Has Increased Access to Credit Made Us Financially Complacent?

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In this week's Rich Girl Roundup, Rich Girl Carolynn responds to our most recent full episode on cognitive dissonance asking if access to large amounts of credit is inadvertently keeping everyone complacent, rather than fighting against wealth inequality. We dig into this potential response as well as other reasons Americans feel powerless in our economic circumstances today.

Rich Girl Roundup is Money with Katie's weekly segment where Katie and her Executive Producer Henah answer your burning money questions. Each month, we'll put out a call for questions on her Instagram (@moneywithkatie). New episodes every week.

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Our show is a production of Morning Brew and is produced by Henah Velez and Katie Gatti Tassin, with our audio engineering and sound design from Nick Torres. Devin Emery is our Chief Content Officer and additional fact checking comes from Kate Brandt.

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Transcript

Transcript

Katie:

Welcome back, Rich Girls and Boys to the Rich Girl Roundup weekly discussion of the Money with Katie Show. As always, I'm your host, Katie Gatti Tassin, and every Monday morning my executive producer Henah and I are going to use this segment to talk through listener questions, interesting money stories in the news feedback, casual financial topics. You get the picture… right after a quick break.

Before we get into it. This week's upcoming main episode, full episode is about the great salary reset. So this episode started as a slack from Henah about something that she heard about from a friend and then kind of unraveled into this sprawling story featuring actually a lot of you corroborating what we found because there is not a ton of reporting on this. So are salaries actually resetting? And how do you deal with this? Should you be worried that you're going to be replaced by someone cheaper than you?

Okay, onto the roundup Henah, what is our question today?

Henah:

Well, before we get to our question, I actually just wanted to take a second to thank so many of the people who wrote in from our previous Rich Girl Roundups, the one on navigating health in the workplace, the one on beauty and Botox. We got some really, really thoughtful emails and comments and we tried to respond to all of them in the inbox, but just wanted to give a public shout out to everybody who's written in because it was a lot of food for thought across those two specific Rich Girl Roundups.

Katie:

Incredible. Anything that jumps out at you as particularly tasty?

Henah:

We got a couple of emails just saying that they felt more empowered about navigating their own health in the workplace, which I just didn't expect. I really was kind of like, let me just share what I go through. And so I really appreciated that it resonated with people. And then for beauty and Botox, we got a lot of people who wrote in and said, when I first listened to you, I actually ended up cutting everything and I'm still going strong with that. Maybe added back in one thing.

Katie:

Hell yeah.

Henah:

But that they've kind of learned to look for the messaging behind the advertising and the marketing behind what they're being sold.

Katie:

Magic. I love it. Hey, power of awareness.

Henah:

Amen. So this week's question came from Carolynn. It was actually a follow-up to our most recent episode on cognitive dissonance. And they said, “Per your point that Americans don't seem to be riled up enough to rebel in a productive way against wealth inequality. I feel it's worth exploring the ways in which access to credit has expanded over the decades. There's no friction when spending and virtually no consequences for going far, far beyond your means. Your debt can spiral for approximately as long as you're able to continue making the minimum payments on it. The average American might have a smaller piece of the pie, but I'd venture to guess that very few actually feel poor as a result of just using credit instead of worrying about having the cash on hand. I know you follow Ramit, and this is a recurring theme with couples that are profiled on his podcast. So I'm not judging or pointing fingers. I just think this is very related. And if we didn't have access to such vast amounts of credit, more Americans would be feeling the pressures of wealth and inequalities such that they'd be compelled to do something.” And I was like, this is a Katie plant talking to Katie. She has planned her own question.

Katie:

I have a email, Carolyn at Gmail, where I'm like, hey, Katie, actually, would you mind talking about this other thing?

Henah:

Yeah, it seemed very Katie coded.

