Adventures in Personal Finance, Part 1: The Middle-Class Family

Sometimes the middle classes have a hell of a lot more financial horse-sense

than the rich, even if the financial press doesn’t like to spin it that way.

Exhibit A: John

Leland, in the New York Times, in a story headlined "Couple Learn the

High Price of Easy Credit". There’s an accompanying graph showing how the

average family spends more than it earns, and Leland has found himself the average


[Christine] Moellering, and her husband, Mark, 39, earn average salaries

for their age (together about $66,000 a year), live in an average-priced home

and have an average cost of living.

Ms Moellering, and her husband, Mark, also have two young children (the daughter

goes to ballet lessons) and the ridonkulous bathtub featured in this

photo, as well as a 42-inch television. We set ourselves up for a contemporary

morality play, where people learn the hard way what happens when you spend beyond

your means.

But in fact a careful reading of the article shows that the Moellerings are

actually doing pretty well, financially speaking. The bathtub looks extravagant,

but we don’t know how much it cost; the television cost only $800; and the ballet

lessons are essentially paid for by the state of Michigan.

It’s true that supporting a family of four on $66,000 a year, especially with

the occasional splurge, is not easy, and these chaps have managed to rack up

$22,228 in credit-card bills on top of $161,574 in debt secured on their home.

But a lot of that credit-card debt, it turns out, is hangover from their wedding,

and, importantly, it’s coming down, not going up.

The Moellerings’ total annual debt-service payments are $17,500, give or take

– which is about 22% of their total income, including the $1200 per month

they receive from the State Department of Human Services. And that $17,500 includes

substantially all of their housing costs, which means that even once you throw

in credit-card interest, they’re still better off now than they would be if

they were paying $1,500 a month in rent. (This is where I reveal myself to be

a New Yorker, one of that peculiar breed of Americans who thinks that $1,500

a month in rent is dirt cheap.)

In fact, if you scroll down past all the woeful tales of "the high price

of easy credit," you’ll find that they’ve managed to cut their credit-card

debt in half over the past two years, have built a savings account with $5,000

in it, and have also been contributing to Christine Moellering’s retirement

account at work. Add it all up, and they’ve basically managed to sock away $30,000

in two years, which they’ve put into savings and paying down debt. They’re not

living beyond their means at all. In fact, they’re living well within their

means – no easy feat for a family in their position, where the pressures

of work and children always take precedence over issues of personal finance.

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