Category: U.S.PffStat

Personal/Family Finance statistic

(cf2middle class)the poor spend more on..#Uber,processedFood

Posted on by tiger40490

Based on 2024 article Nine services that poor people spend on that the rich and middle class don’t

— Uber .. In Waltham, MA, I noticed many blue-collar workers had to deal with (usually reduced) weekend public transport to get to work.

Poor workers often have service jobs that require weekend hours. If they miss a bus/train on weekends or weekdays, then they have to walk or take Uber. Cycling is unsafe on the road. (Walk is more realistic.)

Uber is cheaper than taxi but still more expensive than Grab in Singapore.

( The middle class can afford to own cars. )

— processed foods … In the U.S. I find these foods much cheaper than fresh foods.
— hire-purchase or rent-to-own
— cash advance from ccard … I feel this “assistance/service” is largely designed for the poor.

The middle class borrow big amounts and have more “efficient” loan facilities.

PPP, Int$ #Sgp^PEK

Posted on by tiger40490

k_PPP

This bpost is about PPP and cross-border comparison, based on https://en.wikipedia.org/wiki/Gross_domestic_product#Cross-border_comparison_and_purchasing_power_parity

Intuitively, we compare two countries’ GNI by converting both amounts to USD. This is the standard comparison but ignores regional price differences. For example,

  • SG is expensive for car owners than most countries.
  • U.S. medical and medical insurance (“services”) costs are higher than most countries.  Tristate rent is expensive. Suppose your basket is dominated by rent and medical, then using FX rate to compare U.S. vs SG incomes will ignore the high-cost of the U.S. Suppose your U.S. after-tax income of 120k is 20% higher than SG (S$133k=USD100k). The lightly (i.e. 20%) higher income in the U.S. looks like 20% higher quality_of_life.

There’s an alternative exchange rate .. the ppp-fx. Using ppp-fx, the slightly higher income in the U.S. may translate to lower quality_of_life than the S$133k in SG.

Specifically, if  someday ppp-fx of Int$/SGD becomes 1.0, then S$133k salary in Sgp has equal purchasing power to USD 133k in US. It would provide (or buy) you a richer quality_of_life than the USD 120k salary mentioned earlier.

( Naturally, we adjust our “basket” and avoid the locally-expensive products like cars in Sgp and medBx in US. )

Using ppp-fx, the same basket would cost the same amount of Int$ in any country. This sentence sounds concise but is unclear. If you observe real world prices and compute an aggregate “basket price” in local currency, then use ppp-fx to convert the basket price into Int$, then the Int$ basket-price would be identical across all countries. Note Int$ has parity with USD, for some theretocal reason.

https://en.wikipedia.org/wiki/International_dollar and https://data.worldbank.org/indicator/PA.NUS.PPP?locations=SG-US  tabulate the latest ppp-fx rate of every currency vs the Int$. Int$/USD = 1.0.

  • Int$/RMB = 3.64 meaning Rmb 3640 and USD 1k have equal purchasing power locally.
  • Int$/SGD = 0.8 meaning SGD 800 and USD 1k have equal purchasing power locally.
  • Int$/MYR= 1.54 meaning MYR 1540(=SGD470) and SGD 800 and USD 1k have equal purchasing power locally. Therefore, Singaporeans go to JB for shopping and entertainment.

PPP theory is all about normalizing regional price differences but PPP is inherently entangled with FX. That’s why I call it ppp-fx.

  • lower costs in Greece relative to Denmark (all in eurozone) can’t be resolved using ppp-fx. Similarly, cost difference between Shenzhen vs inland China is not resolved using ppp-fx. Instead, you need cost-of-living index.
  • PPP-fx is useful for cross-currency comparisons of two salaries.
  • PPP-fx is also useful for GNI comparison
  • Don’t use BeyondCompare as a main component of a ppp basket. Such a basket is likely to produce a ppp-fx similar to the FX rate.
  • The Big Mac exchange rate is one simple example of ppp-fx. You can find readable illustrations.