Katie:

It definitely strikes me as, first of all, it had never occurred to me. I had not made that connection before. So I really enjoyed that perspective, but it also kind of struck me as like, yeah, this is a plausible explanation for at least a portion of the collective resignation that we're talking about to the way things are now. And it reminded me of, I can't remember actually if I included this quote in the full length episode, but if I didn't, there is a quote from the book Winners Take All that comes to mind about—we love Anand, we love Anand, how if we should get Anand on the show and not if you're listening, we love your work—about how good enough solutions become like anesthesia. They numb the pain just enough to prevent us from actually looking at the root of the problem and kind of allow us to just keep addressing symptoms. And I think that that's a really, credit does kind of function in that way and in this metaphor, what an effective medicine it is because wow, what a win-win. Americans get to amortize all their spending, they get to make it their future selves problem and bonus, some lender gets to profit from it. So we're further financializing our every move. So it's layered. That's what I'll say.

Henah:

I also felt like it was a really astute observation that I had never considered before because it also positions, if you have debt or credit that you owe, it's positioned as a “you” problem. You did not do this correctly. You are just spread too thin rather than looking at maybe childcare is just so expensive for everybody that they have no choice but to put their groceries on credit cards and not pay them. Maybe wages have not kept up with the cost of inflation, so it doesn't really look at wealth and inequality because it's positioned as a you problem. So I know we're going to talk about probably the broader context of her point within the cognitive dissonance episode, but I wanted to just pause for a second and actually talk about and debt in this context before we move on.

Katie:

Yeah. Did you find some interesting numbers to share?

Henah:

I did. I mean, I think we've talked about this a little bit on the show, but essentially the Federal Reserve says that just under 50% of people have credit card debt. So if we're talking about 150 plus million Americans consistently feeling drained, it's easy to feel like that's just how it is. This is just my life now. And just 3% of those people with debt are delinquent according to some other data that was pulled. So to Carolynn's point, as long as you're paying something…

Katie:

Sure, you're making payments. Yeah.

Henah:

They allow this to continue until it reaches this astronomical level that you can't really come back from easily.

Katie:

I will make a counterpoint though. As a positive spin. Here's the PR hat coming on. If under 50% of Americans have credit card debt, that means the median credit card debt is $0. The median American has $0 of credit card debt. So that's good.

Henah:

That is true. That is true. But probably also not ideal because we're also told that having a card is the best way to build credit. Right? It's like when I was 15, my mom was like, we're going to get you this card so you could build your credit and then you can get a home in the long run, blah, blah, blah.

Katie:

It's like, here's a little fire to play with and if it burns you, that's your problem.

Well, and I think that it's worth distinguishing too because we are not saying that everyone who's in credit card debt is just like a well-meaning down on their luck has no personal responsibility or agency. There are absolutely situations in which poor decision making, patently poor decision making leads to credit card debt and accountability matters.

However, we cannot separate that from, I'll call it the culture of consumerism that we're steeped in as well as to your point about systems. I think that there's a really, really specific example here that retrofits back to that original episode topic, which is that yes, partially this is the result of individual choices in the sense that you can make a different decision. You can play with fire and not get burned. More than half of Americans do it every day.

They don't have any credit card debt. But there is an economic component here in the domain of borrowing, especially for things like home ownership and auto ownership, that if every other buyer is using credit to finance a purchase, that leads to higher prices for everybody. Even if you decide, I'm not going to touch this at all, I'm going to stay as far away from that fire as possible, I'm not going to worry about a credit score, I'm just going to buy everything in cash. You are still exposed to higher costs as a result of our society's dependence on credit cards charge merchants fees that are then passed on to the customer in the form of higher costs.

So beautiful example of our overarching theme. You can control what you do in your own life, you can control what you can control, but if you're not examining the bigger picture to figure out how you fit inside of it, you are going to have less information with which to make those choices.

Henah:

So that actually, that reminds me of the “We Live in a Society” blog that you did and just kind of our ongoing conversations about community, which is how is anybody supposed to know what other people are going through? And a realistic level when the economy headlines are saying, everything's so strong, the job market's great, social media is a highlight reel, how do you know that you are all dealing with something and how can you band together to tackle a problem like wealth inequality if you don't know that most people among you are also struggling? And I think that's kind of this larger piece of, in a community, it's probably more evident that everybody is spread thin or everybody is having a hard time rather than, hey, my five friends that I follow on Instagram who are influencers are living it up. I need to go on yacht in Croatia for a week.

Katie:

Everyone's in the south of France.

