Chapter 1: What is the main topic discussed in this episode?
Today's number, 170. That's the five-year percentage increase in Google searches for the phrase, how to looks max. However, new geolocation data shows that the number was skewed by a large volume of searches from number one observatory circle, also known as the vice president's house.
Welcome to Profiteer Markets.
I'm Matt Elson. It is May 6th. Let's check in on yesterday's market vitals.
Chapter 2: What shocking statistic about high earners is discussed?
The major indices rose and the S&P 500 hit a fresh high after the U.S. said Iran had not broken the ceasefire. Despite Monday's direct hostilities, Brent crude fell as fears that the war would reignite eased. Treasury yields fell and finally Samsung stock rose 5% while Intel stock jumped 13% to an all-time high.
Those rallies came on reports that Apple might enlist the companies to build chips for its devices in the U.S. Okay, what else is happening? Goldman Sachs just uncovered a concerning fact about America. In a survey, roughly 40% of households earning more than half a million dollars a year say they are living paycheck to paycheck.
That is a higher share than households making between $50,000 and $100,000 a year. 36% of those households say the same. Now, there is a debate about what this stat actually means, which we will get into, but it does raise a very important question, which is, how much money do you actually need to feel economically secure?
So, to dig into this question, we're going to do something a little different today. We're not going to focus on the news per se, but we are going to focus on this survey today. And we're going to speak with two really excellent guests to break this down.
We are speaking with Ben Carlson, Director of Institutional Asset Management at Ritholtz Wealth Management, and also the author of the forthcoming book, Risk and Reward. And also our friend Ramit Sethi, host of Netflix's How to Get Rich, bestselling author and host of the Money for Couples podcast. Ben and Ramit, thank you so much for joining me on the show here.
Ben, I'm going to start with you because I know you've written about this. You've talked about this on your own podcast. I mean, this data is just quite striking. The fact that you've got people making more than $500,000 a year, 40% of them say they're living paycheck to paycheck. I'd also add people who are making $300,000 to $500,000 a year. They say the same thing.
41% of them say they're living paycheck to paycheck. Really striking data. Let's just get your initial reactions.
Where to begin? The personal finance people would look at this and say, see, I told you, lifestyle creep. These people, it doesn't matter what you make. It's what you keep and what you spend. But I also think that in a lot of ways, sentiment is completely broken these days. And you have to watch what people do and not what they say.
And I think that the idea, the definition of what paycheck to paycheck actually means for people is totally distorted depending on how much money you have and how much money you earn.
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Chapter 3: How do lifestyle changes impact financial security?
you still don't feel that good about it. When you're asked the question, no matter what the definition of the survey questions are, what the answers are, you're kind of just choosing the most negative one. And I guess that gets to this question of like, is there ever an amount of money that makes you feel good or at least not bad?
And this seems to tell me that for 40% of people, the answer is kind of no. What do you make of that, Ben?
I'm of the opinion that financial advisors love to say, like, just figure out what enough means for you, and then you'll be happy for the rest of your days. And I don't think that that amount exists for any individual person or household because I think the goalposts can move, and they probably should move for most people. If you make more money, like, you shouldn't introduce lifestyle creep.
Most personal finance experts tell you, no, don't ever spend any more money, never enjoy anything. But I think you should have some lifestyle creep. And it's funny because it's probably bad at the individual level, but better for society that no one is ever really content with what they have. It's like what pushes us towards progress and innovation in these things.
But it also is what makes people never satisfied. And I think once people reach their goals, if they have a goal in mind, Right? They get there and then they realize like, oh man, I feel the same. I don't feel any different at all. I said, if I make half a million dollars, my life is going to be easy. I'm never going to have to worry again.
But I still have all the same worries and nothing changed.
Yeah, this seems to be the thing that that's my takeaway, at least from this survey. It's honestly a little concerning. Ramit, you've consulted with lots of different households across the entire spectrum of income. Is this reflect what you see among higher earning households?
Yes, and I think it's... I'm not particularly interested in asking people how they feel about money at large in America because the answers are always wrong. Why ask a question where the answer is only going to get you bad data? And think about it. We are the product of the media that we consume.
As Ben pointed out, the media loves to rile people up, get them feeling worse, and then enact whatever policies they are trying to enact. So when it comes to actual... mastering your money, there's two parts you need to do. Number one, you need to know your numbers. The average American does not know their numbers. 50% of the people I speak to do not know their own household income.
