Financial Fragility (by GKARL [PA]) Apr 2, 2019 5:35 AM|
Financial Fragility (by razorback_tim [AR]) Apr 2, 2019 6:13 AM
Financial Fragility (by David [MI]) Apr 2, 2019 6:29 AM
Financial Fragility (by S i d [MO]) Apr 2, 2019 7:16 AM
Financial Fragility (by Kurt [MI]) Apr 2, 2019 7:32 AM
Financial Fragility (by CGB [MI]) Apr 2, 2019 7:34 AM
Financial Fragility (by David [MI]) Apr 2, 2019 7:34 AM
Financial Fragility (by GKARL [PA]) Apr 2, 2019 7:34 AM
Financial Fragility (by David [MI]) Apr 2, 2019 7:36 AM
Financial Fragility (by MikeA [TX]) Apr 2, 2019 7:50 AM
Financial Fragility (by Oregon Woodsmoke [ID]) Apr 2, 2019 7:55 AM
Financial Fragility (by David [MI]) Apr 2, 2019 7:58 AM
Financial Fragility (by Busy [WI]) Apr 2, 2019 7:59 AM
Financial Fragility (by S i d [MO]) Apr 2, 2019 8:03 AM
Financial Fragility (by Busy [WI]) Apr 2, 2019 8:06 AM
Financial Fragility (by S i d [MO]) Apr 2, 2019 8:10 AM
Financial Fragility (by Nicole [PA]) Apr 2, 2019 9:53 AM
Financial Fragility (by Doogie [KS]) Apr 2, 2019 10:16 AM
Financial Fragility (by GKARL [PA]) Apr 2, 2019 10:30 AM
Financial Fragility (by David [MI]) Apr 2, 2019 10:36 AM
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Financial Fragility (by GKARL [PA]) Apr 2, 2019 11:42 AM
Financial Fragility (by David [MI]) Apr 2, 2019 11:47 AM
Financial Fragility (by S i d [MO]) Apr 2, 2019 12:09 PM
Financial Fragility (by David [MI]) Apr 2, 2019 12:15 PM
Financial Fragility (by Beth [WI]) Apr 2, 2019 12:23 PM
Financial Fragility (by Kurt [MI]) Apr 2, 2019 12:34 PM
Financial Fragility (by David [MI]) Apr 2, 2019 12:47 PM
Financial Fragility (by David [MI]) Apr 2, 2019 12:49 PM
Financial Fragility (by David [MI]) Apr 2, 2019 12:52 PM
Financial Fragility (by Kurt [MI]) Apr 2, 2019 1:08 PM
Financial Fragility (by GKARL [PA]) Apr 2, 2019 1:09 PM
Financial Fragility (by David [MI]) Apr 2, 2019 1:43 PM
Financial Fragility (by Busy [WI]) Apr 2, 2019 3:06 PM
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Financial Fragility (by MikeA [TX]) Apr 2, 2019 5:15 PM
Financial Fragility (by GKARL [PA]) Apr 2, 2019 6:29 PM
Financial Fragility (by David [MI]) Apr 3, 2019 5:15 AM
Financial Fragility (by Busy [WI]) Apr 3, 2019 7:43 AM
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Financial Fragility (by David [MI]) Apr 3, 2019 10:26 AM
Financial Fragility (by 6x6 [TN]) Apr 3, 2019 10:51 AM
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Financial Fragility (by David [MI]) Apr 3, 2019 11:56 AM
Financial Fragility (by 6x6 [TN]) Apr 3, 2019 12:41 PM
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Financial Fragility (by GKARL [PA]) Posted on: Apr 2, 2019 5:35 AM
A friend of mine shared this clip. It's about formerly middle class folks who've fallen out of the middle class due to job loss and age discrimination. All of them made mistakes buying into the typical middle class lifestyle of spending a bunch of money and shoe horning their kids into the "best schools" or trying to get into the "best neighborhoods". There is going to be a huge demand for small inexpensive dwellings across a number of demographic groups particularly as they age out and find themselves in retirement with no money. All of these high end housing developments are either going to be sitting empty or be offering steep pricing concessions. People are going to get reacquainted with budgeting and value consciousness.
Financial Fragility (by razorback_tim [AR]) Posted on: Apr 2, 2019 6:13 AM
You always wonder why they lost their last job - did they mess up or just get downsized?
IMO some of those people would make great hires - good people skills, likely to be reliable, etc. --166.137.xxx.xx
Financial Fragility (by David [MI]) Posted on: Apr 2, 2019 6:29 AM
Many decades ago, a middle class lifestyle could be sustained with only one working parent. Now, with good insurance bonded to employment and corporations looking out for profits and not employees, it's a fatal mistake for a family to forgo two breadwinners.
With two breadwinners, you have a safety net. Barring a full blown depression, the odds of both people losing their jobs within a year of each other is minisucle. If one person loses their job, the entire family can go on the others plan as it is as qualifying change even. Far easier to budget for income halving than going to zero. --144.250.xx.xx
Financial Fragility (by S i d [MO]) Posted on: Apr 2, 2019 7:16 AM
" it's a fatal mistake for a family to forgo two breadwinners"
That's one way to look at it. I'll offer an alternative.
I'm an outlier as usual...my wife has been stay-at-home full time since we had our first kids 13 years ago. Neither she nor I are particularly high-wage earning individuals: rather, we have several diversified income streams. I work the 7 - 4, and for the past two decades years I've had two side gigs:
2) Rental property investing
I could have just done the 7 - 4 and waited until I was in my late 50s/early 60s to achieve any level of financial independence. But I chose a different path, and it's made my family 80% independent of a W-2 paycheck in our early 40s. So the economic landscape isn't too horrible for those who are willing to invest some creativity and delay pleasure.