— Q: is cost level close between China and Sgp? Evidence suggests yes:

  • Int$/RMB = 3.64 meaning Rmb 3640 and USD 1k have equal purchasing power locally.
  • Int$/SGD = 0.8 meaning SGD 800 and USD 1k have equal purchasing power locally.

Therefore, SGD 800 and Rmb 3640 both have the purchasing power of USD1k (Rember Rule_1). If I convert SGD 800 to Rmb 4440 (2024 FX rate), I can buy “1.2 baskets” in China, since one basket cost Rmb 3640.

— Q: how does inflation affect ppp
A: inflation erodes purchasing power of every currency.
%%A: I think U.S. inflation doesn’t affect the Int$/USD ppp-fx. Suppose this inflation is stable. If China inlation far exceeds U.S. inflation, then Rmb purchasing power would progressively drop against USD

==== some fundamental but non-trivial concepts

Rule_1: “Purchasing power of 1000 units of a currency” is not a vague concept but a number, and always measured in local market.

It’s safe and realistic to assume a consumer has a USD denominated expense account.

Note the PPP-basket is an international standard basket, and distinct from each government’s CPI basket.

— personal quality_of_life (and national standards of living ) .. depends not only on your income but also the actual cost level. Abstract 🙁 Concrete example: Your after tax income, converted to USD, is identical between Sgp, Beijing, NY and Miami, but the same basket of “products” cost more in NY and less in Sgp. Therefore, your quality_of_life is higher in Sgp.

— Most products have location-specific prices. Beijing and Hebei are different locations.

Commodities like cude oil have no loction-specific prices. However, I’m more interested in consumer goods, which indirectly depend on commodity prices.

If your basket is mostly high-tech products like softwarer gadgets, then there’s no location-specific price. Indeed you can use FX  because iPhones, BeyondCompare etc are sold at the same USD price regardless of location.

However, in most people’s “basket”, high-tech products are a small portion. A big component of your basket can have a highly location-specific price.

Services as a type of “product” have location-specific prices. The BigMac is a famous example. Converted to USD, it is expensive in Switzerland and cheaper in SE.Asia.

[[Nomadland]] reflecting PFF ]U.S.

Posted on by tiger40490

I feel this movie is fairly realistic. Based on a book, it includes no exaggeration no gimmicks.

  • contingency cash reserve
  • NNIA
  • Fuller wealth
  • SSA payout insufficient for some Americans
  • home ownership vs RV camping. Note you can live an RV life in style, if you have NNIA or Fuller wealth.

These workampers are mostly older white Americans, resilient, hopeful, proud, independent, self-reliant, not weaklings dependent on handouts and family/friends.

I also get the feeling that when times are tough, the U.S. government’s job support programs are less effective than in Singapore.

— DIY, self-reliance..
There are informal self-help groups among fellow RV dwellers. Karma. Unplanned lucky events. You can’t really count on them. In contrast, a commercial support is much more reliable but not 100%.

U.S.home ownership”rate”

Posted on by tiger40490

In any country or city, home ownership percentage is defined as
=: number of owner-occupied homes / total number of occupied housing units

It is around 2/3 in the U.S. as of 2021.

The numerator includes homes not fully paid off. About 38% of all U.S. (occupied) housing units are owned without mortgage.

Q: What if a single “occupied housing unit” is sub-divided into multiple “homes” used by multiple families?
A: It would probably be reported to the census as a single unit. See https://en.wikipedia.org/wiki/Home-ownership_in_the_United_States

The same wikipedia article also pointed out that the percentage of adults-who-own-their-home is believed to be significantly lower than the homeownership rate. Reason? Only the single owner or the main couple (or adult child + the aged parent) are the legal owners, possessing legal right to the property. Any other adults living in the same home are not home owners.

median household income n midclass quality@life #R.xia

Posted on by tiger40490

The free availability of credit is similar to the free availability of drugs and junk food.

Q1: is it naïve to assume that a family of 3, earning the U.S. median household income is able to enjoy a decent quality of life?  You hinted at the savings factor (discussed later)

Yale graduates typical earn 80k/Y pre-tax, according to a Yale professor on an 2022 BBC broadcast.

