Consumption

In the last couple of months, I’ve gotten a chance to read both Barbara Ehrenreich’s Nickel and Dimed and E. and A. Warren’s The Two Income Trap. They’re both pretty interesting, and both basically about “getting by.” This is a subject that fascinates me. As a bachelor professional, I don’t really have a point to relate to the “average” person at the point of expenses and family, so I often wonder “just what would it be like to live like a normal person?” There are so many things from school systems to buying a permanent house to paying for children to dealing with someone else financially that just don’t come up in my day-to-day life. I mean, it’s not like I’m living the life or reilly here, but my worries tend to take the form of “how can I BOTH spend a week in New York and buy a new sports car without having less than six months income in the bank?” I’m told that this isn’t normal.

The basic thesis of the Warren book (Elizabeth Warren, of Harvard Law, grew up in Oklahoma, by the way) is that with two-income family households now the normal condition in the labor pool, the additional income sloshing around has demand-driven the price of housing in a “decent” public school district to a level where BOTH incomes are necessary to afford a house. All of this means that if either partner loses their job (statistically almost twice as likely) they can’t afford fixed expenses pegged to 65% of their combined income. Ergo, bankruptcy.

This has been on my mind for some time. I’ve observed the basic Dallas mode of living (especially Collin and Denton Counties, a David Brooks experiment if there ever was one) seems to be two really high car payments and a really high house payment. Think 20% and 40% of income respectively. Now, according to the 2000 Census (www.factfinder.census.gov - GO) the median household income of Collin is $70, 835, with the median per-capita at $33,345, and a high 75.7% labor force participation (Making, by my math, income per wage earner at $44,049.) This makes sense: two people with incomes around 40k add up to 80k, working out nicely with the existing figure. It’s this “household” combination that makes the comparisons a little skewed. My question is this: how many of these people with this relatively high household income are living at the bare extent of their means? Collin county, let’s remember, is the spiritual home of the Hummer H2 and the Yukon Denali. There seems to be a pervading mentality that one buys to the maximum point of “what you can afford (monthly),” a number interestingly set usually by finance companies that are all-too-willing to exceed recommended debt-to-earning ratios. [see assortment below] This dovetails very nicely with the oft-sited plummeting (negative?) rate of current American savings. Why?

I remember dozens of times hearing my gray-haired father shake his head and ask “there are all of these people with a thousand-dollar house payment, what do they do if something happens?” (Don’t laugh about the amount – remember that Oklahoma has some of the lowest costs in the country.) His (incredulous) point was this: No one seems to carry a contingency plan any longer. It’s almost like the element of fear (or realization) of the unknown is not there in people’s planning. I can’t figure out why not. Perhaps it’s a generation used to security and affluence (you’ve heard of the Baby Boomers?) that sees setback as individual and not systemic. Maybe it’s a drive for some sort of competition [see below] that crowds out all other priorities. Strange.

I’d still like to know a little more about how other people structure their lives. Maybe my perspective is either paranoid or conditioned by a frugal environment in my formative years, or maybe having too many members of the family that were used to growing their own food. It’s that sense of context that’s hard to gain.