Tuesday, January 02, 2007
Ahh! The New Year is finally here. Out with the old and in with the new but in our case it’s out with the old and in the old again. It just seems like that anyway because I don’t make any stupid promises to myself. Oh sure, I would love to make a New Year’s resolution to win the lottery, lose about 10 pounds, grow more hair and screw Kate Beckinsale but that will not happen (maybe next year though, LOL).
People are flocking to join gyms to lose weight quickly to fulfill their empty-headed attempt at a New Year’s resolution. But the reality is, they will go the first couple of weeks and then pay the gym for nothing but sitting at home (or at the bar) on their asses. How foolish is this? If there is something you should be doing then you should be doing it already. Why do you need a new year to start?
I never have understood this stupid ritual. People think, “I gotta do this but I’ll put it off until next year, do it for a few weeks and then back to the same old shit. But at least I tried.” Yea right. Everybody eats a little more cake, cookies and pie during the holidays because it’s there. It’s usually not there the other months. But we should not need a new year to start eating right again; you should just do it.
A New Year’s resolution is one of those empty promises like the “American Dream”. What is the American Dream? To most people or if you listen to what the media tells us, it’s simply obtaining a mortgage. So you find a house, give it to a bank and then work the rest of your life trying to pay it off. So now you are a slave to the bank working for them. And then when the house is finally paid you’ll be paying at least triple of the original price on the house. That sounds more like an American Nightmare to me. The American Dream should be at least to OWN the home. (NOTE: owning means not paying for it or having paid it off.)
My idea of the American Dream is a little different from everyone else’s. I want to work less while earning more. If I average 50 hours of work for $50,000 last year, then I want to average 40 hours of work for $55,000 this year, and so on. That is my goal every year and if I do that, then everything else will work itself out.
I am one of the lucky ones. I have no debt other than my mortgage: no credit card, no car payments, no child support or alimony; just the house. I do use the credit card but at the end of the month it is always paid in full. Also, 10% of our total salary goes into a 401k and 25% into an interest bearing savings account. You should always pay yourself first before paying your bills. But then you have to make sure to keep your bills at an affordable level. This translates into living within your means. Translation, you cannot live like a rock star on a janitor’s salary.
I read someplace the average American carries $10,000 of credit card debt (at 12% or higher interest). They also spent $1.10 for every $1 they earn. How stupid is that? Living the way I do requires discipline but it is worth it not to be a slave to the creditors. I can’t imagine paying a $10,000 loan at 15% interest or higher.
Most people get themselves in financial trouble by buying a home they cannot afford. They think, “Well the bank says I can afford this and they wouldn’t lie to me, would they?” Yes they would. I remember shopping for a loan on the new house a few years back and the creditors telling me I could afford this enormo-house payment. I remember them saying, “Darth! You should buy a bigger house than that, you can afford it.” To which I would reply, “Just give me the freakin’ loan for this amount…..idiot!”
According to their calculations you can afford a house payment which is 25% of your salary. Well you can do that but its financial suicide. You still got to have money to live and you can’t do that when 25% of your gross income goes to the mortgage company. Our house payment is less than 10% of our salary.
For those of your shopping for a loan for a first-time home remember this. Do not listen to the bank or the real estate agent. Do your budget and buy a home based upon your calculations, not theirs. They aren’t the one who must pay off that enormo-loan. The only thing the real estate agent cares about is making their commission and the bigger the commission, the better. The only thing the bank cares about is getting those payments every month and the bigger those payments, the better. They don’t really care about you at all. And they don’t care about you at all with a BIG smile on their face.
People are flocking to join gyms to lose weight quickly to fulfill their empty-headed attempt at a New Year’s resolution. But the reality is, they will go the first couple of weeks and then pay the gym for nothing but sitting at home (or at the bar) on their asses. How foolish is this? If there is something you should be doing then you should be doing it already. Why do you need a new year to start?
