Adventures in Personal Finance, Part 1: The Middle-Class Family

Sometimes the middle classes have a hell of a lot more financial horse-sense than the rich, even if the financial press doesn't like to spin it that way.

Exhibit A: John Leland, in the New York Times, in a story headlined "Couple Learn the High Price of Easy Credit". There's an accompanying graph showing how the average family spends more than it earns, and Leland has found himself the average family:

[Christine] Moellering, and her husband, Mark, 39, earn average salaries for their age (together about $66,000 a year), live in an average-priced home and have an average cost of living.

Ms Moellering, and her husband, Mark, also have two young children (the daughter goes to ballet lessons) and the ridonkulous bathtub featured in this photo, as well as a 42-inch television. We set ourselves up for a contemporary morality play, where people learn the hard way what happens when you spend beyond your means.

But in fact a careful reading of the article shows that the Moellerings are actually doing pretty well, financially speaking. The bathtub looks extravagant, but we don't know how much it cost; the television cost only $800; and the ballet lessons are essentially paid for by the state of Michigan.

It's true that supporting a family of four on $66,000 a year, especially with the occasional splurge, is not easy, and these chaps have managed to rack up $22,228 in credit-card bills on top of $161,574 in debt secured on their home. But a lot of that credit-card debt, it turns out, is hangover from their wedding, and, importantly, it's coming down, not going up.

The Moellerings' total annual debt-service payments are $17,500, give or take – which is about 22% of their total income, including the $1200 per month they receive from the State Department of Human Services. And that $17,500 includes substantially all of their housing costs, which means that even once you throw in credit-card interest, they're still better off now than they would be if they were paying $1,500 a month in rent. (This is where I reveal myself to be a New Yorker, one of that peculiar breed of Americans who thinks that $1,500 a month in rent is dirt cheap.)

In fact, if you scroll down past all the woeful tales of "the high price of easy credit," you'll find that they've managed to cut their credit-card debt in half over the past two years, have built a savings account with $5,000 in it, and have also been contributing to Christine Moellering's retirement account at work. Add it all up, and they've basically managed to sock away $30,000 in two years, which they've put into savings and paying down debt. They're not living beyond their means at all. In fact, they're living well within their means – no easy feat for a family in their position, where the pressures of work and children always take precedence over issues of personal finance.