Henah:

Yeah, I mean, I have to say though, I'm very heartened by France's recent win because I actually was going to bring this up that when we talked in our election episode also a few episodes ago, people feel really discouraged and even more so now I think in the last couple of weeks and rightfully. But I did feel really encouraged by France's recent win because I think what it does is it helps us imagine what that victory could feel like for the us and it is possible to imagine a better future for all of us when we see it happen with a country, not exactly like the us, but a little bit similar. So yeah, I dunno, do you have any thoughts on that, that kind of relation between the two?

Katie:

For sure. I mean, haven't been following the French elections super closely. I'm broadly aware of what's going on and this, I'll call it surprising and heartening change of pace.

But I do think that your point about hopelessness, feelings of powerlessness, I feel like the credit explanation is a really good one. And in tandem, I would add just the lack of organization. My theory is that there are a lot of people who understand that something has gone gravely wrong in this country, but are not sure how to imagine what better would look like.

I've kind of talked about this on Instagram. My parents and I hold very different political viewpoints. We are on opposite ends of the spectrum, but my dad has been, since he's retired, he volunteers with an organization that goes through basically very, very poor people's homes in Tennessee and kind of helps them get whatever they need.

So if they need a little bit of money to make rent that month, if they need help with groceries, if he helped a guy the other week that needed a handrail installed in his house and couldn't afford it, so my dad will go to Home Depot and get the stuff and put it up for him and help him out. And I think I have seen through our conversations a real tone shift in him and a real recognition that something has gone very wrong and it makes him emotional to talk about what he experiences and what he sees people going through.

And I think it's really powerful that that has given us an opening to meet in the middle. I think where we still have differences is like, what do we do to fix this? What has gone wrong? But I'm hearing him coming around the other day, I was like, so you think it's fair to say that capitalism is exacerbating this? And he'll be like, yeah, whereas years ago he was like capitalism's biggest cheerleader and now he's like, something is broken.

Henah:

Well, it's funny because you also would text me years ago and be like, I'm a capitalist at my heart. I'm a capitalist. And I'd be like, I don't know if I agree with that. And now I feel like how the turntables, because…

Katie:

I don't think I would mean I'm a capitalist in practice because I think that that's the only choice we have right now. But I think that the more that I learn and the more that I can, this is, this is where it comes back to imagination. The more that I can see a different and better way, and the more that I can imagine how things might change and improve, the more possible it feels to go, oh, well that would be better, wouldn't it? So I want to pull a specific example to kind of help connect the dots here. There was an article I read the other day called The Case for Socialized Ownership.

Henah:

Uh oh, she said, socialism, here we go.

Katie:

Get out the red scare banners.

But it uses transportation as an example. And it says, it almost reminds me a little bit of the Henry Ford quote from back in the day, well, if I had asked people what they wanted, they would've said a faster horse. It's like we are only able to imagine incremental improvements. When you think of aspirational transportation in the United States, you probably think about a luxury vehicle. You probably think about, well, when I make it, I'm going to trade up my Toyota for a Lexus or whatever. You are only imagining incremental steps above what you have.

And the article, I loved this quote, they called it a “neurotic little hands-on private fortress.” But I was like, yeah, that's the narrow view that we have of what is better. What you probably are not imagining as aspirational travel is like futuristic high speed rail where you have a clean little pod that you can nap in, watch movies, catch up on emails while you get zipped to where you need to go.

Henah:

I want to do a train vacation so badly. And then the US is just not equipped to have that.

Katie:

Not accommodating. No, you have to fly.

Henah:

But it’s kind of like the, you can't be what you can't see. Right. So exactly. I didn't even know that making this kind of income was possible five years ago for someone like me or I could not think of something where a left climate justice advocate is winning national elections. That is unheard of I feel like in the last decade.

And so I feel like there is a rising tide of people who are like, we have to do something that is better than what we have because it is not working. And I agree with you that people feel kind of powerless, but I would argue that I'm like, Katie, should we do a Money with Katie workshop where we imagine what is possible?

Katie:

Well, it is interesting. I feel like it is that two step process. It's like recalibrating your expectations and imagining something better, which I do think travel can help. I think when you go to other countries, I'm not sure if it's, oh man, I saw a reel the other day of someone who was traveling in, maybe it was Japan. They were somewhere with very futuristic looking society and they're like, oh, probably Japan. So there are places in the world that have this, we just don't have this. But I think travel can help you see, oh my gosh, there are societies that are organized differently.

