This article has me shouting at my screen. I'll try to condense to one point:<p>> Earlier this year, Mr. Guzman put his credit cards in a Ziploc bag with water and placed it in the freezer. In May, however, they went to two weddings, and needed a card to cover the cost of a gift and a rental car.<p>1. You're never required to attend a wedding
2. You can give gifts with minimal cost<p>When I got married, I had a friend who was unemployed at the time. Didn't expect a gift, but they still took the time to go out of their way and provide baked goods they homemade for the wedding party. Can't bake? Write a nice letter or compose a song.<p>You can't mismanage your money, go into debt, and point your finger at anyone but yourself. Can't afford a new car? Don't buy one - buy a used one instead. Can't afford to travel to a wedding? Don't go, send the appropriate cards and letters and niceties. Buried under credit card debt? Don't have a kid yet, don't go get a dog, stop buying on credit.<p>Yes there are some terrible woes around medical debt, and that's a serious problem we should evaluate and fix, but you can't blame "the economy" or "society" for what is just an inability to manage your money.
We have been told to get a good education, to get a good job and to live happier every after. For most, this is far from the truth. Wages have not increased in decades, while everything else is more expensive. Corps would rather hire you as a contractor, to pay you less so they make more. There are not enough jobs, because there is no process for teaching about free enterprise in America. Its jobs jobs jobs, but you need people to create those jobs. When H1Bs take your jobs, its hard to compete when they are paid less and willing to take less. So many issues, but we have an inept Congress and elected officials that care for more their power, and their greed that the American people. </rant>
How does this math work?<p>They take home $8070 [0].<p>The mortgage might be $2130 (assuming $360k house, $300k initial mortgage @ 5%) [1].<p>Credit cards of $50k - if they put $1000 on it each month @ 12% that's 70 months to pay off [2].<p>For $51k of student loans, lets say they are paying $985/month (which would take 5 years [3].)<p>So far I've used up $4115 and have $3955 left. Let's assume they pay $2000 for childcare and $1000/month for groceries for a family of three. They'll also have utilities and insurance payments to make. These are all insane number in my opinion, and I was already generous with overpaying on the credit cards and rapidly paying towards the student loans. Now they've only got $955/month left (which some people are actually able to live on.) What did I miss from their budget and which of the numbers did I get wrong?<p>I'm not saying the article is wrong. I'm saying what was the point of their example household?<p>[0] <a href="https://smartasset.com/taxes/connecticut-paycheck-calculator#vm51vOqdhz" rel="nofollow">https://smartasset.com/taxes/connecticut-paycheck-calculator...</a><p>[1] <a href="http://www.calcxml.com/do/mortgage-calculator?skn=292#calcoutput" rel="nofollow">http://www.calcxml.com/do/mortgage-calculator?skn=292#calcou...</a><p>[2] <a href="https://www.bankrate.com/calculators/credit-cards/credit-card-payoff-calculator.aspx" rel="nofollow">https://www.bankrate.com/calculators/credit-cards/credit-car...</a><p>[3] <a href="https://www.bankrate.com/calculators/college-planning/loan-calculator.aspx" rel="nofollow">https://www.bankrate.com/calculators/college-planning/loan-c...</a>
I've actually seen the opposite. Most people who get to the upper-middle class do so by smartly using debt.<p>Beyond the obvious examples of borrowing to get an in-demand education and buying real estate in an in-demand location -- there are other smart times to borrow as well, like to expand a business.<p>It's quite difficult to really get ahead without at least a little leverage.<p>The irony is that the poorer you are, the more likely you are afraid of any and all debt -- which can be a very bad thing. In philanthropy I've seen many stories of young people who refuse to go to college due to a cultural fear of debt -- which often gets them stuck with a lifetime of low earnings. Or folks avoid taking on a mortgage only to find that rent inflation makes it difficult for them to retire later in life.<p>(I realize that the article is much more focused on "bad" debt: car loans and running up credit cards to buy consumer goods.)
The Credit Card interest rates are at all time high, in spite of the fact the PRIME interest rates at historic lows. This is something no one is talking about.<p>The Corporate Debt is going to BITE so hard in the next recession -- I say, bring them the pitch forks and every person who had a C in their title be prepared for clawbacks!
