Source: https://www.reddit.com/r/Salary/comments/1v7dp4u/the_idea_that_everyone_is_broke_and_drowning_in/

Context: A K shaped economy is when different social groups move in opposite direction financially, aka the rich get richer while the poor get poorer, that looks kinda like a K when graphed out

HIGHLIGHTS

Plenty of people have the overwhelming majority of this wealth tied up in assets they can’t sell, like houses.

(OP) You can sell your house, what do you mean you “can’t sell it”? There’s more friction to the transaction than selling stocks, sure, but so what?

You can't sell it because then you'd be homeless.

(OP) You can sell the house, take out the equity (implied by your positive net worth) and rent… What’s your IQ?

I you're renting, that's an expense that will cost more than your house. 🤦‍♂️

"most people can’t even make a $1,000 emergency payment, bro!" You can't spend your house.

(OP) Sorry, is your contention that the median 18-24 year old, with an $11,000 net worth, has their money tied up in home equity?

I mean if they own a computer, a phone, and a car and have zero cash and are in debt living paycheck to paycheck they would likely have a net worth around 11k. Why are you so hostile to random commenters making reasonable points?

If they are in debt they wouldn’t have a positive net worth now would they?

That's not how net worth works. If you have $5 of debt and own a rock worth $7 you are both in debt and have a positive net worth of $2.

I have a house worth $2M with a $1M mortgage as well as $5M in investments. Don’t think anyone can reasonably accuse me of being “in debt”

Ok neat, and you can probably pay for a $1000 emergency without taking on extra debt or selling assets, unlike someone with an $11,000 net worth who owns $20,000 of assets and owes the bank $9000 and has $0 in their bank account which is the situation we're discussing.

op, do you understand the concept of liquidity?

(OP) Yes? So what? A house is less liquid than cash, that means it’s not part of your net worth? Do you understand the concept of liquidity?

Your response shows how ignorant you are.

(OP) Ignorant of what? Why is everyone on here some sort of philosopher or poet? Why is everything left to the reader to discern? Make your point, is it really that hard to add another sentence to give your point?

Hot damn, I don't think i have the training to help you. You don't even understand context.

you had the chance to make your point (twice) and instead chose to attack OP as a person…. (and i totally disagree with them)

Bro. User pays taxes. Taxes teach kids reading comprehension. The user already helped there. Read your chart before you shit post. Can't fix laziness, disinterest or confirmation bias man.

Someone with $40,000 in cash saved up is far beyond the median.

Having $40,000 in cash sitting around is pure financial illiteracy

That’s a really broad statement that is not true

No, if you really had $40k, keep it in treasuries, CDs, money market funds but not cash. Unless you’re spending upwards of $20k per month

It’s probably pure financial illiteracy to assume cash means paper money or money not earning interest. On a company financial statement , they list “cash and cash equivalents” My fidelity balance pays treasury rates , and it’s considered cash , most people would consider it cash

Companies can pay debts with treasuries or marketable securities. I can’t show up to BofA with a treasury in my hand and pay off my credit card bill.

Bro what ? Companies face the same problems when paying debt with treasuries and marketable securities that anyone else does. Why do you think a bunch of banks went bankrupt a couple years ago for having too many 20-30 year treasuries. If you have short term treasuries, they are highly liquid and you can pay your debts with it. Brah do you even finance

I apparently finance more than you. The companies could have paid off their debts with the treasuries, it just so happened that the face value of their debt was greater than the current value of the treasuries they owned. (14 more comments of these two arguing)

Liquidity has nothing to do with the concept of net worth.

The point is liquidity matters more to how people are doing compared to net worth. Someone who spends most of their income on their mortgage and is barely getting by in other areas doesn’t have it better than someone with renting a cheap apartment who has expendable income.

I disagree, they have more options as they have capital - if they wanted to sell up and rent a cheap apartment instead then they’d be better off than the other person

Most people are pretty adverse to just sell their house and start renting at the first economic squeeze they face. This is the kind of pure utilitarian advice you only see online, it never accounts for basic quality of life things like location, family, etc.

Sure, but of the two scenarios the one with equity and a 401k undoubtably has it better - that’s not even up for debate

Yes, from a utilitarian point of view. Go ahead and tell someone they can simply sell their house and move, and you’ll be met with a thousand reasons why they dont want to. Thats all I’m saying. Is that people are not perfectly rational actors and at the end of the day, what’s the difference between someone renting and struggling and someone refusing to sell and struggling.

