>She told me, “I was curious, but I don't know how a single person in America who doesn't have family money could buy anything, I really don’t, if they're not working in finance or they're not a doctor. ”
Easy, there are vast areas of America where housing is more affordable. I certainly got zero cash from family when I bought a home. My family put money into giving me food and shelter growing up though.
This is kind of like that cartoon of a New Yorker's view of the US, where Manhattan looms large, then there's New Jersey, and at the fringes there is the rest of the nation.
This reminds me of when I was working at Microsoft and a colleague said to me: "I don't know how anyone raises a family off less than $130k/year." I laughed and asked him if he'd ever been anywhere in the US outside of Seattle before. Turns out, he hadn't and assumed the insane cost of living we're subject to in this area also exists in the rest of the country.
My point of reference is my family's house in a rural area that is about 2x the size of mine (the property is 10x) and costs 1/3 as much. I wish my career as a software engineer better enabled this type of living but, alas, my corporate overlords require I am ass in desk every day in a metro area.
My first trip out to the valley working for a company out there someone turned to me and asked "So what do people do out there?" I thought he meant "for fun" but he meant regarding jobs or a career.
Despite the fact that I did the same job he did... "out there".
Between the cost of daycare, health care/insurance, pet care, car payments and maintenance, student loan payments, and then a mortgage (even a cheap mortgage) on top of that, not to mention saving something for retirement, forget the 10x your salary by the time you retire or whatever, and once every 2-3 years go on a vacation at least to the next state over, I do sometimes wonder how households can make ends meet on less than $100k a year, and have no idea how a household can get by on the average $60k a year.
I know living in certain areas are a lot cheaper, but the salaries are usually a lot lower in those areas as well.
Not to mention get married (wedding costs are insane, going through that right now) or other life events.
We make more than that, have no children, and we're still shuffling money around to make it all work. I can't wait to finally pay off my student loans in a couple of years. My fiancee might never get hers paid off, she's barely making a dent in hers.
Children cost money, budget accordingly and have the income/s to support them or don't have them. That's a wildly unpopular statement in my experience because so few people like personal responsibility, and yet it's still the economic reality regardless. It's not asking much that people wait until they're financially stable to have children, or otherwise accept that they may not get to have everything they want at an early age. Costs and trade-offs.
> health care/insurance
Most full-time employed persons have their healthcare largely covered by their employer. Among everything you listed, health risks & costs are by far the big concern and are often not something you can easily control.
> pet care
That's a pretty easy choice. Stop having pets until you can soundly afford them. What's more important, pets or saving for children and housing? Car payment or pet?
> car payments
There are plenty of good used cars to be had for $12k to $16k. If you take care of them, they'll last a long time.
> student loan payments
Do not under any circumstances go to an out of state school, or in-state school, that costs $30k+ per year, unless you're going to have the income to afford it. There are a lot of quality state universities that are very affordable.
> and then a mortgage
A monthly mortgage payment at the median is no more expensive than renting. Where you take an economic beating, is inflation + property taxes + maintenance over time; in the form of real value capture destruction (net retaining ~$0.20-$0.30 on the dollar of what you put in).
> wedding costs are insane
Stop having $35,000 weddings. It's really not complicated. Down payment on the median $225,000 house, or have a $25k-$35k wedding. Skip the ridiculous wedding cost, spend $5,000 instead on a nice outdoor BBQ for 30-50 guests, keep the rest to throw at a down payment (or pet care if that's a greater priority). It's nothing more than economic sanity and understanding that you don't get to have everything you want, especially all at once.
As someone who has come from poverty, it still blows my mind that folks who make more than $70k struggle at all. A few of the things you mentioned are strictly luxuries. College, pets, new cars, vacations are all put on the back burner until it's financially reasonable to do so. I've met many folks making more than $100k who are in more debt than someone making $40k. Just ignorant of finances.
Making more money means more people will be willing to give you the rope to hang yourself with. People aren't as willing to lend money to people who don't have a means to pay it back, but someone can be doing well, take out a decent amount of debt ("buy" a car, "buy" a house, take out loans for education, etc), suffer a health or career setback, long periods of unemployment, and it starts a debt that spirals out of control.
I went through a period of near poverty myself (seriously considered declaring bankruptcy a couple of times), and it seemed like the first year or two of any new job I had was just digging myself out of the hole from last time (only to get laid off right as I was starting to get back to a 'normal' amount of debt, and thus be forced to dig myself back deep into debt while I made the next job work). It can be a vicious cycle. I'm finally free of it, but if I was forced not to work for six months or so due to a health issue I could very easily be back in the midst of it again.
