I wrote a little while ago about inflation and budgeting and the question of what, exactly, my grandparents meant when they told their children in the 1950s or 1960s, “We can’t afford that.”

I don’t mean that I’ve never heard of or can’t imagine poverty. What I mean is, these are families which had multiple children, sent at least some of them to college, at some point owned their own home, owned at least one car, etc. By any standard of material consumption they would have been pretty solidly middle class. Yet they practiced a frugality that—to my mind—implies poverty. “Turn off that light switch, what do you, work for the electric company?” “No, honey, toys are only for Christmas time.” “That brand of ham is for special occasions.” That kind of thing—things that at the end of the day seem like they would be rounding errors in the budget of even of a lower-middle-class family in the postwar years.

This one got a lot of comments, so I’m just going to share a bunch of the most interesting ones here to further elaborate these questions/thoughts, and share your best thoughts.

One of the things I think people forget is that goods that are more expensive today are quite different than the goods we could purchase 50 years ago. Health care is a perfect example. Before the 1970’s hospitals did not have intensive care units. If you had a heart attack on the street, there wasn’t much they could do other than pick up your carcass and take it to the morgue. Cancer therapies? Cobalt, radiation, and surgery. Chemo was in its infancy. Medications like statins did not exist so managing heart disease wasn’t a thing. There was no bypass surgery, no stents, no valve replacement—heart disease just progressed on its own and people died. Health care was cheaper because the product had vastly fewer features and wasn’t consumed for nearly as long.

Housing—land was cheaper because it was more available. Construction—go look at a house built in 1960 and you would find single pane windows, very little insulation, one outlet per wall, a small kitchen with cabinets made of birch plywood, probably not even a dishwasher or space to install one. Three bedrooms, 1.75 baths, a living room, and a double garage. Maybe 1600 square feet. En suite bathrooms were not a thing, nor were walk in closets. It’s not like you could opt to purchase those things even if you did have money to pay for them—they just were not available unless you paid an architect to design a custom home—and even then the amenities were limited by the buyer/designer’s imaginations, and nobody back then thought you needed an entire room to use as a closet.

Cars—same. No air bags, no catalytic converters, no third row seats, no all wheel drive, no air conditioning or power windows, no speakers. It didn’t cost as much because the bundle of products known as a “car” just wasn’t as elaborate.

“The bundle of products known as a “car” just wasn’t as elaborate.

That’s a really insightful way to put it. Not only is there more stuff available now, the same things aren’t really the same things. Some are actually cheaper, like computers, but some are more expensive and complicated.

This kind of gets at one of the dynamics here: it was easier to be frugal 30 or 50 or 70 years ago because in most communities, there was just less stuff to spend your money on. You probably didn’t have supermarkets with caviar and USDA Prime dry-aged steaks and sashimi-grade ahi tuna. (Probably? You definitely didn’t have that in the vast majority of places.) You didn’t have boutique furniture and fancy over-engineered mattress companies and a million restaurants serving half the cuisines on the planet to lure you.

It’s sometimes said that rich people were more humble in those days: that their lifestyle was much more similar to that of the regular people. I don’t know if that’s true, but if it is, it’s probably partly because simply having money didn’t mean you could consume like a rich person without a lot of effort. All I need to do to serve caviar and a $100 French champagne for dinner is to put those items in the cart when I go grocery shopping (Wegmans—the cheapest store for grocery staples and also a luxury supermarket, all in one.)

All of that is to say, the mental effort required to say “We can’t afford that” is much higher, and must be made more often, today. Everyone, everywhere, every day is bombarded with stuff they can’t afford.

See this one:

I know someone (young Gen X/old Millennial) who was one of eight children. His father was a janitor at a high school. Even so, he has a university education…in fact, he spent 6 years getting a BA. So that janitor income was sufficient for all eight children to get ahead in life. I’m also one of eight and we lived well on my father’s income.

Life was simply more affordable then. Scrimping and saving may have been largely pointless but I do think older generations lived less comfortably and had lower expectations. I think people have higher expectations now. We expect more comfort and luxury … and so many commodities have become luxuries. Coffee used to be inexpensive and plain; now it’s customized and complicated and expensive. From our beauty treatments to shoes to subscriptions to any number of products, things have become more expensive because they’re not functional anymore. They’ve been luxurified.

Yeah. Expecting a lot of comfort and convenience is very expensive. That’s what convenience and comfort extract from you—the ability to do without them. I think that applies to a lot of things, and explains a lot.

There’s also the question of prices for labor-intensive things rising as a country develops, which is a well-documented economic phenomenon:

Also worth noting the Baumol Effect (“cost disease”):

As capital accumulates and production gets more resource efficient, many things that are still labor constrained become significantly more expensive relative to goods themselves.

