Another article on debt/youth.....

[aljdewey]

........and how it has impacted the 20-34 age group. It is much different trying to start out today than it was even just 20+ years ago.

http://abcnews.go.com/Business/CSM/story?id=1492351

""A lot of parents don't understand why their kids haven't accomplished the traditional markers of adulthood that they did — buying a home, starting a family, living without debt," Draut said. "I don't think there's an awareness of how much the economic context has changed."

 

[ursulawrite]

It''s hard, especially living in a city like NYC. I know plenty of people making $250,000+ who can''t afford their own apartment because of the down payment issue (still 20% in Manhattan) plus you have to have considerable assets in your bank account, too.

I feel very fortunate that we have such a lovely apartment in Soho at the ages of 28 and 32.

 

[njc]

Being in this age group, i cant agree more, although DH and I are lucky. Coming out of school, we were both able to payoff credit cards quickly and now the only debt we have are the mortgage and DHs student loan.

My junior year in college, i watched my roommate breakdown to her parents that she was $10K (!!!

!!!) in debt on credit cards! Everytime she got a pre-approved card, she used it. The really messed up thing was her parents were giving her all the money she could possibly need to live on and then some (rent, books, plenty of fun money). Even sicker part... she spent most of the money on cigarettes.

And as far as the article talking about saleries and not keeping up with the cost of living... my first job paid so little, i had to live with my parents or face barely making it month to month, which was REALLY sad because the only debt i had was $5K in credit cards. I choose to live at home so i could save, which in turn gave DH and I the money to purchase our townhouse. But what happens when your job isnt close by to family where you can crash???

At my current job (big national company) my health insurance is a $1K more than my raise this year. So to me, I got nothing except more taken out of my paycheck.

Again, proof that it is harder to get ahead now...

 

[ladykemma]

I disagree with premise of the article. I am respectfully playing devil's advocate here..... I'm being nice so please don't jump on me. The article implies that it's the gummint's responsibility that young people can't get ahead. BUt, I believe in personal responsibility.

well, I am confused-- i see young people on this website expecting, demanding, asking for, complying, pleasing, buying 1 -2 carat diamonds. I simply don't understand where the money is coming from for these expenses. Huge weddings too. I see friends buying McMansions and watching them divorce over the stress. could this be the same population that is expecting to start adult life where their established parents are now?

My husband and I are in our early 40s. when we were first starting out, all we could afford was a quarter carat engagement ring. we had bricks and boards for bookshelves and milk crates for furniture. we bought a house instead. The real estate agent tried to get us into a McMansion. we said "No!", which surprised him. The modest house is paid for now. we earned our furniture, bought it used, or made it, one piece at a time.

Some have a five dollars a day starbucks habit. $5 a day 365 days a year is $1825 a year, peed down the toilet. buy a coffee machine instead. carry your lunch. cook at home. I see friends crying that they don't have any money when they eat out every day.

Debt free is the way to go!. The only acceptable debt, in my opinion, is mortgage and student loans. I am a faithful advocate of "the dollar stretcher" website and frugal living.

Forgiveness for student loans is available by teaching in underpriveleged (sp?) schools for a couple of years or being a doctor or lawyer or something in rural areas. There are more ways to deal with student debt than first appear.

No, you will not live like the young ones in "friends". But where are your priorities?

Save credit cards for travel and serious emergencies. pizza is not an emergency. hubby in intensive care is....

Live below your means. Self reliance. Personal responsibility.

With most sincerity,
lady kemma
edited to add a sentence.

 

[Dancing Fire]

Date: 1/15/2006 12:44:08 PM
Author: ladykemma
I disagree with premise of the article. I am respectfully playing devil''s advocate here..... I''m being nice so please don''t jump on me. The article implies that it''s the gummint''s responsibility that young people can''t get ahead. BUt, I believe in personal responsibility.

well, I am confused-- i see young people on this website expecting, demanding, asking for, complying, pleasing, buying 1 -2 carat diamonds. I simply don''t understand where the money is coming from for these expenses. Huge weddings too. I see friends buying McMansions and watching them divorce over the stress. could this be the same population that is expecting to start adult life where their established parents are now?

