Why budget culture fails Americans
June 12, 2022 7:00 AM   Subscribe

The budget culture blueprint has been copied over and over by financial experts who think they’ve pinpointed the problem keeping us all poor, from lattes to avocado toast to mindset mistakes. But they all really have just one secret to getting rich quickly: aggressive investing. And you can invest as aggressively as you want with $1 or $5 at a time — tons of apps will help you do it! — but you won’t quit your day job that way. The only sure way to make money is to have money, but no personal finance expert wants to admit their wealth is built on anything other than a solid foundation of hard work and self-control — not their degrees in finance, Ivy League educations, middle class upbringings… or their ability to sell you a fantasy. Dana Miranda writes in Anne Helen Petersen's Culture Study on why budget culture fails so many Americans.
posted by Bella Donna (93 comments total) 54 users marked this as a favorite
 
I wish all of the budget-centric articles and think pieces were required to begin their articles with an assumed budget — or were forced to provide a sample budget based on a cities - any cities - real cost of living.
posted by Silvery Fish at 7:13 AM on June 12, 2022 [36 favorites]


I love this. It's just money, it comes down to money. Money to support oneself, money for taxes supporting others, money money money.

Money hoarding by people and organizations hurts everyone not at the top. It's just money, money fixes the problems but we don't have money to fix problems because Musk, Bezos, et al have (through means legal and illicit) hoarded the stuff. You can't patch a hole without patch.

I've been lucky enough in my life that I could take a look at my finances, look at what The Advertised Life was for my cohort and peg that down one or two notches and be comfortable. As pay increased, my lifestyle pegged up slightly but I'm not chasing the best car, phone, computer, vacation, house, etc and everything is still comfortable.

But without sufficient money, that choice I made would have been impossible. There's not an infinitely low floor on lifestyle while maintaining modes of employment at varying levels and a certain point there's no life sustaining employment available at all.

There has to be a maximum wage and there has to be maximum wealth. Capitalism has no inherent rules against consuming itself. Cap the top and force money back down through the bottom rungs. Emphasis on force.
posted by Slackermagee at 7:39 AM on June 12, 2022 [60 favorites]


My favorites are the look at this poor couple barely getting by on $350K a year articles. When you dig in, those couples are almost always spending 75% of the income on housing and childcare, which ironically is the same problem you find when you look at much less well off people. The difference, of course, is that the rich folks are essentially choosing to be cash flow poor, as they could make different decisions. The options for the couple or single parent trying to get by on $30K a year are much less flexible.
posted by COD at 7:45 AM on June 12, 2022 [41 favorites]


I wish all of the budget-centric articles and think pieces were required to begin their articles with an assumed budget — or were forced to provide a sample budget based on a cities - any cities - real cost of living.

Including costs associated with kids or other dependent family members, which often go missing from the discussion once you start talking about lower-income budgets.

My favorites are the look at this poor couple barely getting by on $350K a year articles. When you dig in, those couples are almost always spending 75% of the income on housing and childcare

I can't make sense of these articles except as ragebait - as a sort of false-flag operation to sell the idea that the problem isn't wages, it's how people spend their wages. Presenting these people in the most upper percentiles of income as "cash-strapped" focuses our attention on the individual choices that those people could be making - because those people do have choices. Even 100k is above the 80th percentile.

Show the budget of that 30k couple with a toddler that can't find/afford childcare so one of them (usually the mother) has to quit their job and now they live on 15k and it suddenly looks much different.
posted by Kutsuwamushi at 7:55 AM on June 12, 2022 [28 favorites]


Googling around, it seems like the top categories in every breakdown of the typical American budget are housing and transportation.

(I'm surprised health care isn't higher. They're probably not including employer contributions?)

I'm increasingly convinced that one of the biggest things we can do is give more people the option of denser urban housing: cheaper housing per unit, with better access to transit, education, jobs, and services.
posted by bfields at 7:59 AM on June 12, 2022 [9 favorites]


So I just need a high income, low expenses, live in a two income, no kids household and to never get a major illness or get seriously injured. God I’m such an idiot. It was just so simple.
posted by interogative mood at 8:12 AM on June 12, 2022 [67 favorites]


"How do you make a small fortune in [x]? Start with a large one!"
posted by lalochezia at 8:13 AM on June 12, 2022 [7 favorites]


I really like the discussion of how budget culture is like diet culture, because that's something I've been thinking about a lot with respect to my own deep hangups about money. And while I've mostly been thinking about how some of my individual financial behavior mirrors some of my residual eating disorder issues, I also think it's true on a societal level. In both cases, powerful people (doctors, policy-makers, the entire financial industry) leverage really deep cultural narratives to heap shame on individuals for things that are basically the result of systemic failures. (And I truly believe that fat stigma in the US is tied to our fucked-up healthcare system: fat people provide a really easy scapegoat for poor health outcomes that are better explained by our profit-driven healthcare system.) And that means that we endlessly harp on individual behavior, rather than thinking about who our systems serve and who they fail. It's a really difficult thing about American culture, and I'm not sure how to overcome it, although it feels like maybe we're making some tentative steps in that direction, at the level of conversation if not yet at the level of policy.
posted by ArbitraryAndCapricious at 8:13 AM on June 12, 2022 [57 favorites]


I'm constantly shocked at how little healthcare is represented in any budget article. I have a fairly typical health/dental/vision plan via a small tech company and my contribution to the premium is $840/mo for 2 adults, plus a $4400 deductible each. I do track my spending versus budget each month, and with the $400/mo budgeted for out of pocket health related expenses (my wife has an expensive chronic disease) I'm spending over $1200 a month on healthcare. My only other more expensive budget item is housing.
posted by COD at 8:16 AM on June 12, 2022 [25 favorites]


I completely agree with the premise of this article (that you have to have a certain amount of money before any financial advisor's strategy will even sort of work) but I think it sort of ignores the fact that there actually are plenty of people out there that have that amount of money and want to do better (and can do better) with their finances.

10-15% of house holds have $1m or more in assets, not including their home.
That goes to about 17% when including home value as 1-12 US homes are worth more than $1m, but there is quite a bit of overlap between people who have lots of money and have an expensive home. That's just a bit less than 1 in 6 households, which is a lot!

Even on the lower end, the number of households earning $75k+ is over 50%.

Income is not at all evenly distributed, that's a major problem.

She also keeps implying that having debt is bad - it is not. "A 2021 survey by The Penny Hoarder, for example, found that budgeters are just about as likely as non-budgeters to have any amount of debt." So what is the answer to that survey.

Finally, there are structural reasons that people are under the 'tyranny of credit reports', ie Federal loan legislation. Those regulations need to be weakened ASAP.

"American Dream of homeownership relies on hoarding stolen wealth." is a bit too abstract for me. The American dream of homeownership currently relies on denying others the opportunity to live nearby, whether via renting or owning. That also needs to change via legislation.

The BBB plan by Biden (never mind even worse ones by Republicans) emphasizes financially acceptable forms of travel (ie: car ownership) and crumbs are given to anything else. That also needs to change via legislation. Car ownership is most Americans 2nd largest expense and it's required.

So yeah, Dave Ramsey is a big liar. But he's working under the terms set by the Feds. He didn't make them up.
posted by The_Vegetables at 8:19 AM on June 12, 2022 [7 favorites]


(I'm surprised health care isn't higher. They're probably not including employer contributions?)

Probably not.

Also, speaking as someone with a lower income: the ACA makes a tremendous difference, one that I don't think is always appreciated by people who have a higher income and get less of a subsidy. After the subsidy, I pay about $70 a month for a middling plan. There are copays and deductibles, of course, but I probably paid about $2,000 for that last year - which isn't peanuts, especially for someone in my income bracket, but is probably less than the average people pay to buy/maintain a car.

Without the ACA, I wouldn't have health insurance at all because it would cost at least ten times as much.
posted by Kutsuwamushi at 8:20 AM on June 12, 2022 [42 favorites]


I'm increasingly convinced that one of the biggest things we can do is give more people the option of denser urban housing: cheaper housing per unit, with better access to transit, education, jobs, and services.

I’m not sure any of those are givens in most urban centers in the US.
posted by Thorzdad at 8:21 AM on June 12, 2022 [3 favorites]


My favorites are the look at this poor couple barely getting by on $350K a year articles. When you dig in, those couples are almost always spending 75% of the income on housing and childcare, which ironically is the same problem you find when you look at much less well off people. The difference, of course, is that the rich folks are essentially choosing to be cash flow poor, as they could make different decisions.

Emphasis mine, as this jumped out at me - since there is a very similar sentiment I see expressed right in here when there's a post about high rents in major cities. Someone always, always comes in to say that "pfft, I spend way less than that on rent living in a small town, looks like it's their own damn fault."