I never have understood this stupid ritual. People think, “I gotta do this but I’ll put it off until next year, do it for a few weeks and then back to the same old shit. But at least I tried.” Yea right. Everybody eats a little more cake, cookies and pie during the holidays because it’s there. It’s usually not there the other months. But we should not need a new year to start eating right again; you should just do it.
A New Year’s resolution is one of those empty promises like the “American Dream”. What is the American Dream? To most people or if you listen to what the media tells us, it’s simply obtaining a mortgage. So you find a house, give it to a bank and then work the rest of your life trying to pay it off. So now you are a slave to the bank working for them. And then when the house is finally paid you’ll be paying at least triple of the original price on the house. That sounds more like an American Nightmare to me. The American Dream should be at least to OWN the home. (NOTE: owning means not paying for it or having paid it off.)
My idea of the American Dream is a little different from everyone else’s. I want to work less while earning more. If I average 50 hours of work for $50,000 last year, then I want to average 40 hours of work for $55,000 this year, and so on. That is my goal every year and if I do that, then everything else will work itself out.
I am one of the lucky ones. I have no debt other than my mortgage: no credit card, no car payments, no child support or alimony; just the house. I do use the credit card but at the end of the month it is always paid in full. Also, 10% of our total salary goes into a 401k and 25% into an interest bearing savings account. You should always pay yourself first before paying your bills. But then you have to make sure to keep your bills at an affordable level. This translates into living within your means. Translation, you cannot live like a rock star on a janitor’s salary.
I read someplace the average American carries $10,000 of credit card debt (at 12% or higher interest). They also spent $1.10 for every $1 they earn. How stupid is that? Living the way I do requires discipline but it is worth it not to be a slave to the creditors. I can’t imagine paying a $10,000 loan at 15% interest or higher.
Most people get themselves in financial trouble by buying a home they cannot afford. They think, “Well the bank says I can afford this and they wouldn’t lie to me, would they?” Yes they would. I remember shopping for a loan on the new house a few years back and the creditors telling me I could afford this enormo-house payment. I remember them saying, “Darth! You should buy a bigger house than that, you can afford it.” To which I would reply, “Just give me the freakin’ loan for this amount…..idiot!”
According to their calculations you can afford a house payment which is 25% of your salary. Well you can do that but its financial suicide. You still got to have money to live and you can’t do that when 25% of your gross income goes to the mortgage company. Our house payment is less than 10% of our salary.
For those of your shopping for a loan for a first-time home remember this. Do not listen to the bank or the real estate agent. Do your budget and buy a home based upon your calculations, not theirs. They aren’t the one who must pay off that enormo-loan. The only thing the real estate agent cares about is making their commission and the bigger the commission, the better. The only thing the bank cares about is getting those payments every month and the bigger those payments, the better. They don’t really care about you at all. And they don’t care about you at all with a BIG smile on their face.
Labels: My Life
posted by DarthImmortal at 12:47 PM
9 Comments:
(Let's see if this Freakin' thing will post.)
There's a simple way to determine who actually "owns" the house... don't make the payments and see who REALLY owns the house!
I believe the number I heard recommended for renting, is 25% of the monthly net income. That was what I used to get my current apartment. Now, it's actually higher than 25%, since I don't make as much as I did when I first started renting it, but I would not pay more than 25% of my monthly for a house either.
Basically, I can't afford anything but a crappy home, and not for equal to the amount I pay for my apartment.
Unless a person is going to use their home (or condo) as a "trade-up" to a bigger and better one down the line, I see no reason for a single person, or even a couple to own a home (unless they have kids, and need the additional rooms). I guess there are the write offs, but ultimately, a home is the Bank's asset, and our liability, until it is finally paid off.
Since I am single, and have no plans for marriage, I see no reason to buy one unless I plan to use it to leverage into a better one down the line. I don't like moving my crap from one place to another, so I only see myself moving one or two times in the future and that's it: Once to an apartment or condo that has a covered parking area (for the day I finally buy the new Mustang I've always wanted), and then finally to the home I intend to die in (hopefully many decades from now).
