Roody, over the years I followed the advice that HUD used to give. In a nutshell it was "You have to live somewhere so the buy or rent decision should be based on cost of suitable shelter." In other words don't use your shelter as a giant poker chip. I've noticed that the rent or buy, for comparable shelter has been pretty much a toss-up over the years, you can find deals if you shop and some years are better for locking in long term shelter costs. A few years ago several friends got the buy bug from the frenzy and I sat them down and went over the costs basically showing them one data point in that graph where the buy decision cost so much more than rent. One just last week thanked me for keeping her out of financial hot water. Another friend who I couldn't talk sense too- "You're nuts I'm going to make so much on this deal I'll retire in two years." Two years later- "Yeah, its gone down on paper but if I can just hold out until the recovery I'll get my money back." Not when he loses his job to a programmer in India.
The worst story I've heard so far is this guy who believed the "Home equity is your money so you may as well enjoy it." line that the bankers were dishing out. He used his home equity loan money to support his drug habit. Of course that led to a job loss. Now the bank will have to write off the loan since the house isn't worth as much as the bank loaned him and he has no option but to walk away. If the government steps in to help this guy we can all take comfort in knowing that they're waging a war on drugs and subsidizing a crackhead and his banker at the same time- with our tax dollars.
You had very good reasoning. What you explained to your friends was exactly what Chart # 4 showed. Unfortunately, the financial institutions and experts either didn't understand this, or they deliberately chose not to warn people of it. Instead they continued to encourage people to invest in real estate that would become more expensive and less valuable when it was held longer.
I hope Congress and prosecutors investigate this thing real hard.
Newspaperguy
04-21-08, 10:40 PM
Also people insisted on taking out home equity loans to buy stuff they didn't really need and now are stuck...big time.
I'm in a townhouse complex where that happened a few years ago. We needed a loan for some necessary work and then a few years later, the strata added onto that loan for some optional purchases. We were able to make the payments but we had no contingency fund. Strata meetings were tense at the best of times. In 2003, I was named treasurer. I asked the others if they'd be willing to do whatever it took to clear the debt. They all agreed. Each unit had to shell out roughly $1,000 in a one-time expense in order to get us debt-free. It worked and the strata's a happier place now, but I was probably the least popular treasurer they've ever had.
Nightshade
04-22-08, 10:09 AM
It worked and the strata's a happier place now, but I was probably the least popular treasurer they've ever had.
People who do the right thing or tell people the naked truth are seldom "popular". ;)
Roody
04-22-08, 10:44 AM
I'm in a townhouse complex where that happened a few years ago. We needed a loan for some necessary work and then a few years later, the strata added onto that loan for some optional purchases. We were able to make the payments but we had no contingency fund. Strata meetings were tense at the best of times. In 2003, I was named treasurer. I asked the others if they'd be willing to do whatever it took to clear the debt. They all agreed. Each unit had to shell out roughly $1,000 in a one-time expense in order to get us debt-free. It worked and the strata's a happier place now, but I was probably the least popular treasurer they've ever had.
I wish our presidential candidates would read this!
JeffS
04-22-08, 10:48 AM
Forced frugality for me in the 1970s; leaves me very happy, debt free, mortgage free, subsidized due to low income, etc., yet I can snap up a recumbent trike easily. It is very sad about housing, employment, Harley Davidson, energy in general- the world falling apart; yet people could not even pay me enough to get a McMansion, any gas hog, plasma TV,
BUT
I have kind of a perverse sense of humor watching oil rise 115, 116, 117.....
countersTrike
So this is a point of pride now? :rolleyes:
TiberiusBTkirk
04-22-08, 11:12 AM
don't the rich get subsidies, too?
why is being poor a 4 letter word? yeah yeah, pull yourself by your bootstraps
and all that hookie.
the American dream is still a Dream.
gwd
04-23-08, 11:44 AM
You had very good reasoning. What you explained to your friends was exactly what Chart # 4 showed. Unfortunately, the financial institutions and experts either didn't understand this, or they deliberately chose not to warn people of it. Instead they continued to encourage people to invest in real estate that would become more expensive and less valuable when it was held longer.
I hope Congress and prosecutors investigate this thing real hard.
