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Old 10-15-2007, 10:12 PM   #21
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All of us who were born with good genes and are relatively intelligent should be very grateful for winning out in the game of life, rather than scornful of the stupid less fortunate. Admittedly, it can often be a challenge!
Indeed......a challenge to all of "you."
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Old 10-16-2007, 08:34 AM   #22
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I'm a big time saver, but I can definitely see where the wife is coming from.

Playing devil's advocate for a minute: Why spend a ton of effort to scrimp and save just to have a $25,000 down payment for a house that will cost $400,000 and have a huge mortgage payment? Right now they are doing ok in a rented house paying only $1,050/month. After they buy the new, expensive house, then they will have to continue to scrimp and save to afford the oversized mortgage payment.

Maybe the wife wants to enjoy her time and money now instead of saving up for a big house purchase that she places a lower priority on? The husband might be stuck on this "American Dream" crap of owning your own home is the only way to be a upstanding citizen.

If it was my money to waste, I'd rather waste my money on consumer goods, vacations, and dining out instead of massive interest payments on an overpriced house that I don't really care to own, maintain, clean, insure, upgrade, etc. etc. That is, of course, assuming I couldn't just save the money and FIRE one day...
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Old 10-16-2007, 08:49 AM   #23
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I'm a big time saver, but I can definitely see where the wife is coming from.

Playing devil's advocate for a minute: Why spend a ton of effort to scrimp and save just to have a $25,000 down payment for a house that will cost $400,000 and have a huge mortgage payment? Right now they are doing ok in a rented house paying only $1,050/month. After they buy the new, expensive house, then they will have to continue to scrimp and save to afford the oversized mortgage payment.

Maybe the wife wants to enjoy her time and money now instead of saving up for a big house purchase that she places a lower priority on? The husband might be stuck on this "American Dream" crap of owning your own home is the only way to be a upstanding citizen.

If it was my money to waste, I'd rather waste my money on consumer goods, vacations, and dining out instead of massive interest payments on an overpriced house that I don't really care to own, maintain, clean, insure, upgrade, etc. etc. That is, of course, assuming I couldn't just save the money and FIRE one day...
justin, you make a lot of sense.......some people should not buy a home just to have a home...........
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Old 10-16-2007, 09:29 AM   #24
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Good point justin....and besides, if all of these "tweeners" would just figure out buying a house and having a mortgage isnt the thing to do, then housing prices might come down and then they could afford it...
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Old 10-16-2007, 11:14 AM   #25
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I didn't see anywhere in the article that told their ages. It wouldn't be the end of the world if one needed to wait until their 30's to buy a house, and as Maddy points out, it may not be necessary at all. I have seen lots of people in bondage to a house and mortgage when they don't need to be.
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Old 10-16-2007, 11:24 AM   #26
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Playing devil's advocate for a minute: Why spend a ton of effort to scrimp and save just to have a $25,000 down payment for a house that will cost $400,000 and have a huge mortgage payment? Right now they are doing ok in a rented house paying only $1,050/month. After they buy the new, expensive house, then they will have to continue to scrimp and save to afford the oversized mortgage payment.
I was wondering the same thing. After several years of saving, I can now afford a down payment in Los Angeles, but my mortgage (and taxes, insurance, upkeep) would still be a few times more than what I currently pay in rent. That extra is currently saved, invested, working towards ER. Our apt - like the one in the story - is comfortable, big enough and below market in terms of rent. So what's the big advantage in buying again?
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Old 10-16-2007, 11:35 AM   #27
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I hate to admit it here but dh and I officially stopped saving any money at all a couple of years ago once kids were grown and we had a wedding we wanted to provide for our daughter. All our existing savings is tied up for retirement and growing on its own for the future. We spend everything we earn in the meantime. It's a lot more fun now....
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Old 10-16-2007, 11:36 AM   #28
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I was wondering the same thing. After several years of saving, I can now afford a down payment in Los Angeles, but my mortgage (and taxes, insurance, upkeep) would still be a few times more than what I currently pay in rent. That extra is currently saved, invested, working towards ER. Our apt - like the one in the story - is comfortable, big enough and below market in terms of rent. So what's the big advantage in buying again?

