Comments for My Budget 360 http://www.mybudget360.com Fri, 17 Apr 2015 22:13:00 +0000 hourly 1 http://wordpress.org/?v=4.1.1 Comment on You Cannot Afford a $350,000 Home with a $75,000 Household Income! by SocialCritic http://www.mybudget360.com/you-cannot-afford-a-350000-home-with-a-75000-household-income/#comment-378678 Fri, 17 Apr 2015 22:13:00 +0000 http://www.mybudget360.com/you-cannot-afford-a-350000-home-with-a-75000-household-income/#comment-378678 The piece correctly indicates that the house in the example is in reality unaffordable to a couple making $75K per year. However, the elephant in the living room that most of the financial media is missing is that in those same over-inflated housing markets, people who are trying to save by renting often commit equally egregious financial mistakes even to cover median rents. If you live and work where the jobs are, it’s increasingly a lose-lose scenario.

Take this astounding fact:

“Renters in Southern California have to pay nearly 48 percent of their income on a median rental property

“University of Southern California’s Lusk Center for Real Estate estimated that rents will increase more than 8 percent in Los Angeles County by the middle of 2016 to more than $1,850 a month.” (* source below)

In view of the RENT BUBBLE nobody’s talking about in the major population centers from New York and California to Washington and Florida, home ownership doesn’t look all that irresponsible in comparison to the risk of renting. If you are going to violate the 30% rule of thumb, many people would rather do it on a house as opposed to spend their life moving every year or two to increasingly bad (or outlying) areas to accommodate rental inflation.

The article appears to be using Southern California home pricing as a baseline. As of 2015, those prices are again hitting the ~$500K mark for a 65-year-old ~1300 sq. ft. fixer in LA/OC. In SoCal where the subprime lending crisis originated, we now have the home bubble solidly re-inflated, a rather convenient “bailout” of all those homeowners who would otherwise (still) find themselves underwater. This might not be such a problem but at the same time we have a RENT BUBBLE comprised of all those people who lost their homes and are still competing for rental housing (housing that isn’t necessarily cheaper than a mortgage).

The housing recovery has been hampered by the very fact that there is this presumption that in good job markets where average earnings are higher, people can afford it. There is talk of loosening mortgage lending standards to make housing more available to such buyers. At face value this seems ludicrous. But when you consider that being a mere renter sets you up for the same budget headaches — and that in some markets it is actually cheaper to own vs. rent — it begins to make sense why the de-facto solution is to allow people who shouldn’t qualify to nonetheless obtain a home loan (again!).

In spite of all the ravages of the Great Recession we Americans, and particularly our elected representatives, are asleep at the wheel when it comes to fingering the broader practice of routine (“normal”) price gouging?

As a teenager, I grasped the economic irony when, in visiting a small mountain community, I noticed that the cost of gas there was SIGNIFICANTLY lower than it was in the greater metro area close to the ports and refineries (where I lived). This was my first wake-up call that price manipulation in housing, food, gas, energy and other staples is routine. Sure people make more — and they feel that for their education level or tax bracket they ought to be able to at least match the living standard their parents had (often on a single income at that!). But they can’t be further from the truth.

If we had a non-manipulated, non-monopolistic economy, living within miles of a major port or refinery WOULD mean cheaper prices of products shipped the short distance from that port to our store shelves. Likewise, living miles from the nation’s largest refineries ought to translate to cheaper prices at the pump.

But they don’t!

For all the perception that small communities in the parts of the Midwest and South are lacking in opportunities for jobs, there are areas where a waitress can buy a home. Her counterpart in a big city close to where the country’s major goods and services are actually produced or sold (“the jobs”), on the other hand, would be taking in roommates just to RENT.

Are we beginning to appreciate that something is fundamentally wrong?

We can talk budgeting until the cows come home. But until Americans realize that there are calculated attempts to offset their better job prospects with higher living costs, or to charge them more for food, gas and even insurance just because they live in a “wealthy” geographic area, we have to ask questions. If we can spend that much more transporting food and gas into small towns, yet the prices at Walmart there are lower and so too is the cost of owning and renting a home, are those small towns really so wayward or those big cities really so prosperous?

Budgeting should always be a priority for every household. But when it feels like you’re doing everything right yet are still forced to make “mistakes” even though Uncle Sam says you are solidly middle class per your tax bracket, please know that it’s not just “you”. The economy is rigged to offset any and all regional job/income gains by inflating costs of living relative to median incomes. Therefore it is possible to be “poor” in a job-rich community with a professional salary, yet be a responsible saver in a small town with comparatively fewer prospects (or to even make do on a single income).

One of the reasons Americans don’t manage their finances properly is because too many of us are in a damned-if-we-do, damned-if-don’t scenario. When people can’t control for economic forces beyond their direct control they often give up.

