I just finished watching the end of the Winter Olympics on my TiVo, and I was struck by something. These athletes are inspiring not because they can go fast on snow, but because they did not focus on the fact that they were too short or too skinny, that practicing every day is really hard, or that not enough people watch their sport. They achieve excellence because they know what they want and they are not afraid to work for it.
Right now there seems to be a trend towards books like ‘Strapped: Why America’s 20- and 30-Somethings Can’t Get Ahead‘ and ‘Generation Debt‘, about how young people have it so rough – what with credit card companies throwing money at us, high education costs, and soaring housing prices. No wonder we’re in debt. My response? Don’t Be A Victim! Yes, Social Security is gonna suck big time for us. Education is expensive, but it’s up to you to make it worth it. I can’t afford a house either, so guess what? I’m saving up for one.
Yes, life in America may be getting worse, and you may have to work harder than your parents. Deal. This why I like to read other money blogs – there are just about zero whiners and they are all about thinking up ways to make their lives better. They share experiences, provide support and encouragement to others, and even give you the occasional reality check you need.
This is not to say I’m blaming all people for being poor or in debt. Life is unfair, and stuff happens. I consider myself blessed with great parents and no tragedies endured. But dwelling on your misfortunes won’t help you solve your problems either.
Added: I knew I had read about that Strapped book somewhere before, I just couldn’t find it – check out this post at Money Musings.
Added: Wow, I’m the insomniac tonight. Budgeting Babe has a great related post about linking choices and their consequences.
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OK, 30-somethings aren’t whining about how they’re getting screwed financially. But why? Draut in Strapped asks the question: government policies are skewed toward helping people who’ve already got money get more (tax cuts and deductions for those with high incomes) while forcing those without money to pay more for everything (no pensions, no student aid, no support for daycare, no housing assistance). The people being affected by these policies just don’t care.
How are those without money not getting student aid? I would think it would be the opposite with need-based financial aid. As for pensions, I would think that applies to everyone? Are you saying that the young/poor don’t care? I don’t understand.
Taxes continue to be a mystery to me. Every tax deduction has a lobbying group behind it, and I think it’s all just too complicated.
Over the past 20 years, student aid has shifted from grants to loans, and the limits on how much you could borrow have been raised. Collges have responded to this by raising tuitons (just like the increasing availability of mortgage money has led to higher house prices). The net effect is that members of this generation are saddled with much more debt early in life than their parents were.
The shift from defined-benefit pensions to 401(k)s has affected younger workers more strongly than older ones (since they have no existing vested benefit).
The ownership society means everybody pays for what he or she uses. This is a big change, and in my view an unfortunate one. Free-market, laissez-faire policies and low tax rates have led to a profound concentration of wealth in the hands of a few. That money could (and was, in days past) distributed to everyone, for the benefit of everyone. What’s amazing to me is that the people who have suffered due to this change, and who could benefit from a more progressive tax and social policy, don’t seem interested in it.
Personally, I feel that the generation that is following me isn’t getting a fair deal.
I see what you mean now, and I actually agree with all those points. It seems like this country has chosen to become a very individual-focused society, for better or worse.
I guess I don’t feel like I’m not getting a fair deal because my parents were immigrants. My life is going to be better than theirs in so many ways, and I am grateful. Different perspective, I suppose.
I disagree about the shift from grants to loans. I think it is the opposite. I’ll have to find the article again but the stat said something like 70% of students get some type of grant with only a small minority paying full tution. I compare it to shopping at Filene’s – you only the “desperate” or “unknowing” go to shop at Filene’s with they aren’t haveing a sale – which is every other week or so.
Colleges have upped their tuition dramatically for various reasons but they have also upped their grant giving. I’ll look up the stat.
I agree with Bluebird – why isn’t there more whining from the 20 & 30-somethings about getting screwed. If we keep saying “I’m not counting SSI” or “I know I won’t get SSI” that filters to the politicians and becomes engrained in the media and becomes “perceived knowledge”. Then the policymakers cut SSI because they say the 20/30-somethings aren’t expecting it anyway!!
“Yes, life in America may be getting worse, and you may have to work harder than your parents”
Why oh why do people always whine about “the good ‘ol days”. I never understood that, and frankly, as a black male, those were not “good ‘ol days”.
I for one, will always refuse to be a victim, but that doesn’t mean that you get discouraged sometimes. I try to keep my eye on the prize and be thankful that I don’t live in “the good ‘ol days”.
Bluebird is right about grants versus loans – the College Board website has a press release that goes into more detail at http://www.collegeboard.com/press/article/0,3183,48884,00.html
An important paragraph from there says, “Although average grant aid per student is growing, the increases are not large enough to prevent increased reliance on borrowing. While low-income students receive more grant aid, on average, than higher-income students, recent changes in student aid policies have benefited those in the upper half of the income distribution more than those in the lower half.”
