. 420. Phone, gas, electric: 35+25+30=90. 310. Haven’t paid for gas in the car yet. I’ll put that at $40 a month. 270. You think health and dental are $100 a month? I don’t, but hey, let’s take it. And besides, the human race survived up to this time without doctors and dentists, so if our man was a little tight he could scrap insurance as optional. But hey, he’s got $270, so toss $100 at insurance. $170.
And, for the sake of argument (since he’s only paying $500 a month in rent we can assume he lives in a relatively cheap area), let’s say he could get some real estate for $70,000. I don’t know why you would expect a house that costs $54, 000 to $70, 000 to appreciate as much as you say, but I will take your word for it. Maybe I’ve just lived in the wrong areas all my life. So we want to put down 5-10% on the house, and take your $60, 000. That’s 3000 he’ll want saved away. If his life went perfectly smooth, no accidents, no sickness, his car doesn’t break down… perfectly smooth, this guy is looking at 17 months to get that downpayment.
Whoops, forgot Christmas time. So, ok, 18 months. Ah, shit, did he forget to do laundry all this time? Maybe we should put that to 19 months. Oh, and did he need to buy clothes ever? Maybe we should put it at 21. And forget taxes, we could just pretend our guy makes another $1 an hour or so, not completely unreasonable. No sweat, just over a year and a half living paycheck to paycheck, right? Oh, wait, now that there’s a mortgage his payments for housing have either stayed the same or increased due to house insurance (which we’ve ignored previously because, hey, with his frugality he had nothing to lose anyway)… let’s hope that his wages increased, too. So, hey, $600 a month now, that’s the mortgage and insurance. But hey, maybe he paid off his cheap car by this time, so no sweat. He pays $100 a month more but took off $150. So now he’s actually ahead. He’s at $220 a month now, sitting pretty. Except that his electric and gas bills went up quite a bit. Lets say he pays an additional 30 a month now between the two. True, he may have had to move somewhere where there is no winter, but this guy isn’t tied down by things like family. He’s living frugal: Scylla-style. So we’re at $190 a month now.
Question: how long in your world will it be before he isn’t living paycheck to paycheck? In mine he never leaves it. Ever. Why? Because he’d like to catch a movie once a month, or get pizza, or (shudder) take a girl out on a date. And his car isn’t going to last forever, it needs oil changes four times a year, and since it is used he’s gonna have to have some more preventative maintanence done on the car than if it was a newer one (which he couldn’t afford, really, anyway).
Sam, of course I am picking at Scylla’s margins. We’re talking about the people on the margins: the result of the wage gap.
Just as a point of curiosity: Why is it that pretty much the same people who argue here that one can get rich on $20,000 a year with the correct frugality are the ones who seem to think that those making, say, $200,000 are suffering under a horrible burden and need a tax break? [Or, closer to home, that those making say $75-$100 K a year with no dependents need a tax break?]
(And yes, that is sort of a rhetorical question…I know the income distribution was willed by God, i.e., The Market, and should not be redistributed in any way … Well, that is, in any downward way after those with the bucks have gotten through with their various less-obvious upward redistribution policies.)
Actually, I’ll admit that I do have some sympathy for the point of view that a big problem in our society is its materialism that causes people, both rich and poor, to spend beyond their means rather than save. That is probably the subject of a whole other thread! Unfortunately, this seems to be the product of our modern market economy kept afloat by consumer spending and in which people are constantly being bombarded with messages to make them feel that their happiness is dependent upon them spending their money on one thing or another.
On the subject of a couple of points raised by Tretiak…
Well, this is an interesting question and I think there are answers on a number of levels. One is a general appeal to the idea that our society, and in particular, our economy is a very cooperative enterprise and everyone should share in the fruits of the enterprise. The labor market, etc., is at best a very imperfect way of determining how this sharing should be done and thus one needs to supplement it by some appeals to an admittedly subjective concept of “fairness” administered through other collective enterprises such as government.
On another level, I believe that studies have shown that people generally rate their material happiness more in relation to their peers than on any “objective” scale. So, excessive income and wealth inequality necessarily creates a situation where lots of people are very unhappy and discontent, just as excessive equality would create a situation of insufficient incentives and rewards for hard work, etc.
