Are you a 50+ year old Boomer with adult children or their parent who is wondering "What the heck went wrong" that 'they always seem to need money' or saying they don't have money?
As a counselor, I'm seeing firsthand how the combinations of globalization, inflation, banking nightmares, housing collapse, exploding educational costs, technology we can't live without anymore and an incredibly complex health care system is causing a demolition derby to most family budgets.
This posting is NOT for the 1%. It's not even for the 5%.
Hearing how so many families - working adults with children are depending on their retired parents for the basics, I decided to sit down and compare what the real difference is between when they were in their 40's and 50's and now.
It is shocking the difference. What a lot of people don't realize is how much technology has added to our household budgets that didn't exist in the early 80's. With all this technology, digital data, internet access, and computerization of everything - it has made the cost of health care explode.
Since I'm not a mother I tend to be oblivious to the costs of having a child but just the cost of special formulas, MD visits, safety equipment and diapers can completely wipe out a low income paycheck. As they go through school add the costs of sports, braces, activities, camps, and competitions.
Here's some 'reality checks' - the average income in 1980 was $26,078, to be considered in the top 5% -you only had to make $69,000 - you were making MORE than 95% of the entire country. Now you would have to make $311,000 to reach the same rank! This means that you 'felt richer than most' with only $69,000 coming into your household. The only people I know making $311,000 a year of earned income is someone in the news. Probably a CEO.
What I discovered was how many new costs we have now that families did not have in the 1980's. Start with cable, (we had 3 -6 channels and an antenna), add cellphones, internet access for phones, tablets, laptops, and at home systems. If you have a student in the house, a 'at home' business or employment that requires 'reporting in or reports, then you probably added furniture, a printer, modem, cables, and all the office supplies like reams of paper and ridiculous prices on toner and ink cartridges. The PC didn't hit homes until the mid 80's the internet not until the 90's.
Then there's cars - thanks to car safety we added countless air bags, safety harnesses, and five star safety ratings that added $10,000 to the price of new cars. Our gas is 3x the price it was in the 80's - even with the Iraq Embargo! I recall the panic of shifting to 'tiny Japanese cars' away from the 'gas hogs' of that time - but we went back to giant SUV's for 'safety' and being able to buy huge quantities of 'stuff' at Warehouse stores - that didn't exist in the 80's . . . hearing couples with $400-$800 car payments is not surprising anymore. 32% of them are carrying mortgages over $2000monthly payments. . The average rent/mortgage in 1980 was $481.! If you have young children and/or grandchildren add the safety seats you need until they are almost 5 feet tall! Parents now have to go through 3 different types before they 'qualify' to wear just a seatbelt. Add all the expenses of maintenance at $80 an hour - the 4 wheel drive transmission, the larger tires, brakes, and gas tanks that can cost $100 to fill every week. States have increased the costs of registrations while insurance increased due to the expense of repairing this more expensive vehicle. Also add that most families require 2 cars since both have to work.
The other issue that has burdened our younger generation is being caught for driving while impaired. I don't know about you but I don't know anyone my age who even got a DUI - there wasn't the police force watching, the fines if you were caught were in the hundreds not thousands, you didn't need a lawyer and prison time was unheard of. That was the same for drug use. I don't know anyone who was put in prison for drugs - even though they did them! Thanks to that attitude in the 80's we weren't drowning in court, lawyer, fines, insurance and lost employment costs either. The younger generation considers getting a DUI arrest - part of 'growing up' like a badge of honor! The costs multiply out in their insurance costs, limits to getting good employment and ongoing fines to pay off.
Mandated, court-ordered and garnished child support is another expense that was rare in the 80's. Divorce rates were still low, child support was done without court costs and government interventions where now it's 2/3 of a person's income if they aren't the primary, physical custodial parent. Now women have to pay as well and are expected to participate financially by Judges. The average child support payment is $350. a month. If a man's average income is close to $50,000 that means he will pay $16,000 a year for one child's support. This doesn't consider the cost of new children he may marry into!
This upcoming generation is now burdened by student loan debt. I got through my entire 4 degrees (2 Masters) with a total of $15,000 in Federal student loans. If I repeated them now - 2 of the degrees would cost more than $100,000! The student loans for that would be as high as $600 month. More than an average house mortgage - for 10 years - or longer.
My personal concern is how is this heavy debt load going to affect the 21million young people as they want to marry, buy homes and cars? Who wants to marry a person carrying thousands of dollars of long term debt? Credit cards used to be 'the evil' - soon it will be student loan debt - if it isn't already. In a survey, 53% said that 'a partner with debt was a turn off.' 57% of women agreed with this statement, while 48% of men did.
But for everyone, since only 20% do go onto college and 60% actually finish - it's the costs of health care that we're probably overlooking - in how it is already making severe dents in so many household budgets. I used the landmark of 1980 - because it was before we had the PC in our homes - it was also before we could get MRI's, CT Scans, digital mammography, colonoscopies, liposuction, Botox, teeth veneers, artificial hearts, hips, knees, and ultrasounds for everything. In the 80's we didn't have 'co-pays', rarely had 'deductibles and insurance pretty much covered everything. Doctors didn't have the ability to test for everything and anything - you were put through an x-ray and blood tests for most ailments. If you broke a bone, your local MD took care of the casting and physical rehabilitation was unheard of. Now just to manage the basic 'required' annual testing the average American can easily spend hundreds, if not thousands. I'm now 'required' by my insurance company to have 2 mammograms a year, I have a 30 year old client who requires bi-annual cardiology exams that cost thousands. They blame litigation for this reality but I think its also 'because we can' and every MD wants to get a proper diagnosis - to reduce errors and other costly procedures - so they test everything.
Our generation also is the 'Credit card' generation.Credit cards weren't even available to most in the early 80's. A woman couldn't get her own Bank credit before 1977! Now the average household credit card debt is -$4878 per person. The average Baby Boomer carries $101,951 (TOTAL debt) yet this same group thought that they would be 'debt free' by age 53! For those over 66 it's $38,043. For Generation X - our 30-40 year olds - $111, 121, while Generation Y - those in or just finishing college - $34, 765! 13.8% of US households are carrying a debt load ratio over 40%. You can't get a government backed mortgage if the cost of the payment, taxes, and insurance is over 30% of your income. Credit card payments weren't even a 'line item' in a 1980's household budget!
So now that you're more aware of the 'real deal' of your adult children - take a deep breath before you say a judgmental word, anger about 'thoughtless' spending or write a check. Instead - work with them. If you are able - pay specific costs - especially the necessary ones - car insurances, MD bills, utilities, student loans, even rent/mortgages - then you know that those expenses are covered. Use gift cards from Walmart or their local grocery store to fill in gaps - but limit access to alcohol and cigarettes. Take them out for a dinner/lunch to give them a 'luxury' they have eliminated -if they're struggling with a conscience. Try to have helpful conversations, not arguments to help them manage their way through. They are already stressed. They thought that they could live as comfortably as they did when you were their age. It wasn't that long ago. They remember it. They wish for it. It's just not going to be the same. It's a 'New Normal' and I personally think that 95% of us are struggling to figure out what that really means.
Here's some other numbers to compare . . .
Till next week, Karen