Good debt is one where you use other people's money to build your own wealth in appreciating assets.
Bad debt is where you borrow on credit to buy yourself a momentary satisfaction, like a trinket.
Most people think they're richer than they actually are. Which is why it's so common for people to "spoil" themselves. Learning to live cheaply is a skill and takes a bit of pride swallowing as the people around you live more lavishly on less income.
Unfortunately there a lot of people who are quite a bit overconfident about their financial state due to swollen housing prices.
It is hard to live within your means when you see everyone else around you get nice things. I know that when I retire (possibly early) I will be glad I saved all my life as I can afford more nice things when I have time. However there is the desire for now.
Worse, nothing is guaranteed. I knew people who died young. All my savings will be wasted if it turns out I'm one of those who don't make it to retirement age. The best thing to do could be charge my credit cards to the max and enjoy life as best I can now - letting my estate be bankrupt. We have no way of knowing until after I die what I should have done.
Personally, I like to save up some money specifically to blow on stuff I don't need. That way I can save for the future but still feel like I'm being irresponsible, albeit only sometimes.
"I knew people who died young... The best thing to do could be charge my credit cards to the max and enjoy life as best I can"
This argument relies on the assumption that 'getting nice things' yields 'enjoy[ing] life as best I can now'
This isn't necessarily true. Some people, myself included, feel much more satisfied living below our means. Above a base level, I don't think 'stuff' really makes us happier, and the security of having savings gives me peace of mind that is much more valuable and happiness-inducing than, say, an expensive car.
I know exactly what you mean. I've been slowly moving towards a "Mr. Money Mustache" style of frugal living, but I still wonder whether I'm doing the "right" thing. Maybe I'm missing out on all sorts of opportunities to enjoy life and grow as a person.
I do, however, look at friends who make significantly more than me and see that their lifestyle has grown proportionately with their income. Many of them could probably retire early if they embarked on 5-10 years of MMM-style extreme frugality, which to me seems like a missed opportunity.
> Many of them could probably retire early if they embarked on 5-10 years of MMM-style extreme frugality
Depends on where the wealth comes from, and if it's related to the spending of money (networking in expensive bars, for example).
There's another argument: what is retirement? Time spend on 100% leisure? But in this case we live frugally (100% work) in order to get that retirement. the reason we take so long to retire if we don't live frugally, is that we split time among work and leisure - i.e. we are partly doing what we'd do if we retired anyway.
I actually enjoy working. I don't see myself not working when I retire. It will probably be more casual work at my own pace, but I'd still like to be useful.
Many of the "retire early" people I've interacted with on /r/personalfinance are doing it because they hate their jobs and want to spend their life travelling or otherwise not working. To do that, they spend as little as possible (and save as much as possible).
Many people are okay with that. I'm not. I tried simulating that again for the first few years out of college to pay down some student loan debt. I stopped the minute I was able to refinance all of my existing debt into one with lower interest.
I think I dislike living frugally so much because I grew up poor and being poor sucked.
I understand what you mean. For me "retirement" would be about having enough FU money to provide a basic income, so that I could choose to work on things I find fulfilling.
Then again if you already find your work fulfilling and expect to continue to do so, I understand that there wouldn't be the same urgency to retire (with the caveat that everyone should save something for retirement as well as having an emergency fund).
My only advice is don't go overboard with it, but keep sticking to your plan. Spending more money doesn't automatically bring you more happiness, even if a large part of society makes it seem so. Buying a new car seems fun, and it may be for a couple of days, but the fun wears out after a while. Eating out at a restaurant can be a great experience, unless you do it everyday and it becomes a routine.
Yeah, I can relate to restaurants. We started going to them more often (not really sure why laziness?) and they not only became routine it became somewhere of a chore to leave the house when you're hungry. We cut back a lot and when we went out again last Saturday it was literally one of the most fun I've had in quite a while.
I predict people taking out ostentatious lines of credit on their mortgages (esp. in GTA and Van) will lead to very high rates of default if the housing prices drop dramatically (~10-20 %).
"Good debt is one where you use other people's money to build your own wealth in appreciating assets."
I'd say a new car loan is good debt, even though it's a depreciating asset. For the last 15 years or so, the interest rates are so close to inflation that it doesn't even make sense to pay cash for a new car.