Rule #1: Do not use debt to fund consumption or purchase assets that historically are not expected to appreciate within 5 years.<p>People are getting into debt to buy cars and go on vacation, this is ridiculous. Buying a house, even if it's a stretch on your income -- is not too bad. You can build equity and there is lots of support, you can even rent out a room. But going into debt to buy a luxury car? Absolute stupidity.
To me "middle class lifestyle" means no debts other than mortgage, a place to call your own, and a car. With very heavy emphasis on "no debts". Car can be just about any decent car, doesn't even have to be new. Anybody can get a loan for a fancy car, so it no longer means what it used to. That's "middle class".
This is an interesting article and much of the discussion points out the structures in our society that are not optimized for the consumer. For example student loans, medical debts and high interest on credit cards.<p>But I would like to highlight that "middle class" is a made up concept and a fairly arbitrary estimation of class based on net mostly consumeristic factors.<p>For instance, to be middle class I should be able to pay for college with loans, own a home of ample size, have two cars and afford to have a child and pay for child care while both my partner and I work. I must maintain this definition of 'middle class' at all costs, even if that that means taking on $50,000 of credit card debt. Because I am middle class and I have the stuff to prove it.<p>Unfortunately, this means the middle class will continue to get poorer and deeper in debt because yes, wages have stagnated, but we continue to go into debt to maintain the appearance of middle classism based on consumeristic targets.
They need to do a large consolidation loan and cut up the cards. paying 6 or 7 different cards at the mins kills people. I did this myself and my score went up 70 points. However, it's hard to convince a lender you're worthy of it. I think a lot of people need to change their ways after getting consolidated.<p>So now instead of 2100 a month paying mostly minimums and looking at 8 years I'm doing 1450 and looking at 3 years. The extra 600 I'm "saving" per month may sometimes go towards the consolidated loan, but often I need to use it - which is what the credit cards were piling up for.<p>Debt can be a trap because people are simply not paid enough but their expenses outweigh their income. If this happens you need to change jobs, ask your boss for more or change your budget. In my case I asked for $30k more per year and got $20k more per year.<p>Other tricks: Go to ting or a cheap MNVO, Stop justifying yet another $10 / month netflix/prime/hulu - they all add up quickly. Get off the $160/mo cable plan. Buy your own cable modem and don't rent it from the cable company. They cost $40 and your cable provider is renting it to you for $10 per month.<p>Food: Set up a "chipotle" at your house, cook in large batches and think of ways to make Tacos or Burritos quickly. This is the most complicated area - people get tired of food quickly. Food can be the most expensive if you just keep eating out.<p>And of course, as mentioned many times - budget budget budget. There's no way to get out of debt if you don't simply have a balance sheet showing income and expenditures per month. If you don't know then there's no way to stay below the line.<p>I'm sure there are some banks out there now that help with this. I'm sure it's been said elsewhere but you don't owe society anything - you're just here like everyone else. Stop gifting people, stop xmas shopping, stop going to weddings, stop having kids. I've done all these things and I'm quite happy. My parents stopped sending me stuff and there's no expectations either way now, it's fabulous for everyone.
Buisness investment was negative last quarter but consumer spending was robust, we're a service economy now and people are going into debt to keep it growing. The next recession will be caused when all these middle class folk are forced to deleverage or foreclose.
"Earlier this year, Mr. Guzman put his credit cards in a Ziploc bag with water and placed it in the freezer."<p>Mr. Guzman literally froze his credit!
Two definitions of middle class:<p>Marx: the section of society that makes their income from a combination of capital and labor.<p>WSJ: people that buy more expensive things than Doritos
This is why Bernie's Cancel all Student Debt and make colleges tuition-free makes really good economic sense. Student Debt is a huge weight on our economy. Our economy runs on consumer spending and Bernie's policies, including Medicare for All will increase consumer spending and make starting businesses a lot easier.<p>EDIT: Here is an interesting interview from Asher Edelman about the velocity of money and Bernie. <a href="https://www.youtube.com/watch?v=a9xSVzdUNqo" rel="nofollow">https://www.youtube.com/watch?v=a9xSVzdUNqo</a>