Will everything always be more expensive and just out of reach?

The BBQ Pit
21

But our parents owned so much less. On average one car, one or maybe two TVs, a radio and a phono, less home ownership, no plans to send every child to college, no internet, no cable, no cell phones, no video games, limited air travel, credit cards were still fairly uncommon or at least used differently.

People were satisfied with smaller houses and a lot less stuff.

Now we have two incomes, but bigger houses, two cars, childcare, and oh so many goodies.

BTW: Clothing is a lot cheaper now. My mom and grand mom made a lot of clothes as it was a lot cheaper. Now good clothes are cheaper than the materials to make them here.

Housing, basic food, college and insurance has gone up quicker than middle-class salaries. Almost everything else has gone down.

VCO3: The only way to catch up is to get yourself into a job where your salary can advance quicker than inflation. This was something I did back in 1992. It was not easy, but well worth it. I saw many large raises as I changed jobs 4 times in 8 years, but for the last 8 years I have settled into a comfortable cubicle job where I only make enough in raises to keep up now. You need to get ahead of the curve while you are still young.

To anyone with credit card debt that they are only servicing: Pay it down quick, drop luxuries if you are carrying them. If you are already in debt and then lose a job or get seriously ill, it is a lot harder to get back on your feet if you are already in a hole. Debt is bad! Savings are good! It can be that simple.

I am not of course talking to people that have already cut out most luxuries, but someone mentioned carrying debt while maintaining luxuries, this is a really bad idea.

Jim

22

FTR, the cost of residential electricity, over the last 46 years since 1960, has averaged about a 3.05% increase per year: http://www.eia.doe.gov/emeu/aer/pdf/pages/sec8_39.pdf

However, in terms of 2000 dollars, the cost of electricity has actually gone down (see footnotes in prior link). So not everything is more expensive.

23

I totally agree with this. I was looking through one of the many school fundraiser catalogs that are floating around the office and I was agonizing over what to buy. Hmm, a Pumpkin Spice Yankee Candle. $21.00??! I could afford it if it was $16.00! That $5 makes a difference to me.

I’ll talk about it. My husband and I have been in a mobile home in a nice park for about 2 years. We’re satisfied with where we are for now, but it’s only a stepping stone. Our apartment rent kept climbing higher every year and we’re now saving about $200/mo* by living where we are now.

I often drive by those $400K -$500K McMansions that are popping up everywhere and wonder what those people do for a living. We’re nowhere near the poverty level, but I can’t see affording a house like that…ever.

We were paying about $700/mo for rent 2 years ago. Why do you always hear mortgage companies advertise “Why rent when you can own”? Do you know anyone that has a $700 mortgage? I was stunned to learn that even a $180K 30 year mortgage would run us about $1500!! That’s probably the amount we’ll have to spend to get a modest 3Br 2Ba home in this area. I don’t know how we’ll do it when the time comes. We have a 5 year plan, but I think it will be more like 8 years. By then, we’ll have to pony up about $250K.

*That extra $200 (and then some) now goes toward daycare.

$28 to fill my Hyundai :stuck_out_tongue:

24

I am always bad at whooshes, so excuse me if this is a joke, but if money is tight, you do not need to waste it on even a $16 Pumpkin Spice Yankee Candle.

Good news, I just ran the numbers:
The mortgage itself on $180K should be only $1,022.40 at 5.5% and still only $1,139.40 at 6.5%. Did your mortgage figure include taxes and home insurance? Then the $1500 would start sounding closer to correct. The mortgage itself would not be $1500 however until the rate ran all the way up to 9.5%

Jim

25

Yes, it’s called Supply and Demand.

When everyones income goes up, people want to buy more stuff because they can afford to. Since more people want their stuff, stores can sell higher prices so they raise their prices until it reaches a new equilibrium.

The only way for you to be able to buy more is if companies can make the same products cheaper (outsourcing) or produce more at the same or lower cost(automation).

26

That fact is overshadowed by the acceptance of larger homes, air conditioning, new appliances (hair dryers, dishwasher etc). People don’ realize that the comparative cost of electricity as gone down because now they are using so much more electricity.

As far as the Op, I’m in the same situation as Mr. Bus Guy. There’s still about the same proportion of debt-to-income in my life but I live better than 20 years ago.

VCO3’s situation sounds like mine 20 years ago.

