Monday, February 7, 2011

Life Comes At You Fast

(I wrote this post on October 19th and just saw it sitting in my drafts, so I'll post it today. I'm thinking it got away from me with NaNoWriMo getting into full swing. It seems fitting since this month in our homeschool group, our kids are taking classes on finances -- spending/saving/budgeting/interest/credit cards/investing/bills/taxes/etc.).

Photo from www.WNYC.org

Fun Fact #1:


In the past month, we've received the following bills due to varying life necessities, including health care, dental care, and heating costs (we carry our own high-deductible health insurance):

$1700 (medical out of pocket -- this one later turned out to be half this, thanfully)
$680 (dental out of pocket)
$5400 (orthodontic out of pocket for Thing 1 -- keeping in mind we've already paid an additional $1800 for some previous work for her and it looks like we'll have similar orthodontic bills for Thing 2 as well) -- at least these can be paid in installments
$960 (oil for heating our home this winter--that one came today)
$450 for auto insurance (we pay that twice a year -- really not bad)
upcoming unknown amount for a medical ENT procedure
upcoming unknown amount for fixing our van -- it occasionally doesn't start
upcoming unknown amount for replacing our 12-year-old couches that look like this:


This hole is significantly bigger now.

See, my awesome physician husband
uses his stitching skills on more than just
cuts and skin suturing
-- he's extended the longevity of our couches.

Seriously, he's really good.

But, alas, the rips have grown much bigger.
We love our couch set and would replace it with the
exact same set if it still existed.

Remember, most of these pictures
are from October,
so use your imagination
and really widen those holes
and rips in your mind.
There.
Now double that and you're about there.


Fun Fact #2:

Those bills are "extras" and do not include our regular monthly bills, which include two mortgages and student loan repayment as well as business overhead and malpractice insurance (ka-ching!), not to mention food, electricity, insurance, etc.


Fun Fact #3:

Both Mark and I hear SUCH sad stories from our clients who are also struggling. Part of my job often involves hearing about people's financial difficulties and stresses. It is so hard and conflicting to charge people for a session after they've told you how scared and stressed they are financially--because you feel awful for charging them because you know they're hurting, yet you know you also have to make money, because you, too, have financial obligations. We love having our own business in so many ways, but we also get pretty close to our clients and you really feel for them and all they're going through. Ugh. I often think of how nice it would be to be rich and just go around helping people who have it rough.


Some famous quotes dancing around in my head:

Ferris Bueller famously said, "Life moves pretty fast. If you don't stop and look around once in a while, you could miss it."

Nationwide keeps telling us, "Life comes at you fast."

And then of course we know that, "There are some things money can't buy. For everything else, there's Mastercard."


Two New Books -- Generation Debt: While doing some research online, I've come across two new books that address the issue of how our generation is burdened by debt and having a harder time getting ahead than generations before ours.

Generation Debt, by Anya Kamenetz, takes a look at the major economic shift that is happening in our country.

I feel extra prescient and smart, because her research backs my own personal theory that I've had since the mid-1990s. Back then I was saying that it used to be skills that got you a job, then it was a high school diploma, then it was a college diploma, and now it's a graduate degree plus experience.

Our generation faces different challenges than that of the generation before ours. And I do think that, because of that, sometimes our generation seem like "slackers" to the baby boomers. But only if you don't look at the facts that this book presents.

From the publisher:
In this thoroughly researched and rousing manifesto, Anya Kamenetz chronicles and questions the plight of the new "youth class": 18- to 29-year-olds who are drowning in debt and therefore seemingly unable to "grow up." Many older adults perceive today's youth as immature slackers, "twixters," or "boomerang kids," who simply cannot get their act together, but Kamenetz argues that this perception is a misinformed stereotype.

Numerous economic factors have combined to create a perfect storm for the financial and personal lives of America's youth: a college degree is essential for employment yet financially crippling to many, government grants for education are at an all-time low, Social Security and Medicare are on their deathbeds, and our parents and grandparents are retiring earlier and living longer.

It is soooooooooo different now than it was for our parents. My mom has often told us the story about how she and my Dad went into the bank to get a mortgage. The banker met with them, shook their hand saying, "You seem like a nice couple," and gave them their loan. That was it.

Our generation has about 168 pages of information to fill out, multiple background and credit checks, and skeptical looks from all lenders and bankers.

