Peter Coy talks about this in today’s newsletter, and says some sensible things:
Given that, what should we make of the following claim? “Close to two-thirds of the U.S. population — about 157 million adults — currently live paycheck to paycheck, making it the main financial lifestyle in the United States.” That’s from a June report by the lending marketplace LendingClub in cooperation with PYMNTS.com, a payments data company. One-third of people earning $250,000 a year or more are living paycheck to paycheck, says the study, which was based on a survey and government data.
What the LendingClub report says to me is that we don’t have a good agreed-upon definition for what living paycheck to paycheck really means. If the definition of it encompasses almost two-thirds of Americans, I’d say, just looking around, that it’s too broad.
Here, he describes my mindset:
For example, let’s say you have a high income but you sock away money every month in a 401(k) plan for your retirement and a 529 plan for your kids’ education. You spend money on vacations, clothes, restaurants, home renovations. These expenses on average eat up all of your monthly pay. By one definition you’re living paycheck to paycheck, but you could pare back these expenses if you needed to.
and then immediately says my mindset is dumb (which I admit it is):
It seems to me that “paycheck to paycheck” should be reserved for people whose monthly nut — unavoidable expenses like rent or mortgage, utilities, gasoline and food — consumes everything they bring home. One big emergency expense such as a transmission repair or hospital bill can break them.
No offense, but this elucidation just seems unnecessary. The only things you can do with money are spend it and save it. Of course you don’t have any money left over after you do literally everything you can use it for! What would not living paycheck to paycheck even mean in this formulation?
I think of paycheck to paycheck as being if you missed a paycheck it would cause a major disruption in your life. “Major disruption” is purposefully subjective to capture the angst of a paycheck to paycheck life.
Interesting article. And some interesting methodology and funding:
But the new study is the first to show that living in a place that fosters these connections causes better economic outcomes, using a significantly larger data set than other studies, covering 21 billion Facebook friendships.
The researchers limited the data, which did not include names, to active Facebook users. They estimated users’ incomes based on their ZIP codes, college, phone model, age and other characteristics.
Opportunity Insights, the research group at Harvard run by Raj Chetty, has received a $15 million grant from the Chan-Zuckerberg Initiative, run by Mark Zuckerberg and his wife, Priscilla Chan. Theresa Kuchler and Johannes Stroebel have had past research collaborations with Facebook; in 2018, they each received a $135,000 unrestricted research gift from Facebook to N.Y.U. Stern, unrelated to the present research. Employees of Meta, Facebook’s parent company, are listed as co-authors of the papers. The principal researchers said none of the funds from Meta or Facebook were used for this project, nor was Meta permitted to review or influence the findings, beyond ensuring data privacy. The research was funded by the Bill and Melinda Gates Foundation, the Overdeck Family Foundation, Harvard and the National Science Foundation.
I’m convinced this also works for adult connections. I have a friend who’s pushed 3 other mutual friends into a far more successful direction. It’s not even about material help, they all credit his example, motivation, and advice for the change.
I remember Lindsey Graham saying the quiet part out loud about the pandemic relief around that apex. He was going off about how horrible it was that the people receiving aid were actually able to save a little money and that was driving the country right off a cliff. Low-level workers having any freedom, agency, or wealth - what a nightmare! He must be happy now, but I really hope not.
Was just reading that one. “Retiring” seems like a stretch, but I agree, he could probably get another job now that his pension is fully vest.
I do love the recent thread on being asked about salary in an interview, with all the benevolent hiring managers here to tell us that the hiring manager is just looking for an open conversation and dialogue and salary and no way, of course not, never trying to figure out to pay you the lowest they can get away with, so why would the prospective employee ever view it as a game/trick/etc.?
I assume there’s a happy medium of bogleheads, but man it’s crazy to see the bimodal distribution of:
I think I can retire at 40 on <$600k
I’m not sure I can retire on less than $20 million
Haven’t read the comments yet, but has this guy just resigned himself to be perpetually single? I mean, I don’t even think he can afford to get a pet hamster.
Edit: After reading the whole thing, I think the guy needs a good therapist more than anything else.
having a paid off house and no wife or kids to support would take over a million off of his retirement number so hes probably not that far off, maybe 250-300k short. the biggest issue is hes still pretty young so if he ever decided to change his mind about wife/family he would be screwed.
