U.S. Inequality Is Much Less When You Measure Spending Power

“Difference in wealth overstates inequality because it fails to capture two of the main enablers of spending power, namely earnings from work and government benefits, the paper says. Someone who has no money in the bank can still have a relatively decent lifestyle based on salary and various transfer payments, including Social Security.”

Yes, I have seen this with some of the people I have known. They have huge houses, something like 5,000 square feet or more, a Rolls Royce and a big Mercedes, and lots of prime beef and lobster to eat, yet all of it is built on debt. Their net worth relative to their assets is quite small.

It is possible to do this provided that you don’t run into a major problem, like serious illness or the loss of your income. You will face issues when you reach retirement, if you don’t save anything.

One person I know got caught in one of the housing bubbles and mortgage payments of over $10,000 a month. This was 30+ years ago when $10 grand was a good deal more than it is now. I would not want live with that level of stress