How Can They Afford It?

November 21, 2018

Financial Perspectives, Planning & Saving

Puzzled By Your Neighbors’ Lavish Spending?

It wasn’t jealousy or yentishkeit but puzzlement: “How do our neighbors afford their Italian wardrobes, luxury vehicles, and all those enormous home extensions popping up around the neighborhood?” wondered the Grusses.

Although they earned a healthy six-figure income – Chaim Gruss was an administrator and Miri, an office manager – somehow, they just barely stayed afloat. Thankfully, they’d purchased their modest home when prices and interest rates were low, so their mortgage payment was only $1,600. Even so, after paying for food, tuition, insurance, and other necessities as well, they never had any money left over. Now, their ranch house was busting at the seams, but even a small extension was beyond their means. They worked very hard at good jobs and lived simply:

What were they doing wrong financially? How did everyone around them have so much extra money to spend?

Big families with big bills

When a $165,000 household income, in the top 10% nationally, seems meager to frum families, it’s clear that we have a cost of living challenge. A high salary by American standards is not sufficient to provide a comfortable living to a frum family and the Grusses aren’t doing anything wrong. Their family is much larger than the average American’s (10 members vs. a median of 3.1); Chaim and Miri pay for yeshivah tuition, kosher food, and simchos, etc. Although it may seem like everyone around them is flush with cash, in reality, many (most?) in the community are in the same boat as the Grusses. People don’t broadcast their struggles, but as any frum accountant can confirm, Chaim and Miri have a lot of company who share their money challenges.

Business wealth streaming down

While many frum families scrimp, plenty of others do spend lavishly. How can they afford this? Firstly, many frum Jews are risk-takers – founders (or partners) of successful businesses. While opening a business is much riskier than working as an employee, it’s also the most likely path to becoming rich. Therefore, while our community probably has more needy families (who are neither professionals nor entrepreneurs), we also have many more mega-wealthy individuals, who can easily afford a luxurious life.

Even those who aren’t wealthy business owners themselves can become rich from being related to those who are. I recently counseled a Kollel couple who’d just been gifted millions of dollars from the sale of their grandfather’s business. With reasonable management of this pot, they will be able to live comfortably on this windfall for life! While this isn’t too common, it’s not unusual for family members of Gevirim to receive ongoing substantial assistance, which enables them to afford the comforts and conveniences the Grusses cannot. However, while many can indeed afford the high lifestyles the Grusses are seeing, others either borrow or beg to try to keep up.

Al tistakel b’kankan: the credit and tzedakah mirage

Before the invention of 30-year mortgages (after the Great Depression) and credit cards (in the 1950s), loans were hard to come by, and it was impossible for people to live well beyond their means. Today, banks will lend to almost anyone, and some who seem to be very financially well-off are actually cash-poor. Looks can be deceiving, and many of those the Grusses are looking at with huge homes, flashy cars, and designer clothing are living on borrowed money. Some heavy borrowers believe they need to “fake it ’till they make it,” while others strategically count on the bankruptcy laws to wipe the slates clean when their debts become overwhelming. There are various moral and practical problems with these philosophies, and most who are heavily in debt fall into it without thought. That Chaim and Miri are careful to avoid the quicksand of excessive debt is a good thing, not something wrong.

Finally, some are using tzedakah to afford things the Grusses may consider extravagant. Community gevirim, to their credit, donate a tremendous amount of money to support the less fortunate, usually with few strings attached. This generosity allows some people, whose income would cover just the basics, to use tzedakah for the extras and even luxuries. While at first glance this seems completely wrong, real life is not that simple. One person’s luxury is another’s necessity, and hilchos tzedakah include the concept of dai machsoro: supporting people to the level of their standards. Many families are in a position where not keeping up with one, or some family members’ lifestyle expectations would lead to severe problems with mental health, shalom bayis, or chinuch…is avoiding that not a legitimate use for tzedakah funds?

While the Gruss family is stressed, perhaps they can take some comfort that at least their pekel of tzaros is just financial. Hashem definitely has His cheshbonos.