Affluence and the perception thereof

Kraint wrote:

We have historically structured our tax code to make sure that wealth was earned and aristocracy prevented. So that feeling was shared by a lot of great men in the past, regardless of how productive we think it is. Personally, I think it just grates all the more to see the trust-fund/ownership-class types around when the wealth gap has grown so huge, and shows no sign of slowing.

Precisely. There's no reason to be sanguine about this sh*t.

I've-got-mine-ism's Desiderata wrote:

You are a child of material society,
no less than the Dollar Trees and the Starbucks';
you have a right to be here.
And whether or not it is clear to you,
no doubt the free market is unfolding as it should.

EDIT: To not single out Minarchist too much.

What is affluence? Seems like the definition should be "just a bit more that what I currently have." Everybody feels like they're just scraping by and the people above them, they're the righ ones.

People at all income levels talk about how hard it is to make ends meet and frankly, to me that sounds a bit ludicrous. I'm sure any of us could have someone not as well off go through our budgets and say, "a cleaning service? Definitely a luxury. Annual trip to Europe? Luxury. An iPad? Luxury. Cable? Luxury."

The problem is that to us, it's not a luxury, it's a necessity. Of course, we can't seem to figure out how millions of people below us can do without those things.

I also think part of the problem is that people totally buy into the myth that they deserve every dollar they ever owned. Sorry, Charlie. You were in the right place at the right time, you got a profitable degree when the market was up, you knew the right person, whatever. Someone or something gave you an advantage that a lot of people never got. The idea if the "self-made man" is an American myth along with all it's corollaries: I deserve what I own, poor people don't want to work hard, lower-paying jobs equal less stress, you name it.

Was there a point in all this? I don't know, except that the power of the human mind to rationalize is really, really strong. Also the willingness of people to think they're normal and everybody else, they're the weird ones.

strangederby wrote:

When I was younger the general attitude was that if you didn't own a TV you MUST be poor. Nowadays everyone I know seems to own a big ass flat screen TV. I was at a children’s party with my son at the house of someone who was struggling for money but could afford a TV that took up most of the room. Not the first time I'd seen this and some American friends tell me stories of people who can only afford to live in trailer parks and yet can fill the insides with an Aladdin’s cave of technology. I returned home scratching my head until my wife pointed out the obvious use of hire purchase. In short they are paying for it many times over and for the rest of their lives.

I think there's a simple explanation: when you consider how the price of real estate has gone up and up and up (until the bubble, which still doesn't help people living in trailer parks with what happened to credit and how sticky real estate prices have been) in America while technology prices have fallen, it's not surprising. The cost of a flat screen tv probably doesn't even cover a year of property taxes these days, let alone a mortgage payment.

One of the issues with affluence in America is that 'luxuries' like flatscreens are cheap, while 'necessities' like housing are expensive. That's something that skews any discussion of affluence.

CheezePavilion wrote:

One of the issues with affluence in America is that 'luxuries' like flatscreens are cheap, while 'necessities' like housing are expensive. That's something that skews any discussion of affluence.

Is housing actually expensive or is it what people demand in housing that makes it more expensive than what it should be?

The average new home in 1950 was a whooping 983 square feet in size. Today, the average new home is two and a half times larger: 2,480 square feet. And that home better have central air conditioning, multiple bathrooms, and a kitchen chock full of high-end stainless steel appliances or most people will ignore it.

What's happened in the housing market is that the concept of a starter home--a home that young couples could afford--has disappeared. It used to be that you continually traded up your house over the years until you had the one you ultimately wanted. Today, people seem to expect to start in the home of their dreams.

OG_slinger wrote:
CheezePavilion wrote:

One of the issues with affluence in America is that 'luxuries' like flatscreens are cheap, while 'necessities' like housing are expensive. That's something that skews any discussion of affluence.

Is housing actually expensive or is it what people demand in housing that makes it more expensive than what it should be?

The average new home in 1950 was a whopping 983 square feet in size. Today, the average new home is two and a half times larger: 2,480 square feet. And that home better have central air conditioning, multiple bathrooms, and a kitchen chock full of high-end stainless steel appliances or most people will ignore it.

What's happened in the housing market is that the concept of a starter home--a home that young couples could afford--has disappeared. It used to be that you continually traded up your house over the years until you had the one you ultimately wanted. Today, people seem to expect to start in the home of their dreams.

