I consider myself pretty thrifty, but when I moved a year and a half ago, I was astounded by the amount of useless junk stashed in every possible corner of my home: barely worn clothing, toys my kids had used once and forgotten, orphaned sports equipment, and of the course, the obligatory never-cashed gift cards.
Theres no useful data on this, but American consumers must waste an incredible amount of money, if you define waste as spending that does little or nothing to improve your quality of life. Over the course of the last three generations, luxuries have become necessities, while it takes more and more to make us feel successful. This American Dream Inflation is now as much of a problem as real economic stagnation, I argue in my latest book, Liberty for All: A Manifesto for Reclaiming Financial and Political Freedom.
Some things are well worth the money we spend on them, of coursea comfortable home, reliable transportation, kids education, entertainment that helps you relax. But Americans, including myself, are so addicted to pointless spending that a brutal recession and a genuine threat to our living standards have barely made a dent in the amount of money that flies out of our wallets for no good reason.
Consider two sets of numbers. Annual spending per person, adjusted for inflation, has jumped from $29,000 in 2000 to about $35,000 today. That would probably make sense if we were all making more money than we were 15 years ago. But were not -- on the contrary, in fact. Median household income, also adjusted for inflation, has fallen from $56,916 in 2000 to $54,417 today, according to Sentier Research. Thats a 4.4% decline in spending power. The typical family is earning less but spending more, as these two charts illustrate:
Source: Bureau of Economic Analysis, Federal Reserve Bank of St. Louis
Source: Sentier Research, Census Bureau
What makes this mismatch possible, of course, is borrowing. The total amount of debt owed by households (not including student loans) jumped from $7.3 trillion in 2000 to $13.4 trillion, according to the Federal Reserve. The amount of consumer debt grew by 84% during a time when the economy only grew by 72% and the population expanded by just 14%.
This insatiable need for stuff has made it difficult to distinguish what really improves our lives from what is mere clutter. Housing is perhaps the best example, as Jen Rogers and I discuss in the video above. In 1973, the average size of a new home provided about 550 square feet of living space per person. A new home today provides nearly 1,000 square feet for each inhabitant. Some of that additional space might improve your quality of life, but all of it? And at what cost? Meanwhile, new homes today have closets as big as bedrooms were a few decades ago, since we need cavernous alcoves to store all the juice extractors, faddish fitness equipment and Bluetooth-enabled gadgetry were convinced will make our lives better.
The American Dream isnt enshrined in any official document. When historian John Truslow Adams coined the phrase in 1933, he didnt even mention buying stuff as part of the bargain. He described it as that dream of a land in which life should be better and richer and fuller for everyone, with opportunity for each according to ability or achievement.
The American Dream has been co-opted over the years by politicians and real-estate agents and pitchmen for all kinds of gizmos, and transmogrified into something involving material wealth. Thats why theres a common perception that the American Dream is dead: if you define it merely as the accumulation of stuff, it becomes a Ponzi scheme in which its impossible to keep adding to the pile at the same rate as before.
But if you revert to the original idea and define the American Dream as opportunity available to those willing to reach for it (and not, necessarily, for those waiting for it to fall into their laps), then the American Dream is very much alive. Opportunity may not be as plentiful as it was during some magical time we think existed in the past, but its a lot more plentiful than it was in 1933, when the Great Depression raged! And also, by the way, more plentiful in America than in most other parts of the world.
There are very real problems in the economy today, including a huge and growing wealth gap, an underclass thats hard to escape and a lack of middle-skill jobs that pay enough to support a family. But some of our economic problems are self-inflicted, because many Americans are literally working to buy things they probably wouldnt miss if those products had never been invented.
There are remedies. Joshua Fields Millburn and Ryan Nicodemus, who describe themselves as minimalists, advise getting rid of one household item per day for as long as possible, and automatically depositing a large chunk of your paycheck into a savings account while learning to live off the paltry remainder. Greg McKeown, author of the 2014 book Essentialism, suggests starting each week by identifying all the things youre not going to get sucked into doing, while concentrating on just one single priority.
In my own case, I now ask an important question before I buy stuff: Will this end up forgotten in a month? If so, no sale. And to keep myself honest, I now patrol the closets, basement crevices and under-bed hidey holes where I found all that unused stuff the last time I moved, to keep the excess from piling up. When I find unneeded stuff (which I still do, regrettably) I drive it straight to Goodwill or post it on eBay. These occasional purges may not put a Lexus in my driveway or a hot tub on my deck, but Im starting to wonder if I need those things anyway.
http://finance.yahoo.com/news/this-is-why-the-middle-class-feels-trapped-152616810.html
QED.
All you liberals that cry to the wambulance that you are being squeezed like a starving African child. What do you have to say about numbers like this?
The POOR middle class can't afford new Nike Jordan's every month? Buy some equivalent shoes that protect your feet equally from Target, Walmart, Payless shoes, or another equivalent source? LOL wut U STUPID?
In the end, it's actually pretty cheap when you maintain them. Unlike tennis shoes, you can keep dress shoes lasting forever and ever if you take care of them.
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