[ebiester]

You're looking at it from a middle class perspective. Unfortunately, most of these people are also deep in debt and have already made such cuts.

This is the byproduct of double digit unemployment as much as anything. As much as we talk about consumption, most of it is at the middle class level. Now, I've seen poor people make very bad decisions, but many are on purchases you and I would make without a second thought.

It is far too easy to forget how good we have it.

[hugh3]

Unfortunately, most of these people are also deep in debt and have already made such cuts.

Sometimes I wonder about this. How many poor folks are wasting their limited budget on frivolous crap?

One reality show I really would like to see would be about a sensible financial advice type who parachutes into the lives of low-income, deeply-in-debt people and shows them how to budget properly.

[djcapelis]

One reality show I would really like to see would be about sending entitled people into low income neighborhoods so we can all watch them realize just how hard working some people are and just how well most people manage their money. Maybe then they'd stop saying misinformed stuff like "all that person really needs is someone to help them with a budget." A budget helps you cut excess spending. There's not a lot of spending in low income places almost by definition. There is not a lot of excess.

Deeply in debt people typically don't come from low income neighborhoods, they come from the middle class. Low income folks can't get credit that easily, even when credit was easy.

Most poor people I know work amazingly hard and manage their money well.

[jdietrich]

I grew up in one of the poorest parts of the UK. After leaving school, I volunteered for an advice charity for eighteen months, spending two and a half days a week going over (predominantly poor) people's finances with a fine-toothed comb.

Out of the hundreds of people I worked with and kept extensive records on, I found four who were in serious financial difficulty through no fault of their own. Four. I saw people manage perfectly well on £9000 a year and people on £40,000 a year hiding their car from the bailiff.

Correlation between quality of life and income was remarkably weak - the ability of clients to stretch their income and conversely their ability to fritter it was often astonishing. Middle class clients took on unmanageable mortgages and racked up huge credit card bills. Working class clients took out payday loans every week, bought consumer electronics on expensive hire-purchase and spent their housing allowance at the pub. I did observe one strong correlation - the more serious someone's financial problems, the more likely they were to walk out through boredom or frustration, or become abusive when it became clear that I could not fix all their problems.

Of course, we have a welfare state. From my perspective, the political environment in the US seems to be dominated by people who actively hate the poor. It may well be the case that Britain is exceptionally supportive of the poor, or that American society is exceptionally hostile towards them.

[btilly]

I know a lot of poor people who work hard and manage their money well. I also know a lot who could save themselves a ton of money with obvious (if not easy) steps like quitting smoking.

[timsally]

Quitting smoking may seem obvious, but it's important to consider the context. Middle class people grow up in homes that are very anti-smoking. In the rare case that a middle class family isn't anti-smoking, middle class schools certainly are. Hell, I was indoctrinated with anti-smoking feelings starting from age 10 in school. Whereas a lot of poor people are probably being given cigarettes at age 10. Combine this with the highly addictive properties of cigarettes and I'm not convinced quitting smoking is a reasonable money management strategy to suggest unless we provide some sort of support program or infrastructure. If there are free programs available to teach how to fight addiction, then sure I'm on board.

[btilly]

I wasn't claiming that quitting smoking is a reasonable money management strategy. But a pack a day is something like $1500/year straight to your bottom line. No matter what your feelings about tobacco, it is an obvious luxury that you can live without and save a lot of money.

This relates to a very important distinction between being working poor and impoverished. And it isn't money. It is whether you've given up.

Someone who is working poor may objectively have it hard, but they feel in control of their lives. They can and do plan for the future. They save up for things. They anticipate what can be anticipated and make plans. I've seen people like this calculate the cost of smoking, and choose not to because they can't afford it.

Someone who is impoverished believes that their life is hopeless. Bad things are going to happen to them. They might have some influence over which bad things, but it is going to be bad. So why bother? Live for the moment and tomorrow can go hang. Smoke another cigarette, hope for some cheap booze (or other substance) tonight, it is all hopeless anyway.

