Do We Have More Expenses Than Our Parents Did?

At Surviving and Thriving,  a reader named Grace posted an interesting comment on Donna Freedman’s latest gracefully written post about generosity and about keeping perspective on one’s own problems.

Perspective is such an important thing, and one that we so often lose in the face of our personal woes. While I am quick to whine about my financial state, I do try to keep in mind that my parents reared their children, bought a home and had a satisfying retirement on far less than I make. Naturally, they didn’t have my expenses, but truth to tell, I shouldn’t have my expenses!

Our parents brought up their families, paid for a home, and had an adequate retirement despite never earning much…. They didn’t have our expenses, but…maybe we indulge ourselves. Oh, God. I can’t resist:

Really? Is that so?

My parents rented all the time that my father was working — partly because we lived overseas for ten years, and partly because my father felt mortgage interest was the biggest rip-off known to humankind. When my father retired, he bought a house in Sun City with cash.

The house my parents retired to would sell for about $71,000 today. In 2004, it sold for $110,000, considerably less than Zillow thinks it was worth at the height of the bubble, in 2005.

My parents bought that house in 1962. Let’s go with the $71,000 figure as the value of the house, although, relatively speaking, it may have been somewhat higher when the place was brand-new. In 1962 dollars, that price would be $9,235.  In 1960, the average price of a Sun City house was about $10,550 — and my parents’ house was one of the smaller models.

I think my father earned about $8,000 to $10,000 a year as a Merchant Marine deck officer with a license to sail any tonnage on any ocean. That translates to about $61,500 to $76,880 in 2013 dollars. And it’s probably low: today a tanker captain with an unlimited license earns between $120,000 and $200,000. However, toward the end of his career my father sailed, by choice, as first mate, because the job didn’t entail 24–7 responsibility for the ship’s operation and safety.  So, the lower figures are probably accurate. My mother occasionally took office jobs, but she wasn’t paid much — in today’s dollars, probably no more than about 18 grand. By the time my father retired, purchased a new car, and put me through college, he had about $130,000 left in savings; that would come to about $999,400 in today’s dollars.

If that estimate is anywhere near accurate, he was doing a great deal better than his daughter is doing.

Is it true that they didn’t have our expenses?

Well, my father paid for my tuition, room, and board at the University of Arizona. He gave me $1,000 a year to cover all my bills for the nine-month academic period. That’s the equivalent, in 2013 bucks, of $7,868. I paid the tuition and dorm bills, budgeted $10 a week for all my meals, clothing, laundry, and other incidental expenses, and, at the end of spring semester, came out about even. Today, if you lived on campus, it would cost you about $24,744 to attend the UofA.

So: check! There’s an expense he didn’t have.

The four-door Ford Galaxie he bought cost $2,500: about $19,980 in today’s dollars. Not much difference there: that’s what I have budgeted for the purchase of my next vehicle.

In 1962, the cost of gasoline was about 25 to 30 cents a gallon: $1.92 to $2.31 in 2013 dollars: about 2/3 of what we pay today, adjusted for inflation. Some savings there, but not as much as one might have expected.

A Porterhouse steak cost $1.19 a pound; hamburger was 45 cents a pound; butter, 67 cents a pound; baby food, 25 cents for three jars; carrots, 9 cents a bunch; asparagus, 19 cents a pound; potatoes, 39 cents for 10 pounds; corn, 5 cents an ear; onions,  29 cents for 2 pounds;  oranges, 89 cents for two dozen; bananas, 10 cents a pound; bacon, 79 cents a pound; Crest toothpaste, 50 cents a tube; Tide laundry soap, 59 cents.

How much would that market basket cost us today, if we paid the same amount in inflation-adjusted dollars?

Porterhouse steak: $9.15 a pound (= $1.19 expressed in 2013 dollars) (Safeway has Porterhouse for $5.99 a pound just now)
hamburger: $3.46 a pound (Bureau of Labor Statistics estimates average price of $3.055/pound for 100% ground beef in 2013)
butter:  $5.15 a pound (BLS estimates $3.37/pound in 2012)
baby food: $1.92 for three jars (at Walmart, 98 cents for two; that’s $1.47 for three)
carrots: 69 cents a bunch (BLS estimate: 55 cents a pound, which would probably be about $1.10 a bunch)
asparagus: $1.46 a pound (on sale at Safeway in 2011 for $1.28 a pound)
potatoes: $3 for 10 pounds (in 2011, the federal government estimated you’d pay about $6.50)
corn: 38 cents an ear (in 2012, $1 for 6 ears at Safeway; 17 cents an ear)
onions: $2.23 for two pounds — about $1.12 a pound (last week I bought onions at Safeway for 88 cents a pound)
oranges: $6.84 for two dozen (today’s price: 88 cents a pound; for 24 that would probably be about $10.55)
bananas: 77 cents a pound (55 cents a pound, Safeway)
bacon: $6.07 a pound (BLS estimate, 2013: $5.23 a pound)
Crest toothpaste: $3.84 per tube ($3.67 at Kroger; $1.67 with a coupon)
Tide laundry soap: $4.54, unknown quantity (2013 price: Costco, $17.49 for 170 ounces, high efficiency)

