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Hey, guys. It's Chelsea from The Financial Diet.

And this week, I wanted to talk to you guys about something that's a little bit serious but which. I think is a very long overdue conversation on this channel. And that is the systematic realities that we all live with in America that are making our lives harder than they need to be and making a lot of these financial goals harder to achieve.

I believe that you should do everything in your power to make your financial life as good as it can be because money impacts absolutely everything about our lives. And money is ultimately freedom. So, for example, if you are drowning in student debt,.

I believe you should do what you can in your power to manage that and work it down so that you can live a better life. But I also believe that it is fundamentally unfair that so many of you are drowning in student debt to begin with in such a wealthy country. I wanted to take a step back this week from all of the practical advice and personal motivations and talk about the bigger systems in which we live.

So apologies to my non-American viewers, but this one is really talking to my fellow Americans. So let's get right into it with eight financial realities that are making Americans' lives terrible. Number one is that most Americans aren't doing very well.

We hear all the time about how wealthy a country America is. And by a lot of standards, it is a very wealthy country. But the average American compared to other developed countries is not doing very well.

And those super wealthy people we have an abundance of tend to skew many of the statistics that we look at to see how Americans are doing. In fact, the Federal Reserve Board has estimated that 40% of Americans don't have enough money in their bank accounts to cover an emergency expense of $400. And beyond that, 78% of full-time workers said they live paycheck to paycheck, which is up from 75% percent last year, according to a recent report from Career Builder.

And overall, 71% of US workers said they are now in debt, up from 68% a year ago. So when we understand that a lot of the averages we often look at, like average income, average tax breaks, average net worth, are very skewed by people at the top of these brackets, the reality of most Americans' lives come into focus. We hear about things like record low unemployment or the stock market is up, and we have a tendency to think things are going really well without understanding that that only paints a small part of the picture and don't include things like the stagnating income and purchasing power of the middle class as well as things like increasing debt to income ratio, which tell a lot more of the story.

In fact, only 28% of Americans are considered financially healthy. And the point is when we think of America as this country that's just doing super well across all economic indicators, it can make us feel like we are failing if we're one of the many people in America who are struggling to get by. But the truth is if you are living paycheck to paycheck, drowning in debt, struggling to make ends meet, that makes you a normal American, not the exception.

And this refusal to be honest about where we are as a country only compounds that feeling of guilt and shame. But perhaps no misconception impacts us more on a psychological level than number two, which is that we're not really the land of opportunity. So there is a very pervasive myth that we are a country with exceptionally high social mobility.

And while there will always be some truth to that and it's definitely something that used to be much, much truer than it is now, it's also a myth that is pretty untrue compared to a lot of other developed countries and leads to a lot of Americans feeling personally responsible for not making it. And, in fact, when surveyed, we actually think we live in a much more socially mobile country than we actually do. An American born to a household in the bottom 20% of earnings, for instance, only has a 7.8% chance of reaching the top 20% when they grow up.

But Americans surveyed thought the probability was close to 12%. And while there is some nuance to it, there is also a lot of truth to this widely held notion that millennials are amongst the first generation to not do better than their parents in America. And that is pretty accurate when you look at things like our level of employment, our debt to income ratio, our purchasing power, et cetera.

But even across generations, one of the biggest reasons for our lower social mobility in this country is the fact that when someone is born or becomes poor, we make it exceptionally difficult for them to get out of that dynamic. When you are poor, basically, everything costs more. And we have set up incredibly predatory systems that essentially exploit the poor for not having enough money to pay for basic things.

One example of that is with our criminal justice fees. No government agency comprehensively tracks the extent of criminal justice debt owed by poor defendants. But experts estimate that those fines and fees total tens of billions of dollars.

And that number is only likely to grow in coming years with 48 states increasing their civil and criminal court fees from 2010 to 2014. And because wealthy and middle class Americans can typically afford either the initial fee or the services of an attorney, it will be the poor who shoulder the bulk of that burden. And, in fact, even just storing one's money can be incredibly difficult for the poor.

Low-income individuals are much more likely to be hit by bank fees, such as monthly maintenance fees if their checking account falls below a required minimum balance as high as $1,500 at leading banks, such as bank of America and Wells Fargo. And for the more than 10 million US households who lack a bank account, check cashers charge fees as high as 5%, which may not sound like much. But consider that a low-income worker who takes home around $1,500 per month would pay $75 just to cash her paychecks.

And in the cost of money orders, which she'll need to pay her rent, we're talking about $1,000 per year just for basic financial services. And even when it comes to buying basic household necessities and groceries, not being able to afford buying items in bulk means that you're often paying a much higher price per unit on these items. Combine that with things like predatory car loans and mortgages, which effectively target the poor with deals they know that these people will not be able to keep good on, and escaping the cycle of poverty in America is like playing the world's hardest video game.