A third point is that in a society with some wealthy folks, there are some goods (such as housing, particularly in certain geographic regions) that tend to get priced out of the range of the less well-off simply by virtue of the price being “bid up” by those who have the money to spend. In principle, I suppose this sort of thing ought to be accounted for in consumer price indices and so on, but in practice, I think it is probably done so imperfectly in a variety of ways. At any rate, it is certainly true that, for example, the cost of living is much lower in a third world country than in a first world one…so just comparing per capita GDP is not sufficient to compare the relative standard of living.
Other people can probably come up with other critiques of the “inequality doesn’t matter; it’s absolute amounts that matter” point-of-view.
Like you, I also can remember reading some stuff on this but am not exactly remembering the final conclusions. I think part of the problem is that there are many ways to look at this and each side in this debate has quoted studies that tend to support their point-of-view on the issue.
Here are some stats I found from here: http://www.heritage.org/library/backgrounder/bg1418.html
And yes, I’m aware that the Heritage Foundation is a biased source, but they do source all their numbers, and they come from government sources.
Some highlights:
A 1992 Treasury Department study showed that between 1979 and 1988, 86 percent of those in the bottom income quintile moved to a higher quintile, and 35 percent in the top income quintile moved to a lower quintile.
A 1995 Federal Reserve Bank of Dallas report showed that almost three-fourths of those in the bottom quintile in 1975 were in a higher quintile by 1991, and almost 40 percent in the top quintile moved down to a lower quintile over the same period.
A 1996 Urban Institute study showed that large numbers of Americans move into a new income quintile, with estimates ranging from 25 percent to 40 percent in a single year. The same study found even higher mobility rates over longer periods: about 45 percent over five years and 60 percent over 9-year and 17-year periods.
In 1998, the Census Bureau reported that, on average, over 41 percent of Americans increased their inflation-adjusted income by 5 percent or more per year from 1984 to 1994. 5 The primary reasons for changes in income from year to year were changes in marital status, changes in the number of workers in the household, and moving into or out of full-time, year-round employment.
A 2000 Economic Policy Institute study showed that almost 60 percent of Americans in the lowest income quintile in 1969 were in a higher quintile in 1996, and over 61 percent in the highest income quintile had moved down into a lower income quintile during the same period.
I read this list and felt a cold chill. It is pretty much my life in a nutshell. Difference, I have a second job and drive a new car w/$300/mo payments. Second job just covers that $300/mo. I pretty much eek out an existance but…
age 32
I am driving a 1 year old car.
I am a homeowner (sept will be year 4) Purchase price of home $49,700. Pmts 472/mo including taxes and insurance.
Any more questions about this hypothetical chap…ask away His name is drachillix.
I did have some help with closing costs from family but most of that was covered by a countly low income housing program (forgiven loan for all non recurring closing costs).
From Krugman (1994)
Census data show that 81.6 % of those families at the bottom of the income distribution are still there a year later. (For the top quintile it’s 76.3%)
About half of those at the bottom or top of the distribution are still there after 1 decade. Only 3-6% go from top to bottom or from bottom to top.
This is key and addresses Sam’s points: A lot of the movement is at the very edges of the quintiles, so even (1 and 2a) above overstate the effect. And please note the Heritage Foundation’s selective quoting of facts relating to adjoining quintiles. This is fairly typical, IMO, of Heritage’s willfull distortion of the underlying situation. And no, I am not knocking “conservatives” with a broad brush, there is a lot of decent work that comes out of AEI, Hoover or even Cato.
Put another way, much of the movement up and down represents fluctuations around a fairly fixed long term distribution. See Joel Slemrod or Greg Duncan.
In principle, rapid income mobility could very well offset the effects of growing income inequality. In practice though, this is not the case.
Paul Krugman: Peddling Prosperity: Economic Sense and Nonsense in the Age of Diminished Expectations
Gah, seems I messed up my subtraction up there at the utilities area. The guy should have $190 a month left over, not 170, so we can knock off a few of the months that I added back on. I feel sorry for him if he has to function on credit to get furniture, washer and dryer, a television… though we all know a television is just a luxury item. That’s why we have the emergency broadcast system on the radio, too, so we po’ folks can find out when all the stuff we don’t have will get smashed by a hurricane or something.
drach, looks like I’m a few years behind you. I should be purchasing a house by the time I’m 30, if all goes well. I am crossing my fingers. 
