Boomers cant afford they houses. boo hoo

[fsanford]

.

I worked on payday lending for 8 years. I think some people would be terrified knowing how many of their doctors are taking out $500 payday loans because they’re so overextended.

That is kind of scary.. If simply you want this guys to be in the right state of mind all the time. Debt has a way of making people losing focus

 

[KnappShack]

To clarify: California's top tax bracket is 12.3%, so rounded up, 13% on state income taxes means your AGI is at least $1,145,960+ (married, jointly), or $572,980+ (single).

That's quite the retirement income.

But for normal people in California, if you make a normal combined salary as a married couple in California ($112,170 - $572,984), the tax bracket is 9.3%.

Compared to Iowa's 8.98%.

Not to mention the arbitrage opportunities that exist with the salary differences in certain industries.

Living by the beach is definitely worth the 0.32% difference in income tax.

"Sunshine Tax" was the best tax I ever paid

 

[cyrocksmypants]

https://fred.stlouisfed.org/series/PSAVERT

So it doesn’t look like it really takes CoL or pay rates into account?

 

[Blandboy]

Tucson is pretty nice, I think you can get a nice home like $130/ sq ft. You have the university there as well so usually something going on.

too close to the border

 

[NorthCyd]

"Sunshine Tax" was the best tax I ever paid

I could see spending extra to live in a nicer climate. The problem is all the other people that also like to live in nicer climates. Cold does a good job of weeding out a lot of the idiots. Not all of them mind you, but a lot of them.

 

[VTXCyRyD]

If Reno becomes a new Silicon Valley then I demand a return of Reno 911.

Or a merging of Reno 911 an Silicon Valley.

 

[Sigmapolis]

So it doesn’t look like it really takes CoL or pay rates into account?

Personal saving as a percentage of disposable personal income (DPI), frequently referred to as “the personal saving rate,” is calculated as the ratio of personal saving to DPI. Personal saving is equal to personal income less personal outlays and personal taxes; it may generally be viewed as the portion of personal income that is used either to provide funds to capital markets or to invest in real assets such as residences. [from the FRED site]

So yes, it would account for those. It is the amount of income that is saved/invested by households relative to income minus taxes. As incomes go up (or do not) or taxes go up/down, then DPI goes up down, changing the denominator of the potential savings rate.

COL would not matter because it is nominal income versus nominal savings. And it would account for pay because that affects the amount of DPI to compare to savings.

 

[CtownCyclone]

I worked on payday lending for 8 years. I think some people would be terrified knowing how many of their doctors are taking out $500 payday loans because they’re so overextended.

My dad's a doctor, he told me about some of his partners' spending habits. Completely matches up with that. It was one of those fatherly advice moments where he was impressing upon a young Ctown that just because you make a lot of money, you don't need to spend it all.

 

[cyrocksmypants]

Personal saving as a percentage of disposable personal income (DPI), frequently referred to as “the personal saving rate,” is calculated as the ratio of personal saving to DPI. Personal saving is equal to personal income less personal outlays and personal taxes; it may generally be viewed as the portion of personal income that is used either to provide funds to capital markets or to invest in real assets such as residences. [from the FRED site]

So yes, it would account for those. It is the amount of income that is saved/invested by households relative to income minus taxes. As incomes go up (or do not) or taxes go up/down, then DPI goes up down, changing the denominator of the potential savings rate.

COL would not matter because it is nominal income versus nominal savings. And it would account for pay because that affects the amount of DPI to compare to savings.

I’m not going to pretend I’m an economic wizard. I am absolutely not. But if CoL increases by 20% (random number, not real) and pay rates only increase by 1% (again, random) doesn’t your personal savings increase automatically decrease because you’re making less net income due to increased living costs?

 

[cyrocksmypants]

My dad's a doctor, he told me about some of his partners' spending habits. Completely matches up with that. It was one of those fatherly advice moments where he was impressing upon a young Ctown that just because you make a lot of money, you don't need to spend it all.

And if I’m being honest, they were always some of my worst customers, because $500 ultimately meant nothing to them. The best customers (in regards to being nice, paying on time, etc.) were typically my lower income and fixed income customers.

Also, a lot of people think that the poorest of the poor are the people that take out payday loans, but our average customer had an income of almost $45k per year.