This kind of thinking is cousin to the whole "avocado toast" mindset - the assumption that other people are making the spending choices they're making because they're being frivolous or irresponsible. Silly millennials, wasting all their money on something weird like avocado toast instead of choosing something cheaper; they should just have a donut or something. Silly New Yorkers, choosing to live somewhere expensive, they must be trying to be all glamorous, they should grow up. Silly people living in a McMansion they have to spend 75% of their income on, they should live somewhere smaller. The thought that the New Yorker may have moved home to help with a family business, the McMansionites bought it to prepare to take in an aging relative and care for them comfortably, and the avocado toast fan may be deliberately trying to have more vegetables doesn't seem to occur to them.

And this is exactly what the people who REALLY are at fault may want. If we're all focusing on questioning each other's budget choices, we won't notice that "hang on, if Jeff Bezos and Elon Musk actually paid a fairer share of taxes, then NONE of the rest of us would be struggling as much no matter WHAT choices we made." You even say that "When you dig in, those couples are almost always spending 75% of the income on housing and childcare, which ironically is the same problem you find when you look at much less well off people."

Yes. That there is the problem, the fact that anyone is spending 75% of their respective income on childcare and housing. The price tag on said child care and housing was never the point.
posted by EmpressCallipygos at 8:39 AM on June 12, 2022 [48 favorites]


Don't prescriptions for sweeping policy changes work on a longer timeline than most people have when it comes to personal health or financial security?
posted by Selena777 at 8:47 AM on June 12, 2022 [2 favorites]


Someone always, always comes in to say that "pfft, I spend way less than that on rent living in a small town, looks like it's their own damn fault."

But I think you see this a lot within smaller markets as well. I live in a very affordable area, and our home’s value is definitely less than the average home cost here ($110-130k I think). But I see so many people in similar income brackets as us buying way, way, way more house. It’s not entirely apples-to-apples (families with children vs our dogs-only policy), but I do feel like there are a lot of people in that middle income range spending a LOT more on housing that seems logical.
posted by obfuscation at 8:59 AM on June 12, 2022 [1 favorite]


I heard around a week ago either on NPR or the BBC, don’t remember, one of those attention grabbing lead in lines, but never heard the actual piece. The line was “30% of people making $250,000 a year are living paycheck to paycheck.” I don’t know the details, but this seems rather insane. If there is some truth to this statement, then how the hell are these people spending their money?
posted by njohnson23 at 9:02 AM on June 12, 2022 [1 favorite]


Not to mention you have some really bad people who have realized that the only place you can get good rental yields is small towns. They'll come in with city (or worse, private equity) money, buy the place out, then everyone in town is permanently a renter because there's no housing stock. This further drives up the price so even less people are able to make it onto the property ladder and the rental market tightens up raising rents. New housing starts cost more than established stock in small towns so you can't even build your way out of the problem on a development at the edge of town. The city doesn't care because their property tax receipts are going to go up and they've have zero income since the late 80s.

It's a system of really fucked up incentives working against people.
posted by Your Childhood Pet Rock at 9:04 AM on June 12, 2022 [11 favorites]


I do feel like there are a lot of people in that middle income range spending a LOT more on housing that seems logical.

I don’t know how this shakes out in other locations but in California at least, selling off a house that has appreciated wildly is the only safety net many people have for old age. So they buy as much house as they can possibly afford in the hope that by the time they retire or need intensive medical care, the value will have increased enough to cover that.

Which explains a lot of NIMBYism and things like issues with the way that school districts are funded here—everyone is trying to protect their primary investment so that when they need care in a nursing home they have some hope of affording it. The whole phenomenon is catastrophically problematic.
posted by corey flood at 9:15 AM on June 12, 2022 [39 favorites]


There has to be a maximum wage and there has to be maximum wealth.

Perhaps death is some sort of environmental adaptation to capitalism.
posted by NoThisIsPatrick at 9:19 AM on June 12, 2022 [5 favorites]


Someone always, always comes in to say that "pfft, I spend way less than that on rent living in a small town, looks like it's their own damn fault."

Except that, you know, I didn't say that at all. If you make $350K a year anywhere in this county, you have options the lower income folks don't have. If you choose to use those options to move across the country and buy a McMansion to take care of a sick family member, that is great. The poor person is going to stick mom on the couch, because they have sick family members too, but they don't have the option to buy a 4000 square foot home with a mother-in-law suite in the suburbs.

Elon Musk doesn't make anybody buy a $3 million dollar condo in SF, and those folks are never going to send their kids to public school anyway, so the idea that a fairer tax system resulting in well funded schools and free daycare for all would change that calculation is simply false. Those folks would still choose to spend $3500/mo on preschool even if perfectly good free or affordable options were available.

Actually, the idea that a fairer tax system would get us funded schools is probably a pipe dream. More tax dollars would likely get us more fighter jets and aircraft carriers.
posted by COD at 9:19 AM on June 12, 2022 [6 favorites]


I'm a personal finance writer. I got my start writing about money in 2006 thanks largely to the support of MeFi and MeFi Projects. I come from a poor but entrepreneurial family. I've been reading and writing about money for nearly twenty years now. I've consumed mountains of money media in that time. I think this article sucks.

It sucks because it presents strawman arguments and cherry-picks "stats" and doesn't accurately reflect the nuanced view that personal-finance writers take of money management. The author makes all sorts of claims that just aren't true. (She says, for instance, that prior to Dave Ramsey that money advice was largely for the rich. What? Of course it wasn't. There is a long, rich history of money advice for everyday people.)

I have never ever read a single article that says, "You can solve all of your problems by simply cutting costs." No. That's not how money works, and money writers know that. Financial success comes from the gap between your income and expenses (and what you subsequently do with that gap, if it's positive). The two levers you have at your disposal are: increase income, decrease expenses. There are no other levers. (Well, I lie. Again, once you have a surplus, a third lever is the financial return you earn on your surplus.)

"Budget culture" is a made-up bad guy here. It comes from willfully (or ignorantly?) focusing only on one half of the budget equation: spending. I've never seen any financial advice that would urge somebody with a low income to cut expenses even more. That's because all financial writers understand that in this case, it's the income lever that needs to be moved.

This article is simply financial alarmism. And it's part of a growing group of pieces that try to convince readers that they have no ability to control their destiny. I don't like it. Sure, there are larger systemic issues that ought to be addressed. I get that. Let's address them. Regardless, it is up to each person to make the most of her individual situation, to do the best she can to improve her lot with whatever resources she has at hand. Articles like this attempt to strip that agency and control from the reader. That's bullshit.

This article sucks.

Other random thoughts:
  • Yes, on average, housing is the largest expense for American families. According to the U.S. Bureau of Labor Statistic's annual Consumer Expenditure Survey, the typical household spends roughly 33% of its budget on housing. About 17% goes to transportation, 13% to food, and 7% to health care. Obviously, there are national averages, and there's plenty of variation at different income levels.
  • Budgeting doesn't have to be onerous. Perhaps my favorite budget comes from Elizabeth Warren (yes, that Elizabeth Warren) and her book, All Your Worth. Warren advocates what she calls the Balanced Money Formula, which is simply a Big Picture budget: spend no more 50% on Needs, set aside a minimum of 20% for Savings (which includes debt reduction), and allow yourself to spend the remaining ~30% on Wants. No need to do detailed work. And Warren understands that many folks won't be able to adhere to these numbers when they begin working toward financial freedom. They're targets.
  • Yes, there are plenty of people with high incomes who live paycheck to paycheck. My brothers are two of them. In their case, I think it's because we come from a poor family and our parents, who lived paycheck to paycheck on very little income, couldn't set a better example or teach us better skills. So, my brothers continue doing what Mom and Dad did but with more money. It's these kind of folks for whom the "spend less" budgeting advice is intended. If you have a high income and can't make ends meet, you don't need to move the income lever — you need to move the spending lever.
Bottom line: This article sucks. Its "facts" aren't factual and its advice isn't helpful. Yet, it's the kind of thing that gets people riled up and prompts them to share it on Reddit and Twitter and Metafilter. But it has little value outside its virality.
posted by jdroth at 9:23 AM on June 12, 2022 [68 favorites]


Financial success comes from the gap between your income and expenses (and what you subsequently do with that gap, if it's positive). The two levers you have at your disposal are: increase income, decrease expenses. There are no other levers.
I mean, there is another lever, which is political: we can use the political process to address a whole set of policy decisions that have been made in the past fifty years to tilt the economy away from the interests of ordinary people (or, to be more accurate, ordinary white people) and towards the interests of the people at the top. Those decisions explain a lot of why many people are struggling, and no amount of budgeting is going to solve their problems until we address those underlying issues.