At times when I was in the market for a used car, I opted to buy new because the interest rate was lower on the new car and it was irresponsible for me to pay cash for the used car.
I think the concept of good debt does nobody any favors. The people who make real money using debt get money at very low to 0 percent interest rates. There are always exceptions but for most people this concept is BAD.
I would beg you not to tell this nonsense to people but I suspect you will think you know better.
What appreciating assets should people get in debt to buy? Surely you aren't trying to label houses as appreciating assets.
You absolutely can't "know" ahead of time what assets will appreciate at all, let alone their rate of appreciation. If you knew that for sure you'd be a guaranteed millionaire. Even if you say "real estate historically appreciates," most communities (esp small ones) are prompted up by 1-2 big employers or industries thus house prices in a community are not as secure as you might believe (see Detroit). Plus neighborhoods change over time. Plus you're ignoring the carrying cost of a property and the transfer costs.
However, a house can provide a lot of enjoyment so I am not advocating you don't buy one, just be realistic about what you are buying.
>I "knew" when I bought corporate bonds paying 15% in 2008 that they would appreciate.
No, you're ignoring the case where they might have defaulted.
The housing market oftentimes works in cycles and changes with time. In my life I've watched the neighborhood I grew up in go from highly desirable to highly undesirable and now it's back to being desirable again. 30 year mortgage is enough time to see wild swings in technology, the economy, industry, and plenty else.
These all effect housing prices. Dramatically sometimes.
Mountain View is currently dependent on the tech industry and the flow of VC capital to maintain housing prices. Another .com crash and Mountain View house prices will crash accordingly. "Silicon Valley" may even move to the South or something in 20 years.
Right now the neighborhood I currently live in is in a boom due to a large employer here heavily ramping up production and the associated influx of people moving here from other parts of the country for work. I don't really expect the sort of growth we are experiencing now to last in the long term but who knows what will happen.
There's always the unknown.
A house is a house, enjoy it, but don't count on making money on it.
>No, you're ignoring the case where they might have defaulted.
How on earth do you know what I'm ignoring? I most certainly accounted for the fact that the companies could default.
>The housing market oftentimes works in cycles and changes with time. In my life I've watched the neighborhood I grew up in go from highly desirable to highly undesirable and now it's back to being desirable again. 30 year mortgage is enough time to see wild swings in technology, the economy, industry, and plenty else.
And yet, the long term real rates of return are positive (but small). You have your strategy, I have mine.
If the house is your primary residence, you also have to factor in how much typical rent would be. In many cases, you are able to finance a house for lower monthly payments (principal, interest, taxes) than rent on an apartment.
It's not surprising that people get into debts like the ones described in the article. Credit card companies want you to be terribly indebted to them.
I had an uncle who suffered brain damage from an aneurism that left him unable to handle money- memory issues, disorganization, etc. He was never going to be able to pay back credit cards and my mother (his PoA and lawyer) informed the credit card companies of this. They sent the cards anyways. They wanted him to go into debt, hoping that his family would bail him out.
There's more profit in taking advantage of people than there is in being a decent person. Unregulated free markets cannot account for that reality. We in Canada have some regulations, but clearly not strong enough ones to prevent this kind of predatory lending.
Unregulated free markets? The banking/loan industry is a heavily regulated industry in both Canada and the US.
Yes, predatory lending exists and it may be immoral, but it still requires the other side to agree to it. And keep in mind that the other side frequently has no intention/ability of paying. That is at minimum acting in bad faith and is usually against the law, even if there is no misrepresentation of income, assets, etc. In many jurisdictions, merely taking out an unsecured loan without the intention of actually paying it back (regardless of what the lender says or does) is technically illegal.
I didn't mean to imply people were rational. Not only are people frequently not rational, there is also an information asymmetry that is involved with most financial/legal/medical decisions that would make people elect choices that are not in their own best interest.
I wasn't trying to say they were rational, merely that they are still required to agree to the terms of the predatory lending and they should still be considered responsible for their choices. Also, I wanted to point out that they frequently are not the innocent victims that they are made out to be. Many times they are just as bad as the lenders simply because they don't intend to pay. The lenders are just far better at inducing payment than crooked borrowers are at getting away without paying the money back.
