We have a very materialistic and consumeristic culture and we shame the poor.
Or more specifically, we are ashamed when we can’t afford things we need. We are saturated by right-wing propaganda that says if you don’t succeed, it’s your fault. So, like abuse victims, we internalize the shame of what is done to us.
It’s a message tailored so we don’t question the rich, and as an added benefit to them, trains the poor to not seek government systemic solutions to the inequality that creates their poverty.
Homeless people are more financially rich than most of this country.
Do you see the problem yet
It’s actually curious to read this comment while several others state how they could manage to pay their debt, but they choose to be in debt because it’s somehow convenient for them. I believe them, it’s just curious because anyone could say the same.
Part of that has to do with how our economy is built around credit cards and debt itself. They don’t want you to fully pay off your credit card debt, and will reduce the amount you can borrow if you do. And if you try to opt out of the debt system entirely, it hurts you as well because you have no credit score from the credit card companies and no history of paying off you debt on time, which hurts your chances to get things like loans and mortgages. I hate debt, and ran into this issue the first time I went to buy a car because I had always used debit cards to buy stuff. Despite the cards being Visa cards that just got paid off immediately by charging my bank account instead of being paid off over time, I didn’t have any debt history as a result and had to have somebody cosign my car loan to vouch for me that I’d actually pay the loan.
are you talking about the comment mentioning it makes financial sense to not pay off their mortgage?
Being in debt isn’t synonymous with being broke.
I could pay off my house tomorrow if I wanted to but it’s simply not a smart thing to do from a financial point of view so I remain in debt. That doesn’t mean my net worth is negative.
Sorry, I’m dense. For me being in debt and paying off something like a loan on a house has the purpose of paying something you do not have the funds for to pay off in one go. Seeing as the longer you take paying it off, the more you actually pay since rates increase or whatever, depends on contract specififcs.
How is it not a smart thing for you? Is this about US credit rating system or something else.
Edit: thanks to all replies, not gonna spam thank yous to you all. Didn’t consider those options.
My savings are invested in the stock market, and the returns I get from that are higher than the interest on my mortgage. If I liquidated my investments to pay off the house, the savings from not paying mortgage interest would still be less than what I’d make from the market over the same period. I’d rather use the profits from my investments to cover the mortgage interest - that way I still have money left over. If I did the opposite, I’d lose that extra money.
What would happen if stock market dives?
The value of my portfolio dips too, but I don’t actually lose anything unless I sell. I just hold and wait for prices to recover - as they always have so far. In fact, when the market drops I buy even more, because the same money gets me more shares. People don’t lose their savings because of a crash; they lose them because they panic and sell for less than they paid.
Your personal financial situation is not really representative of the financial situation of Americans in general though.
No, even regular savings accounts have ~4% interest, so it makes sense for anyone who got a mortgage more than 2-3 years ago when the rates went up. Any extra money shouldn’t be going to pay down old debt faster, it should be in savings or other high yield accounts.
I have enough to pay off my house right now but I’m not because the interest rate is both lower than inflation and what I earn from interest, and other invesents, plus the increase in home values. If I paid off the house today then I also wouldn’t have as much in my emergency fund. I have 5 years left of the mortgage, I’m paying roughly $50/mo interest which goes down every month.
I’m not who you are responding to, but I’m in the same position.
Interest rate on house mortgage is around 2%, currently looking to invest in an apartment in Europe. The current rates are ~4% here, so it makes more sense to keep the cheap money from the house mortgage than to trade it for more expensive money.
Besides what others have said, there is a mortgage interest deduction on taxes in the US. It’s basically the government saying “we want you to buy a house, so for the interest you pay on a home loan, you don’t have to pay taxes on it.” So combine that with a low rate, and it absolutely makes sense to have that debt and put the money to work elsewhere.
That is still technically true, but it requires filing your taxes with “itemized deductions” wherein you provide a complete list of all the things that you can deduct from your taxable income before calculating the tax owed. Stuff like mortgage interest, charitable donations, medical and education expenses. Back in 2013 up to 30% of tax filers did that. Mostly this was done by higher income people who had enough income and deductions to put them over the default standard deduction.
The “standard deduction” was increased in big changes to our taxes in 2018, and since then only about 10% of filers itemized. So mortgage interest isn’t usually paid with pre-tax money anymore by up to two thirds of those who did it before.
