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When you're right, you're right. My wife and I are in my early- to mid-30s and you've basically described us to a T, except that we blew our first 10 years of income on an even worse investment than partying: education. Our monthly student loan payments, even on an income-based repayment plan, are roughly equivalent to the mortgage on a 300K house. And that's with a full academic scholarship to college and a need-based half-tuition scholarship to law school.
The way I see it, my wife and I made three fatal errors on our path to financial success: (1) we married each other, instead of going our separate ways to form one of those "power couples" that can afford $750K homes; (2) we both slid down the birth canals of parents who didn't provide college funds, instead of holding out for different sets; and (3) we had children (who will also be disadvantaged by our own inability to save for their education, thus perpetuating the cycle). Number two actually seems to be our biggest mistake. Based on many of the posts I've seen here and in other forums, I'd wager that most of those folks went to college, but didn't pay their own way (or they paid their own way, but had the luxury of living at home rent-free after high school).
I missed this one, but it's huge when I think about what could have been. Our parents paid for both my and my wife's undergrad degree and our companies paid for our masters. If this didn't happen, I'd have $400k of student loan debt to pay off instead of a mortgage. I might've purchased a small 3 bedroom home in Framingham or Natick, but to be honest that's all I would've comfortably been able to afford if I had that much student loan debt. I might even still be renting. But then again if I knew I had to pay for college on my own I would've gone to a local state school and wouldn't have met my wife.
I missed this one, but it's huge when I think about what could have been. Our parents paid for both my and my wife's undergrad degree and our companies paid for our masters. If this didn't happen, I'd have $400k of student loan debt to pay off instead of a mortgage. I might've purchased a small 3 bedroom home in Framingham or Natick, but to be honest that's all I would've comfortably been able to afford if I had that much student loan debt. I might even still be renting. But then again if I knew I had to pay for college on my own I would've gone to a local state school and wouldn't have met my wife.
Yes, now consider that not everyone is so fortunate before doling out boilerplate advice about how anyone can afford what you have if they just saved a little more and didn't go out partying.
Yes, now consider that not everyone is so fortunate before doling out boilerplate advice about how anyone can afford what you have if they just saved a little more and didn't go out partying.
How about putting an asterisk next to it - *only applicable to 30-somethings whose parents paid for their college education AND still can't afford a house
Interesting convo... Okay if I add our perspective? Hubby and I both have Bachelor's degrees. He graduated with debt, I graduated with none. We never carry credit card debt and have in 8 years of marriage only purchased two items that were financed: a modest family vehicle and and a TV. We both work and we save well, but are still, at 32 and 38 respectively, unable to buy a home. Why?
Start with our industry: it's incredibly volatile. I've had 6 full-time jobs in 10 years, and that's not even including all the contract gigs I took to make ends meet. Hubby has had 4 jobs in the same time, plus contract work. What with the recession happening pretty much right after we graduated, I have never received a raise, ever. And because companies often folded up right under me, giving me little time to seek something new, I've also not consistently made more at each successive place I worked, so I actually make less today than I did 5 years ago. Every time one of us loses a job, we use up much of our savings while searching for a new one. We're fortunate that we've never gone into debt during a period of unemployment, but we've also never been able to truly get ahead with savings. It's like starting over every time. And with such an unstable income, locking ourselves into a mortgage would be a colossal mistake.
Then there are the places we've lived: early in our careers, we had to go where the jobs were, which meant, for a time, San Francisco. The housing and rental prices there are stratospheric.... we were paying way over the recommended percentage of income for our place there, even though it was very modest. Until recently, that was our only option, though. We got the chance to escape to Massachusetts and we took it. We spent most of our savings (again) in the process, but it was worth it for the lower(!) cost of living compared to SF. Now, I'm actively seeking to switch careers and get out of our unstable industry, but that probably means starting at the bottom again and working my way back up. I expect it will be a few years before we can even consider buying a home.
So, no partying, no significant debt other than one person's student loans, and we're still renting. We did go ahead and have kids but that's because neither of us were willing to put it off until we have more secure finances, because frankly, that may never happen and I'm not willing to sacrifice having a family for that. My kids may not have a back yard and I may not be able to put much away for their college funds, but I hope I can prepare them for adulthood in spite of that.
I've got nothing against John's success, but it's a bit tiresome to hear obvious advice reframed as profound wisdom and being born on second base reframed as hitting a double. I'm really sick of hearing "have a mortgage that's less than your annual gross income" as practical advice. Have you seen what kind of advice people get on this board when they look for a $150k place to live, especially with a family?
And, yes, I am interested in how someone affords a $750k house. That might include practical and useful information. Starting 30 years ago, making a lot of money, and not having kids certainly are good ways of doing this, but not particularly useful or actionable to the people who need to ask. Proferring such advice comes off more as "A modest proposal" than genuine advice.
So good for John and good for you. I mean that genuinely. I just want to counter the impression that it's just super easy to get by here and those who struggle necessarily have some character defect.
This is exactly what Samuel Smiles wrote about when he 'advised' the poor to be thrifty and hardworking back in 1886. The funny thing was that most of the English working poor were putting in 16 hours days in horrific loom factories already. I guess history repeats itself over and over again.
