You have a point. If you are spending $5 a day on starbucks, another $10 a day on eating out above what it would cost to cook at home, an $80/month smartphone plan, etc. that adds up to 5-6k a year net income. The point about used computers is that if a person really needs one, they can buy one used so I don’t think giving up an extra computer is really necessary. Even if not sites online sell new laptops for $300-400 now and desktops even less. Buying a new laptop for $400 every 4 years isn’t going to bankrupt anyone.
I don’t think I’m typical in that regards as I’ve already pared down most of those purchases anyway. I don’t use my phone much so I have a prepaid, and when I eat out I usually find deals and it costs less than $5. I bought my car with cash and have no debts. I know coworkers who make 2-3x what I do who are deep in debt and I think all those minor purchases adding up plays a role (buying $10 kindle books, eating out at higher end restaurants, etc).
How do you keep your electric down to $50/month? When I was in college living in apartments that were 700-900 sq ft my monthly electric bill came to $60-100 for the entire apartment depending on the season. Do you have a newer apartment with better insulation? High efficiency bulbs and appliances, insulating windows, high efficiency heating/cooling, etc? I’m genuinely curious because electricity is one of the bills I have trouble cutting.
It may be a regional thing? Maybe Dominion Power provides cheap electricity? My apartment was built in the 1940s and is as efficient as you would expect something that old to be. And I don’t have high-efficiency anything.
I don’t have central heating or air, so that may be it.
I disagree. With a little planning a 2 income family can pay a starter house off in 5 years and revert to a single income for the early years of child care. It’s all about setting a goal and budgeting money.
I could see people dropping the whole concept of a “starter” home before doubling up.
I’m about to move into a small house (~650 sq ft) in a couple of weeks. It’s an old bungalow, built in the 1920s. It will be just me and my two cats and I know it will feel small (it’s bigger than my current apartment). I imagine, however, that once upon a time it housed a family. It is quite tight for three-four people, but I can imagine a family “back in the day” making it work because they didn’t know of anything better. And yet I’m also thinking the family back then considered itself “middle class”.
I’m wondering if average, middle-class Americans would ever pare themselves back to this level.
I didn’t read the rest of the thread but I have to respond to this specifically.
Over-consumption IS the economy. It is literally built on people buying things they cannot afford. And it is so deeply ingrained into society that it will never change.
As long as people derive social status from owning stuff, people will generally buy stuff, up to the limit of “as much as humanly possible”. If you’re off that treadmill, congratulations. But the tradition of conspicuous consumption is so old (ie, as human history) that I doubt it will ever change as radically as large numbers of people voluntarily deciding to downgrade their lifestyle. “Not increase it dramatically just because they can” is probably the most you can hope for.
As far as the “but if we don’t buy stuff the economy will collapse” argument, I don’t buy it for a second. The West doesn’t have a general problem with not enough stuff being produced every year - it has a problem with unequal distribution of the stuff and the opportunities to be involved in its production. People buying extra stuff they don’t want or need, and won’t use, doesn’t actually help with either of these problems.
If you are in your 40s, say, you should be saving for retirement. (Paying down a mortgage of a house that you will sell when you are older counts as savings).
Then again, buying a house is often associated with greater spending…
Individuals should shape their spending decisions to their individual situation. If we want economic recovery, stimulus should be provided by the government. US infrastructure quality lags behind other developed countries. The federal government can borrow at extremely low rates. They should do so. There is work to be done, and people eager to do it. It’s only politics and ideology that prevents us from applying textbook macroeconomics to the problem at hand. This obsession with austerity is the diametric opposite to what we should be doing.
It may be at most 700 sq ft (I forgot that it’s got two bedrooms, not one), but I meant to say it’s smaller than my current apartment, which is 800. When they advertise a place as “charming”, that’s really what they mean. The upside is that it’s got a relatively big fenced-in back yard for my cats to fromp in, and a front yard where I can grow flowers. I can finally feel grown up without dealing with the stress of a home-owner. And the location can’t be better. I’m stoked!
Not for sensible people. There is no guarantee property prices in any given market will steadily increase for decades, like savings will. You might not be able to beat inflation with savings, but you definitely won’t with home value.
I responded to the OP claim that if I didn’t agree that people need to “pare back,” I’m unintelligent.
I wasn’t blaming anyone except the person who associated a personal point of view with intelligence. And I’m not much blaming that person, just using a throwaway remark as a segway.
Now, what is true is that most people on the thread are responding in terms of a personal finance perspective, which is fine. I responded to the political claim that if people don’t pare back, it will hurt the overall economy.
Personal finance decision should be based on what is best for your family, not on what is best for the economy.
Since, relatively speaking, the economy already has collapsed, I agree what’s in quotes is now hard to buy. However, if you ask why it collapsed, yes, it has a lot to do with decline in demand AKA people buying stuff. People stopped buying stuff because of rational factors such as worry about how long they are going to have their job. When confidence picks up, employers will resume hiring, and people will buy more.
Depends on the location. Outside of major metro areas a starter home is less than 100k, so mortgage payments are $500/month. In rural areas a fairly decent home can be had for 60-100k.
Things like spending on Starbucks do help me understand how people with wages much higher than mine still end up broke a week before payday; it really does add up.
Consumer electronics, OTOH, have become ridiculously cheap compared to when I was a kid.
My two-bedroom flat (home to 2, previously 3 people) is that size and is larger than some of the other flats here where people are also raising families.
But if you can pay it off before you retire, that means that one of the biggest costs, rent, is not a factor then. I’d always hoped to buy a 2- or 3-bedroom place so that I could rent out a bedroom for extra cash if I needed to.
Sure, but buying a house with the intention of selling it at a profit to fund one’s retirement (which is what Measure for Measure suggested, saying it is the equivalent of savings) is different from buying a house with the intention of living in it forever. The former makes zero economic sense.
I think I have been out of phase with the recession all along. Everyone was supposed to be roaring along during the Bush years, but I considered myself financially screwed. I spent the first decade of the millenium living in crummy 1 br apartments, driving old cars I repaired myself, and so on. Sure I went to the local dive for burritos and beers frequently enough, and I always had a cell phone, but mostly I was working like a dog and spending all my money on paying off debts.
My income has basically behaved the opposite of the recession though. While everyone was getting laid off my assets were exceeding my liabilities at the same time my income was growing dramatically. So I moved into a nice little townhouse (rented) with my gf. First time I’ve had a place with central air, first dishwasher in a decade. I’m typing this on my killer new i7 laptop. But I’m still driving the same late-model Toyota and my wardrobe is older than ever.
I feel like I am not the usual case. I paid my bills and suffered to do it. Once I could afford it my lifestyle improved. I don’t worry about ordering pizzas or splitting some fancy cheese and wine with the gf. Sometimes I take her out for $100 meals. But (if you consider credit-card payments as ‘savings’) I’m still saving about 20% of my gross income, down from about 35% pre-gf.
I think history proves that most people don’t do it this way, or we wouldn’t be in a position where everyone is up to their eyeballs in personal debt.
I guess it’s a lifestyle thing. my garage is 660 sf. I keep tools and stuff in there partly to keep the house going and partly to generate a little cash flow. My basement and 2 bedrooms are lined with shelves. I guess I’m part collector of history and part pack rat. You never know when you’ll need carburetor parts for a Holley 5200. And that electric chainsaw that’s sitting in parts and was replaced by a newer one. I’ll certainly get around to fixing THAT.
