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The Most "Not Even In The Same Ballpark" Conversation I Ever Had With A Co-worker

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    The Most "Not Even In The Same Ballpark" Conversation I Ever Had With A Co-worker

    A 27 yo pharmacy tech making about 38k/year asked me about the area I live the other day and wondered if he should look into buying a house. I said for a 1500 sqft used house, you are talking about 270k. He said "oh that's not bad, I should look into it so I can stop paying for rent". His rent is only 700/month with utilities included thanks to roommates. I said that if you factor in interest, hoa, property tax, and home insurance, all of these things will blow 700/month out of the water. And if you don't have 20% down, you need to add another 150ish a month to this. He agreed it's best to put 20% down, and I said it's going to be about 60k of saved up money to play the game due to closing cost. This also assume a really good credit score.

    Now this is where he tells me his credit score is in the 500s, and just failed to get a personal loan..in which he wanted to use his paid off car as collateral. Apparently he has zero savings with 3500 worth of debt and he's short this month and wanted the personal loan. The conversation quickly shifted from "looking at houses" to you "should never put your car up as collateral because that can destroy your livelihood. "

    I have never had a conversation where what the person wants and what the person has being so out of sync. There needs to be some education on how to be an adult and win in life badly. I mean the information gap with this individual is astonishing.

    #2
    So many people live in a real fantasy world of what they can and can't afford. The fact that someone like this even thinks they could buy a house is incomprehensible. He can't even afford his current expenses. I'm at least glad he was turned down for the loan, and I'm impressed that he actually has a paid off car.
    Steve

    * Despite the high cost of living, it remains very popular.
    * Why should I pay for my daughter's education when she already knows everything?
    * There are no shortcuts to anywhere worth going.

    Comment


      #3
      Originally posted by Singuy View Post

      I have never had a conversation where what the person wants and what the person has being so out of sync. There needs to be some education on how to be an adult and win in life badly. I mean the information gap with this individual is astonishing.
      I have these conversations frequently as I am surrounded by people with NO clue about personal finance or being an adult.

      My favorite conversation.... a co-worker who bought a home using a federal government program Ö..as she told me " I know what my payment will be with no change, because my rent keeps going up" I asked her if her escrow was in her payment and she told me "I think so, what is that?"

      I explained and told her payment CAN change if taxes go up and insurance increased to which she said " I hope not, I have this to the last dollar I can afford, any change and I cannot make the payment." Seriously how could ANY program give this person help to buy something she clearly was ill prepared for.

      The MOST astonishing thing is that SO many people who have not met or interact with the clueless.
      Often these people then believe that everyone is on the same page with BASIC financial information and then believe media hype saying it is impossible to get ahead.

      Comment


        #4
        This is probably more common than you would think... Sadly .. this guy might do a little bit of change that increases his credit score temporarily and he would then qualify for a 3% down payment mortgage .. there are a lot of people who shouldn't be buying houses.. and of course that's driving the price of houses way high.

        Comment


          #5
          Originally posted by Captain Save View Post
          there are a lot of people who shouldn't be buying houses.
          And while there is plenty of blame to go around on this, the government is largely responsible. They push home ownership constantly and keep coming up with new ways for poor people to buy houses they canít afford.
          Steve

          * Despite the high cost of living, it remains very popular.
          * Why should I pay for my daughter's education when she already knows everything?
          * There are no shortcuts to anywhere worth going.

          Comment


            #6
            This is a major social issue caused by so much misinformation. We live in a society where credit cards and consumer goods are pushed on us. The idea that most people live pay check to pay check and are only $1000 away from being bankrupt astounds me.

            I do believe every high schooler should have to take a finance course. How to balance a check book, the basics of interest, income vs expenses, credit cards, retirement. The material would probably be provided by VISA and MasterCard though so even that is a hopeless outlook

            Comment


              #7
              Originally posted by myrdale View Post
              I do believe every high schooler should have to take a finance course. How to balance a check book, the basics of interest, income vs expenses, credit cards, retirement.
              We've discussed this here many time. I agree that better financial education is needed. I think high school is way too late to do it. It should be incorporated into the school curriculum beginning at the time you first introduce the concept of money in elementary school. It should follow through from there, advancing the subject at a grade appropriate level.

