Welcome to the Age of Envy
There aren’t many iron laws of money. But here’s one, and perhaps the most important: If expectations grow faster than income you’ll never be happy with your money. -Morgan Housel
By Capital Thinking • Issue #870 • View online
One of the most important financial skills is getting the goalpost to stop moving. It’s also one of the hardest.
First, a little story about the 1950s.
Getting the Goalpost to Stop Moving
Morgan Housel | The Collaborative Fund Blog:
“The present and immediate future seem astonishingly good,” LIFE magazine’s January, 1953 cover story begins.
“The country has just lived through what was economically the greatest year in its history” it wrote. It had done this with “10 straight years of full employment, through new management attitudes which include an increasing realization that the well-paid worker, who does his job under healthy and agreeable conditions, is a valuable worker.”
Wealth came so fast to so many it was jarring. “In the 1930s I worried about how I could eat,” LIFE quotes one taxi driver. “Now I’m worrying about where to park.”
If these quotes don’t surprise you it’s because the 1950s are so often remembered as the golden age of middle-class prosperity. Ask Americans when the country was at its greatest and the 1950s is usually near the top.
Compared to today? Different worlds, no comparison. The overwhelming feeling is: It was better then.
George Friedman, a geopolitical forecaster, summarized the nostalgia a few years ago:
In the 1950s and 1960s, the median income allowed you to live with a single earner — normally the husband, with the wife typically working as a homemaker — and roughly three children. It permitted the purchase of modest tract housing, one late model car and an older one. It allowed a driving vacation somewhere and, with care, some savings as well. I know this because my family was lower-middle class, and this is how we lived, and I know many others in my generation who had the same background.
There are two ways to debate a position: Asking whether it’s true and asking whether it’s contextually complete.
This version of the 1950s lifestyle is true in the sense that the median American family indeed had three kids and a dog named Spot and a breadwinning husband who worked at the factory and so on.
But the idea that the typical family was better off then than now – that they were more prosperous and more secure, by nearly any metric – is so easy to debunk.
That doesn’t mean those yearning for the 1950s are necessarily wrong. It just shows that something else changed in the last 70 years that created a gap between what happened and how people feel about what happened.
And that something else is not complex: America’s wealth grew but its expectations grew more.
The numbers are not close.
Median family income adjusted for inflation was $29,000 in 1955. In 1965 it was $42,000. In 2018 it was $63,000 (last year was higher but stimulus checks skew the data).
Higher median income wasn’t due to working more hours, or entirely due to women joining the workforce in greater numbers. Median hourly wages adjusted for inflation are nearly 50% higher today than in 1955.
LIFE described the 1950s as prosperous in a way that would have seemed unbelievable to someone living in the 1920s. The same is true today – a 1950s family would have found it unfathomable that their grandchildren would earn 50% more than they did.
Some of today’s economic worries would have puzzled a 1950s family.
Healthcare costs have indeed exploded in the last 20 years. But half of Americans didn’t even have health insurance in 1950, and two-thirds lacked “surgical insurance” to cover a major incident – which partly explains why 4% of Americans didn’t live to see their fifth birthday in 1950 vs. less than 1% today.
Saving for retirement is a burden today, but in the 1950s the entire concept of retirement was a luxury reserved for the upper classes – 47% of men age 65+ were still working in 1950 vs. 23% today, to say nothing of how much more physically demanding a typical job was back then.
Average Social Security checks adjusted for inflation were half what they are today; poverty among those age 65+ was nearly 30% compared with less than 10% today.
The homeownership rate was 12 percentage points lower in 1950 than it is today.
An average home was a third smaller than todays despite having more occupants.
Food consumed 29% of an average household’s budget in 1950 vs. 12.9% today.
Workplace deaths were three times higher than today.
That’s the economic era we long for?
Yes. And it’s important to understand why.
Morgan Housel
Whether it’s savings or investing, getting the goalpost to stop moving – or at least move slower than your income grows – is the only way to both be happy with what you have and ensure you don’t push beyond the limits of what you can handle.