Location: RI, MA, VT, WI, IL, CA, IN (that one sucked), KY
41,937 posts, read 36,951,955 times
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Quote:
Originally Posted by FromEverywhereUSA
Interesting convo... Okay if I add our perspective? Hubby and I both have Bachelor's degrees. He graduated with debt, I graduated with none. We never carry credit card debt and have in 8 years of marriage only purchased two items that were financed: a modest family vehicle and and a TV. We both work and we save well, but are still, at 32 and 38 respectively, unable to buy a home. Why?
Start with our industry: it's incredibly volatile. I've had 6 full-time jobs in 10 years, and that's not even including all the contract gigs I took to make ends meet. Hubby has had 4 jobs in the same time, plus contract work. What with the recession happening pretty much right after we graduated, I have never received a raise, ever. And because companies often folded up right under me, giving me little time to seek something new, I've also not consistently made more at each successive place I worked, so I actually make less today than I did 5 years ago. Every time one of us loses a job, we use up much of our savings while searching for a new one. We're fortunate that we've never gone into debt during a period of unemployment, but we've also never been able to truly get ahead with savings. It's like starting over every time. And with such an unstable income, locking ourselves into a mortgage would be a colossal mistake.
Then there are the places we've lived: early in our careers, we had to go where the jobs were, which meant, for a time, San Francisco. The housing and rental prices there are stratospheric.... we were paying way over the recommended percentage of income for our place there, even though it was very modest. Until recently, that was our only option, though. We got the chance to escape to Massachusetts and we took it. We spent most of our savings (again) in the process, but it was worth it for the lower(!) cost of living compared to SF. Now, I'm actively seeking to switch careers and get out of our unstable industry, but that probably means starting at the bottom again and working my way back up. I expect it will be a few years before we can even consider buying a home.
So, no partying, no significant debt other than one person's student loans, and we're still renting. We did go ahead and have kids but that's because neither of us were willing to put it off until we have more secure finances, because frankly, that may never happen and I'm not willing to sacrifice having a family for that. My kids may not have a back yard and I may not be able to put much away for their college funds, but I hope I can prepare them for adulthood in spite of that.
Now this is the modern reality and much of what I see. Thank you for posting it. Bonuses? Regular raises where you can project your earnings? That's privileged.
Though one person said something about the lottery of who you were born to. Yeah, its a huge difference, but when I used to let my mind go that route I have to be honest with myself, I'm pretty fortunate, and we're all rather fortunate we were born here and not in the slums of Kibera or rural China.
Now this is the modern reality and much of what I see. Thank you for posting it. Bonuses? Regular raises where you can project your earnings? That's privileged.
Though one person said something about the lottery of who you were born to. Yeah, its a huge difference, but when I used to let my mind go that route I have to be honest with myself, I'm pretty fortunate, and we're all rather fortunate we were born here and not in the slums of Kibera or rural China.
Yes. There are some websites where you can put in your salary and it shows you want %ile you are in, in terms of the entire world population as far as wealth, etc. Anyone on this board would be above the top 5%, worldwide.
Certainly you can think of it this way: Throughout almost all of human history, and even in the present day, for about 2 billion people, the entire focus was simply on staying alive day to day. Disease and starvation were everywhere, and often there wasn't anything that could be done about it. So many of our problems, as stressful as they may be, are actually luxuries, in the sense that we're well enough off that those are our worries.
Also, in one of Malcolm Gladwell's books he talks about being born in the right time. He uses the examples of the tech boom, and how based on the state of the industry and world economies, etc., the optimal time to be born was something like 1955 -- any earlier and you were already on a career trajectory and entrenched in life to make a big change, and any later, you were, well, a little late to get in early enough. And both Steve Jobs and Bill Gates were born that year (IIRC).
For me personally I paid around $650k for my house and my mortgage is barely 10% of my gross income...
You know, you've provided enough in your post for one to calculate your gross using two simple algebraic equations.
Some people in their late 30s still can't comfortably afford a $650K house. I'm an example, as I've just started working for a couple of years due to that PhD and postdoc. I've stretched to buy a $650K house. The escrow is eating up a huge chunk of my monthly gross. But with proper budgeting, I think I can be on track to fund my own retirement and kids college.
But the main point of my post is this: buy the cheapest reasonable house in a desirable town. I've recently tried to do a lot of what-ifs scenario. Interesting, if I were to downside to a 2-bed $450K condo, I would only be slightly better off financially 10 years down the road. But, I would be significantly worse off if I 'upgrade' to a $850K house say 5 yrs later when I can amass $200K for the down-payment.
So what is a cheapest reasonable house in a desirable town? Unfortunately, that's about $700K right now, in the bottom 1/3 to 1/4 of many desirable towns.
You know, you've provided enough in your post for one to calculate your gross using two simple algebraic equations.
I think Parsec meant that their monthly mortgage payment is ~10% of their monthly gross income. My wife and I are older but we are right at 9%. This is probably not that uncommon for dual income couples that are in their second or third houses.
I agree with your advice to buy the best house you can afford in the most desirable community that you can, even if that means forgoing a bigger house, 2-car garage, central air, etc. Those are the houses that will hold their value the best in the case of a downturn and offer the best opportunity for capital appreciation if you make improvements or renovations.
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