Depressing simplistic ideas… August 19, 2016Posted by WorldbyStorm in Uncategorized.
the wealthy are the wealthy because, unlike you or me, they don’t waste their money on frivolities.
This is a trope that has been extant during the crisis and after. It is, needless to say, incorrect.
As Olen notes, there are much more obvious reasons for overspending in recessions…
The advice in his and other books spreading this idea was often cloaked in the guise of your friendly next-door neighbor offering tips that were good for you. Take Jean Chatzky, a perky adviser with a frequent, somewhat nervous smile who came by way of working on the Forbes 400 list and, like Bach, Oprah’s couch and morning television. Her response to the Great Recession? Penning a book that contained money advice for the poor from the wealthy, with such words of wisdom as “Overspending is the key reason that people slip from a position of financial security into a paycheck-to-paycheck existence” (italics in original). Of course she failed to acknowledge that it’s easy to overspend one’s unemployment check that, at the time of publication, averaged $293 weekly.
And Olen notes, and this is as true here as in the US, that:
Warren and Tyagi demonstrated that buying common luxury items wasn’t the issue for most Americans. The problem was the fixed costs, the things that are difficult to cut back on. Housing, health care, and education cost the average family 75 percent of their discretionary income in the 2000s. The comparable figure in 1973: 50 percent. Indeed, studies demonstrate that the quickest way to land in bankruptcy court was not by buying the latest Apple computer but through medical expenses, job loss, foreclosure, and divorce.
Giving up a latte or another such small extravagance in this environment wasn’t going to be enough. Yet the personal finance shills continued to tell people their problems were mostly of their own making.