Posted on 04/13/2010 6:59:30 AM PDT by SeekAndFind
While the market cheers on the fantastic job “growth” of March 2010, the more astute of us are concerned with a growing tide of personal bankruptcies. March 2010 saw 158,000 bankruptcy filings. David Rosenberg of Gluskin-Sheff notes that this is an astounding 6,900 filings per day.
This latest filing is up 19% from March 2009’s number which occurred at the absolute nadir of the economic decline, when everyone thought the world was ending. It’s also up 35% from last month’s (February 2010) number.
Given the significance of this, I thought today we’d spend some time delving into numbers for the “median” American’s experience in the US today. Regrettably, much of the data is not up to date so we’ve got to go by 2008 numbers.
In 2008, the median US household income was $50,300. Assuming that the person filing is the “head of household” and has two children (dependents), this means a 1040 tax bill of $4,100, which leaves about $45K in income after taxes (we’re not bothering with state taxes). I realize this is a simplistic calculation, but it’s a decent proxy for income in the US in 2008.
Now, $45K in income spread out over 26 pay periods (every two weeks), means a bi-weekly paycheck of $1,730 and monthly income of $3,460. This is the money “Joe America” and his family to live off of in 2008.
Now, in 2008, the median home value was roughly $225K. Assuming our “median” household put down 20% on their home (unlikely, but it used to be considered the norm), this means a $180K mortgage. Using a 5.5% fixed rate 30-year mortgage, this means Joe America’s 2008 monthly mortgage payments were roughly $1,022.
So, right off the bat, Joe’s monthly income is cut to $2,438.
According to the US Department of Agriculture, the average 2008 monthly food bill for a family of four ranged from $512-$986 depending on how “liberal” you are with your purchases. For simplicity’s sake we’ll take the mid-point of this range ($750) as a monthly food bill.
This brings Joe’s monthly income to $1,688.
Now, Joe needs light, energy, heat, and air conditioning to run his home. According to the Energy Information Administration, the average US household used about 920 kilowatt-hours per month in 2008. At a national average price of 11 cents per kilowatt-hour this comes to a monthly electrical bill of $101.20.
Joe’s now down to $1,587.
Now Joe needs to drive to work to make a living. Similarly, he needs to be able to drive to the grocery store, doctor, etc. According to AAA, the average cost per mile of driving a minivan (Joe’s a family man) in 2008 was 57 cents per mile. This cost is based on average fuel consumption, tires, maintenance, insurance, license and registration, and average loan finance charges.
Multiply this cost by 15,000 miles per year and you’ve got an annual driving bill of $8,550. Divide this into months (by 12) and you’ve got a monthly driving bill of $712.
Joe’s now down to $877 (I’m also assuming Joe’s family only has ONE car). Indeed, if Joe’s family has two cars (one minivan and one sedan) he’s already run out of money for the month.
Now, assuming Joe’s family is one of the lucky ones (depending on your perspective) they’ve got medical insurance. Trying to find an average monthly medical insurance premium for a family in the US is extremely difficult because insurance plans have a wide range in deductibles, premiums, and co-pays. But according to eHealth Insurance, the average monthly premium for family policies in February 2008 was $369.
So if Joe has medical insurance on his family, he’s now down to $508. Throw in cell phone bills, cable TV and Internet bills, and the like, and he’s maybe got $100-200 discretionary income left at the end of the month.
This analysis covers all of the basic necessities of the average American household: mortgage payments, food, energy, gas, driving expenses, and medical insurance. It also assumes that Joe:
1) Didn’t overpay for his house 2) Made a 20% down-payment of $45K on his home purchase 3) Has no debt aside from his mortgage (so no credit card debt, student loans, etc) 4) Only has one car in the family and drives 15,000 miles per year 5) Keeps his energy bill reasonable 6) Does not eat out at restaurants ever/ keeps food expenses moderate 7) Has no pets 8) Pays for health insurance but has no monthly medical expenses (unlikely with two kids) 9) Keeps his personal budget under control regarding cable TV, Internet, and the like 10) Doesn’t spoil his kids with toys, gadgets, trips to the movies, etc. 11) Doesn’t take vacations.
Suffice to say, I am assuming Joe maintains EXTREMELY conservative spending habits. Personally, I know NO ONE who meets all of the above criteria. However, even if the above assumptions applied to the average American, you’re still only looking at $100-200 in “wiggle” room for spending per month!
If Joe:
1) Overpaid on his house 2) Didn’t have a full 20% down payment 3) Owns two cars 4) Eats at restaurants 5) Splurges on heating & A/C bills 6) Has any medical expenses aside from monthly premiums…
… he is running into the red EVERY month.
I also wish to note that my analysis didn’t include real estate taxes and numerous other expenses that most folks have to pay. So even if you are extremely frugal and careful with your money, it is impossible to “get by” in the US without using credit cards, home equity lines of credit or burning through savings. The cost of living is simply TOO high relative to incomes.
This is why there simply cannot be a sustainable recovery in the US economy. Because we outsourced our jobs, incomes fell. Because incomes fell and savers were punished (thanks to abysmal returns on savings rates) we pulled future demand forward by splurging on credit. Because we splurged on credit, prices in every asset under the sun rose in value. Because prices rose while incomes fell, we had to use more credit to cover our costs, which in turn meant taking on more debt (a net drag on incomes).