Let’s compare. In the comparison, though, let’s drop the laundry detergent, since we don’t know how much that inflation-adjusted $4.54 bought and since the new HE version would wash many more loads than 1962′s Tide would.

What would they have paid, in the same dollars we use, for their products, and what are we actually paying for those products today:

1962 vs 2013 prices

I swear: I’m not making this up!

If you express the amounts they paid in 2013 dollars and then compare what you and I would pay for the same products today, the total is…just about the same!

So no. Their day-to-day expenses were not a lot less than ours.

What about utilities?

Well, the average residential cost of electricity in 1965 was 2 cents per kilowatt-hour; adjusted for inflation, that figure would come to 15 cents per kilowatt-hour. In 2010, the average cost for residential users was 11.53 cents per kilowatt-hour. No bargain for our parents there.

Most homes had no air-conditioning, although we did have swamp coolers and window air-conditioners, which, like heating systems, were inefficient and expensive to run. And of course no one had ever heard of a DSL connection.

Average cost for cable TV: about $50 a month; in 1962 dollars, this would have been $6.50. But it’s moot: there was no cable TV in 1962 — television viewing was free. There was less advertising, too, we might add.

After much Google and Yahoo searching, I haven’t found a reliable figure for the base monthly cost of a residential land line in the 1960s. Today’s basic cost for cell phone service of $30 to $50 compares favorably with the  $45 landline cost claimed by Wiki Answers (there were no cell phones, of course), except…$45 would equate to $331 today, plus you had to pay extra for toll calls. Highly unlikely. If memory serves, I think the base residential cost was $8 or $10 a month, but any call to another area code, including one just a few miles away, would result in a long-distance charge, which could be pretty expensive. When we lived in San Francisco, my mother had to pay long-distance charges to call her grandmother in Berkeley, a 20-minute drive across the Bay Bridge. Assuming you rarely made toll calls, though, a $10 bill of 1962 would be $76.88 today — about what I pay Cox for a DSL connection and a landline.

If we moderns dispense with the land line, we can get cell service for a much more modest rate. We’ll have to pay for the phone itself — but that’s a one-time hit. And besides…the “phone” is not really a phone: it’s a tiny computer connected to the airwaves.

In 1968, a 23-inch color console TV cost $349; a quick conversion indicates this was the equivalent of $2,328. A 60-inch high-definition flat-screen color TV will set you back only 980 of today’s dollars at Costco. And you won’t have to deal with the recurring visits by the repairman that we enjoyed during the 60s.

The average salary from which our parents paid costs that were the same as or higher than the prices we’re paying today was $4,659 in 1965 — $31,082 in today’s dollars — and most households had only one salary: the man’s. Today’s intact families usually have two earners. In 2012 the average starting salary for new college grads (those who could get jobs…) was $44,259. For all earners, the average salary in 2011 was $42,980. But bear in mind: in many households today, two adults are working. In 2012, the average U.S. household income was $63,091 — twice what a typical married couple in my father’s generation could expect.

Think of that. They were paying the same or higher costs — sometimes much higher — for the same products and services we buy. But in many cases those products and services, such as automobiles that were unsafe at any speed and clunky hard-wired phones with extra fees for long distance and TV sets prone to snow, static, and spinning images, were decidedly inferior to ours. Overall the cost of living was not a heckuva lot less, when the monetary units consumers paid with are inflation-adjusted.

Did our parents make far less than we do? Yep. In general.

Did they have fewer expenses than we do? Not exactly.

Should we have our expenses? Well, sure we should. Most of them buy the same services and products our parents had, only better in quality and lower in real cost. The only indulgence I can see in the expenses shown above is cable television — and many American TV fans have canceled that in favor of cheaper, less wasteful entertainment such as Netflix.

Maybe there’s a reason we live in bigger houses than our parents did, collect electronic gadgetry that would have been science fiction to them, and park two or three cars in the garage: we can afford them.


