Thursday, March 1, 2012

Income stability

This post has been questioned.  But I think some of the mockery is unwarranted as there is a pretty real point buried in this post: namely that lack of financial stability is bad for everyone.  Consider:
Likewise, when middle class people take out a mortgage that's perfectly affordable on the income they've been enjoying for years, and then lose the house because they suddenly saw that income cut in half, we don't feel a delicious sense of joy because they finally got what was coming to them. We recognize that this it is really terrible to be forced out of a home where you've built loads of happy memories and dreams--and not incidentally, to possibly be forced to yank your kids out of the aforementioned schools.
These disasters can hit people at any point on the income spectrum.  A lot of landlord policies are designed to minimize tenant flexibility, and houses can be difficult to sell on short notice.  I applaud the idea of trying to live well below one's means (an option that should be more realistic for the well off) but the real issue is the disconnect between the time frame of obligations (tuition, housing, transportation) and that of income streams.

The long run impact of this lack of basic security isn't pleasant.  It's true that the well off should be able to plan better and be more careful about things.  But it would also be reasonable to be able to make medium term plans with some assurance that the carpet will not be yanked out from under you.

EDIT: Mark makes the excellent point that I am talking about salary and the original article was talking about executives who committed to fixed expenses that could only be met with a bonus.  Clearly, it is possible to fail to get a bonus at a bank and counting on it to cover basic expenses (as opposed to saving it and using it for one time costs like a car or house downpayment) is begging for disaster.

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