In the greater-NY region, median household income is about 80k/Y pre-tax, according to https://censusreporter.org/profiles/31000US35620-new-york-newark-jersey-city-ny-nj-pa-metro-area/. This “median” is computed across all households regardless of size. In economics, a household can have one to four or even more members. I believe a family of 3 earning 80k (pre-tax) would have a decent living standard. This is my short answer to Q1.

You described your own story 10 years ago + the story of your Mexican neighbor. As you hinted, a key differentiator is the savings rate. If a family of 3 can consistently save $5k, and invest at 4% return over 20 years, they would build up a $150k nest egg [1], providing a cushion in a downturn. However, many people seem to fail the “consistency” criteria — They save for a while and spend all in a splurge.

Q2: Will $5k/Y or $420/month less spent affect that family’s middle-class living standard? I say no. The reason has to do with the concept of livelihood needs vs aspirations.

  • A typical saver family would think hard about allocating and budgeting for livelihood needs. They bend over backward to make ends meet while saving some amount every month. They feel insecure (or impoverished) when looking at their cushion/reserve/nest egg, and compare it to their peers.
  • I imagine that many non-saver families (in the U.S. or other countries) hate the trouble, hate the restriction, hate the loss of freedom. They feel impoverished when they must adjust spending to reach a savings goal. They feel impoverished when they compare to their free-spending peers.
  • ^^ Peer comparison is a fundamental driver of the spending/saving/investing behavior.

(I always appreciate personal stories. Here’s another.) Until Apr 2010, my wife and I together earned slightly over USD 90k pre-tax, or around 75k post-tax. I spent an estimated [2] 60~70k to support a family of 2 or 3. My living standard wasn’t a hardship, but we had to make some (by American standard) uncommon lifestyle choices, choices that most middle-class Americans wouldn’t accept:

  1. eg: net rental cost .. was $500~1100 even when we had a newborn. Contrast that to “earn $72k (post-tax), pay $24k on rent” lifestyle typical of American renter families.
  2. eg: car ownership .. we just said NO. This requires that we live near public transport, not suburbs.
  3. eg: medical insurance .. we bought only briefly for my wife before having baby, and for my newborn baby.
  4. eg: no debt .. no car lease, no credit card loan, no hire-purchase by installment. We never spend the money before we earn it.
  5. eg: alcohol, tobacco, latest gadgets, overseas vacations .. aspirations ! we just said NO. We did go to cinemas and waterfront parks.

The first three big-ticket items, rather than food cost as you mentioned, add up to explain the bulk of my higher savings rate (among comparable families). We sacrificed many non-essential “finer things in life”, and I actively rejected peer comparison. (Actually, most of my colleagues had much higher combined incomes and therefore not my peers! ) Based on first-hand observations, my longer answers to Q1 are:

  1. Yes, the median household income does represent a reasonable quality of life and comfort level, provided we spend well — allocating, budgeting, and giving up non-essentials.
  2. Part of “spending well” is consistent saving on a monthly basis, which requires discipline and sacrifice.
  3. fundamentally, freedom and responsibility are the 2 sides of the same coin. Quality of life and discipline are also two sides of the same coin.

If words like “discipline”, “sacrifice”, “responsible” and “give-up” sound inconsistent with “comfort” to you, then the answer to Q1 is NO. Among those families earning the median, if the majority of them actually struggle for livelihood[3], then I believe it’s first and foremost an attitude problem. You may blame the high-cost “system” [4] of the U.S. but I think that’s only a superficial part of the problem.  If an individual lacks discipline, then even if she earns higher than 70% of the local population, she would still struggle to make ends meet, let alone saving up.

[3] most of the non-essential items are not part of livelihood, such as car ownership, home-ownership, living in the suburb, …

[4] I’m not denying that some U.S. “systems” are indeed expensive, such as healthcare, home repair, (public) universities, and public transport. Therefore, some observers (you too) claim that a middle-class lifestyle in a rich country like the U.S. is not so enviable because the cost of living is much higher than assumed.  There’s an economic concept designed to measure “income relative to local cost of living”. It is the PPP-GNI [i.e. PurchasingPowerParity-adjusted Gross National Income]. Using this estimate, Singapore nationals are richer than Americans.

