Wednesday, September 3, 2014

From "The Tightwad Gazette III

Oh, finally.  We're back on our property (Fountainhead) in the US, mostly unpacked, and settling back into our routines.  Husband has gotten a job already and I am getting our home set up, slowly but surely.

In the unpacking, I came across my collection of "The Tightwad Gazette" books and have started reading them again.  For those who aren't familiar with them, Amy Dacyczyn published "The Tightwad Gazette" newsletters during the 1990s, which later became three published books and then finally one complete edition.  

The third book of the series starts out with an article titled:  Drowning in Rising Expectations; which is spot-on even 20 years later, and I'd like to share it with you here:

The idea that baby-boom generation has fewer opportunities and most struggle harder than previous generations is believed by millions of Americans.  Specifically, they believe that it's almost impossible to afford kids on a middle class income anymore.




A major reason I started the newsletter was that I believed this was false.  It seemed to me that boomers were victims of their own inflated expectations, not the economy, and if they didn't live so extravagantly and planned better, they could easily afford what they really needed.  But I lacked the statistics to back up my belief.

So now I am indebted to Karl Zinsmeister, an Ithaca, New York, writer and the editor in chief of American Enterprise magazine.  He sent me some fascinating information, which will be included in an as-yet-unnamed book.  His basic premise is that we are more fortunate today than we realize.  Understanding this can be a great help to tightwads wrestling with the notion that "it's not fair."

First, why is this idea that boomers are worse off so prevalent  ziZsmeister says politicians can get lots of mileage from convincing people that they are hurting, and that a particular political plan will bring back opportunity.  And news stories thrive on finding villains and victims.  Stories built along these lines are more interesting than "gosh, everything is great' stories.

.......

So why do people "feel" poorer than their parents?  Zinsmeister says it's mainly because we have come to expect more.  For example:

  • The average American now consumes twice as many goods and services as he did back in 1950.  (Going back to 1928, when our grandparents were having children, the number of consumer durables bought annually per person has gone up ten times.)
  • The number of motor vehicles per adult is 50 percent higher than it was in 1950.  One reason is that it takes one fewer month's worth of family income to buy the average car now than it did then.  Cars are cheaper to run, too.  Today's biggest Ford, the Lincoln Town Car, gets the same mpg as Ford's smallest car did in 1975.
  • Now, every year, 16 million Americans go to foreign countries other than Canada or Mexico.  In 1950, the number was 680k000.
  • Per-person spending on hobbies and home recreation has gone from $403 in 1950 to $1,149 in 1991, adjusted for inflation.
  • In 1960, purchasing a refrigerator cost a family 145 hours of labor.  Today it costs half that.  As for what to put inside, in 1960, Americans spent 15 percent of their incomes on groceries, versus 7 percent today, and there are 12 times more items to choose from at the supermarket.
  • In 1990, 42 cents of every food dollar was spent on restaurant meals--twice the amount spent by the previous generation.
  • Only about 25 percent of the parents of baby boomers went to college.  Half of all of the boomers themselves got to go, and by 1992, 62 percent of high school graduates chose and were able to go on to college.
.....

The reason people feel priced out of the housing market, argues Zinsmeister, is because they want houses that are so much bigger and "better." Though the average family is smaller, the average modern, new house is twice as big as the average one built just after World War II.  More than 75 percent of new houses have central air-conditioning, up from just 34 percent in 1970.  Almost half have more than two bathrooms, up from 16 percent.  In 1970, 85 percent of new homes had a garage; now 82 percent have them.

.....

You might argue that the boomers earn more only because women have gone to work, unlike the stay-at-home moms of the previous generation.  But Zinsmeister's figures point up a fact that I've been stressing all along:  If you are willing to live like people did in the 1960s, you can be a stay-at-home parent, too.  Today's second income is often consumed by child care, extra taxes, and luxuries that our parents happily did without.

Zinsmeister's arguments are based on statistical averages.  You might respond that they are interesting but they don't apply to you,.  You've examined  your situation, and despite your hard work, you really are worse off than your parents were at  your age.

I would respond that even if there is a  finacial inequity, complaining about it wastes emotional energy.  You could use this same energy to be even more creative than your parents were.  for example, our family expenditures for food and clothing is almost the same as what my parents spend for these items 25 years ago, and this isn't adjusted for inflation.  There are are many ways to save money today that didn't exist when I was a kid:  yard sales, warehouse stores, and energy-saving appliances, to name a few.  I feel that today it's easier than ever before to be a tightwad.

Zinsmeister's point, however, is that a great deal of modern complaining is baseless.  There is more wealth, more luxury, and more opportunity.  If you doubt it, sit down and have a long talk with your parents and grandparents.

.....

The logic and reasoning Amy is using here is still valid today.  Incomes today are higher than they were 20 years ago, but so are people's expectations.  Children expect their parents to supply them with cell phones and laptop (or even tablet) computers while they live at home, and they expect to have it when they get out on their own too.

But it takes sacrifice to start out on your own.  A first time homeowner or apartment dweller who expects to have all the trappings of an established 20-year work veteran has unrealistically high expectations, and consequently high consumer debt.  But a starting-outer who sets his/her budget by his/her income, as it is, and chooses accordingly can live quite successfully and earn the perks that come later while living a debt-free.

I believe as parents it is important to set our children up for success and part of this is explaining to them that reality is they may not be able to afford everything mom and dad are offering them when they get their first apartment and are working a minimum wage job.  In other words, lower their expectations.

Please share your thoughts in the comments below.  Cheers!

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