Gaming the System

[Aggie]

Some in the middle class may put the noose on themselves at times but the overwhelming majority of people doesn't have much of a chance, you have to live somewhere, you have to be able to get to work, you aspire to a better salary so you "invest" in an education, and if you are normal enough you may have a child or two and then you have to pay for all the things involved.

I'd be interested to know how someone can avoid:

-paying rent and/or mortgage.
-paying for child care and/or education.
-paying for transportation when there are no available alternatives.

and more importantly:

-paying for a debilitating illness in the family.

The 0.1% seem to suggest that you should work at least 16 hours a day, don't get sick, don't get children, don't get married and spend all of your income paying for your housing and education.

People don't go broke because they pay for cable or cellphones, but because they get sick or they lose their job/hours. In the meantime the banks are laughing all the way at all the debt they acquired while dangling cheese on poorly informed people.

Sorry, caught myself speaking from a privileged position north of the border. It sometimes slips my mind how different the US is.  

Some of my rallying against discretionary spending is also from that perspective; food, alcohol, telecommunications, fuel, consumer goods and non-essential services are significantly higher here than there. Real estate tends to be higher in many cases, too (we didn't see a property bust of major magnitude in the crash of 2008).

I assume health care in the States remains brutal to the Canadian perspective? Obamacare has hogged the spotlight for a while now, and I haven't heard as many reports from the front about where medical costs have settled out.  It's well-known up here that one dare not set foot in the US without taking out lots of supplemental medical insurance.  I don't have an answer to financially surviving a debilitating illness in the family other than an overhaul of the system.  It's not really a part of the Canadian narrative.    I've got a cousin who's gone at least a dozen rounds with melanoma in pretty much every part of her body (skin, lungs, brain, lymphatic system, various organs and tissues) and while I'm sure some of the pharmaceuticals involved are very expensive, unbearable financial impacts haven't been part of that discussion that I know of.

Education costs have been going up here, but still remain more or less affordable to pay back relative to one's career path (i.e. med school debt is massive, but doctors can afford to pay it back in a short period). It's possible to access grants and loan-forgiveness programs especially if one pursues education for jobs where demand exceeds supply. I've heard that universities in the US have been cranking up tuition fees and taking more of a profit-oriented approach.

Childcare is a killer; I mourn the loss of a one-earner family system that allows parents to parent their own children - not necessarily the mother. I support equal rights for men to be the primary caregiver and/or equally share the parenting and earning.  The deck is horribly stacked against the latter in the corporate world, which demands over-availability and isn't interested in retaining someone who can work only 20-30 hrs a week. Then again, it's not that uncommon to hear of families where one earner's income is only a couple of hundred dollars higher than child care costs.  That doesn't seem logical to me... wouldn't it be better to stay at home with the kids and be able to capture some of the additional savings that go along with that? (less reliance on convenience foods, more time to look for bargains, in some cases the ability to home-grow a good percentage of the family's food)

Transportation is a killer too...  I've gone this year from a centrally located house where I could walk to work and most amenities to a short commute (10 km or less, but lots of hill and corners).  That in itself has spiked my transportation costs significantly, by up to $100 per month in fuel, not to mention wear and tear on my vehicle. I don't have a practical way to reduce that cost.  When I lived in a major city, I made a point of living downtown within walking distance of work (as little as half a block in one case), but this isn't always practical for families and can also result in higher rent.  I'm not sure I'd go back to living in a flat, either...  I can take low square footage, but need some outdoor space attached. That being said, it's getting increasingly rare to find someone in the middle class who has a vehicle fully paid off. A car is often a big status-piece, so while low-income folks tend to be fairly canny about hanging onto their vehicles for 10+ years, there's an income threshold at which many people would prefer to make monthly payments on a new $20,000 - $30,000 car with no down payment rather than save up enough to buy an older but equivalent model car for a fraction of this price. Under a certain price point, I realize that maintenance and repairs can make a cheap beater a bad investment and money trap.

I have answers to avoiding rent but they are not applicable to the general population.  That being said, the status-driven chase for higher gross income can distort the rent question.