My parents got that loan and then paid off their home in 7 years. 7 years! No eating out, no buying clothes (they sewed all their own clothing), etc., but they paid if off in 7 years.

The generation before theirs? Some didn't even take out loans at all! The other night in book club, one of our friends talked about how her grandparents paid CASH for their home and there was a murmur of consent and a lot of nodding all around as many could vouch for the fact that just TWO generations before ours (one for some of our book club members), many paid CASH for their homes. That was, for many, the norm!

So, two generations ago, they paid cash. One generation ago, they paid off their homes in a few years, and now our generation can barely afford a home in 30 years? What has happened??

Those of our parents' generation were marketable with high school diplomas, bonus if they had a college degree. And even many jobs without either of those paid decently to start.

Our generation is faced with a dilemma: cheap labor or expensive schooling? People our age can go into massive debt for an education and a chance of getting ahead or get an $8/hour job at Home Depot.

Economic shift indeed. Read this short article for some alarming facts. Seriously, read it. Stop reading our blog and go back and read it. I mean it.

All right. Welcome back. Ahem. I was saying . . .

Today's middle class, college-educated families are among the poor families getting food at food banks.



Two New Books -- Strapped:

Strapped: Why America's 20- and 30-Somethings Can't Get Ahead, by Tamara Draut, has a peppy title that just screams hope and optimism, doesn't it?

This book has more of a political slant to it, in that it addresses how things have shaped up the way they have thanks to a generation of leaders more interested in serving the wealthy than investing in the future.

But here is one fun fact from one of the reviews on the above-linked site:

'Today's college grads are making less than the college grads of thirty years ago.' In fact, men aged 25 to 34 with bachelor's degrees are making just $6,000 more than those with high school diplomas did in 1972.

From the publisher:

Drowning in student loan and credit card debt? Can’t afford to get married, buy a home, have children? At last, a book for the under-35 generation (and their parents) that explains why it is not their fault.

Strapped offers a groundbreaking look at the new obstacle course facing young adults—the under-35 crowd—as they try to build careers, buy homes, and start families. As Tamara Draut explains, getting ahead is getting harder. A college degree is the new high school diploma—but it now costs a fortune to get that degree, and students graduate with crippling debts. Good jobs are scarcer thanks to stagnant wages and disappearing benefits. And, the cost of everything—starter homes, health coverage, child care—keeps going up and up. Budding families, even those with two incomes, struggle to pay the bills, while Visa and Mastercard have become the new safety net. Young adults are starting out behind the financial eight ball—borrowing their way into adulthood and wondering whatever happened to the American Dream.


And that closing line is what leads me to my next point . . .


Is this a purely American phenomenon?

Is it? I mean, obviously there are countries FAR poorer than ours. I've lived in them. We have SO MUCH here -- running water, electricity, indoor toilets. We have the Internet, we have so many resources, we have choices. Honestly, we have it pretty good!

But it also seems Americans are all TIRED and run ragged in the pursuit of the basic American Dream of home ownership.

I often wonder about people in countries like Portugal and Italy. People there work hard but they really know how to live and relax, too. They own small homes, use public transportation, and spend a lot of time in their backyards (if they have them) and at caf├ęs drinking and relaxing
with friends. (Ha! After writing this post and without even trying, I found this article that backs this up, too!)

In the movie "Eat, Pray, Love," an Italian man in a barbershop says, "Americans know entertainment, but they don't know pleasure. Italians know pleasure." I think that's true!

So, yeah, sometimes I daydream about buying a small villa in Portugal or Italy and living simply. Is it less expensive there or are they just smarter? I don't know.

But we do love where we live and so we're now back to the bills and expenses mentioned at the beginning of this post in the fun facts.

And this leads me to my next point . . .


What's your take? The other evening, I was at the coffeehouse with a bunch of my friends and we were talking about life and kids and college and retirement (yes, we've long graduated from playgroups to discussions of IRAs and 529s . . . or the lack thereof). I later spoke with a couple of the dads from the group as well. Here is a little look see at how the group broke down:

Women #1 and #2 did not have college paid for them and do not feel that they can afford to pay for college for their own children either as they feel they can't afford to do both (that and retirement).

Women #3 and #4 had college paid for them and also want to pay for college for their kids.

Men #1 and #2 didn't have college paid for and don't want their children to have to go through what they did, so they want to be able to pay for it.