So groceries (which are heavily automated a all points in the chain) probably really are a much smaller part of the cost of living than they were two generations ago.

There’s this comment about the psychology of saving before the New Deal and the (quasi) welfare state:

For my Mom, who was born in the 30s, it was real trauma. Her mom was extremely frugal. She was crazy frugal - even irrationally so: she would turn off the water heater at night so we would have no hot water in the am.

But I don’t think for either of them it was a current cash question, meaning balancing the monthly budget. It was about saving as much as possible against a future crisis. It was less cost than stability of the economy. Because of the laws passed in the FDR years, our economy became much more stable than it had been, allowing us to be lax about “saving for a rainy day.” But they were a product of the more pure kind of capitalism we are returning to, where crises were real and devastating.

This one is really interesting, which challenges what I wrote at beginning:

I am going to repeat something that I heard someone else say — my parents weren’t poor; they were broke. And there is a difference! We had a roof over our heads; a car (eventually two!); clothes on our backs; utilities to keep us warm or cool; home cooked meals. What we didn’t have was much left over each month. Rarely ate out (even fast food was expensive for a family); vacations were spent at a relatives’ or camping; movies were occasionally at a theater but mostly at drive-ins. And mom would pop corn before hand and bring along a six pack of Pepsi.

When I think about my parents being broke in their early years, it also occurs to me there wasn’t as much to spend their money on, even if they had it. No cell phones; cable; airfare was for rich people as was fancy restaurants. Food was never delivered as it is today — that didn’t even exist. I think people feel broke today but for different reasons. Whereas my mom insisted on new shoes for her daughter, my granddaughter has a plethora of shoes and the “expensive necessity” is high speed internet access, so she can do her homework. Same problem; different reasons.

Of course I love this comment:

I agree the obsessive focus on tiny purchases is silly. Every personal finance article seems to track how many coffees a person buys, as if this is a moral measuring stick, but they never really question the big things that are draining their income and trapping them in a payday-to-payday existence, or even debt.

The big questions: Are you living the life you really want, or are you living a life you think will impress other people? Are you just blindly following the crowd through some arbitrary stages of life, trying to hit consumerist milestones? Do you really need two vehicles, or would one do? You live near a subway station, do you need a car at all? Do you really need that monster home and a big yard, or would a smaller home do? All those things cause thousands of dollars per month to pour out of your bank account in mortgage fees, insurance payments, maintenance costs, etc. Trying to offset those large expenses with skipped coffees and 20-cent-off coupons is like trying to empty the ocean with a teaspoon.

This is really interesting:

Does it make sense psychologically if we think of it as "We can't afford TO THINK OF OURSELVES AS the kind of people who can afford this"? Expressing the anxious practicality (if we buy this now, we'll have to buy all the treats forever, and that *would* be real money) and the resentful class consciousness (we could become like the weak, snobby wastrels of the elite).

And man, I love when a comment on some narrow area of interest illuminates a larger point:

I used to sew a lot before WTO opened up cheap clothing imports from Asia—that’s when it flipped. Prior to 2000, it cost about half what you’d spend retail to sew a garment of equivalent quality (fabric, trim, lining, etc.). Now it is almost the reverse, although it is impossible to find really good quality fabrics anymore—and when you can they are $40+ per yard. Nobody sews so there are no good fabric stores—the chains mostly focus on hobby stuff and quilting.

I want to end with this one, the inspiration for the “It Pays To Be Cheap” headline:

Having the mental habit of “I don't need that slightly pricey thing” is a good hedge against lifestyle creep and the hedonistic treadmill. Had a wise aunt tell me when I was just starting out “the key is to always live on less than you make, significantly less if you can manage it. And remember, the more you make, the more you spend. Be aware of that and proactive against it and you’ll never worry about money.”

My husband recently got a major promotion and is now making almost 30% more than before and it’s a challenge to fight against the “now we can afford _____” which sure might be a defensible way to spend money but we were doing just fine without ______ before, and buying it interferes with other financial goals we have. “If you make more you spend more.”

This is kind of a subtle point. There are lots of things we need to do that don’t matter, in order to inculcate a habit that does matter. For example, my mother used to insist that I follow table manners at home, so that I would just unselfconsciously have the habit of eating like a civilized person. With work-from-home, I can see the creep of “Eh, I can lick my plate, I’m in my own house!” to “Hey, is the waiter watching? Keep an eye on him while I lick my plate!” There’s just no way to cut out the “unnecessary” part of that and keep the “necessary” only.

I also think that applies to a lot of things and explains a lot.

Lots of food for thought. Leave your own comment!

Related Reading:

How Much Of Urbanism Is Poverty?

Back in Time on Small Roads

Saturation

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