Also too, think of how the "middle class" lifestyle expectations have grown in just 1-2 generations. Back in the day when it only took one breadwinner to support a family, people had ONE car per family, a 3-bed house with one or (maybe) 2 bath rooms. Size around 1200-1400 sq ft. The size of homes has mushroomed...1900 sq ft today!
Credit cards were not common before the 1980s. Maybe 1 in a household. Low limits and low usage. Today folks have an average of SEVEN cards per household, many of which are maxed out.
TV? One set. Cable bill? No such thing. 200 channels of satellite/Netflix? Nope.
Smart phones with bottomless data plans for everyone in the household over age 7? No. High speed Internet? What's that?
Central heat and air? Probably central heat...AC was just as likely to come from window shakers. I remember having those in my "middle class" home growing up.
Summer camp for kids? Sure, but it was church or community sponsored, led by the volunteer moms who stayed at home, they mostly stayed in-town, and the kids survived off plenty of hot dogs and off-brand Kool-Aid. Today? $400 per week to send a kid to "camp", which includes semi-private cabins, catered meals, and professionally trained staff.
Is healthcare more expensive now? Sure it is. People are also living longer, getting fatter, exercising less, eating more sugary junk foods, and along with those issues comes a host of health problems that require expensive, long-term medication and/or care. Amazingly, folks who would've died in their late 60s or early 70s several decades ago can now kick the can of meeting their maker down the road 10-15 more years with pills. My grammy and grandpa never had those plastic containers with a cocktail of pills for every day of the week. Maybe one or two pill bottles for a prescription in the cabinet...that was it. Today's medicine cabinets resemble small pharmacies!
Bottom line: we can't look back to a point in history and say, "THIS was the golden age, and if people just cared more then everything would be hunky dory!" Every time-period is unique in its level of wealth, the "average" person's expectations, styles, trends, etc. A "middle class" lifestyle today would have seemed well-off, if not affluent to a 1950's-70's middle class family.
Financial Fragility (by Kurt [MI]) Posted on: Apr 2, 2019 7:32 AM
I agree with Sid's post and the many points made there.
I live in a LCOL area (Michigan) and providing the necessities on 1 income is easily doable.
Financial robustness can come in the form of emergency funds. If one has 12 months of living expenses saved, if they are laid off they have an entire year to find new employment. You can do this while living on a "normal" budget, not half.
The problem is that today's "necessities" aren't necessary. And people get themselves in trouble (and make themselves miserable) thinking that way. --68.61.xx.xxx
Financial Fragility (by CGB [MI]) Posted on: Apr 2, 2019 7:34 AM
Poverty in the country, despite all that you have heard, is largely based on three decisions. If you finish high school, get a job and dont have children out of wedlock, the chance of poverty is very low, regardless of race. Every financial advisor I have heard says to keep at least a 6 month emergency fund. It was elevated to 9 months in the recession. How many people and families have a basic cell phone, small TV and an emergency fund? While good choice do not guarantee a good outcome, poor choices lead to never lead to good outcomes. --73.144.xxx.xxx
Financial Fragility (by David [MI]) Posted on: Apr 2, 2019 7:34 AM
Sid, none of what you said precludes your wife from working. THINK: why is it that a single unmarried woman or a single mother is expected to work, but there's suddenly no need for a married woman to work?
I recently did a back-of-envelope estimate of our living expenses. One of our salary (or the income from rentals) is just enough to cover . >> But that does not take into the risk of job loss <<
Even if you have rental income, having no w2 income means you're a very big bind with getting health insurance. Nothing you've said about overall health changes how you get affordable health care, thru your w2 job. --144.250.xx.xx
Financial Fragility (by GKARL [PA]) Posted on: Apr 2, 2019 7:34 AM
Middle class isn't really an economic status so much as a lifestyle choice. That lifestyle choice generally means living in certain communities and sending your kids to the "best" schools even when you can't really afford it. If you do all of what is suggested you should do as a middle class earner, it will be impossible for you to save any real money. No one has any money and that applies to the so called middle class as well as poor folks. Poor folks' problem is not enough money. The middle class' problem is that they spent it all trying to keep up appearances and this is why the decline is very steep when there's a job loss. All the money has gone to get "stuff".
We've been sold a bill of goods by Madison Avenue and Wall Street. Madison Avenue sells the goods and Wall Street gives you to credit to buy them. This is a bandwagon to financial disaster. A values revolution is in order. The entire notion of the so called American dream of consumption needs to be completely rejected and it will be as a practical matter.
For me that translates into staying with apartments and MFH's. Of course, this varies by area, but these are more likely to be affordable in my area. Same thing applies to the room renting. There's going to be a huge and growing demand for cheaper housing.
Financial Fragility (by David [MI]) Posted on: Apr 2, 2019 7:36 AM
"If one has 12 months of living expenses saved, if they are laid off they have an entire year to find new employment. " And what are you going to do about health insurance during that year? COBRA? Good luck!
I can just as easily save 12 months of living expenses with two incomes. Why should I endure the stress of no income when I could have another income? --144.250.xx.xx
Financial Fragility (by MikeA [TX]) Posted on: Apr 2, 2019 7:50 AM
I would also add, my dad's generation suffered with the same peer pressures we face today. I saw it then and still see it today. People move in and out of the middle class depending on the decisions they make. Get too greedy and your expenses push the limit of your income. Then you find yourself one bad day away from moving out of the middle class lifestyle and starting over. Get out of the consumption mind-set and you have sufficient resources to weather a storm or two and have a much better likelihood of surviving in the middle class for some time to come.
There will always be a need for nice little houses both for those starting out and for those who find themselves starting over. Meeting that need has helped me do very well. --50.26.xx.xxx
Financial Fragility (by Oregon Woodsmoke [ID]) Posted on: Apr 2, 2019 7:55 AM
There is already a huge demand for inexpensive rental units. There is no "going to be a huge demand" about it.