Except its not the stuff in the home that makes it expensive or even the size of the home: it's the property that the house is built on that drives up the price. I mean, you're talking 60 years. Air conditioning, multiple bathrooms, and high-end appliances isn't exactly break-neck progress. Even the growth in the size of the home can be explained by the fact that we spend a lot more time at home. And of course we now build these monstrosities right to the property line so that there's barely a back yard, let alone a front yard.

CheezePavilion wrote:

One of the issues with affluence in America is that 'luxuries' like flatscreens are cheap, while 'necessities' like housing are expensive. That's something that skews any discussion of affluence.

I agree. A 42-inch flat screen is about $500 and will last for years while delivering hours of entertainment. It is a substantial improvement over old technology televisions. It's not an extravagant purchase. It's utilitarian and a good value. Same goes for something like a cellphone, which replaces the need for a landline and allows people to maintain the same telephone number however many times they move.

Regarding home prices, whatever the size of the home, the value of the land remains a sizable chunk of the purchase price of a house, particularly in desirable areas with good school districts and amenities. Even a small crappy house in my CT town goes for well over $200k. My front neighbors in a small two-bedroom ranch paid something north of $360k during the last boom. We put policies in place that encouraged the growth in real estate prices, which never made much sense to me, but they seemed very popular with the government and house owners. Now we're all paying the price.

If anything, you'd think the government would want lower the costs of housing, education, and healthcare, but these are the areas that seem to suffer from the most out of control cost increases.

OG_slinger wrote:
CheezePavilion wrote:

One of the issues with affluence in America is that 'luxuries' like flatscreens are cheap, while 'necessities' like housing are expensive. That's something that skews any discussion of affluence.

Is housing actually expensive or is it what people demand in housing that makes it more expensive than what it should be?

The average new home in 1950 was a whooping 983 square feet in size. Today, the average new home is two and a half times larger: 2,480 square feet. And that home better have central air conditioning, multiple bathrooms, and a kitchen chock full of high-end stainless steel appliances or most people will ignore it.

Housing as investment commodity has a lot to do with that as well. In 1950 the house came with your job at Ford or Cadillac here in my area. You did not really buy it on credit as you do these days. Neither is a house something you plan on holding on to for 40, 50 years. Does anyone here, other than the self employed or boarded members, imagine that they will have their current job in 20-30 years (let alone 10)? That home has to be something you can unload with as little loss as possible. So it had better have as many amenities and appliances to make is appealing.

Do you think your kids will end up living in the same area, wanting your home after you retire? Or will it just be sold off? And we are in the same situation. How many people on this very site have gotten jobs across the country, but a home is what kept their spouses and families stuck?

The market has not bottomed out yet. My friend Jon bought a home that was worth 300k 15 years ago in a very well to do area. He bought it for 90k, and it is worth less than 70k even with improvements he made. His neighbor was foreclosed on and the house is going to sell for 50-60k. That situation is normal in this area, and in much of the nation.

Talking with my wife to be, we entertained buying a home this last year because they are so damned cheap. But when all was discussed, I am doubtful that I will end up practicing law in this area. And her own prospects are slim. A home would be an anchor around our necks in 2 years. For myself and for her goals for grad school Milwaukee is a better prospect. I have solid contacts for jobs, and my alma mater would be a fantastic resource for her to go to grad school with a nearly guaranteed job at the end (Marquette's placement in the speech pathology or occupational therapy is top notch). So why buy a home in Detroit right now?

I am a wealthy motherf****** son-of-a-b****.

I am.

I own (and am probably underwater on the mortgage of) a slightly ramshackle, but sizable house in a nice neighbourhood. My wife has ongoing, constant medical bills, which we can afford to pay due to having decent health insurance through my work. There's 2 quite nice cars in the driveway. A portion of every paycheck goes to retirement savings, another portion goes to our "rainy day" savings. I pay my bills when they come due, and I have some money leftover to play with.

That makes me one wealthy so-and-so. I certainly ain't rich, but I'm sure-as-sh*t wealthy.

You know what else I am? Frivolous with that leftover money. I shop at a fru-fru expensive grocery store, and we eat like fricking kings in my house. My TrueAchievements page tells that I've played 255 videogames on my 360. There is always expensive booze in my house. I fly down to San Fransisco on a regular basis for naughty weekends away.

That ability to be frivolous with money is what wealth means to me. The fact that I can afford the bills, afford to save AND afford to spend significant amounts of money on purely hedonistic pursuits connotes a significant level of wealth as far as I'm concerned.

