Tag: t_midClass22

Chinese middle-class esp. in U.S.

breakaway[def] from Upper-midClass #w1r2

Posted on by tiger40490

See also

Q: Why is it crucial for me to break away from the Chinese upper-middle-class mainstream in the U.S. ?
A: My asset and esp. combined salary is lower-middle-class. My carefree ezlife demands that I live well within (hopefully below) my means.
A: if I follow herd instinct, and surrender to that peer pressure,

  • my Melvin3 total burden would balloon to $7-8k, so my total burn rate could exceed 10k/M. I think this burn rate is top 2% of U.S. households.
  • I would lose my cash-flow high ground (brbr, Fuller wealth, FCF,,) My CPF + rental income + Beijing inheritance … all become 杯水車薪.
  • I would lose my steadfast focus on the long-term important/non-urgent goals of healthy longevity, career longevity, family harmony, ..
  • I would long for an additional USD 2M in net asset (endless greed). These Chinese middle-class families typically have a net asset of $1M+ but have a thin brbr. They don’t seem to live within their means.
  • I would be pressured to maintaining my salary and worry about job loss. I would envy those fake role models [interview rock stars, OC-effective guys, ]
  • Such a self-created baggage is simply too heavy. Something’s gotta give.

— t_breakAway tag is not about my own “unique or original” solutions.

It’s more about questioning,  challenging, rejecting and letting go of the Chinese middle-class immigrant mentality.

It’s related to t_mellow,

##hot assets2avoid esp.4 Lower-midClass

Posted on by tiger40490

I see a pattern — if you are lower-middle class like me, but compete with the upper-middle class to acquire these hot, favorite, trophy or popular assets, you would feel the strain eventually. Wrong priority.

Possibly a strategic misstep if you can’t easily liquidate it or if you spend a sizeable amount maintaining a white elephant.

Rule_1: I avoid all of these assets.
Rule_2: always check overvaluation relative to alternatives, and check value/price ratio

[w=white elephant, often high maintenance trophy]

— eg: hot growth stocks with near-zero CDY or very high P/E
— [w] eg: big, luxury cars .. are for the rich
— eg: leading cities .. See mansion^commercial rEstate demand]leading cities #defy`gravity. Beside the Beijing home, all my properties fall outside the category. My HDB is not a private property 🙂
[w] NYC co-op has very high maintenance cost according to Chris Ma.

— [w] eg: top U.S. SDXQ homes, usually SFH with slightly higher psf valuation, but much bigger, therefore a white elephant. GRY suffers as a result.

Items below are not tradable “assets” per se, but still related to the same theme

— eg: medical school .. is for the rich, similar to luxury cars
— [w] eg: expensive branded colleges.  See luxury(+special)Edu: unaffordable to 中产华裔
UChicago is my 1st hand experience, and a breach of my Rule_1
— eg: international competition trophies .. takes lots of effort but often don’t mean much to your career.

[21]Y livelihood pressure@USD300k/Y income #LZ.Yu

Posted on by tiger40490

Yet another blogpost on a familiar paradox, after a discussion, without a lot of new content. I wrote this letter to my wife, but edited later.

Over a 2021 Chinese New Year dinner, I described the paradox “Many WallSt colleagues have a household income around USD 300k (USD 17k/M after tax), in the top 2% among U.S. households, but I notice some kind of livelihood pressure.” (The paradox also exists in Singapore.) I asked why.

  • LZ.Yu and his wife pointed out the car cost, mortgage cost, private schools, tuitions (more expensive in U.S.), perhaps maid cost.
  • LZ.Yu also pointed out taxes including pTax and the tax-like med insurance (Melvin3 items)
  • I pointed out the FOMO factor — they spend as much as other families in that tax bracket, otherwise they felt impoverished. The Chinese middle class tend to complain about livelihood pressure while living in the top 2% of tax brackets. See [19]wage+homePrice: biased views@China colleagues etc.
  • I pointed out their need to save up for an Ivy League education .. about USD 600k for 2 kids. Real pressure.

If you earn $17k a month, and spend $16k, with close to no zero net balance in the bank (below 10k), you have a very thin buffer (brbr). You would feel a livelihood pressure, whether you admit it or not.

LZ.Yu’s wife has a familiar view — “For a big spender, it’s her own money. If she earns it herself, and if she is happy with her lifestyle and if she can cope with it over ups and downs, then it’s suitable for her“.  This view is full of IF’s. In reality, millions of people spend like there’s no tomorrow. When tomorrow comes, they would not show regret in public, but in their quiet moments, they would feel regret once a while, esp. when they look at their saver-investor peers. Same regret as binge-eating, binge-gaming or binge-drinking. We do regret later .. our life was weakened not enriched.

My first-hand observation of my high-earning sibling (before his/her mortgage) showed me that any savings built up in bank account tend to disappear within months. I think it’s a lack of self-discipline. Similarly, you also said some homeless people have trouble saving away a windfall income. I think even if this person receives a million-dollar inheritance, he would spend it all within 2 years.  A common pattern among undisciplined people.

Note the absence of “pressure” in that big-spender lifestyle as described, but I believe the limited level of savings makes the lifestyle rather vulnerable. Indeed LZ.Yu’s wife went on to describe a big-spender’s reaction to a $1k denied medical claim.

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.

##which midclass aspiration ≠ LG2

Posted on by tiger40490

So far, all the bposts on this broad topic (..) have called out aspirations that are non-consequential:

  • branded college
  • SDXQ
  • spacious new home with a view
  • car ownership
  • overseas vacations

Q: Is there one middle-class aspiration that I do subscribe to?
A: here are some choices. Not sure which ONE I would pick.

  1. a safer car
  2. orthodontics, skin surgery
  3. wife staying home? Common among the upper class, but some lower-class families also have this pattern.
  4. safe, conducive school and Safe, clean street? No. This is not just for middle-class
  5. yoga classes

[22]G2 costs: middle-class immigrant]SG

Posted on by tiger40490

— The trigger .. In Oct 2022, I overheard a pantry conversation when a Filipino finIT said half his income goes to school fees and a quarter goes to accommodation. Later I double-checked with another immigrant colleague (From Shanghai). She said that was not exaggerated and not uncommon. Obviously, we were careful to avoid naming a (typical, presumed) salary figure.

Now I agree that school fees and accommodation are the top 2 costs to a higher middle-class immigrant in SG. How can an immigrant cope?

  • sugg: rent HDB … practical for me and some colleagues, but seems impractical for majority of my immigrant colleagues.
  • sugg: stay in outskirt, not prime locations. I think many of my immigrant peers do that already.
  • sugg: if no slots in public schools, then go for the least expensive private school. Lowest price tag was $2k/M as of 2015/2016
  • .. Luckily, my kids are good enough to cope with public schools.

— Medical cost … Luckily, my employers provides good health benefits for entire family, but
* what if you have a grandparent staying with you, like Umesh? They are not covered and they tend to incur high cost
* what if your employer provides only partial coverage?

— brbr and savings rate .. My Filipino colleague implied a brbr barely above 1.1. Saving rate would be very low, as Lancy pointed out.

— How about my immigrant friends in the U.S.?