I don’t think there’s any reason to be too strict on that rule, but when a large fraction of your income goes to rent, you’re subject to increased volatility.
Suppose you net $3k a month. You can choose to live in a crummy $1k apt with $500 of luxuries, or a nicer $1.5k apt with minimal luxuries. Great–you have $1.5k left for essentials. However, if rents go up by 20%, in the first case you’re out $200. You can choose to cut your luxury budget with no impact on essentials. In the second case you’re out $300, and it comes out of your essentials. Hopefully you have enough of a savings budget that you can cut that instead of food or gasoline, but that’s still not a great situation.
I spent close to half my income the first year of my mortgage, but that’s different from a rental–the mortgage doesn’t go up year to year. And I knew my job was stable and my salary would increase soon. I wouldn’t have done the same with an apartment unless I knew I could move quickly.
Also not forget people like me that bought in '93, and the house is worth four times what I bought it for. My mortgage never went up a dime. It’ll be paid off in under a year.
‘Kids’ that live with their folks until they’re in their mid 30’s??? Seriously???
My neighborhood is considered the “gateway” neighborhood to get into my sought-after town because even though the median home price is in the 400K range, it’s also the low end (I’m in the metro Boston area, btw).
Historically there are very few homes available in my neighborhood. This is because people inherit them. I currently live in the house where I grew up. My mother paid off the mortgage years before she started to decline. I can tell you who else is currently in a similar scenario, either because I grew up with them and/or their siblings or our parents knew each other, that kind of thing.
The only time a property comes up for sale is when the last who inherited dies and nine times out of ten it’s the last person in that family line. The house still stands, but nine times out of ten the house has to be gutted because the person living there couldn’t afford to update because their savings went directly to the property tax. As obnoxious as the tax is, it’s cheaper than a mortgage in this area especially if you’re 65 or older and and therefore qualify for the abatement.
If they are in a situation where they have to live with roommates anyway and their parents are happy to have them, why not? The only people who are in the position to care (besides parents) are any significant others that may be in the picture. If they are fine with this arrangement, then yes, SERIOUSLY!! It’s really that simple.
I don’t think it’s wise for people to make themselves miserable or to stress their wallets just for the sake of meeting arbitrary and possibly outdated social norms. It’s probably not ideal for someone’s social standing to live with their parents until they are 35. But you can’t eat or heat your home on social standing. Money does that. Spending more than you have to just so you can be a lone, rugged individualist is just as foolhardy as spending too much on toys and fine dining.
But if you are netting $6K a month, your “essentials” are the same as when you were making $3K. A spike in rent will impact your budget, but it’s not like you’ll have to eat Top Ramen every night. It will take a long time before that happens.
Even if someone were only making $3K a month, it wouldn’t be the worse thing in the world that they were paying 50% of their income on rent, provided that it was a temporary situation–one that was going to lead to increased earnings. For instance, if a person were to get a once-in-a-lifetime job opportunity in Silicon Valley and they can only find a room to rent for $1.5K, it would be crazy for them to turn down the job because “OMG, 50% to rent. NO WAY!!!” It would also be kinda crazy for them to build in a ridiculous commute (two hours, let’s say) just so they be under 40%. Provided they didn’t have any debt obligations and they were confident this opportunity would increase their job prospects, then they should just go for it and ignore all the tsk-tsk-tsking from the financial gurus. There are times to be financially cautious and times to take some chances.
But the majority of renters wish they could be so lucky. For them, housing costs that eat 50% of their income really is a horrible situation to be in. So this really is an exception to the rule.
Every time you have a repair bill, you pay more for that month. While it’s true a person who rents may have an increase in their monthly payment from year to year (though this hasn’t been the case for me), at least they don’t have to deal with unexpected costs hither and thither throughout the year, when various shit breaks down. A $1000 repair bill equates to a rent increase for that year. Since more shit breaks down the older a house gets, it’s easily plausible that your “rent” increases each year. It’s only when you finish off the mortgage that you get a break.
