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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck...
Old 07-12-2006, 07:16 AM   #61
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck...

Quote:
Originally Posted by macdaddy
I find 70% hard to believe.* The top 20% of households have income of around $100k at the low end.*
I don't know. Oprah's three "Debt Diet" families make 70K, 90K, and 100K and all are in serious financial trouble. I think one family had a second mortgage that was over a year past due and another family had several bills (10K and up) that had gone to collections. One guy was stunned to find out that their student loan debt was 70K instead of 30K. How can people not even know how much they owe?

I'm not sure if these families are typical, but obviously income is no barrier to living paycheck-to-paycheck.
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck...
Old 07-12-2006, 07:36 AM   #62
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck...

I could probably go for quite a few years without a paycheck. And I'm sure most people here could do that as they are working towards not having a 'paycheck' for their lifestyle.

I ran this calculation a couple months ago, before the stock market hiccupped. I think I estimated that if I quit my job immediately and never went back to work, the money would run out when I'm 53. I'm 36 now. That was assuming a low return of like 2-3% above inflation, IIRC.

On a brighter note, I did calculate that if I could maintain a return of about 8.3% above inflation, then the money would last indefinitely! I'm not about to test the theory, though.
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck...
Old 07-12-2006, 07:53 AM   #63
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck...

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Originally Posted by FlowGirl

I'm not sure if these families are typical...
Keep in mind, this is 'Oprah' we're talking about. Just like newspaper headlines, she goes for the dramatic story. And she makes a good buck at it!

I still think there is quite a bit of truth to it in general though, and if you scale down the drama a bit, some pretty large % of families would fit these descriptions. I have no doubt that some significant % of +100K earning families live pay-to-pay.

I've seen it - earning some big bucks does not mean you have a clue about personal finance. It can also give you the feeling that you can just afford all this 'stuff' - after all, you make a lot of money, right? Spend, spend, spend.

-ERD50
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck...
Old 07-12-2006, 09:07 AM   #64
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck...

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Originally Posted by Cut-Throat
The definition for 'living Paycheck to Paycheck' given by Oprah was. If you lost your paycheck, you would have to borrow money to eat. You had no savings at all. No retirement savings, no Stocks, No bonds - nothing.
I imagine more than 30% have a pantry and fridge slam full of food. My guess is my food would last close to a month before it was gone - and that's after I've intentionally tried to stock the pantry with "just-in time" purchases.

Therefore, without considering general levels of savings, I doubt Oprah's 70% figure is accurate. By her definition, I'd guess 20% might live like this - if the paychecks stopped, they'd be out of food within 2 weeks. Although even this ignores the support provided by unemployment insurance. That would give you enough money to eat (not sure about paying the rent/mortgage!). Then there's the fact that there's a good chance you can get another job within 2-4 weeks to get the paychecks flowing again.
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck....
Old 07-12-2006, 09:42 AM   #65
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck....

OTOH there are a lot of paycheck to paycheck people who are as ignorant about shopping/eating as they are about finances. Their fridge contains some six packs, pudding paks and lunchables. Cupboards: pop tarts, Pringles and hamburger helper. They go shopping several times a week.
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck....
Old 07-12-2006, 09:49 AM   #66
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck....

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Originally Posted by youbet
Thanks C-T for the Oprah definition. *That gives some clarity to the Oprah 70% figure. *Clearly, she wasn't refering to liquidity issues but rather to "no food on the table" issues.

I think it's important to understand the difference between folks with liquidity problems (money tied up in houses, cars, collectibles, land, airplanes, jewelry, retirement plans, etc.) and someone who is just plain broke. *Sadly, I think it's the latter situation that is plagueing many of our fellow citizens today. * :-

If it was just a matter of selling off non-financial assets, and there were plenty of them, to make ends meet, not so bad, eh?*

But a lot of the people with liquidity problems are the same... they have a house note, but because of a HELOC not much equity... both (or more) cars are negative, no land, no airplane, probably some jewelry, but not much in their retirement plans (I can not save anything with all that I owe!!!)... I have seen these people... they make a very good salary and they are the same as the low income people you are thinking of.. if they lost their paycheck, they will be borrowing money to put food on thier table AND have a lot more debt to worry about...

You seen to talk more of the Donald Trump type people who are in a real cash flow issue, but have a high net worth (that is debateable with the Don)...
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck....
Old 07-12-2006, 11:53 AM   #67
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck....

My friends clear 120k+ in household income, rent their home, have less than one paycheck in their checking, no savings, debt on their credit cards, and their only real asset is time he's accrued in his pension system. Just because people make 100k doesn't mean they have any more padding than anyone else. In cities like New York, San Diego, L.A. and San Franciso (where they live) 100k is barely middle class wages!
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck....
Old 07-12-2006, 12:25 PM   #68
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck....

If wealth is defined by how long you can survive without a paycheck then the FIRE'd are infinitely wealthy, right?

Since I consider myself pretty close now to a comfortable ER, I have to assume that I could survive indefinitely, if somewhat less comforably, if the paychecks stopped tomorrow.

