Posted on 04/13/2010 6:59:30 AM PDT by SeekAndFind
While the market cheers on the fantastic job “growth” of March 2010, the more astute of us are concerned with a growing tide of personal bankruptcies. March 2010 saw 158,000 bankruptcy filings. David Rosenberg of Gluskin-Sheff notes that this is an astounding 6,900 filings per day.
This latest filing is up 19% from March 2009’s number which occurred at the absolute nadir of the economic decline, when everyone thought the world was ending. It’s also up 35% from last month’s (February 2010) number.
Given the significance of this, I thought today we’d spend some time delving into numbers for the “median” American’s experience in the US today. Regrettably, much of the data is not up to date so we’ve got to go by 2008 numbers.
In 2008, the median US household income was $50,300. Assuming that the person filing is the “head of household” and has two children (dependents), this means a 1040 tax bill of $4,100, which leaves about $45K in income after taxes (we’re not bothering with state taxes). I realize this is a simplistic calculation, but it’s a decent proxy for income in the US in 2008.
Now, $45K in income spread out over 26 pay periods (every two weeks), means a bi-weekly paycheck of $1,730 and monthly income of $3,460. This is the money “Joe America” and his family to live off of in 2008.
Now, in 2008, the median home value was roughly $225K. Assuming our “median” household put down 20% on their home (unlikely, but it used to be considered the norm), this means a $180K mortgage. Using a 5.5% fixed rate 30-year mortgage, this means Joe America’s 2008 monthly mortgage payments were roughly $1,022.
So, right off the bat, Joe’s monthly income is cut to $2,438.
According to the US Department of Agriculture, the average 2008 monthly food bill for a family of four ranged from $512-$986 depending on how “liberal” you are with your purchases. For simplicity’s sake we’ll take the mid-point of this range ($750) as a monthly food bill.
This brings Joe’s monthly income to $1,688.
Now, Joe needs light, energy, heat, and air conditioning to run his home. According to the Energy Information Administration, the average US household used about 920 kilowatt-hours per month in 2008. At a national average price of 11 cents per kilowatt-hour this comes to a monthly electrical bill of $101.20.
Joe’s now down to $1,587.
Now Joe needs to drive to work to make a living. Similarly, he needs to be able to drive to the grocery store, doctor, etc. According to AAA, the average cost per mile of driving a minivan (Joe’s a family man) in 2008 was 57 cents per mile. This cost is based on average fuel consumption, tires, maintenance, insurance, license and registration, and average loan finance charges.
Multiply this cost by 15,000 miles per year and you’ve got an annual driving bill of $8,550. Divide this into months (by 12) and you’ve got a monthly driving bill of $712.
Joe’s now down to $877 (I’m also assuming Joe’s family only has ONE car). Indeed, if Joe’s family has two cars (one minivan and one sedan) he’s already run out of money for the month.
Now, assuming Joe’s family is one of the lucky ones (depending on your perspective) they’ve got medical insurance. Trying to find an average monthly medical insurance premium for a family in the US is extremely difficult because insurance plans have a wide range in deductibles, premiums, and co-pays. But according to eHealth Insurance, the average monthly premium for family policies in February 2008 was $369.
So if Joe has medical insurance on his family, he’s now down to $508. Throw in cell phone bills, cable TV and Internet bills, and the like, and he’s maybe got $100-200 discretionary income left at the end of the month.
This analysis covers all of the basic necessities of the average American household: mortgage payments, food, energy, gas, driving expenses, and medical insurance. It also assumes that Joe:
1) Didn’t overpay for his house 2) Made a 20% down-payment of $45K on his home purchase 3) Has no debt aside from his mortgage (so no credit card debt, student loans, etc) 4) Only has one car in the family and drives 15,000 miles per year 5) Keeps his energy bill reasonable 6) Does not eat out at restaurants ever/ keeps food expenses moderate 7) Has no pets 8) Pays for health insurance but has no monthly medical expenses (unlikely with two kids) 9) Keeps his personal budget under control regarding cable TV, Internet, and the like 10) Doesn’t spoil his kids with toys, gadgets, trips to the movies, etc. 11) Doesn’t take vacations.