I don't have time to delve into your link, jdroth, but I would be really curious to see how that breaks down according to age group and especially to see the percentages of income that younger households spend on childcare and educational debt.
posted by ArbitraryAndCapricious at 9:34 AM on June 12, 2022 [18 favorites]


If you make $350K a year anywhere in this county, you have options the lower income folks don't have.

It's worth pointing out that an annual income of $350,000 in Manhattan, NY is not at all the same thing as an annual income of $350,000 in Manhattan, KS.
posted by slkinsey at 9:34 AM on June 12, 2022 [5 favorites]


"A 2021 survey by The Penny Hoarder, for example, found that budgeters are just about as likely as non-budgeters to have any amount of debt." So what is the answer to that survey.

Yes, but there's a difference between having a mortgage (which I'd conjecture that people who've created a budget are more likely to have and high interest credit card debt. Or a college loan, which it's increasingly hard to get out of school without, and an 8% interest loan on an $80K status symbol pickup truck. I also technically have credit card debt according to my credit report because at any given time I have some spending on them but they're all paid off monthly so it never costs me anything.
posted by Candleman at 9:37 AM on June 12, 2022 [3 favorites]


I've never seen any financial advice that would urge somebody with a low income to cut expenses even more.

With respect, I feel like I see that all the time -- e.g., "stop buying lattes every day" -- along with the judgy comments people make about poorer people prioritizing nice phones or cable TV rather than prioritizing deferred gratification, or eating food that is nicer than rice and beans.

I have lots of issues with the article, but I agree with what I saw as the underlying point that unless you have an income that is adequate to cover your actual needs, the focus on budgeting and "personal responsibility" isn't going to change your underlying situation. (Which doesn't mean that focusing on budgeting won't help, just that it doesn't change the parameters someone is working under.)

The line was “30% of people making $250,000 a year are living paycheck to paycheck.” I don’t know the details, but this seems rather insane. If there is some truth to this statement, then how the hell are these people spending their money?

Law school or med school-level student loans, big house payment(s), private school tuition for the kids, vacations... People in that income category can burn through a lot of money without any actually absurd indulgences.

But I see so many people in similar income brackets as us buying way, way, way more house. It’s not entirely apples-to-apples (families with children vs our dogs-only policy), but I do feel like there are a lot of people in that middle income range spending a LOT more on housing that seems logical.

Agreed, but another piece in that mix which is quite common but usually invisible is how many of those people received family help with buying that big place. An interest-free loan (or a "loan" that everyone knows is going to be forgiven) from someone's parents makes a huge difference in what they are actually paying, but since no one talks about it, usually you don't know unless you know that person really well.
posted by Dip Flash at 9:41 AM on June 12, 2022 [10 favorites]


Isn't the latte a cultural symbol of the middle/upper middle-class and not the low income?
posted by Selena777 at 9:45 AM on June 12, 2022 [1 favorite]


Isn't the latte a cultural symbol of the middle/upper middle-class and not the low income?
20 years ago it probably was, but I think the meaning of the latte has changed, now that there's a Starbucks in every strip mall. It's a cultural symbol of the aspirational lower-middle class, who are supposedly spending money on frivolous luxuries to ape their betters, instead of drinking Folgers and making packed lunches, as befits their station.
posted by ArbitraryAndCapricious at 9:50 AM on June 12, 2022 [24 favorites]


it's the income lever that needs to be moved

this is one of the central premises of the article

It's worth pointing out that an annual income of $350,000 in Manhattan, NY is not at all the same thing as an annual income of $350,000 in Manhattan, KS.

everyone knows that, but $350k in manhattan is still enough to cover the average rent with $300k left over for other costs. some people making $350k in manhattan like to pretend that it's the same as making $35k in flyover country, but it's really not so

median income in manhattan, btw, is only $52k
posted by Kutsuwamushi at 9:51 AM on June 12, 2022 [32 favorites]


Of course, there’s always plenty we don’t know about others’ lives, financial and otherwise.
posted by obfuscation at 9:56 AM on June 12, 2022 [1 favorite]


I do feel like there are a lot of people in that middle income range spending a LOT more on housing that seems logical.

Often, though, that logic is not in their control. It’s the purview of the landlords and the housing market in general. If you need to live within a reasonable commute to your job in city-X, you’re pretty much at the mercy of the boffins at the helm of the housing/rental market.
posted by Thorzdad at 10:06 AM on June 12, 2022 [7 favorites]


I don't see a ton new in this article--most of these points were made at least as far back as Helaine Olen's Pound Foolish. But the comparison to diet culture is interesting. There's a sort of interesting analogy in that systematic issues will often prevent people from attaining their personal goals, and then shame them for it, and yet lack of knowledge of the mechanics can hamper people from improving their situation to the degree it can be (and they want to) improve it.

JD, you and most other personal finance writers of your ilk write absolutely from the assumption that the existing system is right and just and maybe even natural and inevitable (at least for "free people") and the job of the individual is to fit themselves as best they can into it. This can be useful practically. It's better to understand the difference between a Roth and a traditional IRA than not to. It's better to understand what credit card can give you the best and most useful rewards or benefits than not to. It's definitely better to know what a low-cost index fund is than not to (this alone cost my mom thousands and thousands of dollars she could definitely use right now). But in the end, for most people, you're tinkering at the margins. Tinkering at the margins is helpful if your margins are thin. Still, you're not going to budget yourself to financial independence unless the income is already there and you get a good dose of luck.

The line was “30% of people making $250,000 a year are living paycheck to paycheck.” I don’t know the details, but this seems rather insane. If there is some truth to this statement, then how the hell are these people spending their money?

I doubt it's accurate, but I imagine most of the people for whom this is actually true are starting with maximum contributions to various savings vehicles that deduct before the paycheck hits the account. Two people can contribute a total of $41,000 a year to a 401(k) and another $3700 a year to FSAs (think it's a larger amount if you go the HSA route but am too lazy to check). Of course, this is completely different from "living paycheck to paycheck" as most people would understand it.
posted by praemunire at 10:09 AM on June 12, 2022 [7 favorites]


JD, you and most other personal finance writers of your ilk write absolutely from the assumption that the existing system is right and just and maybe even natural and inevitable (at least for "free people") and the job of the individual is to fit themselves as best they can into it.

While I agree that many people write from the assumption that the system is right and just, I'm not one of them. I know that it's not. I don't know what a right and just system actually looks like (and I'm not convinced that anyone else knows either), but I definitely see that there are plenty of problems with the system we have. I 100% support folks who want to fix things.

My position is: The system is what it is. I don't think it's natural. I don't think it's inevitable. I don't think it's right. I don't think it's just. But it is the system we have. And while we have it, I will do my best to help individuals better their circumstances from within the system. Some of my colleagues (see Tanja Hester at Our Next Life, for instance) are more focused on changing the system. I applaud their efforts. That's necessary work. But for me, for now, I say: "This is the system we have; here's how you can make the most of what you have within that system."

I don't spend a lot of time in the Blue, but over in AskMe I sometimes point out the difference between locus of concern and locus of control. Articles like this lead people to focus on things that are in their circle of concern but outside of their circle of control. That is, these pieces get people agitated about things they cannot change (or cannot change without a lot of time, effort, and help). I would rather see people turn their efforts to those things within their circle of concern, those actions and habits they can directly effect.
posted by jdroth at 10:23 AM on June 12, 2022 [39 favorites]


Law school or med school-level student loans, big house payment(s), private school tuition for the kids, vacations... People in that income category can burn through a lot of money without any actually absurd indulgences.

I'm gonna keep on thinking that people who buy houses in the 90th percentile for their area don't get to whine about not having money when they could have bought the median house instead.

I'm gonna keep on thinking that people sending their kids to private school don't get to complain about not having money when they could have sent their kids to public school at zero marginal cost.

I'm gonna keep on thinking that people taking very expensive vacations don't get to whine about not having money when they could have driven around national parks.

People like that are not in any reasonable way struggling.
posted by GCU Sweet and Full of Grace at 10:24 AM on June 12, 2022 [29 favorites]


No one is saying six figure earners living paycheck to paycheck are struggling or worthy of pity. It is an observation about human nature that educated PMC people of high incomes can still find it hard to save, and tends to support the idea that savings is extremely hard for people of average and low income.

The idea that political agitation is an alternative to personal financial prudence is insane. Actual successful progressives don’t conduct their lives that way, although prominent ones may not advertise it. There’s no socialist revolution coming. Any remotely plausible tax increases are spoken for by the looming insolvency of public pensions, aging of baby boomers into their 70s and 80s and what that will cost Medicare, infrastructue replacement, and making up for the flight of income and assets to lower tax jurisdictions.
posted by MattD at 12:12 PM on June 12, 2022 [5 favorites]


What advice does the author actually have for a struggling person trying to improve their financial position other than to give up on whatever money saving/earning tactics they are trying and instead concentrate on how oppressed they are in the incredibly futile hope that society will somehow someday realise the error of its ways?

