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This sounds like a useful corollary for a high income individual that should apply generally, but if you watch videos on the "death of the middle class" videos

by dmix 4y ago

This sounds like a useful corollary for a high income individual that should apply generally, but if you watch videos on the "death of the middle class" videos you'll learn that the middle class in America didn't actually die recently, its actually just as big as it ever was, it's just stuff like spending on cars and housing is wayyy more expensive than ever so even us well paid software people are functionally poorer than we should be. https://youtu.be/0sj-8pjt9Xk https://youtu.be/0sj-8pjt9Xk IRL the vast majority of these consumer spending things don't play a massively damaging role in the average consumers life / upward mobility... at least relative to history or other regions. But a few things do. When you start getting serious about personal finance people tend to obsess about the small less important things we're wasteful about. Mostly because it's more obvious locally and easy to feel guilty about (consumer electronics, clothes, restaurants, etc). But in practice for healthy well employed workers 80-90% of the time self-imposed poverty comes down to two things: cars and renting housing. Cars ranks #1 easily in terms of actionable things, if you asked 90% of middle class households making >$100k you'll find car loans/costs are easily the biggest burden on disposable income. People buy cars they can't afford and getting $30k+ loans plus the associated costs of nice cars (damaging them, insurance, etc) it becomes very apparently the biggest thing stopping someone from having extra money that could be invested in 10x+ more value like paying off high interest credit card loans (rather than adding another +interest car loan) or simply investing in better things like real estate, small businesses, personal development, stocks, etc etc. The other elephant in the room that far, far outweighs spending on vanity consumerism is housing. This one involves plenty of personal responsibility but of all the things in Americans/western life this is the least to blame individuals. Stopping Americans from buying stupid expensive cars is a very hard mostly social problem, but housing is something that could be solved much more simply through stuff like ending zoning and anti-NIMBY laws. We could gain plenty from working on the smaller tier consumer stuff at the same time (every dollar really does matter and you don't know until you track it) but education about cars and gov action on increasing housing supply would be the most productive work in the short term.

anovikov 4y ago
I seriously don't understand how is it possible to overspend on a car. House sure, because many people, conveniently for developers, confuse it for investment, but a car? Besides, cars are cheap and getting cheaper vs inflation let alone incomes. Are people just trying to buy the most expensive car they can get a loan approved for?
- peepee1982 4y ago
  I'm baffled by how much people spend on cars. But I get it. Everyone else is driving a nicer car, so you feel left out. Even if your rational side knows it's stupid, you still feel less than. It's the same with homes. But as you say, at least real estate tends to hold it's value somewhat.
  - hgsgm 4y ago
    > But as you say, at least real estate tends to hold its value somewhat. Expensive land usually does appreciate (in some areas, only until interest rates go up?), but the house on the land is a money pit.
    - noduerme 4y ago
      In America, the best investments in the past 100 years have been structures like car dealerships built on cheap land around the exurbs of major cities. You get commercial use of the structure, wait 20 years for it to be surrounded by residential development, then sell the land. This, working hand in glove with the driving and commuting culture, had been the middle class gear in the system attached to the resource extraction itself. I'm not here to pass moral judgments on this method of creating wealth, although to me unnecessary mineral extraction for energy is largely fraught with moral hazard. But to say that real estate isn't an investment is to consider the past two centuries of American economic growth to be a temporary aberration, and I don't think you can do that in light of the degree of economic reliance that has grown up around it.
  - noduerme 4y ago
    There's a smart side to this, and a lot of people take it: Buy a car that has all the features you want, for almost half the price. Buy a house in a neighborhood that's run-down but improving and that you can help to improve. You don't have to be famous on social media to be a "thought leader" and increase the value of your assets by pulling gullible people into your aesthetics or way of thinking. You can just show up and buy the thing and use your skills to improve the thing, which improves everything else around it. There is enormous financial leverage if you can do that, because most people aren't willing to put in the work.
noduerme 4y ago
parent here... I own two cars. One I bought outright for $2700 and put about $15k into restoring over the last 5 years. The other is the only substantial debt I have, but I bought it for $30k at 2.99% ...and considered that a good place to put my money. I understood interest rates were about to rise and used car prices wouldn't fall anytime soon. Nothing I did in that regard was something they don't teach you in 9th Grade Macroeconomics. I take small loans if the rate is right because I'm pretty sure I can use that $30k to generate more than 3% a year, so, it's free money. Other than that, I'd never take a loan for anything, ever. That seems to be the fundamental piece of logic most people haven't been acculturated to. Yet... I know a lot of people who are otherwise uneducated (high school, if that) who understand this implicitly. I don't think it's exceptionally American or even related to education level. It's learned by going through actual deprivation and remembering how hard it is to earn every dollar you make. [edit] what I'm referring to here as 'it' is: Never take a loan unless you are sure the value of the money over time in interest or investment favors you. A loan is just a bet that you can do better with that money than the interest rate you have to pay for it. Why don't they explain this to children anymore? [/edit] I'm a 3rd generation American. I've had a view, for my whole life, that America is a machine that turns ambitious producers into lazy consumers over the course of a couple generations. Being ambitious, and producing, is at least as much about making wise decisions with your savings as it is about earning. Personal observation: The immigrant tendency to save their money used to be racially judged and regarded as a type of "cheap" "hoarding" - always, of course, by the 3+ gen stock of old money. But the phrase "a fool and his money are soon separated" is as true today as it ever was: the tendency of the children of the rich to be idiots and blow it all is the greatest bulwark against generational wealth we possess in a free market democracy. Far more effective than any tax. Deprivation is key not just to the hunger to create, but the hunger to conserve. It has to be experienced or taught.