Where I am now, a small shack costs upwards from $350,000. I can't buy that and rent it to a retiree for $300 a month. I can't build a small house for $125 a sq ft, plus the cost of land, development, and permits, and rent it for $300 a month.
Poor people all seem to think they deserve to live in desirable areas, when they could live on their little government pittance if they would just move to a low cost of living state. --98.146.xxx.xxx
Financial Fragility (by David [MI]) Posted on: Apr 2, 2019 7:58 AM
Here are a few more reasons for (continuing to) have two working adults.
Diversification of industries: further reduces likelihood of simultaneous job less
Better odds of one person getting ahead , re: high-level promotions
Risk taking: allows both to push the boundaries when negotiating for non-cash benefits. Work from home, flexable hours, better vacation schedules etc etc --144.250.xx.xx
Financial Fragility (by Busy [WI]) Posted on: Apr 2, 2019 7:59 AM
It used to be easy to get catastrophic health care policy, pre ACA. Very inexpensive, then day to day costs could be covered out of ones’ income. Many self-employed in my large extended family, and this is what they used to do. Then, ACA changed all that. Now the policies have to cover everything under the sun, rates skyrocketed, and, in some areas, it became impossible to get appointments. Doctors booked up with ‘frequent fliers.’
I have a good friend that is playing that frequent flier bull hockey. She’s had four or five colonoscopies in the last year or so. Doctors don’t ever find anything. Sure, she is having food sensitivities, but, she always manages to cross-contaminate when we eat meals together. We’ve gently been redirecting away from her endless talk about her gut.
If they ever lost that good health insurance from her husband’s employer, they would think it was devastating. But, it would actually possibly be the thing to ‘heal ‘ her. Accept she has a couple of food sensitivities, and stop hyper-focusing on it. Then she could just go back to having ordinary anxiety. Not, all this expensive testing, doctor shopping, just for attention. Yes, I have gently told her I think her gut issues are made worse by focusing on them. And that she should talk to a therapist about anxiety.
Münchausen syndrome was a common problem among military families. Anxiety over constantly moving, losing friend relationships ( hardest part of moving) and access to free health care. Lots of frequent fliers.. Seeing a doctor for the physical complaints that come about from the emotional stressors that having to constantly be forming new relationships causes. Then it becomes addictive to getting that attention.
Want to be healthy? An apple a day keeps doctor away. Take a daily walk. Laugh with friends often. Accept what you cannot change, find the courage to change what you can, and learn to know the difference. (ok, not ALWAYS that simple. But, that would ‘cure’ a good bit of what ails this nation. We have made a hobby out of seeking more pills, more procedures. When, living simply is maybe a better way? --70.92.xxx.xxx
Financial Fragility (by S i d [MO]) Posted on: Apr 2, 2019 8:03 AM
David... good news, I wasn't disagreeing with anything you were saying. That's why I said "that's ONE way to look at it...here's an ALTERNATIVE."
So what a great deal today! We are both "right" on this one. :-) --173.20.xxx.xxx
Financial Fragility (by Busy [WI]) Posted on: Apr 2, 2019 8:06 AM
Woodsmoke, exactly right! Plenty of simple, two bedroom houses in my area. I offered to help a close family member ( I know, I know, never rent to family,) first question out of her liberal/ progressive mouth, ‘ Are there xxxxx people there?’ Sheesh! Made me sick to hear that. --70.92.xxx.xxx
Financial Fragility (by S i d [MO]) Posted on: Apr 2, 2019 8:10 AM
GKARL, I agree with everything you said, in particular the need for a values revolution.
I think this is one reason why I'm such a die-hard fan of Dave Ramsey. He represents a massive backlash against conspicuous consumption and keeping up appearances. His no nonsense approach to dealing with money, as he puts it, is "God's and Grandma's way of handling money". Although he did say recently he may have to update that now since over the past 20 years many new "grandmas" aren't as responsible with money as the prior generation's grandmas....that plus his wife is now a grandma, and he's afraid she'll smack him for making her feel old.
Truth be told, the greatest benefit of knowing Dave Ramsey's method is seeing that there are a LOT of people out there who desperately want to do better with money than their parents did. Not in terms of earning larger incomes to fuel a lifestyle of consuming ever-larger slices of "pie", but rather in getting control over their finances and building a sustainable future for their family, their community and our country. It's why many of us have gone back to host his FPU courses: we want others to win as much as we want ourselves to win!
Credit cards, debt, etc....all that is just the piddly details. The landscape is financial peace.
Financial Fragility (by Nicole [PA]) Posted on: Apr 2, 2019 9:53 AM
as a mother and a grandmother I also think you are both right. My comments are slanted to mothers although you could flip flop it to fathers
A stay at home mother *should* provide a calm, stable home life... no rushing around scrambling because mom's gone for 9 hours a day and then trying to fit everything she needs to do for the household and kids in the few remaining waking hours. I think more stay at home mothers are needed in the world.
BUT, all women need to learn to take care of themselves and be financially independent. $tuff happens even in a good marriage. Unless someone earns a high income and banks a considerable amount, two incomes are most times needed to live middle class (in Sid's case, his wife doesn't work outside the home but he has taken on the second income)
A tough balance to work out when day care costs the same amount as a mortgage payment. --207.244.xx.xxx
Financial Fragility (by Doogie [KS]) Posted on: Apr 2, 2019 10:16 AM
Can't agree with Sid more. I recently went full time in real estate. I didn't do it by choice, but was kind of forced into it. Shocked and scared when it happened to say the least. The only way I was able to do it was the no debt and a savings account to back it up. Had either of these not been the case, I would be applying for jobs at a fierce pace at the current time. Never say never, I may do an 8-5 again. It's nice to know I probably won't have to though!! --72.209.xxx.xxx
Financial Fragility (by GKARL [PA]) Posted on: Apr 2, 2019 10:30 AM
"Where I am now, a small shack costs upwards from $350,000. I can't buy that and rent it to a retiree for $300 a month."