Number three, the wedding industrial complex is bad for marriage. It's no secret that in America, the wedding industrial complex has exploded over the past few decades and is only getting bigger and bigger with the rise of social media. But this massive wedding spending is not doing our marriages any favors.

In fact, according to a 2014 study from SSRN, couples who spend more than $20,000 on a wedding are 46% more likely to get divorced than couples who spend less than $1,000. Of course, this does not mean that every big wedding or fancy wedding ring is going to lead to divorce. And similarly, assuaging those things does not mean you are guaranteed a happy marriage.

The pressures and costs of the wedding industrial complex is by no means something that is going to help our marriage start on the right foot. In fact, it's quite the opposite. And this enormous social pressure we create on each other is only hurting each other.

But speaking of people who can afford to throw enormous fancy weddings, let's talk about number four, rich people do not play by the same rules. It is probably no surprise that the wealthiest people in America have devised endless ways to not play by the same rules or pay their fair share in taxes in this country. And, in fact, Erin at the Three Minute Guide did a whole video about some of the more creative ways they get around the system.

And I'll link you guys in the description to her great video on the subject. It may surprise you the extent to which they have tilted the entire system, even the legal stuff, in their favor, particularly over the last 40 years. You may have been hearing a lot over the past few weeks about freshman Congresswoman Alexandria Ocasio-Cortez' proposal to instate a marginal tax rate of 70% over $10 million.

And it's so important to remember here that what that means is that yearly income over $10 million will be taxed at that 70%, not that anyone earning over $10 million a year will be entirely taxed at 70%. But even knowing that, a lot of people are freaking out about this, insisting that it's a super unfair proposal that is just punishing super rich people. But here's the thing.

Our top tax rates used to be even higher than that. During Eisenhower's presidency, it was over 90%. But lobbyists, advocates, and spokespeople for the super rich have done a fantastic job convincing Americans that it's totally normal for them to be paying as low taxes as they do now.

But we have to remember that it's not just abnormal for rich people to be paying as low taxes as they do compared to other developed countries. It's also abnormal compared to how America used to be. The top tax rate in 2015 was 39.6% applied to single people making $413,200 or more per year or married couples filing jointly making $464,850 or more annually.

But if we went back to 1954, single people making the equivalent of $413,200 would be in a 72% tax bracket, while a couple making the equivalent of $464,850 would end up in a 75% tax bracket. Basically, we have let our rich people in this country get away with paying much, much less than they should compared to other wealthy countries and much, much less than they used to. And even on top of those incredibly low tax brackets, they still find every loophole and bullshit way to avoid paying taxes.

The reality is that those super wealthy should be paying way more than they do. And not acknowledging that reality is making all of our lives way worse. Number five is that Americans are paying way more for way worse health care.

A lot of people argue in this country that a privatized health care system is a better system. But the truth is that Americans are spending on average twice than other developed countries on health care, and we're dying earlier. According to a study from the Journal of the American Medical.

Association, in 2016, the US spent 17.8% of its GDP on health care. Other countries' spending ranged from a low of 9.6% of GDP in Australia to a high of 12.4% of GDP in Switzerland. At the same time, the US spent an average of $1,443 per person on drugs compared to an average of $749 per person across all of the countries in the study.

And life expectancy in the US was found to be the lowest at 78.8 years compared to other countries, which ranged from 80.7 to 83.9. We also have the highest infant mortality rates with 5.8 fatalities out of every 1,000 live births. For other countries, the average infant mortality rate was 3.6 fatalities for every 1,000 live births.

And it should be said that a huge part of the costliness and ineffectiveness of the medical system in America comes from enormous administrative costs. They total about 8% of our health care spending here in America compared to a range of 1% to 3% of spending costs in other countries. And this drives up everything.

Everything from routine procedures to lifesaving operations to day-to-day medications cost way more on average for Americans. And these realities are often obscured by our perception that because we have a relatively market-based system compared to other countries where providers can compete for health care resources that we must be getting a better product. Basically, the only people who are benefiting from our current system are people like the insurance providers and pharmaceutical companies.

Whether we want to admit it or not, we are paying way more for way less effective system and leaving tens of millions of Americans to fall through the cracks. And this reality is making our lives terrible. And it doesn't need to.

Number six, on a similar note, is that there is no reason college has to be so expensive. One of the things that really needs to be understood by all Americans is that our cripplingly expensive higher education system, leaving the average bachelor's degree holder with about $38,000 worth of student debt, is almost totally unique. It does not have to be this way, especially in such a wealthy country.

And it isn't this way almost anywhere else. In fact, according to the 2018 Education at a Glance report,. America spends more on higher education than almost literally any other country in the world.

We spend on average $30,000 per year per student on higher education, which is nearly twice as much as the average developed country. The increased cost of college has actually driven down the value of a degree over the course of a lifetime because we now have to work so hard to dig ourselves out of the debt that we got into to get the degree just to break even. But why is American college so expensive?