I’m going to be diligent about tracking all of my repair and maintenance costs my first five years of homeownership. If custodial costs+mortgage+taxes+insurance are the same or less than my rent payment, then I will let everyone know that the financial wonders of homeownership is truth, not myth. But if my rent payment comes out ahead, I’m also going to let the world know. Stay tuned for my blog!
no, because a house is not “zero cost” once you’ve paid off the mortgage. A tear-off and reshingling to fix a leaky roof can easily cost 5 months of what I pay in rent. Furnace needs replacing? 3-4 months of rent.
There are cases where people live at home until mid 30’s through no fault of their own. But experience teaches that there is a large correlation to being lazy, or just pathetic. It’s not a matter of spending more than you have to be an individualist. It’s living in a manner that you are able to support yourself, and not be a burden to others. When you are young that means sacrifices. You probably won’t get to live in the sexiest area of town. You probably won’t have very a nice car, you may have to get out a manual and figure out how to fix it yourself. You may not be able to afford the new iPhone each time. You may need to buy the shitty beige cereal in the bags, rather than the colorful one in the box.
If you are living with your parents because you are responsible with money, by your mid 30’s you should have a hell of a savings for a down payment by then. But most of the ones I know don’t. They don’t pay rent, and mom still buys their Captain Crunch while they but X-Box games and weed.
And yes I am stereotyping them. That is the baseline though . The few I know who are living at home and actually being responsible, are clearly shown in their daily going about of business what is going on, and people know it.
During and after college, life is about learning to be at minimum a self supporting adult, and hopefully a contributing one. If by your mid thirties you haven’t managed that, then society is right to scorn, and hopefully shame you into getting your ass in gear to start becoming one.
I mean as a representation of the population as a whole. you’re doing the usual Internet Person thing of treating “everyone I know” as a cite.
I don’t know why people don’t want to admit the whole “get your ass out at 18 and start earning a living” is from a bygone era of this country’s history. plenty of other places around the world, the norm is for multiple generations of a family to live together.
Lets do the math. A $10,000 mobile home purchased on a 5 year loan costs $179.69 a month. $200 lot rent brings it to $379.69. This is cheaper than the smallest apartment in my area by $100. That’s a $6000 savings over 5 years. You can rent a room to other college students who want to live in a college bound environment. At $100 a month that’s $6000 more money in your pocket. When you’re done you can sell it for ANY amount of money and come out ahead. Or you could rent it out like many homeowners do when they have to move out of state quickly. Turn it over to a property manager and walk away. Or you could have it moved to where you’re moving. That’s why they call them mobile homes. There are businesses that do nothing but this. You have to pay to move out of your apartment anyway and there’s no labor involved. All you’re paying for is the same semi tractor to haul a trailer only instead of the company’s trailer it’s YOUR trailer.
Honestly, what is complicated about this beyond your disdain of driving 10 miles to the suburbs? You can’t lose. I’ve taught this to other people and it profoundly altered their financial position.
At 19 I was a Freshman in college because I spent my prior year building funds for college working multiple jobs. Prior to that as a teenager I worked jobs to pay for a car to get me to/from school. I had limited funds. I also didn’t want a student loan after graduating so I went to school part time. It took me 15 years to get a Bachelors Degree. I could have trimmed that down by half but during that time I transitioned to full time and was making “college-degree” wages. But I was working for a company that was always on the brink of bankruptcy so I my financial planning had to include that possibility. My trailer drastically reduced my living expense as did my house. The cost of living in either of them was ALWAYS cheaper than the cheapest apartment.
Again, I’ve taught this strategy to friends starting out and it drastically improved their financial situation going forward. It’s about choices. We both got degrees but one of us took longer to get and the offset was a debt free lifestyle. At any time in my life I could have lost my job (which happened multiple times) and I had a cheap place to live. The first time I lost my job I had a wad of money in the bank and I was debt free. The second time I lost my job I used that money and then some. But I structured some of my retirement money for instant no-penalty retrieval. Again, I planned ahead. It got ugly after that and I went 6 years working multiple part time really shitty jobs. I’m still here if not considerably thinner financially.
This is hardly the end-all method of getting the best return for your money. What I’m suggesting is for people who are basically unmotivated. For motivated people I’d suggest leveraging their money by buying all their major purchases as fixer-uppers. That includes cars, trailers, houses etc… But that’s not for everybody so I’m not suggesting it.