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Chapter 4: What is the definition of living paycheck to paycheck?
I mean, come on. Quantifying this is totally absurd. And actually talking about these surveys is also absurd. We might as well throw out a survey that says, Rameet Sethi is too handsome for the internet. 72% of people agree. Let's discuss that. We might as well. It's actually more relevant than this.
But when it comes to what are you supposed to do, yeah, you do need to work on improving your relationship. Just today, I have an episode on my podcast of a couple. He won't buy a new office chair. He's had his chair for like 15 years. It's aching his back. She has holes in her pants and they are so struck by ultra frugality, by scarcity. I work with them. I talk to them.
There's lots of reasons they feel that way. Eventually I show them if they stop investing today, never add another cent, at retirement they'll have $9 million. This is quite common. Common in the sense that almost nobody knows what they're gonna have even at age 65, which is a very simple math calculation. And it was shocking.
That insight alone that all of us spend our entire lives worrying about money but never run a couple of basic calculations. That's just the first step. You got to know your numbers. Then you got to stop trying to quantify your feelings. It doesn't work. Working on your feelings directly and your relationship with money, that's the only way to actually heal it. Yeah.
It is funny, Ed, your question about quantifying it. So we have like these different breakpoints for our firm in terms of the clients we work with. So there's the people who make, who have less than a million dollars up to 5 million. And then there's the people who have 5 to 10 million, 10 million and up, and then like 20 million and up is, you know, ultra high net worth.
And I've talked to our advisors about this and I say, who are the clients who have like the least amount of stress? Because at a certain point, money becomes more of a responsibility than a stress. And they say the sweet spot is somewhere in like the $5 to $10 million range for wealth management clients.
Because it's enough money where you know you're going to be okay, but you don't have enough money where people are constantly trying to reach into your pockets and make you do something and give money away or help them out. And so we've actually talked about this. It's like, what is the least stress value? But if you talk to those people, they're not going to think that.
They're
That's the hard part. They're going to say, no, no, no, I want to be on that next level. I want to have more responsibility. So that's like the really tricky part is like you think you have this narrowed down, like this is the perfect number. And then you get there and you go, no way, that's not, no, I need more. It's got to be more.
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Chapter 5: How does social media influence financial perceptions?
It's at 55%. And it's quite striking. And it coincides with these consumer sentiment surveys we've just seen, which just hit their lowest levels ever. or at least in the history of recording consumer sentiment. This is the University of Michigan survey.
And yet, when you do look at the underlying data, the situation isn't that everyone's doing great in America, but it's certainly not the case that everyone's doing worse off from a purely numbers perspective right now than they were... at previous times, during depressions, during recessions. I mean, we look at the unemployment rate. We do know that wages are growing.
Yes, inflation is growing too, and it's very tight. But this isn't the worst time ever, but people feel that way. And so I guess the question I would pose to you, Ben, and then I'd like Ramit's perspective, what do you think has changed in the past couple of years, say? Because that seems to be where it started to get really bad.
Well, the pandemic is the biggest one, obviously. If you look at, they do these annual happiness readings, and from 1970 to 2020, it was up and down a little bit, but essentially the same. And then it falls off a cliff in the pandemic, and it has never come back. So I actually think...
this is gonna sound weird to say, it's a sign of progress because we didn't go through world wars and depressions and such and these things that people in the past were more used to dealing with. And I think that shock to the system that we had, it's like, oh my gosh, this thing that we thought this only happened in history books,
I think it's actually a sign of progress that we're, like luxuries have become necessities to us. And we are, I don't want to say we're more pampered than the past, but things are a little easier for us than they were for previous generations. And I think that shock to the system was something that we as a society were not equipped to deal with.
And now we're seeing the ramifications of that, that it's completely changed the sentiment readings and thrown them off so much that it's hard to trust them anymore.
Where does the pandemic sit in that? Because you're right. It does seem as though the pandemic happened. It suddenly reset expectations on everything. But I'm not sure exactly why that necessarily means that suddenly we feel worse about everything. Like, on the one hand, I would also think that maybe we feel better. We went through this crazy year.
We suddenly learned the beautiful nature of getting together with people. We started to appreciate things. But that's not what happened.
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