Reflections on Financial Hardship in America

Reflections on Financial Hardship in America

I keep seeing that number get thrown around from the Fed's 2018 survey about 40% of American adults not having access to $400 in cash if they needed it for an emergency.

I looked up the original report because I was curious. Indeed, it's accurate. Check it:

"If faced with an unexpected expense of $400,
61 percent of adults say they would cover it with
cash, savings, or a credit card paid off at the next
statement—a modest improvement from the prior
year."
"Similar to the prior year, 27 percent would
borrow or sell something to pay for the expense,
and 12 percent would not be able to cover the
expense at all."

These numbers have been improving since 2013 ig, so that's cool. But this still strikes me as unbelievably stressful. I haven't been in a situation since my early 20s where I couldn't come up with $400 in a serious pinch. That's not a brag, it's just a reflection on how fortunate I've been. If I was living that close to the wire in terms of an unexpected expense forcing me to choose rent or food, I think my natural neurosis and anxiety would cripple me a lot of the time... or dramatically incentivize me to figure out a way out, assuming I could. I can't really relate to the emotions involved (even though I can imagine them), but it reminds me of two stories.

When I was 23, I was playing catch (baseball) with a guy in my friend group at a party. I threw him a fastball at a moment when he happened to glance away and I broke his nose. It did not make a great impression at the party. I felt awful. After the accident, a mutual friend called me and told me the right thing to do was offer to pay for his medical bills. He was totally right! It was my fault.

But this was massively anxiety producing at the time for me. I don't remember how much they were but I want to say our household AGI for me and my then-partner was around $80k combined? We were living in downtown Seattle and just out of college. No real savings to speak of. Overextending on the rent a bit to live in Belltown. It must have been at least a few grand (on paper) but I don't know how much he actually paid because the guy whose nose I broke declined my offer and never spoke to me again. But what I really remember is the feeling of thinking that due to a freak accident, I wouldn't be able to save any money for about a year. I think we were only putting away about $100-200/month after expenses.

Even THIS was devastatingly stressful for me. It felt like a freak accident just setting us back by over a year. It sucked. I know it sucked even more for him, but I was 23 and still pretty selfish... anyway, it's the feelings I want to focus on. When I was 25, some major medical expenses completely wiped out my savings anyway. I had $0 in my bank account. No money in stocks. A small 401k.

That was stressful, but I still had a job in tech so things were okay. Had I not, that would have been reeeeally rough. And then by the time I was 28 I was doing okay again. I had a nice little nest egg set aside. I was spending wisely. Again, the high-income tech job made this possible.

But I remember a conversation with a photographer friend one day. He wanted to learn to play guitar and he asked me how I would come up with $300 quickly if I had to.

The question kind of confused me because I'd never been further away from $300 in disposable income than my next paycheck since I'd been out of college. My answer probably sounded insufferably arrogant. I think I said something like "Uh... I'd just have it I guess. Or I'd sell something maybe?"

This did not satisfy him. We brainstormed for a while and I came up with some cool ideas but nothing that certain or fast. But what was eye-opening for me was the idea that if I didn't "just have it" or I didn't have my cushy job, I had no real idea how I'd come up with even $300 in a pinch.

I think of myself as pretty resourceful. This was a weird realization. Even now, almost a decade later, with tons more experience and resources and savvy, I could MAYBE creatively and legally hustle up $300 cash profit in a week if I had spare time and some seed cash... but it wouldn't be easy, and having a 9-5 would make it 10x harder. Of course, I'm doing okay, so I have dozens of options here... credit card, family and friends who could spot me $300, stuff to sell, assets to liquidate...

But if you don't have any of that, what do you actually do if you need $300 today for something? Assume you also have a few kids (probably), you're exhausted from a 9-5 grind that maybe physically exhausts you too, and you have very limited spare mental bandwidth and hustle for the kind of creative flipping I'd use to generate $300 now. You're also dealing with stress. Your first reaction is probably that it's not fair. You've done everything you're supposed to be doing. You work, you pay taxes, you vote, you don't commit crimes.

And yet. You're being forced to default on a bill or feed your kids ramen for a few weeks due to misfortune

This sucks a lot. I agree that it doesn't seem fair.

How is it that 40% of Americans are in this position? What can realistically be done about it without reaching for solutions like "dismantle capitalism"?

It's mind blowing for me that 4/10 adults live with that stress.

I think if you're in the situation I was at 28 and you've always had a middle-class job and you've never really thought about this your first gut-level reaction is just to attribute it to poor planning, bad decision making, whatever. But uh... this seems very uncharitable. I have a really hard time believing that 40% of adults could sock away money every month if they just felt like it and instead choose to blow their cash on non-essentials and just spin the wheel of destiny on unplanned expenses. EVERYONE knows they're supposed to save. Even if not for a rainy day, most people I know don't love working a 9-5 and see savings as a possible vehicle toward an earlier retirement or an easier life circumstance. And even some of the most successful professional class people I know, people with jobs at FAANG companies with stock options and nice cars and etc etc aren't exactly LOADED. Take your $400 unexpected expense and 10x it for a medical bill or a totaled car and it's still a hit

Can you cover it? Sure. But $4000 is still a nice little chunk of cash to pop out of your accounts unexpectedly. And we're talking about some of the highest-paid examples of professional class individuals in their 30s! These are the positions many people are desperate for. This just seems... weird... to me. Like I'm not advocating for financial or social revolution or anything, and maybe I'm deluded and all the hot money is in NYC or SF, but also I know what living costs are there because I've run the numbers and even that doesn't go THAT far

Plus, let's be real. Not everyone CAN make six (or especially seven) figures a year. Not everyone who CAN, will.