When I was living in the city during oil boom years, $80,000 per year felt distinctly lower middle class _{(my ex-wife essentially left me at this income level for being too poor )} In the small city where I live now, that sort of income is considered very desirably upper middle class, and any sort of 6-figure income puts you in Rich F*cker territory. Cost of living (esp. fuel and consumer goods) is considered to be much higher here, but anyone with a small backyard can grow at least half of their yearly produce cheaply and easily due to the climate, and rent is significantly less.  One other factor that probably isn't discussed much is the cost of one's wardrobe in a white-collar job, and for city living in general. Business wear isn't cheap, and looking the part is a factor in career advancement; this becomes much less of a factor in a more casual environment. Trying to replicate a small-town standard of living in a larger centre means living in the suburbs with a long commute at the start and end of a long work day (and all associated transportation costs), which becomes demoralizing and effectively drops your per-hour salary.

It's also difficult to find intelligent employees with a decent work ethic here (as most flee to the cities where the gross earning potential is higher), so it becomes quite easy to be a superstar employee.  I've been given multiple job offers just from being hardworking, efficient and cheerful while volunteering at events or working temporary jobs. Smaller centres are good for networking, and with a higher proportion of small businesses as employers it becomes easier to secure long-term employment that is less prone to mass layoffs.  When owners interact constantly with their employees, they tend to see them as people more than as numbers (finding a good boss, OTOH, is not always easy). It's not a stretch in a smaller town to hold the same job for decades, provided the business itself keeps afloat.

Some of these factors (not including medical costs) are so tightly interlinked that while it's possible to optimize them, it really needs to be done at an age where one is not ready to tackle these sorts of problems. For instance, if a young person can objectively look for career areas that take a minimum of education to get into a well-paying job that is undersupplied with skilled workers, and be willing to move to a less desirable/more remote area of the country for the first few years of one's career, it's possible to get ahead of the curve a bit and have some flexibility.  Canada's resource economy has made this possible for quite a while, although it's not as rosy at the moment with the price of oil down.

This isn't the case for the majority of US workers, perhaps. Blue collar jobs have declined and/or no longer pay a decent living wage, so there's been  a scramble for white-collar cubicle jobs. This has given employers the upper hand in squeezing every last drop of work out of their employees, by holding an axe over the head of anyone who doesn't comply.

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I suppose I rally against discretionary spending because it seems like the easiest way to cut cost of living.  The current push towards perpetual monthly payments on goods and services (especially online services, but also for financing purchases and leasing toys) frightens me, because this is the sort of system that makes a job loss or inability to work result in a major life disruption. It becomes a trap that reduces flexibility of employment and allows exactly the type of employer leverage that is grinding workers into the ground. Rent and food are always going to be necessary costs, but adding a $300+++ car payment, a $150 telecoms bill (phone, net and cable commonly costs more than this here), $200++ minimum monthly credit card payments and a few modest cloud-based service on top of this makes unemployment positively frightening. If you can't tell your employer to f*ck off when they deserve it, they can run you ragged with nary a peep.

I still insists that advertising of consumer goods is straight-up capitalist propaganda that distorts our spending habits as individuals, especially in desiring quick-fix consumables and pushing us to pursue the latest and greatest products. If you could reasonably put $20 per week aside for a year to buy a new TV, or buy it now on credit, what seems like the better option? Consider also that the price of that same TV is likely to drop by a large percentage over the year. Does your old TV really need replacing if it works as well as it always has? As a society, we've become very discontent with having something formerly adequate simply because better is available. Moore's law and the associated acceleration of digital services has aggravated this in regards to personal electronics...  there becomes a point where one's old smartphone or PC simply starts to lack the processing power to keep up with the newest services and the data capacities required.

The ubiquity of value-added food products is also something I rally against in general (despite the fact that I do use a certain set of processed foods); while many of these foods are cheap in terms of calories, their market share reflects their profitability to producers, and therefore represent a poor value to consumers. Anything that needs to be heavily advertised in order to sell is probably a bad bargain in terms of health, taste and plain old economics; some of the money you spend on any advertised product is literally paying to push more ads in your face. Good-value foods don't generally need advertising.  When's the last time you saw an ad for a carrot?  Given the life-destroying costs of health care in the US, the wisest investment one can make in terms of dollars and sense is to eat a healthy diet of home-prepared whole foods.  The ability to do this depends on having the time to do so, which reduces one's income now, but is a good long-term bet.

