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Old 08-13-2009, 05:10 PM
 
Location: Conejo Valley, CA
12,470 posts, read 18,229,914 times
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Quote:
Originally Posted by rubber_factory View Post
It is a mixed bag. Good portions of Gen X and Gen Y got caught up in the leveraging. Some of them were hit by the huge tuition inflation. Some of them took on huge mortgages relative to their incomes, probably banking on the greater fool theory. Don't get me wrong, it is nobody's fault but their own.
Yeah the older Y's often have a good deal of student debt and many X's depending on their age either have a lot of student debt or got catch up in the housing bubble. The amount of debt one of my sisters took out during the housing bubble was amazing ($250~300k worth!).

Personally, I wish I was smarter about debt when in school, but I won't make the same mistakes again. I think the issue is that the younger simply do not know how much it sucks to have a big piece of debt over their shoulder and their parents really never taught them to take on debt cautiously. Once they experience it, I think will start to avoid it. Of course I still know Gen-Xers are that are building a nice mountain of debt for themselves.
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Old 08-13-2009, 06:16 PM
 
Location: Seattle
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I think one of the differences between the boomer generation and Gen X/Y is the college experience. It's much more expensive (especially relative to inflation), and consequently, a lot easier (maybe too easy) to finance. Boomers are impacted by this as well since most of these people are their children.

The problem is that real single wages at the entry level have continued to decline over time relative to inflation + total student debt. At the same time people are graduating with sometimes almost $1000 a month in student loan payments. Look, 18 year olds generally don't have a good grasp on what it means to take 60k out for college (nor do a lot of their parents). IMO it's irresponsible to allow them to take out that much money for school, but lenders allow it, and financing college is normal and acceptable. To a certain degree it has to be financed if parents can't or aren't willing to pay for it. The Economist had an article about college spending and its increase. They put the blame on the universities themselves for overpaying for buildings, staff and constantly trying to "one up each other" and in the process not enacting financial discipline to keep costs low for students and parents. Also many universities endowments have increased to billions and billions of dollars while parents and students eat 2x inflation increases in tuition.

College students don't understand how much it sucks. But can you really expect them to? Sure some do but they are certainly the exception. Walk on any college campus and talk to students. I mean if they have parents that are financially irresponsible then it's hard to expect the children to suddenly be awesome with money.
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Old 08-13-2009, 06:30 PM
 
Location: Conejo Valley, CA
12,470 posts, read 18,229,914 times
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Quote:
Originally Posted by drshang View Post
The problem is that real single wages at the entry level have continued to decline over time relative to inflation + total student debt. At the same time people are graduating with sometimes almost $1000 a month in student loan payments.
Yeah, its a combination of the student loan debt and low entry level salaries, or now often no job at all. In some sense, the younger Gen-X and Y are a bit lucky though. Many got the opportunity to learn how damaging excessive debt can be while they are young and have plenty of time to recover. They can also teach their kids about it. Some of the older Gen-X and Boomers are not so lucky in this regard.

I know when I was early 20's I just thought "oh well, I'll make plenty of money later to pay it off". Of course, it did not play out that way. I just decided to continue to live like a college student and another 2-3 years while I deleveraged a bit. Now, minus a $300/month student loan payment I'm fine (the effective rate after tax deduction is around 1.8%, so not much motivation to get this paid off too quickly).
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Old 08-13-2009, 08:45 PM
 
Location: Great State of Texas
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Here's one boomer that abhors debt. I do credit my parents who taught all their kids to always have a savings account and cherish it and think twice before taking out money.

And I have a son entering college this year.
I purchased a pre-paid guaranteed tuition plan here in Texas when he was in third grade.
I didn't want either me or him saddled with a huge college debt. I saved some other money on the side for books/dorm/etc.

I'm pretty honest about the household finances with my son and I'm trying to instill some frugality into his thinking about finances. I can only hope it pays off after he's out of college and on his own.