Suffice to say, I am assuming Joe maintains EXTREMELY conservative spending habits. Personally, I know NO ONE who meets all of the above criteria. However, even if the above assumptions applied to the average American, you’re still only looking at $100-200 in “wiggle” room for spending per month!
If Joe:
1) Overpaid on his house 2) Didn’t have a full 20% down payment 3) Owns two cars 4) Eats at restaurants 5) Splurges on heating & A/C bills 6) Has any medical expenses aside from monthly premiums…
… he is running into the red EVERY month.
I also wish to note that my analysis didn’t include real estate taxes and numerous other expenses that most folks have to pay. So even if you are extremely frugal and careful with your money, it is impossible to “get by” in the US without using credit cards, home equity lines of credit or burning through savings. The cost of living is simply TOO high relative to incomes.
This is why there simply cannot be a sustainable recovery in the US economy. Because we outsourced our jobs, incomes fell. Because incomes fell and savers were punished (thanks to abysmal returns on savings rates) we pulled future demand forward by splurging on credit. Because we splurged on credit, prices in every asset under the sun rose in value. Because prices rose while incomes fell, we had to use more credit to cover our costs, which in turn meant taking on more debt (a net drag on incomes).
And on and on.
Does this mean the market is about to tank? Not necessarily, stocks have been disconnected from reality since November if not July. Bubbles (and we ARE in a bubble) take time to pop and this time around will be no different.
Best Regards,
Graham Summers
If your post is a true reflection of your life — which it may or may not be — then you need to work on your presentation somewhat. In that post, you don’t come across as successful, happy and well-adjusted ... you come across as superficial and self-superior.
For instance, your post does not seem to credit your husband with anything. When I describe my life, my wife and I are a “we” ... and I wouldn’t run her down like you did your husband — who you described as geeky, superficial (he wouldn’t have paid you any attention without your extraordinary workout and appearance routine), and in need of a makeover to achieve anything in business.
My wife and I are successful (to whatever extent we are) because of OUR plan ... not my plan. I am an attorney. My wife is a music teacher and way out of my league in grace, appearance, intelligence and general geniality. She’s quite a catch — I truly married up. Like you, we have two kids. We’re reasonably comfortable financially, but have some debt (law school is expensive) and have made some mistakes along the way. But, we have a plan, and we do the best we can.
I can tell you that if my wife wrote a post like yours — about my “big salary”, how good looking and fit she is, how she chose me because of my earning potential, how she could’ve married better looking guys but she’s more interested in money, how she’s trained me to look better so I can be successful, etc. — there would certainly be a marital discussion about it. I’m not a demanding husband ... but I do expect that I won’t be publicly disrespected by my wife.
There is a line between believing in a “plan” and being a braggard. Your post seems less about a “plan” and more about how you were/are good looking and smart enough to snag any will-be rich geeky guy you wanted ... and then savvy enough to teach the geeky rich guy how to fit into your good-looking-guy mold (teaching your geek how to behave and dress to be successful) so that he can make his “big salary”.
Bragging about how much money you make, how good looking and fit you are, or how well you’ve trained your geeky husband is rarely becoming.
SnakeDoc
I don’t really, but had to take the opportunity to use one of my favorite FReeperisms.
;-)
Are you calling me a red x?
;-)
>>He’s read it and laughed at the personal attacks. He knows me better than anyone. I’m very disappointed with the frequncy of personal attacks. My husband has the rest of the day off so off goes the computer.<<
Sweetie, first of all, if your husband was a geek, you’d have a clue about net etiquette. How one does not pop onto a site and cop attitude with long time posters. They don’t do it on Daily Kos and we don’t do it here.