The other reasons for carrying a low interest rate mortgage are still true.
I didn’t realize the rate was so low now for people who itemize. I guess I’m outing myself when I say we still do it? I’m not loaded or anything, but we do enough giving and have mortgage interest to make it worthwhile.
It could just be that you are in a higher cost housing market, or have big charitable donations. But also, yeah, you’re probably also kinda loaded. 🙃
(at least when compared with the median American)
Well, we’ve been living the DINK lifestyle for a long time. It would be a very different story if we had only one income, or kids, or both. But yeah houses are pretty expensive where we are. Though from what I can tell, houses are expensive everywhere now 🫥
houses are expensive everywhere now
True 💀
I could pay off my house tomorrow…
That’s not what being in debt is
Is it not debt when you owe money to the bank?
How else are we supposed to know who’s better than who?
I thought you guys used race and gender for that?
Oh that too. We make sure to remind the poor white folk they are still better than rich black people
You said people and folk, but I think you meant men.
My apologies. In my attempt to be horrifically racist, I forgot to also be sexist. It won’t happen again.
God damn lazy modern bigots. Back in my day there was a word for people like you, but using it will get me banned on half the fediverse.
Its implied.
As President Lyndon B(ig dick) Johnson once said
“If you can convince the lowest white man he’s better than the best colored man, he won’t notice you’re picking his pocket. Hell, give him somebody to look down on, and he’ll empty his pockets for you.”
With a star on your belly.
The Jones’s are a bunch of chatty kathy pricks.
Yeah, but they have a hot tub.
I mean, I have a hot tub. Granted, it been sitting on its side for about 5 years, the critters have claimed it as their own and now live inside, and the siding is rotted to hell, but it’s there.
I mean, it depends on what you mean by that. Anyone who has a credit card is going to have debt, just by virtue of needing to pay the bill.
But if you mean “most Americans have a negative net worth” — taking into account assets and debts — most Americans have a positive net worth.
https://www.kiplinger.com/retirement/average-net-worth-by-age-how-do-you-measure-up
The median net worth of all Americans in 2022 was $192,900.
TIL that for my age bracket, apparently I suck.
Oops, dad got sick, time to sell the house
You have a house?
I don’t, my parents do.
Right? Who the fuck has a house?
I do, but I bought it used.
I know you’re joking but I’d much rather buy a very used house than a house made today. At least in the US seems like houses from 20-40 years ago are solid but everything made in the last 5-10 years absolute paper mache dog shit.
Yeah, but if you were younger than 35 in 2022, your net worth was 39,000 USD. It was already brutal, since society expects people to own, or at least rent, homes in their twenties. Now, I haven’t heard about things shaping up for younger people (quite the contrary), Trump’s dollars are less biggy and the clocking bomb in the form of inflation, they all paint a gloomy picture.
$192,900
How much of an average little house is that?
About ⅖
Credit cards don’t have to mean debt if you pay them off before the intrest applies. That’s how you use them responsibly. Many don’t.
It’s debt regardless of whether or not one pays interest. Debt isn’t linked to interest. Just means that you have an obligation to pay money to someone.
EDIT: Though in fairness, if one never actually uses a credit card at all, then one never takes out debt, so I suppose it’s probably better to say “if one has a credit card that one uses”.
EDIT2: Though all this is not to diminish your point that not carrying credit card debt from month to month is generally a pretty good rule to live by.
Here in Australia if you have a credit card with an outstanding balance of $0 with a maximum limit of $10k, that actually acts as $10k of debt when you go to take out any loans etc.
I’d be interested to see the median net worth after removing the top 1%, but I can’t be bothered to Google it atm …
It’d have an effect, but not a large one — that’s why one uses median, rather than mean.
If a person has a house they are paying a monthly mortgage payment towards, no one in America would consider them “broke”.
I was in debt for several years from college tuition, but would not have been considered “broke” because I managed a job that met my essentials plus enough to pay down my tuition loans.
Debt isn’t seen as bad so long as it’s being managed. Exceptions for Dave Ramsey fan types.
You could say college and housing and medical stuff should never out a person into debt and I would agree. But that wasn’t the question, it was about general perspective in the US.
Yeah. Being broke is a problem with cash flow, not the balance sheet.
Broke, poor, and in debt are three different things.
