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Does America Need to Wake Up Financially?

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I might not have mentioned it, but I'm in Los Angeles this week, staying at a swanky hotel called The Omni. (I'll tell you more about it after my stay, but it's essentially free.) They dropped off a copy of USA Today yesterday and for the first in months, I read a physical newspaper. It's a general interest newspaper, but the front page seem dominated by financial concerns. There is a "Nation's gas gauge" in the top left showing how much the price of gas has changed in the last day and the price a year ago. (It's 37% more expensive for the regular stuff in case you were wondering.) The cover story was, As food costs soar, it's back to basics for meal planners. At least they didn't have an article on adjustable rate mortgages rising and people foreclosuring on homes. Maybe the editor didn't want to depress everyone on the same day.

That's what America is faced with today. Food prices through the roof. Gas prices through the roof. Home prices through the roof. It's going to cost you more money to commute to your job. The money you make there is going to less quantity or quality of food. Then you come home and worry about how you are going to pay the mortgage. At least basic clothing is relatively cheap, right?

As Ben Stein says, this isn't so much of a problem for the highly skilled/educated lawyers, doctors, investment bankers, etc. When you bring in six figures or more, you can usually a few hundred dollars a month. However, if you are on the lower pay scale you likely have bigger problems. The rise of gas and food is huge. When you might have been scraping by before you might be in even bigger trouble now. In the aforementioned article, Ben Stein is quick to point out that "Since [1974], real wages both hourly and weekly for all non-government workers, on average, have fallen by about 5 percent, very roughly."

I'd like to revisit that USA Today article on food costs. It is filled with anecdotal evidence of people reacting to food costs:

  • Retirees Sally and Robert Jones reverted back to some of the menus that got them through graduate school, living on beans, stews, and soups.
  • Nancy Sierra eats peanut butter and jelly sandwiches for lunch.
  • Tiffany Nicosia whips up new recipes with whatever is left in her refrigerator.
  • Rebecca Woods and her family of five saw their grocery bills double from $800 to $1,600 a month.

However, the part that I want to focus on is the Rebecca Woods quote:

"We were eating whatever we wanted "” yogurt, bagels, name-brand cereals. I wasn't looking at the price of anything. I was at the point where I bought the same thing every week. I ran into the grocery, I bought what I needed and ran out." Later she says, "I realized we were sinking financially and couldn't go on that way."

Are you like Rebecca was - spending money without looking at the prices? Do you know someone who is? Do them a favor and use the little e-mail icon at the end of this story to send them this article.

Last updated on July 8, 2008.

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17 Responses to “Does America Need to Wake Up Financially?”

  1. Bob says:

    I just got my electric bill and it is $400! It’s NEVER been that high, yikes!

  2. Jeremy says:

    Mainstream American has been living high on the hog for too long. It always baffles me to see people in stories like this complain about having to do things like eat a PB&J for lunch of *gasp*, eat leftovers!

    Come on now, if having a sandwich for lunch, eating leftovers instead of throwing excess food away, or actually paying attention to what you buy in the grocery store is reducing your quality of life, then you’ve been living beyond your means for too long and you should just shut the hell up.

    If people weren’t carelessly throwing money away on food they didn’t need for all these years, we’d all be healthier, both around the waistline and financially.

  3. Ryan says:

    Amen Jeremy!

  4. Michael says:

    I don’t look at prices when I shop for food. When the weather is uncomfortable, I turn on the A/C. When a friend is in town, I get in my car and drive over to pay a visit.

    As Lazy Man and Ben Stein noted, a period of high inflation does not affect those with higher incomes.

    So the solution is simple. Make more money.

  5. Brip Blap says:

    As someone with a “higher” income I will admit that I don’t care too much – yet- about higher gas prices. Higher food prices are making me pause a bit, but I’ve always been willing to pay a premium for certain foods – for example, organic dairy. At the same time, I was wondering with my family how high the price of gas would have to go before we started really curtailing or combining our trips out. I concluded that here in the Northeast, where distances are short (NYC is 3 miles from “coast” to “coast” after all) it would have to get much higher. Now, if I lived in St. Louis and had to drive roundtrip 40 miles to work I’d notice it already.