Henah:

A hundred percent. Japan’s COVID tracking system was amazing. Their rail system is amazing. Even the way their toilets work are amazing.

Katie:

They're public transport, the kids are safe. You'll see videos of six year olds using it alone. The culture is like, oh, these kids belong to everybody. We all are responsible for protecting them. They respect their elders.

So the imagination is first, and then it's getting organized and it's policy reform and it's demanding these things of our leaders. But it is a two-step process, and I think that that's where Paco had kind of alluded to the fact that sometimes the messages of hopelessness and nihilism are very counterproductive because it is good to get people pissed off enough that they want to make a change, but it's bad if the conclusion is, well, it's not worth doing anything.

Henah:

That's just the way it is.

Katie:

It’s too far gone. That's just the way it is. Yeah.

Henah:

And well, I think also Caro, when she said something like, Americans have this mythology of what the country is or should be, even though that has never existed, and so we're unable to have conversations about it without it being a critique of, if you don't like it, go somewhere else. Go back to your country. I'm like, I was born here. What are you talking about? Would you really know what they mean when they say that? But it's just interesting that the question was about credit, but it's also so related. I feel like we're doing the Charlie in It’s Always Sunny where we're connecting all of all the dots.

Katie:

The threads. That's all, all the best episodes feel that way. Yeah. What's also been helpful for me, I think in my own journey of unpacking and unlearning and relearning has been, I have found that the more that I learn about American history and real American history, not the kind of American history they teach you in a third grade classroom.

Henah:

In 12 years of Catholic school?

Katie:

In a Catholic school in Kentucky, that's very whitewashed, very friendly, happy rose colored glasses. Not like that, but I just read White Trash, the 400 Year Untold History of Class in America, and I just got at Caro's rec, a book called Fantasyland, and it's also about this dream of American exceptionalism and what have you.

But I do feel as though immersing myself in, oh, this is actually from the jump, how this has all played out. It has very much allowed me to perceive that our current moment as just that it's just a moment in history. We're not at some magical Goldilocks end state. We haven't done it. We're not like, okay, great. Everyone has the correct amount of rights and we are at the correct amount of inequality, and now we can all just sit back and let it ride. This has been a constant evolution and we are still in the midst of that evolution, and that has been helpful in allowing me to kind of perceive modern history as just a moment in history that we are still in the midst of change and we still have the power to shape where we go next.

Henah:

Yeah. I feel like that's a good note to end on, and I was going say it's also intentional to be built that way, but that's a downer. So we'll cut this and keep your point.

I do have a money story that I think actually ties it together, kind of came out of the episode, but more of your, “We Live in a Society” piece, which I actually, I would like to turn into an episode eventually because I think we got so many interesting responses on social, emails.

Katie:

I've never had an essay go viral on Instagram before. I was shook. It has been wild to see.

Henah:

I was texting you like it's at 5,000 likes. It's been only an hour. It's at 7,000. Yeah, it's like…

Katie:

25,000. It's crazy. But that's so cool. It goes to show, this is resonating, this idea.

Henah:

Oh, a hundred percent.

Katie:

And for anyone who hasn't read it, we'll link it in the show notes, but the TLDR is that we exist in an economic system that benefits from atomizing us and from separating us from one another such that we have to pay for everything that we need and every human need must be met with a transaction. And so if you can reinstill a sense of community and actually kind of disengage a little bit from the big wave of therapy speak that came through during the pandemic, which obviously I'm not going to say therapy's a bad thing, that's not at all what we're claiming. We're also not claiming that boundaries are a bad thing, but that sometimes that language can be weaponized to make you feel as though needing anything or asking for anything from the people in your community or social circles is like this terrible imposition. And so you should just be getting rides on Uber using DoorDash for groceries, TaskRabbit for stuff around the house. And it's kind of a pleading of we need to reestablish the bonds between one another and give and take a little more freely such that we are not so reliant on money. So it's kind of like we're shoehorning like a, hey, if you want to save money, you should really think about the role that you have in your community, even if that's just literally your neighborhood.