Also, “Over the past decade, in both public and private institutions, net price [published rates less grants and tax advantages] as a percentage of income has risen significantly only for those in the lower half of the income distribution.”
I’m a young 20-something, and I think they *should* cut out SSI. It’s not the government’s responsibility to fund people’s retirement, and it’s been used in this way for too long now. Dependence on the government is never a good idea, because you never know what will happen to the funds.
In terms of the college issue, yes, it’s getting worse. I fear for how expensive it will be when my future kids are that age. For the time being, though, it’s not as scary as it seems. I mean, sure, if you go to a private school without having scholarships or grants or other funding, of course you’re going to have debt trouble. Go to the public school instead. My best friend had to put her entire 4 years at a state school on student loans, and will have them paid off in 5 years through hard work and dedication. Choices, choices, choices.
Bluebird wrote:
Wait… everyone paying for what they consume is a bad thing ? Who would you have pay for it ? Why should I have a right to the fruits of someone elses labor ? Where is this right enumerated ? Isn’t that (taking the fruits of someone elses’ labor) at least theivery, if not slavery ?
Cursiosly,
– MikeB
I agree that young(er) people are a bunch of whiners. IMHO, it is because of the dependence on government and the failure of goverment schools that has made so many people weak and unable to take care of themselves. Our parents (or grandparents, depending on your age) went thorugh a great depression [1] and a world war. They didn’t have cell phones, iPods, Game Boys, 30″ color TVs, modern supermarkets, or modern medicine. I would opine that every generation thinks they have it harder than the previous generation.
I will grant you that there are some government policies that are skewed toward helping people who already have money, or at least paying off politicians to NOT take malicious action against their company or industry, but I would say that most government policies are skewed toward helping people to not help themselves, to keep them in a cycle of dependence.
[1] It has been argued — “FDR’s Folly” is an excellent read on the subject — that government bungling turned a normal cyclical recession into a Great Depression.
Here, here! Luv the post. I agree, DON’T BE A VICTIM! Do something to change your circumstances. We could toast to that! 🙂
You also have to look at it from a sociological stand point as well as an economic standpoint. 20/30 somethings do have had it worse off as a result of greater access to illegal and more dangerous drugs, a crack down on crime, they are more likely to come from a broken home than baby boomers, there was a rise in mental health problems and anti-depressant use, they are more likely to be obese, they have had more fast food, more junk food, eaten a heck of a lot more chemicals, refined sugar, high-fructose corn syrup, partially-hydogenized fats, MSG, the vaccines they received as children contained more mercury, they were less likely to be breastfed, plus many of them have to delay having a family until late in life which according to Erikson’s model can seriously compromise personality development. If you ask me, young people should be whining a lot more and they deserve an Olympic medal just for getting through all of this crap half-way intact.
Thanks for the post, I think this is a great point.
Young people is the US today have opportunities our parents never dreamed of. But just as in our parents’ generation, there will be those who choose to reach for the brass ring, and those who complain about how far away it is.
I agree, too many of our contemporaries are using these as excuses. If one is proactive about their finances then there is little excuse to be in massive debt. I like how you tied the Olympics and personal finances together. Your site is a real inspiration.
The bottom line is that people who have access to good information and who act wisely upon the information will do just fine. So, anyone who is in their twenties or thirties (I’m 31) who pays attention to how to get ahead, will get ahead. If you take the time to read blogs like this one and then comment on the posts, you are the type of person who will get ahead.
Social Security is a crummy program, so whether or not we should expect it to be around in 30 years, who cares? If all you can aspire to is to get SS, then that’s what you deserve to get. As an employer, I pay double the SS tax than just about everyone else. It’s lame, but that’s the way it is. Complainers will always be complainers, but those who seek out new knowledge and attempt to better themselves (like anyone reading this), will make their parents’ generation look like a bunch of paupers. Just think about the demographics we have going for us (Gen X is tiny), and you’ll realize it’s there for the taking.
MikeB writes:
In the days before Social Security, if you were old and sick and poor, and you had no family to take you in, you starved, or lived in degrading conditions. Yes, this would be “your fault” for having failed to provide for your own retirement.
It is within the the power and rights of a society to decide that no one in that society, regardless of how stupid or unfortunate, should suffer from hunger, cold, and disease while others live amidst great material abundance.
I don’t think it’s crummy – it’s insurance for society. You and I will never see a dime from it because we’ll be above the income level to receive anything from it. Do you really want to see thousands or millions of elderly street people when you’re retired? It’s like any other insurance program – car, property, health. Imagine the consequences if we didn’t have those.