Right now, there is none! And the RE market is just beginning to figure that out! Seriously, there are some advantages to home ownership that have nothing to do with investing. Occupant owned house based communities are often very nice places to raise kids, often have better schools..etc.
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Old 10-16-2007, 12:06 PM   #29
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I had a lesson on contrasting living styles in school. We lived "across the tracks" so we could observe how the upper middle class lived. Most of my buddies from my side of the tracks quit school, got a job, bought a car, got married young and had kids.

I toiled away, surrounded by kids being given cars and lots of other things. I won several scholarships and was able to complete a Master's degree, by working during summers and at weekends during school.

When I finally was making the big bucks, we used to spend money on certain luxuries to compensate for much of the sacrifices we had made along the way. But LBYM was still our baseline out of habit.

So I can understand both sides of this situation. The kids at school got handed everything and never thought about LBYM. The rest of us developed the habits out of necessity.

So I think this is not a philosophy or religious habit but more a fluke of circumstances.
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Old 10-16-2007, 12:13 PM   #30
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Occupant owned house based communities are often very nice places to raise kids, often have better schools..etc.
Exactly. Just rent in a primarily occupant-owned housing community. Take advantage of the better schools and the nice place to raise kids without paying full price.
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Old 10-16-2007, 12:56 PM   #31
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It sounds like a lack of self-discipline more than anything else. Saving is "hard" for those people who indulged themselves with things they will need to sacrifice in order to save. Yet if they had exercised the requisite discipline in the first place, they wouldn't have indulged themselves. Does this stem from a poor upbringing? Perhaps. But the information about LBYM is out there all over the place, so once you reach a certain age you really have no excuse. Sacrificing unnecessary indulgences is the price you pay for being lazy.
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Old 10-16-2007, 02:02 PM   #32
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From The Daily reckoning:
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Despite the problems in housing, most Americans are feeling pretty fat and sassy. Living standards – at least, by the standard measures – have soared in the last 30 years. In 1950, the average new house had only 1,100 square feet of space. Now, the average is about 2,400 – even though families are much smaller.
Back in the ’50s, the typical family had one car. Now, driveways are full of them. And, of course, there are Jacuzzis, air-conditioning, big-screen TVs and all the other paraphernalia of modern life.
From the Eisenhower years to the Bush years, however, the U.S. economy was maturing. In the ’50s, manufacturing profits were half the nation’s total. Americans made things and sold them to foreigners. This left us with money to spend, to lend, to save...or to invest. Typically, we saved nearly 10% of what we earned in the Eisenhower/Kennedy era.
But then came a New Era. The government spent too much in the ’60s...and rather than own up and make good, the Nixon Administration defaulted. "The dollar is our currency, but your problem," said Treasury Secretary John Connolly in a moment of spellbinding honesty. Then, in 1972, the U.S. trade deficit stood at $3 billion. Now, the trade deficit is nearly $3 billion every day!
It did not pay to save dollars in the ’70s. Inflation rose to 12% and made them worth less and less. In a way, this was the lesson Americans most wanted to learn. They didn’t want to save anyway...they wanted to spend. Gradually, the economy shifted from one in which people made things at a profit to one in which they bought things at a loss. Households turned their attention to how to consume what they had never earned. And business turned its attention to how make money by selling to people who didn’t have any money. The economy itself shifted to one based on manufacturing to one that emphasized marketing...and then finance. Factories rusted. But shopping malls and housing development proliferated.
In 1967, Henry Kaufman was made a full partner at Solomon Bros. in New York. His compensation: $25,000 a year.
Forty years later, the average hedge fund manager is taking home nearly $24,000 PER WEEK.
Meanwhile, the average U.S. weekly pay is only $841 – a figure that is about the same, in real terms, as the average 30 years ago.
I think that sums up many of the differences.
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Old 10-16-2007, 02:21 PM   #33
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A lot of good points have been raised here.

