“Financial freedom is our only hope.” ~ Jay Z
Education is the difference between wealth and poverty. The difference
between debt captivity and financial freedom is financial literacy. Building a
financial legacy for your family comes down to what you know not who you know.
When you have dough it is easier to get to meet whoever you need to know.
Polling data shows that 64% of people say they are either the same or
worse off financially under the Trump economy. US census data shows income
inequality keeps rising and has reached its highest level in over 50 years. In
what appears to be a strong economy due to record stock market numbers, low
unemployment and low inflation working people are struggling to acquire the
basics of a middle-class lifestyle. The Wall Street Journal reported in an
October 1, 2019 article: “The Seven Year Auto Loan: America’s Middle Class
can’t Afford its Cars” that even buying a car is out of reach for the majority
of people earning middle-class incomes.
One of the issues that are preventing most middle and working class
people from making gains financially is due to rising income inequality. As
income grows it is only going to the top of the income scale. Another culprit
is wages have largely been stagnant since the 1970's with some increases between
2013 and 2017 but then hit a wall in 2018. Other factors include the rising
cost of healthcare with an increasing number of families being uninsured along
with the rising cost of child care. In what appears on the surface to be a
strong economy people are not having children. It is very rare to see the birth
rate decline in a strong economy. This indicates that a significant number of people
are reporting that they are doing well publicly while they are struggling
financially privately.
Despite Trump’s claims of a strong economy the benefits of it have not trickled
down to the middle-class. We are seeing an increase in demand for workers but
we are not seeing an increase in the power of workers to demand better working
conditions and higher wages. The mechanism that normally gave workers bargaining
power appears to be broken. I believe this is the crux of the problem with
respect to the disconnect between the strong economy and how people are
actually fairing financially. People have lost the power to pressure
corporations and politicians to bend to their will. This occurred because many
union workers gave away their power by voting for republican politicians
staunchly when they knew that what republicans always do is work to diminish union worker’s
pay and benefits.
The stock market rises and falls on the emotions, perceptions and
predictions of its stakeholders. Although the average worker is struggling
financially people are reporting that they feel good about the economy which
gives added strength to and buoy the stock market. In many ways the individual
stockholder has been deluded into believing they are doing well. Then there is
the (Joe the Plumber type) republican voter who pretends to be stockholders to create
the illusion that they are doing well financially and to justify their support
for Trump. During a CNN interview one woman who claims that she voted for Obama
and Trump said her reason for continuing to support Trump is that she has seen
an increase in her paycheck and her stock portfolio is doing great.
I’m not saying she is a liar but her clothing and speech pattern gives suggests
that she more than likely lives in a trailer park in Hillbilly Hamlet. She is
apparently not financially literate enough to understand that the Trump
administration lowered her marginal tax rate which put more money in her
paycheck but that means she will receive a lower tax return at the end of the
year. In some cases, it has caused people to owe money to the government. She
is also apparently unaware that Trump’s tax cuts for her will expire on
December 31, 2025 which means she along with most taxpayers will see a tax hike. At that point the extra
money she received in her paycheck will disappear.
The Federal Reserve Household Economic Survey asked the question: If you
had an emergency where you needed $400 immediately, could you meet that
emergency? 47% of the respondents said that they could not meet that emergency
unless they could borrow the money or sell something. The survey also asked if
an unexpected need arose could they raise $2,000 within 30 days and 40% said
they could not.
The middle-class in America is struggling financially due to financial
illiteracy with many struggling desperately. The average middle-class family
has only 3 weeks of household expenses in reserve with some having only as much
as 3 days. Middle-class men are secretly suffering from financial impotence (which
is described as financial frigidity for women leading families) that is like
sexual impotence. Many are going through it but no one is willing to talk about
it because it is embarrassing.
Although wages have stagnated since the 1970's people are still earning
relatively good incomes. However, those incomes are not actually middle-class.
Middle-class income is calculated by dividing the median American income by 2
to determine the low range and multiply by 2 to determine the high end. Median
income in 2019 America was $63,000 or $51,000 after taxes. Therefore, the
middle-class income range is $31,000 to $126,000. However, the income needed to
live a middle-class lifestyle comfortably in America is currently $130,000.
Most people who consider their self to be middle-class don’t have the
money to live a middle-class lifestyle so they use debt to make up the
difference. Debt allows them to create the illusion that they are swimming in
money when in reality they are drowning in interest payments. The average
person making $63,000 per year could do better if they knew better. The primary
cause of financial impotence is financial illiteracy. People who are
financially illiterate pay a heavy price for their illiteracy.