Someone in the latter frame of mind knows that payday loans are stupid, but doesn't care. Because it is bad in that nebulous future that they already know is going to suck, and how much worse is it really going to get?

Anyone who talks about the poor being good with money who does not understand this critical difference between being working poor and impoverished is missing a very important point.

[timsally]

I agree with your distinction and it is an important one. It is also important to define the function by which one becomes either a part of the working poor or impoverished. I argue it is a function of personal motivation, race, sexuality, religion, and a myriad of other factors. Indeed, pointing this out was the point of my previous exposition regarding smoking. I'm wary of those people that place too much weight on the personal motivation term in the above equation.

[hugh3]

One reality show I would really like to see would be about sending entitled people into low income neighborhoods so we can all watch them realize just how hard working some people are and just how well most people manage their money.

That would indeed be interesting if it were true, regardless of your snarkiness. I'd be interested in seeing a show just like that regardless of how it works out.

[tesseract]

Secret Millionaire?

[kamaal]

Yes, that is always the case. Poor people often work hard and save money for many reasons. One obvious reason is they really have no way out. If you are given one and only one chance to do something, you are left with no choice but to do it well.

The other aspect I see is upbringing, when all you see around is poverty and and way out being working hard, you grow a natural tendency to think of hard work that way. You also learn to live frugal, and manage even with little resources. Later on life when you earn well, these habit help in saving and making proper investment decisions.

On the other hand people raised in spend thrift environments, try to match their living accordingly. For example even if they do no have money they try to buy things through debt and credit.

Saving and making investment decisions overtime make you rich, this is obvious and nothing surprising. But people rarely realize this.

[stretchwithme]

Why is someone able to provide sensible financial advice considered entitled?

There are plenty of people who started with nothing and who, by being sensible, worked and saved and became financially successful.

hugh3 probably had such a person in mind, not someone with a trust fund who has learned to stay within their allowance.

[tricky]

I have a friend at work who I try to help. I can't count the number of times or ways I've tried to tell him pay day loans are bad news. The one time he came into some money (by cashing in a part of his 401K) I suggested he open an account at a credit union or even walmart (he lives 3 blocks away) but he ended up opening a "savings" account at a pay day loan shop because it was just around the corner.

It is horrible and sad but the reality is there really is no helping some people...

[reemrevnivek]

Dave Ramsey's Financial Peace program (not reality TV, a and "Total Money Makeover" (a book, even though it sounds like a reality TV show) does delve into how to take a deeply-in-debt situation and start budgeting properly.

Step 1: Create an emergency fund with $1000 (as a rough starting point, your financial situation may be different) to handle the unexpected and avoid making more debt. Adjust the $1000 number based on your income level and possible expenses. A homeowning breadwinner with a wife and kids would need a good deal more. See: http://www.daveramsey.com/new/baby-step-1/

[skidooer]

There's a show in Canada named Til Debt Do Us Part that has a similar premise, except they usually visit higher class households (usually $100K/year+ earners) who still have managed to rack up tens to hundreds of thousands of dollars worth of consumer debt.

[singular]

That sounds like Alvin Hall[1]. He's not done a show (in the UK at least) for a while, but he's definitely done that type of show.

[1]:http://en.wikipedia.org/wiki/Alvin_hall

[rb2k_]

We actually have a show like that in Germany... It's mostly the same basics over and over again (cut the cigaretes, no Pay TV, Why do you have 4 Cell phone contracts, ...). It could very well be scripted though. Maybe I'll remember the name over the next hour or so :)

[bconway]

There is such a show, it follows Suze Orman on CNBC on Saturday nights (I forget the name off the top of my head, something about being married to debt). It's not all low-income people, but it meets the rest of the criteria.

[llimllib]

> Unfortunately, most of these people are also deep in debt and have already made such cuts.

