Tag Archives: class

Our American Dream: Two Sisters Losing the Middle Class

We grew up in a nice suburb of New York where you would run into a mall in 30 minutes any direction you drove unless you were to drive towards the ocean. Our dad went into the city daily for his job that kept him out late, mom stayed home and took care of us by trying to get me to do my homework and fighting the school system to ensure my learning-disabled sister got the access to the education she needed. Outside of my father’s raging temper and my mother’s relentless narcissism and hoarding disorder, life was pretty good. It was all we knew.

I definitely took my class status for granted, and my sister is now learning that she did too. My sister is seven years younger than I am, and with her learning disability also graduated college later than I did. Nonetheless, after going to a private school for special needs students, she managed to obtain a bachelor’s degree from a state school. Unfortunately, that degree didn’t help her much in terms of setting her up for the real world.

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Middle Class? Not So Fast. A Tale of a Downwardly Mobile Society

With election season starting to heat up, so is reporting on the so-called “middle class.” Apparently, 9 in 10 Americans consider themselves “middle class” (I’m no math genius but something tells me medians and averages don’t work that way.) Given most Americans are middle class in their minds, and middle class today isn’t what it used to be, in short, everyone is freaking out.

Ok middle-class math, why does America hate you so much?

“The middle-class label is as much about aspirations among Americans as it is about economics. But a perspective that was once characterized by comfort and optimism has increasingly been overlaid with stress and anxiety.” — Telegram

I see. So most Americans aspire to be middle class, as everyone has been sold this dream of working hard to get the basics in American life — a decent house, backyard, education, healthcare, maybe vacation once a year. No one is expecting to afford regular Gucci on a middle class income. We were just all told work hard and you too can be middle class, and quite frankly upwardly mobile from your parents lifestyles. Yet, even if you’re doing exactly the same thing your parents did, you’re actually worse off today. No wonder we’re all anxious.

“A recent report from economists at the Federal Reserve Bank of St. Louis concluded that “families that are neither rich nor poor may be under more downward economic and financial pressure than common but simplistic rank-based measures of income or wealth would suggest. The study, conducted by William R. Emmons and Bryan J. Noeth, found that one reason many Americans viewed themselves as struggling was that their real incomes had not advanced significantly beyond their parents’ even when they reached higher educational levels, while those who matched their parents’ achievements were actually worse off.”

The New York Times published an article this week titled “Middle Class, But Feeling Economically Insecure.” That headline, brilliant, sums the middle class anxiety up to a T.

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The Extreme US Young vs. Old Wealth Gap

Here is some new information I will be sharing with my GOP-fire-breathing dad this Thanksgiving. The typical U.S. household headed by a person age 65 or older has a net worth 47 times greater than a household headed by someone under 35, according to an analysis of census data released Monday.

While people typically accumulate assets as they age, this wealth gap is now more than double what it was in 2005 and nearly five times the 10-to-1 disparity a quarter-century ago, after adjusting for inflation. The 47-to-1 wealth gap between old and young is believed by demographers to be the highest ever, even predating government records (see the full article here).

The good news is, for older folks, the median net worth of households headed by someone 65 or older was $170,494. That is 42 percent more than in 1984, when the Census Bureau first began measuring wealth broken down by age. The median net worth for the younger-age households was $3,662, down by 68 percent from a quarter-century ago, according to the analysis by the Pew Research Center.

But for Millenials, Generation Y’ers, things are not looking so good. Older Americans are staying in jobs longer, while young adults now face the highest unemployment since World War II. As a result, the median income of older-age households since 1967 has grown at four times the rate of those headed by the under-35 age group.

Yes, I’m an outlier in this country with my six-figure salary at 28, but I recognize that the majority of people my age are not being paid a fair rate to keep up with the pace of inflation. Still — I can’t afford a house where I live on my six-figure salary (again 1br condos go for $500k here). According to Pew, housing has been the main driver of these divergent wealth trends. Rising home equity has been the linchpin of the higher wealth of older households in 2009 compared with their counterparts in 1984. Declining home equity has been one factor in the lower wealth held by young households in 2009 compared with their counterparts in 1984.

