Making $570,000 a Year, but Not Feeling Rich; Does "Mr. Smith" Deserve Your Pity?
By George Leong
I just read about this doctor who made $570,000 in 2012, yet he didn’t feel rich. The article used “Jake Smith” to cover the person’s identity. In the interview, Mr. Smith said, “I think of rich as not having to worry about money, not having to worry about retirement, not having to worry about saving for your kids’ educations. I have three kids and I try to save up for their futures, and my retirement, and even with my salary I don’t feel secure.” (Source: Sachon, L., “I Made $570K Last Year, But I Don’t Feel Rich [In Fact, I Feel Worried],” The Billfold web site, May 17, 2013.)
OK, Mr. Smith is not rich like Bill Gates or the sports players who make enormous amounts of money for throwing a baseball or making a dunk, but at $570,000 a year, Mr. Smith should not feel worried.
Maybe he is caught in his own little world of self pity, but heck, there are tens of millions of Americans struggling on the other side of what has become a widening income gap. These people are not worrying about cars, fine dinners, college education funds, 401(k)s, or planning their next vacation—they’re struggling each day just to put some food on the table only to then have to worry about the next meal.
The federal minimum wage is $7.25 per hour, and could rise to $10.10 by 2015 if the Obama administration gets its way. That’s $15,080 per year based on a 40-hour week, and I doubt there are any benefits, medical coverage, or retirement plans involved.
So while Mr. Smith ponders his unfortunate state, he may also want to think about the income gap and the 48 million Americans collecting food stamps. (Source: USDebtClock.org, accessed May 28, 2013.)
The reality is that Mr. Smith is one of the more fortunate ones. In his case, his worry has probably more to do with his spending habits. If he were to go to a food bank or welfare office, I think he would understand.
While I’m not really here to slam Mr. Smith, I want to point out the widening income gap in America between the top one percent like Mr. Smith and the rest of middle- and lower-income America. This growing income gap between the rich and the other 95%–99% of the population is becoming a major dilemma that will need to be addressed or I believe the situation will worsen.
On the income gap, economist Anthony Randazzo of the Reason Foundation recently suggested that the easy monetary policy “is fundamentally a regressive distribution program that has been boosting wealth for those already engaged in the financial sector or those who already own homes, but passing little along to the rest of the economy. It is a primary driver of income inequality.” (Source: Frank, R., “Wealth Inequality Getting the Fed’s Attention,” CNBC web site, March 26, 2013.) This statement on the income gap is true, as I have noted in these pages on numerous occasions in the past.
My concern is for the widening income gap as the poor are getting poorer and are being left behind, while the stock market and housing sector rally. At some point on the horizon, the government will be faced with significant and rising demand for food stamps and social programs due to the widening income gap for those who are not as fortunate as Mr. Smith.
The easy money has also resulted in massive debt levels for consumers like Mr. Smith who are spending rather than saving. And when rates rise, there could be another financial crisis, so be careful, because America might face more problems down the road other than just the income gap.
This article Making $570,000 a Year, but Not Feeling Rich; Does “Mr. Smith” Deserve Your Pity? was originally published at Investment Contrarians
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