Q3: When earning $75k post-tax, did I feel a decent quality of life?
A: Not sure. Perhaps we were giving up too much while building up a war chest, a cushion, a nest egg.

[1] computed using https://www.rl360.com/row/tools/regular-savings-calculator.htm?Currency=1&LumpSum=150000.00&YrsTilNeeded=20&GrowthRate=4
[2] I keep my “burn rate” records every year, except my U.S. burn rates during 2007 -2012.

covid19$handout reflect`jobless burn rate #%%kids com` 2me4help

Posted on by tiger40490

Compared to barebones ffree=realistic: BT^YLZ ^wbank^CPF , this blogpost describes a crisis situation lasting months to 2Y. Therefore, the involuntary “jobless burn rate” is lower than the voluntary barebones-ffree burn rate.

  • — covid19 handouts:
  • Japan — JPY 100k (USD 900) for each citizen
  • SG — SGD 3000 for my family of four
  • US — up to USD 3000/family or $1200/person unless your income exceeds 99k/Y. The Dec 2020 handout (described below) amounts to $2400 for a family of four.
  • HK — HKD 10k or SGD1833 for each permanent resident, in 2020

Covid19 rescue budgets by these rich economies often feature a one-time cash handout like listed above. These figures suggest a bare-bones monthly family burn rate of USD $1k/family. Similarly, there are two longer-term rescue programs in the U.S.:

  1. More tellingly, regardless of pandemic, New York state unemployment benefit is up to $504/week for 26 weeks. Total payout is capped at 504 x 26 = $13k, even for a $1M wage earner.
  2. A US expert commentator interviewed on https://www.bbc.co.uk/sounds/play/w3csz8mz said that an extra $400/week on top of state unemployment benefits, adding up to $900/week in NY is higher income than many people’s regular wage, and discourages them from seeking job.
  3. After 2020 Christmas, Trump temporarily vetoed a bill paying out a one-time $600 to (adult/child) Americans earning less than $75,000 a year (https://www.bbc.com/news/world-us-canada-55447731 ). His veto caused widespread /outcry/. A one-time $600 amount is not insignificant for millions of affected families.

Based on these figures, I would say that to the authorities, realistic median family burn rate, on the ground, is estimated[1] at well below 5k/M. Even a 3k/M estimate would render the handout amount as useless as a drop in a cup. Some American families received handout equivalent to 20% of household annual income. This is not rare — very high percentage.

[1] That median is an unknown quantity, so an estimate is all we have. — U.S. safety net is less than other rich countries https://www.bbc.com/news/business-52450958 compares the U.S. covid rescue budget against Europeans: “The discretionary response is very large in the United States but when you’re comparing you need to take into account   that actually more needs to be done in the US because the social safety nets are smaller”

— Q: If my grown-up son or daughter had a high BR (like $6k/M) and comes to me for help during a pandemic, how much would I give out? A: $1-2k/M. That’s close to 70% of the median income, sufficient for basic livelihood.

— Raymond 2020: During the lockdown, Raymond was job hunting and was also scenario-planning for wife’s job loss at MBS — a non-zero probability after the RWS retrenchment. He told me they might need to survive on savings, at a 3k/M burn rate for a family of four. No maid, no private tuition. I think his 3k plan is based on real experience. I trust his estimate.