Another variable in the discussion is do people change their habits when the paychecks stop or do they just keep on spendin' like they're spendin' now until it's gone? Many of us would take actions to reduce expenses, many of the soon-to-be-bankrupt probably wouldn't even sell the vacation home...

Face it: there are two types of people in the world, those that know how to manage money and those that haven't a clue.
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck...
Old 07-12-2006, 12:48 PM   #69
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck...

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Originally Posted by Sheryl
Another variable in the discussion is do people change their habits when the paychecks stop or do they just keep on spendin' like they're spendin' now until it's gone? Many of us would take actions to reduce expenses, many of the soon-to-be-bankrupt probably wouldn't even sell the vacation home...
I think there's a period of disbelief and entitlement when the paycheck goes away. Disbelief in that things will probably turn around, times will get better, etc. Entitlement in that one "deserves" the lifestyle they were accustomed to prior to being layed off. There's also the fact that most of these folks that spend money like it was going out of style don't know their "burn rate" - how many months their dough will last them. Once they get to the point where they are out of money, it is too late. They can't sell all their obligations (cars, seadoos, vacation house(s), boats, etc) fast enough to avoid the continuing payments and also pay off the loans.

A lot of these folks budgeting and financial planning goes like this - "gee how much money do I have right now?" "Oh, $300?" "That means I can go to the beach this weekend". Then next month it'll be "oh, I've got $500 in my pocket - that will make a nice down payment on that new car I've "needed" for a while". The only question is "what will the money I currently have allow me to buy (regardless of the monthly payments I might incur)?"

There's two kinds of people in the world - those that know how to manage money and those that don't know they don't know how to manage money.
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck....
Old 07-12-2006, 01:00 PM   #70
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck....

Right. Those would be the people that buy cars based on how much of a monthly payment they can afford. When you ask them how many years their loan is, they don't even know.
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck...
Old 07-12-2006, 01:10 PM   #71
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck...

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Originally Posted by Sheryl
Right. Those would be the people that buy cars based on how much of a monthly payment they can afford. When you ask them how many years their loan is, they don't even know.
"Buying the payment" irritates me to no end for some reason! I don't know why people even negotiate the payment when they buy a car using the "buy the payment" technique. Just tell the dealer you'll pay full sticker price as long as he can figure out ANY way for your payment to be a certain amount. Then head straight to the financing counter.
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck....
Old 07-12-2006, 08:13 PM   #72
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck....

I am shocked that so many people cant believe that this is true. Of course you guys knock Rk but most of these people are doodad rich and money poor. Of course Gaap may consider your stuff assets but how much money are you going to really get if you have to start liquidating ?
Even though I make a high income most of the people I know with the same job are drowning in debt. Of course they say its cause they have kids and I dont that I have mo money then them
Then there are the tech's. I really dont know how they pay the bills with the money they make.
Rob
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck....
Old 07-12-2006, 09:03 PM   #73
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck....

Never ceased to amaze me when I hear people who makes +100K in debt up to their chin. I would have always thought these people are the ones with nice cars, nice house...look great top to bottom, good earning potential..what could go wrong?

Meanwhile I know people who are frugal...not necessarily know how to manage money such as investing, have pensions, etc but they have no extravagant hobbies, don't have the newest thing all the time, rarely shop and if do shop it's for food - kids. As I'm writing this, I'm thinking this is my sister's trait. 4 kids (overly fertile, I would guess) 2 boys, 2 girls (ain't it perfect??)

Life must be hectic, the oldest is only 9. She doesn't look like a superstar but in this 10 years they have managed to own 3 houses...paid off. The trade of is they only have 1 car which is 4 years old and paid off, rarely or never go on vacation as a family of 6...sometimes I look at them and thought I'm not sure I can do what she does.

People choose their destiny. Some to be rich, some to be poor. I'm sure somewhere between the lines they know what they're doing but not able to break the spell. Unless it is something such as medical situation, spend spend spend attitude is not an excuse.
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck....
Old 07-12-2006, 10:25 PM   #74
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck....

According to Table 3 of a recent survey by the Federal Reserve Board ("Recent Changes in U.S. Family Finances: Evidence from the 2001 and 2004 Survey of Consumer Finances", available in PDF format at http://www.federalreserve.gov/pubs/o...4/bull0206.pdf, page 8 ), the net worth of the average ("mean", technically speaking) family in the bottom 20% of all US families was $7.5K in 2004. They define "real net worth" as "the difference between families’ gross assets and their liabilities". That's very close to living "paycheck to paycheck".

The average family*between the 20% and the 40% marks was worth $34K, which may be close to living paycheck to paycheck as well depending on how quickly and efficiently you can*liquidate your assets. The next 20% were worth $71K and from that point on it gets much better.

Anecdotally, sure, there are lots of high income people who have little to no savings. I have worked with quite a few of them myself.
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck....
Old 07-13-2006, 12:15 PM   #75
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck....

