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Mark's mutual fund is launching December 15, 2011. He is a self taught private investor who operates the website Fund My Mutual Fund (http://fundmymutualfund.com); a daily mix of market, economic, and stock specific commentary. Fascinated by the market since an early age, he discovered mutual... More
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  • US Poverty - Exceeding Expectations 17 comments
    Sep 11, 2009 1:34 PM
    I wish I could invest in symbol POOR - its really outperforming. Exceeding analysts expectations year after year.
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  • Jasper M
    , contributor
    Comments (1652) | Send Message
     
    I must take exception to one part of this: the notion that a single person making $23K/year is poor. Back in my working days, in 2001, I was making less than that, in a fairly high cost of living metro area (Raleigh, NC), and I was living quite well.
    I don't doubt for a minute that it would be hard for even a single person to make ends meet on that income in, say, New York, or pretty much anywhere in California. But they are Not the nation.
    11 Sep 2009, 05:13 PM Reply Like
  • babajay
    , contributor
    Comments (52) | Send Message
     
    If you were making 23K.. TRUST ME.. YOU WERE POOR. I dont know what it costs to commute in North Carolina, but if you deduct the cost of your commute and your rent from that figure, then factor in healthcare, theres not much left. We have to consider that just because one is young doesnt mean they shouldnt be saving for retirement etc. With 23K in income coming in, the rest of us are viewing you as a "Ward of the state" in a few years if anything at all happens to you.

     

    On Sep 11 05:13 PM Jasper M wrote:

     

    > I must take exception to one part of this: the notion that a single
    > person making $23K/year is poor. Back in my working days, in 2001,
    > I was making less than that, in a fairly high cost of living metro
    > area (Raleigh, NC), and I was living quite well.
    > I don't doubt for a minute that it would be hard for even a single
    > person to make ends meet on that income in, say, New York, or pretty
    > much anywhere in California. But they are Not the nation.
    12 Sep 2009, 12:36 PM Reply Like
  • Jasper M
    , contributor
    Comments (1652) | Send Message
     
    baba,
    I promise you, I WAS saving - I paid all my bills with half my paychecks, the other half going straight into savings. My rent was $300 and change, and gas was cheap ('98-'02). Having an (old) car that was paid for, there was nothing to spend money on. When my father demanded I visit him in Sicily, the airfare didn't even mess up my hair. Seriously, I had a 40+% savings rate.
    And I wasn't so young - I was about 40.
    I suspect a LOT of people get hooked on things they can't sustain (deluxe cable package, latest smartphone, mortgage, etc.), and then try to factor that into their notion of some 'poverty level' they must stay above. But, in my experience, IF You Are Single, you don't have to live poor to get by on (for example) $23K. You just have to be sensibly frugal, and have no expensive vices.
    14 Sep 2009, 01:04 AM Reply Like
  • Michael Clark
    , contributor
    Comments (8680) | Send Message
     
    Did povery 'beat the Street's expectations'? Buy poverty on the NYSE, quickly -- it's undervalued.
    14 Sep 2009, 01:41 AM Reply Like
  • TraderMark
    , contributor
    Comments (2422) | Send Message
     
    Author’s reply » Jasper, just curious what you were living in for $300?
    I live in a relatively middle of the road state - not a high end, and most 1 bedroom apartments in even "somewhat seedy" parts of town are about $500 a month.

     

    Also $23,000 in 2001 is not $23,000 today. Inflation.

     

    I'd also quibble with the point that someone making $23,000 a year would be able to live rent free by owning a home. Obviously if you reverse engineer (a) car payment (even a junker) (b) insurance for car (c) house over head (d) groceries/eating out at McD's every so often as a luxury item (e) utilities - heat/cool, water, electricity - you generally are going to be paying $12-$15K a year. Take out taxes and your somewhere in the upper teens low $20s in gross. I assume these people are renting rather than owning and hence have zero property tax.

     

    This type of person I am describing never has an emergency like a flat tire, never has entertainment like movies, doesnt watch cable TV, doesnt have a phone, etc etc.

     

    I also would challenge you to ask how many Americans have a 15% savings rate not to mention 40%.