Meanwhile, she herself is making upwards of $100K a year and admits at the end of the article she was able to improve her financial situation by following the exact "budget culture" advice she denigrates here: making more money, saving, paying bills on time, improving her credit score.

That's kinda effed up and it scares me that this person is a "financial educator".
posted by Jess the Mess at 12:44 PM on June 12, 2022 [10 favorites]


I have never ever read a single article that says, "You can solve all of your problems by simply cutting costs."

I have read so many articles that say this. Maybe not from people who you’d consider to be personal finance writers, but on popular newspapers and blogs of all kinds.
posted by adrianhon at 12:51 PM on June 12, 2022 [9 favorites]


She points out that the only reason she could do those last three (saving, paying bills on time, improving her credit score) was the higher income.
posted by soelo at 12:53 PM on June 12, 2022 [5 favorites]


She points out that the only reason she could do those last three (saving, paying bills on time, improving her credit score) was the higher income.

Yep. Major difference between praemunire-of-the-600s-credit score and praemunire-of-the-800+ credit score? Substantial increase in income (not from some "side hustle," from switching professions from an underpaid to first an overpaid and now an okay-paid one). I still overrun my budget a bit, but it no longer puts me in a dire position.
posted by praemunire at 1:02 PM on June 12, 2022 [4 favorites]


There’s no socialist revolution coming. Any remotely plausible tax increases are spoken for by the looming insolvency of public pensions, aging of baby boomers into their 70s and 80s and what that will cost Medicare, infrastructue replacement, and making up for the flight of income and assets to lower tax jurisdictions.

I guess those of us who aren't boomers should just...lie down and die, then?

Every change is impossible until it happens.
posted by praemunire at 1:03 PM on June 12, 2022 [13 favorites]


I tend to disregard most "money management" articles as being religious tracts for Midwestern coupon-clippers. People who have no financial worries, live in outer-ring suburbs, probably have gotten a great deal of unacknowledged government subsidy at various points in their life, but they'll present a 50-cent-off coupon for the buffet as a marker of personal virtue. Look how much better they are than those other people who don't know how to "manage their money"! I'm going to heaven, they can go to hell.

The whole artificial drama that goes on between money writers and their readers has to do with writers on the grift, and readers who read the articles for personal validation. Little to none of it has anything to do with real-life personal finances. It's empty value signaling, and it doesn't have any actual importance to people outside of that holier-than-thou writer-reader relationship.
posted by gimonca at 1:10 PM on June 12, 2022 [9 favorites]


It is possible that there are some money writers on the grift, but I don’t believe the person who wrote the fucking article is on the grift nor that jdroth is on the grift. Like, do you have some kind of citation for that or have you decided that everyone who ever writes about finances are full of shit? Which you totally get to believe, of course. I am grateful to whomever wrote the articles I read back after I was lucky enough to buy and own a house briefly in California. There are a lot of fucked up things about tax deductions for home owners for sure. And I benefited from some of them because I read articles explaining that I should keep the receipts for home improvements which I could use as a deductions when I sold my home. My husband at the time was not enthusiastic about keeping those receipts but perked up when it came time to sell.

Anyway, there are absolutely some writers (bakers, nurses, engineers, ministers, politicians) on the grift. But why pick out writers who specialize in finances? I don’t get it. I posted this because I thought the idea of budget culture was interesting as well as the observation that basically financial writing is not for poor people because they can’t take advantage of the information.
posted by Bella Donna at 1:32 PM on June 12, 2022 [13 favorites]


Sorry, I was referring more to the targets of the article (Dave Ramsey, etc.), than the author of the article itself.
posted by gimonca at 1:42 PM on June 12, 2022 [1 favorite]


The problem here is the classic debate breakdown of people arguing about how the world should be and how to live in the world as it currently is. They're two different things with two different answers!
posted by srboisvert at 1:46 PM on June 12, 2022 [19 favorites]


@Bella Donna, the idea of budget culture is interesting. It's a new way to consider the ages old comparison between physical and financial fitness, but presents it in a new light. And I think that to some degree that "budget culture" exists. I would love to see a different author explore it, somebody with a better sense of the history of personal finance and a better grasp of statistics and facts, somebody willing to provide citations to back up their claims.
posted by jdroth at 2:00 PM on June 12, 2022 [2 favorites]


I can't say I've read anything that explores the history of personal finance in real depth, but I do want to toss a book into the discussion: The Next Millionaire Next Door, by Fallaw and Stanley. I went in expecting an update to The Millionaire Next Door, and it's somewhere between that and theme-and-variation. What might interest folks more is Fallaw's citations.

I don't own a copy of the book, nor do I have links to specific papers cited, but she went to some lengths to cite various peer-reviewed scholarship on behavioral finance, common traits among "prodigious accumulators of wealth," and so on. The common gripes about personal finance on the blue may or may not resonate with you personally, but it sure resonated with me that X high percentage of people who don't live paycheck to paycheck take actions Q, F, and P. The conclusions did not vary too widely from the general sort of advice you can get on r/personalfinance... and that was itself interesting to me. Where there's smoke, there's fire sort of thing.

As to jdroth's comments on the article, I tend to agree. (I've read your stuff occasionally and liked it, yet somehow I did not know you were a MeFite!) I thought the guest substack author's perspective was an interesting read, given her background in personal finance writing, but it seemed kind of of a piece with a lot of the anti-personal-finance writing out there.
posted by cupcakeninja at 2:46 PM on June 12, 2022 [4 favorites]


~I have never ever read a single article that says, "You can solve all of your problems by simply cutting costs."

~I have read so many articles that say this. Maybe not from people who you’d consider to be personal finance writers, but on popular newspapers and blogs of all kinds.


There’s a woman who comes on NPR fairly regularly (and I cannot for the life of me remember her name) and I want to throw my radio out the window every time she starts in on her finance suggestions. It’s blatantly obvious her counseling could only work for mid-six-figure earners, but she paints it all as if anyone making 40K could easily follow her advice. And, yeah, if the host happens to actually ask her about low-mid-income earners, she often falls right into the “cut out the lattes” bullshit. It’s so anger-making.
posted by Thorzdad at 2:48 PM on June 12, 2022 [3 favorites]


Thorzdad, are you thinking of Michelle Singletary? "The Color of Money" columnist for the Washington Post? Because she came from a background of poverty, and she has noted many times in her writings that her messages on savings and investments are to help others who, like her when she was younger, never was given any information about that.
posted by apartment dweller at 3:01 PM on June 12, 2022 [1 favorite]


So the article posits that 'budget culture is like diet culture'; only a tool of The Oppressor.
I'd like to counter with two ideas about what a budget culture could be.

On a very shallow level, beginning a budget is like beginning a diet. You start a food diary and find out "I'm getting how many calories from X?! I hadn't realized". You start a detailed inventory of all your income and outgo and find out "I'm spending how much on Y?!".
Budget/diet/inventory is not going to get you out of poverty or lose 40 pounds or otherwise achieve your goals. But you're unlikely to do so without it. The phrase is 'Necessary, but not Sufficient'.

The second thing is that maybe budget culture can be thought of like checklist culture.
There is a checklist culture in surgery. Before you open someone up, you count the sponges: before you close them up, you count the sponges again. Every time. An airplane cockpit with all its buttons and dials and pre-flight procedures is a checklist culture. If you toss away the clipboard with the checklist, saying 'Aaah, I don't need any of this, I know how to fly one of these babies just on instinct', then you're doing it wrong, you're being irresponsible.

Checklist culture doesn't magically make everything go right. But it keeps things from going horribly wrong, from making complacent or ignorant mistakes. 'I think we started with two scalpels - or was it three' or 'wait, the landing gear doesn't lower automatically on this model year plane?'.

This isn't to say that people won't peddle unhealthy unrealistic fad budget plans, the same way they peddle unhealthy unrealistic fad diet plans.
But if you say 'Please help, I'm not making progress' and the advisor asks 'well what are you doing now?' and your answer is 'I don't even know!'.
Well, that's your first problem.
It's not the solution to all your problems, though, regardless of what the paperback bestseller 'guru' is peddling.
posted by bartleby at 3:22 PM on June 12, 2022 [10 favorites]


I'm gonna keep on thinking that people sending their kids to private school don't get to complain about not having money when they could have sent their kids to public school at zero marginal cost.

That's an issue I've struggled with personally.

As the son of two highly committed State education system teachers, and having therefore grown up keenly aware of the unfair way Australian governments have long underfunded public schools while overfunding private ones, I felt like a complete class traitor for choosing to send little ms flabdablet to a fee-paying private school 90km from our town instead of the State high school 25km away. The bus commute was a bit of a shock to the system after spending seven years at the State primary school that's literally across the street from our house.