If we want to combat “economic fatalism”, America’s financial experts need to change their approach to conveying the message of financial responsibility. We need the media to do a better job, for one, of facilitating Economic Transparency. Let’s take, for example, the tax code. How many of us appreciate that the federal poverty line is determined only by how much it costs a family to EAT for a year, and little more? We all know that the cost of eating, if it doesn’t include a baseline estimate for shelter, sets the bar for poverty artificially low. How many more Americans would be “poor” and profoundly so if the definition of poverty took into account other fixed expenses?

According to the website Shadow Stats, the feds have tinkered with how other statistics, most notably inflation, have been tabulated. Efforts to alter how inflation was calculated, among other indicators of the true Financial State of America, began with “free trade” (globalization). People may be surprised to learn that economic experts worry most about “deflation”. Inflation is considered low even though the cost of basic staples occupies a greater percentage of our budgets than it once did. It turns out, official inflation statistics do not include things we can’t escape paying — like food and energy. What we call the “middle class”, adjusted for inflation and cost of living in today’s dollars, would be “poor” in the 1950s and much of the ’70s.

The U.S. government is in the business of lying to us. Meanwhile, the financial media is complicit in not calling out irrelevant data if not overtly fraudulent statistical methods.

Many Americans personal budgets aren’t working because in spite of seemingly “high” professional salaries the cost of living is constantly edging up, and yet not finding itself expressed in the usual facts and figures put out by Federal agencies. We are living with the fallout of globalization, and this only a relatively brief 35 years in. What was a single-breadwinner household pre-globalization has morphed into a dual income household norm today. Make no mistake! If nothing changes what is today’s single-family lifestyle will become tomorrow’s multigenerational living (income) necessity.

When will mainstream financial experts and media pundits on the right and left speak out? Do they think that it is useless to critique broader trends in the economy because all we can “control” is our own personal spending habits?

Do the Dave Ramseys and Suzie Ormans of the world not understand that as Americans become more and more disenfranchised it will become paradoxically that much harder to compel us to save or budget responsibly? Acknowledging the gouging that is going on — that we Americans pay a premium for energy, food, higher education, health care and other “private sector” expenses as compared to the rest of the developed world — would have the impact of mobilizing people. At every turn we pay the “American lifestyle premium”. Who are we kidding? By paying higher prices than the rest of the developed world — to include even far-flung locations — we are effectively submitting to taxation at the hands of corporations — without representation!

http://pacific.vistage.com/2014/10/29/southern-california-has-least-affordable-housing-market-in-u-s/

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Comment on An economy of peak food stamp usage, peak Dow, and peak Debt: What does it say about our economy that at the same time the Dow Jones hits a peak, we have the highest percentage of Americans on food stamps? by Free Labor http://www.mybudget360.com/food-stamp-usage-record-high-dow-jones-record-high-national-debt-record-high/#comment-378423 Thu, 16 Apr 2015 08:30:41 +0000 http://www.mybudget360.com/?p=4689#comment-378423 The country never weened itself off of free labor. So here we are today continuing to maximize profits at the expense of Johnny Paycheck. Yes Morning in America began in the Reagan 80’s with the breaking of The Air Traffic Controllers Union.

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Comment on The new American retirement plan equates to working forever: Nonexistent nest eggs and most Americans are bad at planning as to how long they will live. by No Nonsense Landlord http://www.mybudget360.com/new-american-retirement-plan-retirement-savings-predict-retirement-age-life-expectancy/#comment-378266 Thu, 16 Apr 2015 02:38:23 +0000 http://www.mybudget360.com/?p=6163#comment-378266 Most lower income people will be protected by SS and do not need as much. Higher spending people need to save the most.

Rental property can be a great way to achieve retirement income, but it is a bit risky if you do not understand the concepts.

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Comment on Comparing the inflated cost of living today from 1938 to 2013: How the US Dollar has lost incredible purchasing power since 1938. by Robert J Schundler http://www.mybudget360.com/cost-of-living-1938-to-2013-inflation-history-cost-of-goods-inflation/#comment-378178 Wed, 15 Apr 2015 12:35:29 +0000 http://www.mybudget360.com/?p=5304#comment-378178 We should look at the Basic Law of economics in the relationship of the amount of money (demand) to the supply. Since we now have two incomes plus government loans to finace what we want. Two people wanting to live in the same home with twice the income plus fanny mae would drive the prices of home up, also the cost of college has been affected by the government student loan program all of which drive up the price. Get the government out of the finance business, and we would have lower prices on many items.

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Comment on The new American retirement plan equates to working forever: Nonexistent nest eggs and most Americans are bad at planning as to how long they will live. by williamrw http://www.mybudget360.com/new-american-retirement-plan-retirement-savings-predict-retirement-age-life-expectancy/#comment-378174 Wed, 15 Apr 2015 12:12:42 +0000 http://www.mybudget360.com/?p=6163#comment-378174 laura m.

You are 100% correct about so many Baby Boomers obsession to work into their late 60’s on into their 70’s. But if these people are greedy or selfish “The Joke is on Them” Because let’s not forget about “The Health Factor” Most of these people have early stage cancer, heart disease and diabetes, to name a few age related maladies. “Their Retirement” will be that drive in a hearse from the job site to the grave site!

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