In the first page of The Tightwad Gazette (published in 1992), Dacyzyn writes:

"the myths expounded...

'Nowadays, a family has to have two incomes to make ends meet.'
'Nowadays, it is impossible for a young couple to get into the housing market.'

.. and so began my quest to prove that it could be done."

So I guess things haven't changed much since 1992. (See also this article: Life is harder now, experts say - Gut_Check - MSNBC.com).
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Old 10-16-2007, 02:28 PM   #34
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Not to worry; the 'crisis' will soon be fixed up, courtesy of the taxpayer: Dems demand quick action on mortgage crisis - Mortgage Mess - MSNBC.com
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Old 10-16-2007, 02:30 PM   #35
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Not to worry; the 'crisis' will soon be fixed up, courtesy of the taxpayer: Dems demand quick action on mortgage crisis - Mortgage Mess - MSNBC.com
Whew! That's a relief...
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Old 10-16-2007, 03:27 PM   #36
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it took me about 15 years to save up enough to buy a house. i was close at one time but then a bad construction accident took all my savings during recovery and i had to start again.

i never made enough money to have ever had bought a house in five years. it's amazing to me how school teachers and others in south florida complain that they can't afford a house here coming out of college and entering the workforce. and then others use that to complain that housing prices are out of wack compared to salaries. well, my salary never bought a house either. it took years and years and years of my salary before i could do that.
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Old 10-16-2007, 03:49 PM   #37
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it took me about 15 years to save up enough to buy a house. i was close at one time but then a bad construction accident took all my savings during recovery and i had to start again.

i never made enough money to have ever had bought a house in five years. it's amazing to me how school teachers and others in south florida complain that they can't afford a house here coming out of college and entering the workforce. and then others use that to complain that housing prices are out of wack compared to salaries. well, my salary never bought a house either. it took years and years and years of my salary before i could do that.
Isn't that the whole point? It takes YEARS of sacrifice to amass the requisite down payment -- and so it should. Why? Because those years of sacrifice had the secondary effect of requiring you to live below your means, which usually continued once you bought the house. In today's day and age, people want the trappings of success now, not later. Easy access to money, even financing the purchase of a house 100%, avoids the necessity of saving, and thereby the secondary effect of LBYM.
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Old 10-16-2007, 04:11 PM   #38
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In today's day and age, people want the trappings of success now, not later. Easy access to money, even financing the purchase of a house 100%, avoids the necessity of saving, and thereby the secondary effect of LBYM.
IIRC, it is every American's constitutional right (per the 82nd Amendment or something, I forget) to have a McMansion, recreational property, two SUVs, three huge plasma televisions, a DVD player, DVD camcorder, four children, and three overseas vacations every year.

All on credit, natch.
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Old 10-16-2007, 04:36 PM   #39
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While I agree with your observations, did you look at their budget? It doesn't seem to me they are being all that wasteful. Yes, they have a car payment, but as long as they plan to keep the car for many years, that isn't all that bad. The 17k on the technical school for education Dale obviously isn't using based on his job description seems to have been a very poor investment, though.

I don't think they could do much better than they are currently doing. However, her attitude is definitely going to prevent them from improving if their income gets another increase.
I think their budget is reasonable even somewhat frugal I don't believe they spend only $20/month on entertainment dining out. The problem is they don't stick to it. If their income is 5833 month and their expenses is 5169 that leaves $664 month which equals almost $8K a year. Even if they have to spend $2K-3K on various emergency/vacation that still leave $5K a year for savings.
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Old 10-16-2007, 04:40 PM   #40
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IIRC, it is every American's constitutional right (per the 82nd Amendment or something, I forget) to have a McMansion, recreational property, two SUVs, three huge plasma televisions, a DVD player, DVD camcorder, four children, and three overseas vacations every year.

All on credit, natch.
My dad always has good lines, like this:

Well, your mom wanted a house, and the bank said 20% down or forget it, so we had a small wedding, lived in a tiny apartment, and I had PBJ sandwiches for lunch at work for 4 years until we had enough down to buy the house. And it WASN'T EASY..............
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