You might be underestimating the middle-class-ness of the problem. My first job out of college was pre-screening people's credit reports (in 2004, so in quite good economic times), and it was shocking how many middle-class and lower-rich-class people were living way beyond their means, while applying for expensive short-term debt to cover it up.

The worst I saw was the owner of a local chain of stores whose wife or girlfriend was clearly cleaning him out, and he was applying for short-term unsecured debt.

[ChuckMcM]

"... most of these people are also deep in debt ..."

At least on the news we see this a lot. The folks who are "screwed" by the banks because they raised their credit card rate and are going broke. When they cover those stories you often get to see how much credit card debt these folks have and it is always > $10,000 and often > $20,000.

To the comment above, at that point you had an emergency a long time ago. If you can't pay off your credit cards at the end of the month you have an emergency.

[kamaal]

Well the first question that needs to asked here is why do those people borrow money after knowing very well they can't pay it back?

Its purely their mistake, and nobody else (society, government etc) can be blamed here.

[Confusion]

You're suggesting that 50% of the US population is deep in debt and lives as frugally as possible to resolve that issue? I don't think so.

[Duff]

Responsibility is not a class issue.

The lady who cleans our office is poor by any definition. She works 14 hours a day, every day. She has two kids, no TV, and has cash saved up to buy Christmas presents and school uniforms.

The guy in the next office makes $110k/year leases a BMW 5 series, owns a new condo, and goes out of the country on vacation 3 times a year.

Who's irresponsible?

[jrockway]

Neither?

When you get paid a lot of money, it's easier to be less careful with your money and not have anything bad happen. It's easy to contribute the maximum to your 401k, have the best health insurance and flexible spending account, save $1000 a month, and still buy a lot of things. If you lose your job, you'll probably get another one. And banks are more than happy to loan you money to bridge the transition.

All I'm saying is that consumption is not bad for any intrinsic reason other than the taboo of consumption.

(Let's look at your examples: owning a new condo, and going out of the country on vacation 3 times a year. New condos cost the same as old condos. You're paying for the ground under them. You're going to pay for that, in some form regardless of whether you rent or buy, so this isn't much of a "consumption" issue. Going on vacation isn't amazingly expensive. A cheap round-trip flight out of the US is $500. If you have friends, that's the total expense right there. So again, not an amazing display of financial ineptitude.)

[kamaal]

I think the guy earning high is to blame here. Nobody else is responsible for one's financial mess(Recession, Inflation, government etc) if one doesn't know how to manage their money well.

All measurements in the world are relative. One person lives frugual, saves and invests money. Another person doesn't.The spend thrift guy will have himself to blame. You can't have good earning conditions all your life, good and bad times come alternatively in every person's life.There will always be recessions, wars and inflation. There will always be health problems, there will always more competition.

The responsibility to secure your future when you have the chance is yours.Savings and good investment decisions make people incrementally richer. A person may not become a millionaire next year with this strategy, but over time savings and good investment decisions can make you really rich over time(When you need it the most).

[anonymous246]

Umm, I think you misunderstood his point. I guess he was trying to make the point that a 110k salary will barely (if at all) cover the sorts of expenses he described.

Which is actually true, unless you go through contortions like interpreting "foreign vacation" to mean shacking with friends in a different country. Btw, AFAIK, new condos do cost more than older ones.

[hugh3]

Which is actually true, unless you go through contortions like interpreting "foreign vacation" to mean shacking with friends in a different country.

Meh, international vacations aren't necessarily all that expensive. $1000 for an airfare, another $1000 for a week's accommodation... that's six grand a year. Heck, let's make it ten grand, just so you don't have to skimp. And a lease on a new 5-series is, what, $600 a month? This is all perfectly affordable on a $110K salary.

I'd never advise anyone to lease a car rather than buying one with cash, but actually I reckon three international holidays a year is a great way to spend money. You only live once, and while you're probably doomed to spend your entire life within a six-mile deep approximately-spherical shell, it's full of interesting stuff so you might as well go and see as much as you can.