Look at student loans. Nearly half of all students think that their loans will be forgiven eventually. Maybe they are right, maybe they aren't. No one knows. But the point is that they are taking on the loans because they don't expect to be held liable for and required to pay back in full.
> keep in mind that the other side frequently has no intention/ability of paying. That is at minimum acting in bad faith and is usually against the law
I see. My complaint is that a credit card company knowingly took advantage of a disabled man, and your answer is that he was the villain in the situation.
The man sometimes couldn't tell what was real vs what he had imagined happened. He couldn't go too far from home alone because he would forget how to get back. He was a wonderful human being, a hilarious story teller, and happened to be disabled because of a health issue.
In many countries, particularly European ones, knowingly giving loans to people you know will be unable to pay you back or are unable to handle money responsibly due to a medical condition, is basically handing out free money.
The moment a court hears of it ALL your claims against that person will be forfeit and the blame will lie squarely with you. I'd be surprised if Canada/US doesn't have similar provisions.
It might, but I would wager that making it to court isn't a cheap proposition - you'd likely need to retain an attorney, pay all sorts of fees, and even with a judgement against you, you now have to track down all of the places your debt has been sold off to, repair your credit history, etc.
Not easy even if you're in full control of your mental faculties.
It doesn't do much that is useful in the uncle's situation.
If you register for it then you won't get unsolicited credit offers from companies you don't have an affiliation with. So American Express can only go pulling random people they aren't affiliated with a score of over 700 or whatever and send card offers only to people who haven't opted out.
However, it doesn't prevent companies from marketing credit offers to people they do have an affiliation with. So if you have an AMEX card then American Express can market other American Express cards to you even if you signed up for prescreen opt out, and your bank can market their cards to you, and your airline rewards program can market their cards to you, etc.
That website was set up as a result of the Fair Credit Reporting Act (which also allows people in the US a free credit report once a year) which only applies to Americans.
I had a more cynical view that it was so the credit card companies had the fewest amount of people opt out. They could have made that site apply to anyone worldwide but that would hurt themselves.
No, you're not clear on your understanding, that site isn't run by credit card companies, it's run by the three credit bureaus.
Basically, credit card companies (and insurance companies) buy consumer data from the credit bureaus to send unsolicited offers. That site is for you to register with the bureaus that you don't want your credit report sold in that way. That's how come companies can still send you unsolicited credit offers when they already have your information from elsewhere, such as from your bank account or frequent flyer account.
I don't know which, if any bureaus operate in Canada or how that are allowed or not allowed to sell your data. That particular site gives you specifics information about American law (FCRA), and how things work in America with credit bureaus information sharing - it's completely irrelevant for Canada.
I don't know what we have, but I know that apparently, having a lawyer and power of attorney tell a credit card company to not send credit cards wasn't enough.
"Around Christmas, they decided to take the children to Mauritius to visit with family. That trip cost them $12,000, shaving their nest egg down to $9,000. Kervin wasn’t worried."
Just starting the article but... It seems like this is a pretty big issue. I couldn't imagine taking a 12K vacation. Especially if it was going to bring the total savings for my family down to 9K. That's just poor financial planning.
> “Rent, groceries—everything is costly,” says Kervin. “You get your paycheque, and you don’t know where it goes.”
This quote really stuck out to me. It wasn't "just poor financial planning" it was absolutely no financial planning.
Was there predatory behavior on the part of the loans? Absolutely. But to me the larger take away here is the importance of budgeting, saving, and being responsible with your financial planning. They were making over $87k/year after-tax, and just a couple months after he lost his job they had liquidated their entire savings.
I had the same reaction. I don't want to judge anybody too harshly for their choices, but it definitely makes it harder for me to view them as victims of a systematic hollowing out when they are making choices like this. A $12k vacation is a luxury by any standard and something I could not justify for myself even with a much more stable financial footing than the article describes for this family.
Everyone I know goes south every single year. The Dominican Republic, Cuba, Mexico but also Thailand, Australia. All they do is sit on a beach and drink until blackout drunk.
I have never gone on a trip to any of those places or anywhere else because I save my money (I'd rather Rome or Tokyo). Yet people with absolutely no money or on unemployment, a dozen kids etc. It seems everyone goes no matter the cost and every single year.