My husband and I are in our early 40s. when we were first starting out, all we could afford was a quarter carat engagement ring. we had bricks and boards for bookshelves and milk crates for furniture. we bought a house instead. The real estate agent tried to get us into a McMansion. we said ''No!'', which surprised him. The modest house is paid for now. we earned our furniture, bought it used, or made it, one piece at a time.

Some have a five dollars a day starbucks habit. $5 a day 365 days a year is $1825 a year, peed down the toilet. buy a coffee machine instead. carry your lunch. cook at home. I see friends crying that they don''t have any money when they eat out every day.

Debt free is the way to go!. The only acceptable debt, in my opinion, is mortgage and student loans. I am a faithful advocate of ''the dollar stretcher'' website and frugal living.


With most sincerity,
lady kemma
edited to add a sentence.

lady Kemma

agree on everything you said.

yep....debt free is the way to go.

i''m 47 yrs old , i have been debt free for the pass 3 yrs. and it feels so good.

i think many parents today are setting a bad example for their kids,they are bury in deep debt themself.must live in a mansion ,must drive a $80k car,must go on that $5k vacation.

 

[finerthings]

Well said ladykemma, you hit the nail on the head.

 

[Mara]

having been one of those silly college students with pre-approved cards up the yin-yang, i can relate to that article...it's also very hard to pull yourself out of it after making stupid mistakes. i had a year of spotty payments and lots of debt when i was in college and that was all it took. it was really only in the last 3-4 years that things have changed for the better, my credit store is extremely excellent, we try to keep our cards very low and/or pay things off within a few months and this year (by march hopefully) we will be entirely debt free except for our mortgage. i know tons of people in their 20's who had the same issue. and if their parents bailed them out they NEVER learned how to take care of themselves.

so i do think it is hard when you are young and stupid and don't know any better, but part of that is parenting responsibility...my parents didn't really teach me how to use credit in a smart way and i obviously didn't figure it out on my own, esp when you are away at college and heady with the excitement of being out on your own.

my sister is dealing with this same thing right now too. she moved out this year to live with her boyfriend (she is 22) and she has gotten herself into debt buying things that she doesn't need and trying to live a lifestyle that neither she nor he can afford. she says her credit is already ruined and i told her it would be a long 7 years until it was fixed. the irony is that she has had cards since she was 16 and has always been SO good about paying them off and not overspending, but this year she left the nest and now it's like her brain has been replaced by scrambled eggs.

that said, even if you DO fall into the pit of debt when you are young, smartening up and playing it straight will eventually pay off. we managed to squeeze into the housing market here in overpriced N. CA a few years ago, and if we found a house we loved today we could sell our place and reap about $250k profit to put into the next house, easily making and exceeding 20% DP even on an upgraded home. so we are pretty happy about that, but don't intend to leave anytime soon nor do we want a larger mortgage payment!

the biggest thing i think for young people is to get into property as soon as you can. i tell this to my 22 year old coworker whose mom wants to give her a DP for a condo. i said DO IT. pay her back over the next 5 years or whatever but if she wants to help you get into property around here, take the help. it will pay off in the long-run especially in an area like this where even if things do drop a bit, they always climb again. and personally i think LONG-TERM property can be such a bonus to you...i know people whose parents own 3-8 properties each full and clear since they started buying property when they were 25 and newly married and just kept it up. funny and ironic thing is that the kids don't want the properties, having made it on their own, and instead tell the parents to sell them and enjoy their retirement!

so that article does speak to me about debt and foolishness when you are young but if you smarten up you can get ahead...where we are now makes us both extremely happy with what we have accomplished and it will hopefully only get better. now next on the agenda for us is to start thinking about retirement and taking steps to ensure that we are comfortable.

 

[ladykemma]

thank you i thought i was going to get jumped....

 

[Kaleigh]

Date: 1/15/2006 2:07:30 PM
Author: ladykemma
thank you i thought i was going to get jumped....

You made perfect sense. I agree with everything you said!!!

 

[ursulawrite]

Lady Kemma,

I agree with everything you said 100%.

I know someone who demands eight designer handbags from her husband, per season (because you need, "the funky red one", "the clutch", "the camel" etc. etc.). She has the most amazing jewels for a woman of 28 -- big drop diamond earrings, huge pearls, a 2.5 carat ring, tennis bracelets... Her husband, who makes exactly the same salary as my husband, hasn''t, at the age of 32, started paying off his law school loans yet, they have a mortgage on a $1.6m house and she''s pregnant with their third child. Crazy! Talk about having your priorities out of whack.

