We’re Living Beyond Our Means

You might recall Neal Gabler from when he replaced Roger Ebert on PBS’s Sneak Previews program when Siskel and Ebert left PBS. He’s a well-known writer, published in various prestigious newspapers and magazines.

Recently, Mr. Gabler garnered a certain amount of attention by confessing in an article for Atlantic that he was living hand to mouth:

Since 2013, the federal reserve board has conducted a survey to “monitor the financial and economic status of American consumers.” Most of the data in the latest survey, frankly, are less than earth-shattering: 49 percent of part-time workers would prefer to work more hours at their current wage; 29 percent of Americans expect to earn a higher income in the coming year; 43 percent of homeowners who have owned their home for at least a year believe its value has increased. But the answer to one question was astonishing. The Fed asked respondents how they would pay for a $400 emergency. The answer: 47 percent of respondents said that either they would cover the expense by borrowing or selling something, or they would not be able to come up with the $400 at all. Four hundred dollars! Who knew?

Well, I knew. I knew because I am in that 47 percent.

Megan McArdle responded at Bloomberg:

Why can so few people seem to save any money? The number of people scraping along from paycheck to paycheck is astonishing; surveys routinely find that somewhere between a third and half of all Americans don’t have the savings to fund ordinary emergencies — a moderately large repair, a month with no income. These are not the kind of astonishing runs of bad luck that no one could realistically expect to cover, like a $100,000 medical bill, or a multi-year illness that makes it impossible to work. They’re just the normal vicissitudes of regular life, and somehow, Americans are unprepared.

These are the questions that Neal Gabler tackles in an article for the Atlantic. The answer he arrives at boils down to: we need to keep up with the Joneses, only our incomes aren’t growing, or even stable in the face of inflation, and meanwhile, access to credit enables us to live, for a while, as if that last part weren’t true. The result is a recipe for disaster. Or at least, for Neal Gabler’s disaster.

Most of the responses have been sympathetic. Many have praised his bravery for stepping forward.

I’m understanding but not particularly sympathetic. As a friend of mine’s mother used to say “You lay in your bed—now make it!”

In the article he acknowledged the choices that he made which—at least from his viewpoint—inevitably led to the situation in which he found himself. Why does he live in New York? (He’s a native Chicagoan.) Why is he a writer? Why did he send his daughters to expensive private universities (Stanford and Emory)? One daughter is in medical school. Another is a clinical social worker. In both of those cases they could well have gone to a school in their state’s public university system and gotten into medical school or graduate school.

I think it’s pretty obvious that he’s hunting for status.

Maybe it takes some courage to reveal that you’ve been living a lie. You know what takes real courage? Living within your means no matter what the neighbors think.

When I was a kid my family followed some simple rules. Live below your means. Don’t pay interest if you can possibly help it. In my second job in which I had to travel a great deal, when I needed a credit card for travel I went to our banker, an old family friend. She was somewhat surprised at my request, blurting out “Your family is a non-credit type family!” A week later I had an American Express Gold Card. Things were different 40 years ago.

But I don’t think that the rules of saving are that much different.

What I think has happened in the United States is that wages haven’t kept up with expenses particularly educational expenses. That blow was cushioned somewhat by the feeling of increasing wealth that people had as their homes gained rapidly in value, especially during the Aughts. It’s not something we experienced here in Chicago but we read the newspapers here in flyover country, too. People learned to extract the unearned equity from their homes.

And they got used to living beyond their means.

In Mr. Gabler’s particular case I also wonder whether he has had the experience of being truly poor?

Meanwhile, I think that Tyler Cowen put it well: we’re not as rich as we thought we were. We need to get our heads around that and start living within our means.

20 comments… add one
  • Modulo Myself Link

    The existence of Megan McArdle is partially the reason why people live beyond their means. There is status, yes, but there are also legions of mediocrities like McArdle who without their connections would be doing data-entry. I don’t know what the answer but unless people who can afford Dalton and Yale stop using these names for their own benefit you aren’t going to see any changes in how most Americans in Gabler’s position live.

  • TimH Link

    Something that’s not often discussed: The increasing abstraction of money and how much of it someone has. As recently as 20 years ago, debit cards were pretty uncommon, someone paying for groceries would pay in cash or write a check (or use a credit card in some cases).

    You had to balance a checkbook because there finding your current account balance wasn’t nearly as easy (you could call in to a bank and find your balance – but try figuring out whether your last 3 checks had cleared yet).