These age-based divergences of households widened substantially with the housing market collapse of 2006, the Great Recession of 2007-2009 and the ensuing jobless recovery. But they all began appearing decades earlier, suggesting they are as much linked to long-term demographic and social changes as they are to the sour economy of recent years.

Another trend of “non wealth accumulation” I’m part of — for the young, these long-term changes include delayed entry into the labor market and delays in marriage—two markers of adulthood traditionally linked to income growth and wealth accumulation. I didn’t get too much of a delayed start into the job market, and made up for lost time, but with the current state of the economy it’s even harder to get one’s foot in the door. I don’t envy my sister who will be graduating college next year.

Will I Be Rich Because I’m Jewish?

Google News “Spotlight” popped up a NY Times article today that asked in it’s title: “Is Your Religion Your Financial Destiny?

According to the article, the most affluent of the major religions, including secularism, is Reform Judaism. What’s more, 67% of Reform Jewish households made more than $75k per year. Hindus and Conservative Jews take the #2 and 3 spots.

On the other end are Pentecostals, Jehovah’s Witnesses and Baptists. In each case, 20 percent or fewer of followers made at least $75,000. The share of Baptist households making $40,000 or less is roughly the same as the share of Reform Jews making $100,000 or more.

While I’m not sure religious belief has anything to do with the income discrepancy between religions, it’s clearly due to the values placed in each culture (because let’s face it, in America, for many of us, religions is our culture — even if we’re not religious.)

In other families – perhaps other non Jewish families – money wasn’t the considered the most important definition of success. I couldn’t choose not to go to college, nor could I choose to be satisfied in a lower-wage position when I knew the only thing stopping me from upward mobility would be myself, and myself being a coward. But, given I was able to go to college and graduate with no debt, the bravery had a cushion behind it at all times.

The article points out that “the differences are also self-reinforcing. People who make more money can send their children to better schools, exacerbating the many advantages they have over poorer children. Round and round, the cycle goes. It won’t solve itself.”

Taxing the Rich, Class Warfare, and the Quest To Be in the Top 1%

With $3,000 extra after my recurring bills are taken care of per month, I know I have a chance, albeit a tiny one, to ride the tailwind of the rich to my own wealth. As I dream of prosperity, I also acknowledge the class war that is brewing throughout the world, and in America.

The upper 1 percent of Americans are now taking in nearly a quarter of the nation’s income every year. In terms of wealth rather than income, the top 1 percent control 40 percent. Twenty-five years ago, the corresponding figures were 12 percent and 33 percent.

For the white collar workers of the world, and even those with mid-level government jobs like teaching at the nation’s public schools, wealth — as in ascent to the top 1% — is not even fathomable. The only goal regarding finances is to be able to pay the mortgage and children’s doctor bills.

Then there are those in my bucket… the 20 somethings with a dream of one day being in that top 1%, knowing it’s unlikely, but in the least working in an industry where odds are better than playing the lottery in becoming a millionaire, in the least. Continue reading

Friends in High Classes

My ex is an attorney with a 6-figure salary and a cushy job in the city. He’s also one of the most frugal people I know. Go figure.

He IM’d me this evening to say “it was a sad day.” I figured some girl blew him off again. Instead, this time, it was potential layoffs at the office. Well, he was sad about a new pay structure at the office… no more bonuses.

A part of me gets really ticked off every time he complains about money because he’s making, like, $150k a year. On the other hand, I’m making $60k a year and I still remember a time when I was making $20k and thought $60k was “rich.” I complain about not making enough money too… so I really have no right to be upset with him. While I do feel like I can live comfortably at $60k, it no longer seems “rich” to me at all.

I’m still trying to understand what “rich” means. My greatest desire in life is the ability to donate my money to different causes and people who deserve it. And… realistically, I could do that now… yet I also haven’t donated one penny in years. I’m an awful person. Or at least a guilty one. I used to try to volunteer my time, but that was back when my time wasn’t worth that much money. Now… my time is worth a fair amount of dough, and my free time is worth even more.

