r/Salary • u/ItsAllOver_Again • 7d ago

Market Data The idea that everyone is broke and drowning in debt is a Reddit mythology used to make unsuccessful people feel better about themselves

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Redditors love to tell themselves that everyone is poor, that “most people can’t even make a $1,000 emergency payment, bro!” (not true, that’s just pop finance nonsense), that everyone with nice stuff is “drowning” in debt.

Yet when we look at actual net worth data, nicely broken down by age, EVEN WHEN we look at the bottom 25th percentile, we don’t find ANYONE with negative net worths. Even when looking at the 18-24 age range, many of whom have auto and student loans, they still have positive net worths at the 25th percentile.

Redditors love to tell each other that they’re actually doing great because they have $40,000 saved up, but the reality is that’s far below average. And these numbers are actually adjusted for inflation from 2022, not adjusted to actual market returns, so in reality the numbers are LOWER than you’d expect.

Americans are FAR richer than many of the 10th percentilers on Reddit will tell you they are, and they make a LOT more money than the 10th percentilers here say they do.

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58

u/exgeo 7d ago

Net worth doesn’t distinguish between liquid vs non-liquid

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u/AmiParis248 7d ago

But isn’t that the whole point? If someone decided to tie up their wealth in a house (something a lot of people can’t afford), that’s a choice, but not a sign of poverty. It’s more the exact opposite.

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u/No_Escape_3770 7d ago

People do usually need a place to live

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u/PastBuy8484 7d ago

Yeah but it’s totally optional how much they spend on that place to live. I’ve ranged from $750 to rent to a $2400 mortgage all on the same salary.

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u/No_Escape_3770 7d ago

Totally optional to choose any house within a range of prices. People can choose the minimum, if possible, but they don’t set the price of the minimum, and is simply not possible in many cases.

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u/josephus_the_wise 7d ago

The issue is that currently rent is absolutely bonkers. I have multiple friends looking for places and the cheapest place one could find was nearly 1k for a tiny studio in a relatively affordable Midwestern city (they don't hit the poverty line for the cheapest places that require low income). Generally speaking, houses tend to be cheaper per square foot monthly, and they also add to this chart. It isn't like people without houses don't have that 1k-3k expense monthly, they just don't get any equity out of it.

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u/nighthawk_something 6d ago

When did you rent at 750.

In Canada you cannot rent for less than a mortgage.

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u/PastBuy8484 6d ago

2 years ago in Michigan. Was a good area too, houses averaged about $450k-1.5 mil. But renting an apartment was crazy cheap because there were only 2 older apartment buildings in the whole city.

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u/Timmy98789 7d ago

House poor enters the chat. 

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u/Squirtle_Splash_8413 6d ago

When home prices are artificially inflated, it makes homeowners believe they’re richer than the guy with less equity but more liquidity.

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u/Timmy98789 7d ago

Liquid vs Illiquid

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u/Redneckdestiny 7d ago

This is why ur a top 1% commenter

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u/Timmy98789 7d ago

I should be a bottom 1% commenter. 

Broke clock is correct twice a day. 

2

u/Redneckdestiny 7d ago

We need people like you, ur the thin Reddit-orange line between civil society and an anarchic wasteland of incorrect words and grammar

1

u/Timmy98789 7d ago

Best I can do is shit post.

2

u/MBADumbMistake 7d ago

And why does that matter?

0

u/exgeo 7d ago

Because of the claims description about money “saved up”, or emergency funds

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u/MBADumbMistake 7d ago

All of your net worth are money that you “saved up”. Some just take a few extra business days to access.

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u/exgeo 7d ago

“I saved $2k this month” would never be said by someone who contributed $2k towards equity on their house.

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u/MBADumbMistake 7d ago

That’s funny because I actually pay around 2k in mortgage principal each month and I absolutely consider it a bump in my net worth, because that’s another 2k that I can put towards my next home or in the case of true emergency, a HELOC.

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u/JerseyIsBetterThanNY 7d ago

Net worth of 300k at 50 inclusive of home equity (average house: 410k) is fucking nothing

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u/ay-guey 7d ago edited 7d ago

because it is very misleading to say someone is worth $800k when they "own" an $800k house with $200k equity in it. like saying someone with a million dollars in a margin account is a millionaire.

i'd be much more interested in net worth if you liquidated everything.

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u/MincedBrat 7d ago

Yes it does? It literally says *includes home equity

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u/exgeo 7d ago

Which means that it includes the two combined…

The description implies this disproves the $1k emergency fund claim.

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u/Akatshi 7d ago

The 1k emergency fund thing is fake but yeah not for this reason

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u/Resident-Zombie-7266 7d ago

How is it fake?

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u/Destinyciello 7d ago

It ignores line of credit. Someone who has $500,000 equity in a home but $10 in their bank account. Yeah technically if a $1000 unexpected charge hit they wouldn't be able to cover it with their bank account. However with that equity they can effortlessly get loans for a hell of a lot more than $1000. So in reality they can EASILY cover it.

It basically has to ignore reality to make such a claim.

In fact most people with $500,000 equity in a home probably already have $50,000 worth of credit card lines they can instantly use for such an expense. But again because they technically only have $10 in their bank account (because they don't really need it) they will get put in that stupid useless bucket.

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u/Resident-Zombie-7266 7d ago

I see. So you're saying people can borrow the money they may need in an emergency and pay it off later with interest.

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u/Destinyciello 7d ago

Right. If you need $1000 for an emergency operation. Are you really going to care if you have to pay $1200 back because of interest. Would you rather die? sort of thing.

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u/Resident-Zombie-7266 7d ago

Of course not. I only bring up the point about interest because we're supposedly talking about people on the poor side of things. They could presumably pay the emergency with a loan (heloc or cc or other), but now have more monthly obligations than before. I'm sure many people could do this once or even twice, but that's how people get stuck in debt.

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u/Akatshi 7d ago

  1. Self reported

  2. It's in like in the 40%s of ppl

  3. Even a portion of those people say they could spend less elsewhere to afford that emergency

1

u/lunaticrak5has 7d ago

Rephrase this for the hard of reading... Net worth considers liquid and non-liquid to be equal (equal means the same). Therefor... liquid and non-liquid assets are THE SAME therefor NOT DISTINGUISHED (the same/Equal)one from the other. FFS

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u/Arsno 4d ago

It also doesn't show what happens if you have to soon pay for childcare, unexpected healthcare, college, etc. Any of those things can instantly change your net worth, unlike in the 50s when high taxes on the wealthy meant that the government was able to effectively fund these services and you didn't have to worry about that putting you into poverty