     

    On Sep 14 01:04 AM Jasper M wrote:

     

    > baba,
    > I promise you, I WAS saving - I paid all my bills with half my paychecks,
    > the other half going straight into savings. My rent was $300 and
    > change, and gas was cheap ('98-'02). Having an (old) car that was
    > paid for, there was nothing to spend money on. When my father demanded
    > I visit him in Sicily, the airfare didn't even mess up my hair. Seriously,
    > I had a 40+% savings rate.
    > And I wasn't so young - I was about 40.
    > I suspect a LOT of people get hooked on things they can't sustain
    > (deluxe cable package, latest smartphone, mortgage, etc.), and then
    > try to factor that into their notion of some 'poverty level' they
    > must stay above. But, in my experience, IF You Are Single, you don't
    > have to live poor to get by on (for example) $23K. You just have
    > to be sensibly frugal, and have no expensive vices.
    14 Sep 2009, 07:48 PM Reply Like
  • TraderMark
    , contributor
    Comments (2422) | Send Message
     
    Author’s reply » I am also curious if you got sick at that point in your life or had health insurance? If so, how much was your healthcare premiums a month?

     

    Many in poverty just use the emergency room for their healthcare service which means person ABC can live on $23,000 a year but someone (everyone else) is paying for those visits.

     

    p.s. $23,000 in 2001, assuming a 3% annual inflation rate = $29,100 in 2009 dollars.

     

    I'd argue inflation for working class is much higher than 3% with food and gas and energy prices... and if they are fortunate enough to have healthcare (premiums)

     

    If we want to reverse what your $23,000 in 2001 would be equivalent to today, it is $14,200. You said you had a 40% savings rate which would of made you exactly break even in reality. $14,200 is about 40% lower than $23,000. Again, I'd challenge you how many Americans can save 10-15% not to mention 40%.

     

    Inflation is the most regressive tax in the world, and our leaders love it. I don't think people realize how evil it is to people with very little margin of error in life.
    14 Sep 2009, 07:55 PM Reply Like
  • Mark Bern, CFA
    , contributor
    Comments (4824) | Send Message
     
    If the survey discounted unemployment insurance benefits, the numbers below the poverty level would be much, much higher. The reality is that most of the unemployed really are living at or below poverty, but being propped up temporarily by the government. As benefits run out, the rate could skyrocket, unless, that is, the government continues to extend benefits for a couple more years.
    14 Sep 2009, 10:19 PM Reply Like
  • TeresaE
    , contributor
    Comments (3041) | Send Message
     
    For years, and years, I did not have insurance. I negotiated with my doctor and they all worked with me (and I was in a rural area). Cash talks.

     

    We love to pull out the ER as an example of where uninsured go, but in my friends and family those with the best insurance are the ones that rush to the ER for the common flu or sinus infection.

     

    I've always said there is an easy way to solve the ER crisis using interns and the "Urgent Care Clinic" scenario. But hospitals don't want that, they want to bill $2000 to check your temperature and administer benadryl.

     

    On Sep 14 07:55 PM TraderMark wrote:

     

    > I am also curious if you got sick at that point in your life or had
    > health insurance? If so, how much was your healthcare premiums a
    > month?
    >
    > Many in poverty just use the emergency room for their healthcare
    > service which means person ABC can live on $23,000 a year but someone
    > (everyone else) is paying for those visits.
    >
    > p.s. $23,000 in 2001, assuming a 3% annual inflation rate = $29,100
    > in 2009 dollars.
    >
    > I'd argue inflation for working class is much higher than 3% with
    > food and gas and energy prices... and if they are fortunate enough
    > to have healthcare (premiums)
    >
    > If we want to reverse what your $23,000 in 2001 would be equivalent
    > to today, it is $14,200. You said you had a 40% savings rate which
    > would of made you exactly break even in reality. $14,200 is about
    > 40% lower than $23,000. Again, I'd challenge you how many Americans
    > can save 10-15% not to mention 40%.
    >
    > Inflation is the most regressive tax in the world, and our leaders
    > love it. I don't think people realize how evil it is to people with
    > very little margin of error in life.
    15 Sep 2009, 01:57 AM Reply Like
  • TeresaE
    , contributor
    Comments (3041) | Send Message
     
    Things were much cheaper overall in 2001. Lights, heat, rent, food, health care have all gone up.

     

    In 90-92 I supported my son (no child support), had a car and was buying a house on $22,000 a year.

     

    Times change, $23k today is pretty poor.

