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Eh, right. And you think this is a good way to live? I guarantee you, it's not. It just ends up creating a lot of stress. You don't feel that stress so much in your 20s, but you do as you get older. If you don't develop good savings habits in your 20s, it gets harder to do so as you get older. You should talk to my 58 year old friend who never developed a good savings ethic. Now he has to work for jerk bosses (because those are the only jobs he can find that pay decent) and says he'll have to work until age 70. I think that's very unrealistic on his part. Even though he makes around 50K per year, he insists he can't save anything.
I didn't say it was a good or bad way to live. It's just a reality in America.
FFS. I never said it was. I was merely saying that those young people you know who think SS will be gone are just wrong. It's not going anywhere.
It will likely still be around, but, inflation and debt will likely render it worth less (buying power) than today. Something is going to have to be done (besides simply printing more money) when the actuarial imbalance of more outgo than income becomes a reality).
With regard to your OP question, the 1/3 formula/calculator is only a 'guideline' of what one should be able to pay for housing, based on average living expenses. Instead of looking at it as "What is the maximum one can qualify for when purchasing a home?" ... one would better ask, "How comfortable should one really be in going against the 'guideline' when it comes to a long-term financial commitment?"
Oh, believe me I know it's a reality. But the gist of your argument seemed to imply "everyone else is doing it, so it can't be that bad". There's no good reason for 76% of Americans to be living paycheck to paycheck. But if you decide to pay 1/3 of your gross income or more on rent, you're setting yourself up for a pattern of living at or beyond your means....and that is a very tough pattern to break once it is started.
I'm a teacher and make 38k a year. According to the 1/3 metric I could only be rented an apartment for $1044 a month. Now, good luck finding a one bedroom in LA for that that's not in a bad area for that. I could easily afford $1500 rent. And that's with putting money into savings and having money to go on vacation every year (I just spent a month in Scotland).
Heh, I make more than 38K and my rent is less than $1044. You and I clearly have different definitions of what's "easily affordable". And when you say "putting money into savings"...that's a vague term. Lots of people save 6% in their 401ks and maybe put another 5% into their savings account. Most of them are sitting ducks, as that is just not enough of a cushion unless you already have large savings balances (unlikely). These are the types of people who end up raiding their 401ks when they lose their jobs, or stop contributing because their cars died & they need to make payments on their new ones, etc.
I see lots of folks have learned nothing from the recent recession.
Quote:
Originally Posted by Aldous9
I never said there shouldn't be a metric, but 1/3 seems just arbitrarily picked out of a hat.
Any metric you use is going to be somewhat arbitrary, as there is no perfect metric that will apply to all people. That said, I really don't think the 1/3 metric is all that stringent.
Oh, believe me I know it's a reality. But the gist of your argument seemed to imply "everyone else is doing it, so it can't be that bad". There's no good reason for 76% of Americans to be living paycheck to paycheck. But if you decide to pay 1/3 of your gross income or more on rent, you're setting yourself up for a pattern of living at or beyond your means....and that is a very tough pattern to break once it is started.
no, the gist of my argument is that the 1/3 metric for deciding how much rent an individual can afford is flawed. And to illustrate that I used someone making 24k who, by that metric, should spend no more than $650 on rent. Then I showed how a budget at that income would leave someone with $700 savings at the end of the month(I left out clothing and laundry, so lets make it $650).
Heh, I make more than 38K and my rent is less than $1044. You and I clearly have different definitions of what's "easily affordable". And when you say "putting money into savings"...that's a vague term. Lots of people save 6% in their 401ks and maybe put another 5% into their savings account. Most of them are sitting ducks, as that is just not enough of a cushion unless you already have large savings balances (unlikely). These are the types of people who end up raiding their 401ks when they lose their jobs, or stop contributing because their cars died & they need to make payments on their new ones, etc.
I see lots of folks have learned nothing from the recent recession.
Well, I live in Los Angeles. You can't get a one bedroom apartment anywhere below $1300 unless you want to live in a high crime area. So, I choose to live somewhere safer and I'm frugal in other ways. For instance, I don't have cable tv or a satellite, my cell phone is only $35 a month, I don't drive an expensive car and my auto insurance is only $40 a month.
no, the gist of my argument is that the 1/3 metric for deciding how much rent an individual can afford is flawed.
As I pointed out, there are no perfect metrics. Any line in the sand you draw is going to be somewhat arbitrary, by definition.
Quote:
Originally Posted by Aldous9
And to illustrate that I used someone making 24k who, by that metric, should spend no more than $650 on rent. Then I showed how a budget at that income would leave someone with $700 savings at the end of the month (I left out clothing and laundry, so lets make it $650).
And several of us pointed out the many holes in your sample budget. You didn't leave out just clothing and laundry but also:
Unemployment
Future rent increases that are likely to outpace your salary
Retirement savings
Health insurance and co-pays
$50 gas is unrealistic for most
Saving for your next car
Car repairs
In short, your budget was wildly unrealistic. Lots of people live their lives according to the unrealistic budget you presented...which explains why 76% live payday to payday (per your own link).
Well, I live in Los Angeles. You can't get a one bedroom apartment anywhere below $1300 unless you want to live in a high crime area. So, I choose to live somewhere safer and I'm frugal in other ways. For instance, I don't have cable tv or a satellite, my cell phone is only $35 a month, I don't drive an expensive car and my auto insurance is only $40 a month.
You're probably right. So either get a studio or get roommates. That's what I did for 8.5 years, until age 35. Reality bites....but when I got my (studio) apartment, I had 100K saved in various accounts (retirement, savings, etc.). I live in the SF Bay Area and don't make a huge salary, either. I'm 43, and haven't lived in a 1BR since my 20s, when I lived in a lower cost area (and when I was less realistic about finances than I am now). This is the way life is for moderate earners in high cost areas like L.A. & SF---at least for those who want to have significant savings and not be living payday to payday.
I don't have cable, either. It's not a big deal and doesn't prove some sort of ultra frugality on your part. Neither does the $35 cell phone. My car is 17 years old. I could afford to get another one, but the car I have still runs ok. The auto insurance might actually be a bit low. You might be putting yourself in danger of having not enough liability coverage (I don't know that for a fact, just sayin' it sounds like your coverage may be too skimpy).
As I pointed out, there are no perfect metrics. Any line in the sand you draw is going to be somewhat arbitrary, by definition.
And several of us pointed out the many holes in your sample budget. You didn't leave out just clothing and laundry but also:
Unemployment
Future rent increases that are likely to outpace your salary
Retirement savings
Health insurance and co-pays
$50 gas is unrealistic for most
Saving for your next car
Car repairs
In short, your budget was wildly unrealistic. Lots of people live their lives according to the unrealistic budget you presented...which explains why 76% live payday to payday (per your own link).
Well that's right. Lots of people live by this kind of budget. That's what makes it realistic.
But I get your point about the arbitrary line in the sand.
Well that's right. Lots of people live by this kind of budget. That's what makes it realistic..
No, it's not realistic. That's why 76% live payday to payday.
You're being a blockhead so we're done here.
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