Factoring that into the discussion of having two-earner families vs. going back to a homemaker-based family system (1 FT or 2 PT) is a game changer, IMHO.  I'm aware that I'm being biased towards 2-parent families here, which we've moved away from a bit as a society.

_{(disclaimer: I've done poorly with following my own advice on this lately, especially because my workplaces provide me with free or very cheap meals.  The Vietnamese restaurant is generally healthy food and freshly prepared, but pub food isn't so healthy, despite being mostly freshly prep'd in-house).}

The 0.1% seem to suggest that you should work at least 16 hours a day, don't get sick, don't get children, don't get married and spend all of your income paying for your housing and education.

It's in their best interests to do so, and as long as people keep chasing the lifestyle promoted by that 0.1%, we're going to stay trapped on that treadmill.

The increase in individualism that has occurred over the past few generations leaves us prone to this, I think, as have some other cultural shifts. That lifestyle is so bleak and alienating that it leads people to seek quick and easy sources of satisfaction, which - not surprisingly - are most readily accomplished by buying all the things that advertising tells us will make us happy.  The move to individualized direct-to-your-screen advertising tailored to your demographic, geographical location and personal consumption habits, combined with advances in online shopping and logistics which allow instant wish gratification is IMHO a game-changer. We're about to see a whole new level of discretionary spending and associated consumer debt in the next decade. We need to spend most of our income on housing and education, but it's incredibly frustrating to restrict our spending to only those things, so we necessarily go into debt to fulfill our wants and feel like we have the ability to exert our will on the world around us.

It's a complex picture that can't be attributed to one thing, but it bears comparison to previous generations' standards of living.

Imagine going back to the living standards of the 50's - 60's, raising 2.5 children in a 1200 sq. ft. 3 bedroom house with one TV in the living room (with no cable fees), one phone, a parent around at least most of the time, no game console, kids playing unorganized games of imagination around the block with a couple of sticks, home-prepared meals and a single vehicle.  Is this a lesser standard of living? Yes, in many ways.  Is it an inadequate standard of living?

Now imagine a 4000 sq. ft. 4 bedroom 5 bathroom house where each of the 1.5 children have their own tablet/computer/phone, a TV in every large room, are bought enough consumer goods to be considered a major marketing category (tweens) despite having no earnings of their own. The parents arrive home with take-out or heat up some convenience food at the end of the work day in order to get the kids dropped off at soccer/baseball/piano/whatever practice on time; the kids probably already nuked something and ate it in their rooms. Is this a richer standard of living? Yes, undoubtedly.  Is it a better standard of living in terms of the mental and physical well-being of the family?

Heck, forget the kids. If you want to be able to travel, dine out at *good* restaurants, drive a sporty 2-door and drink decent wine, let alone afford that 4000 sq. ft. house, kids are too damned expensive.  It's also important to retire with enough savings to ensure you die with enough money to pass down to the next genera... oh, never mind.

Yeah, I'm trotting out some worn-out cliches here, and I'm not promoting a return to the cultural values of an earlier time, but I do want to point out that what many people consider an ideal standard of living has more to do with consumer culture and income-based status chasing than what's actually best for us as individuals.  Comparing the two scenarios, do you see any clues as to why debt levels have risen even more spectacularly than family incomes, and why most people are feeling ground down to the bone with their lifestyles?

More is not always better, and I'm intent on finding the minimum appropriate standard of living that satisfies me, with room for a few simple luxuries on top of that.

People don't go broke because they pay for cable or cellphones, but because they get sick or they lose their job/hours. In the meantime the banks are laughing all the way at all the debt they acquired while dangling cheese on poorly informed people.

I strongly agree that people are poorly informed in general, and there's a clear financial interest in keeping them that way.  While I agree that what pushes someone over the top into bankruptcy or inescapable debt tends to be due to major events, it's my opinion that learning to live a more modest lifestyle and resisting non-essential purchases allows one to stay out of debt during the normal course of events, and build up enough of a savings cushion to weather periodic crises without being financially annihilated. I'm of the 'every drop counts' school when it comes to spending, so while I have my little indulgences here and there, I'm dead serious about keeping my basic costs down and clawing back a few cents here and there on the normal course of living to afford those indulgences.