I know people say "travel now while you can" but I don't want to be 65, poor, an alcoholic, and with with blond hair, bald and blue eyes I'd probably end up with melanoma.
This is the same crowd that goes to Timmies two or three times a day yet poo poos Starbucks.
Labor has never had it easier than it does right now in 2017, in a G8 country.
The mental gymnastics required to tell a 1930s sharecropper, an 1890s coal miner, or a 1770s battlefield medic that writing javascript in an air-conditioned cubicle for 45 hours a week is "unbearable".
Vacations are absolutely a luxury. A luxury that is increasingly "required" by modernity with Facebook and Instagram posts convincing people that their lives are less than that of others.
> The mental gymnastics required to tell a 1930s sharecropper, an 1890s coal miner, or a 1770s battlefield medic that writing javascript in an air-conditioned cubicle for 45 hours a week is "unbearable".
I don't know, I think they'd find a lot of suffering in common. The sharecropper can sympathize with the tragedy of property ownership. The coal miner has nightmares about seeing his canary drop. And the battlefield medic definitely knows everything about missing semi-colons.
Good thing we don't have enough people from the 1930s, 1890s, or 1770s around to really weigh in on this.
Different times, different stresses. Vacations are a necessity, whether it's going out to the world or just retreating inside your house for a staycation on the weekends.
> The 2016 full-time average hourly wage rate for transport and heavy equipment operation and related maintenance occupations, which includes truck drivers, is $21.00. The 2016 corresponding median weekly wage rate is $950, giving an approximate full-time annual salary for this employment group of $49,000.
Yeah, I'm dealing with that now with one of my family relatives. They don't make that much but somehow manage to go to Mexico, Thailand, DR, wherever and spend a ton of money they don't have. And then they expect me to participate in buying stuff on credit unnecessarily despite me telling them that I can't do this. I'm good, thanks.
Oh, I actually meant "do you consider that a lot of money to have when unemployed?". Because, I wouldn't. (Even though it's more than many have saved when they lose jobs)
To put this in context, they were visiting their family (in Mauritius) after the birth of their new child. It's still irresponsible to spend such a large amount of money in that kind of situation - with that amount I guess they didn't look for the cheapest travel options, and lived in an expensive hotel instead of staying with their family - but it's not like they just went there for the beaches, as it looked like when I first read the comment.
I'm sorry, but people not having just a basic understanding of how debt works is not 'the system's problem.
After reading the article I can identify a few things that would've raised a huge red alarm in my head if it was me:
- Don't spend $12k in holidays right after you're fired and have a couple kids.
- C-Sections are quite normal these days... It'd great that you want to be with your wife and the new babies... If you can afford it! Most people can't.
- Using loans that have an interest of 590% APR... Sorry, you have to be quite ignorant to sign that. Even the worst credit cards have an interest that's a fraction of that. That's definitely not cheap credit.
I know many Canadians... And people with that little financial knowledge is definitely not that common. And yes, most people take more debt than what they should, but the case portrayed in the article should give way to a very different headline "Couple chains badly financial decisions".
Depends how you define the system, but if the system is the broader community, then I'd say it's the system's problem. A debt spiral isn't going to lead to happier people, crime-free communities, etc.
It's this a million times. As a Canadian I've talked to a staggering number of people who don't understand finances or basic financial instruments. At best they end up terrified of anything so much as a credit card, and at worst they end up like the family in this story, just grasping whatever ill advised financial resources are available to live the life they feel is right.
My person pet complot theory is that this is because if they would teach even the basics of proper financials to future household runners the system would not be able to profit so handsomely of the victims.
I think sadly the assumption is that kids will learn about finances from their parents, but since so many adults also don't know enough about this (and often shield their children from the family's financials), that's a bad assumption to rely on.
We used to have that in Quebec when I was in high school (in the 90s) but they took it out a couple of years ago.
I remember doing budgets and figuring out how much it would cost to leave your parent's place, rent an apartment, buying fridge, furniture, etc. to help you prepare for being an adult.
Yes! It was called Family Economics, and was by far one of the best classes I've ever had.
They even taught you basic cooking and sewing. Our final cooking exam consisted of every team of 2 students being given 20$ and an hour and a half to go to the grocery store across the street, buy ingredients for a pizza and then cook it, without assistance from the teacher. You were graded on budget, teamwork, time taken and the quality of the cooking.
