No Savings

My girlfriend is a family doctor and I don’t even want to know how much she makes every month. I assume her gross monthly income as a family doctor in California is easily over $10,000 a month and I think it is fair.

But she is among the vast majority of middle-class Americans that I know..Why? One thing that I noticed since I had moved to California is their spending habit. I want to make it clear that this is not everybody and there are many middle-class Americans who are diligently saving for their retirements while having sufficient funds to support themselves for six months if they lose their jobs. Of course they can get unemployment benefits but it takes a couple of months for the benefits to kick in and having emergency funds is critical especially if you have children.

My girlfriend isn’t spending more than other middle class American people that I know. But it is very common for middle class American people to struggle to come up with even $2000 to replace their car engine or transmission..you know, things do come up.

So the reason that I am talking about this today is because of my doctor girlfriend. I do look up to her for being a humble human being despite her admirable career and she is a good person who really wants to help her patients. She drives a Toyota Prius and didn’t appear to one of those people who don’t have savings.  So when she told me about her big credit card debt, I was a bit surprised. I can’t count how many times people that I know in America have told me about their debts that include mortgage, student loans, credit card balance etc. And many people in this country still seem to use their lines of credit to make big purchases.

Some of my coworkers and people that I know lost their houses when the market crashed in 2008 or 2009. It was very unfortunate and witnessing some of my coworkers struggle with the move and they did admit that they were so excited with the subprime loans they were able to get with their credit history to realize the American dream of owning a house.

Wall Street Journal reports that only 46% of those with annual income of $75,000 or above have enough savings to cover six months of expenses. This was a huge cultural shock in the past because growing up in Japan, Japanese people are typically very careful with their money and it’s all about savings back home. It’s the culture that I was used to and it is changing because credit cards, debit cards and loans are more common over there so it is easy to overspend. But in America, people rely on the lines of credit and credit cards even more and my American express has over $10,000 limit and my other credit card has $10,000 limit thanks to my steady employment history and decent FICO credit scores. So I am trying to be very careful and try to pay with cash just like my family and friends back in Japan.

This is another extreme story related to my American friend who grew up in Midwest. She and I became really good friends in college and we even traveled together. I lost in touch with her and then reconnected with her four years later and it was around 2009 and she did tell me that her parents lost their childhood home, two of her sisters filed for bankruptcy after losing their homes and she and her husband were also really struggling financially but managed to take out loans to buy a small house and they were surviving. I do remember her mother’s very generous spending habit and I do have to say it was a bit excessive even in American society.

After talking to my coworker who was recently promoted to be the head of this division, she did tell me that she was coming back from two different banks to find out her options because the bankers said she would be qualified to take out more loans to pay her ex husband whom she is currently divorcing and she may get to even keep some to renovate her house, then she was also looking into buying a nicer condo in an upscale community..I held back my urge to tell her..”Wait, what if you lost your job or something comes up..Are you going to be able to keep up with all these payments?” Of course, it is NONE of my business and it was inappropriate so I did congratulate her on her promotion and wished her the best. But she is one of the most conservative spenders that I know in California and she does have emergency funds to cover four people! So it might be the way her bankers communicated with her and it might have excited her too much.

Either way, it seems like middle class Americans have much less savings than Japanese counterparts. I am definitely much more westernized in my spending habit and reading some articles makes me rethink the way I spend my money.