No one can do that. The question is who is actually buying these places? I suppose there are still enough people wedded to the notion of middle class lifestyle. We've had an extended period of abnormally low interest rates that is supporting this sort of buying. An modest increase in rates taking us back to 7% to 8% mortgages will put stall on that. That's not to suggest it will take that. I think many folks are at financial exhaustion right now.
My sympathies are with those of limited means and not the middle class though. For the latter, the wounds are almost entirely self inflicted. I know someone who made over $ 500,000 a year who could not raise $ 5000 to settle a tax debt. Yes, you read that right. This person could not raise 1% of his total income. There are a ton of people like that who are one paycheck away from a steep decline. Their problems stem strictly from excess consumption. We've had decades of advertising defining what you should be buying and doing as the middle class. You're supposed to shoehorn your kids into the "best" college. Never mind that it sets you back $ 50,000 a year and on one cares where they went to school 5 years after graduating. You're supposed to live in a certain area or drive a certain car. It's all a scam IMO designed to benefit those with these items to sell. --64.121.xxx.xxx
Financial Fragility (by David [MI]) Posted on: Apr 2, 2019 10:36 AM
If the goal is to ensure people are not getting into mortgages they cannot afford, then tighten up underwriting criteria. Arbitrarily increasing interest rates only stalls economic growth for investors --167.160.xxx.xx
Financial Fragility (by 6x6 [TN]) Posted on: Apr 2, 2019 10:42 AM
Living a simple life and not having to have all of the bells and whistles makes a huge difference. Nobody is willing to sacrifice and live this way. They think it makes them look bad or something. Everyone seems to think they deserve more than the generation before. --73.120.xx.xxx
Financial Fragility (by David [MI]) Posted on: Apr 2, 2019 10:44 AM
6x6, I would like to think having two breadwinners in a family is a sacrifice --144.250.xx.xx
Financial Fragility (by 6x6 [TN]) Posted on: Apr 2, 2019 11:28 AM
David, I agree it is. I was referring along the lines of TV without cable, not having the fastest internet on the planet, not having the latest phone, not having a fancy car, ect.... --73.120.xx.xxx
Financial Fragility (by GKARL [PA]) Posted on: Apr 2, 2019 11:42 AM
"If the goal is to ensure people are not getting into mortgages they cannot afford, then tighten up underwriting criteria. Arbitrarily increasing interest rates only stalls economic growth for investors"
Low interest rates and looser lending criteria is all about bank profits and if things go belly up, they know they can shift the losses to the public. Lower interest rates also benefit the stock markets. If one could achieve a risk free yield of 7% - 8% at the bank, you need the markets far less. Higher risk free yields would present perils for stock market wealth and that limits how high interest rates can go IMO. There are a great many things that are manipulated including consumer behavior. --64.121.xxx.xxx
Financial Fragility (by David [MI]) Posted on: Apr 2, 2019 11:47 AM
"If one could achieve a risk free yield of 7% - 8% at the bank, you need the markets far less. " If people could get guaranteed 7-8% interested after inflation, no one would invest in anything. --144.250.xx.xx
Financial Fragility (by S i d [MO]) Posted on: Apr 2, 2019 12:09 PM
I find stuff like this fascinating so I did some research.
Interesting note: CD yields in the mid-to late-1980s were around 14-15% and while FDIC insurance only covered up to $X per depositer (I believe it was $100,000 back then?), the majority of folks who were customers at those were fully covered, so the odds of them going belly up were minuscule to the point of being effectively guaranteed.
During those same years the S&P 500's CAGR (annualized return) was slightly over 16% (15.5% adjusted for inflation). Source: moneychimp.com/features/market_cagr
Real estate median sales price rose from $62,900 in Jan 1980 to $125,200 in Dec 1989. Slightly better than doubling, for an average increase of 7.2% year over year, according to the Rule of 72. Source: census.gov/const/uspricemon.pdf
So.... I don't know if I can agree with no one would invest in anything if they could get 7-8% on CD, unless, like we saw in the 80's an odd phenomenon where all other asset classes were posting similar returns. My first thought is that if other assets classes were close to the rates CDs were offering, then it would not make sense to take the extra risk of owning real estate and/or stocks.
Why did it work that way in the 1980s? No clue. I was in grammar school then and more worried about getting cooties than getting max ROI. If anyone knows, I'd be interested, because I am a bit surprised by the findings. --173.20.xxx.xxx
Financial Fragility (by David [MI]) Posted on: Apr 2, 2019 12:15 PM
Inflation in 1980 was 14%, in 1989 it was 5%. So i would say that the RE prices increased at about inflation, or slightly less.
S&P had 16% returns, while CD was 14-15%. That means no one should bother putting money in S&P as they can get almost the same return risk free in the CD --144.250.xx.xx
Financial Fragility (by Beth [WI]) Posted on: Apr 2, 2019 12:23 PM
Actually when 2 parents are working... they are twice as likely to lose a job. So there is actually LESS stability. It would seem like they would be more stable but that is only true if they live off of one income (and we all know the majority spend everything). --47.12.xxx.xx
Financial Fragility (by Kurt [MI]) Posted on: Apr 2, 2019 12:34 PM
One can pay and plan to pay for health insurance themselves. I already pay for my own health insurance.
To say it is a "fatal mistake" to have one parent or one adult stay home is outright wrong. There are plenty of families that survive on 1 income.
As Beth points out, it is highly unlikely in 2 income households they are living off of the smaller income and saving all of the other income. So it is not as robust as you claim. No more so certainly than an emergency fund to tide people over until new employment is found.