But the thing about being a parent is that loyalty to the kids comes before loyalty to anybody else. Our choice of schools was based squarely on what we knew about the experiences of people who had attended the schools that are options where we live - some as students, some as staff and some as both. And the school we picked was the one that seemed to us to have by far the lowest chance of causing serious long term damage to our complex-needs child and the highest chance of setting her up for a future no harder than it needs to be.

If you have access to a school that strongly encourages curiosity, helps kids work to their strengths, effectively shuts down bullying, and features a student culture where academic achievement is to be celebrated and supported rather than avoided or hidden for fear of reprisals, then send your kids there because schools like that deserve all the support they can get regardless of their funding model. Unfortunately, our local State high school has always had a dominant streak of crabs-in-a-bucket anti-intellectualism among the student body and having seen the effects of that on the two older kids I was unwilling to subject little ms flabdablet to it as well.

She's now in Year 12, and she's switched to a closer school for that final year after having had enough of certain aspects of the culture at Grammar - and fair enough too; the place positively oozes underexamined white privilege. However, since moving schools she's finding that the new one does only marginally better at addressing some of the issues that are important to her while being worse at most of the others. She's also finding that the study and work-completion skills and standards that Grammar expected of all its students and helped her build in herself are simply not in evidence among her current peers to an extent that's surprised and dismayed her.

As it happens, she'd qualified for a scholarship at Grammar so in fact our spending on the first five years of her high school education was way lower than I'd budgeted for. We've had a really lucky ride and I am in no way complaining about the amount we've ended up spending. But there are countless parents who find themselves in the position of needing to choose between a fee-paying school that they have reason to believe will do right by their kids and a no-fees school that won't, and therefore end up spending more than they can afford on school fees, and I can't begrudge them their completely justifiable complaints about struggling financially as a result.

The structural fix obviously involves governments collecting enough taxes to fund public education properly. But as jdroth says, the system we're all making decisions within right now is the system we have right now. People who put a high value on education are going to do whatever it takes to get their kids a good one. Sadly there are far too many places where right now the local public schools are too overstretched to offer them that and kids in those places don't have the time it will take for that to improve.
posted by flabdablet at 4:06 PM on June 12, 2022 [3 favorites]


I followed good advice from Your Money or Your Life and The Millionaire Next Door and they helped me buy a house at 2.4x our very early careers household income in 1995. The same house (ish; the lot was severed and became two houses) sold about a month ago for 7.5x my husband’s and my much greater (like, much more senior) combined income. (Toronto area but very un-fancy.)

That’s hard to account for in a budget. I mean yes, that’s the reality, that you have to. But still.
posted by warriorqueen at 5:17 PM on June 12, 2022 [6 favorites]


Has anyone been to Starbucks lately? Lattes are $5 a pop now. Cutting back on those might be decent advice now.

I’m an avid user of YNAB, but it just ends up being an end-of-the-month “Where did the money go” tool instead of a rigid budget planner. But the one thing I absolutely give it credit for is tracking savings for irregular expenses like property taxes and vehicle registration so that you decouple your checking account balance from what you actually have available to spend.
posted by hwyengr at 6:17 PM on June 12, 2022 [1 favorite]


Has anyone been to Starbucks lately? Lattes are $5 a pop now. Cutting back on those might be decent advice now.

Sure, $5/day is $150/mo but at that rate it would take 138 years to match inheriting $250,000 from a relative.

Like I'm sure people mean well but the deck is well and truly fucking stacked against those without generational wealth.
posted by Your Childhood Pet Rock at 9:28 PM on June 12, 2022 [28 favorites]


I’m surprised our budget culture is still using examples like “latte” and “avocado toast”, which are at least 20 years old now. We at least need an update to the examples like, “Stop simping in OnlyFans and just jerk off manually!
posted by FJT at 10:55 PM on June 12, 2022 [10 favorites]


Has anyone been to Starbucks lately? Lattes are $5 a pop now. Cutting back on those might be decent advice now.

Right, but OFFERING that advice assumes that the person in need of financial help hasn't ALREADY done that.

Lemme put it this way - it's safe to say, on balance, that most of us here are a bit above average when it comes to tech savviness, yeah? So imagine that frustration you feel when you've tried trouble-shooting a computer issue and then you call a tech support help line, and they doggedly insist on going through their basic level script before getting to the real help ("have you tried turning it off and on again? have you checked that it is plugged in?.....").

Ten years ago I was financially struggling. Now I am not. The reason why is not because I cut out having Starbucks' lattes because I never did have anything at Starbucks; the reason why is entirely because I am making about $20K more now than I did ten years ago.
posted by EmpressCallipygos at 3:56 AM on June 13, 2022 [22 favorites]


I loathe coffee and have never had a latte in my life, and yet am still being crushed by student debt and that my income has not kept pace with rising costs.

It's bad enough feeling lonely and left out of various things because I don't have a partner, without being punished for it financially.
posted by bile and syntax at 7:45 AM on June 13, 2022 [9 favorites]


I took a giant pay cut (working out to ~70%) to move into some passion work at the start of 2021. I had a decent though not high salary for the area and did not realize how acutely I would feel the difference.

Materially I'm in mostly the same shape, but am subsidizing the slide with a credit card to the tune of $1000/month or so. My credit has started to take the hit from that balance. Couldn't afford the repairs on my car so now I don't have one. No healthcare, as my wife's income is high enough to keep us mostly afloat but also keep us out of most of the ACA subsidy, to the point that we can't afford the monthly premium (high col city). More importantly the effect is felt as the stress from lack of cushion or backup. Get sick? Fucked. Slip and have a finger torn up? Fucked. The fact that a nonzero portion of America has felt this way their whole lives is not lost on me.

I've read most of the books listed here and when I had a higher income, was considered pretty good with money. Anyone looking in now would probably disagree.

So it's tough. I know the advice is to go increase income, and I guess that's the backstop I have - even as we slide into a recession I make so little that most any job would be an increase over current income.

Nobody really gives you advice on how little air can be left in your lungs before you're *really* drowning. At what point you stop trying to dig up the sunken treasure chest and head back to the surface.

I recognize the privilege in that, but still.

The article felt cathartic, but as others pointed out, didn't really touch on how to use the variable amounts of agency we do have.
posted by jellywerker at 8:06 AM on June 13, 2022 [8 favorites]


Right, but OFFERING that advice assumes that the person in need of financial help hasn't ALREADY done that.

Or that it makes a meaningful difference. It might, it might not.

If you have a latte once a week, that's $20 a month, up from $16 a month when lattes were only $4. You might be in a situation where using that elsewhere really matters, like putting gas in your car. But if your problem is finding another $1,000 a month to cover childcare, someone telling you that maybe you should cut back on lattes isn't just being unhelpful; they're engaging in the same misguided financial shaming that the article is talking about, that people are talking about in this thread. I'm surprised it was even said seriously here.
posted by Kutsuwamushi at 8:26 AM on June 13, 2022 [16 favorites]


I do feel like there are a lot of people in that middle income range spending a LOT more on housing that seems logical.
That's probably because the federal supports for housing far exceed the supports for any other investment class. The various levels of government support high housing prices (and if you have the means to do so) high rental prices from the perspective of the landlord, and most people have far more invested in their home than in the stock market. So spending less is illogical [until you get into the $3m range or so - that's driven by market demand again]!


If you are the lessee with a bad credit rating, well sorry but the fact that you can pay $2k a month for rent doesn't mean that you could pay $1900 a month for a mortgage in the eyes of the Feds, so too bad for you.
posted by The_Vegetables at 9:04 AM on June 13, 2022 [3 favorites]


I mean everything is dependent on an individual's, well individual, situation. If you only have one latte a month and you need an extra $1000 a month, doing that alone won't help much. But taking that advice might make a bigger dent for someone who has a latte every day. Or someone who buys lunch every work day at $15 a pop. Or someone who takes that advice and is able to find other unnecessary expenditures to cut down on.

And "stop buying lattes" is not literally the only piece of personal finance advice that is ever given out. You take what you can use and leave the rest.
posted by Jess the Mess at 9:14 AM on June 13, 2022 [1 favorite]


Can a regular person with a bad credit rating pay 2k a month for rent without the assistance of a 2nd or 3rd party that may not make it onto a mortgage application tying them to that person property and payment for 10-30 years?
posted by Selena777 at 9:16 AM on June 13, 2022


And "stop buying lattes" is not literally the only piece of personal finance advice that is ever given out. You take what you can use and leave the rest.

And if the rest is similar?

I mean everything is dependent on an individual's, well individual, situation.

