Yes, You’ve Been Screwed Over – So Now What?

Life is hard. But even beyond being hard, there seems to be a significant chorus of individuals and groups complaining about how much harder life is today than it has been in the past. They argue that it’s harder to get ahead, harder to get out of debt, and harder to live a comfortable life than it ever has been before. And there are an equal number of individuals and groups, both inside and outside of politics, claiming to have a solution to the problem.

And you know what? If you are one of the people that thinks this way, you are absolutely right. You have been screwed over. The facts are that it is much harder to live a reasonable life today than it was just 30 years ago because life has become demonstrably harder to afford. Let’s look at a few examples that illustrate the point.



Life Is More Expensive – And It’s Not Just Inflation

Cars are one major purchase that has gotten a lot harder to afford. In 1989 I was in my late teens and desperately wanted a Ford Mustang 5.0. In the US, the base MSRP for that car was $12,265. According to the US Bureau of Labor Statistics, the average inflation rate between 1989 and 2019 is 2.44% per year. This means a new Mustang 5.0 should cost $25,277 today. But it doesn’t. It starts at $34,950. The current Mustang 5.0 is 38% more expensive than it “should be” after accounting for the official inflation rate.

Now, the Bureau of Labor Statistics says officially that the cost of a new car has risen at less than the rate of inflation, but that’s because they make adjustments for the fact that cars are so much better now than they were then. They have air bags, anti-lock brakes, stability control, etc. And while that is all true, it is also true that due to legislation it is impossible to buy a car without those things today. Therefore, it is a forced increase in expense for all current car buyers.

What about housing? In 1989 the average US home was $136,500. Adjusted for inflation, that would be $281,309 in 2019 dollars. Yet the average US house price today is 40% higher than that amount, standing at $393,700.

Education is an even bigger issue: education costs in the US have increased by 431% from 1989 to 2019 (US Bureau of Labor Statistics). So a $20,000 college degree in 1989 “should” cost $41,217 today. In fact, it costs $106,142.

This same story repeats itself over and over again for a lot of life’s major expenses: health care costs, insurance premiums, taxes (especially when looking at total taxation including income tax, sales tax, payroll tax, property tax, estate tax, etc.), and a host of other things.

As has been demonstrated time and time again, for middle-class Americans (and Canadians) wages over the past 30 years have barely kept up with even the official rate of inflation. So yes, life is getting harder and harder to afford. There is simply no denying the fact.

(Information on US wage growth can be found here: https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us-workers-real-wages-have-barely-budged-for-decades/ )

How We Have Maintained Living Standards – For Now

And yet, people’s lifestyles don’t really seem to have been impacted by this fact, to a significant degree. The reason for this is that we have been using more and more debt to try and maintain the kind of lifestyle our parents had – the kind of lifestyle we think we “deserve”:

By US Federal Reserve Board of Governors

But using debt to maintain a lifestyle that is no longer affordable is simply not sustainable. It is, at best, a temporary patch and sooner or later all that debt, and the interest payments that go with it, are going to have a significant negative impact on the finances of a large portion of the population. We got a preview of this when the housing bubble burst in 2007, but the next correction could be even more dramatic.

It’s Up To You – Choose Wisely

So what’s the solution? Should you spend time writing politicians, agitating for a change in government or marching in the streets? Well, you could. But it’s unlikely to change anything. This is the way things have been going for decades, and it is working very well for the car manufacturers, the realtors, the colleges and universities, the banks, and yes, your government. And let’s face it, they have way more power and influence than you do.

What you should really do is leverage this knowledge to your advantage to make better decisions than the average person. Maybe instead of that 2019 Mustang you could learn to live with a 2015 Civic. Maybe instead of that Master of Humanities degree, you’d be better off learning coding at a local college. Maybe instead of buying the “average” house, you can buy something more modest and put in some sweat equity. Maybe the knowledge that life is likely to continue to get more expensive will move you to re-evaluate your priorities and think about what you really want out of your life, leading to a rejection of empty spending that fails to bring you lasting satisfaction.

Don’t expect your government, or anyone else, to make things better for you. Instead, put your time and effort into being self-sufficient: learn new skills that have real-world usefulness, grow your income, spend responsibly and invest wisely. You’ll be glad you did.


Important Disclaimer: the information above is for general informational purposes only and does not in any way constitute an offer for the purchase or sale of any security and is not intended to be considered comprehensive or personalized financial or investment advice. themoneygeek.info assumes no responsibility for the use or application of this information. Always consult a tax, investment, or other appropriate professional before adopting any new financial strategies.

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