I've talked to others, too, from different situations and the big breakdown seems to be:

Didn't have college paid for -------> Won't pay for kids' college (it's what they know)
Didn't have college paid for -------> Want to pay for kids' college (it sucked for them)
Did have college paid for -------> Want to pay for kids' college (was great - want to share)

So, most want to pay, but the question is how to afford it when, you know, "life comes at you fast."

As a good friend of mine who reads this blog (you know who you are) says (and I agree with him), "I brought them into this world. I figure the least I can do is educate them."

And let's not forget investing for retirement . . .

So, Generation X/Generation Y (we fit into both of these, depending on which chart/article we reference, but more often it's "X") . . . where do you stand? How do you think we fare compared to past generations? Are you more often scared and stressed? Or happy and hopeful? What do you hope for your own children?

16 comments:

the emily said...

This is so thought provoking. These are some thoughts I've had myself very recently. I feel like my parents were excellent--they paid for everything. I never wanted for anything, and that included college. It was completely paid for until I got married (which was my second senior year--bachelor's took me 5) so I took out one small student loan that year. The problem is they never taught me how to save. I am so grateful for what I was given, especially my college education. But I wish so badly that they had taught me fiscal responsibility. It took several years of working hard to pay off the stupid credit card I got in college, which taught me a good lesson--save for what you want, don't buy it first and then spend--but in this world it's impossible. Especially on our family's salary. We barely cover our bills. Saving is impossible right now--for ourselves or for our kids future. And it's horrible knowing that there is nothing backing us up should something go wrong besides a credit card. I would like to pay for my kids education, but Isaac is already 6. The likelihood (if we started saving right now) of us having enough for him by the time he's 18 is very small, so it feels a little hopeless.

My grandparents got a loan for $6000 for their first farm and they were certain they would never be able to pay that off. And it was for an entire FARM! It's laughable now to think that my cheapo, 8 year old car cost more than that. It makes me a little sick, actually. I don't know if it's American, but I do know that I HATE it and wish things were different. I would love to have a nice house some day but it seems less and less likely of that ever happening anymore.

Jimmy said...

I can look at my parents and my grandparents and say each generation has more wealth than the previous one, largely due to the fact that each generation in my family has become more educated.

One observation I have: Seems like many young LDS couples I know feel that upon graduation from college, they are entitled to start off with a nice 3 bedroom home, a garage, and a yard for kids to play in. I guess I'm not convinced that's true. Even once you get your education, it still takes a while for your income to climb and your career to develop.

So I guess I'm asking, are folks expecting too much too soon?

Boquinha said...

Thanks, Emily and Jimmy. I'm surprised there haven't been more comments. I thought it might generate some good discussion. I'm glad you two commented.

That's great about college for you, Emily. I'm also very grateful that my parents helped me with college and we're planning to do the same with our kids. It makes sense to me -- kids don't stop being your kids when they turn 18, you know?

Our kids are taking a class right now through our homeschool group -- it's all about saving and investing and interest and stuff like that. GOOD stuff everyone should learn -- I call it "real world math." I never learned about mortgages or credit cards in school! I'm very lucky that growing up, my parents were incredibly open about finances and taught us those principles early on.

I hear you on the fear about the lack of back up/safety net. That is scary. I think with saving for the future, even a little is *something* -- I think that sometimes people think that if they can't save thousands, then why bother at all, but even 10 or 20 bucks is a start. It's the principle and habit, I guess.

And Emily, that is exactly what I'm talking about -- not that long ago, it was conceivable to not take out a home loan at all or to pay it off in less than 10 years. But that seems a MAJOR impossibility now. What has happened?? That's why those books and articles are so interesting to me. Our generation isn't lazy or unwilling to work, but we're at a major disadvantage in many ways compared to previous generations.

Jimmy, I think education IS key. And the trick is that it's getting SO EXPENSIVE to get one, but the alternative isn't one really (and it used to be!). I've heard of the observation you make (and have even seen it at times), but I'm thinking more of people in their 30s and 40s who still can't even afford a simple home. Not getting one in your early 20s makes sense for many, but 30s and 40s??

Vivian said...

ok, I'm a generation older than you and I want to know where was the mortgage that got paid off in 10 years? We have been paying on our 30 year mortgage for 32 years now with years more to go. (interesting math, eh?) Some of our friends retired in their 50's. I don't know how they travel to Europe, time share in Hawaii, cabin at Lake Tahoe. It was so costly raising a family (wouldn't trade my family for *any* size bank account) that we aren't prepared for retirement. Someday I'll actually catch up to that darn carrot.
I don't envy your generation. Somewhere along the line, the rules changed. I do have confidence that my kids can have good and satisfying lives though, because they are hard workers and more intelligent than their parents:)

J Fo said...