It is the same reason that a single person losing their job (1 income) is not "fatal". Emergency funds can bridge the gap. --68.61.xx.xxx
Financial Fragility (by David [MI]) Posted on: Apr 2, 2019 12:47 PM
"Actually when 2 parents are working... they are twice as likely to lose a job." No, the problem is not losing a job, the problem is having NO job. If only one parent is working, loss of one job means NO job. If two parents are working, BOTH parents have to lose their jobs to have NO job.
"To say it is a "fatal mistake" to have one parent or one adult stay home is outright wrong. There are plenty of families that survive on 1 income." Why is it that you think it is "normal" or fine to simply "survive" on 1 income? I say it is normal for an able-bodied adult to work and make a living.
As for living off one income, well, that's no different than if you only had one income and lived off that . --144.250.xx.xx
Financial Fragility (by David [MI]) Posted on: Apr 2, 2019 12:49 PM
As for health insurance, it is simply a fact that group insurance thru a large employer is far cheaper and accessible than trying to buy it on your own. --144.250.xx.xx
Financial Fragility (by David [MI]) Posted on: Apr 2, 2019 12:52 PM
"No more so certainly than an emergency fund to tide people over until new employment is found." Looking for a job is hard. It took me six months to find a new job while I was employed. It will likely take me 12 months should I be laid off, and maybe 18-24 months in a recession.
Looking for a job while unemployed is very very hard. Not being able to say you have current employment is a huge handicap. Really, when you think about it, not much different than if an applicant who applied to your rental was homeless or living in extended stay hotel etc --144.250.xx.xx
Financial Fragility (by Kurt [MI]) Posted on: Apr 2, 2019 1:08 PM
You should have a 24 month emergency fund then. Problem solved. --68.61.xx.xxx
Financial Fragility (by GKARL [PA]) Posted on: Apr 2, 2019 1:09 PM
Sid, thanks for providing those stats. I think one would have to do a deep dive behind the numbers for comparison. I think there were far less people investing back then and trading volume was far less. For sure, there would still be investing going on but a lot of investing today is driven by a search for yield which forces people into risk assets. Higher yields in cash would most certainly pull money out of both real estate and financial assets. I think the latter would see more of an outflow as real estate better lends itself to leveraged returns.
I also think that the stock market is juiced more today with layoffs and shifting of jobs overseas to support stock prices. We had far less of that back in the day and that's an issue that contributes as much to the subject of this string in addition to profligate consumption. --64.121.xxx.xxx
Financial Fragility (by David [MI]) Posted on: Apr 2, 2019 1:43 PM
Kurt that's silly, why would I be in effect spending $50-75k and then have to save 24months emergency fund? I get nothing out of that. Except paying a buttload of alimony --174.230.x.xxx
Financial Fragility (by Busy [WI]) Posted on: Apr 2, 2019 3:06 PM
David, the emergency fund is a starting point for retirement savings. We’re getting close to retirement, so our fund has many, many years worth of living expenses in savings.
Saying that saving 24 months of living expenses is silly just proves the point of financial fragility. Retirement, for most people will be up to thirty years. So, maybe better start saving for 360 months of ‘emergency fund’. --172.58.xxx.xxx
Financial Fragility (by David [MI]) Posted on: Apr 2, 2019 3:41 PM
Busy, having a W2 means we are each contributing the max to our 401k. Not really sure what your point of saving 360 months is.
Having an emergency fund is not a replacement for working a full time job. --50.4.xxx.x
Financial Fragility (by MikeA [TX]) Posted on: Apr 2, 2019 3:50 PM
I sold my first SFH rental in 1980 and put it into a CD that made 19% for 6 months.
The real estate problem back then was that housing was dirt cheap. When I tried to sell my rental to non-investors, no one could afford the payments when they were having to borrow money at 12+%. Because no one could afford a loan, houses went vacant, fell into disrepair, and as a result rent was stagnant or declining. In retrospect, it would have been a great time to pick up a bunch of units and in fact this was the start of the We-buy-houses industry. Me, I was young, starting college and fearful that I would loose all the hard earned money I had earned over the last 4 summers picking up hay bales. --50.26.xx.xxx
Financial Fragility (by MikeA [TX]) Posted on: Apr 2, 2019 3:59 PM
I should also say, I had just finished a 2 year VoTech program in building trades with the intent of working a construction job to pay my way through College. Construction stopped, I couldn't find a job. Lived at home and attended the local college. Two years later the real estate industry was still reeling, I changed my major from Construction Management to the Computing program (they had this new fangled thing called a Personal Computer) because I knew I would not be able to find a job when I graduated. It took a few more years before construction took off again. --50.26.xx.xxx
Financial Fragility (by Kurt [MI]) Posted on: Apr 2, 2019 4:06 PM
An emergency fund is meant to suffice in an event where you are unexpectedly unemployed and looking for new work.
You said you think it may take 2 years to find a job if you become unemployed, so save up 2 years worth of living expenses, so that if that happens, you will be okay. This helps make you financially robust. The topic of this thread.
Not sure how that security is worth nothing to you
401k funds are locked up till 59.5 Having an emergency fund accessible (no fees/taxes/loans) outside of that is prudent.
You should be able to max your 401k and have a fully funded emergency fund. --107.5.xxx.xx
Financial Fragility (by David [MI]) Posted on: Apr 2, 2019 4:09 PM
Why do I want to lock up 2 years of income, when my spouse, an able bodied , well-educated woman, could simply work a full-time job? That is the common sense way to be financially robust.
Should she not work, that is the same as lavishly spending six figures a year , as that is the lost income. Why would I, on top of that amount, then save 24 months of emergency fund? And to boot, have it in liquid funds? --50.4.xxx.x
Financial Fragility (by David [MI]) Posted on: Apr 2, 2019 4:11 PM
And again, being unemployed and looking for work means you are at a disadvantage in the job search game. You are likely going to have to settle for a demotion and lower pay . This situation only gets worse the longer you are unemployed.
