I get worried about my American friends these days. I don't think they understand how poor they are.
We grew up with some truths about money and working that aren't true any more, and I don't think we've quite realized it yet.
Inflation. When I was at an impressionable age, inflation sometimes ran into the double digits. In that environment it made all kinds of sense to borrow money, lots of it, because the money you were going to pay the loan back with was going to be worth less than the money you borrowed. My grandparents' horror of debt vanished. Everybody was borrowing money. Everybody is still borrowing money, but now they're going to have to pay it off with real money. Borrowing money is stupid now.
Furthermore, when money was dwindling rapidly in value, employers had to keep giving raises to keep up. We came to expect raises of ten or fifteen percent as a matter of course, just the way things worked. Well, they don't work that way anymore. You make what you make, and if you don't like it, there's plenty of unemployed people who would be delighted to step into your shoes. Suck it up. There's no reason to think you'll ever make more money than you're making now. You might well make less. This is it.
The balance of power has shifted decisively to Capital. Pensions, unions, benefits, all those Western European style things, are vanishing from our landscape. Labor, with a few dwindling exceptions, is passive and powerless. We grew up with the vague expectation that we just had to earn a living – make our daily expenses – and everything else would be taken care of. That's how people in France and Germany live: if something awful happens, the State will take care of you.
Not here, not now. You're on your own, and if you don't have money saved for your incapacity or your old age, you're going to be out on the street. In the age of inflation, saving was for suckers, and making a few percent on your capital was a mug's game. Now it's working for a living, just meeting your expenses, that's for suckers. The overriding priority, in this economy, is to get yourself over to the Capital side of the equation, where people actually get ahead.
How do you do that? By saving like a motherfucker. 'Scuse my French. All that stupid crap about saving five percent of your income? Forget it. You want to save half your income. Half of it. Get that through your head. When you have paid off your debts, and what you have saved equals 20 or 25 times your annual expenses, then you can ease up. Then you can live off your capital, and you're not a slave any more. Till then, it's going to be hard.
But that means I'm poor, like really poor. Yes. It does. You are. You have to live in a shit place. You can't afford lattes every day. You can't afford a car. You can't afford vacations abroad. You can't afford to eat out. You are poor. You're not “middle class.” There's no such thing any more: there's rich and poor. I don't like it any better than you do, but not liking it doesn't make it go away.
Save radically, as much as you can. Stick it in an index fund and leave it there. Don't try to outsmart the wolves: just get in amongst the pack and try to blend in. This is survival we're talking about. Get real.