              The problem, of course, is that teaching it in the classroom must be reinforced and modeled in the home. If the parents are irresponsible with money, as 70% of Americans are by most surveys, I don't know how much of an impact the schooling would actually have. I guess it would help eventually once those kids grew up but it would take a generation to start seeing the change.
              Steve

              * Despite the high cost of living, it remains very popular.
              * Why should I pay for my daughter's education when she already knows everything?
              * There are no shortcuts to anywhere worth going.

              Comment


                #8
                We haven't seen the impact yet of people en masse retiring without pensions. I cannot imagine what it will be like in another 20 years when people my age (generation X) really start retiring with 401k. I mean and then having to draw on a lump sum versus their parents pensions. Where you get money no matter what. It's a very different ballgame. Especially considering if most have barely saved $100k. How much and how long is that going to realistically last?

                I know that many people my mom's age 67 retired with a pension and a 401k of ZERO. My uncle and aunts are all retired with pensions from the state from being teachers and stuff and get SS and pensions to the tune of $7-8k/month between the couple. And free medical. How much do you think they would have had to have saved to have generated $2k/month? $24k/year? $600k in a 401k. Are people actually doing that? I don't ask that sarcastically but honestly. It hasn't quite hit yet people retiring without the safety net of a pension.Just wait. I think even another 10 years we'll start seeing those articles because people wil be freaking out.
                LivingAlmostLarge Blog

                Comment


                  #9
                  I live in a high cost, low to moderate income area, so people generally dont exhibit that type of delusion because they know they can't afford it. Other smaller things like cars and luxury goods, sure.


                  median home price $800,000
                  median family income $86,000 before tax

                  Even assuming they scrape together $100,000 for a down payment, excluding all closing costs, cost of interest points, fees, furnishing the place, initial repair, property tax, utilities, PMI, etc. you're looking at a mortgage payment of $3500/month or $42,000/year.

                  Comment


                    #10
                    Originally posted by LivingAlmostLarge View Post
                    We haven't seen the impact yet of people en masse retiring without pensions. I cannot imagine what it will be like in another 20 years when people my age (generation X) really start retiring with 401k. I mean and then having to draw on a lump sum versus their parents pensions. Where you get money no matter what. It's a very different ballgame. Especially considering if most have barely saved $100k. How much and how long is that going to realistically last?

                    I know that many people my mom's age 67 retired with a pension and a 401k of ZERO. My uncle and aunts are all retired with pensions from the state from being teachers and stuff and get SS and pensions to the tune of $7-8k/month between the couple. And free medical. How much do you think they would have had to have saved to have generated $2k/month? $24k/year? $600k in a 401k. Are people actually doing that? I don't ask that sarcastically but honestly. It hasn't quite hit yet people retiring without the safety net of a pension.Just wait. I think even another 10 years we'll start seeing those articles because people wil be freaking out.
                    yeah, my parents retired with federal pensions and modest savings. The millenial generation is going to have a tough time trying to manage their 401ks to carry them through retirement.

                    Truth be told, the baby boomer generation are sucking all the benefits dry, the pensions,the social security, the medicare, etc etc and the future generations are left holding the bag plus having to fund their own retirement. The pension and medical unfunded liabilities is basically like credit card debt the boomers are incurring and leaving the younger generation to pay off.

                    Comment


                      #11
                      I guess my view is influenced by the fact that my father (born in 1923) was on his own for retirement, just as most of us are today. He was self employed as an accountant. There was no pension or 401k. It was whatever he saved during his career plus SS. He did start an IRA when those came along. He died 26 years ago but my mom is still going strong living on that nest egg and SS.

                      So the concept of saving for my own retirement isnít new to me. And I didnít really have a job-sponsored plan until 2 years ago when I switched jobs at age 52. Everything before that was all me. There was some sort of profit sharing thing at my first job but it only amounted to a couple thousand dollars per year.
                      Steve

                      * Despite the high cost of living, it remains very popular.
                      * Why should I pay for my daughter's education when she already knows everything?
                      * There are no shortcuts to anywhere worth going.