Wow. This really hits close to home. Greg and I have had a lot of similar discussions and those 2 books that you mentioned really sound good. The ideas kind of back up what we have talked about. We kind of feel like we've done everything right that we can: getting degrees, working a lot, working hard, avoiding credit cards...but then "Life comes at you" and we got stuck in some holes. Month to month it's just trying to pay bills, and pay more than minimum, but then some other road block comes up and sets us back again. We're not sinking, but we're barely keeping afloat, and I think that's not very uncommon for families our age. Even with our careers, we feel like our degrees and experience aren't getting us paid as much as they should. (Maybe that's just So. UT?) Ahhhh...it's kind of exhausting to think too much about!

Vivian said...

re: your couch. How sound is the frame? Maybe a slip cover could give you a whole new look and some more years. Wish I had Mark's suturing skills for my 13 year old car seat.

Cristin said...

I've been thinking a LOT about this stuff lately, too. A few thoughts:

I can appreciate the couch photos! Mine is slowly coming apart, dissolving practically, but we refuse to buy another one until the puppy's bigger!

On generational differences--my grandfather, for instance, didn't have a lot of (if any) debt, but taking the car out on the weekend and going for a fifteen minute drive to visit someone was a big deal. He mostly just went to work and did things right in his own neighborhood. Things are very different for our family now. If I'm not careful, I could easily spend at least an hour per day in the car. And I'm a SAHM!
I think our 'normal' way of life was just a lot more expensive, until I stopped to think about it and made changes--less car use, less money spent on recreation/eating out, less money spent on clothing/food. I had to examine these things (about 5 years ago or so) in order to survive fluctuations in the construction industry which DH is in and continue being at home with the kids. Now I'm looking at these things even more closely, so we can up our savings.

I'm also on the hopeful side of the fence--there are a lot of people who have accomplished a lot without a big income. I think of books by people like the Economides (their real last name!) or Amy Dacyczyn (sounds like 'decision'). Did you ever hear of Dave Ramsey? He's an online financial guy who has this saying, "Normal is broke. Be weird." I don't know a lot about him, but I think he's right when he says that--about 'normal' being broken. But there are other ways of doing things.

Boquinha said...

Vivian, I'm not sure where the mortgage was, but I think the one story I heard was of people from around here in PA. And I didn't get the impression that they were at all rich, just big time savers. I've also heard similar stories growing up in New England, too. But again, that was over 30 years ago. I haven't heard many current stories like that -- some, but not many. Some thing I see around here is people with a lot of land passing on parcels of land and homes to their children, thus keeping the money in the family and keeping things more affordable. Somewhere along the lines people spread out, too.

The rules have changed and it's made it so much harder -- I don't think it's impossible, but it's just NOT as attainable as it used to be. And definitely not in the same way.

As for the slipcover, we considered that right away, but the frame/cushions are SO worn out that older people who come to our house ask for hard seats to sit on and have difficulty getting up -- it's pretty bad. :P Mark's suturing skills really are fantastic. You've got me wondering. He is the one who mostly drives our 13-year-old car around -- I'm going to ask him if the seats are ripping in there, too!!

Jessica, I love how you put it -- "We feel like we've done everything right . . . " -- I think that's exactly what the authors are saying and what our generation is saying! And "not sinking, but barely keeping afloat" -- it's soooooo stressful (which makes me think -- ack! Not good for health -- must take care of health -- that costs, too! :P). LOL! I don't think it's particular to Southern Utah -- according to the articles and those books, it's everywhere and very relevant to our generation. We've paid A LOT to get educated but the pay is not commensurate, especially considering the debt load to get there. It costs more to get educated, but the pay hasn't gone up, too. Quite a conundrum.

Boquinha said...

Cristin, I thought you'd like this post! Good call on the couch/puppy!! :P

You're so right about the car trips -- how much do we all depend on MANY car trips per day?!? Back then, everything was simple and close. Now, part of "getting ahead" is more than keeping the farm, but about taking our kids to music lessons and book clubs and making sure they have social opportunities -- I think even that used to be closer to home (like we've talked about). It doesn't help that gas prices are through the roof again (what happened?!?). We've got back a lot on eating out (one of our few and favorite pleasures).