    Now, for most in the lower-middle-class or above, money is just an abstraction: You pay for things by swiping plastic, and maybe once a month you pay off the credit card or something. It’s really easy to live beyond your means when you aren’t sure what your means are.

  • Modulo Myself Link

    I don’t think there’s much difference between checks and debit cards.

    I do think it’s no accident that capitalism created the paranoid world of social media where it’s possible to seek social capital 24/7. I can’t really imagine what it would me like to be a teen and to see that much.

  • CStanley Link

    Now, for most in the lower-middle-class or above, money is just an abstraction: You pay for things by swiping plastic, and maybe once a month you pay off the credit card or something. It’s really easy to live beyond your means when you aren’t sure what your means are.

    As a parent I find this particularly concerning for the generation who never experienced a cash based society at all. Not long ago it was a common shared joke among parents, that a young child will turn to mom or dad and say something he or she wanted could be purchased because we still had checks in the checkbook. That was a blurring of the abstract idea of money but at least there was still the physical item, the check, that helped make the idea of money real. Now that it’s electrons passing in the ether I think it’s harder for the abstract concept to make sense to our kids,

  • PD Shaw Link

    This dovetails with my reaction to the article about how tax withholding is a blessing in disguise because it is a forced savings vehicle. This glossed over the underlying evidence that the people withholding were living from paycheck-to-paycheck, and using it to pay down debt and pay for food and utilities. And we are very likely discussing people whose income is in the top 50% nationally.

    The 47% who don’t have emergency funds include a lot of people making over $100,000, for whom I don’t feel much sympathy at all. Those making under $40,000, I do.

  • Guarneri Link

    Living beyond ones means knows no income boundaries. And I don’t think its as simple as keeping up with the Joneses.

    When I didn’t have a pot to…. We didn’t go out to eat. Have premium cable channels. Buy alcohol or cigarettes. Go to the movies. The car was a beater. Vacations? What vacations? Or if you did, flying wasn’t even an option. If there had been cell phones we wouldn’t have had them, either. I could go on.

    Today everyone is entitled. All those rights, and so few responsibilities. Buy heavy and often…………..if something bad happens someone else will pick up the tab for that. Take a close look at the message of Obama, Clinton or Sanders. (Hell, listen to our Chicago schools union president.) A vote for me is a vote for free stuff for you, and blatantly on your neighbor’s dime………all in the name of caring of course. Of course.

    These people need to put a sign up on their bath room mirror and look at it every day: “What’s the problem? You are looking at it.”

  • PD Shaw Link

    Megan is a little weak on discussing child-related expenses, which I would start with the cost of childcare, which is unbelievably high in many metropolitan areas. I’m increasingly hearing advise to young couples that warns childcare costs is more of a financial stress than housing starting out. And while I think parents can have unreasonable exceptions about the capacity for early-childhood learning, the economics of paying someone to watch 4 kids in a high-cost area can be difficult to do prudently.

    I also suspect that the idea that daycare is only needed for 4-5 years can legitimize carrying a credit card balance that can be paid-off when the temporary expense is over.

  • Gray Shambler Link

    Some will save out of greed, but most won’t save without fear. Easy credit and the social safety net have eliminated fear of depravation. The solution? We don’t need one because we have created the fear free society we say we want. So chill. It’ll be fine.

  • Gray Shambler Link

    oh, and also, what do savings accounts pay for interest? Why not buy it today before the price goes up tomorrow?

  • steve Link

    A number of my employees live paycheck to paycheck. I have thought about it but can’t find a unifying factor. They all spend too much, but on different things. If you are in the bottom decile or two of income, I can understand it being difficult to save money, but when you are in the top one, it doesn’t make sense, unless you are just starting out.


  • michael reynolds Link

    People don’t save because: death. Well, death and related uncertainties.

    The thing with death is you don’t know when it’s coming. So you think, “Why shouldn’t I have that steak? I could die tomorrow.” If we knew when death was coming, we could plan. Instead it’s an ending that is likely to be preceded by a fair amount of misery, or it’s a bolt from the blue, and either way people figure, “What am I holding off for?”

    We are pleasure-seeking, death-avoiding creatures. We put off pleasure when we are convinced we can have a greater pleasure later. This is why rich people are thin. If we think this pleasure right now is unlikely to be on offer later, we take what’s in front of us. No hope of rescue tomorrow? Okay, then, buy the lotto ticket because why the hell not.