Makes sense! Currently going through this right now. Got laid off, have maxed out all my credit cards, and spend my days studying for additional certs or spamming LinkedIn/Indeed/Angel. Nest egg is completely gone, and at this point, might just start applying for minimum wage jobs just to get some form of income coming in. That also means less time focusing on studies and applying for jobs, so it's a lose lose.
Sorry you're going through that right now. I've been in a similar situation. It can be really stressful and seems to take forever to get out of that hole.
If you have friends or family that want to help out, try not to be too proud and let them (at least as far as accepting free meals and whatnot). I always felt uncomfortable "mooching" off people, but it really helped me get through that period without being totally miserable. I never asked for it, but I did accept it when offered.
As a side effect of what I went through, once I paid off my credit cards I have yet to take out another one (still haven't) years later, and I avoided taking on any new debt as much as possible. I was really hesitant to "buy" a house and bought one a lot later than I probably should have, and thus forewent years and years of building up equity (I only bought a house a year ago, and probably could have 5 or 6 years ago, in retrospect). It really screwed with my head, mentally.
Agree this is totally the way to go. We spent $15 and got married in town hall two months ago. Then made breakfast with family at home. The rings cost a little more though.
If you count the gifts, which were not particularly numerous or substantial, we kind of made money on our wedding...
> I do sometimes wonder how households can make ends meet on less than $100k a year, and have no idea how a household can get by on the average $60k a year.
I know many families who make under 100k, have 7+ children and do just fine. There are lots of hand-me-downs and thrift store shopping. This is all fine.
> Between the cost of daycare...
Most tend to Homeschool so no daycare is needed.
>not to mention saving something for retirement, forget the 10x your salary by the time you retire or whatever
One of the benefits of having many well raised children, they take care of you during this time.
> and once every 2-3 years go on a vacation at least to the next state over
This is non-necessary.
> Not to mention get married (wedding costs are insane, going through that right now) or other life events.
My wife and I got married (not including the honeymoon) for about $5k with 200 guests. Cheap weddings are doable.
> Not to mention get married (wedding costs are insane, going through that right now)
Then don't do it that way. You can get married in a back yard, or in a park. For a park, the venue might cost you $100; for a backyard, $0. You don't have to have a reception with a meal (schedule the wedding at 2 PM, with reception immediately after, so nobody expects a full meal). You don't need a stunning dress or a tux.
I've been married over 28 years. The building we got married in has been torn down. I lost my original wedding ring. The developer lost the pictures from our honeymoon. The cake is long gone. But we're still here. It's not about the stuff around the day. Choose some balance between your desires and your desired budget, and call it good enough.
I don't think it's crazy with some budgeting. These numbers seem pretty conservative for most parts of the country:
Monthly take-home income (after health insurance, taxes, and 10% retirement): $6000
Rent/mortgage: $1200
Car payments: $750
Student loan minimum payments: $750
Shopping: $600
Groceries: $500
Savings: $250
Transport/auto maintenance: $200
Restaurants/bars: $200
Utilities: $200
Subscriptions: $100
Other insurance: $100
Haircuts/cosmetics/etc: $75
Pet care: $50
That leaves ~$1000 for paying down debt, saving for things like vacations, furniture upgrades, etc. I'm probably missing some things, but I'm also being pretty conservative with most categories. Many things will also vary by region.
>Between the cost of daycare, health care/insurance, pet care, car payments and maintenance, student loan payments, and then a mortgage (even a cheap mortgage) on top of that, not to mention saving something for retirement, forget the 10x your salary by the time you retire or whatever, and once every 2-3 years go on a vacation at least to the next state over, I do sometimes wonder how households can make ends meet on less than $100k a year, and have no idea how a household can get by on the average $60k a year.
You list a bunch of optional things here as if they are some human right. Pet costs? Don't own a pet. Car payments? Do you think people struggling to make ends meet should be spending $250+ / month on a car? Buy a 20 year old Civic. Mortgage? Families making a combined $60k rent. Student loans? Why are they making so little with their degree? Poor choice? I doubt most families making $60k are paying off student loans.
>Not to mention get married (wedding costs are insane, going through that right now) or other life events.
Well that's just dumb. Families making $60k don't (shouldn't) kick things off with a lavish wedding.
>We make more than that, have no children, and we're still shuffling money around to make it all work.
I admit that I'm assuming a lot here, but if you two can't make things work on a six figure income I don't know, sounds like you're throwing away a lot of money on luxuries.
To me you come off as if you assume all of these luxuries are how everyone does/should live, and that's simply not the case.
And so the legend goeth: A friend exclaimed, "how do you afford to buy a house in San Francisco?" I, too, laughed! For lo': huts in the wilderness were mere pennies. He hadn't ever been to the bush, and had assumed the insane cost of living in this area exists in other places with high-paying tech jobs.
