As y’all know, I follow many things closely and many of them are related to the cabbage.
I read with interest three different articles on my Yahoo! feed today, which were that our middle class incomes are now the highest ever, that credit card debt is now the highest that it has ever been, and the Dow Industrial average once again set a new high.
How are these interrelated to Yours Truly Middle Class Guy, my few dozen readers and what does any of it have to do with the price of tea in China?
My guess is that Chinese tea prices are not effecting any three of these things.
What is effecting these three things is a confluence of companies that have become more and more profitable by cutting labor costs and by selling to upper middle class and upper class consumers throughout the world.
According to a new study released Monday, U.S. consumers added $33 billion in credit card debt during the second quarter of 2017, making it the second-highest point of debt since the end of 2008.
Personal Finance website WalletHub.com—who conducted the study—projects that by the end of 2017, Americans will pile more than $60 billion in new credit card debt, which means overall the U.S. is headed towards well over $1 trillion in credit card debt.
American consumers now collectively have the most outstanding revolving debt — often summarized as credit card debt — in U.S. history, according to a report released by the Federal Reserve. Americans had $1.021 trillion in outstanding revolving credit in June 2017. This beats the previous record in April 2008, when consumers had a collective $1.02 trillion in outstanding credit revolving credit.
Total household debt — including housing, auto loans and student-loan debt — in the U.S. also surpassed the 2008 peak. While the debt level is similar to 2008, the things Americans are buying on credit have changed, as household incomes have increased in recent years, and housing prices and stock prices have improved.
Speaking of increased incomes, today I read several articles referencing the Census Bureau’s release of last year’s income data, which indicates that middle class incomes in the U.S. hit their highest levels ever.
Per the Washington Post, which I consider to be real news, the incomes of middle-class Americans rose last year to the highest level ever recorded by the Census Bureau, as poverty declined and the scars of the past decade’s Great Recession seemed to finally fade.
Median household income rose to $59,039 in 2016, a 3.2 percent increase from the previous year and the second consecutive year of healthy gains, the Census Bureau reported Tuesday. The nation’s poverty rate fell to 12.7 percent, returning nearly to what it was in 2007 before a financial crisis and deep recession walloped workers in ways that were still felt years later.
Of course, inequality remains high, with the top fifth of earners, the twenty percenters, taking home more than half of all overall income, a record. Also of course, massive racial disparities remain, with the median African American household earning only $39,490, compared with more than $65,000 for whites and over $81,000 for Asians. Nothing surprising there.
The deck is stacked against African Americans and Hispanics because they are dealt, as a recent Stanford University report states, an immediate “one-two punch” at the very moment of birth. They are not just more likely to be born into families with less wealth, education and income, but they are also more likely to live in poor neighborhoods where high-quality schools are more difficult to find, crime is high and other amenities are unavailable.
Going along with these higher middle class incomes and debt-fueled spending, on the way home from work today, I heard that the S&P 500, Dow Jones industrial average and the Nasdaq all closed at record levels today. The Dow Jones Industrial Average rose rose 39.32 points, or 0.18 percent, to 22,158.18 The S&P 500 edged up 1.89 points, or 0.08 percent, to 2,498.37, and the Nasdaq Composite added 5.91 points, or 0.09 percent, to 6,460.19.
So what does that mean to you and me?
Well, for me, most, but not all, of the money that I have invested in my and my wife’s IRA and in my children’s college savings accounts are tied into these funds.
I have purchased many shares in the S&P 500 Index fund, the Wellington fund and the Primecap fund through Vanguard and the Blue Chip Growth, Capital Appreciation, GNMA fund and College 2018 fund through T. Rowe Price.
I hold some individual stocks, as well, but those are mostly contrarians and have been losing money as stocks have been soaring. My largest stock holding, several hundred shares of a triple-leveraged daily gold miner stock has been losing me money hand over fist.
Don’t worry, I do not invest my children’s college money or our retirement funds in this crazy stock that I should be ashamed to admit having bought and sold numerous times over the past three years. Last year I made over $7,500 on one trade with it. This year, I am down far more than that so thus will be holding it for a good long while.
If anything, I wish that I had more money invested in stock funds rather than the GNMA fund, which has not done particularly well for years and the bond funds that I have two of my children’s four 529 accounts in. I still have two 529 accounts per child, one in a bond fund through Bright Start, and my daughter’s still in the Wellington fund and our son’s in the College Portfolio 2018 fund.
I share this highly personal information with you because, unlike a financial adviser who may likely be incentivized to push certain products at you, I am telling you what funds I am entrusting the funding for my children’s college education, something that I take most seriously, probably more seriously than my own retirement.
Trust me, it was not easy for a Middle Class Guy worker bee like me to save up nearly two hundred grand while my wife was a stay-at-home Mom and I was inching my way up from the forties when our son was born to just over a six figure salary.
Ask me how I did it and I will tell you that I picked some good funds on the advice of my late maternal grandfather, namely the Wellington fund and the Primecap fund, and I regularly contributed to them through thick and thin.
I have never owned an iPhone and do not want one. My family uses pay-as-you-go phones from Walgreens and Tracfone. We own two old tube TVs, both older than our nineteen-year-old son and speaking of nineteen years old, I drive a rusted out 1998 Subaru station wagon handed down to me by my mother when she purchased a new Prius about two and a half years ago.
However, despite my efforts at frugality, I recognize the need for us to further address our family’s precarious car situation this coming year and it will be one of my 2018 Resolutions.
Also, I may have a cheaper phone, TV and car than you, but we have been eating out several times per week lately and I made a $650 payment today (with $500 more to go) for our daughter’s December marching band trip to Disney World and throughout Florida. We made another deposit on yet another trip for her to return to Disney World for the national poms competition in February, and I just made a $2,471 payment to our son’s college this past Monday night.
I do not want to provide all details, but I went over our last month’s bank statement today and again, more went out than came in. This time, $10,455.89 went out and only $9,398.75 came in. To our defense, besides the first month’s payment of $2,671.40 to the college, I also completely paid off the two round-trip flights and the payment for the first night’s lodging for my wife and son to visit Disney World while our daughter is there this December. I also continued Paying Ourselves First $300 per paycheck and also continued automatically depositing $400 into our daughter’s 529 account on the first of the month.
I got off on a tangent there
The upshot of all of this is that as Yours Truly Middle Class Guy, I benefit from the soaring stock prices while losing some dollars on some unconventional investments.
I am glad to read that the median household income in the U.S. has risen for the second straight year, but am nervous about the massive amount of debt taken on by our fellow citizens.
Even though I strive to pay off my wife’s two credit cards and my one credit card every month, it is not an easy thing to do.
Between my wife’s $1,706 Visa bill, her $219 Kohl’s bill and my $416 Visa bill, I sent over $2,300 to our creditors in August. Along with all of our other purchases, repairs, groceries, gas and everything else, it added up to another middle class suburban month of over ten grand leaving our account.
I have been listening to a lot of music lately and most of my posts, like the one that I wrote on a whim earlier today called Wouldn’t It Be Nice, remind me of a lyric from a song.
Whenever I open my wife’s credit card bill, once I express my dismay at the amount, a quote from David Bowie’s 1975 hit Young Americans plays in my head:
Do you remember, the bills you have to pay
For even yesterday?