27

What? I can’t buy Christmas presents early? Sorry Rachele, **What Exit ** said that I shouldn’t buy you that candle.

Why would that be a whoosh? If I can afford $16 for a candle, money isn’t tight. I thought this thread was about things just out of our reach. A $21 candle is just out of our reach. In that case, call me a cheapskate for only wanting to spend $16 on my sister-in-law, rather than $21. In all honesty, I’d probably just head to the Yankee Candle store in the mall to get an even better deal during a sale, but that’s beside the point.

I was watching a show on HGTV about first-time home buyers and $1500/mo is the amount they figured for a $180K fixed rate 30-year loan at 7%. I should have double checked the amount myself, but I believe everything that the electric picture box tells me. :smack:

28

Bingo. Commodity prices have been rising strongly across the board in recent years - the Reuters/Jeffries CRB Index of commodities dropped 7.4% in 2006, but it jumped by three-quarters in the prior four years. Wheat prices have more than doubled in six months, corn rose to the highest in 10 years in February, and cotton is up by more than a quarter in the past year, to give some examples. That means higher food prices, in the case of edible commodities.

Oh, and as this is the Pit, fuck fuck fuckity fuck!

29

I apologize for the first part; I thought you meant you were buying it for yourself. That is why I thought you might be joking. I am sorry about that. I do sound condescending in my post.
I am glad I could at least clear up some of the mortgage confusion; it is possible the HGTV show was calculating in Hone Insurance, PMI and taxes. That could bring a $180,000 loan at 7% to $1500 per month.

Here are the figures for 180K at 7%
Yrs Loan…Monthly
15 180.0 1,618.20
20 180.0 1,395.00
30 180.0 1,197.00

You should be able to do better than 7% currently.

You can avoid PMI if you muster up a 20% down payment. This is often very hard for first time buyers. We just barely go 20% on are first home. If a car died in the first ½ year we were in our first home, we would have been in trouble.

Jim

30

My lay $0.02 is that that high gas prices are driving the cost of a lot of stuff up since it costs more to get the goods and services to market.

31

An excellent point and quite true, distribution costs have increased along with prices for plastic packaging, as the raw materials for making plastics are derived from crude oil.

32

Similarly, while more efficient engines would have been expected to at least mitigate the problems of higher gas prices, it hasn’t quite worked out like that.

33

IMHO this is a combination of a lot of factors. Yes, a lot of underlying costs have increased – fuel in particular, which drives up the cost of other things. However, so has the average income. My parents could have nearly bought a house for what I now take home in a month. The first new car I bought cost me less than what I make in two weeks.

Upthread someone else listed the things we insist are necessities now that didn’t even exist in 1950. Back then my parents had one car, used by my dad to drive 5 miles to work. Things we did not have at all: t.v., clothes dryer, dishwasher, air conditioning. Things that didn’t even exist: personal computer, cell phone, digital camera, cd or dvd player. They had to shovel coal in to a furnace to heat the house. Average people had smaller homes, too, and they travelled less.

The other factor is that when you’re in your 20s, you are just trying to jump onto that escalator of rising costs, to get your foot in the door. Work to establish yourself in a field with a future, and you may find that you can increase your income faster than inflation.

Finally, many of us can re-evaluate how much stuff we really need. $50 to fill up a gas tank??? You really need that big a car? Or are prices really so much higher than what they are here? I paid $30 yesterday to fill up my nearly empty gas tank (and I didn’t have to pump my own gas!).

34

I think this is a huge factor, too. Even in the 70s, when I was growing up, a lot of families only had one car. My mom would drive my dad to the train station if she needed the car during the day. We had one TV in the whole house, and no VCR or cable.

If you add up JUST what an average family probably spends on items that requre a monthly payment (not even including equipment costs), internet access, cable, DVR service, cell phones, it probably comes to several hundred dollars a month. Add in electronic equipment such as the phones, computers, and TVs themselves, plus MP3 players, video games, etc. It’s a lot of dough.

My house has no air conditioning and people are AMAZED that I can live that way. Why? My house is 100 years old, and no one who ever lived there had air conditioning…why would I NEED it now, if they didn’t then?