But I’m wondering where you live… not that its entirely germane, of course, but that’s a pretty cheap house for most areas. Do you have a lot of maintenence costs? And for the sake of argument, how long have you been living paycheck-to-paycheck? I have since I was 21. In fact, when I was 21 I went back to college, which means I was living on credit, and I mean that more than just school loans (see, I made too much money at McDonalds to get grants :rolleyes: ), I had to live some months completely on credit cards. I’m still paying for that now, five years later. :shrug: Hey, if we just work a little harder, right? Truth is I still believe it. jshore’s market gods have me in their grasp 
Saying I’m in error is not the same as demonstrating that I’m in error. In fact, much of what you say actually supports my contention. More on this in a bit.
**Yes, it is realistic, because my hypothetical couple is a model or an average, not actual people. There’s a number of very different ways in which a car can be owned or purchased. I did it this way for simplicity. The other way is that we can assume that their first car is a '76 Grenada that they pay $600 cash for, and that they take the bus until they have enough to buy it. They drive the car for a few years and their second car is a better one that they buy for a bigger down payment. Or, if you wish, you can happily adjust the cost of car ownership upwards in your model, and reflect the difference throughout the analysis. ** Um–pointing out that your couple is hypothetical is a rather novel way of claiming your figures are “realistic”. I suppose a '76 Grenada might hypothetically run for 1o years and 100,000 miles, but I would not call that hypothetical realistic.
To one degree or another we all spend our lives one single accident away from disaster. How much life insurance should my `18 year old couple buy? Term or universal or whole life? How much do you want to charge them? Hey, you posted your scenario to make some point about wealth disparity. I’m not sure exactly what the point was, perhaps something about how if everyone were willing to live a subsistence existence and were lucky enough to suffer no significant financial setbacks then they would have plenty of wealth to enjoy in their childless old age. Okay. That’s you r point. Mine is twofold:
[ol][li]Some of the assumptions in your model are suspect.[/li][li]Even apart from (1), so what? Demonstrating that an ideal couple can amass wealth if they manage to live on $16,000 a year for 32 years and enjoy solid investment performance tells us exactly what about income disparity?[/ol][/li]
So, the first one’s a '76 Ford Grenada. Happy? I am, but that has nothing in particular to do with a hypothetical couple driving a junker. Still, I don’t object to your making it clear that your hypothetical couple relies upon a 25 year old Ford for their transportation.
Jeus Christ! How badly do you want to screw these kids? 8.5% mortgage, WTF? I believe my estimate was a 60k house, and rather than have you pick nits, I’d expect a man of your intellectual honesty to say that I made an excellent rough approximation useful for my model.** 8.5% isn’t an outlandish rate for a couple with no credit history, little verifiable income, and no resources to secure a loan. You hypothetical couple are hardly the “ideal borrowers”, after all. Your estimate was indeed pretty accurate. The “margin” I was trying to illuminate here is the complete lack of budgetary allowance for home upkeep on a ~$60K residence which you expect to generate an 8% profit over the next 32 years. It’s your hypothetical, but I don’t find this realistic.
**Contrary to popular belief there’s nothing wrong with an all-equity approach for investors with a time horizon of ten years or more . . . 11% is the Ibbotson number and that’s what I use. ** Sure, and when we’re talking about probabilities and expected rates of return that type of averaging makes sense. It really depends upon what you are trying to demonstrate with your hypothetical couple. I’m still not sure exactly what you are trying to demonstrate, but so long as you aren’t actually expecting every investor to be able to match 11% return over 32 years I don’t really care. My response here was to your parenthetical (arguably) in reference to diversity of investment. Then again, your hypothetical couple does seem to like playing with high risk. And, of course, the gods of statistical averaging ensure nothing bad will hypothetically happen to them.
**I use TIAA-CREF’s number which is actually 8.25% since I don’t have the time or the millions of bucks to commision a study. If you think the number is bad, please feel free to contact TIAA-Cref . . . ** Well, how am I supposed to know whether the number is bad when all you have done is give me the number absent contextual details. Perhaps you could provide a link to the study or an abstract of the results pointing to the areas of analysis which you find compelling. You know, the standard stuff in response to a request for a cite. I found tiaa-cref.org, which lists a real estate investment fund that shows an 8.25% return since inception. I figure you must mean something else, since this fund invests in commercial properties, rental properties, conventional mortgages, etc, in addition to residential real estate and it has only been around since 1995.