Now, if I remember correctly, back then Alan Greenspan declared that there was no housing bubble, he called it a "froth" or "foam" saying that in only a few places were prices unreasonable and that things would come to an equilibrium. Compare that with his "irrational exuberance" warning about the tech bubble. Also, didn't the president brag on the fact that by not regulating the financial sector more people than ever were moving into "their own homes"? How could my voice, the voice of a frugal living person without any ostentatious displays of wealth counteract the rich experts? All I had was arithmetic. The friend who listened to me doesn't watch TV and was educated over seas so is numerate. The friend who didn't listen to me watches TV a lot and is in tune with pop culture. His brother in law made tons of money as a mortgage broker so he heard the equity as bank account rap a lot. Basically what I got from the friend who didn't listen is: "If you're so smart why don't you have a big McMansion and several gas hog cars like my brother in law? You live in a modest dwelling and don't even own a single car how can you know more than the economists on TV and my brother in law who works in the industry?"
pmseattle
04-23-08, 12:32 PM
Now, if I remember correctly, back then Alan Greenspan declared that there was no housing bubble, he called it a "froth" or "foam" saying that in only a few places were prices unreasonable and that things would come to an equilibrium. Compare that with his "irrational exuberance" warning about the tech bubble. Also, didn't the president brag on the fact that by not regulating the financial sector more people than ever were moving into "their own homes"? How could my voice, the voice of a frugal living person without any ostentatious displays of wealth counteract the rich experts? All I had was arithmetic. The friend who listened to me doesn't watch TV and was educated over seas so is numerate. The friend who didn't listen to me watches TV a lot and is in tune with pop culture. His brother in law made tons of money as a mortgage broker so he heard the equity as bank account rap a lot. Basically what I got from the friend who didn't listen is: "If you're so smart why don't you have a big McMansion and several gas hog cars like my brother in law? You live in a modest dwelling and don't even own a single car how can you know more than the economists on TV and my brother in law who works in the industry?"
Now the spin is that everyone who went in over his head in debt is simply a helpless victim. Both political parties are tripping over each other in the rush to bail out mortgagees ( they can't really be called "homeowners" ) at taxpayers expense. And of course the mortgagees don't pay much in the way of taxes themselves since their indebtedness is deductible. So in the long run the frugal people will be squeezed dry to pay for the debtors.
Even the CEO of Bear Stearns described himself as a pathetic, helpless victim as the Fed handed out $30 billion to bail out the company he mismanaged, in return for utterly worthless subprime mortgage-backed securities.
In a way, your friend's brother in law is right since bailing out the sad "victim" real estate speculators is turning into the most lucrative welfare program of all time, and frugal people will be footing the bill for the big spenders.
gwd
04-23-08, 01:29 PM
Now the spin is that everyone who went in over his head in debt is simply a helpless victim. Both political parties are tripping over each other in the rush to bail out mortgagees ( they can't really be called "homeowners" ) at taxpayers expense. And of course the mortgagees don't pay much in the way of taxes themselves since their indebtedness is deductible. So in the long run the frugal people will be squeezed dry to pay for the debtors.
Even the CEO of Bear Stearns described himself as a pathetic, helpless victim as the Fed handed out $30 billion to bail out the company he mismanaged, in return for utterly worthless subprime mortgage-backed securities.
In a way, your friend's brother in law is right since bailing out the sad "victim" real estate speculators is turning into the most lucrative welfare program of all time, and frugal people will be footing the bill for the big spenders.
Oh no. You have me remembering an article I read in the newspaper maybe 10 years ago titled something like "You saved for retirement and they didn't- now what?" Basically it pointed out that most people weren't saving money. Just last week I heard a radio report say the savings rate in the US is now negative. So, when the squeeze on social security comes in the future the spendthrifts will out number the frugal people by such a large margin that it will be politically impossible to prevent the non-savers from funding their retirement by voting to take from the savers through one change in the law or another. With the frugal people being such a small minority we'll have absolutely no power at the voting booth when proposals to heavily tax our IRAs come up. Your post reads like the process of taking from the thrifty to give to the profligate has already begun.
chephy
04-23-08, 01:37 PM
One of my coworkers pays $130 a month for cable TV, drives an SUV, lives 18 miles from work, and has a wife and two children. If that were me I'd be making some major lifestyle changes as quickly as possible. Me too! For starters, I'd dump the wife and kids! :D
Newspaperguy
04-23-08, 01:45 PM
Oh no. You have me remembering an article I read in the newspaper maybe 10 years ago titled something like "You saved for retirement and they didn't- now what?" Basically it pointed out that most people weren't saving money. Just last week I heard a radio report say the savings rate in the US is now negative.
