The Three Crumbling Pillars of the Middle Class

It’s so easy to become immersed in our own beliefs – echo chambers built from our subconscious inclinations sound-off and only solidify our already established ways.  Because that’s what we do, we play at world building in the vaulted kingdoms of our own lives. 

What’s next?  Always looking forward. 

Yet, when we take a moment to step back, when we experience that rare moment that pierces our guard like a knife thrust to the gut and makes us question again the solid footing that we so resolutely believed we stood upon.  It can mean many things to us upon that dawning realization: wonder, humility or even sadness. 

For me personally, I fall victim to this way of thinking too often.  I surround myself by like-minded individuals and forget the privilege that envelopes me daily. 

When it comes to financial independence, too often do I feel like I’m falling behind.  If I only could do this better, or optimize here, then I’d be able to shave more time off my corporate servitude.  Then I’d finally be free…  But when I focus on what I don’t have yet, or what I haven’t accomplished yet, it is so easy for me to forget how much freedom I have already attained.  Flip the script and compare myself to the average American, and I’m operating in an entirely different galaxy – light years ahead toward my retirement. 

What sparked this reflection is a conversation I had last weekend with my cousin that reminded me of how far I have come, rather than how far I have yet to go.  It was a refreshing reminder that what we pursue in financial independence is still so far from the norm in America.  People look at you with cocked heads as if you were crazy, because to them, you really are crazy.  Who could ever be financially independent?  Only the rich, right? 

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We were sitting outside next to the pool on my parent’s patio, practicing social distancing as a cool breeze drifted off the foothills of the San Gabriel Mountains.  I was excited to catch up.  Both my parents and sister live relatively close to me in LA, so we’ve been doing outdoor Sunday dinners together pretty much since the pandemic has started.  But this time was different.  My cousin and his girlfriend would be joining us for a rare treat.  It’s not often I get to interact with people nowadays, so just the extra two bodies that would be present felt like a unique event.  That’s the irony of this whole pandemic thing.  I’m as excited as I would have been for a wedding previously just to see two familiar faces.  Hahahaha.  Oh, the little things in life and all that we take for granted. 

After shooting the shit for a while, hearing how their lives had changed and updating them on ours, my parents and sister had departed to help with dinner leaving my cousin, his girlfriend and my wife and I alone out on the deck.  Usually these conversations with him and I lead to the usual ebb and flow of discussing local politics, sports and the economy. 

As we scrutinized how the stock market was evolving and what we thought it would do to the housing market, I brought up a recent a16z podcast episode that I had listened to – in it Marc Adreessen’s main topic was discussing how education is like a cartel, but he touched upon what he considered the three main pillars of the middle class that were hurting people the most: education, health insurance and housing.  We can argue about this list all day long, but in my opinion, he had hit the nail on the head and his main argument was that these vital areas were outpacing inflation by a long shot and not much was being done about them. 

People were simply getting fucked. 

And when you look at each point briefly, I agree with him. 

First you have education, the costs have skyrocketed and there haven’t been any new universities recently (you should look it up, tell me the last time there was a new university in the US – bonus points for you if you know).  The market is controlled, and any 17-year-old kid can take out six figures of debt that they don’t even understand and it’s the only unforgivable loan type.  Then with health insurance, the recent pandemic has made it even more obvious that medical coverage should not be tied to employment and those costs have been increasing by unfathomable percentages as well year over year (the cost of two MRI’s and foot surgery this year have blown my mind even with top notch employer insurance).  And finally, with housing, yes, it depends on where you live, but for me being in LA this has also outpaced inflation.  When you look at these three areas, it is no wonder that things have been getting worse over the years for the middle class (who actually qualifies as middle class is a debate for another day).  They are getting crushed on cost increases. 

When I hit the education topic with my cousin and his girlfriend, this is when I had that epiphany moment of remembering, damn, most people are not like me at all. 

I had always known that my cousin had student loans but when we got into the amounts and interest rates, it floored me.  These were government loans, and they were crippling both of them.  They had shifted to the income-based repayment option because they could barely even pay the interest on them (not for lack of good jobs). 

And I’ll be honest, it crushed me and I felt so sad.  Here were two of my favorite people sitting in front of me.  Young (early 30’s), talented and they had done everything that they were told they were supposed to do.  Yet they had gone to a private school for both undergrad and grad school, so now they were sitting in six figures of high interest debt. 

Of course, my first question was why don’t you refinance?  But the answer was that if you do to a lower interest rate, your monthly payment goes so high they wouldn’t be able to do it.  Again, my mind was blown.  All you hear about are record low interest rates and the CARES Act, every Mo-Fo in the US is refinancing their mortgage for a lower rate, yet the people who need it the most aren’t getting any help.  Typical US scenario. 

But what hit me the most, was how different their lives were than mine.  They are in their early thirties and unless a miracle happens, I don’t see them paying off their debt until well beyond my age now.  And here I’m sitting with my wife, no debt, a shit load of paper assets and flexibility. 

And I think that’s the key: the freedom and flexibility to live your life on your own terms.  If my wife and I decided to alter our plans a little, then we could probably step away from work in five years or less.  But we’ve made some life decisions that have put us on the 10-year plan until finally retiring.  But I have that flexibility to change my plan whenever I want.  I have options. 

I can’t imagine what it feels like to be crushed by that amount of debt.  At their age I was worrying about saving for a down payment to buy a house, or maxing out my 401K, not to buy my way out of student loans. 

Sure, we all make different decisions to land us where we are.  And I’m not making excuses for them, their situation is a result of their decisions and they will figure it out.  They’re smart kids and I know bright futures await them both… just a very different future than mine. 

But I wasn’t prepared to hear it from them.  It’s easier to disassociate yourself from the world’s problems.  You hear all of these stories about the student loan crisis and I hadn’t expected it to slap me in the face in my parent’s backyard on that afternoon. 

It does make you feel a little guilty to be so well off in your own life.  But that was the bubble I had been surrounding myself with FI.  Compared to a 30-year-old early retiree, sure I’m behind.  But that’s me doing the comparison thing and hoping rather than living. 

It’s always good to be knocked back down Earth on occasion. 

I’ve been fortunate to never struggle with debt in my life, but that’s by design.  Significant loans always made me nervous, so I spent time trying to limit it as much as possible. 

Life is always better when you’re grateful.  And damn am I grateful today that I’ve made it to where I am.  I still have a long way to go on this journey, but when I compare myself to the rest of America, I’m still light years ahead. 

And while the pillars of the middle class may lay crumbling around us like the detritus left in a dystopian wasteland, here’s to freedom and choices.  May they forever grace your fingertips. 

-Q-FI 

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P.S  What was your last humbling experience that either knocked you down to size or reminded you of the privilege we enjoy by pursuing FI?