A Quick Mathematical Debunking of the Idea that People Aren’t Choosing to Save Money

7 min readJul 22, 2022

This is a popular talking point out in the world, and it won’t take me much effort at all to disprove it.

There is an unexamined belief amongst the older generation that poverty is self-imposed. Everyone, they believe, makes enough money to survive, and if those people are nonetheless having financial problems it’s because they choose to have financial problems. It’s just a matter of proper budgeting — as the McDonalds’ Corporation “proved” with their meme-worthy math.

Now, this budget was released in 2008. Money was a bit different then. So I think a better idea is to re-do this budget today.

What’s our income?

According to Zippia.com, the median U.S. household income was $61,937 a year in 2021. According to census.gov, it was $67,521 in 2020. Since a household implies two incomes, let’s average the two together and call median income $32,364 per person per annum, about $16 an hour. That’s a darn sight better than the $24,720 (from two jobs!) McDonalds’ is ascribing to people. (And while you can argue that this is the first of me fudging numbers and lowering the accuracy of our thought experiment, it should be pointed out that I’m fudging the numbers against my own argument. Median household income is going down. For me to fudge it upwards results in an overly optimistic bias.)

What’s our rent?

According to a cnn.com report, itself quoting realtor.com, median rent is $21,924 per year as of May 19, 2022. I’m having trouble finding any data about rent by bedroom, so here is where the figure starts breaking down —and it won’t be the first time, obviously — but the whole point of this exercise is that we’re assuming the median, the person who makes more than 50% of Americans and less than the other 50%, the person in the exact middle, regardless of how factually likely this person is.

“C, these are median figures,” you might say, “and as you admit, you aren’t adjusting based on the reality of needs. A single person needs a one-bedroom apartment; does this figure of $21,924 serve to get them such a thing? Or are they paying for more?” The answer is, I might be lowballing: according to Redfin, median rent breached $2,000 a month in May 2022. Meanwhile, worldpopulationreview.com claims the average is $1,326 a month, or $15,912 a year.

If we average those amounts, our hypothetical person is now paying $20,612 a year, and we’re going to use this as our figure. Which, I mean, we’re doing fine. After all, it’s only 64% of our pre-tax income.

How much are we spending on food?

This is one of the reasons the McDonalds’ budget was made fun of when it came out: the person who is living by it doesn’t eat. Since human beings, factually speaking, do eat, let’s factor this into our more accurate budget.

No one has done any studies on the median food budget in America. According to usda.gov, the average household spent about $6,500 on food every year (see the second-to-last chart) in 2020. While averages and medians are derived differently, the USDA chart shows food by quintiles (bottom 20%, next 20%, etc), so $6,500 will serve as a median.

Information infrastructure (cable, internet, etc)?

cnbc.com claim to be quoting a JD Power survey, but I can’t find the link to that. But supposedly, the average American paid $1,528 a year for their cellphone plan in 2020. This is where figures break down further, since averages and medians are derived differently — in a world where certain people at the top can pay a great deal, they can singlehandedly tilt the average upward. For instance, in America, the Social Security Administration has determined that while the median income in 2020 was $34,612, the average was $53,383. The median is only 65% of the average.

If we assume that the same ratio applies to mobile phone plans, that’s $993.49 a year.

If this seems like an astronomical amount of money, keep in mind that this bill, and this device, are standing in for a huge swath of other expenditures. We are pretending we live in the developing world: our cell phone is our only computer and serves all our entertainment and computing needs. We don’t own a TV, we don’t own a console, we don’t own a desktop computer or a laptop or even a tablet. (Let’s ballpark and assume that a person spends $100 a year on each of those things spread out over the duration of their use.) This does leave us in the frustrating place of having to update our resume on Google Drive using our phone keyboard, but hey, we’re being frugal. We don’t have cable (saved $304.80 there) or Netflix ($119.88) or Hulu ($69.99). We aren’t buying anything in the App Store. We certainly don’t have an internet plan for our apartment ($350). Everything we watch, play, read and write is on our cell phone, and doing this allowed us to cut out a lot of expenses.

Gasoline?

