What’s the Deal? Are We Poor?
I’ve read a couple posts on personal finance blogs in the last week in which hordes of commenters shared their yearly incomes. (I did too – I have no issue with this. I have read others doing this in the past, but these were close to one another in time.) I was surprised that our combined income was among the lowest of any posted – probably in the bottom 2% of commenters. Our income is actually exactly the same as the median household income in the US, so if the commenters were random Americans we should have been smack in the middle. Why would ours be so low in this population?
- People who read PF blogs are more proactive about their finances and more motivated to make money.
- People who make less than the median household income are working too hard/long hours to read and comment on blogs.
- Lower-earners are less likely to reveal their incomes on these posts.
- People who are attracted to academic/quantitative subjects like PF are more likely to have white collar/high-paying jobs.
- Low-earners may be reluctant to give their financial situations any more thought than necessary because it is unpleasant/unchanging.
- The population reading these particular PF blogs are skewed to high-earners because that is the author’s profile. This is as opposed to, for instance, stay-at-home mom PF blogs, which focus more on frugality, deals, and DIY projects.
I actually wouldn’t have expected the income of PF blog readers to be so skewed to the high side. I would moreover expect something like the average debt, or perhaps debt-to-income ratio, to be different in this population from the general. While I think personal finance is an important subject for everyone, I would think it would be more helpful or relevant to people who are low income earners in terms of getting great value for the money they spend, avoiding costly mistakes, and preparing for the future.
The second post I linked to above contained a lengthy discussion on what incomes the author considered to be “rich” in a major US city. Having lived on my current income in a suburb of one of the major cities referenced, I have to say that I strongly disagree with this author’s benchmarks. I made less than half the income that he pegs at “lower middle class” and certainly felt that I was living a middle-class lifestyle – certainly not as well-off as I had been under my parents’ roof, but not at all hard up. The author writes that he would not consider a person rich (that is a single person – one earner) until his/her income reaches $500,000/year. That’s twenty times what we earn per capita.
Is “rich” a state of mind, an objective standard, or relative to our peers? I wouldn’t say I feel rich right now, but I have stated that we are comfortable. I’m not sure at what income I would start feeling rich – perhaps two to three times what we earn now, or maybe a little more after our move to southern California? However, when I think about the low income earners in the US who have many hardships in their lives and about the billions of people around the world without access to clean drinking water, who go to sleep hungry, or who don’t even own a pair of shoes… of course I feel rich! Of course I feel blessed and grateful. That’s a much more pleasant feeling than the envy that can be stirred by lists of high incomes, and one that motivates good works as opposed to hoarding of money.
Why do you think only the higher earners were piping in on those blog posts? Do you feel rich, or do you think you ever will?
photo by alancleaver_2000
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Emily of course I feel rich, I live in America where all my basic needs are pretty much fulfilled and most of what my wife and I decide to buy are wants! But seriously, it always bothers me when we judge whether or not someone is rich by how much their income is. I wrote a blog post about this before, but is someone rich because their household income is $150,000? Well if they spend $160,00 a year then probably not.
Also I think a lot of times when determining what income makes someone rich or not, it is always a number that is higher then what you currently make? Why is that? Probably to keep up motivated to earn more income. So a lot of people might be rich but not feel rich. Why is it that rich people do not feel rich? Because a lot of times they do not live with the appropriate priorities.
You are totally right, Jon – income is only half the equation in influencing how you feel about your financial situation. One thing I’m very concerned with is lifestyle creep, the combatting of which is one of the purposes of this blog.
I rather don’t think my goal will be to “feel” rich ever, but to live in what I consider a comfortable manner while meeting the reasonable goals we have set. Like you said it’s probably very difficult to ever feel rich in a worldly sense as you are always looking to your new, higher peer group with each increase in income. But we can feel richly blessed by our income and lifestyle and can use our monetary power to give richly to others.
I really admire the people who set a maximum income for their families and then give away all the excess income. That is really the way to keep lifestyle inflation at bay while you feel better and better about the work your money is doing in the world! I haven’t necessarily set this as a goal for our family but it’s something I’d like to think more about.
[…] Jon from JW’s Financial Coaching wrote “it always bothers me when we judge whether or not someone is rich by how much their income is” on What’s the Deal? Are We Poor? […]
only one benchmark matters: Knowing when you have “enough”
http://jlcollinsnh.wordpress.com/2011/06/02/the-monk-and-the-minister/
Totally agree – it’s a question that we can never fully resolve. Pursuing the answer for our family is part of the purpose of this blog.
I think the audiences of personal finance blogs are pretty skewed. And also, people’s idea that “rich” means “you have so much money you don’t have to worry about anything” is a little ridiculous and that’s why the bar is so high – my parents do not make the $250K number that’s been thrown around a lot as the top of the “middle class” by Obama, but if you asked them if they were rich, they would say YES because they have all they need and more.
Your parents have a great attitude! We would all be better off if we cultivated gratefulness for what we have rather than envy over what others have.
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