The fluctuations in construction (and in owning your own business) DO make that tricky. Our first year in business was so panic-inducing for me when the clinic would slow down. Now I've learned that there are normal highs and lows, but you do have to manage it to make it work (which I really wouldn't trade for "working for the man") and I'm not nearly as panicked anymore. Plus, with every passing year, your business grows and we're still in that "growing" stage, so we're learning patience and perspective with that.

And, as a side note, did you hear about the kids' quiz in Bethany's Finance class? It was about millionaires and they said that most self-made millionaires work for themselves. Interesting!

I love that you're on the hopeful side of the fence -- perspective and attitude really make a big difference. Law of attraction and all that. I see that a lot.

I have heard of the Economides, but not that other one. I was introduced to Dave Ramsey's principles by an online blogger friend a couple of years ago. I hadn't heard that phrase (I like it, though -- the therapist that trained me used to ask why people always want to be "normal" -- why not extraordinary?!).

Dave Ramsey's approach is the snowball method of debt repayment. We're doing a variation on that theme, so to speak, and I'm hopeful, too. You're right -- it does take a lot of tweaking and cutting back. And that's okay. I'm down with that. Your blog has great reminders of that, too!

the Lady said...

Stacy,

I love this post and wanted to talk to you about this on Friday at Inch. There are so many factors to take into consideration here. The economy is a tricky thing but this is what I have recently learned. As the GDP increases, so do prices- ie. when people are making money, prices rise. And when the economy is tough and unemployment is high, the Feds lower the interest rates so that businesses will borrow from the banks and hire employees. This all leads to lower prices. (Remember the overnight price drop in fuel in 2008 or 2009 when the Feds officially announced we were in a recession?)

So inflation will continue to rise and fall.

I'm thinking about those high interest rates of the past. People earned less money and interest on loans were higher. I remember Stephan's mom telling us that in the '80's interest rates on home mortgages were around 13 percent. Can you imagine? Prices on the homes might have been lower but that monthly payment would have been pretty high. 1980 had the highest inflation rate as well- in history-hitting 13.5 percent. These were not easy times to live. Remember the long lines at the gas stations because of the fuel shortage?

I guess that what I am trying to say is that each generation has had to struggle and figure out how to pay for their wants and needs. And each family has to decide how best to do this. What risks they want to assume.

I think that owning your own business can certainly provide opportunities for financial security in the future. (Just as the millionaire quiz suggested). But as you have mentioned in earlier comments to this post, there is a risk. I mean, what would happen to your business if you or Mark got hurt and couldn't offer your services? Do you have a safety net? I know of one entrepreneur who had a warehouse full of soda for his business. One day the air condition broke and the heat of the AZ desert got so high, that all of his inventory was ruined when the cans exploded. This tragedy put their family in debt for years afterwards.

There are always risks and rewards.

As for those bills of yours- we've been there too. Some months just really hit you hard.

As for Dave Ramsey, I think that his debt elimination plan is fabulous- and we are working the plan.
Tim Decker also wrote a fabulous book called, The Sleep Well At Night Investor.

As for that couch of yours, I'm sure that you'll wait a little longer after the pain of that avalanche of bills webs off and go and pick a lovely, affordable couch. Can't wait to see it. :)

Thanks for the post! Great topic.

Oh... and just a side thought, how lucky are we to have the internet so that we can research stocks and bank rates at the click of a mouse. Our parents and grandparents generation didn't have that luxury. Did they?

Boquinha said...

Bethany, thanks for the comment! I was excited to hear what you'd have to say. You know? I do remember the high interest rates of the 80s -- you're right, a different kind of challenge. It makes me think that that may have provided incentive to people to pay off their mortgages more quickly!

My parents have always encouraged us to pay extra toward our mortgage, even if it's a little bit. I LOVE playing with those online calculators where you can toy with what happens to your mortgage as you pay extra each month. It's AMAZING! When we switched ours from a 30-year to a 15-year, the print out showed that that saved, over the life of the loan, $199,999! That's *beyond* SIGNIFICANT! Yes, our monthly went up in the meantime, but it's totally worth it! I'm such a nerd -- I love those calculators.

I recently found a website that was a lot of fun to explore -- Man vs. Debt: Sell your crap. Pay off your debt. Do what you love. On it, he interviews a financial guru (David Bach) who makes a point with which I totally agree!!

