this post was submitted on 01 Oct 2023
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The only difference between a citizen and a serf is the right of ownership. This is the "freedom" people fought and died for. Welcome to Neo Feudal America where you will own nothing and you will be happy about it because complainers go to the gas chambers. Remember to go get your "Real ID" and passports because you are in the process of being tied to the land too.
Growing up, learning history, I always wondered how average people went from the freedoms of the citizens of Rome to feudal serfs barely more than slaves. I never thought I would get to learn first hand.
Americans would probably have a lot more freedom if they didn't normalize getting into debt. You can save a lot of money if you never pay anyone interest.
Oh fuck off I missed owning a home because I was too afraid of debt. It's impossible for most to save enough cash for a house outright especially with how insanely the prices inflate
Can confirm, I only have a low rate mortgage and otherwise no debt. I bought my cars with cash, worked my way through school, etc, and I have a comfortable savings. We're not rich, we just don't piss away our money to interest.
Honestly, if you can avoid credit card interest and make an average income, you can probably afford a home by your 30s in most of the US.
I don't think that's even remotely the case for the vast majority of the workforce. It takes an incredible position of privelege to think otherwise.
For the average US citizen, they have a spare ~$200/month (see my comment history for context) the median US home price is $420,385 according to redfin. That means your closing costs (4%) + minimum down payment (3.5%) for an FHA loan would be (.075 * 420385) $31,528 which would take 157 months assuming you had no emergencies or extra expenses at all. Leaving you destitute to pay your mortgage on a home which will have inevitably increased in price since you started saving.
It's a pipe dream for most US citizens, everyone has surprise expenses. People lose jobs, people buy things for leisure (what's the point of living if you don't?) Once they spend their 13 years of perfectly saved money to buy the average house, how do they afford the inevitable expenses? Save another 13 years to pay for another roof? Unfortunately now they have a mortgage which will be more expensive than their rent.
I assume the context you're talking about is this article:
And then you estimate the income as being ~$6275 or so, hence your $200 extra number.
That figure seems to come from this study by BLS. Instead of taking that number at face value, let's take a look and see where people are spending their money. The following is for a 4-person family unit, because that's the default for the USDA food plans (dollar figures assume $6083 per month to expenses):
What stands out to me is the insane amount of spending for transportation. Here's what I estimate, assuming two cars and excluding acquisition costs:
So let's assume $300/month for both, that means people are spending ~$800/month on acquisition and maintenance. That's nuts! Over 10 years, that's ~$96k! You can buy a new car for $25-30k with a 10 year warranty, so something doesn't add up. If you finance new cars, you're usually forced to get comprehensive insurance, so not only are you paying a high finance charge (including interest), you're also forced into a higher insurance payment.
My strategy is to buy quality older cars and keep them for 10 years or so. For example, I bought one car ~9 years ago for $10.5k w/ ~60k miles, and I've spend <$5k total (probably $2-3k, I DIY pretty much everything) on repairs and maintenance. But let's say I actually spent $5k, that means my average monthly expense is ~$140 for acquisition and maintenance. Double that and I'm under the average expenses in a car by almost half ($300/month for insurance+gas and $300/month for acquisition and maintenance, so $600 vs ~$1100).
So just with that, we can increase the savings per month by $500, meaning $700/month saved. To get that $30k down payment would take ~4 years. That's totally reasonable.
I think people on average just don't know how to follow a budget, save money, etc. I really don't think we have an income problem in the US (at least for the median household), we have an education and priorities problem.
If you have actual numbers for a household, I'd love to go through it because I've made a ton of assumptions here.
I don't disagree that spending less on transportation helps to save for a down payment. Finding inexpensive and reliable cars is not an easy task, but for people who were lucky, like myself, to find one it makes one chunk of the budget easier to stomach.
I own a home, so I'm not speaking from a place of woe is me, but from a position of empathy.
Don't forget you have to qualify for your mortgage, even if you have a downpayment. Lenders will let you spend up to a max of 43% (and most far less than that) of your pretax income on your mortgage payment. If you're the average household, 6275 * .43= $2698.25 monthly maximum payment. The average home price is $420,385 as we established earlier. Minus our down payment you could almost (but not quite) afford the loan with a PITI of 43%, the new payment would be around $2700/month with interest rates as they are today around 7.5%. But let's say you are above average income wise for the sake of the narrative.
Oh shoot, $2700/month? That changes our household budget, now you're spending at least an extra $800/month not including maintenance, utilities, and the many other expenses that come with home ownership. If you take that money out of your transportation budget you're left with $300/month, hope you don't have any surprise expenses! If your property taxes go up you have to give up something to afford it. Lose your job, lose your house. Paycheck to paycheck for the next 30 years, sounds like a nightmare to me.