     

    On Sep 11 05:13 PM Jasper M wrote:

     

    > I must take exception to one part of this: the notion that a single
    > person making $23K/year is poor. Back in my working days, in 2001,
    > I was making less than that, in a fairly high cost of living metro
    > area (Raleigh, NC), and I was living quite well.
    > I don't doubt for a minute that it would be hard for even a single
    > person to make ends meet on that income in, say, New York, or pretty
    > much anywhere in California. But they are Not the nation.
    15 Sep 2009, 02:00 AM Reply Like
  • Jasper M
    , contributor
    Comments (1652) | Send Message
     
    My, my, SO many questions!
    (This is what I get for using myself as a data point)
    I was living in a c. 500 sf one bedroom apartment, with a Huge kitchen. On the ground floor, a stone's throw from the complex's pool. Neighborhood was a small-but-growing bedroom community, most people worked in Raleigh.
    I grant you inflationary arguments, But I was actually making a bit less than $23K. In '98 I was getting $7/hour, by /02 it was $10 and change. Lots of overtime early on, none later.
    I didn't raise the point about "rent free by owning a home", I think such arguments are Bunk.
    As for the national savings rate, I was pointing out what was possible, Not what people choose to do. I managed a high rate on $10/hour (with Plenty of flat tires, thank you).
    As for illness, no, at that point in my life, (40's) my immune system was a threat to low flying aircraft. No, I didn't have health insurance, as I believe its modern incarnation is a scam, actuarilly unsound. I paid for my medical bills (and I had some) out of pocket, in cash, to a doctor who was smart enough Not to take insurance.
    And finally, now that I am retired, I seem to be burning through about $15k/year - notably close to your inflation adjusted calculation of my earlier income.
    Summing up, I belief a person of modest appetites can do fine on modest income in America today. You just have to know how to tell yourself "No" - a forgotten skill in a prosperous society, but easily relearned.
    15 Sep 2009, 01:47 PM Reply Like
  • TraderMark
    , contributor
    Comments (2422) | Send Message
     
    Author’s reply » Jasper you fascinate me
    Able to retire in 50s on $10/hr work? Either you hit the Lotto or really squirreled away some cash.

     

    So I reversed engineered what your hourly rate would be in todays dollars assuming a $10.25 rate in 2002.

     

    About $8.33 an hour @ 3% inflation
    About $7.70 an hour @ 4% inflation

     

    People can argue what the true inflation rate has been in America, I'd argue closer to 5% but for arguments sake you would effectively be making $7.70-$8.33 an hour today

     

    I am not saying one cannot survive on those figures. But again the larger picture is that is not 1 person in America the way the government figures

     

    That is for a 4 person household.

     

    p.s. my comment about rent free simply was 99.9% of people at that income level won't have a lower cost of living due to owning a home outright since they will never be able to save enough over the year to (a) buy a home and then (b) pay it off. But yes I'd agree if you don't have a home payment you can ilve on far less

     

    In fact that is why what just happened is a huge disaster - many of today's retirees actually had a goal of paying off a home by retirement so they could get by with less.

     

    Contrast that to their children who believe a house is an ATM and due to that belief will be making house payments well into their 80s. Never allowing them a chance to get by at a lower salary. But that's because no one things out 20+ years anymore and why should they - when in trouble, the government will pay for new homes and new cars for us.

     

    The other solution is the now increasingly popular reverse mortgage - if you have equity you can "owe more" on your house each year and just hope that you die before your equity runs out. A nice gamble! Granted a lot of people no longer have equity in their homes so not an option - but they will once we hit 2011 and Congress passes the "mortgage principal modification relief" act.

     

    On Sep 15 01:47 PM Jasper M wrote:

     