He said, "Somewhere in the last, I’d say, two generations—really in the last 20-30 years, that whole philosophy of pay down your debt, have mortgage-burning parties, live free, is just gone away. And part of the reason it’s gone away is we have incentivized people to borrow more money.

. . .

I’m a huge proponent of home ownership, and I think it’s great that we get tax deductions. But I have to tell you, this whole tax deduction philosophy around borrowing money has really brainwashed people into thinking, “Great, I borrowed all this money, but I get a tax deduction.” In reality, who cares if you get a tax deduction if you still owe money? If all your income goes to making debt repayment, and you’re only paying interest, you’re really not getting ahead. So I just think we’ve been led down the wrong path, and I think Americans need a wake-up call. And they just got one with the recession."

http://manvsdebt.com/debt-free-for-life-david-bach/

I think he's spot on. I hear a lot of people justify stretching out their debt in the name of tax savings and it doesn't make sense to me. Over the long haul, you're paying out MORE. I think it's just a psychological sense of savings rather than a real one. He really hit the nail on the head.

Thanks for the book suggestion. We also like "The Millionaire Next Door" -- such sound advice. I'm seriously considering suggesting it for my book club book this year (even though I prefer and almost ALWAYS suggest fiction as opposed to non-fiction). It's been on my mind and I think it would be neat to discuss it. We have so many different ages in our group, the generational perspective would be interesting (already, the topic comes up just based on novels we've read and it's so fascinating to hear everyone's thoughts).

Anyway, I think it's a really interesting topic and I think it's a good one to discuss, since we all learn from one another. If everyone were hush-hush about their finances, it would be really hard to learn the ins and outs (isn't that true of anything really? Homeschooling? Knitting? Cooking? Etc.). It takes the mystery out of it. And we all learn and are better because of it. Yay!

Aaron Houssian said...

Interesting that I read this post today....
We're lucky that we have REALLY good health insurance here so we can avoid things like that, but yah dryer fixed €81, catch up gas payment €900 (split over 7 months thankfully, and on top of the €240 we pay every month already), $400 in catch up escrow because the bank royally screwed up everything.... at least it's better than the $1500 they wanted. Some days I choose to get down about things like this, today is one of them.

I think though that America in general is way too involved with debt. I can't remember where but I read an interesting article about how (and this is a gross paraphrasing) in the 60s the economy was slowing and it was figured out that we could keep the economy going if people had more money to spend.... how could we do that? credit cards and looser easier credit in general. We developed all kinds of crazy metrics like credit ratings to keep the house of cards up.

It seems like the other major English speaking countries of the world have similar systems to ours, but most other countries do not.

Here in NL I applied for a credit card.... they took one look and said no way, our income to housing cost ration is too out of whack. In Switzerland there is really no such thing as a credit card. When you get a visa it's secured against a savings account. A typical person can charge up to the size of the account, good credit or a bit more well off you can charge 2x, and some people can do 3x.

We're way too involved with credit. I can think of countless business opportunity pitches I've sat in (some more legitimate than others) that said "put it on your credit card, and start making money." All just a crock.

We've made it quick, easy, and oh so painless to live beyond our means... until we have to start repaying it. We're really the first generation to grow up like this. Our parents didn't grow up wit it, but they knew to avoid it for the most part. Somehow that message didn't get through.

People are defaulting on their mortgages because it's seen as the right business decision (if they're underwater). There is almost zero idea that when you take out a loan or a line of credit you have some kind of moral obligation to repay it. Those of our parent's and grandparent's generation who did such things would (and yes it happened back then to some extent) were thought to be dishonest.

I am not mourning the death of the good old days, or getting nostalgic with rose colored glasses looking at the past... just stating the change.

What to do? I think the only thing we can do... start with yourself, be what you want to see in the world.

Dr. Mark said...

Aaron, I think you're right about the credit thing. Somewhere along the line a lot of people convinced themselves that they deserve to get whatever they want, even if they can't afford it. Enter credit cards and to-good-to-be-true mortgage plans. I can't imagine not paying back what we've borrowed, and I can't imagine buying anything we can't truly afford. It just makes sense that we should pay what we owe on our home and student loans and try to live within our means.

Thanks, Stacy for the post. I know we talk about this stuff all the time, but it's cool to see your thoughts organized like this. It keeps the conversation going.

