Posted on 04/04/2005 10:46:18 AM PDT by ex-Texan
So you bought in 2000? Did you rent an apartment in 2000 and were able to save enough to buy a house? I'm guessing the answer is no. So your solution is simply move. Well, I don't know about you, but there are MANY reason people choose not to move.
BTW, I'm not a victim. But I can appreciate how things have changed in such a short period of time.
20 year olds spend exactly as you would expect them to.
At that age, most of them have never had a job or if they did it was part time for walking around money while their parents covered the real expenses. Youth culture is largely the "bling bling" garbage as seen on MTV wherein the meaning of life is consuming. What actually paying for stuff entails is a new concept for them.
With no perception of what bills are like, credit is magic. For a trivial amount of money today, you can live large. Drive a new car no money down. Wear new clothes and go out to eat every night, $50 monthly minimum payment. Have all the latest electronics, no payments till 2006. And by the time you realize that that stuff wasn't free and now the bank owns you, it's too late.
The kids out spending beyond their means are certainly at fault, but there is plenty of blame left to go around.
First and foremost, the lending institutions. Offering a line of credit (with a 30% APR after the first late payment) to a 18 year old kid who has never even had a job is nothing less than offering a free first dose of heroin.
Next, the parents. You'd better be looking out for your kids and keeping them out of the debt trap, cause sure as hell noone else is.
And last, the public schools. In an ideal world the public schools would be teaching academic basics and not doing what should be the parents' jobs. But in the world we've got, where they own your kids 9 months a year from ages 5-18, it is unforgiveable that basic life skills like balancing a checkbook and an understanding of credit are completely neglected.
NO we counsciously rented because we had no intention of staying more than a year or two in the area... That and the read I had on the market was bubble ready to burst... and guess what it did burst less than a year later.
If you choose not to leave an overpriced area, than you can't complain about its price... There was a time when housing in Detriot commanded top dollar, now you can buy entire streets for 100k... Just because someplace is hot today, doesn't mean it won't be tommorrow. The key to anything is patience. DC will fall, Atlanta was insanely hot a few years ago, and its coooled considerably, in the 80s folks would pay out the nose to buy in Boston and it collapsed... remember cycles on average are every 8 to 12 years... DC will go down again, and likely sooner than later.
Rent someplace cheap and save your money... when the bubble pops you can be the only person buying and enjoy the fact you aren't on the other side of the transaction looking at having to bring money to the closing table to sell your house because you are under water.
I could care less what you earn.
All I want to know is - do you understand, from a purely macro-economic point of view, why we all can't earn a living being real estate investors, bond traders, and government employees? Somewhere, someplace, someone has to be employed outside the "paper economy" and outside government - in industries that produce real things, real services, add real value, earn real profits, etc.
If you are doing well in the paper economy, more power to you. Hell, maybe I ought to join you.
You could live in the house for 2 years, sell it and put the tax-free gains in the bank. Then rent an apartment and wait for the housing market to drop before you buy again.
What paper economy? You think Real Estate is a paper economy? I'll show you several hundred thousands of dollars in reciepts of real dollars spent on real things.
Produce nothing? You are an idiot, lumping bond traders and real estate investors in the same lot.
Yes, folks got to work, and you get paid to produce, and if Real Estate isn't your think, it doesn't matter... do it with something else! You go start your own business selling widgets for all it matters!
Or invent something with residual income attached to it.
The idea that everyone's gotta work for someone else is foolishness... Yes, that's how you generallystart your career, but it shouldn't be how you end it! If you are, then you are then you are losing out on your potential.
I product things every day, I take crap and turn into a marketable product. What I do is no different than USX taking Coke and Iron in one end and steel out the other... I take JUNK and turn out a livable house out the other, and I add a lot of value and production to that process.
I'm not riding some paper train, and I don't just make money through paper. However the fact remains it doesn't matter what you use to create that wealth, the vehicle is not nearly as important as the journey.
If you work 9 to 5 each day, and debt yourself up to your eyeballs trying to play "keep up with my peers" you aren't going to create wealth! I don't care if you create wealth by investing in real estate, or simply putting money into a mutual fund making you 10% a year... you do either of them long enough and you will find your investments will far outstrip your ability to earn working for someone else!
Unfortunately in america, most folks seem to have forgotten this fundamental fact. You will never be paid what you are worth if you work for someone else, economics demands that... if they paid you what you were worth, where would the profit come from?... You have to produce more than you cost or you don't work there any longer.... Only way you will ever remotely get what you are worth is to do something for yourself... and most folks are either too lazy, too scared, or just too damned cynical to get off their asses and do it... so they sit down and bitch about the rewards those that aren't enjoy.
I know a guy who makes Millions of dollars from recycled truck parts... he's not part of the paper economy... etc etc etc..
Go find out who the millionaires are and what they are doing before you throw that sort of nonsense around. I'd suggest 2 books, the Millionaire next door and the Millionaire Mind... you will see the truth about first generation wealth in america... and it isn't generally paper economy at all. Also to get your mind right about what you should be doing to become one yourself, pick up a little thing called "The Richest Man in Babylon" and listen to "Dave Ramsey" if you can...
Best of luck to you.
The only thing you should find yourself owing money for is your house. And you should limit that as fast as you can.
And trust me, this is the voice of experience talking.