As for employer’s paying double, that’s not quite right:
FICA (SSI) is 12.4 percent of your income up to a 94k annual limit and an additional 2.9 percent must be paid into Medicare. Employees pay 6.2 percent for Social Security + 1.45 percent for Medicare and your employer pays the other half. (The medicare portion is not limited by income). (I love the first paycheck of the year above the SSI limit – it’s like a little bonus).
Perhaps you meant to say “self employed person” , who pay the whole amount.
Wes – I’ll amend my statement about Social Security. It’s not a crummy “program”, but the benefits are crummy, especially when put into this context: the vast majority of Americans perceive it as their sole retirement vehicle. I don’t want “to see thousands or millions of elderly street people” when I’m retired either. I’d rather see those potentially desperate people educated now before it’s too late. Then, if they do ever see a SS check, it’ll seem like a bonus instead of a lifeline.
As for the FICA debate, I was referring to being self-employed and referring to SSI, not Medicare. I pay 6.2% up to $94K (I think it was $90K in 2005) as the employee, and 6.2% as the employer. It’s essentially double.
Thanks for your feedback.
Well, I’ve almost finished Strapped, and after all that, most of the “case study” Gen-Xers in the book will get zero sympathy from me.
String together enough poor decisions in your higher-ed choices (what you’re getting the degree for, as well as what/how you paid for it), “where you live” choices, and lifestyle choices, and eventually you’ll get smacked. It happens again and again to the book’s respondents.
There will always be “victims,” and there will always be authors ready to write tales lamenting their “plight.”
I’m a Gen-Xer, and I don’t buy the “It’s tougher now!” story. Not for a moment. I’ve heard my grandparents’ Great Depression stories, and wartime stories, and all that. I’ll take my “hardships” over theirs any day.
Someone posted under my name and with my URL…
I would just like everyone to know that MyMoneyForest did not make the comment about cutting social security.
To whoever did that, it’s not very polite.
Wow, disregard my last comment. I’m apparently a little slow tonight….
Bluebird wrote:
You didn’t answer my question, so I’ll pose it another way.
Let’s say you and I are walking down the street and there’s a homeless man asking for change. I reach into my pocket and hand him a dollar. I think everyone would agree that this is acceptable. It’s my money and therefore my choice what is done with it.
A slightly different approach…
Let’s say you and I are walking down the street and there’s a homeless man asking for change. I reach into my pocket and pull out a weapon, say a gun. I point the gun at you, reach into your pocket your pocket to retrieve a dollar and give it to the homeless man. Is this acceptable ?
When you use government to accomplish what you believe to be a ‘social responsibility’ that’s exactly what you’re doing. The means by which government accomplishes its goals is through the threat of force. Don’t believe me ? Refuse to pay your taxes and I can assure that eventually armed men from the government will come to seize your property… just like in the 2nd example above.
I also believe we should help those who cannot help themselves but it is morally wrong to use the threat of force (i.e. government) to do so.
– MikeB
Wow! Interesting topic and comments.
I have to agree with Jonathan on this one. It reminds me of the opening of M. Scott Peck’s classic “The Road Less Traveled.” He says:
“Life is difficult.
This is a great truth, one of the greatest truths. It is a great truth because once we truly see this truth, we transcend it. Once we truly know that life is difficult – once we truly understand and accept it – then life is no longer difficult. Because once it is accepted, the fact that life is difficult no longer matters.”
As far as Social Security goes, it should be on a needs basis and not paid out to everyone. The program should have never grown as big as it did. I would love it if they would cut the withdrawal rate to 1% and let me keep the other 5.2% so I could invest it on my own.
Social Security is crummy. It’s not real insurance. It’s not even a real annuity. There is no income level to receive it. Jack Welch, former CEO of GE, who has more money than God, receives Social Security. Granted, it is a small amount compared to his other sources of retirement income, but every American is entitled to Social Secuirty, no matter their financial situation.
An insurance policy, or retirement annuity, is offered by an insurance company which invests the contributions to long term investments. Social Security only buys Treasury bonds, i.e., loans the money to the gov’t. The principal and interest to be paid back not by return on capital or investment but by additional taxes.
As for other insurance — car, home, health — those are, at least for the moment, privately funded and run by proper insurance companies.
As for “thousands of millions” of destitute elderly, that’s a fallacy for sure. That’s billions of people. Maybe you are mistaking us for China where they do have billions of destitute and impoverished people. Even in the Great Depression, the number of retirees who did not have family or charity to turn to if they did not have their own retirement funds was relatively small, which is why there was not a lot of support for Social Security until later in the 1930s.
As for the SS taxes, the self-employed don’t pay double, they pay the full the amount. Regular employees also pay the full amount, but they only see half on their pay stubs, the other half they don’t see but is part of the employer’s cost of employing them. If people knew how much they were paying — the visible and the hidden — and how little they would get back, they may realize they’d have a better return if they put that money in their own private account, even if it were a plain money market fund.