When I am out of debt, have savings, and have a nice down payment available (in addition to the savings), I may re-evaluate at that time.
Personally, I'd prefer to just save and build my retirement home to my specifications, and pay for it all myself. If I can't do that, then I may just stay in an apartment.
I will be completely out of debt this year. Having gotten myself in and out of debt several times now, I would rather live far below my means in the future, than deal with the stress of debt. Especially the stupid kind of debts I have accrued in my past.
The problem is, in today's hyper-competitive society, it's virtually impossible to make yourself marketable without going into a significant amount of debt. Student loans are only the beginning. People whose parents don't support them through college/graduate school have to take out additional loans to pay for housing, on top of their tuition and lost earnings while they're in school. If you're single, this translates into TONS of debt, and usually a decent chunk of this is on credit cards, once your eligibility for lower-interest loans dries up.
This is a sucky situation, but it's not one of people's own making. It's a greedy society, with greedy universities, a greedy government, and greedy loan companies all out to make more money without regard for who it harms, or, ultimately, how it causes our civilization to collapse.
I'm one of those amazingly amazingly lucky people who got help from my family. Without it, I would be digging myself out of a monster hole, and even if I lived like a pauper this would take me YEARS, in spite of the fact that I make a big firm lawyer's salary. If a big firm lawyer is struggling to maintain financial viability (and I and my friends are no financial dummies), this says something about our culture.
I disagree that a mortgage is throwing your money away, though... obviously it's great if you have the money to just buy the house upfront, but for the vast vast vast majority of Americans this simply is not feasible (especially if they live in Los Angeles or areas with comparably inflated real estate values). In my mind, I'd rather be paying that money, in essence, back to myself (in the form of equity in my home) rather than to a landlord. Plus, if you're really good at banking/finance (I'm not, but anyone can learn) and can secure a decently low interest rate on your mortgage, a mortgage can actually be to your advantage if you invest wisely in high-yield investment accounts. You're better off investing $100K over the course of 30 years than paying it on a house all at once, if your investment interest rate exceeds the interest rate at which you finance your mortgage.
I would LOVE to have a mortgage. Problem is, anything larger than a two-bedroom condo in Los Angeles is over half a million dollars, STARTING, and I simply don't have $50K saved up at the present to throw out for a downpayment. I'm thinking I'll just invest in real estate somewhere else in the meantime, so I can build up equity SOMEWHERE.
Andy,
I think a home is a good investment even for somebody like you but the credit laws need to be adjusted. Even though you can only afford a smaller house, it is still a better investment than an apartment. After you have been paying rent for X number of years you will start to acquire equity and eventually ownership. However, an apartment offers no equity and you just contribute to someone else’s equity.
Lawfairy,
I don’t think a mortgage is a bad investment but I do think the credit system as a whole is corrupt. A home is one of the best investments you can make. There should be stronger laws protecting the consumer from predatory lending practices and the whole system of amortization is flawed, being tilted toward those with lots of money.
I just don’t think it should take a person their entire life to own their home. But the ruling class knows if too many people own their homes earlier in life then the slaves might stop rowing the boat. Then they have a problem. So the credit laws were written so the wealthy can retain and grow their wealth.
You mentioned another predatory practice with the whole way higher education is handled. You have to understand credit is a way to enslave people and it does not liberate anybody. What better way to keep the masses working than to have them in major debt before they even get out of school.
One more thing you have to realize is even the taxing system is set up so the ruling class can retain and regain ownership of property. Look at how many elderly who have finally paid off their house can easily lose it because of local property taxes or other local taxes. A home is so hard to obtain but so easy to be taken from you. And it is this way for the reason which I stated earlier. The ruling class wants a system to keep the slaves working and still have the ability to legally take their property when they finally are able to retire. The stupid thing is they have brain-washed us into thinking this system is fair and just.