But, can't the government make it so that we never have to face the consequences of our decisions ?
It's only fair since the rich people already have all the money and they don't need any more.
Right now I am maxing my 401K contributions, no IRA's yet. Wouldn't your plan mean that I would have to take those actions and defer paying off my debt? My plan is to be debt free (actual, not just on paper) ASAP to become freer to make some of the decisions being discussed on this thread.
Maybe I am just confused, but I don't understand how you can shelter income, then use that income to become debt free. If I put it into an IRA, then I can't touch it, until retirement. How does that help releive debt? And yes, I do understand a balance sheet.....
My husband and I got lucky and bought a tiny, tiny townhouse in Burke, sold it for a slightly larger house, etc until we worked up and saved up for what we now own.
It's a tough call, the salaries are better in this area, but housing costs are also high. I feel sorry for those who don't have the flexibility that apparantly you do.
That's where we are at, and in less than four years we should have our fifteen year mortgage paid off ten years early.
CSM,
Again, Being DEBT FREE in the long run is probably your number one goal, and it should be.. if that means you pay a few more taxes today... So be it.
However, lets say you max your contributions to your 401 at what say 6k or whatever it is a year.... that's the most you can put in without paying taxes on it per year... and your 401k is say invested in a mutual fund making 10%.
So you spend 6k pretax, and make 10% on that money for the year.... meaning tha 6k in that year with contribution is a total of $6600 toward your retirement.
Now lets say you have a self directed ROTH IRA.. and you put in say $1000.. you will have to pay tax on that $1000 the year you put it in, but you won't pay ANY taxes on what that $1000 earns you EVER!... So if you can make that $1000 make you $6600 that year, you'd be at break even in your retirement fund verses putting in 6,000 right? Now lets assume you do pay .50 on the dollar in taxes on that 1000, so that 1000 in cost you 1500 to put in with taxes... that's still 4500 less than your 6000 contribution to your 401k before... and lets say your tax on that 4500 is 50 as well, you are still up 2750 for the year in money you can spend against your debt vs putting the 6k into the 401k
So provided you can make that $1000 earn you another $5600 in that year, you will have $2750 less debt at the end of the year than you did if you put 6k in your 401k.
The key to make it all work is making sure you can use your self directed ROTH IRA to make you that $5600. Not suprisingly this isn't difficult to do, if you get yourself educated and make the effort.
Lets not get fancy, lets keep it simple... lets say your IRA uses all $1000 to buy a junker house... well below retail, and then your IRA sells the house to an investor that wants to actually fix it up and a higher price, and your IRA makes $3000 on that transaction (a very low amount, but for poops and giggles, we'll use it).. so your IRA just turned 1k into 3k on 1 transaction.. do just that simple transaction again and you have basically made your 6600 for the year... you will pay no taxes on those profits at all.
Or better yet, lets say your IRA actually has some money, say 100k. And you find a junk property you can pick up for 30k and put 20k into it and sell it for 90k or 100k... You do that just one time and you are looking at a 40k to 50k profit to your IRA TAX FREE....
Of course there are ways to make money using little to no money in an IRA as well.. You could do the same thing with automobiles buying them at an auction then retailing them for a profit, etc etc etc... the key is the IRA grows TAX FREE... you pay tax on your contributions, but the money in the IRA is free to make as much as it can without ever paying a dime in taxes... can you see how this will outstrip any 401k plan?
With little to no contributions per year needed to keep your retirment growing, the money you were pushing into your IRA/401k can now go toward your debt and pay it off even faster, without harming your long term retirement.
Roth Self Directed IRA's are incredibly powerful tools for those willing to take the time to learn how to and properly use them.
So, lets just take a simple example
Yeah baby! One of the few "non-slaves" in the US.
so we all could earn a living being real estate investors, the economy would function just fine if everyone made money swapping real estate back and forth to each other.
Your kids may have to move to another area to start there lives, and frankly if the housing market is a huge bubble, I'd frankly tell them too... there was a reason generations before moved west... cheap land, more opportunity. If an area is so rediculously overpriced that it doesn't make fiscal sense to stay there... don't.
Kids should take the highest paying job they can in the market with the lowest cost of living that isn't a complete hole in the wall or slum... the sooner they are able to build wealth the sooner they will be able to tell there boss to stuff it.
Nah! Society and enviroment made/forced/pummeled them to "do it."
Do you even read before you respond? It doesn't matter if you are doing it with real estate or widgets... fact is go out and do something other than punch a clock.. if you want to be a clock puncher and spend everythign you earn every week, don't gripe about the folks who don't and actually build wealth. It doesn't matter what wealth building vehicle is chosen, whether it be your own business, real estate, stocks, etc.
How many times do I have to repeat myself? You can either create wealth, by hard work, or by slow and steady saving... or you can spend all you earn and whine about those who don't and end up wealthy.
I'm a SW developer and I'm house trained!
With the exception of the odd case where some health emergency caused someone to be financially ruined, most people with large amounts of debt (especially of the higher interest variety) have only themselves to blame. They fail to comprehend basic financial concepts, and cannot grasp how cash flow works. Rich Dad, Poor Dad 101 ....
RE: CitiBank will eventually transfer you to somebody else's card if you do.
Not true. I can personally attest that this is not true.
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