The American Dream Is Now Officially Unaffordable

[Zorkorist]

It's a Brave New World.

-John

 

[randomrogue]

You would be a fool to NOT work for the government today if you're an average Joe. Everyone I know who has a government job has great benefits and makes $100,000 a year with overtime.

This was not true before but today? Three month training courses and $65,000 starting salaries? They were hiring at my local police station for as high as $6000 a month starting. When I was in LA they police officers made as much as $90,000. None of that with overtime.

 

[Zorkorist]

Talk about inflation.

-John

 

[Zorkorist]

Normal people, doing normal things, are priced out of the market.

Worse yet, they are replaceable.

They are inconsequential.

They don't matter at all.

THAT is SLAVERY.

-John

 

[randomrogue]

Slavery in the workplace is more defined by lack of benefits. Everyone is replaceable (almost) but a slave gets very little for his efforts.

The thing that's killing everyone today is that the costs associated with surviving have risen dramatically. Forget housing for a moment. Think healthcare and daycare. Think transportation and utilities. Take a long shower and your bill goes up by $150 a month. Think paying for your education or your childrens education. Think paying for your retirement. Compare this to 20 years ago and it's changed a lot.

 

[JEDIYoda]

thanks obama

Thanks Republicans!!

 

[Zorkorist]

No. It's easier than ever to live today. Government keeps spending money that it doesn't have.

But succeeding in life, is becoming more and more polarized. You have the haves, and the have nots.

America has never been that way... we were always for freedom, and recognizing hard work.

Today we are all subject to Government.... and polarized with haves, and have nots.

-John

 

[Zebo]

You would be a fool to NOT work for the government today if you're an average Joe. Everyone I know who has a government job has great benefits and makes $100,000 a year with overtime.

This was not true before but today? Three month training courses and $65,000 starting salaries? They were hiring at my local police station for as high as $6000 a month starting. When I was in LA they police officers made as much as $90,000. None of that with overtime.

govt can print or borrow unlimited monies what do u expect

 

[Spungo]

I see the Rich Republicans in here blaming Obama.

What exactly did he personally do to cause this?

While Obama was busy working on his golf game instead of doing his job, the federal reserve successfully reached its desired level of cost-push inflation. You know, because things like soaring energy and food bills are good for the economy.

Gallup poll: Americans are having a harder time covering basic necessities.
People are seeing unchecked inflation in groceries, gasoline, utilities, healthcare, toilet paper, rent, housing, telecommunications, toothpaste, etc. Due to the high inflation, Americans don't have surplus cash for things like retail shopping. This is why retail spending is in the toilet, and it's not an accident. Central bankers are not idiots. All of them have doctorate degrees in economics, so they understand perfectly well that diverting a larger percentage of income toward food and energy means a smaller percentage of income can be used for things like starting a business, hiring people, buying consumer goods, etc.

Edward Snowden and Ben Bernanke tell you everything you need to know about the Obama administration. Snowden exposed an evil spy network that puts the KGB to shame. Bernanke caused home ownership to hit generational lows, labor participation to hit generational lows, and wealth inequality to hit all time highs. Guess which one Obama agrees with and which one Obama has chased out of the country.

 

[manimal]

Nothing is impossible, FDR moved fucking mountians and he was an elite. Obama is just bought and sold like a good house ni**er

Hey everybody look at the racist bigot!
I used to think you were amusing but now your just a fool and a tool of talk radio.


Calling someone a n bomb really makes you look like an ignorant simpleton.

Go back to the 50s where you belong.

 

[Matt1970]

Not for a household. That's only 65k each.

That's more than twice the median household income.

 

[Bitek]

Not for a household. That's only 65k each.

That's more than twice the median household income.

I think that is about right. that includes funding all the necessary savings accounts, like retirement, old age care, normal savings for house/car repairs etc, and I bet they included some savings for kids college funds.

properly funding you are savings accounts is very expensive. That's how the baby boomers ended up having the historically high wealth as a generation, yet ended up having very little for retirement savings.

 

[Genx87]

This is such a first world problem article. 17,000(~1500\month) in extras. Car payments\costs ~1k\month. Food at over 1K\month. A fully invested 401k at 17,500.