Dr. Mark said...

Er, I meant "TOO-good-to-be-true." Yeah, I can spell.

terahreu said...

Great topic. It obviously hits a nerve with many people.

I feel somewhat isolated from the 'real world'. I live amongst Bentleys and Lamborghinis. It is hard to know that there is a real crisis out there.

After living in several different countries I am always surprised how my environment encourages me or discourages me to consume. I think about when I was back in the US. There is a little bit of a competition always at play. Who has the bigger car? The bigger house? Where do you buy your kids' clothing? etc. It is a constant play of whose ahead and whose behind. The entitlement issue (as previously discussed) is also a big issue. Why the hell would I think that after being married for 3 years I should have a mansion. Look at Utah, it is a great case study.

I hate to say it but Canadians are far more frugal. The entitlement is not nearly as strong. People are more conservative with their cash and I guarantee the average square footage of most homes is significantly smaller than the US. We don't feel anyone owes us anything. You earn what you get--period.

Furthermore, when living in Nepal I found that I barely ever felt like I needed anything. For one, there is no competition. I am one of the richest people in the country. Where the hell would I buy something expensive anyway? Not only that, if I did, why would I dare flaunt it? Everyday I lived in Nepal I felt thankful. Who the heck cares if my kids' pants came from Gymboree? The main purpose is it clothed my children, nothing more.

Qatar also brings a different side of me. Here, you see such a disparity between classes and citizens that you just don't bother. I can't dress my kids in D & G or Burberrys and why the hell would I want to? Again, there is no reason to compete (for other reasons than Nepal) so I don't find that I want to consume. Pus, Indians and Filipinos are working their guts out for 300 bucks a month. Spending that during one dinner is blasphemy.

It is so interesting how spending habits drastically change the way we do things merely by the environment that we are in, or at least that has been my experience.

---

I think about when Axel and I bought our second home. We put nothing down, nothing. It was shocking that we could get into a 200K home, no problem. The banks were too willing. Then again, had they not, we wouldn't have made the large amount that we got when we sold that home. We bought at the right time and sold at the right time. Luckily.

At the moment, we are looking to buy a new home in Utah to rent. There is question whether we will get a loan because, why? We have not developed any line of credit for over 6 years. We have had an active credit card, but nothing significant. We have been debt free for over 6 years and have zero liabilities. The system is set up to make you go into debt and climb back out. Bizarre.

I don't know the secret. I think as long as economics are in play (limited resources to unlimited wants) most Americans will be fighting to stay ahead. I think many people need to reevaluate what those *needs* are to their *wants*. Sometimes that is hard to define.

Your point about how education is more needed than ever and yet it is more expensive than ever is significant. Will there be a decline in educated individuals come 8 -15 years from now? If so, how will that effect our economy and future development? Something to think about.

Great topic. It is certainly relevant.

PS - I do love the medical procedures done on your couches. I envied those couches back in the day. They were comfy and cute. Sad to see them leave. Sniff, sniff.

Boquinha said...

Terah, great comments -- thank you!

I think you're spot on about the influence of environments, especially the longer we're in them! Our book club is reading "The Millionaire Next Door" this month. I'm excited about that. It addresses (in part) that issue, from what I understand.

The US does have those "high school" games and I really dislike them. They're juvenile.

Canada sounds nice. When you guys are done globe trotting, do you hope to settle in the US or Canada?

I can relate to your Nepal experience with my own experience of having lived in a very impoverished West Africa.

Was that your AZ home you refer to? So many of our friends in AZ made so much money doing that. The market was perfect for that kind of timing.

Are you getting a UT home to rent out to others? Will it be your own home base state side? Or do you even need that? I imagine that establishing is an issue for ex-pats who move around a lot.

Congrats, btw, on being debt free! That's wonderful. And so impressive.

You said, "The system is set up to make you go into debt and climb back out. Bizarre." SO TRUE!! Bizarre indeed.

I don't know if there's a secret either. Maybe it's living elsewhere? Sometimes we toy with the idea of living overseas.

As for education being more needed than ever and yet being more expensive than ever . . . yes, there have been many, MANY articles encouraging community college while living at home and some even encouraging no college at all! SUCH a different message from the world than the one I got growing up.

About the sofas, we're sad to see them leave, too. Thankfully the new ones (arriving soon) are similar and the old ones are going to be used by some friends on their screened in porch!