That's it, "Économie Familiale". We didn't have a grocery store near our school and don't remember that well but I think out school provided the ingredients, or maybe we brought them from home?
If you can read French, I found these documents that are interesting while researching the subject:
Huh we had Home Ec classes as well, but there was no financial planning or budget component to it, and it wasn't in high school it was in middle school..
Seems to make way more sense to have it in high school
> Sorry, you have to be quite ignorant to sign that. Even the worst credit cards have an interest that's a fraction of that. That's definitely not cheap credit.
Agreed, but sometimes that's the only hope some have. At one point in time, I did and I came from a very normal credit-worthy background. Shit happens, ktzar.
Maybe they're already maxxed-out?
Or can't get a credit limit high enough to borrow what they need.
Or need to pay something in cash, and don't have a higher limit available from a cash-out card.
Or are "un-bankable"
That 590% is scoffed at, yet paid, because there's a majority of people (2M in Canada, according to the article) who have no other choice.
Most people would opt for the better option, if they had one.
This should surprise absolutely nobody. Canada's middle class gets to bear the brunt of the costs of running the country, it would take a much larger population to be able to do so responsibly, on top of that your average Canadian spends far more on consumer goods than is probably wise given their income. In places where the future arrived a little early you can already see this, I've known people to burn up their furniture and inner walls of their house to stay warm in winter. Todays middle-class has a fair chance of ending up in the poor house or on the streets when the final bills arrive. Some parts of Canada make Northern Michigan look good by comparison. Just drive around Northern Ontario for a bit if you want to have an idea of what poverty in a first world country looks like.
How is that even relevant to this article? The middle class family described wasn't forced into debt by expensive essentials. It sank into it by living beyond its means by overspending on non-essentials.
Nobody made them spend two months income and 60% of their savings on a vacation. That's patently idiotic.
> > Canadian spends far more on consumer goods than is probably wise given their income.
I think I covered that. The reason they do is because Canadians are very much conditioned (and Americans too) to describe everything they buy in terms of monthly payments. That works, as long as the paychecks keep rolling in. But it does not take much to upset that.
As for the infrastructure spending and other bits in that comment: if there were more people carrying the load then everybody would end up a little wealthier. As it is the only place where real money is being made in Canada is in banking, which is almost predatory as to how it treats the population. The interest rates are off the scale compared to the rest of the world and the various low key trade-wars with the US do not help either.
Their is far more money here than appears on the surface. Years of 10,000+ miners making 100K+ per year + nickel bonus saw to a rather well off retirement community and thriving big ticket item market. Yup, lots of them borrowed to get there quickly. But it was also paid off quickly.
Now, that being said, Sudbury is a very different place 15 years later. The vast majority of the mining jobs are gone, the infrastructure is falling apart. But I wouldn't even come close to calling it poor. Is the future bright here. Nope. But I wouldn't call lots of the major centers to the south prosperous either.
Myself. I never had a CC until I was in my 40's. Even then, they are rarely used, and, paid off immediately. Despite what I think is an artificially inflated local housing market, I manage to save a significant chunk of my income every month. The root cause of the debt problem, I think, is the lack of education. Schools haven't taught 'money' in ages. Managing a household is no different than managing a small business. People have been purposely NOT taught how to manage their money by our education system, it borders on the negligent.
Doesn't matter if its a nickel delivered from space, or timber or diamonds or gold. What matters is that it's a resource based economy that has been sold and sold resold to different companies
Anecdotal evidence of money issues is my buddy who does repo's and is baliff. Just before the economy goes into the tank as a whole, he's called it each time because repo's and defaults shoot way up just before.
> As someone born and raised in Northern Ontario, I have no idea what you're talking about.
Been to Wawa, Sault Ste. Marie, North Bay or Timmins recently? What about the smaller towns like Desbarats, what about the rural areas?
It's - to me - incredible that in a first world country people would be living like that, I've seen poverty in other countries as well, but not in places where the winters are that cold. In Panama or Colombia you can get away with living in a shack, in Northern Ontario it is not an option.
If you feel that Northern Ontario is doing well then you are not in agreement with the people that live there, younger people - if they have any marketable skills - move to the large cities, mostly Toronto but also in the United States as soon as they are able to.