 

[Cystheman]

I've always heard it as "Keeping up with the Jones's".

And the number of people who perpetuate that owning a home is always a better investment over renting astonishes me. Owning a home doesn't make financial sense for everyone and it really does depend a lot on personal situation. Being a renter means you are not on the hook for major property repairs, and it gives you the flexibility of easily picking up and finding somewhere new if life changes call for it.

I'm not saying people shouldn't own homes, just that everyone should be encouraged to evaluate their life and financial situation thoroughly before committing to a 30 year investment.

If it takes you 30 years, you are doing it wrong and have almost paid for your house twice when you factor how much interest you paid.

 

[cowgirl836]

.


That is kind of scary.. If simply you want this guys to be in the right state of mind all the time. Debt has a way of people losing focus

then you read about the bribes/kickbacks around opioids and other prescriptions and the pieces start to fall into place.

 

[DeereClone]

If it takes you 30 years, you are doing it wrong and have almost paid for your house twice when you factor how much interest you paid.

I didn't realize "30 year investment" (in a home) = keeping the mortgage in place for 30 years.

 

[Sigmapolis]

I’m not going to pretend I’m an economic wizard. I am absolutely not. But if CoL increases by 20% (random number, not real) and pay rates only increase by 1% (again, random) doesn’t your personal savings increase automatically decrease because you’re making less net income due to increased living costs?

Walking through an example...

Pants makes $100 per year
Pants COL is $80 per year
Pants saves $20 per year
= Pants' savings rate is 20%

That one should be simple to follow.

Few years later...

Pants now makes $150 per year (wages increased was 50%)
Pants DOES NOT CHANGE WHAT HE BUYS and his COL is $140 (inflation was 75%)
Pants saves $10 per year
= Pants' savings rate is 6.7%

That one should be simple to follow, too.

But then Pants decides to tighten his belt...

Makes $150
Spends $120
Saves $30
Savings rate = 20%

I think you are trying to say that declining real wages (e.g., inflation being faster than nominal pay raises) puts downward pressure on savings rates. That may be true, and I will leave the question as to if real wages have really fallen in the past 20-40 years aside for the moment. The point is, that situation does not guarantee a lower savings rate. It still depends on how households react to those conditions. The second Pants above made 20% happen again -- he would just have to shift his consumption around a bit in order to make that happen (no more dogs).

Nothing makes you spend more (or less, for that matter). The situation you imply is that real incomes are falling over time, which, of course, makes it harder and harder to save and maintain the same level of spending, no matter what the circumstances. That might be the case, but the personal savings rate data is not somehow trying to disguise that.

The personal savings rate is not biased over time, though. It reflects the above. It is just looking at what people save versus what they spend in a given year. How and why those numbers are changing is an important conversation, but the general trend is our grandparents used to save about ~12% of their income after taxes, and it is more like ~6% now.

 

[Freebird]

If it takes you 30 years, you are doing it wrong and have almost paid for your house twice when you factor how much interest you paid.

I think the old adage on a 30 year is if you make just one extra payment against the principal per year, it shaves seven years and tons of interest off the loan. If you can't make one extra payment a year you probably need to take a strong look at your finances.

 

[cowgirl836]

I think the old adage on a 30 year is if you make just one extra payment against the principal per year, it shaves seven years and tons of interest off the loan. If you can't make one extra payment a year you probably need to take a strong look at your finances.

Might be optimistic. Taking about 4/5 off ours but I tend to overpay on that payment. I should probably switch to bi-weekly payments. Not sure if we can do that or not.

 

[KnappShack]

I think the old adage on a 30 year is if you make just one extra payment against the principal per year, it shaves seven years and tons of interest off the loan. If you can't make one extra payment a year you probably need to take a strong look at your finances.

Come on. Go full CF.

If you can't afford to pay straight cash for the home then don't buy it.

CF is cash only, homie

 

[cyrocksmypants]

Walking through an example...

Pants makes $100 per year
Pants COL is $80 per year
Pants saves $20 per year
= Pants' savings rate is 20%

That one should be simple to follow.

Few years later...