My biggest money question is life is when do you reach the point where you can donate money and feel good about it without worrying that you’re pushing off an opportunity to own real estate, go to grad school (etc)? All the extra money… I put into savings accounts or retirement accounts. I’d like to one day make “enough money” where I can donate a sizable amount to non-profit(s) I care about. There are lots.

I’m always intrigued by the person who can’t walk by a homeless man or woman on the street without giving them cash, or, even better, a meal. I’m awed. I grew up in the ‘burbs of NY. My parents taught me to look the other way.

These days, I don’t know which way to look. I just feel so guilty for having such great luck (as in, having a job right now, not having student loans, etc) and so terrified of running out of money one day and going into debt. Money totally controls my life. I like having it (who doesn’t?) but I can’t stand not knowing what to do with it… and feeling like I don’t deserve it. That’s probably why I have a spending problem… I always want to get rid of it as soon as possible.

First Generation with Fiscal Suckage?

Frugal Zeigeist has a great post today about whether we’re the “first generation to be worse off than our parents.” She writes:

…I’d say that I’m way behind because of the way the work world has changed. My dad worked for a single employer in Canada and a single employer in the US; although he went through reorganizations, I don’t think he ever worried about layoffs or downsizing the way I do. He also has traditional pensions both from his years of work in Canada and from working in the US. Between that and Social Security, my parents have never had to touch their retirement savings. — Frugal Zeitgeist

At my age (24), my parents were living in New York City, renting an apartment. In a couple of years their apartment would go ‘co-op,’ and they’d buy and sell their place within a few years for enough profit to put a down payment on the house in New Jersey where I grew up.

My mom was a fashion designer, working for fairly low wages, and my father was… well, I think he was a grad student when he was 24. He was going to grad school for physics but dropped out and ended up working as an actuary (pension planner). He stayed with the same company UNTIL HE RETIRED. He obviously had a good pension plan in place as well. My mom… she stopped working as a fashion designer 10 years into her career to have children (waves).

I’m not sure where they were financially at 24. Were they struggling? Possibly. I assume that if my father had started his job as an actuary, his entry-level salary was probably pretty high. And back then it wasn’t so painfully expensive to live in a city like New York. Then they got lucky with buying their condo and selling it, and the rest is history.

Looking at where I’m at now, I don’t see myself buying a condo anytime soon. It’s not that it would be entirely impossible to make enough money to buy a small studio apartment, but I’d have to live extremely frugally and, even more so, I’d have to be sure I want to stay in this area for the foreseeable future. And I’m just not ready to make that kind of commitment.

Then again, the housing market seems to be pretty attractive right now. I don’t know a lot about it other than the fact that lots of people are losing their houses because they can’t afford their mortgages. That’s sad for them, but good for potential buyers.

I don’t want to just sit back and watch another housing boom happen without having the opportunity to partake. Still, I don’t think I’m ready to buy a condo.

So, instead, I spend $12,600 a year on rent. Ouch.

My 25-year-old boyfriend… he lives at home and works part time. I don’t think he’s ready to make that commitment either. :X

I wonder how much monthly payment on a studio condo would be. Would that help me be as successful as my parents were at my age?

In any case, Frugal makes this important point:

They key point that this thought exercise brought out for me is this: The rules of the game have changed big-time. In the modern economy, the cards are stacked in such a way that if I’m ever going to be better off than my parents, I can’t rely on employers or government to lend a helping hand as a reward for loyalty or years of service. It’s definitely possible to end up being better off than my parents ever were, but I have to make it happen on my own. — Frugal Zeitgeist

Personally I think the opportunity to switch employers and make oneself more of a commodity is to the advantage of the employee. It might hurt when it comes to long-term savings, but salaries (and benefits) are higher if the employee has well-sought skills.

Here’s to hoping that my skills will develop into ones that people want to pay me for!