"Get your ass out at 18 and start earning a living " might be from a bygone era, but wolfman was talking about people who live with their parents into their mid-thirties. “Get your ass out and start supporting yourself before 35” is not from a bygone era.
And that norm in other cultures and times - I can’t think of one where it was the norm for all the children to remain with their parents after they were married. Perhaps the oldest son might expected to remain at home after marriage and take over the family business and/or household and financially support his or her parents in their old age. And there have been plenty of cultures where offspring were expected not to leave their parents home until they were married - but typically, that goes along with expectations as well. Either for unmarried adults to turn over the majority of their earnings to the running of the household and/or for them to have roughly the same amount of independence* they had just before becoming adults and certainly for them to financially and otherwise care for their parents in old age if they were still unmarried. Often, there was also some expectation that a married sibling would take in the unmarried sibling after the parent’s death. Not to mention the opposite stigma -there have been plenty of times and cultures where a woman who left her parents’ home before marriage would have been stigmatized.
You can't really go back in time or to other cultures and expect to take only one piece of it. All the pieces are dependent on each other.
My great-grandparents had four children who never married and remained at home until after their parent’s death. I guarantee you that my great-aunts never stayed out overnight with anyone who wasn’t family until their parents passed away. My great -aunts and uncles kept the house until 2 of them passed away. My great-aunt then moved in with her sister and brother-in-law and lived with them for another 25 years or so. Finally, they both passed away, their sons sold the house and my great-aunt is mad at those nephews for selling the house - because her expectation was that since she took care of her parents, she should never have to live on her own and pay a normal rent. (She shared my great-grandparent’s house with her three siblings and the other house was paid off when she moved in , so she had never paid normal rent- it was always just a share of certain monthly expenses)
While Magiver’s mobile home option has a certain attraction maybe I’ve just lived in Tornado Alley too long - where the F do you go in severe weather? Not entirely an academic question, as it wasn’t that many years ago my area was hit by tornado. Even through it was a small one it completely destroyed a number of buildings, including homes, and left our place with part of a tree through the roof and other peoples’ possessions littering the roof and yard. In a storm like that a mobile home is a deathtrap. Is saving money worth feeling chronically unsafe?
Safety and security are factors in housing choice.
Now this is what I’m talking about. Somebody thinking about the future. You put anchors in the ground and you run cables over the top and secure it or if the trailer has the straps built in you attach the anchors to the frame. There is a wide variability in construction but If I remember correctly some of them are framed in 2x6’s which is sturdier than a house.
Alternately, many parks have a central building that may be used as a shelter.
Look, Magiver. It’s obvious that buying a mobile home at 19 worked for you. Kudos that the planets aligned just right so that years later, you could gloat on the interwebs! But at any given moment, a person is constrained in how many risks and gambles they can take. We can preach about “individual choices”, but if a significant portion of tax payers are unable to save for retirement, pay off debt, or pay their taxes, then it’s eventually going to affect the folks like you who made all the right choices. That’s why we should all care about this.
On another message board somewhere, there’s a 20-something who bought property because they didn’t want to be a “loser”, and here there are, complaining about how they are stuck with a house that’s falling apart all around them and they can’t get out. And this is especially rampant in rural areas, where mobile home parks prevail. If they “get out” by walking away, they ruin their credit. Bad credit can keep you from getting a job. It can make it hard for you to get an apartment. It’s unfortunate that this 20-something was more concerned about being a “winner” than being cautious.
Can you really not understand how this is really not a matter of making choices?
You can also build safe rooms into a mobile home, or any home for that matter, that can protect you during the worst tornadoes (well, at least in theory… actual testing has been limited although with mostly positive results). If such a room is already integrated into the structure, great (and I hope one day they become standard features), but renovating to install one is usually around $6-10k (yes, I’ve actually researched that). That’s a serious problem for someone in my income bracket.
So yes, there are various solutions to the problem, with varying degrees of practicality.
If it had taken me 15 years to get a Bachelors Degree, I wouldn’t be employed in the career I enjoy now and I would likely be getting paid half what I do now. I gambled on education and it resulted in me being financially secure, with cadillac health coverage and a full pension and a decent salary.