Jonman wrote:

That ability to be frivolous with money is what wealth means to me. The fact that I can afford the bills, afford to save AND afford to spend significant amounts of money on purely hedonistic pursuits connotes a significant level of wealth as far as I'm concerned.

I agree heartily with this. I'm sitting on top of a car payment and 50k in student loans while making about 50k a year. However, I rent a single room in a decent house, I'm single, I get free medical, and I don't have a lot of other expenses. I can afford to pay ahead on all my debts, save for retirement, and still have money left over to throw at video games, alcohol, and vacations. I consider myself wealthy. If I had a family to support, or some other major expenses, this would be a different story.

Wealth has more to do with the overall budget than only with the net income. To me, the amount of disposable income as opposed to net income is a much stronger indicator of wealth.

(EXTRA CREDIT: However, I consider disposable income to be pretty broad term. Most conspicuous consumption, like buying a house bigger than what you need, or buying a 50k car instead of a 10k car, I consider to be uses of disposable income. This is where my argument may get murky, which I guess is why I only called it a "strong indicator". F science.)

Word to you both.

I have to agree with all the people commenting that it's so incredibly easy to grow into your income it becomes hard to really judge how well off you have it.

My wife recently left a very secure, well-paying school-teaching position (yes, teachers do make good money eventually) in Massachusetts due to certain political aspects and work environment issues that were causing her to be completely miserable.

At the time she had no job lined up, and no means of collecting unemployment since it was classified a voluntary extended leave of absence. At the time in spite of the fact we live in a modest house in a modest neighborhood - I estimate we were making 3 to 4 times the average neighborhood income - we were spending practically every penny we had on, for lack of a better word, "stuff". A lot of this had to do with my wife's stress levels causing her to try to find some relief in the power of spending, which was ultimately futile.
Despite our relative wealth when she made this decision we had to seriously consider the financial implication. While she was still getting paid, we basically reconfigured our lives to work on one income as we were uncertain what the future held. Now she has found another job and while it is significantly lower-paying, is not nearly as low paying as we initially expected, for which we feel undeservedly fortunate. The changes we made seemed insurmountable based on our prior spending, but they were not nearly as terrible as they seemed at first. I think that aspect is key to us feeling wealthier now with less money than we did with more money - the fact that we could weather this change with merely a minor bump makes us realize how much we really have.

However we are trying our damnedest not to fall into our old habits now that the money issue is better resolved. It's really, really hard not to look at the bank account and not say "hey, I can finally afford xxxxx" and just blow some money on "stuff." The ultimate goal is to save up enough to pay off the house in 4-5 years, which is only feasible if we can stay on track. It's a struggle every day to prevent that slide. We have keep the carrot of being completely out of debt dangling ahead of us to succeed. It's remarkable how unconsciously we fall into habits that then seem utterly necessary for life.

I find that working in charitable institutions and/or contributing some of your money directly to projects you participate in gives you a wonderful perspective on what's really essential to living. I know many children who do not receive any education whatsoever. It's criminal but I'm powerless to change it system-wide. My kids are better off than them; but they survive. Somehow.

I know families with 5 kids surviving on a documented household income of less than $200 a month. They're not dead yet, they're not suffering from malnutrition, and the kids are actually getting some kind of an education. We make way more than that. It would an insult to their struggle for me to complain about my situation.

Wait, did spambot post enough to reach intern status? That's frightening.

Minarchist wrote:

Wait, did spambot post enough to reach intern status? That's frightening.

No, looks like every single one of their posts is spam, so they must've just waited out the timer.

I need boogle to figure out some math on my dickhead probability algorithm, but I'd say over 5 links in your post, and you're probably a spammer, unless you've been tagged or are at least a Junior Executive.

That's the most ironic spam I've ever seen.

One thing I have not seen fully discussed here is cost of living. According to bestplaces.net, my city has a cost of living that is 25% over the US average. Des Moines, Iowa has a cost of living that is 16% lower than the average. Taken together, someone making $50,000 in Des Moines would need to make $70,500 in Columbia, MD just to have a shot at the same amenities and standard of living. And that would certainly be in a rental property, which means you'd probably need to make *more* in order to have any chance to actually buy property and appreciate value. We live in one of the least affluent communities there, just one step above the apartments, too. And yet in Des Moines, we could live in a single family home with 1.5x the floor space and a 6500 square foot lot, instead of a townhouse.

That's a HUGE difference - just consider what it takes to get a $20% raise - and one reason why it's hard to generalize based just on salary amount. Fars, if you made $30,000 now, instead of $50K, would you still feel the same about it? Because that's what your standard of living would be like out here, on $50K. And yet, where you are, you're lucky, you're in a good place economically.