And then of course, there is the health insurance problem. Having both spouses unemployed means no health insurance. --50.4.xxx.x
Financial Fragility (by Kurt [MI]) Posted on: Apr 2, 2019 4:11 PM
High interest rates lower asset values, so they (high rates) may increase returns on assets. High cost of borrowing, less borrowing, less buying, values go down.
For example, say tomorrow we have 10% interest rates, it may make a house go from $100,000 to say $60,000 (numbers made up but principle remains). If you can still net $10,000/yr then your return on asset goes from 10% to 16.67%
Low interest rates, like we have today, inflate asset values and lower returns on assets. Valuations get raised due to "cheap money". --107.5.xxx.xx
Financial Fragility (by MikeA [TX]) Posted on: Apr 2, 2019 5:15 PM
David, my wife worked full time when we were first married and we lived off of my income only. Her income paid off the house and cars which substantially reduced our monthly costs to live, then her income went to an emergency fund and the beginnings of our real estate investments. When we had children the cost of childcare cut her bring-home by 3/4. Coupled with the fact that we chose to not lose the influence we would have on their upbringing by her continuing to work, we jointly made the decision for her to stay home and raise the children. There is more to this world than a financial perspective. Each family has to make their own choices on what works best for them, it can be done either way with the right financial mind set. --50.26.xx.xxx
Financial Fragility (by GKARL [PA]) Posted on: Apr 2, 2019 6:29 PM
"Low interest rates, like we have today, inflate asset values and lower returns on assets. Valuations get raised due to "cheap money"
This is why one has to be very careful buying now. Cap rates are compressed for this very reason. My bank is appraising at a 9% cap, while everything is selling for 5% to 7%. People are dealing with that by putting 50%+ down to get these deals financed. --209.122.xx.xxx
Financial Fragility (by David [MI]) Posted on: Apr 3, 2019 5:15 AM
And such is the cost of having children, but capitalism does not care about such frivolity --144.250.xx.xx
Financial Fragility (by Busy [WI]) Posted on: Apr 3, 2019 7:43 AM
Capiolism is ENTIRELY dependent upon consumers having children. It’s the morality of the parents that determines how those children are raised. My husband and I made a deliberate decision for me to work at jobs which accommodated my spending very large amounts of time with our kids. Since I worked in education, we had all of summer together, plus all the school breaks.
Certainly NOT an option for most people, as how many jobs are out there which offer that schedule? Nor does everyone have the aptitude. I am not shaming anyone for their choices. But, I know that taking a lower paying job which offered the benefits it did was very valuable. By benefits, I am referring to the non-monetary benefits. The schedules matching up, and training conferences I got to attend, also the on the job learning of how to handle difficult kids. I also brought plenty to the job, was considered very good as a teacher’s aide. Now, I could have finished my college degree earlier, and taken a much higher paying job. With a schedule that left no time for all of the one on one time my kids got, all of the time volunteering with my kids’ youth organization, where they tremendously benefitted by seeing all of the ‘behind the scenes’ details (and lots of hard work,) that goes into running a large youth organization. Capitalism allows for that.
We could have a nicer house, but I wouldn’t fit in ‘those’ neighborhoods anyway. We could go on more vacations, but, I don’t like crowds and tourist traps. A nice meal out, or a long dog walk with the one I love is my idea of fabulous living. That we have raised two terrific kids, who are doing well, and living within their means is important to us.
Capitalism allows me to own rental properties. And I am using that to continue teaching my kids, and now grandkids about running a business, about rehabbing a property. As well as continuing to learn these things myself.
YMMV. Take responsibility for your life! And your life choices! --70.92.xxx.xxx
Financial Fragility (by David [MI]) Posted on: Apr 3, 2019 8:15 AM
Capitalism allows families to choose to have each able-bodied adult to work a full-time job. They will make more money and more financial cushion than those who only have one. That's just how it works, unfortunately --144.250.xx.xx
Financial Fragility (by Busy [WI]) Posted on: Apr 3, 2019 9:42 AM
And more money is CLEARLY the goal for your family, David.
NOT for mine. I have muchINCREASED financial stability because I have a great relationship with my kids, my husband. If hubby and I became unable to care for ourselves, we have adult children who will gladly figure things out to help with that. We don’t have to worry about alimony ever. Nor did we have to support an adult child who cannot function on their own, though one of our kids was at risk for that. In fact, because he knows how to fail, and get back up, he may end up being very financially successful. Though that isn’t his goal.
That’s just how it works ISN’T just how it works. That is how it works for SOME. WE were that couple that, when first married, both worked. He made slightly more than me, though neighbor of us made much. SO, we SAVED his entire paycheck, and lived off of mine. For our one year anniversary dinner, we went to McDonald’s. Each had a Big Mac and coke, no fries. Weren’t going to spend the money, or the calories.our friends made fun of us for our frugal lifestyle. A few short years later, I got out of military so we could have kids. I could have stayed in, but didn’t want the risks. Good thing too. Only one unit took any hits in the first Gulf war. My old unit was hit with a scud missile . My daughter was two months old, and her momma was not in a war zone. Good choice.
That early savings gave us the foundation to be a one-income family, while the kids were little. I did eventually take a part-time job, worked around husband’s schedule, when the youngest was weaned and out of cloth diapers, into underpants. That part-time job was VERY good for mental health. I would agree that a family benefits when Mom gets out of the house, goes to work where she is only known as herself, not somebody’s wife, not somebody’s mom, but just her.