Broke just means no cash on hand. You can have tons of cash flow and assets but at the moment you are lacking liquidity to pay cash for things. You may or may not have debt. You might have just blown all your cash on a big purchase.
Poor means you have little and earn little and can do little. Debt is often a factor here but you can be poor and not in debt.
People in debt owe money. They might not be struggling at all. Sometimes rich people borrow money because it costs them less than the interest they receive on the cash they have. Or it could be the opposite, it could be crippling every aspect of their lives.
Americans carry a lot of debt on average. My only debit is my mortgage plus the last two weeks of credit card spending. I pay off my card in full every month. I only use the credit card because it offers purchase protection and I get rewards. Not all debt is bad debt, but a lot of it is.
I used to be comfortably poor with no debt. My income, expenses and living standards were low.
Now earning a little over minimum wage and fucking hell life is easy, but largely because I was poor and just got used to not having things. I continue that now.
Once you learn how to live on very little money out of necessity, living comfortably within your means as your wages increase doesn’t feel like such a bad thing.
And anyone who has been without a safety net understands that keeping a buffer in their bank account feels way better than splurging on impulsive luxuries.
My buffer started at treat £2k as zero. As my wages went up I quickly started going over £5k and then £10k, didn’t even know how to spend it. So I didn’t spend it.
Within a few years of saving like £5-10k a year I had enough for a pretty good deposit on a house, like 15% or so. The house we got wasn’t even at the higher end of what we could borrow. I don’t want to min/max wealth, I want to live comfortably, and there are allotments across the road from us.
Honestly, not being a dick and caveat for me not knowing shit about you, but if you are curious enough about the topic to ask, you should take a quick finance course. Not like enroll in college or anything. I wanna say there are tons and tons of free to access resources for learning how debt and assets work that will undoubtedly improve how you manage your own money.
Just to save the search (I use Udemy the most but definitely have not checked out all of these platforms personally, so do yo own due diligence lol)
-
PERSONAL FINANCE FOR SELF-RELIANCE COURSE - In our course of working with and developing courses in personal finance, we found that the best beginning program had already been developed. As such, we have received permission from the Church of Jesus Christ of Latter-day Saints to use their Personal Finances for Self-Reliance program materials on this website.
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MONEY WISE FINANCIAL COURSE - This beginning course gives you a broad introduction to the many different areas of personal finance, with the hope that you will continue your study to understand better the topics covered in this website.
- At the end of this course, students will be able to…
- Build excellent credit
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- Invest wisely and effortlessly
- File a tax return
- Get a great bank account
- Understand credit cards
- Understand and get six types of insurance
- Make a spending plan
- Buy a car
- Find a great apartment
- Buy a house
- Get a jump start on retirement
- Save for college
- Get out of credit card debt
- Avoid identity theft and fraud
- Understand an estate plan
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Fuck it, lol, here is a link to a list of 30 free financial courses for all types of financing.
No idea who down voted you but holy shit, some people om here resent the idea of having to educate themselves.
Hopefully threat actors but JFC
Do we have a personal finance community on fedi?!
I am sure there is enough middle age cucks here to provide proper info for specific questions.
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Maybe the real curency was the debt we found along the way?
I’m guessing not admitting your finances are shit is pretty universal, no need to pick on 'Murica.
There is some truth to what you’re saying but the USA are special about it. It’s like, tbey try to (badly).act as if they had more than enough money but it’s obvious they’re struggling badly. Like a functional addict thinking he’s hiding it but everyone knows and there’s a shared social discomfort in the charade
I blame that predestination bullshit that’s in the country’s DNA. If you’re rich it must mean God loves you and if you’re poor that’s due to your sins.
Puritanism meets prosperity gospel. The original Jesus would get crucified all over again if he set foot in this hellhole.
Not enough people talk about this. This attitude is rampant in the Republican party and no one says a word about it Not even Republicans
Because we want to spend our end of days in comfort
I am absolutely beyond broke on paper. My debts are well into the six figures and my bank account is in the low five figures.
I’m in my 40s and have a whopping $15k for retirement and no assets.
It’s pretty awesome.
I had $17k in the 401k when I was laid off from my last job - it had been twice that but there was that big collapse. Raised a lot of kids and couldn’t put much away. Always something but never much. That was in my 40s.