Go to Hawaii. It's full of millionaires and tourists, but most of the actual workers there live at a shockingly low standard. And yet if they lived somewhere like Iowa, they'd be quite happy with their wages. Location is important.

Food for thought. Sometimes you'll take a situation that puts you on the edge financially for years because you love the area and the lifestyle. It's a risk, but so is life. Being able to enjoy things to the fullest is important, and worth paying for.

Salaries also tend to be higher in the D.C. area. This won't apply for all professions, but it's likely that the job you're doing would also pay less if you weren't in D.C.

Washington, D.C., nosed out San Jose, Calif., as the nation's highest-income metropolitan region, fueled mainly by its army of attorneys, consultants, lobbyists and outside government contractors.

Census data for 2010 show median household income was $84,523 in the D.C. area, compared with $83,944 for the San Jose region, the epicenter of Silicon Valley. Both numbers are well above the median income of about $50,000 for the nation as a whole.

Link.

The stat you'd need to look at is disposable income, I suppose, is disposable income or something similar. Though that would also be affected by the lower cost of living. So I guess we'd need a state breakdown of discretionary personal income. Unfortunately, I can't find one.

Robear wrote:

That's a HUGE difference - just consider what it takes to get a $20% raise - and one reason why it's hard to generalize based just on salary amount. Fars, if you made $30,000 now, instead of $50K, would you still feel the same about it? Because that's what your standard of living would be like out here, on $50K. And yet, where you are, you're lucky, you're in a good place economically.

Oh, I took that into account, moreso in the other thread that prompted this one (I don't remember where that post was now though :().

I'm pretty sure I've also noted that part of why my income feels so comfortable to me is because I'm just supporting myself. When I had a significant other to support and her children to partially support, money felt pretty tight sometimes.

I live in the Philippines. Cost of living is on the floor. The fact that people don't just keel over from starvation or exposure from living on $2 a day without a hint of government assistance tells the story.

Here, $2 gets me a grilled porkchop and a cup of rice - a veritable feast where I live. Poorer people would stretch that by catching their own fish or cooking their own rice. You could live on less than $0.30 a meal if you don't mind making your own clothes.

The true measure of living here is manual labor. Food and space are relatively expensive, but manual labor is dirt cheap. For $300 a month, you could have a domestic servant living with you in-house and he or she would be deliriously happy with the arrangement. $150 a month is the usual going-rate. I could pay a bike mechanic $50 for bike repair and overhaul and have the guy kissing my hands in gratitude.

It's curious for me to read threads like these because I have no basis for comparison really. My family was always low-income, though I didn't quite realize it until there were issues. We were one of those that had that horrible thing happen that made it all plummet.

Which means despite getting a college degree and trying everything I can, I find myself growing incredibly depressed at my inability to make even above $20,000/year.

Now, I know I can live off less than that. Not comfortably, but I can. Unfortunately, having student loans and deferring them as often as I can is not something that is sustainable, so I keep wondering what I can possibly do to break out of it. Networking, volunteering, learning new skills, nothing has helped, and I have fairly limited access based on monetary restrictions.

Part of the issue is the most I've ever made in a year is $19,000, when I worked for a grocery store (which, as far as wages for grocery stores go, was pretty good). Unfortunately, my schedule was constantly up in the air, which meant my sleep patterns were properly fubared, which affected my social life, and I found myself very prone to depression.

It's become one of those things where my goal would be to make $30,000/year, which would allow me to start paying off my loans and live what I would consider very comfortably, despite living in Chicago (living in a city with public transit is a necessity as I have no license, car, nor have ever had the disposable income to acquire the latter).

Even if wealth is a matter of perspective, there is an entire realm of finance and wealth that I have just come to accept I will never witness nor understand in any detail.

Even if wealth is a matter of perspective, there is an entire realm of finance and wealth that I have just come to accept I will never witness nor understand in any detail.

You may not ever witness, but you can certainly learn a great deal for free if you can access this site. Just start watching khan academy videos on banking, valuation, currency, core finance, etc. It's actually more interesting than it sounds when Sal teaches it.

Here in Laos I am one of those expat "millionaires". I am living in a country where a decent monthly wage is US$700 and I get that in per diems in a fortnight. As such I have an amazing amount of purchasing power. I pay the falang price gladly as it doesn't mean that much to me and makes a difference for them so I ignore the feeling that I am being slightly ripped off in most transactions.