 

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Jane Savers @ The Money Puzzle March 18, 2013 at 6:55 am

We have given ourselves more expenses. When I was in high school my parents paid for me to take a bus to a larger city to see a play we were studying in english class.

When my sons were in school they took several trips to the USA and one of my sons took several trips to Europe with sports teams and for history. I could have bought my next quality used car with what I spent on school trips.

1 television is no longer acceptable in a home and no one can be expected to share a bathroom or a computer. Maintaining wants has driven our budgets up.

funny March 18, 2013 at 8:11 am

Yeah, but the point is, we can afford those expenses. Our parents didn’t have them because they couldn’t afford them on what people earned in those days.

If you accept the examples I came upon and described, you can only conclude that products and services cost, overall, about the same as they do now, once allowance is made for inflation. But families didn’t, by and large, earn as much as we do — partly because wages weren’t as high and partly because most families had only one earner, whereas today intact families often have two earners.

Traveling is a positive good in the education of a young person. The cost is probably worth it.

When I was a kid, flying was for the elite. People who needed to travel across the country rode the bus or the train. Today, airplanes are just like Greyhound buses used to be — only much more uncomfortable. At least they move faster…

And consider: How many folks do you know who’ve never flown on a plane? If you’re in the middle class, probably not many. In the 1950s, a lot of people had never ridden on an airplane. Because they couldn’t afford it. Even with the current bloated cost of flying, most people can afford an occasional airplane trip.

frugalscholar March 18, 2013 at 7:29 am

The killers are higher ed, medical, dental. The last two are not generally discretionary.

Consumer goods are cheaper; phone service is cheaper; flying is cheaper; food is cheaper.

funny March 18, 2013 at 7:52 am

Yes. Medical care…come to think of it, I don’t even know how my parents accessed medical care. Did they have insurance? Don’t know. I do remember a doctor coming to our house at 10 p.m. one time when I had a high fever, though.

By the 70s, medical care was getting expensive. My father retired early, and so they weren’t on Medicare. He signed them up for Arizona’s first HMO, a huge mistake. Care was less than second-rate, and when my mother developed cancer at the age of 64, she died with a great deal of unnecessary suffering.

Dental care…again, I don’t know. My mother’s teeth were bad; she had lost them all by the age of about 47. Mine and my father’s, however, were perfect — neither of us had so much as a cavity — and so the only dental care we needed was cleaning.

But higher ed…there’s the kicker. In my parents’ generation, few people had a college degree. But you didn’t need one to make a normal living. My father didn’t even have a high-school diploma — he dropped out of school in the 11th grade, lied about his age to get into the Navy, and went to sea. Today, to make the equivalent of my father’s salary, most of us would need at least a bachelor’s degree. Deck officers no longer come up from swabbyhood…they go to the Merchant Marine Academy, which offers a four-year program leading to a bachelor of science. Cost of attendance is relatively modest, though: in 2013, they say it’s $5,942.

Revanche March 18, 2013 at 12:04 pm

A few thoughts:

We choose more often than not, to go into debt for things we want and can’t afford, creating the impression that we have less. Like the fact that your dad refused to buy until he could afford to buy a home in cash – how many people would be willing to wait for that? (I would have loved to but it’s not happening.) And given the fact that people are willing to go into debt rather than wait, that has to be a factor in rising costs.

We also, IMHO, choose to use a lot more. For example, I suspect our serving sizes both in the home and definitely outside the home, have grown quite a bit over the years. Even if the cost is the same adjusted for inflation, I’m quite certain that in general, we spend more because we choose to buy more of it.

In any case, I’d think that yes, in some cases “we” do have a lot more than our parents did but probably not as a blanket statement.

We definitely do have way way more than my parents. For example, none of my clothing was purchased new when I was a child. It was either all handed down or bought from yard sales. Until I was 13, I don’t think I wore anything new from a store. My dad still buys his clothes this way.

funny March 18, 2013 at 12:52 pm

All very interesting observations!

During the crash, my attention was drawn to the number of 20- and 30-something bloggers who began to argue that it’s better for younger adults not to purchase real estate. Their points were a) that renting frees you from the substantial ancillary costs of maintenance and insurance, allowing you to put that money into savings; b) that renting leaves you free to move on to better job opportunities, something that’s crucial in the first decade or two of your career; and c) if you manage the savings differential between renting and purchasing wisely, you can use that money to build a much larger than typical down payment, one that lets you avoid mortgage insurance and could make a 15-year or even a 10-year mortgage feasible, thus accelerating payoff.