I can say this is truely an American "dream". And yes most people cant afford it for the very reason it is a dream.

 

[Exterous]

n May, AAA estimated it would cost $11,039 a year to own one four-wheel-drive sport-utility vehicle.

I'd be interested in knowing their assumptions for that. I owned an SUV and it certainly didn't cost me $11k a year. Now if you want to spend $25k+ on a vehicle you'll drive at\above the average distance a year of 16,000 miles you might hit that number with $2500 in repair\maint bills.

Also assumes:
$3100 for entertainment
$3600 in restaurants
Saving $5k a year for college
Maxing 401k contributions

 

[IndyColtsFan]

This is such a first world problem article. 17,000(~1500\month) in extras. Car payments\costs ~1k\month. Food at over 1K\month. A fully invested 401k at 17,500.

I can say this is truely an American "dream". And yes most people cant afford it for the very reason it is a dream.

Color me shocked that Dave didn't even bother analyzing what the article said.

 

[soulcougher73]

and why is it wrong? current president should shoulder all of the blame for that which happens while they are in office no?

No

 

[Spungo]

properly funding you are savings accounts is very expensive. That's how the baby boomers ended up having the historically high wealth as a generation, yet ended up having very little for retirement savings.

I think everyone should read Seth Klarman's book on value investing; finding a PDF online is not difficult. It was published in 1991, but you would swear it was written in 2010. Every single thing that happened during the last banking crisis also happened in the 1980s. The book even uses terms like "chasing yield" to describe the phenomenon of people buying sub-prime bonds above face value as the fed lowers interest rates. The book describes a tech bubble that happened in the 1980s, and it was almost an exact copy of the 2000 bubble. Instead of the internet, it was things like computer hardware and computer software. The book goes over stupid metrics used to value assets. In 2000, idiots were talking about "clicks" or "eyeballs" per dollar. In the
1980s, idiots were inventing terms like EBITDA - Earnings Before Interest, Taxes, Depreciation, and Amortization. If you think about it for two seconds, this metric doesn't make any sense. Why would you choose to ignore things like taxes, depreciation, and amortization? The only reason for doing that is to justify stock prices that are disgustingly expensive when using classic valuation methods involving free cash flow or dividends. Microsoft is a tech company, but nobody tries to value it using eyeballs and clicks. They have real cash flow, they have real earnings, they have real profits.

Why do I mention all of this? I mention it because baby boomers were there. They were alive during that time. They saw the 1980s tech bubble. They saw the bond bubble. They saw the savings and loan crisis. They've seen all of this before.
Baby boomers have no savings because they want to be poor. They looked back 10-20 years, remembered the time they lost their life savings because they invested in some company that makes floppy disks, and they said "Hey, I want to do that again. I want to lose my life savings one more time." Their wish was granted, and many of them lost their life savings a second time. Then there was a housing bubble for the next few years. Baby boomers looked back at the period from 1975 to 1980 and say "Hey, remember the time real estate completely crashed due to rising interest rates? Let's do that again. I want to lose my life savings a third time, but this time I'm going to do it with borrowed money on a variable interest rate while interest rates are at record lows and can only go up from here!"

Baby boomers are not stupid. They wanted poverty, and they've achieved poverty. I give them full credit for setting a goal and reaching it.

 

[fleshconsumed]

The article is a hit and miss when it comes to estimating the costs of dream/living. The housing costs are spot on because they're based on hard numbers - the median house price and 4% interest rate. 17K is about what one would have to spend on a median mortgage + taxes + maintenance. Other costs far less solid. 11K for a single 4wd SUV? Sure, if you buy 50K car and drive it 20K a year. With good buying decisions 11K a year should be good for two mid level cars after you include gas, insurance, and maintenance. Food budget is also a little high. $4500 for vacation budget seems about right if you have kids and plan on flying or do not have extended family members to help you cut the costs.