I resented (I''m so ashamed to say it now) receiving a 1.3 carat ring when everyone else was getting 2- and 3-carat solitaires. But you know what? I am glad my husband was so smart. Diamonds are fabulous, obviously, but, in my eyes, having a Soho loft and zero debt is even better

 

[ladykemma]

thank you ursula. my husband is very good with money too. great job on your "paid for" soho apartment

I teach high school in the ghetto. I am also dripping with (secondhand) diamonds and pearls. I try to teach my young students about debt free living. no rent, no mortgage, no car payment. they can''t wrap their mind around it.
"miss, you''re rich, why don''t you drive a better car....? a jaguar, a cadillac, a hummer?" I model for them if you can''t pay cash for it you can''t have it. I also like layaway. Buy "used".

such freedom isn''t it?

 

[angel_nieves]

Wow I agree with what has been said here. As a 23 year old I do have to say it can be very hard. Instead of a big e-ring and fancy wedding my hubby and I had a simple ceremony in his mothers garden and a beautiful .67 diamond from a friend who owns a pawn shop. We saved our money and bought a house off the foreclosure list (leaving no debit for us). Saved money by doing home repairs ourselves and friends (one contractor and a carpenter) helping us for our wedding present. Instead of buying a fancy car when we first got together we decide to keep both of the cars that we had when we where single (1995 Chevy pick up and a 1996 Dodge Intrepid). Also unlike our friends we went to second hand furniture shops and bought most of our pieces. Then we had our son when we where 21. My hubby worked 1 1/2 jobs and went to academy so I could stay at home with our son. I have recently have gone back to work as a mortgage broker and see so many young people my age that have so much debt that it is impossible for them to buy any type of home. REFUSING TO HAVE CREDIT CARDS IS THE BEST THING FOR YOUNG PEOPLE (we use only our bank card if we don''t have the money to buy something fabulous that we don''t need we don''t). My hubby and I went to our pawn shop friend and bought an 1.5 upgrade e-ring from the money that we saved. Yes we both have family that would help us out so we would not have had to watch our budget but we wanted to do it on our own. Now we have less than $1,000.00 dollars debit (recent medical bills) and are making enough money to live comfortably without budgeting if we chose not to.

 

[Dancing Fire]

if my kids ever get into CC debt,they will never hear the end of it.why buy stuff you can''t afford to paid off at the end of the month?

yes...i have my bad habits,starbucks every day

spent too much money on a fish pond.

eat out too much.

today''s kids are so spoil

.why do they need 20 pairs of jeans

why do they need 15 pairs of sneakers

i show my daughters where i used to live,an apartment with no A/C they ask me....how can you live in a place with no A/C. how can you live with no computer/internet?

 

[larussel03]

I''ve incurred about 40k in student loans (FI has about 16k) and sure it stinks to have to pay 200.00 a month to the company I consolidated with but hey that''s life. I think that having certain unavoidable debts almost help to teach you how to budget and realy give a reality check that when you graduate you wont be able to live like all those ppl on "friends" haha. I keep myself on a fair but strict budget and make myself save at least $500 a month, and I have so many friends who blow their entire salary. It''s all about responsibility, and I feel that though it may take longer than it did my parents, FI and I will become financially successful and it will be because we made the necessary sacrifices to ensure our future.

 

[ladykemma]

all y'all, do people think of you as "cheap"? Is frugality and wise money handling considered cheap?

you - singular
y'all - plural
all y'all - super plural

 

[ladykemma]

dancing fire - it sounds like you can afford to enjoy starbucks. good for you!