I remember hearing something similar a while ago. In fall, I asked a banker about this trend. She told me a large part of it is because prices, especially houses and vehicles, have risen much more quickly than wages. The lifestyle a one-income family would have had from the 1950s to the early 1970s is difficult for a two-income family to achieve today.
lazyjayn
04-24-08, 04:44 AM
The lifestyle a one-income family would have had from the 1950s to the early 1970s is difficult for a two-income family to achieve today.
Not necessarily. In the '50's to 70's one parent would work, sure, but look at what they didn't have.
No second car. No dishwasher. No 2000 sq ft. house. Heck, it'd probably be closer to 1200. No cable TV- Heck, my mothers parents didn't get a color TV until 1980. No newest, bestest, fastest whatever. No monthly internet bill, no yearly expensive family vacations.
At that time, they had small houses, one car, few of what we think about now as necessities, and their idea of prepared food was most people's current idea of cooking from scratch. Some how I doubt, though, that most people are willing to live that way. I recommend continuing to live like college students for a couple of years after grad to DVM students and you'd think I was suggesting they copulate in the town square with their grandmother and a dog from the way they react. I thought living poor was what you were supposed to do for at least a couple years after college....
-j.
j.
wahoonc
04-24-08, 05:23 AM
Not necessarily. In the '50's to 70's one parent would work, sure, but look at what they didn't have.
No second car. No dishwasher. No 2000 sq ft. house. Heck, it'd probably be closer to 1200. No cable TV- Heck, my mothers parents didn't get a color TV until 1980. No newest, bestest, fastest whatever. No monthly internet bill, no yearly expensive family vacations.
At that time, they had small houses, one car, few of what we think about now as necessities, and their idea of prepared food was most people's current idea of cooking from scratch. Some how I doubt, though, that most people are willing to live that way. I recommend continuing to live like college students for a couple of years after grad to DVM students and you'd think I was suggesting they copulate in the town square with their grandmother and a dog from the way they react. I thought living poor was what you were supposed to do for at least a couple years after college....
-j.
j.
Nope, not anymore! FWIW I call it living below my means;) Too many people are worried about keeping up appearances and "appearing" successful. Me I would rather sleep at night knowing my bills are paid and I don't have to worry about whether I will be able to afford groceries next week or not. I could care less what people think of my lifestyle. All of my equals at work own houses in subdivisions, drive almost new expensive leased cars, belong to the "right" clubs, their children attend the "right" schools and are in debt up to their eyeballs. I drive a 12 year old truck, that is well maintained and looks almost new, my house and land are mortgage free, and I have over a year's salary in the bank. If I lost my job tomorrow it wouldn't bother me financially, and probably not in any other ways either:rolleyes:
As far as comparing today to the 50's-70's...no comparison... People had less "stuff" back then and lived in much more compact houses. IIRC the average square foot per person back then was something like 300 or so, today it is over double that. Ride through a subdivision built between 1950-1970 average house size was under 1500 sf, ride through the equivalent subdivision today and they will all be 2500+
Aaron:)
Lamplight
04-24-08, 07:13 AM
Me too! For starters, I'd dump the wife and kids! :D
:lol: (Actually, his kids are about the only ones I can stand for more than a few minutes. :o)
TuckertonRR
04-24-08, 07:30 AM
Oh no. You have me remembering an article I read in the newspaper maybe 10 years ago titled something like "You saved for retirement and they didn't- now what?" Basically it pointed out that most people weren't saving money. Just last week I heard a radio report say the savings rate in the US is now negative. So, when the squeeze on social security comes in the future the spendthrifts will out number the frugal people by such a large margin that it will be politically impossible to prevent the non-savers from funding their retirement by voting to take from the savers through one change in the law or another. With the frugal people being such a small minority we'll have absolutely no power at the voting booth when proposals to heavily tax our IRAs come up. Your post reads like the process of taking from the thrifty to give to the profligate has already begun.