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Originally Posted by kane
well, they say most people in the US are about 3 paychecks from being homeless. That may be an overstatement because it would take a bank or landlord several months to evict you, but I can say that of a group of 10 people I know that make pretty decent money (somewhere around or more than the average) there is only 1 of them that actually has any money in savings. So if the money stops coming in they are screwed.
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Never really asked friends in the US what they earn
but the majority "appear" to be fairly OK financially - but, looks can be deceptive. There are exceptions where people can be working for the govt - some of these salaries are fairly bad, but they chose that path not for the money tho they deserve much more for the type of work they do.
That savings or contingency ratio is low in comparison to probably most other western countries. Tho noticed in the US, elderly people seem to have a degree of savings set aside for problems - that is prob much the same as other countries and is prob more related to their upbringing and "money values" - old school
Quote:
Originally Posted by kane
People don't look at what they can afford, they look at what they want. They buy houses, cars and then get credit cards and max them out. While the average household makes around 43K a year, CNN reported that the average family (meaning the family that makes 43K a year) has around $9200 in credit card debt that they are paying and average of 12% interest on, owes about $58,000 in principle on their mortgage and has over $10,000 in car debt.
If you are a family that brings in 43K before taxes and you pay a total of 25% to taxes (including state, federal and social security) that means you are going to see around 30K in bring home which is around $2500 a month. If you are paying the nationwide average of $350 a month for you car, plus the nationwide average of $1300 for a mortgage and at least $150 towards your average credit card debt (and that is basically just paying off the interest each month) you already have burned through $1800 of your $2500 leaving you just $700 for insurance, food, utilities, gas, clothes and everything else.
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Sure... impluse buying based on plastic cards is a killer. Had a meet with a guy who manages assets mainly for US and Canadian people. The meeting was really about potential currency changes, but drifted into the background reasons for this. One thing which has apparently emerged over the last 6-12 months was that there was a change of spending patterns on cards. There is a reduction in impulse/mall spending and the card balances are slanting towards being used to buy necessities - food etc. and also to pay off other debts (or possibly interest on these debts). The conclusion was a tightening up of "free money" and the cards were being used to actually live off.
In your example of $700 "free money" to pay for basics like insurance and food, that sounds very tight and unless that $700 is increased - the next step would probably be to live off cards. If this was remotely near an "average" - it sure does not look good.
There is card debt everywhere - not just the US and some card debt is Europe is totally crazy - can think of one "financial wizard" who, last I heard, is now carrying around $900K debts spread over cards and not one hope in hell of paying them. (He actually won a prize from Amex for being the "spender of the month" or something similar
) But.. that is an exception and although debt balances can be higher - salaries and living costs are pro rata - and probably less chance of defaulting. It may be a Euro culture thing, but there is also a tendency to hit towards debit card use and not credit cards - tho that is slowly changing.
Sounds like it may be time for an advanced look at what matters and possible lifestyle change if the figures don't add up