On top of that affordability is getting worse, living expenses are rising, wages aren't rising as quickly, the average person who didn't luck into a home already will be less and less likely to afford one.
In my area, the average is right around $450k, so I think we're pretty representative of the rest of the US. I did a quick search, and I saw a dozen or so listings for townhouse around $300-350k. If we look at the top end, with a 20% down payment ($70k), the mortgage+HOA is ~$2500/month. If we look at the bottom end, it's ~$2300. I even see one as low as $2k/month. Note, this doesn't include utilities or maintenance. So for an average household income of $6275, we're looking at 30-37% of your income for the mortgage + HOA.
Rent for a similar place (2-3 bed, 2 bath) is $1500-2000. So it is currently cheaper to rent in terms of cash flow, but buying keeps your payment constant (inflation will be on your side) and builds equity, so longer term it should still be cheaper to own vs rent.
Are you assuming a massive $800/month transportation budget or something?
Let's assume $6275/month income, here's a budget that I think makes sense:
So, the major expenses come out to ~$5100/month. Add in another $500 or so for other stuff, and $5600 is a decent spending estimate. That leaves $600-700/month for savings, or 10-11%. Typical retirement savings goal is 10-15%, and that could be met by trimming some of these expenses by $200-250/monthn (a lot of that is taxes if going for pretax investments).
So yes, mortgage rates and property values certainly make things difficult, but I hope I've showed that it's not as hopeless and many people assume. I think the average household could own a house and still save 10-15% of their pretax income. They'd need to drive older cars, but nothing unreasonable (5-15 years old; both of my cars are 15+ years old and have minimal maintenance costs).
Unfortunately, the average person seems to suck at budgeting, which is why I say it's more often a budgeting problem instead of an income problem. The important thing is to establish good budgeting habits early, and then the focus should be on increasing income. Ideally, as your income rises, your spending doesn't rise as quickly, so you end up with more cash flow as you get to the point where you want to invest in a house.
Bingo. But people don't want to hear that the problem is themselves, it's far easier to complain about and blame other people.
Exactly.
I can point to plenty of extreme examples of rich people losing everything because of poor financial planning, such as lottery winners, sports stars, and trust fund kids. You can't outearn a spending problem, and you can often outsave an income problem. Most millionaires are also frugal, and that is extremely interesting to me.
For example, my brother retired super early because he was extremely frugal, and now he lives on a pretty typical average income in terms of regular spending (though his house certainly isn't typical). He's a millionaire, but he lives on someone like $60k/year. Why? He doesn't see value in spending more money, so he stopped working as soon as his savings growth outpaced his spending needs. He had a great job (actuary, eventually became VP), and he decided to retire at 40 after living in $50-60k/year or so and earning more than double that.
On the flip side, my cousin lives in a higher cost area than me and they're in a single income household making a mediocre salary (social worker, so something like $70k in a higher cost area). They own a house and are on their way with retirement savings, and they do this while having four kids. Part of their plan is to live near family so they have free baby sitters, inexpensive vacation options, and someone to help with household projects. I'm guessing they spend about $50-60k/year just like my brother. They'll probably work until normal retirement age and have a healthy retirement.
So I look at these examples and can't help but think that money problems are often symptom of poor financial education or mismatched priorities, or both. Occasionally there's a legitimate income problem, but if you're making around an average income, it's usually a budgeting problem.
So I'm getting closer to 30 so I think this relates to me and my experience well to share.
I've been paid a pretty reasonable pay middle class+ generally just shy of that perfect $70,000 of legend on average. Managed to pay off my absurd credit card debt from college and stopped payments on my college loans. I don't have a car I bile to get around and am generally frugal and had my company helping pay for a lot my stuff
I had about $11,000 pre COVID and that was practically all wiped out during the worst of it because Florida didn't believe in unemployment. At which point I was 26ish.
I think pre COVID I may have actually managed to hit over $30,000 by early 30s enough to actually put down on a house.
I now make over $70,000 a year... I have saved about $2,000 this last year living the same frugal life, still no car, still no debt payments really... I don't think your math works anymore. It's so completely soul crushing now how fast I went from doing ok to being in a gutter.
What are the main differences? If you don't mind, could you share your budget?
I know housing has increased a ton recently, but according to BLS data it isn't that much higher (like 10-15% from 2020 to 2022, which is high, but not "end of the world" high). Food has increased a lot, but food away from home has grown a lot faster than food at home, so I'm thinking there's a difference in what people eat (e.g. more delivery than before perhaps?).
I'm fortunate because I bought before 2020, so my housing costs are largely fixed. However, running the numbers with local data still indicates that buying is feasible, it'll just take longer.
