Financially Impotent Secret Shame of Middle Class Americans

Neal Gabler is a brave man. He writes openly about his own financial troubles in “The Secret Shame of Middle-Class Americans” in the May issue of The Atlantic. 47% of Americans cannot raise $400 for a minor emergency, and Neal is one.

Mind you Neal is a successful writer, publishing 5 books, writing television scripts, and reviewed movies on PBS for 3 years. However being a writer is not a path to riches. Neal admits to making mistakes - his wife quitting work, living in an expensive city, more home than they could afford, sending his children to expensive universities, using a 401K to pay for a wedding. Neal knows borrowing money just to pay bills.

Credit Howard Gold for his commentary on Neal’s article. Howard estimates living the American Dream costs $130,000 a year for a family of four. Only 1 in 8 families earn that much. The median income is $53,657 per the US Census.

The truth is in a global economy incomes have stopped growing. The median family income peaked around $57,000 in 1999. Companies cannot pay as much when other companies sell completive products for less. Compensation has dropped 5% of GDP from 1970 to 2013 per FRED. Our salaries have not kept up (unless you have a high demand profession/skill).

We are uneducated money managers. We spend too much, save too little, and do not manage risk well. Was budgeting ever taught in school? How about picking investments? Look for information on the Internet, and you will find people selling you something. Not always the information you need. Retirees are going from stable pensions to self-managing 401Ks and IRAs. We rely too much on Social Security.

We are no longer getting ahead. Now you know why Donald Trump and Bernie Sanders are so popular. A great Bruce Eric Kaplan’s New Yorker cartoon says it all, “We thought it was a rough patch, but it turned out to be our life.”

Personally have dug out from failing industries, running my own business, real estate investment losses, and returned to manufacturing engineering. Had to move to another state, and my wife has not been able to find work here for 3 years. Most people would think we are lucky. No, it has taken years hard work.

We live frugally, paying off a median priced house, no other debt, save over 20%, and I drive an 18-year-old very used Volvo to work. Probably can’t retire before 70 and would like to work 10-15 years past that.

What can you do? Spend less than you make, pay off debt, increase your savings with every raise, educate yourself, develop more skill, buy insurance, take risks, and develop resilience.

Hard times happen to us all. You can do better.

Read Neal Gabler’s “The Secret Shame of Middle-Class Americans”

Read Howard Gold’s “We’re going broke chasing the American Dream”