I don't think the service industry is as lucrative in most parts of the US (in fact, I've heard it's quite dismal), but I've gotten back into that industry segment largely because it offers the best trade-off I can find in terms of flexibility of hours, pay and employability. I have several friends who have created a very sustainable and comfortable standard of living serving tables, including a single mom with two children who works about 25 hours a week, owns her own home, accesses child care subsidies while still having friends* and family providing the care, and generally lives quite comfortably. This does depend on being able to access a number of low-income benefit programs that may not exist south of the border. 

_{*the non-traditional schedule of service work makes it possible to do some collective childcare swaps with other single-parent co-workers.}

I'm currently focusing on lowering my cost of living as much as possible, to allow me to live with a much lower gross income while still having the ability to save (hopefully - I'm in investment phase this year, and it'll take time to recoup some costs). This is possible largely because I'm single and childless at the moment, with enough of a cushion to live outside of my income at times. However, it's being undertaken with an eye to parenting and creating a lifestyle that allows me to NOT work 16 hour days or be shipped across the countryside to earn a living.  My sister has chosen to take a higher-income path with a more lavish lifestyle, so I consider it good niche diversification for the family line.   

I take the approach to life that I do because I've realized that the top 10% (or whatever) is very adept at working every legal and tax loophole they can to maximize their returns and minimize their outputs. I have no qualms about taking a similar approach to sidestepping the cultural norms that favour them, in exchange for a lifestyle that stacks the deck in my own favour. I've put enough money into the system over the years that I don't consider it freeloading (have never taken unemployment insurance, and probably never will). If they're setting the rules, it's my responsibility to know those rules and game the system to my advantage.

[Sibling Zono (anon1mat0)]

Perhaps we don't live in different countries in the same continent but on different planets regarding money issues.

According to a list based on a Harvard study 62% of personal bankruptcies are due to medical expenses and of those 72% had some form of medical insurance. The next reasons are Reduced Income, Job Loss, Credit Debt (ie, no longer employed and/or sick to afford paying it), Divorce, Unexpected Expenses, Student Loans,, Utility Payments, Foreclosure and finally Overspending.

Even with Obamacare if you get a debilitating sickness you can lose your job or simply not be able to afford procedures and/or drugs. There is no real safety net for long term disability around here, so if you are a wage earner and you get, say, a difficult cancer, you may be able so manage the first few months of your illness but sooner or later you won't be able to keep working hence losing your job, and in consequence, your insurance. If the person getting sick isn't a wage earner copays can become quite hard on you (for instance, our current insurance has a US$5000 copay per year, per person, which means that most of our medical expenses actually come out of our pockets), and what Obamacare did was to prevent insurance companies to drop you if you got sick, still some illnesses can be quite expensive either if you have expensive procedures or expensive drugs.

As a point of reference we at home both work, I have a part time job since I was laid off last year, and despite having only one car to pay, a reasonable mortgage that with the condo administration cost is still cheaper than your average rent and not really going overboard on anything we are barely covering our expenses (having a son in the university doesn't really help though, despite the fact he has a scholarship that helps to pay for his rent).

Sure, I can drop our cable and just leave the internet but it isn't going to make a huge difference (I might have to do it BTW), cellphones are ~US$30 a month per line (although we are paying for all of our parents' and our son's lines... ) and our CC debt which isn't because we purchased the latest TV/Phone/Computer/Tablet/Camera/[insert toy here] available.

Is it possible to live withing our means, sure, but it's gotten harder and we [fortunately] don't have anyone with a debilitating illness in our family.

So forgive me if I don't fall that quick for the consumerism thing, yes, it is a problem, and yes, it can screw you up, but in the end the big ticket items aren't the sports car in the driveway (nothing fancy here and we use them for years after those are paid off) or the TV in the living room (nor that you can avoid spending on some of them, like our washer machine which in our case needs to be replaced  ).

[Griffin NoName]

Sounds tough Zono. Perhaps something will happen that improves things. They sometimes do.

Of course it is different over here. They are just killing off the poor and useless and sick people to save on benefit costs. The UN are investigating us but not quickly enough for the people who are dying. The ruling party, who's policy it is, know exactly what they are doing and don't care. Every time it is "exposed" when another tragic tale hits the headlines they just don't answer the questions, or blatently lie. I seriously won't be surprised when these undesirables have to wear distinguishiing armbands.