I mean, we’ve got a job, and presumably we have to go to it. Most of us will use a car; some jobs won’t hire us if we don’t have a car. So how much does it cost to fuel it up?

Per the Bureau of Labor and Statistics, $1,568 in 2020, when fuel prices (per eia.gov, the Energy Information Administration) averaged $2.69 per gallon. As of July 22 2022, the same administration claims the average price is $4.77. (This link is continually updated. Leave me a comment if I need to replace it some time in the future.) Today that’s $2,780.

So, where are we budget-wise?

The answer is, we’re in a bad state.

$32,364 in income a year minus…
$20,602 in rent…
$6,500 in food…
$2,780 in gasoline, and…
$993.49 for our cell phone budget, leaves us…

$1,488.51 left over.

With which we need to buy a lot of things:

What if our cell phone breaks? According to Android Authority, we’ll pay $705.85 on average for a new one.
What if our car needs service? Per creditkarma.com, quoting (but not linking to) a AAA survey, we’re talking $1,186 per year. Or we could just run the car until it dies and then buy something new — or, at least, new to us; we can’t afford the $7,728 in annual car payments for a new car, so we’ll do the $5,856/year for a used one. It’s probably better to service the car.)
Insurance? Creditkarma claims, “The average car insurance premium in the U.S. was $1,062 annually, or $88.50 per month, in 2016.” The Kaiser Family Foundation claims that the average cost of health insurance is “$7,739 per person.” I’m not going through the bother of adjusting these for average vs median, because you can already see they’re going to have absurd impacts on what remains of our budget. Hopefully we’re not at one of those places that requires renter’s insurance ($174/yr).
We aren’t buying any new clothes ($1,800 a year). We aren’t buying any new furniture. We aren’t buying any new dishes or cookware. We haven’t spent a penny on Amazon. We don’t go to the movies. We don’t go out to eat. We don’t go on dates. We aren’t buying anyone birthday presents; heck, we aren’t going to birthday parties if they’re at restaurants, because we can’t afford the check. We don’t turn on the lights in our apartment because we need to reduce our electric bill lower than the average of $1,380/year.
No pets. Can’t afford it: just feeding the thing could cost $1,200 a year in kibble.
We are incredibly lucky in that our parents paid for our college; we are not paying the $2,664 a year in median student loans.
Our commute isn’t too terrible. Mine used to involve crossing a bridge every day. For two years I paid $7 in tolls a day: $1,750 a year.
Babies? At, according to the USDA, $12,980 a year? LOL.
And God forbid someone expect us to pay taxes.

So, why aren’t people choosing to save money?

BECAUSE THERE’S NONE TO SAVE. How am I supposed to put $2,000 into my 401K every year when I only have $1,500 to spare? If I have $1,500 to spare. If someone isn’t looking at the road for half a second and rear-ends my car, there goes everything.

This is the financial reality we live in now. It’s really that simple.

Or, let’s do it another way. Let’s assume we’re living this exact same frugal lifestyle — no cable, no television, just an apartment and two commutes and a kid. How much do we need?

$20,602 in rent plus…
$6,500 in food plus…
$2,780 in gasoline per person — so, actually, $5,560 — plus…
$993.49 for our cell phone budget — per person, so actually $1,986.98 — plus…
Health insurance for your whole family, which in 2020 was $13,824 per year, plus…
$1,800 for clothing (which we might have been able to skip if we didn’t have a kid, but my youngest just turned 1, and we went through three sizes of clothes during that year) plus…
$12,980 for the cost of raising a child?

$63,252.49. After taxes. If we include taxes, we… God, I don’t know. I mean, that depends on where you live and what your state’s tax laws are. But let’s just ballpark it at $85,000 a year, between two incomes.

If you were living in an apartment with only second-hand furniture and kitchenware, no TV, no pets, no internet, and no lights, feeding your baby from a bottle by the meager glow of your phone’s flashlight, would you feel rich?

Because, to repeat: we’re calling median household income $64,728. Empirically, you’re in the top 50% of households in America. (I have no idea to find out the percentage more accurately, but I’m guessing you’re in more like the top 40% of earnings.) Empirically, you are rich.

This is American prosperity today.

And that’s why some of us laugh when we’re told about it.