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Yes I got a liberal arts degree with law school as a target then couldn't afford to go to law school. Since I'm not a people person, I did not pursue the limited number of jobs available to liberal arts majors such as in retailing and insurance so there were few options left for me from which to choose.
I did think I was clever in getting a minor and undergrad assistantship in comp sci but I found that employers were not interested in a CS minor as long as CS majors were available; I was able to get only one IT interview through the college placement office. The then-emerging PC made my mainframe skills increasingly obsolete.
You had many options. You could have borrowed to go to law school. You were 80% of the way to becoming a school teacher, you could have done that. You could have pursued some other degree. You could have decided you wanted to learn a trade and then done it. You could have enlisted in the military and taken care to choose a job which translated well to civilian life.
In short, you had the same options that everyone else had. You had considerably more options than billions of people who have not had the good fortune to be born in the USA like you.
You continue to have options; you prefer to continue as you are.
When the value of your take home pay is being eroded by inflation, you do not have any incentive to save it because it will buy less in 6 mos. than it does today.
Inflation is an ineluctable facet of industrial capitalism. We can't have functioning markets without some positive rate of inflation. What's the "right" amount is debatable, but historically it has been rare for risk-free "investment" (savings accounts) to outpace inflation. One such time was circa 2005, when inflation was running at around 3% but a short-term CD might pay 4.5%/year.
Today's predicament of 2% inflation and 0% savings-account rates is admittedly unusual, both in the absolute numbers and the spread between inflation and savings rate of return. More typical, I would think, is something like 3% inflation and 2.5% savings rate of return. But that still lags inflation, especially if we include income-tax.
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Originally Posted by jertheber
Our economy grew on the back of all that consumption, the US "miracle" economy was nothing more than a reflection of our collective willingness to immerse ourselves in both materialism and debt. Of course the "consumer machine" had everything to do with it, we have come to think of this machine as our economy, and all the encompassing metrics to our consumption has arrived as the exact same stats as that which we measure our national well being...
A large part of the problem is that consumer spending is such a dominant part of the American economy. If our economic activity were carried more by exports and by civic/infrastructure spending, the aggregate national economic vitality would not be so predicated on Joe and Jane buying stuff at the store.
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Originally Posted by ncole1
When house prices are sufficiently high relative to rent, you never break even buying, even if you lived to be 300 years old you'd still be behind.
Thank you for pointing this out! Ultimately, a price/earnings ratio applies to residential real estate, just as it does for equities. We know that over the proverbial long-term, investment in stocks tends to build wealth. But investment during periods of aberrantly high P/E, or in specific stocks with unjustifiably high P/E, results in subpar (or outright negative) returns. So too with real-estate, especially in markets with moribund economies (midsize and smaller Rust-Belt cities, for example).
And as ncole1 and others have noted, the P/E ratio for houses must include all recurring expenses, including insurance, taxes and maintenance.
Every unit you own represents a person who cannot own. I'd rather put my money into building tiny homes so that more people could build wealth for themselves rather than for their landlords.
This is based on assuming the supply of housing is fixed and there isn't any new construction.
Homeowners have the [U]opportunity[/u] to build equity and wealth with their mortgages. But how often does that really happen? Do we get a really return on our investment equivalent to what we put into maintenance and interest on the mortgage? Because I'm on home number 4 and that has not happened for me. There are no guarantees here, and to assume that home ownership is always going to build wealth is a fools game.
True for both renting and owning. Many renters also fail to invest the cashflow surplus over owning, and end up broke.
It is (usually) not owning or renting by itself that determines if a person builds wealth; rather it is their career, living habits, family circumstances, and prioritization of financial goals over short-term pleasures.
If you don't mind living in a very small place that is very basic, renting comes out as a clear winner. You will pay far less than any single family home. However, most people don't want to live in a place like that.
This is exactly why I think too many people use the "but my house is an investment!" argument to justify going hundreds of thousands of dollars into what is in fact consumer debt (insofar as most of their living space is not a need but a splurgy purchase just like a fancy car.)
Many are quite reasonable and are covering things which must be paid anyway. Including saving monthly to replace roofs, fencing, etc.
Have you owned a condo? (I haven't).
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