Well it didn't used to be this way. In fact, public college tuition has risen about 213% since the late 1980s. And it's continuing to increase nearly every year, faster than the pace of inflation.

And perhaps even more sadly, this increasing cost has almost universally not gone to faculty. In fact, in that same time period, the average income, benefits, and job security of faculty members has gone down. The influx of this new cash has almost universally gone to administration where senior and middle management as well as consultants have exploded over the past few decades.

One study found that the California State University system had 11,614 full-time faculty in 1973 and 12,019 in 2008. During that same time period, administrators grew from 3,000 to 12,183, ending up with more administrators than faculty. And this is leading to serious excess in how that tuition money is being spent.

For one example, Colgate University spent $162 million in 2013. And there's a lot of strange fluff in the expense column, including $11.8 million paid to outside consultants, $8 million in travel expenses, and $4.2 million to top officials, as well as $25 million in undisclosed other expenses. The point is we have created a system in which we pay increasingly more money to an increasingly less valuable degree, which pays for increasingly useless administration and other expenses.

Number seven is most millennials don't have basic financial literacy. Now, among all of the financial realities that are making our lives terrible, one of the biggest is that we often don't have the basic tools to understand the situation we're in. And in a Millennial Financial Literacy Study from the National Endowment for Financial Education, only 24% of respondents showed basic financial literacy.

And financial literacy isn't just our ability to make good, informed decisions in our own lives. It's also our ability to understand the world around us. And this lack of understanding covers up some stats that otherwise are kind of promising, like the fact that 88% millennials are banked, which means they have a basic banking setup.

It's important to remember that financial literacy means that it's difficult for many of us to escape these systematic problems, often because we don't fully understand them. It's partially what leads so many of us to be in debt with 53% of millennials reporting that they are too much in debt. 2/3 of us have at least one source of long-term debt, and 30% have two or more. And more than a third have unpaid medical bills.

And when it comes to long-term preparation for emergencies, millennials are extremely under-prepared with about half of us saying that if a $2,000 emergency came up over the next 30 days, we would almost certainly not be able to find the money and nearly 30% of us having over-withdrawn from our bank accounts in the past 12 months. Millennials are more educated than other generations. But unfortunately, that education often doesn't extend to financial education.

And when you combine that with the levels of debt and underemployment that many of us are entering into systematically after college, it sets us up for decades of not being able to advocate for ourselves or even make informed choices. Number eight, the stock market isn't the real economy. One of the things that we hear so often to boost our morale about how things are going and convince us everything is great is when we hear the stock market is up.

We think that that is universally the sign of a good economy. But that's not really true. The stock market can be on a huge upswing, and it can still mean basically nothing for the average American.

Here's a good explainer. In February of 2018, the US Department of Labor released a strong jobs report showing wages rising at their fastest rate since the Great Recession. Then the stock market promptly began to plummet.

The Dow Jones fell an amusingly on the nose 666 points, its worst day since the UK's Brexit surprised. Traders seem to be worried that if wages rise too fast, it will cause the Federal Reserve to hike interest rates in order to head off inflation down the road. When, earlier this year, the central bank suggested that it would raise rates, much of the market was skeptical, in part because inflation has been so subdued for so long.

But faster pay gains for workers make it more likely the Fed will follow through, both because rising wages are a sign that the whole economy is heating up and because employers will eventually have to raise prices to keep up with the cost of labor. And to even further clarify this,. I thought I would include this chart, which compares real wages over the last 100 years with the S&P 500, an American stock market index.

You'll see that wages have remained fairly stagnant over the last several decades despite huge spikes and drops in the stock market. And a growing wealth gap is largely tied with the fact that the stock market is not a good reference point for a country's overall financial health. What is good for workers is often the opposite of what is good for investors.

It's important to remember that a system whose definition of success is constantly expanding profits and endless growth is almost inherently at odds with the interests of the average people making up that system. And it's also important to remember that another dollar going to a lower or middle income person in America is a much more valuable dollar for the whole because that person is much more likely to go out and spend that dollar. It's very easy to trip ourselves up by seeing, oh, the stock market's up on television and feeling like that means everything's going well.

But for the average American, that can often mean things are doing just the opposite. And most of the time, it means nothing for the average American. Whether we want to accept it or not, these are all financial realities we live with, whether it's how we choose to make big life decisions, the way we get an education, or the way our financial system is set up from the baseline.

And even if we choose to ignore them or not learn about them, it doesn't mean they are impacting our lives any less. I encourage us all to advocate for a system in which we are not constantly forced to make such difficult choices and to just scrape by. We are a very wealthy country who could afford to be doing so much more for all of our citizens.

And even though I have worked in my life to pay off debt and I don't regret doing it, I hope that the person who comes after me doesn't have to be in that debt in the first place. As always, guys, thank you for watching. And don't forget to hit the Subscribe button and to come back every Tuesday, Thursday, and Friday for new and awesome videos.

Bye. .