— Many Singaporeans who didn’t need the $600 handout basically returned it by donating to government-run charities. This underlies the trust of Singaporeans in PAP government. https://www.scmp.com/week-asia/lifestyle-culture/article/3086504/singaporeans-open-their-hearts-and-wallets-donate-needy

[19]typical401k balance~USD 200k #CPF

Posted on by tiger40490

 

https://www.investopedia.com/ask/answers/101215/what-size-average-retirement-nest-egg.asp says

  • end of 2018 average (not median) balance in 401k was $95,600, based on 30+ million 401k accounts. Are zero data points excluded? Yes I assume your account gets created only when a contribution is made.
  • .. The median is likely much lower than average due to large outliers. See [2]
  • zooming into a subset, the average among corporate-sponsored 401k was $104k at end of 2018
  • zooming into another subset, those with household income above 100k, the estimated household(not individual) median retirement savings is 215k,
  • zooming into another subset, those with some post-grad education[1], the estimated household median retirement savings is 225k

[1] this Investopedia article makes distinction between “some college education” vs “colledge graduates”. The nest egg sizes are very different !

Comparable — CPF RA balance is typically SGD 200k. The typical 401k sums are not a lot in the U.S. given the high burn rate in the U.S. (Melvin3++).

— https://www.brookings.edu/blog/up-front/2020/12/08/the-black-white-wealth-gap-left-black-households-more-vulnerable/ has a chart showing the Median value of retirement equtity among households with retirement assets [2] in 2019. Note negative data points are excluded 🙂

  • among white households with househead head >= 55, that median was USD 66k, regardless of education or income.
  • among black households with househead head >= 55, that median was USD 27k

[2] “retirement assets” in this survey may include more than the 401k. I will assume “little more”. So Median 401k among all races might be [50k->60k]

— Bob Wells (cheapRVliving.com) said 25% of Americans have “$0 saved towards retirement”. Did he include non-working individuals, such as children?

These “25%” Americans may have savings for other purposes, not retirement.

 

[23]U.S.credit card debt: 18k/household

Posted on by tiger40490

— A concrete example as of 2002. In a Reader’sDigest article, a prudent couple in their 50s were working diligently to pay off total credit card debt of USD 4k. This was a typical household credit card debt level as of 2000. Note this American couple, with their strong financial discipline, are not irresponsible, immature, reckless big spenders.

— “current” snapshot of household credit-card debt level

2023 https://www.nerdwallet.com/article/credit-cards/average-credit-card-debt-household shows $18k/household, but excludes those households without credit card debt.

Q: are borrowers (like me) who pay off every monthly statement excluded from the sample, or included?
%%A: probably Included with a small outstanding amount. The stats come from a snapshot of every card’s outstanding amount. Even if you pay off every statement balance, your card can still show “unbilled purchases” that will go to the next statement.

2023 Fed news release (widespread media coverage) showed a snapshot level close to $1000B credit card debt across all U.S.-issued cards. Highly reliable data, of entire population, not some “unbiased sample”.  Assuming 125 million households, we get $8k/household, but this “population” of data points include those non-card-users.

food security: low-saving U.S.families

Posted on by tiger40490

See also

Household Pulse Survey in November reported that Nearly 26 million adults (12% of all adults) said their household had food shortages in the past week.

Millions of children get free or reduced-price meals at school, says Prof Schanzenbach, “and losing access to that really hurts” for families already on the brink.

— https://edition.cnn.com/2020/11/26/politics/trump-biden-thanksgiving-two-americas/index.html described “the vast challenges facing so many, their lives financially devastated by the pandemic, who have turned to increasingly strained charitable organizations to temporarily satisfy basic needs.” .. like feeding the family.

A Washington Post survey of Census Bureau data from late October and early November 2020 found that food insecurity growing at a terrifying pace. One in 8 Americans said they sometimes or often did not have enough[1] to eat during the previous week, a figure that climbed to 1 in 6 in homes with children.

[1] I assume “enough” is subject to interpretation by the respondents, thereby weakening the value of this research.

Kamala Harris tweeted “Food banks across our nation are struggling to keep up with the demand due to COVID-19.” Personally, my judgement is that she can’t afford to exaggerate, not with the spotlight on her tweets.

Describing a family of four who had exhausted their savings, O’Connell spoke to CNN about the feelings of shame that often accompany having to ask for help. “They came to us to be able to put food on their table this Thanksgiving,” she said. “One of the parents stayed in the car because they were a little bit embarrassed about how they were getting food.”