On the otherhand, I have a sister-in-law that encouraged her daughters to take out loans and go to private 4 year colleges out of their state. They are graduating with about $65-70K debt if not more and this is before they even start out in life by themselves.
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Old 08-13-2009, 09:01 PM
 
Location: Conejo Valley, CA
12,470 posts, read 18,229,914 times
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Quote:
Originally Posted by HappyTexan View Post
Here's one boomer that abhors debt. I do credit my parents who taught all their kids to always have a savings account and cherish it and think twice before taking out money.
There are of course tons of boomers that avoid debt and manage their finances well, etc. Whenever you talk about aggregates people always get up in arms because they mistake statistical claims for claims towards them personally.
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Old 08-13-2009, 09:22 PM
 
Location: Great State of Texas
86,068 posts, read 76,913,074 times
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Quote:
Originally Posted by user_id View Post
There are of course tons of boomers that avoid debt and manage their finances well, etc. Whenever you talk about aggregates people always get up in arms because they mistake statistical claims for claims towards them personally.
You're right. I don't know though if the majority of boomers are spenders or savers. I've seen more spenders than savers over the years.
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Old 08-13-2009, 11:19 PM
 
Location: Conejo Valley, CA
12,470 posts, read 18,229,914 times
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Quote:
Originally Posted by HappyTexan View Post
You're right. I don't know though if the majority of boomers are spenders or savers. I've seen more spenders than savers over the years.
Around 1980 household debt started to grow faster than the real economy, it grew rapidly until a couple of years ago. The personal savings rate went from 10% of so in 1980 to 0% in the mid 2000's. I think this is a pretty good indication that the boomers were not savers and had a lover affair with debt. Gen-X seems to have one foot in the no savings/debt love affair and the other in a more conservative lifestyle. It will be interesting to see how Gen-Y/Z think about savings and debt as they get older.
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Old 08-14-2009, 12:17 AM
 
Location: Texas
15,895 posts, read 16,207,720 times
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I'm a Boomer and I could have retired with 100% at 55 but decided to wait until 60 because I wanted to pay off my house, which I did. You can have my job. Good pay, exceptional perks and interesting work. 38 years with with federal civil service.

I did not start being careful with my money until I was around 40. So, I invested as much as was allowed in the govt' Thrift Savings Plan and 10% of my salary went to savings. Not surprisingly, my TSP account did not suffer much over the last few years because I put the money into solid, less risky funds. I can't get to it until I am 72 without a a significant penalty. That's fine because my retirement benefit is just fine.

I can only speak for the folks I know who are working Baby Boomers. Most are afraid of catastrophic illness. Though we all have excellent health insurance through the government there is still the fear of a dire, long lasting illness that will wipe out a family's money. So, they are working and saving as much as possible to have enough cash in case that happens.

As for me, I'll deal with it if it happens. Retirement is heaven but I am glad I waited the additional 5 years because the check is larger and I owe nothing to anyone (as far as money goes).
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Old 08-14-2009, 02:17 AM
 
Location: Los Angeles, Ca
2,884 posts, read 5,406,466 times
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Quote:
Originally Posted by CosmicWizard View Post
John23 wrote:
With vietnam, the numbers killed now in iraq are much lower, but look at the post traumatic stress, and number of severe injuries. Watching your buddies come back now all screwed up isnt easy. There are wars in every generation.

Also, the threat now of dirty bombs, 9/11, chemical weapons, etc. Our airports have become militarized zones vs the 70's.
Unfortunately this rings very true. The differnece however, is that the folks going to the current wars are VOLUNTEERING. They are not being DRAFTED against their will. Until you have faced the threat of being drafted, there is no way to comprehend how that threat impacts your life. In that regard ( not having a draft ), the post boomer generations have it pretty darn good.
Very true, absolutely.

I think most countries draft when you're 18, the US is one of the exceptions with a volunteer army.
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Old 08-14-2009, 02:55 AM
 
Location: Los Angeles, Ca
2,884 posts, read 5,406,466 times
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Quote:
Originally Posted by Stac2007 View Post
When I was in banking many boomers would come in to the bank to take out home equity mortgages in order to purchase a second retirement/vacation home. Now that the real estate industry is smashed many boomers can't afford to retire. They can't find young buyers for their first super inflated homes and they are upside down on their second mortgage. Is it a matter of greed or bad decision making?
Blind optimism. Fooled by the slick marketing of the financial services industry and the housing industry.

Remember some of the arguements during the boom...

-They arent making any more land.
-You have to live somewhere! (you can live in your car if you cant make your payments)
-Real estate has never declined nationally year over year (but it never got inflated to such a high point)

I think the mentality of the super inflated home, then getting a mortgage on a second vacation home, would be like a gambler who's just rolled 7 the last four times. And it's sure to come up the 5th time.
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