Henah:

There was one line that you wrote where I was like, damn, I'm so guilty of this. It was, your recipe needs a lemon and you don't have it, so you go to the store to get one instead of just asking your neighbor. That happened to me yesterday. Made a mistake with buttermilk. And instead we were like, we're going to have to go to the store. We're going to have to use milk. We tried to think of all these alternatives instead of probably just going to a neighbor and being like, do you have butter and milk that I could use? Yeah.

I thought that it was just such an excellent piece. I felt really happy and encouraged by the response that we got to it, which was just that yes, we do need more community. And so this person wrote in their name is Jim, shout out Jim, because I asked him if I could join their community, and he was like, sure.

So he said, “Before the pandemic, our family and neighbors were all trapped in the same routine, exhausted from work, carting over scheduled kids to a ton of activities generally keeping to ourselves. Then the pandemic hit, and we all found ourselves extremely bored after four days of being in the house. So one afternoon we decided to drag the camping chairs out to the front lawn and have a few drinks. Our neighbors across the street did the same, and we had a socially distant conversation, and as we were doing this, another couple we didn't recognize watch by, and we invited them to join. Imagine our surprise when we found out they had been living four houses down for three years. Anyway, long story short, these gatherings now known as Gappy hour because we know 10 foot gap between people has become more regular with more people joining. And this paved the way for what is now a truly thriving community, complete with a huge WhatsApp group, a tool share spreadsheet for borrowing tools, multiple gardens where we swap vegetables, seasonal block parties, and no need to ever call Uber, DoorDash or TaskRabbit.”

Katie:

Oh my gosh.

Henah:

And I commented, I responded back and I was like, I loved this. I'm so happy about this. I live in Atlanta, but can I get in on that WhatsApp group? And he said, “Sure. I'm sure you'll get notification fatigue from the WhatsApp group. Feel free to come on up for next year's block party chili. It's usually in March, so the weather can be a little dicey. We have plenty of hats, gloves, and jackets to lend you.” Which is such a beautiful example of this community in motion and so stunning. Yeah, I felt like it was a great story to include and just a prime example of what this could look like.

Katie:

Obsessed. Love. I mean, yeah, it's like to connect the dots. I think that part of the reason we become socially distant, not in the Covid protocol sense, but socially distant, psychologically and physically from people that we live around and from maybe even our own friends, is partially a result of both the prevalence of social media that you can feel. It's like fake connection. It's like a hologram, you can feel—

Henah:

The parasocialness of it all.

Katie:

Like you're around people all day and you can kind of get the same, but it's ultimately a very empty form of connection. And I think that oftentimes people that, again, many times, rightfully so they're doing this because they either don't have a choice or because they are playing the long game, you will move away from friends and family for work and live places that you don't know anybody.

Henah:

Subtweet me.

Katie:

Same. There is friction to establishing a new community, but I think that it all just kind of comes back to prioritization and where does it become a little self defeating? I think we kind of mentioned this in the cognitive dissonance episode, but there is that sense of Well yeah, because as long as we live in a system, we're like, college is $200,000 and elder care is $150,000 and childcare is $30k a year. It's like, then yeah, you're going to have to prioritize earning and investing a shit ton of money. Holy shit, that is so expensive. But if you can remember that none of that stuff is set in stone, none of that stuff would have to be that way. That's just the way it is now. Then you can start unwinding like, oh, well maybe we don't all have to be incredibly rich to live a dignified life, if not everything costs so much.

Henah:

I'm laughing because I had that thought this morning that was, I wonder how much less stressful my life would be if I didn't have to think about getting all these things for myself rather than it being provided for me. And so I looked up the American stress levels versus every other country, and we are literally the top ones. So the other ones were like Iran and Serbia, which they have much different reasons…

Katie:

They have conflict.

Henah:

And so I a hundred percent agree with you that we all have the ability to imagine something better and it will also improve our lives greatly to invest and to explore that.

Katie:

You know what? My goal then, I think, is to put myself out of a job. Imagine a world in which people didn't feel like they needed to be constantly consuming personal finance information to get by.

Henah:

Oh, and that's...

Katie:

With that, that's it. That's it for Rich Girl Roundup. We'll see you on Wednesday to talk about the great salary reset. Thank you so much for tuning in, and we'll see you soon.