MikeB writes:
Just so I’m clear, if a democratically elected government institutes a policy that you disagree with, that constitutes theft by force? Can I make the same argument about, say, George Bush spending a quarter of a trillion dollars on the Iraq war?
I think what’s *good* about books like strapped is that they can be educational (ex. yes, most of this stuff IS happening, you’re not crazy…but consequently you might have to work harder to achieve your financial goals etc) but that sort of victim mentality doesn’t do anyone any good.
Once people take charge of their own choices I think they’re pretty amazed at what they can accomplish. I’ve tried to write a few posts about this as well. Good topic for discussion.
Bluebird stated:
All government policies are enacted through the threat of force… my agreement or disagreement on any policy has no bearing on that fact. Are you disagreeing with this fact ? The threat of force is the only means government has available by which to accomplish its goals.
To state it yet again, it is morally wrong to use the threat of force (e.g. government) to seize property from one group and give it to another under the guise of benevolence. If it’s wrong for one person to take from another in order to gift to a third, it’s wrong for a group of people (i.e. government) to take by force from one person to gift to another. Just because it happens doesn’t mean that’s just.
Bluebird said:
LOL.. sure, you can attempt to make whatever argument you like. Feel free. I do find it telling that in a discussion that in a discussion regarding your statement that “everyone paying for what they use is unfortunate” (slight paraphrase) and about ‘government benevolence’ in genenral, not specifically the US governement, you bring the Iraq war up. I suspect that eventually the phrase ‘Iraq War’ will be a corallary to Godwin’s Law.
Also, the government you mention, the US, isn’t, nor was it intended to be, a democracy. In fact, the founders worked very hard to insure that it shouldn’t become one because as they understood the danger of mob rule (aka democracy) as witnessed by history. The form of government founded by Washington, Jefferson, Madison, etc is a constitutional republic, whereby the wants of the majority are secondary to the rights of the minority.
– MikeB
This is getting *way* too philosphical now – it’s all a greay line depening on whether you’re liberal or conservative. Everything the government does is funded by taxes. Everything a company pays for (taxes or COGS) can be theoretically viewed as salary for the employees (it’s NOT it belongs to investors).
We are all under an illusion – we each have our own opinion whether money coming out of our wallet is voluntary or involuntary. In either case, taken to the final degree, it’s ALL backed up by force – taxes, utilities, your grocery bill, those new shoes you just bought, your home association fee.
The whole game is about minimizing how much comes out of your wallet and how much of other peoples money comes into YOUR wallet!
If we didn’t have SSI or car insurance or medicaid we’d all be paying for the uninsured in some other fashion. Who do you think pays insurance premiums?
I’ll say it again: the threat of force is always there and has always been there, for millenia.
I haven’t seen another pf blog have such fun discussions!
While I agree with the “don’t be a victim” mantra, taking too blaise an attitude about the current situation risks not fixing the structural problems that have caused it.
Myself, I am one of these “strapped” youngsters. But I’m not exactly the picture of irresponsibility. Having no money for college, I picked an economical state school. I had some grants, and some scholarships, did summer and part-time work, and the rest was made up by loans.
After undergrad, I did two years of grad school, during which I was actually *paid* as a research assistant.
During this whole period of time, I lived extremely frugally, always having roommates, forgoing car ownership, never travelling, and not being much of a consumer.
Still, after my master’s (and two bachelor’s, which I earned concurrently), I burst out onto the world with about $20,000 in debt.
Due to the tight situation for people in math and sciences, I’ve found it tough to stay afloat starting from this much lower basis. My “salary” does not keep pace with inflation, and it is actually based 100% upon grant funding, so its really not what you normally associate with the word “salary”.
I’ve had to make major sacrifices to be able to put any money away. At age 26, concepts like home ownership, marriage, world travel or even dating are a complete joke to me (I’ve actually borrowed against credit to do some of these things, because the monotony would be mind-numbing otherwise). I have a new car from two years ago but its insanely cheap (~$15k), and still have to retain a roommate to get by. I live in an average-priced city.
Aaron, we seem to have many similarities, but also some differences.
I also graduated from a state school with $20,000 in student loans. No car during school, worked full time each and every summer. I also have a BS/MS in engineering/science. It sound like you continue to work in academia/research.
But these are all choices. Research is a rough field, I chose not to stay in that arena. Also, I do not see having a roommate as a sacrifice. It is a choice to save money, a perfectly acceptable one. I did that too. I got a used car. Another choice. I probably got a better paying job since I chose to be corporate monkey for a while, but I am back in school now. Now, my student loans are all paid. Housing is insane, granted, but I will deal. I rent.
Be politically active for change if you care about SS or the government. But also count all your blessings before you count your misfortunes. My time as a frugal student living on Top Ramen were still some of the best times of my life. =)
Ramen! Boy those were the good old days. I ate a lifetime supply of that in college.