                      Comment


                        #12
                        ^ Yeah, the entrepreneurial/business minded people were always on their own, and it sorta took a special individual to choose that path instead of the company sponsored retirement, which was far more of a norm than it is nowadays.

                        For me, seeing all these boomers doing well with their pension safety nets despite low savings kinda colored my decision to find employment with a pension. Pensions are not guaranteed to be there when I retire (anything can happen), but it's a huge safety net. You have a generation of people who could basically live hand to mouth, and when they retire, they're perfectly fine because they have the pension waiting for them!

                        Some of the retired people I know make the same amount of money in retirement as they did when they were working! You take a pension that's 70-80% of final salary and combine that with social security. Not only do they make the same amount of money in retirement, their tax rate is lower in retirement, as social security has special exemptions, and my state doesn't tax pension income. It does tax 401ks. Also, the pension income is inflation adjusted, so their purchasing power is guaranteed for the rest of their life.

                        How does this relate to "not in the same ballpark"? Well if the person you're talking to has a pension lined up, they can live pretty irresponsibly, as long as they dont rack up crazy debt. Compared to the average person who needs to actively save at least 15% of their income and manage their investments for retirement.
                        Last edited by ~bs; 12-08-2018, 01:44 AM.

                        Comment


                          #13
                          Originally posted by ~bs View Post
                          ^ Yeah, the entrepreneurial/business minded people were always on their own, and it sorta took a special individual to choose that path instead of the company sponsored retirement, which was far more of a norm than it is nowadays.
                          I don't know. Yes, pensions used to be far more common, but I think self-employment and small business employment was just as much a thing years ago, probably even more than today. Today, national retail chains, big box stores, chain restaurants, large service companies (plumbers, for example) and such have more people working for big companies that likely have retirement plans. While there aren't as many pensions, there might actually be more people with employer-sponsored retirement plans, although still only about half of all workers have access to a 401k.
                          Steve

                          * Despite the high cost of living, it remains very popular.
                          * Why should I pay for my daughter's education when she already knows everything?
                          * There are no shortcuts to anywhere worth going.

                          Comment


                            #14
                            Originally posted by ~bs View Post
                            Some of the retired people I know make the same amount of money in retirement as they did when they were working! You take a pension that's 70-80% of final salary and combine that with social security. Not only do they make the same amount of money in retirement, their tax rate is lower in retirement, as social security has special exemptions, and my state doesn't tax pension income. It does tax 401ks. Also, the pension income is inflation adjusted, so their purchasing power is guaranteed for the rest of their life.
                            That's what I'm in line for, however it'll be 25 or so years until I retire so anything can change. If I stay with my current employer, in the 35th year of working for them, I can retire and take home 100% of my salary in retirement. But like I said, that's 25 years down the line, and who knows what's going to happen.

                            Comment


                              #15
                              Originally posted by LivingAlmostLarge View Post
                              We haven't seen the impact yet of people en masse retiring without pensions. I cannot imagine what it will be like in another 20 years when people my age (generation X) really start retiring with 401k.
                              We've talked about this before but I think the traditional concept of retirement has been changing and evolving. This is partly due to financial concerns but it's also due to longer life expectancy and older folks wanting to stay active and engaged beyond the traditional retirement age. Many current "retirees" are still working. They may have left their careers but they haven't hung it up and taken up residence on a rocking chair on the back porch. And many 65+ folks haven't left their careers at all. I know doctors who practiced into their 90s. I had a patient who was a hostess in a restaurant well into her 80s. She had worked there for 40-some years. My mom is 88 and was still working part time until about a year ago and probably still would be but the job no longer exists. None of these people were doing it for the money, though it was a nice perk and helped stretch out the savings.

                              With the rise of the gig economy and online opportunities, I think we're going to see more and more people engaged in working for pay, at least part time, well past 65 whether they need the money or not.
                              Steve

                              * Despite the high cost of living, it remains very popular.
                              * Why should I pay for my daughter's education when she already knows everything?
                              * There are no shortcuts to anywhere worth going.

                              Comment

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