Not so sure about serving sizes. We ate generously: with every dinner, my mother served meat (usually in far more abundance than I cook today), a starch, a vegetable, and a salad. The plates I use today, which date to the 60s, are too large to fit in the cupboards Satan and Proserpine installed over the kitchen counters — by today’s standards, they’re outsized, but in those days they were just normal. What is sold today as a normal dinnerware is what my mother called a “breakfast set.”

From my perspective, which you could probably classify as middle-class blue collar, it seems to me that where necessities are concerned (food, housing, transportation, clothing, medical & dental care, education), they had no less than we do — and in fact, access to medical care was much easier. Decent K-12 education was free and varied in quality less than it does today (tho’ it was never good in low-SES areas), and public colleges & universities were reasonably priced. We had all we needed and never felt deprived.

Where wants are concerned, many of the things that mark an economically middle-class household are much cheaper than they used to be. Take clothing, for example. It’s not as well-made today, but it’s not expected to last as long and it’s much cheaper. Electronics are amazingly low-priced, when you compare by inflation-adjusted units of currency. My father would have fainted in ecstasy if he could have seen a gigantic television set that could freaking HANG FROM THE WALL — spotted at Costco yesterday for $890. Compare that with the 23-inch clunk for which he would have paid the equivalent of $1500 or $2000 and that took up a third of the living room.

Also, consider what we actually get with these objects. Given that a fairly ordinary, reasonably reliable car costs around 20 grand — about the same as it did in 1962 dollars — a modestly priced Toyota, Honda, or even a Ford is infinitely safer with shoulder belts and air bags and better body construction; it’s likely to have a GPS unit; it may have built-in BlueTooth; it has an astonishing music system; it may even have OnStar’s save-your-tuchus service; and you can expect it to run for 150,000 miles, not crap out after 10,000 or 20,000 miles. A television set can bring in hundreds of channels (granted, with nothing on, but that’s not the manufacturer’s fault) and it can stream content from the Internet.

I suspect that our lifestyles are much, much better, especially when you consider the quality and nature of today’s products and services, and, because households earn relatively more, most middle-class earners can afford to buy relatively more. Without guilt. ;-)

Hmmm…. Here’s another thought:

As for debt, you realize that major national credit cards were unknown or little used until the late 1960s? At least, that was true here in the hinterlands. You could buy on credit from department stores, but they were very local — an Emporium credit card, for example, was useless across the street at The Broadway.

It was 1966 when an acquaintance who worked at a bank signed me up for a MasterCard, so that she’d get a bonus at work. I’d never heard of such a thing and didn’t know what to do with it — for the first year I used it as a supplemental ID card for cashing checks. And it wasn’t until after I was married that I realized a person (videlicet, my young husband) could use the things to make a vast array of routine purchases on the cuff.

People carried less debt because it was less easy to incur debt, and because debt was used to underwrite businesses, farms, and housing, not to buy lunch at the local diner.

Evan March 18, 2013 at 1:09 pm

Couple of disjointed thoughts:

1) depending on what timeframe we are talking about (my parents and your parents are a generation apart) mortgage costs would be crazy different than today.

http://www.myjourneytomillions.com/articles/comparing-mortgage-rates-a-generation-later/

My boss purchased a house in 1990ish his mortgage payment (not taxes obviously) was the same as mine is today, and that was in 1990 dollars vs my 2013.

2) We have things today that didn’t exist. Who besides the crazy Jack Lalane was talking fitness then? Now we have gyms on every corner that range by me from 20 a month to $200 a month.

No such thing as leases back in the day. You couldn’t “borrow” a car for 3 years at a lower payment and send it on back.

3) Protection Planning – I am not sure where to start the research, but I would be shocked if auto and homeowner’s insurance was even close to the same industry back in the day. I am going to take the high road and not mention the mandatory health care people will need to have in a year lol.

funny March 18, 2013 at 1:33 pm

Excellent points, all the way around. The mortgage I had right about then was at 8.2%, if I recall correctly, and people thought that was a terrific rate. As you show in your post, in the not-too-distant past we had double-digit mortgage rates. And those weren’t in the low double digits, either!

Jack LaLane! OMG, talk about your blast from the past!! That’s exactly right: no one was obsessive about their health in those days. If you were, people would think you were a hypochondriac or a narcissist.

I think in the 90s fleet leasing deals were available for businesses. The cars my husband drove were leased by the firm; after a few years, partners had the option of buying them at used-car prices. But leasing wasn’t something individuals did.

