The rich get richer… and the poor get poorer.
Why?
Any answer will run the risk of my being accused of
over simplifying a complex
socio-economic problem related to luck, opportunity, class distinction,
‘have-and-have-nots’, minimum wage, the working poor… and so many more reasons.
There are poor people
everywhere in the world, wherever you may find yourself. In wealthy cities, fabulously rich people
pass by hungry beggars every day. Of course, many
people live in poverty due to circumstances entirely beyond their control.
I’d like to focus on the
working poor instead. People
befitting this description are usually though of as people working two or three jobs, often at
minimum wage, or less.
Minimum wage, by definition, is a government instituted tax
on employers… i.e. a legislative requirement that obligates an employer to pay
an employee no less than e.g. a certain amount per hour.
Adherents of a free
market would argue that wage control is not the government’s business. Socialists may counter, perhaps expressing a
need for protectionism - or at least
sympathy - for anyone unable to fend for themselves (regardless of reason). I’m not casting judgment one way or another… simply
expressing different points of view.
It may surprise you to learn that the majority of the working
poor in America actually live in nice houses, in the suburbs. They usually appear to be financially quite well off. They certainly are,
if measured in international terms, using comparative metrics like GDP,
income-per-capita, etc.).
The reality is this: Most two-income families living in the
suburbs, with one or more children, are the working poor. As a matter of fact, if one spouse were to
lose a job… the house of cards that
had been constructed to reflect their apparent economic success may be at risk,
or come tumbling down entirely!
The situation described above has become pervasive over the
last few decades; causing an almost indiscernible poverty creep. Add the huge
debt burden of an average household - exacerbated by a desire to live in a
stately, unaffordable house; owned by a bank - and we end up with a contracting middle class.
They cannot save money, because they live
paycheck-to-paycheck. Retirement savings - if any - won’t be sustainable; certainly not commensurate with life
expectancy. According to Brookings, many households have very few liquid savings. But, on average, the majority (66%) of double-income,
working-poor families, living in the suburbs, have about $50,000 in illiquid
savings.
Unfortunately, the illiquid savings mentioned above usually reflects their down payment on a house they couldn’t afford in the first
place!
And... they had used their liquid savings as security for a debt
obligation spanning an entire working career - usually 30 years - aka a
mortgage. Membership of the so-called middle class is frighteningly
risky!
These homeowners will likely never be able to rise from
their debt/poverty trap. Mostly unhappy with their awful financial lot in life - self-created - they often strive to find happiness in other areas like children’s school- and/or extra-curricular activities; or by belonging to a church, gym
or some other social group of like-minded people.
Is the description above befitting of your standing?
Here are some tips for a better you, starting now:
- Downsize your house (aka your debt; pro tip: it has no asset
value unless you sell it)
- Immediately find a higher paying job(s), that fit your skills
- Maximize your savings; especially 401k with a company match
or contribution
- Start saving and spending what’s left over, rather than
spending and saving what’s left over
- And most importantly, get fit and follow a healthy diet!
(This line trumps everything above, because your life depends on it)
Your future is now… so spend your time wisely!
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