I am dug out now, mostly, in my 50s, not to the point I think I’ll retire but oh my God when I look at the difference between them and now it’s crazy, there is so much more.
I just want to say, don’t give up hope. I would never have dreamed that this would turn around and it did. And the kids grew up too.
Oh, sorry, I haven’t given up hope. It was sort of said with…a laugh. I do have some investments I’ve made as of late that are looking like they could pay off big…we’ll see. Either way, I still sleep okay at night and I have a roof over my head so I can’t complain.
Raised a lot of kids and couldn’t put much away.
And this is why people are not having kids.
If you are normie. It should be really just 1 if you got to breed and any extra depends on financial ability
I’ve been there. It sucks. But it was possible for me to get out. It took years. Be careful, and be ready to catch any luck that might come your way.
That’s all we can do here. Sadly only some of us will be able tobreak out.
But if everyone did their best, it would deny owners so. i profit at least.
In debt doesn’t mean you’re broke. Not having money to spend is being broke. I’m pretty sure most Americans will admit they’re in debt.
Yeah, exactly this. I have a mortgage and a car payment so I’ve got lots of debt, but I wouldn’t consider myself “broke” by any stretch. I don’t live paycheck-to-paycheck, I put 10% away for retirement, and I can afford to spend money where I want without stressing about it. Overall, pretty charmed compared to how a lot of folks are struggling these days and it’s honestly kinda wild to act like it’s comparable to anything they’re going through.
If I have no money and my parent five me money to spend to live off, I’m broke.
How is it different of the money comes from a credit card company or bank instead?
If I have a $500,000 mortgage, and my assets (including equity) only sum to $400,000, then I’m $100,000 in debt. If I make $12,000 a month, and my mortgage payment is $4,000, then I have $8,000 a month to spend. I’m in debt, but I don’t think anyone would call me broke.
The key point in your scenario is that you don’t have money to spend, not that you’re in debt.
Having a debt is not the same as being in debt. In your example, you have equity, which means you are positive in assets. Being in debt is negative assets.
Home ownership is falling which is likely a big part of being in debt for many. Their rent pays for someone else’s asset.
In my example, the total of the assets I own is less than the total debt I have. That means my net worth is negative. By any definition, that means I’m in debt.
Again, being broke means not having money to spend. I can be in debt and I can be broke, or any combination of the two, or neither.
I don’t think I’m understanding your example then. Is this mortgage for more than the value of the home? How do you have equity then?
With a mortgage, the whole home is owned, and assets are always more than debt, for that loan. The fact you say equity implied to me that the home is worth more than the mortgage. I thought you just didn’t lisbthe home asset, which is odd.
Sometimes the value of a house drops and the loan is now more than the house. In that case they’d be considered in debt.
I don’t disagree with the distinction between being in debt and being broke.
Yes, the mortgage is worth more than the home in my example. I guess I shouldn’t have said “(including equity)” or I should have said “my assets and debts”, since to be in that case, I either don’t have equity in the home or have other debts that surpass my equity. The mortgage is $500,000 and the house plus all my other assets and minus all my other debt is worth $400,000.
In your original example though, you weren’t in debt but you had no money to spend, so that’s broke and not in debt.
Personally, I consider being “in debt” to mean having a debt. It wouldn’t matter if the home was worth more than the mortgage, I’m still in debt on that mortgage. If my assets are worth less than my debts, I would call that “insolvent”. But neither of those conditions mean that you’re broke. As long as you have a reliable income stream that can cover your payments on your debts and other expenses, you’re not broke.
Ok, well in your example, I wouldn’t call you broke either, as the debt is currently managed. However I’d call it high risk and I’d call your mortgage underwater. Your debts are more than your assets, so any disruption to pay, like losing your income or having an illness, or damage not covered by insurance and you would be in big trouble. Thats living beyond your means.
Usually the only reason debts would be higher than assets is a drop in home value or taking on too much debt in other areas. That’s pretty much what OP was asking. Why so much debt? Do you think it’s high risk?
Because your debt is backed by an asset (house) that may be worth more than the debt.
It’s part of our culture. It dates back to when America was new. Plantation owners wanted to pretend we had a rich and powerful economy and history and culture. They made everything pristine and gaudy and exp wove looking but there was no substance. Look at the architectural decisions made in plantation houses and how the elements are still used in homes today.
We pretend we are better than we really are.