The same extrapolations happen with population density. People in LA and New York think the world is overpopulated and everyone is on top of each other. They don't realize that 45 minutes north east of San Francisco there are no houses, no street lights and no cell phone reception.
> I certainly got zero cash from family when I bought a home.
Crucially, this is not the least help your family can offer.
For many (most?) people in the world, their relatives are actually insecure and need financial support. This is a key reason the cycle of poverty can't be broken by one person getting a good job.
I know multiple people who would've easily had a down payment on a house if their parents hadn't lost pensions/savings in the financial crisis.
Several years later, that $100k they used to bail out parents would've grown to $300k+ in equity if they could've bought a house in a city between 2009 and 2012.
Responding to your quote: Working in finance, I can report that we do not have magic money machines.
You could narrow "finance" to mean professional traders who do extensive market research and take large risks, sure, they make a lot of money, but they also get wiped out periodically.
They're not very different from other entrepreneurs who make a big investment into their area of expertise and takes big risks, often failing many times along the way.
That is pretty much the "self-made" story, and one thing I do see working in finance is that most people are way too risk averse for it. That's not a bad thing in aggregate, the conservative majority's instinct for stability is an important buffer against all the breakage the risk takers cause.
I'm not saying it's an easy job, by any means, but there's not a ton of risk involved in taking an entry level job at an investment bank and trying to work your way up to MD or similar. And that track most certainly pays plenty well, even if you doin't quite get as high as the boardroom.
The places with cheaper housing also tend to suffer from a dearth of employment options. There are probably a few mid-sized cities out there that have both cheap housing and decently-paid jobs, but I imagine they are few and far between.
I don't know how legitimate this source is, but
> ATTOM points out that home prices are climbing faster than wages in 80% of U.S. markets. In fact, median home prices increased at a faster pace than average weekly wages in 601 of the 755 counties analyzed in its report.
I live in a midwest college town. Unemployment here is extremely low, has been for decades. Housing costs are relatively low as well. I live in a house that in the Seattle area would be over $1M. I paid 20% of that. There are multiple startups for tech here, as well as government jobs, college related jobs, and other industries. So there's no dearth of employment options. If something were to happen, I can commute an hour to a city with a population of 1M.
With the market changing quicker than ever before due to various structural changes such as new technologies, consolidation of employers, and globalization, I would not recommend having one, or even just a handful of buyers for what you're selling. This applies to businesses and individuals.
I would demand a premium for being in a market where there are fewer buyers and I am subject to more risk of losing my income.
Is that true? I know real estate is incredibly expensive in places like London/Paris and most people cannot afford to own homes there based on their working salary (which is usually much lower than the US equivalent).
Works for a lot of people, especially if they fall into fairly standard, but good service gigs. e.g. vehicle repair, home repair, cutting hair, or working a local pub.
Even better if you show up with a pile of cash from a former career.
>> I certainly got zero cash from family when I bought a home.
For a lot of wealthy friends, this was the case, they were self made (first order) and paid their own way (first order). The really valuable thing they received was the safety net and contacts such that they werent exposed to the spikes of unfortunate things that can happen. For me, if I cant make mortgage for 6mo, i'd be in trouble and there is no family member to help out. There is no uncle at a hedge fund who can suddenly get me a job. I'm in the general pool of candidates and only have those opportunities and the ones I create myself.
That makes be reach less, it made me take more conservative jobs earlier on in my career, etc. My risk tolerance and hence potential rewards go down
Exactly. I live in a 2nd tier city. My friends who are home owners have very middle class blue collar jobs. Examples include auto mechanic, security system installer, and local delivery truck driver. None of them got "help."
How old are they? I know plenty of people who bought a house 30 or 40 years ago on blue collar salaries. I don't know any <30 year olds who bought property without parental help.
Where do the people you know live? That might inform the probability of being able to buy a home with or without parental help.
I just picked a metro: Baton Rouge. Median home price there is around $160k, although naturally there is plenty of inventory available for less than $100k. Some of it's in pretty dismal shape, but, looking at Zillow, there are non-zero houses in this category that look livable. The median HHI in Baton Rouge is $45k. So it would take about four years for the median family to save up enough to buy something that's at least livable, assuming they can save ten percent of their income.
I couldn't say whether blue collar people make at, above, or below the median, but it strikes me as likely that at least some of them will be able to purchase a home in this type of metro.
I grew up in the midwest. Most of the people I know are in Iowa, some in Illinois and Missouri. Saving up a down-payment is a significant obstacle, I think. I know that in some areas, you can get a rural development loan that requires a much smaller downpayment, but my friends don't want to live in the boonies and it would lead to a pretty miserable commute for them.
A hearty mmmeeehhhh to the idea that the median household cannot save 10%. Proof by existence: 50% of families live on less than the median. Probably at least 35% live on 10% or more less than the median. At that point it's a matter of priorities.