Pants now makes $150 per year (wages increased was 50%)
Pants DOES NOT CHANGE WHAT HE BUYS and his COL is $140 (inflation was 75%)
Pants saves $10 per year
= Pants' savings rate is 6.7%

That one should be simple to follow, too.

But then Pants decides to tighten his belt...

Makes $150
Spends $120
Saves $30
Savings rate = 20%

I think you are trying to say that declining real wages (e.g., inflation being faster than nominal pay raises) puts downward pressure on savings rates. That may be true, and I will leave the question as to if real wages have really fallen in the past 20-40 years aside for the moment. The point is, that situation does not guarantee a lower savings rate. It still depends on how households react to those conditions. The second Pants above made 20% happen again -- he would just have to shift his consumption around a bit in order to make that happen (no more dogs).

Nothing makes you spend more (or less, for that matter). The situation you imply is that real incomes are falling over time, which, of course, makes it harder and harder to save and maintain the same level of spending, no matter what the circumstances. That might be the case, but the personal savings rate data is not somehow trying to disguise that.

The personal savings rate is not biased over time, though. It reflects the above. It is just looking at what people save versus what they spend in a given year. How and why those numbers are changing is an important conversation, but the general trend is our grandparents used to save about ~12% of their income after taxes, and it is more like ~6% now.

I think you’re making a mighty large assumption that the current generation isn’t as good at saving then, to assume that Current Pants should be able to just “find a way” to save more just to get to the same saving rate Prior Pants was at.

 

[CtownCyclone]

Walking through an example...

Pants makes $100 per year
Pants COL is $80 per year
Pants saves $20 per year
= Pants' savings rate is 20%

That one should be simple to follow.

Few years later...

Pants now makes $150 per year (wages increased was 50%)
Pants DOES NOT CHANGE WHAT HE BUYS and his COL is $140 (inflation was 75%)
Pants saves $10 per year
= Pants' savings rate is 6.7%

That one should be simple to follow, too.

But then Pants decides to tighten his belt...

Makes $150
Spends $120
Saves $30
Savings rate = 20%

I think you are trying to say that declining real wages (e.g., inflation being faster than nominal pay raises) puts downward pressure on savings rates. That may be true, and I will leave the question as to if real wages have really fallen in the past 20-40 years aside for the moment. The point is, that situation does not guarantee a lower savings rate. It still depends on how households react to those conditions. The second Pants above made 20% happen again -- he would just have to shift his consumption around a bit in order to make that happen (no more dogs).

Nothing makes you spend more (or less, for that matter). The situation you imply is that real incomes are falling over time, which, of course, makes it harder and harder to save and maintain the same level of spending, no matter what the circumstances. That might be the case, but the personal savings rate data is not somehow trying to disguise that.

The personal savings rate is not biased over time, though. It reflects the above. It is just looking at what people save versus what they spend in a given year. How and why those numbers are changing is an important conversation, but the general trend is our grandparents used to save about ~12% of their income after taxes, and it is more like ~6% now.

We're paying for a lot more on a daily basis then our grandparents did. Cell phones (and their plans), internet, SuperFanatic T2 access, etc. Some of these things are becoming less of a "want to have" and more of a "have to have." I guess you could argue that you are likely not paying for a landline anymore, but those are cheaper than your cell phone plan (I think, I don't have one).

 

[Sigmapolis]

I think you’re making a mighty large assumption that the current generation isn’t as good at saving then, to assume that Current Pants should be able to just “find a way” to save more just to get to the same saving rate Prior Pants was at.

"Not as thrifty" was not a moral judgement -- just a factual description.

12% > 6%

You can say "not their fault," and you may be right, but the numbers are what they are.

We're paying for a lot more on a daily basis then our grandparents did. Cell phones (and their plans), internet, SuperFanatic T2 access, etc. Some of these things are becoming less of a "want to have" and more of a "have to have." I guess you could argue that you are likely not paying for a landline anymore, but those are cheaper than your cell phone plan (I think, I don't have one).

Yep, we pay more, but we have substantially higher standards of living than they do.

Somebody could live like the average family did in 1960 if they really wanted to (such as my parents growing up in 5-6 kid families in 3/2 homes) -- nothing is stopping you.

People just do not want to do that.

COL is higher, sure, but we are buying a lot more than we used to.

Even between now and 1990 is pretty impressive...