Again, it’s your hypothetical. I don’t find it particularly realistic as a guide to individual human behavior and expected results, but the real question is, “what are you trying to demonstrate?” If you point is simply that compound interest sure is impressive if one guarantees double digit returns for 32 years. Well, sure. I don’t think ayone is going to argue. I don’t even think anyone disagrees that people could live more cheaply if they forgo insurance and lucuries and manage to avoid significant financial setbacks. I’m just not sure exactly what those two points are supposed to demonstrate about disparities in wealth. People who already have a lot of money could live on $16,000 a year and invest the rest, too. I doubt they will, though, because wealth is usually desired for the things to which it can be applied, not for the thing itself.
flowbark, Paul Krugman is easily as biased as the Heritage Foundation.
I found some more data that may be worthwhile. http://www.house.gov/jec/middle/mobility/mobility.htm
This is from Dick Armey’s study group, so take it as biased. However, it does break down the Treasy department statistics on income mobility, and here are some results:
There is a table here: http://www.house.gov/jec/middle/mobility/tbl-1.gif which shows mobility by quintile. The chart ranks people by quintile in 1979, then ranks the same people by quintile in 1988. Here are some interesting results.
First, the poorest. After nine years, 86% in the bottom quintile had managed to move out of it. And contrary to Krugman’s assertion, it’s not the case that they just moved from one boundary to the next. Fully 65% of all the people who were in the bottom quintile in 1979 had raised their incomes two quintiles or more within nine years. 40% of all the people in the bottom quintile were in the top two quintiles within 9 years. That’s significant mobility!
It also makes sense. Absent inheritance, most people move through at least three quintiles during their lives, and people with college educations probably go through all five. I’ve been through all five myself.
It would be interesting to break this down by age.
Interesting link, Sam. One interesting pattern I notice is that the percentage of people in each quintile who were “on the lists” 10 years ago decreases steadily with income. Now, this seems intuitive for younger workers entering at low level jobs/internships, etc. while wealth accumulates with age, but I’m surprised that loss of income through retirement didn’t balance those numbers out more. Of course, with only the few snapshots given it is difficult to draw many conclusions. For the record, the pattern goes:
1st quintile 7%
2nd quintile 15.5%
3rd quintile 22.3%
4th quintile 27.6%
5th quintile 28.2%
The percentages represent number of the total population measured in 1979 and the 1988 quintile location. (It adds up to 100.6%, which is either due to rounding on their part or a silly arithmatic mistake on my part.) Without knowing how much the measured population increased over that decade, it’s not possible ot normalize those numbers against the quintile demarcations, which is a shame. To me, the interesting question is how much income mobility is an artifact of interns/part-timers/grad students/etc. measuring in the lower quintile(s) one year but achieving full-time/professional status soon after. There’s no way to tell from these numbers, of course, and if we could tell we would need to keep that ratio in mind when talking about the numbers of “working poor” and severity of income disparity, too.
A couple of things:
Firstly, Scylla your numbers don’t make sense for a few reasons. But the first and most obvious error is really quite basic: you’ve left all your figures in current real terms but you’ve used nominal returns for your investments. You need to use the real return to be consistent.
And there is the second problem. We live in a historically low inflationary, low interest economy. There is little sign of this changing in the near future. Your historical time frame includes both oil and other supply-side shocks and, more importantly, the inflationary fall-out of the recovery from the second world war.
Inflation in the UK in the late 1970s/early 1980s was in double digits. Given this, it is hardly surprising that nominal interest rates were similarly high. In fact the real return during this period was frequently negative!
Our current UK long-term real assumption for equity return that we use in actuarial valuations for pension schemes (which is of the time frame we are considering) tends to fall around the 3-4% mark. This is a long way from 11%.
Then we come to your actual estimates. What if the couple live in the city? This is applicable to a high proportion of the population. House prices are extremely location-dependent. I’m not convinced that $60k for a house is always going to be realistic. Furthermore, if that $60k house places them in a crime-ridden district, (a) their insurance premiums will rise considerably and (b) if they don’t get insurance, they are taking a considerable risk of losing everything from crime.
You also have to allow for General Bad Shit that will happen from time to time. A friend of mine once commented that he mentally writes of £1000 at the start of each year for things that will go wrong. In my experience, this isn’t too far off the truth. YMMV of course.