    > My, my, SO many questions!
    > (This is what I get for using myself as a data point)
    > I was living in a c. 500 sf one bedroom apartment, with a Huge kitchen.
    > On the ground floor, a stone's throw from the complex's pool. Neighborhood
    > was a small-but-growing bedroom community, most people worked in
    > Raleigh.
    > I grant you inflationary arguments, But I was actually making a bit
    > less than $23K. In '98 I was getting $7/hour, by /02 it was $10 and
    > change. Lots of overtime early on, none later.
    > I didn't raise the point about "rent free by owning a home", I think
    > such arguments are Bunk.
    > As for the national savings rate, I was pointing out what was possible,
    > Not what people choose to do. I managed a high rate on $10/hour (with
    > Plenty of flat tires, thank you).
    > As for illness, no, at that point in my life, (40's) my immune system
    > was a threat to low flying aircraft. No, I didn't have health insurance,
    > as I believe its modern incarnation is a scam, actuarilly unsound.
    > I paid for my medical bills (and I had some) out of pocket, in cash,
    > to a doctor who was smart enough Not to take insurance.
    > And finally, now that I am retired, I seem to be burning through
    > about $15k/year - notably close to your inflation adjusted calculation
    > of my earlier income.
    > Summing up, I belief a person of modest appetites can do fine on
    > modest income in America today. You just have to know how to tell
    > yourself "No" - a forgotten skill in a prosperous society, but easily
    > relearned.
    15 Sep 2009, 04:13 PM Reply Like
  • Mark Bern, CFA
    , contributor
    Comments (4824) | Send Message
     
    Jasper - I salute you! You're not living the dream that most Americans aspire to; but we should. You are living a dream more worthy of being dreamed, though. What I read in your comments that I admire most is a sense of contentment. Being happy with what we have is a state of mind to which we all need to aspire. There are many on SA who would probably argue with that point.

     

    I, for one, live beyond my current means. I have a wife and two children (the typical family of four) and we find it difficult to keep our monthly expenses below $4,000. Of course, the house payment is over half of that amount. Much of our resources are invested in a small company I founded that is growing at a much slower pace than anticipated three years ago.

     

    I'd like to live a much simpler lifestyle, but I've been voted down within the family. Maybe when the kids are both out of the nest we can downsize. Everyone in the family has adjusted to the new reality that we can't just buy whatever we want when we want it. I wouldn't say that we are struggling, but our income (due to the business start up) has been running about $2,500 or so below our monthly expenses for more than a couple of years now. So, needless to say, our savings are dwindling. Fortunately, we are nearly breaking even now and should be back in the black within a year.

     

    None of that was really necessary, except to say that I am waking up to the reality of needing to live within our means. We always did, until after I retired and started the business. If we hadn't, we would have lost the house long ago. If we hadn't always saved throughout our lives...

     

    Well, I wouldn't have been able to retire and spend more time with my kids. We all have to make choices regarding what is really important. Too many Americans make the choice to go deeply into debt so that they can have all the material stuff right now. It sounds to me as though you have made better choices. You are to be commended.
    15 Sep 2009, 04:50 PM Reply Like
  • Jasper M
    , contributor
    Comments (1652) | Send Message
     
    (Trader) Mark,
    Not trying to be fascinating. Really. My total yearly rent in those days was c. $4k. Say another $1K for utilities, and a bit more than that for food. No car payment. Leaves A LOT.
    My crazy significant-other at the time tried to burn up a lot of it, and my old car started coughing up blood toward the end, which also ate up some. Still saved a Lot.
    But the imminent causes of my retirement was the not-quite simultaneous decease of my parents. They lived modestly (relative to means), as well. So, sort of a lotto, yes.
    I don;t think the problem is people not thinking 20+ years ahead: I think it they Do think out that far - they just assume that 'everything will go back up, especially in the long term'. There are a lot of bad advisors getting a lot of attention these days, encouraging folks to think of current events as some sort of anomaly, rather than the logical consequence of Decades of criminally negligent monetary policy.
    Oh, and if I understand the rules of "reverse mortgages", once the bank takes the bait, there is no problem if you 'outlive your equity' - they have to keep paying. This happened famously to a guy who signed one of these from a french lady who went on to live well over 100 years, oldest in the world at one point. He went bankrupt!

     

    Mark (Bern)
    GET OuT OF THERE, man! The depression is Not over. If you are going to keep the business, recognize that your house will likely Never again be worth (in adjusted dollars) what it is now.
    If I had been burning through $2.5k/month of saving in my working days, I'd have been been a wreck.
    15 Sep 2009, 10:22 PM Reply Like
  • Michael Clark
    , contributor
    Comments (8680) | Send Message
     
    I had insurance for 30 years and never used it. I feel lucky I didn't have to. However, I always said if there were rebates at the end of the year for a % of money not used by rushing to the doctor, a kickback to workers, the cost of medical would plummet.