Not saying life is cushy in this situation by any means. And of course there will be many families that cannot save enough. But it is doable if someone wants to make it a priority.
I agree with you, additionally it's important to understand the concept of a "starter home." These homes may be much older, in less than ideal neighborhoods, and need you to put some sweat equity in them. The mistake I see some young people making is being unwilling to accept a home of lower quality than the ones their parents currently live in. They often don't see that this is their parents' second or third home that they've upgraded to. I don't blame the young people, I think this is a failure of the parents to set reasonable expectations of how to build a life.
A $180,000 30yr mortgage will cost you ~$880 per month. These days the median of all home sales in the US is about $225,000. The hard part of that $225k purchase for most people under 30 is the down payment of $45k.
The median full-time income is about $50,000 in the US. Emphasis that that is the median, not average.
Two household incomes is ~$85,000 or higher at median type wages (assuming a pairing of one full-time median, one lesser).
Home ownership is very much within reach at the median, so long as your income matches your market. You can't live in major US cities, earn the median, and ever hope to own a home.
It's very doable, especially if you have a partner to split it with. Where the $45k gets someone under 30, is just that it can take several years to put together that sum. Most people don't start to hit their earning stride until the very late 20s or early 30s.
So you're in the median bracket and you get your first serious, solid paying job by ~24/25. It's reasonable that if you're diligent about savings every month, you could have $45k+ by yourself at 32-36 years of age, and I'm assuming some financial setbacks along the way. With a partner, it really shouldn't be a problem by those ages. To do it before 30, you'd need a good economic pairing of two people that already are near or above $85k by 30. All assuming you're not living in an expensive market of course. With the necessary caveat: having children before 28 or 30 considerably changes the equation (unless you have a larger income in the household to offset that additional cost), as can serious health problems and associated bills (depending on your job/career situation).
Don't forget student loans. We have a whole generation of people that are saddled with large student loans. They can easily spend all the money that would have gone towards saving for a house downpayment on paying their student loan payment instead.
Marriage-related crap is charged to credit cards and/or is subsidized through financial gifts by friends and family after the wedding.
Down payments are neither, unless your parents/inlaws are feeling generous.
The average savings account balance in this country is far less than 45k. You are completely out of touch if you think the average family can simply pull that out of their asses.
>She told me, “I was curious, but I don't know how a single person in America who doesn't have family money could buy anything, I really don’t, if they're not working in finance or they're not a doctor. ”
This is kind of like that cartoon of a New Yorker's view of the US, where Manhattan looms large, then there's New Jersey, and at the fringes there is the rest of the nation.
I met this veteran taxi driver in South Carolina who had bought a big Federal era house north of the state capital, for only $20,000 back in the late 90's. Everything about the house needed fixing, and there was no heating/ventilation equipment functioning at all. He was living there, however, and he was putting all of his extra money into buying construction materials, so he could eventually sell it for 20 times as much. I also knew a waitress/barista in Ohio who had bought a duplex, was living in one half, and renting out the other. She had done all of that on $5/hour plus tips and sweat equity. Both of the above examples happened in the 90's.
This Kirsten Dirksen video is basically a documentary about how homeowner's interests and their affect on local laws have basically ossified our society. (This is set in Sonoma, which is not overcrowded in the least.)
Basically, homeowners have thrown up roadblocks to keep "the wrong element" out of their neighborhoods, which also locks out the young people of their own group. The big irony is that this happened much more in liberal California than it did in conservative Ohio and South Carolina.
The big irony is that this happened much more in liberal California than it did in conservative Ohio and South Carolina.
Not sure where you've come up with this bizarre and selective understanding of US history. Ohio is notorious for racially-based restrictive covenants on housing. There were entire neighborhoods where deeds had restrictions preventing their sale to blacks. They got the idea from southern states like South Carolina. These restrictions are still on many of the deeds in Ohio and South Carolina, though they are no longer legally enforceable.
Not sure where you've come up with this bizarre and selective understanding of US history. Ohio is notorious for racially-based restrictive covenants on housing
Note that I was specifically talking about the unintended impacts of such laws on the youth of one's "own" group. California is singularly bad about that. (I have a different view on these things, outside of the usual polarization. So people tend to project a "side" to my comments which isn't intended and actually isn't there. As a non-white person whose parents experienced ethnically based exclusion, such projections make little sense to me.)
Easy, there are vast areas of America where housing is more affordable. I certainly got zero cash from family when I bought a home. My family put money into giving me food and shelter growing up though.
This is kind of like that cartoon of a New Yorker's view of the US, where Manhattan looms large, then there's New Jersey, and at the fringes there is the rest of the nation.