I had dinner with a guy on Saturday who is an expat American but getting paid at local rates and he has to work hard not to pay too much as everyone assumes he is a walking wallet just because he is the white guy.

I've been thinking of this discussion again lately in light of some personal goals and life changes, so shameless self-bump.

Since I had the disposable income to do so, I signed up for a 10-week fitness class at a local gym, which due to the special Cinco de Mayo sale they were running, ran me about $250. That was money well spent, and I decided to sign up for a year's membership, at a cost of right about $750. That's not a light expenditure for me, but I feel it's very worth it.

I also replaced my ailing car, so my budget's tighter with a carnote back into it, but again - I make a comfortable living enough that I could make a nice down payment and walk away with a car loan (also discovered that my credit rating has been improving more nicely than I realized; woot!).

Now I'm reaching the less comfortable point. I rarely take vacations, because they're expensive (for me). It's why I've never had the chance to travel overseas yet, and I'd like to start seeing more of the world -- or even just the US.

More specifically, as I'm getting back into shape and realizing that due to advances in medication, my arthritis is FAR more manageable than I realized, and I want to pick up a dream I'd given up over a decade ago: get into mountaineering (no, not Everest or the other 8,000m+ peaks).

There is a class I'd love to sign up for next year, an awesome 13-day mountaineering course that covers basic mountaineering + hiking, rock climbing, and the final four days are for tackling a couple legitimate peaks in the Cascades. The fee for the course is right about $2800, and when you throw in all the equipment I'll need, that balloons up to $3500-4000 (but the equipment is a permanent investment, so would not be incurred again on future trips). Add in airfare and accomodations before and after the trip, and now I'm facing easily $5000.

Good grief. I have a lot of budget inspection to do to figure out how to free up $5000 in under one year. More likely, I'll have to wait another year to save up that much.

All of this to take one admittedly expensive vacation trip.

Just makes it that much more mind-boggling to me to try to imagine the lives of those who, while perhaps not rich, can afford annual (or even more frequent) nice vacations. I certainly don't begrudge anyone that luxury! Just noting that it's fairly foreign to me.

And that's for me -- I consider myself moderately affluent given my salary and location. For the half of American households that fall under my roughly median household income, it's even more mind-boggling to them.

Farscry wrote:

Just makes it that much more mind-boggling to me to try to imagine the lives of those who, while perhaps not rich, can afford annual (or even more frequent) nice vacations. I certainly don't begrudge anyone that luxury! Just noting that it's fairly foreign to me.

And that's for me -- I consider myself moderately affluent given my salary and location. For the half of American households that fall under my roughly median household income, it's even more mind-boggling to them.

It's all about how you prioritize your spending though, right? If fancy vacations were more important to you, you could probably tighten your belt in other areas of your budget (like drive a cheaper car, f'rinstance) to make them happen.

I sometimes agonize over whether I could be saving a lot more money, or spending it on fixing up the crappy parts of my house. But then I realize that I enjoy beer, videogames and seeing my girlfriend regularly way more than I do having tasteful decor in my bathroom.

Just going to point out that while this may be aimed at Farscry in particular (whose personal situation I am not familiar with), it feels to me like it carries the implication that anyone who wants to pick one nice thing in their life can have it, if only they budget for it. (Which is laughable.)

Hypatian wrote:

Just going to point out that while this may be aimed at Farscry in particular (whose personal situation I am not familiar with), it feels to me like it carries the implication that anyone who wants to pick one nice thing in their life can have it, if only they budget for it. (Which is laughable.)

Not sure if that was aimed at me, but I was responding specifically to Farscry's issue, which seems to be that he's got a pretty good income, but needs help with budgeting. Obviously, that wasn't meant as blanket advice for everyone in every situation.

Well. It depends on what that one nice thing is.

I read Farscry's point as being about how he can't imagine a lifestyle where a trip like that would fit into the regular yearly spending, and thinking how other people can't imagine his lifestyle, where this trip could fit into the irregular, multi-year saving-then-spending, not the...uh...once-in-a-lifetime spending or something?

What Cheeze said.

I'm certainly not lamenting my lot in life, I mean geez, having to wait an extra year to save up enough to go on an awesome 13-day experience like that? Oh, the horror!

The advice to do an actual, legitimate budget is actually a good reminder that I probably should do that to get more serious about my goals, so no, I didn't take Tangle's post as a jab, but as the helpful link I assumed he meant it to be.