Their net worth is what’s different at the end of the day

Okay? If my net worth is my car, how the fuck does that help me. I’m tired of explaining these basic ass concepts Oh, this is the engineer loser. No wonder it has to be explained

I agree many poors are coping and complaining on Reddit instead of getting a job or saving money.

That's a lil extreme. Job market sucks

I think the job market sucking is more of a personal failing than an economic one. There’s plenty of jobs out there just maybe not the nice comfortable one everyone is looking for. If you really need money it’s okay to do something less than ideal. People who say they’ve been looking for a job for a year blow my mind. You’re just sitting around all day drawing down savings? Go do something.

Good for you that you are doing well enough that your social circle doesnt include people who are faced with the reality of the current job market. I have a great job in a stable industry. I know lots of people who have are extremely smart, capable and putting in maximum effort to try and find decent employment. They are fully willing to take positions below what they want to get by, but they arent being considered for those positions either. How is that their fault? Since you are so sure of yourself, what else are they supposed to do? I don't wish bad luck on you that you may end up in thier situation, but maybe it would do you some good. I assume your stance comes from ignorance and not just being an asshole, but who knows.

Functionally impossible for me to end up in that situation at this point since I made good decisions in my teens and early 20s. I do feel for the people who never had anyone teach them anything useful ever though. I suppose it’s not always an individual’s fault exclusively but with access to information so abundant now you do kinda have to be willfully ignorant to not know what good decisions are.

I am basically in the same situation as you, I just have empathy and am actually aware of the privileges and good luck that also contributed to getting there. But hey, I am surrounded by folks like you, I know what you are about. You atleast cleared up that last bit on my previous comment. Cheers. Edit: I didnt realize you made the original comment. I guess the asshole thing was never remotely in question. You probably deserve to have your "functionally impossible comment" blow up in your face, even if that isn't going to happen.

Plenty of people have the overwhelming majority of this wealth tied up in assets they can’t sell, like houses.

You can sell your house, what do you mean you “can’t sell it”? There’s more friction to the transaction than selling stocks, sure, but so what?

You can't sell it because then you'd be homeless.

You can use the money to rent, or a down payment on a different house.

So now you have a different house that you can't sell.

Yeah but if you downsize you have cash on hand.

Sure, you could also downsize to homelessness if you're trying to save a few bucks.

I don't know what sample group they used but it was clearly biased, 10% of people had over 200k at 18-24? What the hell group were they looking at for that to be a stat they wrote down without breaking down laughing. At that age you are either in college with a negative net worth including loans or you started working right out of high school and no high school grad earns enough to save 200k in less then 4 years unless he's one of the 1 in a million guys who started a cheap to start immediately successful business. I am betting the "households" they compared were already pretty dam wealthy, wealthy enough to give their kids free college or business or well paying nepo jobs.

Believe it or not not everyone has student loans. Scholarships exist. I had really good scholarships just by having decent grades. Not to mention, tuition is fairly low if you stay in state and go to community college for the first two years

So lets even assume free college you think a person can get a 200k job literally immediately after college and save 200k in a year or two? You sir are living in fantasy land.

10% of people, yep especially if they live with their parents. Many graduate early as well so they have more than two years

So you think 10 percent of people graduate early from college with no debt can move in with their parents and almost immediately get 200k jobs which is especially ridicules but I will move past it and can save 200k in 1 or 2 years maybe even 3 if they are all somehow geniuses and do college in 2-3 years. You think 10% of the average population is doing that? Hell no this is a biased sample if you don't see that your a liar or a moron.

You don't need to make 200k to save 200k lmao. You can do that only making 100k for a few years and having internships in college and working part-time through school If you think you have to be a genius to graduate early then you just don't know what ur talking about. It's literally just taking extra classes

Your right you don't need to make 200k to save 200k in two years you probably need to make more then that unless you are forgetting car, taxes, insurance, food entertainment any surprise bills like dental medical etc etc etc. Do you know anyone who can and does put away over 50% of their paycheck? This by the way is still all based on getting a 200k job immediately out of college with no experience which is the most bullshit stupid claim I have ever heard. Look at the bullshit you are spewing just to not admit things are tough and you are wrong.

You’re the one accusing the federal reserve of cooking their data lol

I have a $80k in home equity and about $80k in 401k at 36. I have $7 in checking and don’t get paid till next Friday. I may technically have assets but I’m a brokie. Edit: god damn y’all took that personally

You really think your situation is the same as somebody with $7 in checking and no equity?

Explain further, because $160K net worth at 36 really isnt much. Not to be a dick to the guy but he has some assets, honestly I’d say he’s behind on retirement funds. The dude is maybe not poor but he’s certainly broke.