If you were to lose your job, would you really want to hear sanctimonious lecturing from me about how you made a stupid choice to invest in a mobile home rather than throw everything you had into college education? Would you want to hear me say, “Durr, I don’t understand why it takes people 15 fucking years to get a bachelor’s degree! What are they, fucking retarded? They shoulda done what I did! Then they wouldn’t be in this predicament! NO SYMPATHY FROM ME!”
That’s what your posts scream to me. You can’t grok why people would make decisions that differ than yours, so you assume their reasons are without merit. Which then makes them unsympathetic.
I wouldn’t say “all night,” but there are definitely places where you have to drive for an hour or so just to get to a subway station that’s another hour from downtown San Francisco. As for trying to find a place in SF itself, even the poorer areas are being gentrified - and, if I heard right, Google is making it worse by having people who work for them in Silicon Valley live in San Francisco.
I wouldn’t call it a “stigma,” but I think the major drawback is, how do you bring someone “back to your place”?
You bring someone back to your place when mom and dad or other people aren’t there - not always convenient to schedule, I’ll admit.
The house is somewhat subdivided - basement or upper story “apartments” that, while not wholly separated, do have their own outside entrances and the ability to shut a door and gain some privacy from the rest of the house.
You don’t bring someone back to “your” place for certain… activities. You go somewhere else for that, up to and including renting a cheap hotel room.
How do I know all this? I spent two years in a relationship with someone living at home with mom and dad while putting himself through college and saving up for a nest egg. It also helped that mom and dad didn’t expect their adult children to be celibate or forego romantic/intimate relations while living under their roof.
Basically, there are ways to make this work, just as there are ways for this to be a disaster.
First off no planets had to align. It’s an easy method of avoiding the total loss of money to rent and it is as close to foolproof as any plan can get. Second I’m not gloating. I’m providing an example of an easy solution to a real problem. Possibly you could rethink the accusation. Third, it directly affects the ability to plan for retirement. If you have a better way of converting rent money into $900,000 please post it so others can learn from it. Fourth, everything I’ve put out here directly addresses the concept of debt. You deliberately chose debt post degree. I chose not to because the debt was a higher level of risk that you keep complaining about. You created that debt. You didn’t have to go to school full time. You could have avoided that debt at the cost of time. Money and time are interwoven with financial planning. Fifth. I didn’t make all the right choices. But I did plan ahead. Maybe it’s because my depression era high school educated parents taught me those skills and were my role models. But I was planning my children at age 18. Never had them but I had a financial plan in the works.
No, I honestly can’t. I just used one example that’s easy to follow. It’s foolproof. There are many ways people can plan for their future. I had a friend who used the stock market and leveraged his money instead of time. He was doing great until the market crashed and they called in his markers. I’m too chicken to throw those kinds of dice and prefer security over wealth. I have acquaintances who bought distressed houses, fixed them up and rented them out. They lived like church mice for YEARS. You’d never know what they were worth on paper by looking at them.
We both came from similar backgrounds. I’ve shown that it’s cheaper from the start and has no discernible risk. It starts out cheaper than an apartment and as time moves forward the cost goes down while equity increases. The savings involved would be available to pay for school. Again, the time value of money. My financial future was never set in stone. I had backup plans for when crap happened and then backup plans to that.
Your example of the 20 something who bought a house out of some bizarre pier pressure is not an example of financial planning. It’s an example of keeping up with the Joneses. Screw the Joneses. find a better class of friends. Everybody I’m privileged to call a friend has planned their financial future in a manner that gave them the best return for their efforts.
What our exchange comes down to is it bothers you that you traded time against money to get through school sooner. But what you fail to realize is that it’s YOU who took the financial risk and not me. I didn’t want to risk my financial future with debt I couldn’t easily handle in a crisis. Your choice was one of convenience because it was more inline with your lifestyle. It also appears that you felt you’d be a family laughing stock if you lived in a trailer court which as we all know is often the butt of social jokes.
There are infinite ways to plan financially for the future. I gave one brief example that doesn’t require a lot of thought or effort.