Second, if and I mean IF you are a genuine conservative poster, you would understand that someone calling your post “drivel” is not a “personal attack” unless you are a perpetual victim or so self-righteous you can’t support your head. We discuss ideas. Just because it’s your idea, doesn’t mean it’s right and telling you that is not “personal”. You sound like a lib.
Third, if you want to take your “business” elsewhere, understand that some of us have actually paid real cash for the site you are insulting people on. Long time posters deserve some respect. That’s any site on the internet. I wouldn’t go hang in your digs and insult you. Best you drop the attitude. People will actually give you a chance.
And on that note, if some FReeper didn’t give another a smackdown, it wouldn’t be a day here.
Welcome to FR.
*snicker*
You pegged it.
PS: On my posting comment page it says "Loose lips sink ships." If yours says "No generalizations permitted," that's not my problem. HAND.
Drivel? Seemed like sound strategy to me.
bttt
Oh, is it not showing up? It’s a Baptist church marquee that says
Satan: “Somebody set us up the bomb!?”
God: “All your base are belong to us.”
>>Drivel? Seemed like sound strategy to me. <<
Sounds like a Huffpo plant to me.
A conservative plan involves bettering yourself to make a good living. Not finding the “geek” with great income potential. She could have been a great stay at home mom by saving her earnings before marriage. We women don’t have to look for the great earning potential anymore. We marry for love and not degrade our husbands to show how wonderful we are.
There is something to be said for the woman that sees the best in her husband and not as the “geek” with great earning potential. Personally, I’d rather live in a trailer filled with love than a McMansion filled stuff.
I used to live/work in Phoenix. Lived about five miles from work.
The bus schedule was such it was almost faster to walk that distance.
That was when the bus was running on schedule.
Sometimes, it just didn't show up at all.
Electric heat would cost a lot more than $101.20.
If you "came with a hefty savings and a house", it had to be through either (1) having previously been a "gold digger", or (2) having had a previous career for which you realistically and responsibly prepared yourself, and through which you earned the hefty savings and the house.
A $100,000 income is not necessarily being wealthy, and in most areas of the country is necessary for a middle class or upper middle class lifestyle.
An irresponsible and unrealistic housewife can turn a $100,000 income into a poverty-level existence very easily, and sap the potential improvements from the husband's career.
A responsible and realistic housewife can help make a $100,000 income a comfortable middle class lifestyle, and contribute greatly to the husband's ability to increase that income substantially through their joint career.
This is not rocket science; neither is it any new age discovery. I'm not a Bible-thumper, but you can read about this same concept in the Proverbs of Solomon.
>>(2) having had a previous career for which you realistically and responsibly prepared yourself, and through which you earned the hefty savings and the house. <<
(2) is me.
However, I came with that dowry. I did not look for someone to have good earning potential. If my husband had been a dirt farmer with nothing but the shirt on his back, I would have married him because “stuff” is not what it’s all about.
Five miles would be a real healthy walk! Bus, carpool, subway, train....point is, lots of people don’t NEED that extra car, or that extra job either. They just don’t put a high priority to economizing. How much time they actually spend in the house they went $300k in debt for, whether it’s worth it, that’s what they have to ask themselves, but they often don’t ask.
You joined just yesterday and are posting today...reading your post the alarm bells are going off...
Most Freeper ladies aren’t as materialistic as your post is sounding, most I’ve read tend to have a hard scrabble no nonsense attitude. They are accomplished because they wanted to be so, not because they wanted “a geeky man” who could give them a fairy tale princess life with “plenty of money”. You sound like a female Pygmalian, having “recast” your “geeky man” into your own image.
Color me skeptical, but I think time may reveal you are nothing but zot bait and trying to cause trouble here....
“She called my successful plan to become an upper middle class housewife drivel. Sounds to me like jealousy. I expect jealousy from labor unions but not from free market capitalists”
Now I know you are a troll....
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