Don't they count cars, lawn mowers, your Franklin Mint collection of genuine imitation arrowheads with Elvis painted on them etc. as "net assets"? If so the bottom 40% definitely look paycheck to paycheck to me.
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck....
Old 07-13-2006, 12:29 PM   #76
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck....

Quote:
Originally Posted by Laurence
Don't they count cars, lawn mowers, your Franklin Mint collection of genuine imitation arrowheads with Elvis painted on them etc. as "net assets"?
Right, vehicles are listed on page 21 of the report and collectibles are on page 24 under "remaining nonfinancial assets (tangible items including artwork, jewelry, precious metals, antiques, hobby equipment, and collectibles)".

Quote:
If so the bottom 40% definitely look paycheck to paycheck to me.
True, in most places selling your car is not a viable option if you are looking for a job. Also, if you own a house worth $700K and your mortgage is $650K, then on paper your net worth may be $50K, but how much cash are you really going to get after you pay your real estate agent, movers, etc?
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck....
Old 07-13-2006, 12:36 PM   #77
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck....

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Originally Posted by Scrooge
True, in most places selling your car is not a viable option if you are looking for a job. Also, if you own a house worth $700K and your mortgage is $650K, then on paper your net worth may be $50K, but how much cash are you really going to get after you pay your real estate agent, movers, etc?
Probably little to none, but tere are (very foolish) lenders who will give loan you up to 125% CLTV on your primary residence.
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck....
Old 07-13-2006, 01:51 PM   #78
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck....

Here is a small section from the report that talks about savings rates.
Keep in mind the study is based on surveys and other less than accuate data to come up with all the figures in the report.


...A separate question in the survey asks about families’
more typical saving habits. In 2004, 7.0 percent
of families reported that their spending usually
exceeds their income; 16.1 percent reported that the
two are usually about the same; 36.1 percent reported
that they typically save income ‘‘left over’’ at the end
of the year, income of one family member, or unusual
additional income; and 40.8 percent reported that
they save regularly.
These figures are not much changed over the last
three surveys....


So, 7 percent of families in the survey said they spend more than they make.

16 percent of families in the survey said they spend about what they make.

36 percent of families in the survey said they save some each year from what is left over.

40 percent of families in the survey said they save some each month.


It would appear from these surveys then that those families that don't save some each month could be living paycheck to paycheck for the most part. Clearly 23% do not save. An additional 36% save if there is anything left at the end of the year...this is not the same as actually saving money at the end of the year so I would put these in the don't save category.

That leaves the 40% who say they save some each month. I would venture a guess that these folks could ride out a couple of missed paychecks without selling the house.

60% of families in the survey would appear to be living paycheck to paycheck or would certainly be in deep doo doo if they missed a check or two. While this is not the same as the 70% Oprah figure it is pretty close and is near what many here have reported from their own experiences.

Another aspect of the Fed. report was the data on debt. Seems the lower the income and the older one is, the less likely they are to have debt. More income=more chance of having some form of debt.
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck....
Old 07-13-2006, 02:12 PM   #79
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck....

Quote:
Originally Posted by SteveR
Keep in mind the study is based on surveys and other less than accuate data to come up with all the figures in the report.
When you look into it, a surprising amount of data in government reports on unemployment, income, net worth and such is based on surveys. Changes from survey to survey -- as long as the government uses the same methodology every time -- are generally considered more reliable, although that can change as well with fluctuations in respondents' financial situation. People on the rocks may deviate from the truth in ways that are different from well-to-do people.

Quote:
It would appear from these surveys then that those families that don't save some each month could be living paycheck to paycheck for the most part.* Clearly 23% do not save.
Well, that would also include people like early retirees who may not be saving anything or spending more than they make, so you have to be careful Also, if a family is not "saving" anything but has a 5-10 year mortgage, then they may be accumulating wealth fairly rapidly.

Quote:
Another aspect of the Fed. report was the data on debt.* Seems the lower the income and the older one is, the less likely they are to have debt.
It would take a special kind of bank to lend a substantial amount of money to a person who has little to no income and/or little to no chance of making enough money to pay it back
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck....
Old 07-13-2006, 02:34 PM   #80
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck....

I think that there is a large percentage of people that is living paycheck to paycheck. I used to make waiver determinations to see if overpayments could be waived if it was not the fault of the person and if they were financially unable to repay it. I would look at the household income, assets and expenses to make the decision. I would have been horrified to have some of their bills, with the amount of income and assets in the household. At the same time, a lot of these people had cell phones, expensive cable bills with the premium channels, plus many credit cards with a lot of money charged. I feel that our schools should be doing a better job of educating our students about finances. This should be done before they graduate from high school.

I feel that even though the majority of people have created their own problems, they are clueless about how to dig themselves out of their financial messes. If I were to have a second career, it might be in helping people to regain their financial sanity.

My DH usually receives a bonus every year. The majority of his co-workers have their bonus spent prior to receiving it and it is spent on toys. One year, a lot of his co-workers were getting in ground pools, last year it was motorcycles, especially Harley motorcycles.
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