And on and on.
Does this mean the market is about to tank? Not necessarily, stocks have been disconnected from reality since November if not July. Bubbles (and we ARE in a bubble) take time to pop and this time around will be no different.
Best Regards,
Graham Summers
Believe me, conservatives have their fair share of bitter, holier than thou people. I find your post refreshing. Seems to me to many people get married and produce children, with know idea how they are going to support either themselves or said children. If you are happy, your husband is happy and your children are happy, that’s all that matters. Seems to me one of a woman’s responsibility is to make sure when looking for a husband and the future father of her children, is to make sure her children are gong to have a good and decent life. Doesn’t always work out that way, but to many people don’t think about their future, just the emotion of “love”.
Their are also a lot of “conservatives” who are against government programs, unless it’s their government program.
I will have to heartily disagree with you about Gov. Palin though. McCain got the votes he got because of Gov. Palin, not the other way around.
Good Luck, both here and in your life.
I refuse to be bored. BTTT
Good, go back to DU along with the yutz.
I use a pro-life toll and long distance provider. Very cheap!
And if you can't be happy with it at least be thankful you have that much.
Yep, a couple of years ago the house I grew up in (NW Suburbs of Chicago) was listed at half a million dollars (only 4 bedrooms, 2 1/2 baths, and a partially finished basement)! The price went up a quarter of a million dollars in 7 years (I think my parents sold the house for roughly double what they bought it for in the mid-70s — and that was after 20 years of living in it)!
It’s definitely NOT going for that price now. In fact, many of my childhood friends are using this “opportunity” to move back home — because they were totally priced out of the area just a couple years ago...
If you can’t see the differences then you are beyond help. Glad you got zotted before I saw your posts here on this thread.
EXACTLY what I thought when I read her post... BTW: She’s been zotted. Good riddance...
Amen, Joan!!! THAT is the truth.
My wife is from Elgin. Her sister lives in Woodstock. Her parents live in Huntley. We were just visiting our son, daughter in law and grand children in Rockford last week. We go there about three times a year.
My wife just got back from returning our grandson last weekend. At the area where she put him in our daughter in law’s car she had a knock down dragout verbal fight with one of the female police officers controlling that area that had her in tears. When I was with her a week before we asked one of the male police officers if it was ok for cars to pick up people there. He said it was no problem. This lady would not listen to reason. She would not listen at all. She shouted my wife down and yelled at my daughter in law even as she had her turn signal on and was trying to merge into traffic to take another loop around. I would have cold cocked that bit$$ in self defense and we would have driven off.
I really, REALLY hate the Cook County area and spend as little time there as possible.
.
Nobody on FR gives a rat’s ass about your alleged family’s alleged net worth or alleged success -
I don’t recall anyone else bring up their personal ego stuff in years on FR - some people have other values and do not require tons o’ bucks or to talk about how great they allegedly are
One woman did - but stopped it quickly
There are millionaires and there are those who a scraping by on FR
Some are happy - some are not
You - You appear to be simply a big-mouthed jerk who generalizes and pretends to be “special”
Possibly even a Moby-Troll or Sleeper - who knows - who cares
If you do not like or approve of a
comment, a thread, or Free Republic -
Just scroll down, change threads, or got elsewhere
You have a warped and unhappy personality
Sorry - Your hour is up now -
Pay before leaving.....
No checks accepted.....
Don’t blame you for being P.O.’d about that altercation... However, I must point out that all those towns you listed with the exception of a small portion of Elgin are not in Cook County.
Anyway, I DO understand your point. Although we have friends and family still in the area hubby and I left in 1997 and moved to Colorado. We moved back to the Mid-West 5 years ago, but did NOT return to Illinois... There are some things I miss about my hometown - and I miss VISITING the city (the museums and such). However, I do not think I would ever really go back... For one thing I know I could no longer handle how corrupt the gov’t was in Cook County — wasn’t too “up” on politics and such when living there. Plus, I do NOT miss the nightly news including how many people have been shot that day - EVERY day...
But yeah... especially Elgin and Rockford (their reputations among those who live in the area aren’t great either — too much crime and “social” problems). Granted I’m going by what things were like back in the late 90s, but I can’t imagine Elgin to have gotten much better, and Rockford either (especially with this economy the way it is).
Nope I’m a Texas gal living on love in Pa,nice to meet you!
Please look through every post I ever made before making baseless accusations.
You are definately a plant or troll from DU.
Regardless, I have rarely seen a poster with such an attitude as yours.
There is not one poster here who wants more taxes, but the point of the article is largely correct.
And you!
The troll got the zot.
The only difference between you and the stuff I just scraped off my boot is that the stuff I scraped off my boot smells better.
I still think you are a troll. Why you throw the third party thingy at me I don’t know since I never discuss it...but if you want to know what i think I think the populace has been divided in two between women of all races and men of all races.
It was women who made up the difference in the last election for Obama, especially a lot more women married to conservative men who would never dream of telling their husbands for fear that “ohhh they would just get upseeeeyeett!”, giggling when they said it.
I know because in the field I work in, I hear the wives talking about it all the time. A bunch of them are now regretting their individual choices, especially the ones that have to deal with grumpy, drinking newly unemployed husbands, spending a lot of time now just polishing their guns since polishing their resume’s aren’t getting them anywhere....
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