Interesting thought about insurance. Back in the Dark Ages, you weren’t required to carry auto insurance, and many people didn’t. If you had any sense you did, but…apparently there were as many drivers with no sense back then as there are today. ;-)

I know we had homeowner’s insurance when we bought our house in 1969. But…???? It may have been some sort of high-deductible, catastrophic thing. And as for health insurance…I just don’t know. When he was working, my father’s may have been issued through Masters Mates & Pilots (the union) rather than Standard Oil or Union Oil, but that’s unknown to me. He may have been able to buy individual policies in those days. In the late 60s, early 70s…I think my husband & I had an 80-20 indemnity plan through the firm.

The financial landscape has definitely changed.

eemusings March 18, 2013 at 3:09 pm

Wow, epic post – kudos for all the number crunching. I wonder if it would be a similar picture in NZ, particularly in regards to property and food costs.

funny March 18, 2013 at 3:42 pm

It would be interesting to compare by country, no?

I did come across some data for NZ, Australia, Alaska (which didn’t join the union until 1959), and the UK. A researcher in those countries probably would have an easier time finding country-specific data online.

Karen March 18, 2013 at 4:55 pm

I spent more than 18% of my gross income on healthcare last year. And that was just maintenance. I have no cable, no smartphone, no gadgets except a Kindle (because my eyesight is failing).

funny March 18, 2013 at 5:11 pm

I’ve had that happen, too, once glasses, dentist, and long-term care insurance premiums were included. Actually qualified for a deduction!

Janet March 18, 2013 at 7:04 pm

Very interesting post. I do also think that things I buy die sooner than they would have in earlier times, including electronics (like my television) and clothes that just fall apart.

Pam@Pennysaverblog March 19, 2013 at 1:14 pm

Interesting. I would have just assumed that things cost more these days than they did in the past, but when you take inflation into account, you’ve shown that’s just not the case. Food for thought for sure.

Steven J Fromm March 30, 2013 at 11:54 am

Very nice job in doing these workups. Some of the details are very cool. Anyway, no matter how you slice it in whatever era you are born into you must do a lot of hard work to get ahead and it is never easy.

Pauline March 30, 2013 at 11:38 pm

Fascinating post. I grew up in Paris and my parents could afford a centrally located 3 bedroom as a starter, and 5 bed when they were around 40, on one manager salary. My friends are now on two six figure incomes and can barely afford 2 bed that are not that well located. But your numbers look reasonable for normal cost of living areas. Also, you say that the items we buy today are better quality, not sure that is true about food, houses, and general appliances. My grandmother and mother still wear clothes from their 30s, have pieces of furniture that are 80 years o ld or more, finding sturdy items today is not easy.

funny March 31, 2013 at 6:04 am

Entirely true about the changing quality of various commodities and products. While planned obsolescence seems to have been beaten out of the US car industry by the likes of Toyota, all manufacturers now plan it in to kitchen and laundry appliances. Where once we could expect, say, a dishwasher or clothes washer to last 12 or 15 years (or longer), they’re now designed to run about 7 years — a huge rip, given that they still sell at 15-year prices. Houses, too, are built to deteriorate fast — a realtor once told me that a 10-year-old house is considered “old” and will need extensive upgrades and repairs.

We’re inundated with fake food in a way people in my parents’ generation were not. If you try to keep mostly to whole foods (avoiding as much processed stuff as you can), today’s supermarket looks like a food desert. Most chain grocery stores carry surprisingly little real food, in proportion to the total number of ingestable items on the shelves. That’s because few Americans care to cook meals from scratch — or even know how to.

And to be fair, when both adults in the family have to work to keep a roof overhead, there’s simply no time and no physical strength left to prepare meals made of real food. Taking care of a house and a kid is a full-time job on its own, but as an enterprise it’s so undervalued we relegate it to our spare time, with a corresponding drop in the quality of our children’s lives, and our own.

However, returning to the availability of food, those of us who do eat real food have a much wider selection than our parents did. My mother never heard of such things as bok choy. We didn’t eat chard and kale, because they weren’t available in stores. Fresh asparagus was a luxury item available only in season — when we had it, we got it out of a can. Growing up, I knew adults who had never tasted an artichoke and wouldn’t have known how to eat it if confronted with one. Fresh fish was unavailable unless you lived near an ocean or lake, and frozen fish tasted awful. I’d venture that a typical grocery store, which was likely a corner grocer and not a supermarket, stocked a larger proportion of real food than today’s markets do, but there was less variety and much of the stuff was available only at certain times of year.

Michael @ The Student Loan Sherpa June 24, 2013 at 6:22 pm

One expense that we have that our parents did not his the high cost of college. My father was able to pay for his education as he went to school. Today that is nearly impossible. The price of tuition, adjusted for inflation, is triple what it was 30 years ago.

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