This is literally what we're saying. We're just going on to add the bit that the "budget culture" falls short of what many of these individuals actually need.
posted by EmpressCallipygos at 9:29 AM on June 13, 2022 [3 favorites]


Sure, $5/day is $150/mo but at that rate it would take 138 years to match inheriting $250,000 from a relative

41.5 years when invested at 5%. So at least it's back to a working career span in which you could theoretically save that much money.
posted by hwyengr at 10:52 AM on June 13, 2022 [1 favorite]


And if the rest is similar? I mean I guess it's similar in the sense that personal finance can be boiled down to spend less/earn more/invest, but there are myriad ways to do that, all of which someone somewhere has probably written about.

I've said it before, but I really think personal finance is a subject Metafilter is quick to feel personally victimized by without really knowing what it's talking about.
posted by Jess the Mess at 10:58 AM on June 13, 2022 [3 favorites]


I mean I guess it's similar in the sense that personal finance can be boiled down to spend less/earn more/invest, but there are myriad ways to do that, all of which someone somewhere has probably written about.

And this post is literally about how most of the people who write about it focus on the "spend less" side of things, and make assumptions/judgements about the spending in the process.

And believe me, I read a ton of financial and personal finance books when I was struggling, looking for some advice that wasn't yet another round of "cut back on fancy coffees" or "eat in instead of ordering takeout" or suchlike because I already HAD done all of that. It wasn't until I started working with a free financial counselor as part of an NYC program that I was getting real and actionable advice from someone who went above and beyond the books. Yes, she did say things about investing in my IRA, and advised me to "make sure you're getting a good interest rate", but she was the first person who went on to say "and the definition of 'a good interest rate' is anything over x percent". She told me about some ways to build credit that the books never mentioned (like credit builder accounts), alerted me to ways that banks were taking advantage of me, and - basically, acknowledging that the problem was not entirely of my own making.

I've said it before, but I really think personal finance is a subject Metafilter is quick to feel personally victimized by without really knowing what it's talking about.

Well, when the people who are claiming that they know what they're talking about are telling us it's our fault because we spend too much on things they call frivolous, can you blame us?
posted by EmpressCallipygos at 11:12 AM on June 13, 2022 [8 favorites]


41.5 years when invested at 5%. So at least it's back to a working career span in which you could theoretically save that much money.

I mean, if time value of money weren't a thing. Which is very much is.
posted by praemunire at 11:19 AM on June 13, 2022 [2 favorites]


41.5 years when invested at 5%.

Invested at 5% it will never match the $250,000 inheritance, because that's also invested at 5% and from the outset earns more than the $150/month the latte-saver is putting away.
posted by GCU Sweet and Full of Grace at 2:04 PM on June 13, 2022 [11 favorites]


> It's a system of really fucked up incentives working against people.

Capitalism.

Before you tut-tut me for being so reductive and say that capitalism isn't necessarily the problem: I'm an elder millennial. I was a toddler when Reagan was president. I saw my parents "downsized" repeatedly. I grew up thinking Clinton was a liberal hero while he dismantled the welfare state, as if that bit of "bipartisanship" would keep the Republicans from impeaching him and stealing the next election, leading to the forever war and the first of two once-in-a-lifetime recessions. Next we got Mitt Romney's version of universal healthcare and are genuinely happy to have even that, just in time for mask-off fascists.

I'm almost 40. If there's a different kind of capitalism, I've never seen it.
posted by AlSweigart at 2:59 PM on June 13, 2022 [10 favorites]


Invested at 5% it will never match the $250,000 inheritance, because that's also invested at 5% and from the outset earns more than the $150/month the latte-saver is putting away.

According to the online calculator I just checked, $250k at 5% would grow to around $1.8 million after 41 years. That covers a lot of lattes.
posted by Dip Flash at 4:40 PM on June 13, 2022 [2 favorites]


But there are countless parents who find themselves in the position of needing to choose between a fee-paying school that they have reason to believe will do right by their kids and a no-fees school that won't, and therefore end up spending more than they can afford on school fees, ... there are far too many places where right now the local public schools are too overstretched to offer them that and kids in those places don't have the time it will take for that to improve.

I was one of those parents for many, many years and made enormous sacrifices to keep my kids out of public high schools, because I knew they would have the best chance of 'success' (not just financial) by having access to the resources of a private school - resources that every single school child should have, but most don't. I never complained about it outside my own head, because I know it was entirely my choice that put me there and I don't regret that choice at all.

But I'm acutely aware of my own privilege in being able to make that choice at all, when most parents don't even have the capacity to think about doing so. The reality is that the system is deliberately and forcefully stacked against the have-nots, because the idea that you can just pull your socks up and stop swilling lattes is absolute bullshit for most people. I've been there and had to eke out every single cent just to survive on cheap accommodation, cheap food, a broken down car that hardly got used etc. For so many people, there is just NO wiggle room in their budget so the idea of any form of savings is laughable. The life-changing advice to turn your life around by not swilling lattes and avocado are not the ONLY advice out there, for sure. But the overwhelming majority of the advice is fundamentally the same (or feels like it) - 'stop spoiling yourself, knuckle down and save your way out of the financial doldrums like I did when I invested my inheritance for the best return'.
posted by dg at 5:30 PM on June 13, 2022 [5 favorites]


Some of the best writing on budgeting and being poor that I have read is Jack Monroe, and her "Cooking on a Bootstrap" blog.

One of her comments
"I have said time and again that it takes ten minutes to drop fifty quid on a mindless basket of goods in the supermarket; it takes two hours to walk around it with a calculator, a notebook, a pen, and a handful of change."

I view budgeting as another of the poverty taxes we impose. And if you live in a region which is full of Dollar Shops and no farmers' market - welcome to whole bunch more poverty taxes.
posted by Barbara Spitzer at 5:51 PM on June 13, 2022 [11 favorites]


And, yes I am cash short at the moment - three of my preferred shares all dipped in price so I just topped up the portfolio with three small purchases. Which is another poverty tax - people have opportunities to buy good assets that can generate good income, but they don't have the cash or credit to be able to make the purchase, so it goes to someone who does.
posted by Barbara Spitzer at 6:59 PM on June 13, 2022


Generally I hold that there is no faster way to lose the plot than trying to figure out how other people spend all their money (or why).

There are plenty of great financial writers who offer solid advice and, I believe, are acting in good faith. But the “if you enjoy this latte today, non-rich person, without you having paid off all your debt and fully funded your retirement, well you’ll only have yourself to blame for your future bakruptcy and homlessness” has always felt like “you must prove that you deserve any pleasure” puritanism and punching down. I mean, life is fucking miserable enough most of the time.
posted by thivaia at 4:00 AM on June 14, 2022 [8 favorites]


I was a toddler when Reagan was president.

I was a teen by then, and therefore in a position to see the difference between how capitalism worked both before and after a pack of wilfully blind laissez-faire neoliberal ideologues put themselves in charge and tore all the regulators off while also breaking the back of the union movement.

Capitalism can be mostly benign, but only if genuinely representative governments, rather than ultra-wealthy industrialists and financiers, are the ones actually making and enforcing the decisions about where the limits to its depravity need to be. It also needs a strong and activist labor union movement to keep it in its place.

What we've seen operating all around the world for the last forty years is capitalism gone utterly feral. That needs to be stopped because it's just not going to stop on its own.

Essential services need to be re-nationalized and regulators with teeth need to be restored. Given the US's still-dominant economic position and the complete shambles that Cheeto Mussolini made of the US judicial system, it's going to take at least a generation for that to happen so I suggest that the best thing for ordinary people to be getting on with in the meantime is building organized labor back up to full strength.
posted by flabdablet at 6:56 AM on June 14, 2022 [9 favorites]


It's just money, money fixes the problems but we don't have money to fix problems because Musk, Bezos, et al have (through means legal and illicit) hoarded the stuff.
The problem is that, generally speaking it doesn't - or rather it can't fix them on a society-wide basis. Sure, if you or any one specific individual had more money you'd be better off. You could take that money and spend it on any number of things that would improve your life. The problem is that you'd effectively be doing that by outbidding the people with less money for those things, especially now in 2022 when everything from energy to labour to factory capacity to investment opportunities that let you use money to make more money are in short supply everywhere. (In the case of investment opportunities, this means that the paper worth of a whole bunch of wealthy people went up, because the way making money from money becomes harder is that the price of getting those investments goes up and the on-paper value of the ones already held by people goes up with it.) If everyone has more money, then this doesn't work and in effect no-one has more money.