Forgetting to raise the kids, ( who NEED you MOST when they are young teens, in my experience,) or work at the marriage is just as big a mistake as not bothering to save some income for a ‘rainy day’ and then for retirement. And those things can be done at ALL income levels. Whether both people make upwards of 100k, complete with 401ks, or 30k, and SNAP. The retirement fund for the 30k income crowd is raising good, decent kids, who can make the next step up the economic ladder, and have a room for Mom or Dad when they’re old. In my opinion. --70.92.xxx.xxx
Financial Fragility (by David [MI]) Posted on: Apr 3, 2019 10:26 AM
Busy, don't try to put this on me, I'm just the messenger. Look at all the holes in the safety net
- lack of affordable heath care
- lack of paid maternity and paternity leave
- lack of employee protections
and the list goes on. And of course, there is the biological fact that a woman's ideal age to have children is in her early to mid twenties, but that is the worst time career wise.
The risks have been shifted onto the employee and it makes no sense for two able-bodied adults not to work. --144.250.xx.xx
Financial Fragility (by 6x6 [TN]) Posted on: Apr 3, 2019 10:51 AM
Buzy, I really enjoy your view points. You are a smart woman and good mother that actually teaches your kids. I wish you were my mother. Don't get to choose your parents though. --73.120.xx.xxx
Financial Fragility (by Busy [WI]) Posted on: Apr 3, 2019 11:44 AM
6 X6, what I tell mt tenants who came up from rough lives,: you are making things better for your kids. Not perfect, but each generation can be better. I ( and my siblings) all had issues with our mother. Then we found out some horrific things that happened in her childhood. Gave some of us perspective. So, most of us realized, we would have to be better parents, and break the cycle. And, sadly, a couple are stuck on blaming mom, not growing.
One of my tenants and I have this conversation frequently. Gives us both perspective. She lives to help others figure out how to get to a ‘better life’ as well.
So, go do better, and forgive the past. It’s in the past.
Thanks for your kind words.
David, I come from a very long line of farmer’s. My dad raised against those government programs that paid farmers to leave property fallow. Also against price supports. However, he was very big on helping out neighbors, our fellow man. But, he believed first and foremost in self-sufficiency, self-reliance. Of course I had paid maternity leave. My husband and I saved and paid for it, whilst our friends were out spending like there was no tomorrow.
David, something you might find interesting is ‘locus of control’. I have very strong internal locus of control. I suspect you have very strong external locus of control. I believe in the power of the individual. --70.92.xxx.xxx
Financial Fragility (by David [MI]) Posted on: Apr 3, 2019 11:56 AM
No, I indeed have strong internal locus of control, probably stronger than yours. Why else do you think I take responsibility to have both able-bodied adults employed? Each individual has the ability to work and make a living , the power of the individual. That is true self-sufficiency and self-reliance.
I refuse to cede that "locus of control" to others by only having one breadwinner. I find your criticism to be really ironic considering having only one breadwinner cedes further control to employers and "neighbors" for reliance. --144.250.xx.xx
Financial Fragility (by 6x6 [TN]) Posted on: Apr 3, 2019 12:41 PM
Buzy, that is why I did not have kids. I felt like I would not make a good parent. No education beyond high school and not much life education and poor.
‘locus of control’ I just googled this and learned something else from you. Thank you. --73.120.xx.xxx
Financial Fragility (by GKARL [PA]) Posted on: Apr 3, 2019 2:44 PM
"The risks have been shifted onto the employee and it makes no sense for two able-bodied adults not to work"
I think we underestimate the ravages of inflation on family income. Part of the issue of needing two incomes is enlargement of desires, but the other part is inflation. The dollar simply doesn't go as far and that is a compelling factor behind needing two incomes nowadays where one used to do. Average CPI for 1970 was 38.80 and while the same measure for 2018 was 250.50. This means that something that cost you $ 38.80 in 1970 costs $ 250.50 today; an increase of 600%. Wages have not kept pace with that. I find it funny how tax cuts and moderating tax increases is a constant political issue, but taxes aren't the problem. Devaluation of your dollar is the problem, yet no one talks about it. Inflation is a hidden tax and can be absolutely devastating. This is a big contributing factor requiring two incomes.
A constant growth scenario gives rise to shifts of risks to employees in terms of retirement and health care. Stock values are the new currency and that currency can't grow without increased profits. That means more sales and less expenses. I think one thing to keep in mind that there was really only one generation or so who enjoyed full benefits like lifetime pensions and healthcare. Generations preceding them didn't have these nor will those succeeding them. These only came about because labor was in short supply giving unions more leverage to negotiate. Globalization opened the floodgates to shifting labor abroad thus eradicating labor's negotiating leverage.
Financial Fragility (by Pmh [TX]) Posted on: Apr 3, 2019 3:05 PM
Beth’s statement is nonsensical. --104.218.xxx.xx
Financial Fragility (by Busy [WI]) Posted on: Apr 3, 2019 3:34 PM
Pmh, I got what she was saying, I think. Two people both working, they seem to think the standard of living needs to go up. So spending goes up. Now there is daycare, extra clothes, hairstyles, and and we need a nice vacation to get away. And, the economy tanks, one loses their job. But the credit cards don’t stop wanting to be paid. The couple has no clue how to live frugally on unemployment. They relied on their jobs for the ‘emergency fund.’
If a couple makes a concerted effort for one parent to work considerably less outside the home, that couple may already be used to being frugal, may have an emergency fund.
Now, it doesn’t always work that way, in either instances. I, I do believe a parent is much better at parenting if they have at least a small job or business, outside the house, so they have a place where they get to be just another adult, not always the parent.