I loved the way eris crafted his response and I think that Spiritus has done his usual fine job of deconstructing the detail, so I won’t attempt to interfere there. What do I know of prices in the US anyway? But think long and hard about eris’s point about “luxury” items. Why do we work anyway? What’s the point in living? Just to put every penny away? What kind of existence is that? People shouldn’t be expected to deny themselves any quality of life just because their job (which they work hard at) happens to pay sweet f.a. Low income workers are people too!
On Sam’s shifts between quintiles: I’d like to raise the point that my worry is that as income gaps widen and the issues of disparity in inheritence, education and health become more and more significant, it will become ever harder to make that shift. I already said that the 1960s were quite good in terms of meritocracy, so it is not particularly surprising to me that people in one quintile in the 1970s had shifted ten years later. The concern is for the ability of the current children to break out of their economic class.
Tretiak:
Actually, they are. All you’ve done is scale everybody’s pay by a factor of 500 - essentially you’ve applied an inflation of 50000%. You haven’t improved output. Dredge up the old law of PV = MY, where P is prices, V is velocity of spending, M is the money supply and Y is output. You’ve hiked up M without changing V or Y, so P just increases proportionately.
In this world a pint of milk would cost $250.
pan
I’ve just realised that the meaning of my second sentence in my second paragraph is unclear. I mean that the current low inflation/interest rate environment is much lower than it has been historically, not that historically these things are low.
Thankyou
pan
Scylla, using what I would consider to be an extremely shaky financial model, reckoned that his couple could put away $3,900 per year. OK, let’s stick with that.
And let’s have a look at their real assets at retirement at age 60.
We’ll assume that their real wage growth is 1% p.a., real equity growth is a generous 4% p.a. and 15 year IL bonds at retirement yield and even more unrealistically generous 2% p.a.
Then the real fund they can expect to receive using standard actuarial notation is
3900 x 1.04[sup]42[/sup]asup @ 3%[/sup][sub]42|[/sub] = $476,667.
Sounds a lot? Hell, let’s bump it up to an even $500k. And let’s see what (inflationary) pension that would buy them - remember that means liquidating their entire assets, which would include their house.
Pension = $500k/(asup @ 2%[/sup][sub]60[/sub] + 0.5 asup @ 2%[/sup][sub]60|60[/sub])
We have to make a mortality assumption here - take my word for it that an unrealistically generous factor for the denominator would be 20.
Result? A pension worth $25k per annum that halves upon the death of the male. So in real terms they are $5k per annum better off than when they were 18. With no house.
Suddenly the deal doesn’t appear so good any more Scylla.
pan
Kabbes:
If you’re going to depreciate the value of their growth by inflation, then you must also increase the value of their contribution to savings by the same factor. That is, if the growth of their assets is subject to inflationary pressures, so to should we expect their earnings.
I note that you have failed to do that.
Spiritus:
The point is a simple one. I created a rough, back of the envelope model to make the point that people of modest means can and do accumulate significant wealth.
And, if you’d read correctly you’d see that they don’t drive the Grenada for ten years.
Is the model simplistic? Yes, but it’s evenly flawed. 30 years at minimum wage without benefits isn’t particularly realistic.
That is fucking depressing, kabbes my friend. 
And, Scylla, it appears that I may sound somewhat hostile in my post above… truly, no hostility towards you. I apologize for any perception of ill-will.
erl:
Don’t worry about it.
Spiritus:
If you don’t like 8%, give a rationale for a better number.
Kabbes and Spiritus:
As I’ve said. My model is more in the lines of a quick illustration rather than a roadmap for life. What say we leave it for what it is, and in the next day or so I’ll start a new thread on the subject of the wealth accumulation possibilities of working class people, and we’ll build a more detailed model?
No Scylla, my calculation does allow for real wage growth of 1% p.a. In other words, if inflation is 4% in one year, they will have salary growth of 5%.