 

[larussel03]

Date: 1/15/2006 3:06:36 PM
Author: Dancing Fire
if my kids ever get into CC debt,they will never hear the end of it.why buy stuff you can''t afford to paid off at the end of the month?

yes...i have my bad habits,starbucks every day

spent too much money on a fish pond.

eat out too much.

today''s kids are so spoil

.why do they need 20 pairs of jeans

why do they need 15 pairs of sneakers

i show my daughters where i used to live,an apartment with no A/C they ask me....how can you live in a place with no A/C. how can you live with no computer/internet?

haha and I do agree, we 20-somethings are pretty spoiled today. You have me nailed, I LOVE jeans, I have so many pairs even though I usually wear the same 3 in rotations, and I do eat out too much. However, I pay for everything cash, and put a good chunk of my monthly pay into savings, and I think that if you''re responsible you can get what you want (ok, maybe not everything, but enough to feel satisfied) and not kill your bank account. I think that people my age need a real good lesson on budgeting and keeping to that budget and to quote the Rolling Stones "you can''t always get what you want", and least not when you want it, right away. If I want expensive jeans, I''ll save an extra 20 or 30 a month until I can afford the jeans, rather than buying them immediately.

I''ve seen too many friends go into insane credit card debt acting as though it was free money, that I just cut mine up. I still have a small outstanding balance from college when I used it for books and when I was low on cash. Maybe when I pay it off I''ll get a new one for emergencies, but I view my savings as more of an emergency fund...

 

[perry]

ladykemma

Very well said above. But some of us got into debt problems as adults.

Me - out of HS into the military for 5 years to save money for college and get GI Bill. After 2.5 years of college I pretty much ran out of cash and started working (I also did not own a car untill then either - i.e. I got my first car at about age 26). I also sold accumulated books and other things - and graduated from college with less than $900 in college loans (most of my classmates had $25 - $30,000 in loans). I paid that off in less than a year (I''m actually thinking less than 6 months).

Got a good job and handled my money well. About 4.5 years later I had 75% of the cost of a small house in savings as I was planning to buy (outright) a house. But, the plant closed and the industry I was in downsized significantly. Jobs in my field were few and far between. to make matters worse there was also a death threat and stalking by a wacko (I figure that cost me directly $50,000 by the time it was over); and health problems with no health insurance. By the time it was over - and I was able to get reasonable employment again a decade later I was down about $45,000 on credit cards (about 4.5 years ago).

Lots of people told me I should declare bankruptcy during the process to get out of that debt - but I figured that as long as I could work that somehow I would figure out a way to pay it back. Today, I have about $11,000 left to pay off + the house mortgage.

I agree that debt free is the way to go. I''m working on getting there.

Of course, I see many younger people who just have to have things that I don''t even have. No wonder they are broke.


To answer your follow-up question about how people see me: Some see me as cheap as I drive old cars (my newest vehicle is a 1995 ford Aspire - yet the sub compact thing that is "aspiring" to be a real car). Last year I fixed up a 1993 full sized conversion van for when I need to carry more people or more stuff. Key point is that I paid cash for the van and the repairs, and for a few other things. I do suspose that I could have paid off my debt if I had not gotten and fixed up the van. Partial lesson learned (the van cost about twice as much as I expected to fix up).

On the other hand; other people think I am extravagant because I tend to buy quality items up front. For example, I wear Allen Edmonds dress shoes - which cost hundreds of dollars (I have one pair that retail cost is over $425 - factory seconds usually start at arround $200 if you can get them (and guys, you probably do not know how comfortable dress shoes can be untill you wear a pair of these shoes - I could not go back to my previous dress shoes (normal "high quality" shoes). I have a second pair of Allen Edmonds "casual" dress shoes that look better than most people''s dress shoes that are as soft to walk in as my modern running/walking shoes. What most people don''t see is that those shoes last forever as long as you take just a little care of them, and can be resoled (recrafted) many many times because they are produced the old fashioned way with real welts. Thus, while other people wear out and replace their shoes 3 or 4 times I "recraft" my shoes once for the next cycle where they wear out and replace their shoes 3 or 4 times (note that I only have to break in a pair of these shoes once).

So am I being cheap or extravagant? Long term - I am real money ahead by getting the quality shoes (not to mention way more comfortable to wear).