Sure, San Francisco has poverty too, but at least the climate won't outright kill you (in case you were wondering why there aren't so many street people in Northern Ontario: the ones that try usually do not last a single season).
>Been to Wawa, Sault Ste. Marie, North Bay or Timmins recently? What about the smaller towns like Desbarats, what about the rural areas?
Yes, in fact I have. I lived in North Bay for many years. I have family there still. I played NOJHL hockey. I still spend 4 weeks a year on vacation (best fishing in the world!) in the North.
>If you feel that Northern Ontario is doing well then you are not in agreement with the people that live there, younger people
Not "doing well" isn't the same as "first world poverty". Sure, there are isolated First Nations reservations, like Attawapiskat, that have serious issues. It is nowhere near the norm, or in fact much worse than places like, say, the Appalachian coal regions.
But I'll concede the climate argument. Thankfully, our country has a decent safety net.
>younger people - if they have any marketable skills - move to the large cities, mostly Toronto but also in the United States as soon as they are able to.
Do they? Because I was and know many of those young people. Yes, there's movement to the cities like everywhere else on the planet; it's where the white collar work is. But many people want to stay in the North.
For what it's worth, I'm in the tech industry and moved from Northern Ontario to the city. Now I'm in PEI, another beautiful rural area that I hear people are fleeing....
It surprises me, because I've never been up there. I do accept that we have issues, and that people have been getting hit by harsher bills, like Hydro recently.
The article doesn't want to seem to load for me, but what is the source of cost issues in that part of the country? Cost of living vs what jobs pay out there? Or is it more deep than that?
I primarily have been wanting to see an increase on taxes on the higher earning bracket. Also we should probably have more brackets on the high end 250k+ all paying the same tax rate doesn't make a whole lot of sense to me. Anyways, my hope is that we can use that to reduce costs of services this way. Not sure if it would solve the issues you speak of not.
I had to wait a bit but it eventually loads. Not sure what is wrong with the website.
> what is the source of cost issues in that part of the country? Cost of living vs what jobs pay out there? Or is it more deep than that?
Article concludes frivolous spending coupled with negative life events: Loss of job, "ignore their tax bill while shelling out for rep hockey and baseball", relationship gone wrong.
"Thanks to all the cheap credit, many of us can bridge our financial shortfalls for years before realizing we are on the brink of ruin."
Much of rural Michigan is rather poor but I wonder about the comparison you are making. There aren't people living in anything resembling shacks in Michigan. At least not meaningful numbers of them.
There's even probably a bit of an inversion by now where the poorest areas are apartments in small towns rather than isolated rural homes.
The story looks to me like an example of family budget mismanagement full of red flags. Expensive trips, two kids in day care while 1 unemployed parent stays at home, two cars, and very expensive payday loans on top of it. Honestly, I have little sympathy here.
PS. If there is a problem with middle class in Canada this story is not a good example of it.
The day care thing puzzled me. Surely either parent in between jobs could be at least 0.6 FTE home with the children? Is the father assuming that's not their role or being lazy about it? Schedule job interviews for the 1-2 days/week the kids are being cared for.
I'd also be cautious about trying to live away from family and friends who you can rely on for spot support with childcare, emotional support, etc. I know it's not feasible for all, but that cost would add up.
To be fair, it was never about a hollowing out. The link is, "Many Canadians are living on cheap credit rather than living within their means" and the title is, "Canada’s Middle Class Is on the Brink of Ruin". The whole purpose of the piece was pointing out the frivolous spending habits of the average person that leads to deep financial problems when a negative event happens (job loss, divorce, etc.)
You were never to empathize with it; it's just saying people spend beyond their means.
I know at least one supplier who lives like this financially. They and their spouse have above average incomes, but large debts, and constant spending on expensive vacations and house renovations.
They have jobs, so they don't go over the edge. But it's basically one step removed from the more extreme situation highlighted in the article.
I have more sympathy for Jacqui, the single mom. She wasn't planning to divorce her husband and a $1200 basement seems reasonably thrifty for three people. Perhaps the new vehicles were extravagant, but she purchased that before her second divorce and couldn't save much by selling it to buy an old beater. In the end, her best hope would be a better paying job or moving somewhere with less expenses but a worse university for her daughter.