They also have filial laws to steal property from the heirs. If the sick require hospice care usually they have to transfer ownership of all currency, income and assets to the corporation that owns the hospital. Just think of how many ways your house can be taken from you and how easy it is to lose. But you had to work 30 years or more to obtain it and pay as much as three times the original price because of the loan sharking interest calculations.
Absolutely agreed -- my point was more, I don't think it makes people foolish for taking on debt, at least to a certain extent, since there's virtually no way to avoid it.
But, yeah, credit laws are structured AGAINST anyone with an income of less than probably half a million. I don't know, though, half a million might not even be enough (since that's only about 300K, give or take, after taxes anyway). On the flip side, corporations can get out of pretty much any bad situation by filing for bankruptcy, with far less significant consequences for the board of directors than for the unlucky minions -- and with far less consequences overall than for an individual person who files for bankruptcy. It's disgusting to watch creditors chase after my friends now that we've graduated... we make what by all accounts should be gazillions and yet feel like we're struggling to stay afloat. There's something very wrong when someone whose income is in the top 10% (ish? guesstimating) of the country STILL feels she can't make ends meet.
I'm disgusted by tax shelters. You essentially have to be a corporation to take advantage of the most favorable tax laws in the country. I met an actor who turned himself into a corporation to protect his income from taxes (and, even though he's hardly a household name, apparently does better than a lot of the law partners I work for) -- from what I understand this is common in that industry. I'd do it myself, except that corporations cannot be employed as attorneys (obviously corporations can't meet state bar regulations, pass the bar exam, etc.). How gross is it that corporations get better tax breaks than INDIVIDUAL PEOPLE, even if those people make the same salary?
Equally disgusting is that now, thanks to Kelo, the government can pretty much take whatever it wants from you -- in addition to the corporations' money-grabbing schemes, now we've got to worry about our own government pounding down our doors.
Lawfairy,
You are absolutely right on target with your assessment. You probably know this better than me because you are practicing the law. I challenge you to find the law which allows the government to collect income taxes from the citizens of this country. But don’t waste your time trying to find it because it doesn’t exist.
I’m preparing a blog on this right now about how the government illegally collects income tax from us when we are not required by law to do so. There are 5 Supreme Court rulings from the early 1900’s striking down the government’s attempts to collect an income tax on individuals but yet we still pay (I will include these five cases in my blog later in the week). Also, income is defined by corporate earnings NOT individual earnings.
The government used the IRS like a mob boss uses a cajole to illegally collect tax money and we allow this. Also the Bill of Rights prohibits us from filing tax returns because we are not required to give any statements that might incriminate us. But again, the IRS uses “hitman” style tactics to scare the money from our wallets.
Every once in a while they will feature the IRS on CNN, showing them storming someones house and seizing all the property just to keep us in line. All the while supporting the lie that we are required to pay income taxes.
the record straight...their are a few of us who are ethical and I make sure my clients shop a couple of different banks and so forth so they can pick out the rates and programs that work best for them. I live in a smaller town so word of price gouging by mortgage companies spreads fast. I always look at the good faith estimates my clients bring so that I can see if they are being gouged. My main concern is not making a huge commission but having that client refer me to someone else and so on so that I can at least support my daughter and myself. I would rather have repeat business consistently then hace a huge commission once in a while. Since I work for a national company I can also help my friends in other states find reliable people with my recommendation. And I cancelled my gym membership on the New Year because I never used the damn thing:)
For some reason the first part of my previous post did not come up. It said...I am a good friend of Milwaukee Girl which is how I found your site. I haven't read a lot of your posts but I am still working on a respones to the married/versus single spot.I am also a realtor. This leads into the previous comment I left...so hopefully it will make more sense.
daynad,
Our real estate agent was also very honest but many are not. I wasn't using this post as an underhanded shot at real estate agents. I was just explaining the difference between the typical American Dream and mine.
Welcome to the blog, I hope you come back often and I appreciate your comments.
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