Bottom line though, the article is far closer to the reality than most people would like to admit. Sure, you can pick apart "frivolous" spending and laugh at some of the costs that are clearly overestimated. However, in a median household with a median house, and two mid level cars, it takes $45-50K just to survive. And that does not include vacation budgets, retirement savings, college savings, daycare if necessary, or stashing away for emergencies and what not. All the other stuff would probably add up to 90K I'd say. Still about twice the median income. It used to be called American Dream because it was a Dream that could be achieved by any American. Perhaps, like Genx87 has said, it's become a Dream because most people can only dream of achieving it.

 

[randomrogue]

Nitpicking gets beyond the point.

Food? You're absolutely right you can lower that budget however most people are not cooking with raw ingredients every day, are not just eating rice and chicken, are eating out, and are spending a fair penny on it. A grand for 4 people is not that far off the mark if you're either cooking expensive and good ingredients or are eating lots of processed foods. Generally that's where most of us are. Take a couple hundred bucks off but that's not that big of a deal.

Most people are also not getting the best insurance rates. Remember insurance rates are dependent on your FICO score and most of America took a beating these last few years. Gas prices fluctuate by as much as 10% depending on where you live. Maybe more.

Raising children has got to be the biggest slap in the face. Holy crap has that gotten expensive. Unless of course you're not going to pay for their education and are wealthy enough to not need daycare since one of you is a stay at home parent. When you add up how much money you need to get through the pregnancy, maternity leave, day care, education, and so on it is a financial nightmare. Who is in love with paying $800 a month for part time daycare? Not me. Your kid get into a car accident? Grats your insurance just rose by a fortune. Everyone I know has a kid that wrecked a car unfortunately.

The American dream is dead. I'm in the top percentiles but even I recognize that. What we have done as a country is unsustainable and as salaries get lower, costs get higher, and bubble after bubble keeps appearing the middle class is getting hammered out of existence.

 

[Naeeldar]

Nitpicking gets beyond the point.

Food? You're absolutely right you can lower that budget however most people are not cooking with raw ingredients every day, are not just eating rice and chicken, are eating out, and are spending a fair penny on it. A grand for 4 people is not that far off the mark if you're either cooking expensive and good ingredients or are eating lots of processed foods. Generally that's where most of us are. Take a couple hundred bucks off but that's not that big of a deal.

Most people are also not getting the best insurance rates. Remember insurance rates are dependent on your FICO score and most of America took a beating these last few years. Gas prices fluctuate by as much as 10% depending on where you live. Maybe more.

Raising children has got to be the biggest slap in the face. Holy crap has that gotten expensive. Unless of course you're not going to pay for their education and are wealthy enough to not need daycare since one of you is a stay at home parent. When you add up how much money you need to get through the pregnancy, maternity leave, day care, education, and so on it is a financial nightmare. Who is in love with paying $800 a month for part time daycare? Not me. Your kid get into a car accident? Grats your insurance just rose by a fortune. Everyone I know has a kid that wrecked a car unfortunately.

The American dream is dead. I'm in the top percentiles but even I recognize that. What we have done as a country is unsustainable and as salaries get lower, costs get higher, and bubble after bubble keeps appearing the middle class is getting hammered out of existence.

Agree with all your points. For the most part it's spot on and housing in a lot of areas of the country (north east and west coast) is even low on the numbers. Overall I can't see being well off with less than $100,000 and even that goes quickly. If the country doesn't change it's only going to get worse. But i still think we could change things for the better at this point - it hasn't reached a total tipping point yet. Unfortunately I don't believe anybody in govt has the fortitude to push the changes in that would be required. Which would require pain on a lot of peoples fault.

It's a shame but I feel bad for the generation coming out of college now and all the kids younger - it's going to be far harder on them. This is also coming from somebody who hit the required number by age 27 (I'm 30 now) - as a single professional. I'm doing very well but I recognize how bad out there it is.

Too bad it's unlikely to get better until things get a lot worse.

 

[realibrad]

So where do my GF and I fall?

Combined income just above 80k gross.
We just bought a 250k house.
She put herself though school.
I am putting myself through school.
I am 27 she is 25.

We live a very comfortable life. If I am not middle class, then I can't wait to get there because life is good.

Neither of us come from wealthy families but we both live better than our parents. I know that I could not live this life without someone splitting the bills, but I'm not even considered middle class and life is good.