    I waste money like a champ, but the financial risks I took on when I was broke were hair-raising. I am much more self-controlled now, at least as relates to my income.

  • jan Link

    There are ongoing hardships and sudden crisis that simply can’t be planned for with enough cover money in the bank. Illness, accidents, death or chronic illnesses of family members are but a few that fall into such categories. In most of these circumstances there are few choices or perfect options except to simply do the best you can with the cards in hand.

    However, in these days of glittering objects, the need for status, having the best tech devices or cars coupled with long term leasing, household goods bought via tempting no-interest credit plans, plastic credit, a growing cashless society and borrowing everything on credit, no wonder there are fewer assets being traditionally banked for a rainy day. And as Gray Shambler pointed out, the prevailing low interest rates, keeping the stock market churning and the economy duct taped together, do little to encourage savings.

    Furthermore, what do people normally do with bonuses, tax refunds, inheritances? Do they prudently invest extra monies or put most of it aside for savings or retirement, if it’s not needed for bills and other obligations? Most of the time I hear people mentally spending such windfalls on new iphones, gaming devices, vacations etc. A friend of mine whose Mom passed away a few months after mine, immediately bought a pricey Tesla, has traveled extensively, and is feasting on $600 dinners. Any day now I’m expecting to hear them again voice concerns about finances, once the these funds have been depleted.

    And, much like Megan McArdle expressed, choices regarding wedding expenditures, college preferences, class of neighborhoods, how much we spend on pleasure are ours to make. And, for many people it’s those decisions which can either make or break us financially. So, IMO, an undefined percentage of people, not being able to meet an unexpected $400 expense, is mainly due to having an undisciplined lifestyle and their inability to defer gratification.

  • Andy Link

    Agree completely Dave. My parents grew up in the Great Depression and thankfully some their thrift passed on to me, though it didn’t really appear until my 30’s (I matured very late). In our late 30’s my wife and I dug ourselves out of a huge hole thanks to a major loss during the housing crisis (had to bring $30 to closing after two years of bleeding money trying to sell/rent), and now, despite an income near the top quintile (thanks to my current job which ends in less than a year) we are pretty ruthless with the budget. What’s been surprising is that no one cares that we still drive a bang-up 2005 minivan, or that our youngest son wears hand-me-downs from his older brother, etc. That status crap is all an illusion in the end – our close family and friends never cared about the about the perceived material wealth one way or the other. IMO, the “Jone’s” are mainly acquaintances or distant associates or work colleagues – once you cease to give a fuck about them, life becomes a whole lot easier.


    “I don’t think there’s much difference between checks and debit cards.”

    Not anymore. When I was younger there were no debit cards and checks could take 4-5 days to clear. People, like me, who live paycheck to paycheck would try time time cashing checks to until after a deposit could be made. That was always a gamble and with modern check scanning technology it really isn’t possible anymore.


    You are exactly right about childcare. At one point, childcare would have cost us about $13 a year for three kids. Given the lack of opportunities for where we were, it made little economic sense for me to work. Even with all three kids in school (and with me working), our child care bill is till about $7k for after-school care and summer. We can afford it now, but $7k is not affordable for a lot of people.

  • TastyBits Link

    NEWSFLASH: The money that allows these no good, worthless, vile, scum sucking idiots to live beyond their means is the ability for the financial industry to create money that they cannot repay if there is a crisis.

    Of course, they are the brilliant, captains of society. Never mind that they are the garbage that have caused the situation that lead to today’s wonderful economy. No, let’s blame it on those idiots we do not like.

    That is why I cannot stand my demographic, and it does not matter whether a person is left, right, middle, top, bottom, top from bottom, or none of the above – so smug in one’s greatness and wonderfulness. Assholeness is what I call it, but I understand that the feeling is mutual.

    The poor and working class people (black, brown, and white) do not want to be around you all because you are snotty assholes, and the system that you support and that supports you does so at their expense.

    One day, a statue will be erected of the right with its boot on the neck of the poor and working class, and on top of that boot will be the left jumping up and down.

    Let me help you all out how it works in the real world. The number of junk mail and phone calls about debt opportunities is an inverse relation to your credit rating. As it gets worse, you get more offers, and right after a bankruptcy, they cannot send you too many. The reason is simple. They get much higher returns on money that was lent, and that money never existed.

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