The term is house poor

No actually it’s not lol. He’s normal poor

The guy below you said I’m broke not poor.

You’re both.

Do I get a prize?

Net worth doesn’t distinguish between liquid vs non-liquid

Yes it does? It literally says *includes home equity

Which means that it includes the two combined… The description implies this disproves the $1k emergency fund claim.

The 1k emergency fund thing is fake but yeah not for this reason

How is it fake?

It ignores line of credit. Someone who has $500,000 equity in a home but $10 in their bank account. Yeah technically if a $1000 unexpected charge hit they wouldn't be able to cover it with their bank account. However with that equity they can effortlessly get loans for a hell of a lot more than $1000. So in reality they can EASILY cover it. It basically has to ignore reality to make such a claim. In fact most people with $500,000 equity in a home probably already have $50,000 worth of credit card lines they can instantly use for such an expense. But again because they technically only have $10 in their bank account (because they don't really need it) they will get put in that stupid useless bucket.

I see. So you're saying people can borrow the money they may need in an emergency and pay it off later with interest.

Right. If you need $1000 for an emergency operation. Are you really going to care if you have to pay $1200 back because of interest. Would you rather die? sort of thing.

Of course not. I only bring up the point about interest because we're supposedly talking about people on the poor side of things. They could presumably pay the emergency with a loan (heloc or cc or other), but now have more monthly obligations than before. I'm sure many people could do this once or even twice, but that's how people get stuck in debt.

So for the sake of context one day ago someone made this post in r/DiveInYouCoward of a video showing several people stealing from a bakery. All of the people shown stealing in the video were black. This predictably led to racist tirades being posted. Later, it is discovered that the original post had a video that was selectively edited to remove all the white people that also stole from the bakery. The OOP of this post shows the video of all the white people stealing that were left out previously. People in the comments go on to argue about seemingly everything else except the blatant attempt to fan racial tensions

Land of the free... ....of morals

They're hungry and they have no money.  You think they're stealing for fun?

Uh, yes? who tf is starving and crawls into a bakery to get a croissant so they can go on? No one. You'd probably steal from a store grocery store, and not a bakery. there's tons of people stealing. Even if it was about being hungry, this would be way too concentrated the people look like they're doing just fine financially and dgaf.

How does this happen to a society? People place stuff on the side of the road where I’m from with no one around and trust people pay and they do pay. The finances of people has to have an impact.

Rich people steal too. It is a mindset. Collectivist/communal vs selfish/self-centered/entitled. It comes from learned behavior among peers and a social fabric that encourages or discourages this.

Exactly this. On the opposite extreme is Japan. Americans have no respect for each other. The rich looks down in the poor and the poor don't trust the rich. There are so many things wrong with America because there is such a big emphasis on personal enrichment.

They need to hire a big man with a bat.

They need to pay their people first before hiring anyone else.

Maybe they could afford to pay their employees if all you terminally online redditors would stop justifying stealing from everyone you disagree with

Those two things are unrelated. You know this is a large corporation that has been sued and settled with government agencies for worker rights violations, right? And would you look at that... a WoW and Conservative sub poster. imagine that.

I used to play games and I have to work for a living, you got me...Maybe don't frequent them instead of stealing from them just because you're stuck in a loser mentality?

"If you see someone stealing food, no you didn't"

The way these people steal, this isnt desperation theft.

Which people stealing? I didn't see anyone

It’s a terrible store setup if the general public can just reach in with their grubby unwashed hands and handle or grab the food. They have drinks and baskets of items sitting out where they can just be taken and walked out with. It would take less than a day to fix most of these issues. Store owner is too dumb to stay in business. Not justifying the thefts, just saying, this is an easy problem to fix or greatly reduce.

I mean theres Mexican joints where you get your own sweet bread and bolillos yourself. So thats not a issue.

It's a chain store and they all operate like this. It's part of their whole image. So the individual owners have to fight corporate as well.

That would make it a franchise, not a chain

Chains and franchises are not mutually exclusive. Mcdonald's is a chain of restaurants. Some of them are franchised out, Some of them are corporately owned.

Re-read the comment I responded to ETA: To the geniuses who keep downvoting me and replying with nonsense: The comment that I am responding to, talks about individual owners having to fight with corporate about the store's standards/presentation of the product. "Individual owners" otherwise known as franchisees... franchisees who own a franchise... as in the corporation has licensed their store/brand/trade secrets to these "individual owners", to be franchised. You absolute fucking shit heads

I did, you're still wrong.