When I worked at a retail store years and years ago, as credit cards were becoming the most common means of payment, there were two types of people who were likely to have a card declined: couples where the woman was wearing gold shoes, heavy perfume, or couples where the women wore long hair in a simple ponytail, no make up, simple flat shoes, simple long skirts. So, maybe, ‘all things in moderation’ keeps one out of a mess. --70.92.xxx.xxx
Financial Fragility (by MikeA [TX]) Posted on: Apr 3, 2019 4:14 PM
GKARL, according to the US Census Bureau the average US income in 1970 was $10,000.91 and in 2016 (last data available) was $83,140. I mark that as an increase of 830% in pay over the same periods that costs went up 600%. Not sure I agree that families today are under more financial pressures than families of 1970.
I think what has changed is what is considered a need VS a want. The 1970 family didn't typically have 2 cars, air conditioning, all the technology costs, closets overflowing with clothes, money to remodel periodically,...
Financial Fragility (by GKARL [PA]) Posted on: Apr 3, 2019 5:16 PM
Mike, you'd have to put those numbers on a real or deflated basis for comparison. Once you do that, median family income flatlines over 40 years except for the upper quintiles.
Financial Fragility (by GKARL [PA]) Posted on: Apr 3, 2019 5:19 PM
Also, I don't disagree that enlarged wants is a contributing factor, however, that's not the case in every instance. --64.121.xxx.xxx
Financial Fragility (by GKARL [PA]) Posted on: Apr 3, 2019 5:26 PM
Mike, I didn't look at your numbers to determine if they were on a inflation adjusted basis, but median income versus averages are more meaningful. Averages are heavily influenced by high wages earners whereas median income is a statistical ranking of "middlemost" incomes and not skewed by extreme lows and highs. --64.121.xxx.xxx
Financial Fragility (by MikeA [TX]) Posted on: Apr 3, 2019 6:14 PM
Looking at median income, the CPI and median income remain fairly constant over 40 years. So it would be safe to say that the financial pressures on a family today mirror the financial pressures on a family from 1970 using median income, or income and the cost of goods are lockstep.
I agree the higher wage earners have made some progress in spending power. So how do you get to the higher earnings brackets? Strung through this thread is the answer, well actually two answers. 1) two wage earners or 2) spend thrift and invest the difference in alternate income streams. There are pro's and con's to each approach and looking through the posts we have folks who have been successful at one, the other, or both. --50.26.xx.xxx
Financial Fragility (by David [MI]) Posted on: Apr 4, 2019 7:36 AM
MikeA, nothing prevents two wage earners from also spending thrift and investing the (larger) difference in alternate income streams, as I have done. I dont see why you would say there is a con for every able bodied working adult to have a fulltime job.
Median income on paper may be constant, but the stability of that income certainly is not. --144.250.xx.xx
Financial Fragility (by Busy [WI]) Posted on: Apr 4, 2019 8:46 AM
David, I wonder if your ex-wives would disagree with that statement about no cons of two full time worker’s. Or, are you just always correct?
Don’t know why anybody has ever thought to think for themselves. David has ALL the ANSWERS and his solutions work for EVERYONE. A worker’s paradise! Don’t ever have to worry about who spends time with the kids. They’ll just be put in the hands of a fifteen dollar an hour worker’s paradise worker, and receive excellent care, we’ll just eliminate free thought so we don’t have to worry about teaching kids to think for themselves, think differently. Have to care for an aging parent? again, the worker’s paradise worker will take excellent care of them. Imperfect kids being born, who need extended care? Well, now we can do post-birth abortions. No more worries. Get both of those parents back to work full time in the worker’s paradise. Develop a long term illness, like MS, well, euthanasia could be the answer there. Want to build your own business, where you are the one creating the jobs? Well, you can do that OUTSIDE of your worker’s paradise job, after hours.
So glad these things have worked so SUPERBLY elsewhere. Own your own home, your own car? No need in the worker’s paradise of Northern Europe. Need healthcare, well workers’ paradise provides free for all. No waiting lines ever.
Yes, let’s all work rill time at jobs, working for others. No independent thought ever.
Or, maybe what works for some DOESN’T work for all? --70.92.xxx.xxx
Financial Fragility (by David [MI]) Posted on: Apr 4, 2019 11:14 AM
My dear Busy, I'm very sorry. I must apologize. I read a lot of posters on this board complaining about able-bodied adults not working. I apologize on their behalf.
As for having ex-wives, I'm not sure what makes you think I have even one ex-wife. Why on earth would two able-bodied adults working full-time have a higher likely hood of divorce?
I had to chuckle at your reply. So funny! --144.250.xx.xx
Financial Fragility (by Busy [WI]) Posted on: Apr 4, 2019 12:09 PM
Umm you mentioned your alimony would be higher in one of your replies. So, if you pay alimony....
No I don’t think any particular situation determines any marital, or other outcome. That’s just it. One size fits most , well, doesn’t. --172.58.xxx.xx
Financial Fragility (by David [MI]) Posted on: Apr 4, 2019 12:33 PM
Yes, I mentioned a hypothetical alimony should I ever get divorced. I'm sorry you misinterpreted that.
I guess I'll remember your comments the next time someone rants about adults not working. --144.250.xx.xx
Financial Fragility (by Busy [WI]) Posted on: Apr 4, 2019 1:36 PM
Once again, one size does NOT. fit all. Comments in this thread relate to this topic. Feel free to cherry-pick as you like. That just proves my point. One size does not fit all. I’ll leave you to the last word. --172.58.xxx.xxx
Financial Fragility (by Kurt [MI]) Posted on: Apr 4, 2019 6:00 PM
I don't think many people criticize able-bodied adults for not working on this board unless they can't pay their bills, i.e. rent.
If they can pay their bills then who cares. --107.5.xxx.xx
Financial Fragility (by Kurt [MI]) Posted on: Apr 4, 2019 6:00 PM
I don't think many people criticize able-bodied adults for not working on this board unless they can't pay their bills, i.e. rent.
If they can pay their bills then who cares. --107.5.xxx.xx
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