Of course, if you're just taking money from Bezos and Musk and giving it to ordinary people, that seems like it'd avoid this problem - except it wouldn't other than maybe for investments (and that'd likely come with the side effect of wiping out anyone who'd already bought in, including everyone with a pension plan). People like Musk and Bezos only make up a tiny share of the demand for non-investment stuff like energy and labour, even if you count their weird vanity projects as well as their extravagant lifestyles, so no amount of redistribution from them could make ordinary people substantially better off right now. Almost none of their wealth represents actual spending; in a sense it isn't really money. Their businesses use more, of course, but they use that to supply ordinary people with the stuff they actually buy with their incomes - and capitalism gives them strong incentives to be efficient about this, supplying as much as they can with as little as they can. In fact, that push for efficiency and the fact that people like Bezos don't actually spend their money on stuff that causes demand in the real economy are two of the main criticisms I've seen of capitalism and the super-wealthy from people who want wealth redistribution.
posted by makomk at 7:06 AM on June 14, 2022


What would an effective newer deal look like?
posted by Selena777 at 7:35 AM on June 14, 2022


I think this is yet another example of the difference between "advice" and "policy / politics".

Advice is usually tailored and it operates within the framework of the current world. The financial advice that one might give to a high-earning colleague is different than a friend who makes very little money. In the latter case, there many not be much scope for advice since poor people are usually already doing all that they can to economise - they have to. Advice also usually takes for granted a person's actual circumstances rather than asking why they are that way on a systematic level.

Politics is about the system and doesn't take it for granted.

Advice generally doesn't make good politics. Even if making a budget was the best thing for any individual to, it would likely not make a difference to the systematic issues even if everyone indeed did it.

I note that the cited surveys are all about budgets having much less of an effect than income which is obvious but I would be curious to see whether people, all earning $75k, have a difference in perceived financial security or long term outcomes based on having a budget or not.

Part of the problem is that flim flammers like Ramsey don't just stay in their advice lane where they can given mathematically incorrect but psychologically satisfying advice about paying off credit card debt. They themselves demand an audience as input into policy and claim that they have Answers. That reducing spending on Netflix and other subscriptions is not just useful advice for someone on a reasonable income but actually the solution to housing and healthcare costs. Obviously this is innumerate drivel.

So if I was giving advice to any specific real person - who must make decisions within the existing financial framework, then I would want one kind of writing (i.e. jdroth) but that wouldn't necessarily point to any political goals that I should have to change that framework. Like if a high-earning colleague told me he was struggling to make all his payments every month, I wouldn't suggest that he reads the new Piketty, you know? On the other hand, if I wanted to think about the unfairness inherent in the system, I wouldn't suggest reading an advice focused personal finance blog.

In that vein though, I disagree with a statement from the OP that "budgeting doesn't work". I think what they should be saying (and to be fair the rest of the piece points in this direction) is that it doesn't explain the difference between the rich and the poor and that it doesn't do much to help the poor since by definition they do not have excess income that they can spend wastefully. For people in the highest 10%? 20%? of their localised income distribution, of course it makes sense.

After all, by definition they earn a lot more money than the median person in their region.

So a few things could be true:

1) The median person where they live has a grossly insufficient material standard of living and therefore having a lot more money than those people tells you little about excess spending and it isn't reasonable to consider their spending above the median as in any sense inefficient. This isn't true in the US. Most of what sucks about life as an American on a median income is income insecurity and the inability to save, not the day-to-day standard of living.

2) These people at the top of the income distribution have higher costs for some reason (not likely).

3) The people at the top of the income distribution have a choice that people at the median or below do not have which is what to do with their good fortune.

Without a budget, I would guess that the majority of such people will find their consumption gradually creeping up until they don't have any "extra" left. Maybe that is fine and they're happy with two high end new cars when one used one would have done fine and a house with an extra bedroom that never gets used. Some people take a conscious look at their options make that choice joyfully and with both eyes open. However those people have other options, including retiring earlier (effectively deferring some of their consumption from now to their early sixties or earlier) and a budget might help them do that.


I doubt it's accurate, but I imagine most of the people for whom this is actually true are starting with maximum contributions to various savings vehicles that deduct before the paycheck hits the account. Two people can contribute a total of $41,000 a year to a 401(k) and another $3700 a year to FSAs (think it's a larger amount if you go the HSA route but am too lazy to check). Of course, this is completely different from "living paycheck to paycheck" as most people would understand it.

I almost guarantee that this is true. I often see that in these "I can barely get by on $350k" type click-bait articles. Massive amounts of money going to savings, tax deferred retirement accounts, and mortgage principal repayments treated the same way as food and childcare expenses. "paycheck to paycheck" is meaningless when you have substantial liquid assets. I live "paycheck to paycheck" in that my current account usually only has a few hundred £ in it by the time I get paid for the month but that's because money is going into savings automatically, it means nothing.
posted by atrazine at 8:38 AM on June 14, 2022 [3 favorites]


Can a regular person with a bad credit rating pay 2k a month for rent without the assistance of a 2nd or 3rd party that may not make it onto a mortgage application tying them to that person property and payment for 10-30 years?

The median rent across the entire US is $2k now and can be far higher in other high cost of living (really high housing price) locations because most other stuff costs about the same. So yeah, there are tons. That doesn't imply that they could afford to buy in the exact same place they rent, but the US gets a lot of city to city/state to state migration, even if slightly less than the past. So they could afford to buy somewhere near-ish by.
posted by The_Vegetables at 8:52 AM on June 14, 2022 [1 favorite]


MetaFilter America: It's a system of really fucked up incentives working against people.
posted by nickmark at 9:34 AM on June 14, 2022 [3 favorites]


That’s like half of median personal income in the US, though. Should mortgage lenders be more open to tying people to that kind of ratio of housing payment to income, even when the credit is bad?
posted by Selena777 at 10:18 AM on June 14, 2022


Should mortgage lenders be more open to tying people to that kind of ratio of housing payment to income, even when the credit is bad?

No. I worked on post-2007 litigation, and I can tell you that one of the best predictors of default is high DTI. One of the reasons I don't own my home is that I would never exceed 30% and under most circumstances would restrict myself to 25%.

(The more I see, the less convinced I am that it makes any sense in the modern environment to put most people in a mortgage. Tying up the vast majority of your assets in an illiquid investment governed by a fairly complex contract whose terms are executed largely by an only semi-competent third party is way more risky than most people realize. The poorer people get crushed and the rich people want to know why we aren't manipulating interest rates to rescue them from the terms of the bargain they knowingly entered into.)
posted by praemunire at 10:57 AM on June 14, 2022


"Paycheck to paycheck" for people making over 100k includes putting money away for retirement at a higher rate, often better healthcare, and at the very least stable housing. It's disgusting to me to compare that to someone making $15-20 an hour who lives paycheck to paycheck.
posted by Jarcat at 11:19 AM on June 14, 2022 [3 favorites]


"Paycheck to paycheck" for people making over 100k includes putting money away for retirement at a higher rate, often better healthcare, and at the very least stable housing.

Or maybe it doesn't include that because it instead includes paying for the home health care needs for an adult sibling with cerebral palsy or ALS or something.

I mean, I get what you're saying, but no one here is saying that people with larger paychecks don't get more choices - we're trying to say, instead, that it's foolish (and insulting) to make assumptions about what someone is choosing based solely on their income level.
posted by EmpressCallipygos at 11:30 AM on June 14, 2022 [3 favorites]


No. I worked on post-2007 litigation, and I can tell you that one of the best predictors of default is high DTI.

See, I completely disagree with this. It seems to me you are trying to treat a symptom (prevent foreclosure) based on really limited scope of your involvement, which may be traumatic for each individual case, but is not the full picture.


It's the same thought behind limiting what food you can buy on a WIC card (lobster takes up entirely too much of the WIC income, so only peanut butter!) that's listed above. It doesn't solve anything. How does limiting foreclosure help the housing precarious?

Is it because raising rent and having to move doesn't involve foreclosure, so morally that is fine? The outcome is exactly the same. You as a lawyer just don't see all those cases. We don't have quite the same DTI limitations for renting, so what are you Selena777 suggesting? That people should be denied renting such expensive places? You interested in creating more homelessness?


The more I see, the less convinced I am that it makes any sense in the modern environment to put most people in a mortgage. So I agree with this! Mortgages are really risky, they do tie people to a place for better and worse, and have huge upfront costs! So to think that people enter them without much thought or consideration makes no sense. So therefore having a Federal nanny preventing the vast majority of people who have credit ratings below 700 from purchasing, without any other dramatic increases in low-income assistance, is just another thing separating the haves from the have-nots.
posted by The_Vegetables at 12:37 PM on June 14, 2022 [1 favorite]


Sure, if you or any one specific individual had more money you'd be better off. You could take that money and spend it on any number of things that would improve your life. The problem is that you'd effectively be doing that by outbidding the people with less money for those things. . . If everyone has more money, then this doesn't work and in effect no-one has more money.

I don't think this is true. That assumes a zero sum game, right? Like, I can afford to buy vegetables every day. I'm not doing that by outbidding poor people for vegetables. First of all, there's plenty of food waste going on, and secondly, we could organize society to grow more vegetables if everybody could afford to buy them. Some things are truly scarce, but the things we need to survive don't have to be.
posted by joannemerriam at 12:47 PM on June 14, 2022 [4 favorites]


Or maybe it doesn't include that because it instead includes paying for the home health care needs for an adult sibling with cerebral palsy or ALS or something.