The more complete calculation for accumulated earnings net of inflation is (letting i be nominal interest rates and inf inflation; w is nominal wage inflation, with the suffix r if they are real instead) is:
(1+i)[sup]42[/sup]/(1 + inf)[sup]42[/sup]
= (1+inf)[sup]42[/sup](1+ i[sub]r[/sub])[sup]42[/sup]/(1 + inf)[sup]42[/sup]
=(1+ i[sub]r[/sub])[sup]42[/sup]
=(1+ i[sub]r[/sub])[sup]42[/sup] {1 + (1+w[sub]r[/sub])/(1+i[sub]r[/sub]) + [(1+w[sub]r[/sub])/(1+i[sub]r[/sub])][sup]2[/sup] + … + [(1+w[sub]r[/sub])/(1+i[sub]r[/sub])][sup]41[/sup] }
Now let [(1+i[sub]r[/sub])/(1+w[sub]r[/sub])] = v and let y = [(1+i[sub]r[/sub])/(1+w[sub]r[/sub])] - 1
Then the above sum is
(1+ i[sub]r[/sub])[sup]42[/sup] (1 - v[sup]42[/sup])/y
Check my algebra (though since it is entirely standard I would be very suprised if there were an error). Substitute in the numbers and get the figure for yourself. The calculation allows for wage inflation (or earnings growth) and asset growth.
Don’t get in a number-kicking competition with an actuary.
OK - my actual calculation was a little more complicated than above because I went the extra mile and allowed for payments monthly rather than annually, but you won’t get an answer too dissimilar.
I’m sorry if your carefully constructed fantasy is collapsing around you Scylla. But the fact is that no matter how frugally a couple starting on $10k per annum live, when they start in that bottom quintile of society it is very difficult for them to exit.
Eris - it is depressing but don’t start panicking just yet.
Scylla tries to have his couple retire as millionaires at 50. Sadly he didn’t allow properly for inflation. I tried to retire my couple at 60. It didn’t work out wonderfully because the contributions to retirement were too low. However there is a lot to suggest that in 40 year’s time people will be retiring at age 70, not 60. That makes quite a lot of difference to the calculation because:
a) Annuities are significantly less
b) There is ten years’ worth more interest
c) There are ten years’ more contributions.
Retiring at 70 not 60 could increase the pension by at least a factor of 2 - 2.5. You’re then looking at more like $65k p.a. not $25k. Maybe the couple won’t have to sell their house after all.
Also, the hope for those who have a good work ethic and are talented is that they can rise above the level of $10k p.a. shop floor Joes. Since most of the $10k goes on living expenses, earning 50% more could mean the chance to invest 100% more.
But note that this is only possible and that you only really rise above the floor by increasing your yearly income significantly. Merely living frugally will just keep you from starving in later years.
Hey - I was a pensions actuary. I know what I’m talking about.
pan
Fresno, Ca
Most of the time I have been here it has been tight, I was doing good until my car died, figured I could afford it and I had stellar credit so I bought a new one. Now I have about $120 in “disposable” income a month and it dosen’t go very far. Maintenance has been very cheap, so far I have spent about $300 over 4 years.
Does this mean we can make a lefty out of you yet, my friend?
I’d like to point out, that one man’s luxury item may be another’s necessity. For my family-we have to have a phone. And call waiting. My dad’s job depends on it-same with a car-my father MUST have a working car.
I know that when my dad was growing up, my grandfather didn’t always have steady work (he was a welder, and sometimes he was out of a job, even though he was a union worker). Sometimes they didn’t always have a lot of food. My dad was the oldest, with four sisters. Until my father was a teenager, he and his sisters all shared one room-with two of my aunts sharing a bed. My grandparents had the adjoining room. (And trust me, the room the five kids were in is SMALL. -[sub]of course, now it’s my Pap’s room, because he snores something awful and Gramma just can’t take it[/sub]. )
At the same time, my dad and his sisters had to go to Catholic school-no ifs ands or buts. This was something that wasn’t viewed as a luxury. In addition to this, my grandfather was hellbent, bound and determined that EVERY ONE of them would go to college. He wasn’t able to go, what with the Depression, the war, and his guidance counselor discouraged him. He ALWAYS regrets this, and so he worked his tail off making sure they would be able to go. They were lucky-a bachelor uncle died and left each of them some money, some loans and fianancial aid, here and there. And once my Aunt Katie was in school, my grandmother could go to work parttime-so this helped too.
Between all this, saving for retirement, and the future was a pipe dream. My grandparents didn’t have any luxuries-and if they did it was something for the kids.
Nowadays, (due to pension plans, or whathaveyou), my grandparents are most assuredly NOT hurting. However, this wasn’t the case when my dad was growing up. And I don’t think my grandparents were foolish or short-sighted. Just very very unselfish.
