This was one of the takeaways from the Country Financial Security Index, a survey of about 3,000 U.S. residents published a few months ago. More than half (55 percent) of the respondents consider themselves “middle-class,” even though some of them made incomes of as much as $200,000 a year.
Depending on where you live, $200k might not be enough to live on, at least comfortably. Which brings us to another result, something called the survey authors call the “comfort gap.” Nearly half of the respondents believe that $50,000 to $100,00 is enough to live comfortably. Yet only 34 percent consider the people who earn such incomes to be “financially well-off.”
Sure, they may have nice stuff. But actual security? Not gonna happen on that salary.
And here’s the part that concerns me: More than half of the respondents who described themselves as “wealthy” believe that an individual could live comfortably on $25,000 to $50,000 a year.
In some places that might be true: $50k in rural Mississippi is a lot different than $50k in New York City or San Francisco. But can you really rent or buy a place to live, pay for transportation, cover daily living expenses and save for retirement on as little as $25,000 a year?
I’m betting not – or at least, not without some serious help from family. Stuff like:
- Getting help with landing your first job (it’s not what you know…) or having well-connected relatives network on your behalf (Mary Gates did quite a bit for her son Billy at the beginning).
- Having a relative give you an old car or sell it to you cheaply (I personally have “sold” two cars for a buck each to family members).
- Inheriting a house when your folks die, or being able to buy it from them on a handshake deal (no mortgage required!) from them when they downsize.
And suppose this individual wants to get married and/or start a family? Or has student or consumer debt? (Remember: Serious debt is not always about shopping. Impossible-to-pay medical bills are the No. 1 cause of bankruptcy in the United States.)
Are they for real?
I think there’s a serious disconnect here. The self-described rich people who truly believe that anyone can succeed on as little as $25,000 a year could be the same folks who leave disparaging comments on personal finance blogs. Stuff like:
- “I worked my way through college – I don’t know why today’s kids can’t do that.”
- “We survived on one income so my wife could stay home with our children – young people nowadays just don’t want to make any sacrifices.”
- “We always saved for a rainy day. We didn’t rely on credit cards when something went wrong.”
How nice for you. Now: When was that, exactly?
What did you pay back then for food, fuel and housing? How about auto, home and life insurance? Did the doctor let you pay in installments or demand payment at the time of service?
Was it necessary to have two cars because you and your partner lived 40 miles away from your jobs and there was no public transit? Could you and/or a relative fix that car yourselves?
If/when your wife went back to work, did a family member or nice neighbor lady get your kids off to school and watch them until you got home? Or did you have to pay through the nose for before- and after-school care?
Were your children faced with tons of extracurricular and/or sports options that you funded because you feared that otherwise their college portfolios would be lacking? And about college: You were able to work your way through because higher education was relatively affordable, whereas today’s diplomas come with average debt of $29,4000.
Maybe these rich people view their non-wealthy years as a time of heroic struggle. Perhaps for some those struggles were real. But how many others had a safety net (e.g., help from relatives) that kept them from any serious want?
And now? They have no clue. Do they know the average apartment rent in their town and how that compares to minimum wage?
When they point out “help wanted” signs as proof that there’s work for all, do they know how many are part-time and pay so little it wouldn’t cover the cost of child care?
Are they familiar with public transit, and did they ever have to take one bus to the child care center and another bus in the opposite direction to a job that starts at 8 a.m.? (Hint: In Anchorage, some bus lines run only once an hour.)
Have they forgotten (if they ever knew) what it’s like to be down to $2 until payday and buying generic mac ’n’ cheese instead of the fruits and vegetables they’d love to feed their kids?
To be clear: I am not saying that many of us couldn’t do with a refresher course on needs vs. wants. But it’s pretty shortsighted to assume that what was true 20 years ago – or even five – is still true today.