“I’ve worked for General Motors for over 20 years. I’ve earned over $2 million … and I’m broke.”
I was hired by General Motors to teach “It’s Your Money,” a financial literacy course. About a dozen GM workers signed up for the course. I opened the first class by going around the table asking each worker why he decided to take the course. That’s when one of the participants admitted he had no savings despite earning millions of dollars.
The other workers jumped in with similar stories. These were hardworking assembly line employees. Frequently, they worked 10 hours a day, six days a week. Some admitted they had six-digit incomes. Yet almost every worker in my class said that he had zero savings.
In the latest issue of the Atlantic, writer and critic Neal Gabler appears with a paper bag over his head. Gabler confesses he could not come up with $400 cash if an emergency struck. And Gabler says 47 percent of working Americans couldn’t come up with the money, either.
How did we get to this point in America where people who work hard, have graduate degrees and own homes find themselves so cash poor?
I found most of my GM workers, despite making a lot of money, spent a lot of money. The worker who uttered that statement about making $2 million working for General Motors over the years admitted that he had an all-terrain vehicle, Jet Skis and a boat. One of my suggestions was that he divest himself of some of these “toys” and bank the savings.
Few schools offer courses in money management. Gabler confesses he knows very little about money matters, which explains a lot about his current insolvent monetary position. But if Gabler had a course in handling money back in high school or college, he probably wouldn’t be in the cash-strapped position that he and millions of Americans find themselves in today.
In America, the middle class is being squeezed. Technology transforms jobs. The old Little Rock needed 300 sailors to man the ship. The new Little Rock needs only 64 sailors to do the work because of all the new technology. You can see this same scenario being played out in industry, health care and agriculture.
At the same time technology changes the workplace, students discover they need more and more education to make themselves employable. A generation ago, a high school diploma could get you a pretty good job. Now, many jobs require a college degree. And in order to acquire that college degree, many students plunge into massive student loan debt.
The total of student loan debts exceeds credit card debt in America. But the two debts go hand in hand. The same people working two jobs to pay off their student loan debts frequently resort to using their credit cards to pay for necessities when they come up short.
Young Americans also find themselves stuck in a “gig economy.” Gone are the days where you would work for a company for 30 years and get a pension. Now, many jobs are short term “gigs” where the worker is hired as a private contractor with little or no benefits. Once the project is concluded, the job goes away. And the stressful job hunt begins again.
How can stressed-out members of the middle class survive in this new, transitory economy? I have three suggestions:
1.) Lower your expenses. Do you need a 2,500-square-foot house? Downsizing to a 1,500-square-foot home would save a lot of money in heating, cooling and taxes. Do you need two cars? Do you need 500 channels? Reduce your expenses and the result will be money you can save or invest.
2.) Have multiple revenue streams. Your job may pay for your day-to-day expenses, but you might need a second job to keep yourself financially secure. Investing in high-dividend stocks can also provide needed cash flow.
3.) Take a money management course.
These steps should ensure that you’ll have at least $400 if an emergency strikes.
George Kelley, of North Tonawanda, is a professor at Erie Community College City Campus.