    But it is interesting – I still look at the economy in terms of “how does this affect my investment portfolio” and not “how can I afford milk this week”. I can’t come to any conclusion except what Michael said – we all have to make more money. The market and our short-sighted government are driving prices up, so there’s no way to hope for help from someone else. Figure out how to get more. I constantly am.

  6. Jim says:

    “Home prices through the roof.”

    Was that a mistake? Home prices have been dropping and are down to 2005 levels now.

    Jim

  7. Lazy Man says:

    Well, adjustable mortgages through the roof… hence the foreclosures.

  8. I enjoy PB and J sandwiches and normally bring them, or a simple turkey for lunch. Nothing wrong with that, and I don’t consider it a sacrifice. (actually eating one now for lunch) ;-)

    Also – whipping up meals with what’s in your fridge… Isn’t that a good thing so food doesn’t go bad?

    I don’t see a problem with any of the reactions you posted/the article mentioned other than a $1600 food bill being insanely high even for a family.

  9. JD says:

    Oil will likely come down a little over the next year but nowhere close to where it was back in the 1990s and early part of this decade. Food prices will also remain higher for the long term. But these are not the bigger issues, they are of course important for the average lower income or even many middle income families but they don’t nearly amount to as much in dollar terms as the consumption cuts that will have to come from tighter credit. Commodity prices can come down, the dollar can strengthen – in fact both of these things will likely happen when the next administration comes into office and that will ease some of the burden. But tighter credit is going to stay here for a LOOOONG time. We are still not halfway through the credit crisis, it is effecting all types of loan structures, not just mortgages. People who were using credit cards to get by are going to have to lower their consumption drastically. The fact is the average American does not earn that much money, in fact their real income has fallen over the last 8 years – this has only happened once before in our nation’s history and it was during the Depression. The things that used to be “status symbols” no longer are because easy credit made them affordable to everyone. For instance owning a BMW or Mercedes doesn’t mean anything anymore because you can even get a loan for high-end one and meet the monthly costs on an average income. But you never build up any real wealth. The same goes for housing, furniture, vacations, boats, and so on. Credit cards and easy loans had made everything easy to obtain. A lot of those people are getting squeezed now and it will only get worse and more widespread. Enough of the bling bling attitude.

  10. Tim says:

    what everyone fails to realize that if the u.s. slows so will the rest of the world, and relative economies, i’d much rather have a correction here than abroad. go u.s.a, and everyone stop feeling so gloomy…at least turn off the tv.

  11. deepali says:

    How about a little perspective:
    http://www.economist.com/daily/chartgallery/PrinterFriendly.cfm?story_id=11693372

    I am about to head to one of those red countries for ~10 months, with a 75% pay cut. Maybe I’ll start noticing how tight my budget is then. :)

  12. Lazy Man says:

    I think this reflects how little some countries have to spend on things other than food and fuel.

  13. deepali says:

    Or perhaps how much they spend on fuel and food that they don’t have anything left to spend on other things.
    Until we spend so much on basics that we can’t afford the TVs, additional cars, and other extras, I don’t think we have too much to worry about.

  14. Amanda says:

    I hate to pick at someone else’s life, but I guess I will anyway: how on earth do you spend $1600/month on a family of five’s grocery bills?!
    We eat about 75% organic, down from 100%, and I now carefully spend max $100/week. On a stock up month, I could go $200 on a Whole Foods stock-up trip that lasts at least 3 months–also cutting out that particular week’s trip. (And belive me, coupons & store circulars are flying in the process!)
    Perhaps food diaries are in order here?

  15. Amanda says:

    I should add that the aforemtioned accounting is for two people per week. I’m sure you could do much better non-organic, but when your body knows ‘good’ from ‘bad’ it’s hard to go back to the regular nasty!

  16. Lazy Man says:

    I think they weren’t using coupons, store circulars, or any cost-cutting methods. Pick up some nice steaks and cheeses and maybe it can get to $1600 a month if you aren’t looking to save.

  17. The examples newspapers offer in these types of articles are always so underwhelming to me. The headline screams doom and destruction, and the example is someone is having to clip a coupon, give up a croissant once a week, or not buy mega-premium dog treats. It seems like a disservice to the stories themselves and to the people who are really struggling to save every dollar to focus on such minor “problems.”

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