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It could be that some (maybe the majority) of these people are asset-rich but cashflow poor. They are not necessarily leaving beyond their means, their net wort

It could be that some (maybe the majority) of these people are asset-rich but cashflow poor. They are not necessarily leaving beyond their means, their net worth may be millions. But the net worth is locked in the value of their home, which is not a liquid asset. They have to pay their mortgage, and high food and gas prices make the day-to-day cashflow calculus a bit complex, but that doesn't mean they are anywhere close to being broke.

bigbacaloa 4y ago
How is someone making 250k in income cash flow poor unless they have overcomitted with respect to expenses?
- credit_guy 4y ago
  It was not over-commitment when they committed (when they took the mortgage).
  - s1artibartfast 4y ago
    90% of US mortgages are fixed rate, so inflation shouldn't increase the mortgage. IF anything, Inflation decreases the cost of the mortgage for those who own homes because they are a fixed dollar amount.
    - credit_guy 4y ago
      > IF anything, Inflation decreases the cost of the mortgage for those who own homes because they are a fixed dollar amount That’s only if you saw a salary increase. Lots of people have seen salary increases, but that happened mostly in the lower income brackets. At the 250k+ level, you got an increase only if you switched jobs.
      - s1artibartfast 4y ago
        Yeah, but that is irrelevant to the idea of mortgage increasing as a percent of income. No high earners are getting pay cuts.
dixie_land 4y ago
> the net worth is locked in the value of their home I keep explaining to people that while real estates are good investments, your primary residence is not part of your net worth.
- giantg2 4y ago
  It is part of net worth. It's just that typically you can't access it because you need somewhere to live. The exceptions are things like downsizing to access some of it, selling and them renting or moving to assisted living.
  - dixie_land 4y ago
    when you're required to financially qualify for something based on net worth/assets, primary residences are almost always explicitly excluded. eg to qualify as an accredited investor. https://www.sec.gov/education/capitalraising/building-blocks/accredited-investor https://www.sec.gov/education/capitalraising/building-blocks... not to mention for commercial purposes such as private wealth management
    - medvezhenok 4y ago
      Which seems wrong, somehow. If I have 500K cash (no other assets/liabilities) and rent my place, I have a NW of 500K (according to this). If I go out and buy a house tomorrow, my NW is now $0? The primary residency exceptions drive me bonkers. It should be counted just like any other asset.
      - giantg2 4y ago
        It's not counted when they want liquidity to be able to cover losses on naked positions. Having a $500k house also doesn't show much financial savvy since a person could have bought it years ago without any experience in trading or finance.
        medvezhenok 4y ago

bigbacaloa 4y ago

How is someone making 250k in income cash flow poor unless they have overcomitted with respect to expenses?

credit_guy 4y ago
It was not over-commitment when they committed (when they took the mortgage).
- s1artibartfast 4y ago
  90% of US mortgages are fixed rate, so inflation shouldn't increase the mortgage. IF anything, Inflation decreases the cost of the mortgage for those who own homes because they are a fixed dollar amount.
  - credit_guy 4y ago
    > IF anything, Inflation decreases the cost of the mortgage for those who own homes because they are a fixed dollar amount That’s only if you saw a salary increase. Lots of people have seen salary increases, but that happened mostly in the lower income brackets. At the 250k+ level, you got an increase only if you switched jobs.
    - s1artibartfast 4y ago
      Yeah, but that is irrelevant to the idea of mortgage increasing as a percent of income. No high earners are getting pay cuts.

dixie_land 4y ago

> the net worth is locked in the value of their home I keep explaining to people that while real estates are good investments, your primary residence is not part of your net worth.

giantg2 4y ago
It is part of net worth. It's just that typically you can't access it because you need somewhere to live. The exceptions are things like downsizing to access some of it, selling and them renting or moving to assisted living.
- dixie_land 4y ago
  when you're required to financially qualify for something based on net worth/assets, primary residences are almost always explicitly excluded. eg to qualify as an accredited investor. https://www.sec.gov/education/capitalraising/building-blocks/accredited-investor https://www.sec.gov/education/capitalraising/building-blocks... not to mention for commercial purposes such as private wealth management
  - medvezhenok 4y ago
    Which seems wrong, somehow. If I have 500K cash (no other assets/liabilities) and rent my place, I have a NW of 500K (according to this). If I go out and buy a house tomorrow, my NW is now $0? The primary residency exceptions drive me bonkers. It should be counted just like any other asset.
    - giantg2 4y ago
      It's not counted when they want liquidity to be able to cover losses on naked positions. Having a $500k house also doesn't show much financial savvy since a person could have bought it years ago without any experience in trading or finance.
      - medvezhenok 4y ago