35

For the record, we re-financed our mortgage last year to pay off our credit card debts, and ended up with a $185,000 mortgage at 5.5 % - our payments, including taxes that the bank forwards for us, are $1200 per month (but we pay bi-weekly, because that one small change turns a 25 year mortgage into a 20 year mortgage), and we pay about $100 per month in insurance. So I guess I’m basically confirming your figures. :slight_smile:

As for people living in McMansions, have you heard the term “house poor?” It’s become very common in Calgary, with our massive recent real estate boom (our house that we paid $158,500 for four years ago is now worth around $350,000). People buy as much house as they possibly can with their income, which is a very bad idea, but in a lot of cases, they don’t have any choice if they want a house. And if you live in a booming area, a $400,000 house isn’t necessarily a McMansion, either; they are just modest houses in modest neighbourhoods.

As for the affluenza part of the equation of money not going as far any more, I think that plays a big part. Who wants to give up their cable/satellite tv, their dinners out, their constant stream of new clothes, their new car every two years? Once again, I blame advertising for this. Advertising is entirely based on lack - you lack something in your life, and our product will fill that hole. It’s very negative, and as powerful as a hurricane. And it’s a lack of things you want, not things you need, and nobody seems to make that distinction any more.

36

Cereal goes on sale every so often. Don’t buy it when it’s not on sale; just wait for sales and stock up then.

37

Don’t forget that we usually have to put money away for our own retirement, as opposed to the more common pensions that our parents had. That can account for 10% of your income off the top right there if you are planning ahead. Plus the added amount we spend on health insurance. The difference in what our family pays for that now vs. even 10 years ago is substantial. (It went from totally company covered, to about $300 a month plus deductables and co-pays in our case.)

The cost of a college education is also fast outpacing income increases. My mom could work part time in college and made enough to pay for a 4 year private school degree. I went to that same school and there is no way I could have worked enough to pay my entire way through school. Starting out with big college debt is something most of our parents didn’t have to do.

38

One thing I cannot fathom is how much the so-called “average” American submits to in terms of monthly cable bills/sat TV bills. There are actually people in my office that pay more than $200 a month for their combined cable/dish bills, including taxes. Why do they need both cable and dish? Sports, or one, single channel that they MUST have but cannot find on one service or the other. Then throw in satellite radio ($14 a month + fees and taxes) and you’re up to another $200 a year. Then the other day I was stunned that people said their typical cell phone bill was well more than $200 a month. Why are their phone bills so high? So they can download sports events on their phones and because, of course, every kid in their family needs a fully tricked-out video-streaming phone.

When all’s said and done, about half my office is paying nearly $6000 a year net to, for a large extent, support their sports habit. Note I’m not counting in the cost of the innumerable baseball and football games they attend, which could, in the case of football, run to several hundred dollars per event. Some of these people take vacation to fly across the country to college basketball events.

My average co-worker is probably floating about 5-figures in credit card debt, and they’re damn happy over it. Hell, they’re proud of it - they treat it as if it’s something to brag about, and I hear them bragging alright. Right now there’s a competition in my office as to who can get the largest TV - typically, to enter the “club” you need a minimum 56-inch screen, and some are boasting of their impending plans to add a whole new room onto their house - so they can have a true home theatre system And what, pray tell, do they want to watch on these monster TVs? Sports.

Hey, it’s their hobby and they’re happy with it. But they cannot pretend like it’s fiscally responsible to spend that much money on these things. But then, I don’t understand my co-workers at all. They buy new cars every 2-3 years like clockwork. They live in $250-450,000 homes. They enroll their kids in elite daycare that costs $300+ per child per month without batting an eye. They sign up for $100/month lawn care services. Some pay an additional $75-150 per month in HOA fees on top of the lawn service.

And they’re stunned beyond belief that I can retire in less than 5 years. :rolleyes:

39

Would it be less fiscally irresponsible if they spent the same amount of money per year to watch movies, for example?

I don’t know if I am just feeling cranky, but the message I got from your post was that it was the fact that all this money was spent on watching sports that made it particularly serious.

40

It is kind of amazing to me that anyone would go through that much effort & expense to watch sports, but you’re right, if that’s their one indulgence, it’s probably not unreasonable (of course, people rarely have one indulgence). This is how I justify our dish w/movie channel package. We do like to watch sports, so we got the dish originally so we could watch all the Cubs & Bulls games. Plus, we don’t go to movies, ever. The last movie I saw in the theater was literally around 7-8 years ago. We really don’t spend much money at all on entertainment outside the house, so our entertainment dollars are pretty much all spent on stuff we can watch on TV. $70 a month for all your entertainment isn’t too bad, I think.