In Florida, rents and house prices have increased way more than 10-15% in the last few years, where are you? We bought our house in 2020, the house across the street (slightly smaller and less yard but comparable) sold for 54% more than we bought ours for; and that price was in line with the other houses being sold.
I really thought we were buying at the peak when we did buy the house, assumed it would decrease from what seemed an outrageous amount (double what the previous owners paid in 2010) but it's about impossible now for most. Everyone I work with rents, unless they had a house before I did.
I'm in Utah, and we're in the same situation (our house doubled since we bought, which was ~9 years ago). The numbers I cited are national though, so obviously it'll lose a bit of nuance that's more relevant to specific states, and numbers can vary wildly from city to city. Also, other expenses can vary wildly as well, such as auto insurance being much more expensive in Florida (from what I hear) vs Utah, despite both being no-fault states.
But even in my area, there are still affordable houses. Mine may have doubled, but houses just 15 miles or so away haven't increased nearly as much.
Where exactly are you spending your 70k that leaves you with only 2k at the end? Especially when you're not paying off debt? Genuinely curious.
The problem is there is inflation, high interest rates, house prices increasing rapidly, skyrocketing rent and wages staying stagnant. If you try to save money for 30 years in hopes of buying a home, it would be a difficult prospect currently. In my area, most of the friends that are renting are paying 2000+ in rent. I pay 1300 for my mortgage. If I had started saving when I bought my house, I still wouldn’t have enough and my house is now worth 3X what I paid for it. I don’t know where you are from but you clearly don’t understand the current situation in the US.
Yeah I was raised to understand debt is for three things: education (as an investment and treated as such), mortgages, and cars (though I avoid car loans where I can).
It is more complicated than it first seems. The inflation rate is controlled within the way debt is handled and it is a way to tie together the politics of nations in order to bring mutual benefit and stability. It is not anything like an individual's debt to an institution. The rate of inflation balances against the debt in a way that makes it irrelevant in the grand scheme of things. Talking about debt like it is a bad thing in the world of today is a major form of populist manipulation for conservatives. The whole point and purpose of the GOP is to prevent reasonable legislation from having the opportunity to pass. This is what the billionaires are funding. It isn't about liberalism or responsibility or any bullshit like that. The only purpose is to continue keeping all of the legal loopholes open for exploitation. The USA has a tenth of the laws and protections of any other western nation. This is why there are 750 billionaires and a major homeless problem with most Americans unable to own a home or even most of their property any more due to DRM/neo-digital-feudalism. The GOP is a circus show leading the nation around to one side show after another simply to prevent anyone else from taking the stage. They have no morals, there are no limits. When the focus shifts away from them, they instigate another ever more outrageous event where the outcome is already secured well in advance. This is all about distraction, from the budget, to stealing fundamental human rights from half the population, to massive open corruption by the supreme court, to rocket Karen fighting for Putin, to DeSatan or the orange usurper, to book burning, and defunding education, it is all just a distraction so that no reasonable legislation has the time or opportunity to pass. This is how 750 people robbed the country blind.
But if you want something NOW, instead of saving up for it, you take on debt. People don't have as much patience it seems, than in years past. Also society has become more reliant on convenience (which costs more) and being lazy than taking the longer route (which costs less overall).
But that's the freedom in it, right? The ability to choose the more convenient, fun route than the longer, saver route. An "ant vs grasshopper" fable in real life.
It also feels good to smoke cigarettes and eat cheeseburgers. And there has also been a big marketing push for those. I don't necessarily think people are and more impulsive, but they've been led to believe debt isn't as harmful as it actually is.
Cigarettes are nasty.
Tell that to the average person living 50 years ago.
They were nasty 50 years ago and they're nasty today.
You're missing my point. Marketers convinced people they were good so they'd smoke more.
Nope. Serfs were forbidden from moving out of where they lived.
Fuck real IDs
What's wrong with them?
It requires that you provide a lot of documentation to get something that qualifies as a RealID. Multiple documents showing your full name, birth date, SSN, and proof of address. And if you can't provide that paperwork, no ID for you, get fucked. Maybe that doesn't seem like much, you just need the RealID to fly on planes, right? But if you can't get an ID you can't get hired. You can't drive. You can't rent a place. You can't vote in a lot of places.
And then you get the ugly Catch 22 where you can't get a RealID because you're homeless and jobless, and you can't get a home or job because you don't have any ID.
My dad helped an old friend he knew who he found out hard been homeless for a while. And realized how you can be unpersoned. The old guy had no living family, no supporting documents to prove who he was and as such couldn't get an ID. Which meant he couldn't get a bank account, or a job that wasn't cash under the table.