I live on a tiny pension augmented by sickness benefit which I shall probably lose in the next few months. I just about break even at present, and have no idea how I will be able to reduce outgoings if and when the axe falls. Being sick is expensive even with free health care. Not thaat we'll have any healthcare soon. The aforementioned State is reducing clinicians to gibbering wrecks so most now go abroad to practice.

[Aggie]

So forgive me if I don't fall that quick for the consumerism thing, yes, it is a problem, and yes, it can screw you up, but in the end the big ticket items aren't the sports car in the driveway (nothing fancy here and we use them for years after those are paid off) or the TV in the living room (nor that you can avoid spending on some of them, like our washer machine which in our case needs to be replaced  ).

  No forgiveness required for having a different viewpoint and experience, Sibling.  If anything, forgive me for getting too lost in the big picture and tuning out of the personal aspects of things.  I know we have a different perspective and opinion on some things, so I very much value your input and hope you feel free to poke holes in my arguments at any and all times. I appreciate it.  

I do understand how CC debt can build up stealthily and due to necessary and unforeseen costs such as groceries, unexpected repairs (vehicles or necessary appliances, etc) and the like.  If you lose your job, you can't just stop eating to compensate, and if you need your car to get to work, you can't just wait until you've saved enough money to fix the clutch.

We may well come from different financial planets. Central to this is the fact that I can selfishly look out for myself and my own needs/wants at the moment, whereas you are talking about supporting multiple generations. I don't anticipate having to cover expenses for my parents at any point. When I was growing up, we generally lived well below our means on a daily basis.  I was raised very anti-credit, and Dad had me contributing to my Registered Retirement Savings Plan (roughly equivalent to a 401(k) in the US) when I was still in high school. To put it bluntly, I'm a cheap bastard and have been programmed to actively reject a lot of what other people consider desirable in life because it doesn't make financial sense, and take extra joy in free or low-cost experiences.

Trying to live in too many different financial worlds at the same time has become a struggle for me. I'm anxious about the costs of parenthood, and feel like I need to have my savings, investments and income stream in order before having children (not uncommon, and a big reason that many are delaying parenthood these days). I also feel the need to keep up financially with an earning class that I'm no longer a part of. OTOH, I feel self-conscious in many of my circles about having a greater than average level of financial security, as if that makes me some sort of a class or ideological traitor. Even when I'm open with it here, I feel that it's perceived as impolite. Religion and politics are fairer game than money. On the third hand, I get looked at askance by conventional middle-class friends for my work choices, low income and unconventional lifestyle.

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I guess my anti-consumerism crusade is a reaction to things I feel are wrong with our society, relative to my own personal values. There's something insidious about it, even if one's not actually buying that much.  The societal expectation that one will possess a certain set of consumer goods isn't imaginary and IMHO is a bit of a stressor on those who either can't afford or don't want to own those things. This seems to undermine the supposed holy cow of individualism that's often trumpeted (especially in ad campaigns  ) these days.

Then there's my own personal pissing match with advertising, social media, the banks / credit companies, Wall Street, etc, etc, etc. I express my disapproval by joyfully 'stealing'* as much as I can back from those bastards. I do everything I can to prevent or claw back every service charge my bank throws at me, and turn a profit on my credit card every year. Getting charged money to have money is bullshit, but the worst part of it is that the banks unfairly steal from those who don't have much money. A $15 per month banking fee (typical) is egregious for someone whose average balance is only a couple of hundred dollars after the bills get paid.  I hit them back every way I can manage.

_{*entirely by legal means}

I live on a tiny pension augmented by sickness benefit which I shall probably lose in the next few months. I just about break even at present, and have no idea how I will be able to reduce outgoings if and when the axe falls. Being sick is expensive even with free health care. Not thaat we'll have any healthcare soon. The aforementioned State is reducing clinicians to gibbering wrecks so most now go abroad to practice.

Pensions and disability allowances are dismal here as well, Griffin.  I'm not sure how they expect people to live on the sums provided.  It might cover food and rent if one is mobile and in a shared living situation, but as soon as other hardships are imposed (which goes hand-in-hand with disabilities), it's a grim situation.  Canada too suffers a doctor drain down to the US, and as a result steals doctors from other countries to make up the difference.  We're still short on physicians, and the system is geared to pay the ones we do have on volume of patients seen rather than quality of care.