 

[Naeeldar]

So where do my GF and I fall?

Combined income just above 80k gross.
We just bought a 250k house.
She put herself though school.
I am putting myself through school.
I am 27 she is 25.

We live a very comfortable life. If I am not middle class, then I can't wait to get there because life is good.

Neither of us come from wealthy families but we both live better than our parents. I know that I could not live this life without someone splitting the bills, but I'm not even considered middle class and life is good.

It's interesting, I'm going to assume you put down more than 20% on the home? If not then I'd say the not being middle class would be realized when you start adding kids, home repairs/upgrades, new car purchases on top of your current mortgage payment. At 20% down you are probably paying 1,600-1,700 a month on the payment. That's not exactly leaving a lot of wiggle room for vacations, children, home repairs etc.. Not to mention savings on top of everything.

I gross more than that and I'm comfortable with your payment but even then I wouldn't be living the same lifestyle if I had children to pay for on top of it all.

 

[Zaap]

Yeah yeah, because the American Dream (tm) was just handed to past generations.

No one ever suffered through a great depression. Streets were paved with platinum. Jobs (all guaranteed for life) all paid mega-rich wages and no one ever complained about hard work/low pay. There was never anything to derail whatever anyone wanted... like being drafted by your government and sent off in your prime to die 4,000 miles from home, or any such hardships that the current "Most Put-Upon Generation" faces.

Jobs, houses, cars, all the trappings just fell in people's laps.

But somehow, we needed more and more and bigger and bigger and more intrusive government creating larger and larger piles of debt to go from the age when everything was super-awesome...

... to the age where everything supposedly sucks worse than ever.

Now THAT'S progress.

 

[realibrad]

It's interesting, I'm going to assume you put down more than 20% on the home? If not then I'd say the not being middle class would be realized when you start adding kids, home repairs/upgrades, new car purchases on top of your current mortgage payment. At 20% down you are probably paying 1,600-1,700 a month on the payment. That's not exactly leaving a lot of wiggle room for vacations, children, home repairs etc.. Not to mention savings on top of everything.

I gross more than that and I'm comfortable with your payment but even then I wouldn't be living the same lifestyle if I had children to pay for on top of it all.

We actually did not put down 20% on the house. We were going to and skip PMI but there were things we wanted to do to the house first. It worked out, because 2 weeks after we bought the house we found a leak under the slab. We ended up re-plumbing the whole house because we were doing other work and were putting in new tile. Our mortgage is $1897 a month, but once PMI drops its goes to about 1800 a month.

You are right that kids would probably be out of the equation for now. We first started looking for houses for around 170k which is not bad in South FL where we are. After a year of trying to find something, we had more cash and were a little more flexible. We ended up finding our house in an amazing neighborhood in a great community.

We can afford the house we got but expect to start making more in the future and that would allow us to have kids. I bought my car new in 2008 and paid it off, so I wont need a car for a while. So I figure another combined 20k gross and we should be able to afford kids.

There are tradeoffs for sure. We dont drink for the most part or go out all that often and if we do, the night usually cost maybe $50-$70. We take vacations but even then we try and save money. Most expensive trip we took was a cruise that was about 2200 in total.

 

[werepossum]

So where do my GF and I fall?

Combined income just above 80k gross.
We just bought a 250k house.
She put herself though school.
I am putting myself through school.
I am 27 she is 25.

We live a very comfortable life. If I am not middle class, then I can't wait to get there because life is good.

Neither of us come from wealthy families but we both live better than our parents. I know that I could not live this life without someone splitting the bills, but I'm not even considered middle class and life is good.

You are very much middle class. In fact, you're on the upper end of the spectrum. Average household income is around lower fifties. I earn that and as a single earner family we live just fine. Our house is paid off, our cars are paid off (even one 4x4 SUV, although a four seater Chevy Tracker convertible might not qualify), my motorcycle is paid off, in fact we don't owe anyone anything and we live pretty well. I'm living the American dream; you are living the American dream. Those who believe they need $130k per year to live the American dream are either in very expensive areas or suffer from stupidity or bad luck.