Those of you who've tried to start businesses know how dicey even that can be (often more so unless you get lucky). And this tweet highlights another point: If you can't be lucky in your career, a really viable, rational path to protect yourself is... be healthy. Don't have kids. Don't take on education debt.

So the winning solution in our society if you can't get a highly-coveted professional class job that everyone is scrabbling for is to... not reproduce, not get educated, and not get sick? 😬😬😬

This seems bad. For America. On so many levels.

This tweet raises another interesting point: We keep seeing anxiety being a major issue. Looks like that 40% either develops coping mechanisms or breaks.

That "relationship to money" bit in particular is interesting. You'd have to adapt if you didn't want to break. I wonder what the ripple effects of that are. I've seen people close to me adopt this mindset in the past. Working the system is another coping strategy that pops. And I say "working the system" without any hint of blame. I mean you can look down on people's disability claims or tax evasion schemes or shirking their debts or whatever if you want to, but I'm not really in the habit of judging desperate people trying to get by

Because I get the sense that when you get to that point it's because you just don't see better options, even if they exist... you've kind of given up on "doing things right" and feel justified/exhausted/cynical/bitter or you've decided it's all a game anyway. There's some more interesting statistics in the report that kind of reflect this. Despite the troubling numbers I've been discussing, you also see this:

"Three-quarters of adults in 2018 indicate they are
either “living comfortably” (34%) or “doing
okay” financially (41%)"

So 40% of American adults can't scrape up $400 in a pinch, but almost half of them feel okay about it?

This is also weird. I guess you can't live in a constant state of anxiety and fear, though. If you don't have a $400 bill this month, I guess things are technically fine?

There are obvious correlates that I don't need to list because you can guess them: Being white and being college-educated makes you significantly more likely to report you're "doing okay", which I'm going to guess is largely attributable to network connections.

Correlates with race level a lot if you get educated (7-8% spread across educated Hispanic/Black/White) and about 20% of everyone says they're worse off than their parents are... although I wonder if that question would be different if you compared yourself by life stage? And of course this report is exactly a decade after the 2008 crisis, so we're going to see that impact the surveys as people who were able to get jobs then could advance their careers vs people who weren't.

Yes, I've seen the discussion that the number is over-reported but the concept still holds. I think it's relevant that even if MOST people could find a way to pay a $400 emergency expense, it would still be a massive stressor to do so if you're scrambling to find it. And the other observations about no-kids, no-education expenses, don't get sick TOTALLY resonate.

We even have the "no-home" movement now with the surge in tinyhome and RV life popularity. cough cough

Home prices definitely influenced my vanlife decision. And I can afford a house! I just didn't like the idea of shackling myself to another mortgage for 20 years when there were comfortable alternatives.

This looks an awful lot like a dismantling of everything we considered "normal" growing up. And probably not for the better? Like if you think 20% unemployment or whatever the numbers are up to is going to make things better, boy-o do I have news for you

Someone mentioned that this thread is about a lack of a safety net, but I don't actually think it is. That's the easy conclusion.

I think this thread is more about a lack of real optionality in how most Americans live their lives. You're yoked. It sucks. And that's a maybe-too-evocative description, because again, I don't think the whole "rise up cast off your yoke" metaphor really works or would result in any better outcomes. Because I really do think most people just kinda wanna fall in love, live their life, and get by without massive anxiety or surprise stressors or feeling crushed all the time.

How did we wind up here? What can we realistically do about it? Because I hate to tell you this but there's no change on the horizon coming even under the wildest of improbable outcomes that changes of any of this...

Not healthcare reform, not education reform, not justice reform, not decriminalization.

Money talks and accidents happen. I also don't really believe there's some vast global conspiracy to oppress the masses.

Even when you see the mega-rich do "fuck-you" things I think it's just a human lack of empathy for the outgroup and a grab to improve their own relative fortunes. The system is Moloch. You can't break or change Moloch, I think.

But even that aside, maybe I'm being too pessimistic.

If the root problem is making ends meet via transfers of currency to other people, is the solution that we need a return to more self-sufficiency?

I mean, you already see this trend spinning up a lot in the millennial/zoomer crowd. Anyway, I don't have solutions. But I'm not wild about this state of affairs. And I'm okay... for the moment. Even still I live with a small level of chronic stress where I feel like I have to look out all the time to avoid getting fucked.

I don't know how we build something better.

But "no kids, no education, stay healthy" or "be very lucky" seem like awful prescriptions for a functional society where you don't have to be watching for knives all the time.