     

    We run to our doctors as though they are our priests. Doctors are the closest things we have to priests in our culture: they have knowledge about life and death that we don't have. We honor them for this.

     

    I agree. If you don't have insurance, you WILL NOT over-use the doctors.

     

    On Sep 15 01:57 AM TeresaE wrote:

     

    > For years, and years, I did not have insurance. I negotiated with
    > my doctor and they all worked with me (and I was in a rural area).
    > Cash talks.
    >
    > We love to pull out the ER as an example of where uninsured go, but
    > in my friends and family those with the best insurance are the ones
    > that rush to the ER for the common flu or sinus infection.
    >
    > I've always said there is an easy way to solve the ER crisis using
    > interns and the "Urgent Care Clinic" scenario. But hospitals don't
    > want that, they want to bill $2000 to check your temperature and
    > administer benadryl.
    16 Sep 2009, 04:52 AM Reply Like
  • Jasper M
    , contributor
    Comments (1652) | Send Message
     
    I think a lot of our current 'worship' of the medical profession has to do with how we saw them in the recent past - in, say the 1960's, everything medicine could Touch, it could Cure. Pneumonia, and TB, the big killers of the pervious century, were on the ropes. Heart disease was called 'old age', and cancer was still beyond them, but ANYthing else was treatable. So, yeah, they were like unto gods.
    So everyone wanted to be one. So the AMA had to artificially constrict supply. And insurance crept in, claiming to make medicine available to all, but instead, the third-party-payer mechanic drove prices up and up.

     

    Someday, historians will laugh their asses off over this.
    16 Sep 2009, 06:47 PM Reply Like
  • GotLife
    , contributor
    Comments (1329) | Send Message
     
    Being offered retirement at a surprising early age forced me to analyze cash flow by building a thirty year budget. The real surprise came during that analysis, revealing the tax implications of being DINKs in a large home. We were paying in taxes what we are now capable of living on. Besides the obvious and large drop to a lower tax bracket, SSI and Medicare insurance alone was robbing us of 10%. Downsizing our home shed 50% of real estate taxes. Suffice it to say, we now pay 10% of the taxes we did when both were employed full-time, and without the 60 Emails and 20 panicked voice mails each day, have more time to actually live, rather than just work. I wish I had discovered earlier that working years were not just asset acquisition years but cash flow years. Just stay one income dollar ahead of costs and life is so much simpler.

     

    Wealth redistribution in the US really doesn't hit the wealthy but rather the highly productive WAGE earners. Gates, Buffet, and the Kennedys are allowed their wealth without redistribution. Just don't be a hard working, productive couple or you will unknowingly be carrying the rest of your neighbors on your back.
    23 Dec 2009, 06:38 PM Reply Like
  • enigmaman
    , contributor
    Comments (2686) | Send Message
     
    MY takeaway concerning those newly classified as "poor" did a disservice to all working Americans, by lowering the bar for qualification into this lower class, two things happen,

     

    1- no matter what a person may think about their lot in life they now know is that they are considered "poor" which is very demoralizing, carries a lingering stigma and is counter productive because if you felt OK before the re classification you are not going to feel better after which could result in a "why bother trying" attitude

     

    2-as a newly classified resident of "poor person town" you automatically will qualify for many state and fed run entitlement programs like food stamps ( recently renamed Snap Program to to alleviate the associated stigma) child care, medical care, housing etc. So now we have millions of newly classified poor who may have been satisfied with their current position or at least working to improve it but now they have access to many programs that will automatically elevate them into a better economic environment without doing anything more, ultimately a step backwards for many though it will not be seen this way

     

    The ramifications of both will be profound, will costs states millions of dollars they do not have so they will have to cut other viable needed programs, raise taxes or both, we see this happening in the sate of NY who adopted the reclassification of the poor in advance of the fed changes, they have since realized the serious problems it will and has caused for all. Will produce millions of new victims who might otherwise have pulled themselves up by their own boot straps buy now will expect the state and fed gov to do it for them. It will end up with millions of the new and old poor being totally committed to insuring their new found benefits will go on into perpetuity resulting in a new and empowered progressive liberal voting block who will blindly follow and vote as they directed to, in the end that is and was the ultimate goal for reclassifying the "POOR"
    25 Jul 2010, 09:57 AM Reply Like
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