Not only that. Rising wealth inequality and cheap credit is pricing the middle class completely out of asset ownership. Disposable income is staying constant while asset prices (and related things like rent) continue to rise. This isn't just a US phenomenon.
This is what leads to the "avocado toast" situation [0].
I'm conflicted on what to think about this. He comes across as arrogant, and made a very poor choice of item to illustrate his point, given how many avocado toasts you'd need to forgo to save a deposit for a house. It's also true that lack of affordable housing is mostly a political failure.
But I look at young people in the UK and kind of see what he means. Home ownership (and any sort of real, sustained wealth) seems like such a distant prospect that people would rather just indulge themselves now.
Where the "avocado toast" narrative fails is that young people now are actually spending a smaller portion of their income on eating out than previous generations did at the same age. The categories they are spending more on are things like healthcare, housing and education.
Back last month I got to thinking about this in terms of things my family didn't have in the 70s that we have right now. Cable TV, Internet, TiVo, cell phones, Netflix, routinely eating out ... I reckon I spend easily $600 a month on things I just didn't have growing up.
The anecdote about one individual's credit problem the author uses to lead the article is particularly long and meandering. I can't fathom why anyone thinks this is an effective way to learn about anything.
I believe the Canadian number is the average across all students. The American article breaks things up more:
+ 66 percent of graduates from public colleges had loans (average debt of $25,550)
+ 75 percent of graduates from private nonprofit colleges had loans (average debt of $32,300)
+ 88 percent of graduates from for-profit colleges had loans (average debt of $39,950)
+ MBA = $42,000 (11% of graduate degrees)
+ Master of Education = $50,879 (16%)
+ Master of Science = $50,400 (18%)
+ Master of Arts = $58,539 (8%)
+ Law = $140,616 (4%)
+ Medicine and health sciences = $161,772 (5%)
This is a highly skewed distribution (would be in Canada too, but all values would be lower). Graduate school in the USA is significantly more expensive than in Canada. The average of the Canadian distribution across all majors + graduate programs is going to make the difference between the two nations seem much smaller than it really is. The Canadian report has no such breakdown unfortunately (though see the average debt levels on page 40 of this http://www.cusc-ccreu.ca/CUSC_2015_Graduating_Master%20Repor...).
26k seems pretty good to me, plus if you convert the 37k USD into CAD, it's more like 50k. If you are in a good program, I think 26k is perfectly fine, it's the students going into debt for programs that don't get them a job who are the issue.
Yeah, but prices in CAD !== prices in USD. Much of the stuff in stores is imported, and a weak CAD means higher prices (e.g. gas is around 1.15$ / L at the moment, so ~4.36$ / gal, which you might find expensive).
It should actually be done in primary school. By high school, it's too late to teach them life skills like that. Especially since they are likely already making/spending money at their summer jobs by that point.
One generation builds wealth, the next does everything they can to tear it down. Seems like the way of the world. I stopped worrying about the middle class when I realized that they are the architects of their own ruin.
until their vote during the next election goes against your agenda....
You cannot not care about part of the population, even if you think it's their fault they're not doing better. Because the day they go to the streets to tear apart society as we know it, is when it's too late to care about them. Sad but true, history has shown this is how it works.
Maybe it's extreme, but it's something to keep in mind. I had this very conversation with my grandpa the other day. He told me "well, you cannot care only about yourself, because you have to make sure other people/classes/whatever aren't so unhappy as to start a revolution."
There is a difference be creating wealth and capturing it. The fellow who builds something creates wealth. The fellow who invests in assets generally does it to capture wealth i.e. make money off other peoples labor.
I'm middle class myself, so I don't feel all that bad about it. You don't know how many of my family members I've seen fritter away their lives and fall into dependence on the ones with money. Black holes of neediness, these people are.
I have very little sympathy for that idiocy. And even less for the decline of rugged individualism in favor of asking the government for handouts.
The lower class never had any advantages to begin with so my apathy does not extend there.
I don't think that really stacks up. A lot of the really interesting research into non-mainstream monetary theory (i.e post-Keynesian/modern monetary theory) is saying the opposite - that the size of the money supply is actually hugely important, and not having enough at certain times has caused as many problems as other times when there has been too much.