Point taken, I honestly didn't stop to consider that. I'm pretty sure I'm in circling firing squad territory here so I'll stop.
posted by Jarcat at 1:17 PM on June 14, 2022


I’m not saying that rent should be underwritten more restrictively, I’m saying that there may be good reasons not to transfer the clear problems that inflated rent payments produce for people to houses. Rental history as an largely absent item on a credit report can also conceal prior difficulty in making rent payments that are comparable to the mortgage payment.
posted by Selena777 at 1:18 PM on June 14, 2022


On the other hand, having a mortgage instead of rent due means that I am building equity and have much better access to credit for other things. Also, part of why I bought a place at one point instead of continuing to rent was the issue of having control over my home - not having to deal with the building being sold and maintenance suddenly going way downhill, or renovictions, or similar issues. Affordability issues aside, owning versus renting can be a lot more stable and emotionally secure for many people. So if the choice is between screwing people over by making them pay way too high a proportion of their income for housing as either a mortgage or as rent, why restrict them from the bad option that has at least a bit of silver lining?
posted by eviemath at 2:03 PM on June 14, 2022 [2 favorites]


See, I completely disagree with this. It seems to me you are trying to treat a symptom (prevent foreclosure) based on really limited scope of your involvement, which may be traumatic for each individual case, but is not the full picture.

No, I mean I literally worked on multiple cases involving the underwriting of tens of thousands (if not more, it's been a while) of mortgages for billions of dollars (ditto); studies were done, and it was clear that excessive DTI was a predictor of default.

Is it because raising rent and having to move doesn't involve foreclosure, so morally that is fine? The outcome is exactly the same.

Good Lord, it is not. Eviction is a traumatic and expensive outcome we should devote many resources to preventing. But the costs of foreclosure are startlingly high over an excruciatingly long period of time and it wrecks your credit. In a recourse state, you can even get stuck with a deficiency judgment for the balance of the mortgage if the numbers run the wrong way. And that's before we get into the ways you can be defrauded out of the value of a mortgaged home without being foreclosed upon, of which there are many. Both can be devastating for a family, but if I had to choose one for myself or a loved one, I'd take eviction in a heartbeat.

You interested in creating more homelessness?

Putting people into homes they can't comfortably afford and expecting them to make those mortgage payments will not reduce homelessness in the end. Or, frankly, even the medium term. This is the last lever I would think of pulling if I were working on homelessness prevention.

It's the same thought behind limiting what food you can buy on a WIC card (lobster takes up entirely too much of the WIC income, so only peanut butter!) that's listed above.

I'm sorry, but this analogy leads me to believe you don't understand the financial and legal intricacies of mortgages and foreclosure. Which more or less goes to my point.

(P.S. You can buy lobster with SNAP benefits, which is what I think you meant to refer to. You can't buy it with WIC because WIC is meant to provide supplemental nutritional items for children and nursing mothers. It's not intended as the main source of food support.)
posted by praemunire at 2:38 PM on June 14, 2022 [4 favorites]


So if the choice is between screwing people over by making them pay way too high a proportion of their income for housing as either a mortgage or as rent, why restrict them from the bad option that has at least a bit of silver lining?

Costs of a mortgage: potential returns on the downpayment if it had been invested instead + PMI if necessary (completely gone, no real value to you) + closing costs (completely gone, no real value to you) + mortgage payment + maintenance/HOA (as applicable) + costs of upkeep + property taxes + utilities

Costs of renting: potential returns on any security deposit held by the landlord + rent + utilities (usually, in the U.S., a smaller subset than those paid by owners)

If you paid the exact same rent for a place as a mortgage payment would be, you would effectively be paying more for the mortgaged place. And it will be years before any meaningful amount of the mortgage payment goes to build equity--the early amortization schedule is heavily weighted towards interest. There are a lot of different moving pieces that vary by location, some of which can't be known precisely in advance (like price appreciation), so the exact math varies and isn't completely certain, but it will usually take several years for it to be better to mortgage than to rent a place. And, in the meantime, if anything goes wrong, you are at high risk of losing more.

I'm fortunate at this point to have a bit of margin in my budget, but I would never take out a mortgage at what my maximum rent would be. Moving pieces aside, where would the budget for upkeep and property taxes come from?

By the way, this is the kind of thing personal finance writers can be genuinely useful in explaining. You're definitely better off knowing this stuff than not, regardless of whether the system is just. A lot of people not knowing this kind of thing contributed to the 2007-08 crash, though the originators and securitizers and investors being greedy and stupid contributed a lot more.
posted by praemunire at 2:52 PM on June 14, 2022 [1 favorite]


Lots of folks pay more in rent than they would in mortgage, however, over many years, versus the one-time costs associated with obtaining the mortgage. And some states allow security deposits as high as 1.5 or two month’s rent, which, given current rents, is in the same general ballpark as my closing and other related costs were. In my experience, security deposit theft is common. Add in application fees which are also legal in many states, and you have quite a few non-recoverable costs associated with each new rental apartment or house. Now throw in average number of moves in the same time period as the average mortgage. Which I don’t know what the actual stat is, but also in my experience being able to stay in the same apartment longer than five years is pretty rare (but I don’t know if the sample of renters I’ve known is representative or not). And moving is expensive, so also add that regular cost, minus one move, since defaulting on a mortgage also involves having to move.

And while a tenant isn’t going to be directly paying for something like a new roof, every renter I know has definitely lived in at least one place where they paid basic maintenance and upkeep costs even when their landlord was technically supposed to, because the maintenance and upkeep just wouldn’t get done otherwise.

And if you’re evicted for non-payment of rent, that can also impact your credit or show up on other background checks that impact your ability to find a new place to live, not to mention that landlords tend to keep blacklists (even though that’s not technically allowed most places).

I totally believe you that defaulting on a mortgage causes major headaches and long term disruptions in peoples’ lives. And maybe you also have taken into consideration all of the issues involved in being a renter instead of a homeowner and being evicted and it still works out that defaulting on a mortgage is worse, but you just haven’t communicated that yet if so.
posted by eviemath at 7:52 PM on June 14, 2022 [2 favorites]


Rent / mortgage tradeoffs are also distorted by other things which depend on the local market.

Obviously in places where more people rent, renting will be more protected since people with political power will not tolerate behaviour by landlords that people without it have to.

It also depends what kind of property is even available on the rental market. If you're living in a medium sized town and want to rent a four bedroom house for example, that might literally not exist on the local housing market if people who can afford property of that size are inclined to buy rather than rent. Many American towns and smaller cities have rental stock only at the low end.

Finally, there is a substantial mobility advantage which comes from renting but actually being able to use that depends on one's family configuration and job situation. For people who cannot / will not move from where they live, the theoretical wage premium doesn't materialise.

I know for academics this is a bit different since it's not so much a wage "premium" as minimum table stakes but in general, being able to move easily to somewhere with higher wages (or with employment at all) makes a big difference to lifetime earnings.
posted by atrazine at 7:17 AM on June 15, 2022 [2 favorites]


The line was “30% of people making $250,000 a year are living paycheck to paycheck.” I don’t know the details, but this seems rather insane. If there is some truth to this statement, then how the hell are these people spending their money?

At least for me, this is a deliberate consequence of payroll deferrals and lumpy income. This isn't a claim of poverty -- as many upthread have pointed out, it's relatively easy to press the off button if something goes wrong, or organize your finances in such a way that you can borrow cheaply against those assets. Simply that I need to carefully forecast the checkbook balance, pay attention to credit card billing cycle closing dates for certain transactions, and occasionally, figure out how to paper over cash shortfalls until the next equity grant. Fundamentally, the optimal way to live is paycheck-to-paycheck and avoid excess liquid savings.

Beyond that, their money goes to childcare and housing. Especially with infant care, daycare has to find a way to pay people a living wage while caring for like two kids. So the two are sorta linked -- daycare facilities need to be near family residences and its workers have to be able to afford housing themselves. The cult of "land prices only go up" will have to be destroyed before this can be solved, I think, but even then subsidies will probably be a required component, and I have no idea how that gets past the American "rugged individualist" psyche to a successful vote.
posted by pwnguin at 9:26 PM on June 19, 2022 [1 favorite]


Continuing the rent digression, the main segment in this week’s Last Week Tonight with John Oliver was about rent (not posted to Canadian YouTube yet, apologies for lack of link). He had previously done a segment on evictions that focused on COVID-related issues but alluded to earlier issues. One of the more comprehensive recent treatments is of course the book Evicted, by Matthew Desmond (previously on Metafilter).
posted by eviemath at 4:13 PM on June 20, 2022 [1 favorite]


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