What is really more neat is what I just learned about the Allen Edmonds warranty process - which is actually how I endid up with my now $425 pair of shoes. I recently went down to the factory store (I live near where they are made) to replace my original Allen Edmonds dress shoes from over a decade ago because the leather had torn at a seam. Discussions with the sales rep led me to drive home and bring them back. They store manager examined them - pointed out how well I had taken care of the shoes (actually used them to educate some of the newer sales staff on things to look for that indicated that I had indeed taken proper care of the shoes) - and then told me that the leather should not have torn, and they would replace them as I had taken care of the shoes (I was told that many people bring in shoes that have not been properly taken care of - and Allen Edmonds does not replace those). Note that these shoes were in need of new soles at the time - but no matter. At that point I asked what it would cost me to upgrade to the Shell Cordovan leather in the same model and was told just the price difference ($90.00). I now have a pair of brand new MacNeal dress shoes (Retail @$425) for $90 and the warranty trade in of a 10+ year pair of shoes that "failed".

How many other shoe companies would replace a 10+ year old pair of shoes for a defect that took 10+ years to develop (I''m thinking that I got the original shoes on sale for about $175). But Allen Edmonds shoes should last you the rest of your life if you take care of them and replace heals and soles when needed (factory replacement). So am I extravagant or cheap. I now have a pair of shoes that I cannot immagine ever wearing out (Shell Cordovan is the most durable leather out there - very expensive as it takes a 6 month special hand tanning process to make).

For those interested: www.allenedmonds.com

Now I will get back to being cheap.... (or perhaps frugal is the better term).

Perry

 

[Dancing Fire]

typical young couples starting life together with too much debts....

$20k wedding
$10k honeymoon
$10k e-ring
$100k student loans
$300k mortgage
+ CC debt
+ auto loans

and they wonder why they end up in a divorce after a few yrs.

yep....that''s right.for richer or for poorer,til DEBT do us part.

 

[Mara]

$20k wedding?! where?! the typical weddings here in the Bayarea are more like $30k-40k for the basics...we could not stomach that at ALL. we paid cash for our wedding in Hawaii and had a better time!

finances are the #1 thing couples fighting about leading to divorce they say! i guess you can't live on love?!

 

[ursulawrite]

$300k for a mortgage. Sigh. If only that were the truth.

My zip has a median house price of $1.2m which, in a nutshell, gets you something pretty basic.

 

[MichelleCarmen]

Date: 1/15/2006 3:08:41 PM
Author: ladykemma
all y'all, do people think of you as 'cheap'? Is frugality and wise money handling considered cheap?

you - singular
y'all - plural
all y'all - super plural

I see frugality as a way of living when a person saves more $ than they spend. I see cheap as a person who is selfish and nongenerous.

Example of frugality. A person who has $200 to spend and buys non-designer jeans and a simple, nice shirt, and puts the rest in the bank vs. blowing ALL the cash on an outfit.

Example of cheap. (this is a personal example) A family trip is planned and it's decided a 13 YO child is to travel along with a broke, in college, young couple (dh and I), and the parent of the 13 YO doesn't provide ANY financial help to cover the 13 YO's food and expenses but insteads leaves this up to the broke couple. Very cheap!

ETA - I really cannot stand cheapness. Regifting is soooo cheap!

 

[Diam100]

Yeah that mortgage isn't typical for Manhattan.

I can agree with the article being in NYC. However, I think getting your financial priorities in order is even more important for women. I'm a woman by the way. Since my social set includes friends working in the Financial/Legal field I can tell you from experience how important it is for women to save, save!

My first marriage ended in divorce and unfortunately no matter how much legal tactics myself & my lawyer tried. I ended up having to pay alimony to my deadbeat first husband for 2 years till he ended up getting remarried. Yep I got a sympathetic judge who took one look at my income compared to his & felt I had to help him continue the lifestyle he was accustomed too. Not looking for sympathy since what's good for the goose is good for the gander. This ex-wife jumped for joy when I didn't have to write those painful checks anymore.

Ok fast forward years later & my broken heart poured into my work. I didn't see sunset or sunup for years and ended up rising in my field. So, I bought my 2 bedroom 2 bath apartment in Manhattan all by myself. Along comes husband number two and because he owns a very profitable business & my assets had risen we had to go with a pre-nup. We took two weeks to hash out the details but what can I say was burned once in this town.

Now, that I'm past all that I remember a year ago being at a party of which some of my associates, the same ones who have attended these parties in 10 years past are now not married to the same women who attended these functions before. Makes me sick because some of these men have traded out there 1st wives like used cars. Some of these women got seriously screwed in their divorces so all I can say for all women is make sure you can financially take care of yourself.