The money supply really needs to be flexible to account for the amount of goods and services produced by the economy. Too much and you have inflation, too little and you get stagnation.
So I don't believe that a currency based on a fixed supply of money would ever actually be workable long term (and unsurprisingly gold and other commodity backed currencies have never lasted).
Not suggesting merits of either system. Just saying that if the supply is not based on some gold standard scheme, then for all intents currency is just paper when it's printed. It assumes value when paid in wages, loaned, etc. Effectively, it has to be laundered. The middle class is best at laundering because their ratio of earning power to debt to spending power. If the middle class shrinks, a money system that depends on it will lose value.
As a Canadian making a decent wage, but not living outside my means, I guess this article explains why I feel like I'm being left behind.
I had a coworker who got a condon and was paying 45% of his income for it, it made no sense. So I keep renting and wasting my money as people say, but at least I wouldn't go bankrupt if something bad happens.
I could just as easily say that this the result of 40 years of the upper class shifting the tax burden downward to the middle class, while lobbying for the passage of laws to ensure that all of the economic gains during that period are funneled upwards towards themselves.
Telling the middle class to tighten their belt because - despite a growing economy - there just isn't enough to sustain the lifestyle that their parents enjoyed isn't sound economic principles, it's class war.
I don't understand how it relates to the article, or even Canada in general. Are they contending that the Canadian government running deficits is causing the population to live on cheap credit? Canada historically runs small deficits. The most recent government has had deficit spending as part of their platform, but I don't think they've been in power long enough to be the source of this problem.
It just looks like vague anger at greedy governments from "the whole world" without anything to substantiate it or talk about.
It's not vague anger in the least. From what I just looked up, it seems Canada has ~1.6T in total debt (federal and provincial levels of government) and around the same in GDP, which is better than the US because the US has more than that amount just from the federal.
The issue with deficit spending is simply stated as this - you can print money, but you cannot print value. Meaning that people produce value and just because there are X more dollars in circulation doesn't mean there are now miraculously a proportional increase in the amount of goods and services the economy produces. Roughly the same number of people are working so the GDP is more or less unchanged. So what happens? Well supply and demand does its thing and prices rise because now there are more dollars and approximately the same number of goods and services.
Deficit spending is effectively a hidden tax on everyone. And it's truly vile because it cuts down the purchasing power of everyone equally, meaning those with the lowest incomes get the same % hit to their purchasing power.
When you think about the impact of deficit spending, it should induce rage. What's more, think about this. If Canada has to pay off that debt in full (without even taking interest into consideration), it means that everyone who is currently working would have to work an entire year for free (100% tax rate) just to close the debt. That's how much of the people's labor they have stolen through deficit spending.
Or think of it this way - it usually takes the average person until they are around 30-33 to save up a full one year's pre-tax salary. That's about ~7-10 years of savings (assuming graduating college around 22-23). That means they have spent/stolen 7-10 years of savings for the average person!
The destruction of purchasing power is directly proximate to the use of credit as a means of survival for the middle class.
To add further in India top 5-8 per-cent population is described as 'middle class' by media. Because real middle class there looks like malnourished, emaciated masses.
It hardly fits into narrative of young people doing modern jobs, have a motorized vehicles, eat out and go for movies every week.
True, many people are ignorant, but also we've been target of massive, decentralized, decades-long pysops campaigns (aka marketing and public relations) that have steered us in this direction.
Update: edited for clarity.
>The whole world's middle class is on the brink of ruin thanks to modern era politicians whose gluttony for easy money
I guess that depends on what you define as "middle class". The bottom 50% of people earn 15% of all income in the US. These people are struggling. Not sure I'd consider them "middle class" though.
On the other hand, the segment from median income to $100,000 is 50% of all income earned, and that figure is rising.
Good debt is one where you use other people's money to build your own wealth in appreciating assets.
Bad debt is where you borrow on credit to buy yourself a momentary satisfaction, like a trinket.
Most people think they're richer than they actually are. Which is why it's so common for people to "spoil" themselves. Learning to live cheaply is a skill and takes a bit of pride swallowing as the people around you live more lavishly on less income.
Unfortunately there a lot of people who are quite a bit overconfident about their financial state due to swollen housing prices.