 

[ladykemma]

$20,000 for a wedding? geez louise, one of the best weddings I ever went to was a ren faire/sca couple who wore thier best garb, and we all brought super fancy POTLUCK. home made cake. what fun!

 

[ladykemma]

perry - I wear expensive resoleable shoes too. Birkenstocks are 120 bucks a apir, but they last for years provided you keep up with the resoling. I joke with my high school students that "this pair of Bostons is older than you are!"

 

[Dancing Fire]

Date: 1/15/2006 4:15:52 PM
Author: Mara
$20k wedding?! where?! the typical weddings here in the Bayarea are more like $30k-40k for the basics...we could not stomach that at ALL. we paid cash for our wedding in Hawaii and had a better time!

finances are the #1 thing couples fighting about leading to divorce they say! i guess you can''t live on love?!

worst than i thought !!!

 

[Dancing Fire]

Date: 1/15/2006 4:24:25 PM
Author: ursulawrite
$300k for a mortgage. Sigh. If only that were the truth.

My zip has a median house price of $1.2m which, in a nutshell, gets you something pretty basic.

yeah,but your zip makes $500k a yr.

 

[perry]

Some of us live in lands where reasonable sized houses can be bought for about $100K with larger houses on the water about $200K.

Of course, wages tend not to be as high as other places; but in general we can live a decent life.

Weading cost range from a couple of thousand to $50,000 depending on how extravagant you wish to be. Many in my family have done simple small weadings which were on the lower cost of the scale (often not even in a church). Should I get married that is what I would expect. Immediate family and close freinds only - probably less than 30 people all told.

What is more important: The vows that bind - or impressing your freinds with how much money you "seem" to have.

Perry

 

[Rhapsody]

My boyfriend and I are 24 and money is a constant bane. My parents gave me the boot when I turned 18 and his parents are financially worse off than us due to their business going under so we were on our own Rent, food, school expenses, car expenses, we could barely keep afloat most of the time.

We have about 50K in school loans (and this was just to cover tuition, we didnt take out any extra loans for living expenses) and we racked up about 8K in credit card debt when my boyfriend got laid off and my minimum wage job wasnt paying the bills. We never bought anything extravagent, boyfriends car was free (his uncle donated his 1981 volvo to us when they bought a new mercedes

) and I still drive my 89 integra that I bought for 2K in highschool with babysitting money when my parents refused to drive me to school anymore (I went to a schhol out of my district). I never buy clothes unless I rip or ruin something and we eat out only once a week, lunch together on Fridays

Even if you''re careful with money its really hard to save money at this age, when the jobs dont pay a lot, you dont have a lot of credit history and you live 30 miles from your job (I so want to drive my car into a river). We''ve budgeted ourselves really tightly and if nothing goes wrong (HAHA!) we''ll have enough money to buy a house, pay off all our debt and have 10k in the bank in spring of 07. And that will give us 2k for a wedding... pot luck anyone?

 

[perry]

MC Said:

I see frugality as a way of living when a person saves more $ than they spend.


I see it differntly as most people do not make twice the income that it need to support themselves.

To me frugality is considering the likely long term cost options of a issue or purchase - and then choosing the cheapest long term option to maximize long term savings (or to put it another way - maximize long term disposable income).

An example. I have a freind who has a 5 year old car (paid for), and the car is starting to need maintenance. This freind is starting to half panic that they need a new car now.

I have pointed out the cost options: The car is now in the stage that most likely it will need about $1000 in maintenance per year for the next 4+ years. If you buy a replacement car of the same type - you will make about $16,000 in payments in the same 4 years. What is really the cheapest cost? The reliability of the cars would expected to be about the same as most things needing work give pleanty of warning (and new cars also have problems). I also point out that I do just fine spending my $1000 or so each year on my decade old car. However, I have also pointed out that my car is now getting old enough where maintenance cost are starting to go up (last year is was closer to $1500) and that certain major things would not be worth fixing (such as an engine). So I have started to look at other car options so that I know which model I would like to chose between when that day comes that it is no longer worth maintaining my old car.

So the option is planning to spend an average of about $100 per month in maintenance; or spending over $300 per month on a new car. To me the first choice is being frugal. There are other things that can be done with that $200 per month (if a person has it).

Perry