by dmix 4y ago

anovikov 4y ago

I seriously don't understand how is it possible to overspend on a car. House sure, because many people, conveniently for developers, confuse it for investment, but a car? Besides, cars are cheap and getting cheaper vs inflation let alone incomes. Are people just trying to buy the most expensive car they can get a loan approved for?

peepee1982 4y ago
I'm baffled by how much people spend on cars. But I get it. Everyone else is driving a nicer car, so you feel left out. Even if your rational side knows it's stupid, you still feel less than. It's the same with homes. But as you say, at least real estate tends to hold it's value somewhat.
- hgsgm 4y ago
  > But as you say, at least real estate tends to hold its value somewhat. Expensive land usually does appreciate (in some areas, only until interest rates go up?), but the house on the land is a money pit.
  - noduerme 4y ago
    In America, the best investments in the past 100 years have been structures like car dealerships built on cheap land around the exurbs of major cities. You get commercial use of the structure, wait 20 years for it to be surrounded by residential development, then sell the land. This, working hand in glove with the driving and commuting culture, had been the middle class gear in the system attached to the resource extraction itself. I'm not here to pass moral judgments on this method of creating wealth, although to me unnecessary mineral extraction for energy is largely fraught with moral hazard. But to say that real estate isn't an investment is to consider the past two centuries of American economic growth to be a temporary aberration, and I don't think you can do that in light of the degree of economic reliance that has grown up around it.
- noduerme 4y ago
  There's a smart side to this, and a lot of people take it: Buy a car that has all the features you want, for almost half the price. Buy a house in a neighborhood that's run-down but improving and that you can help to improve. You don't have to be famous on social media to be a "thought leader" and increase the value of your assets by pulling gullible people into your aesthetics or way of thinking. You can just show up and buy the thing and use your skills to improve the thing, which improves everything else around it. There is enormous financial leverage if you can do that, because most people aren't willing to put in the work.

noduerme 4y ago

parent here... I own two cars. One I bought outright for $2700 and put about $15k into restoring over the last 5 years. The other is the only substantial debt I have, but I bought it for $30k at 2.99% ...and considered that a good place to put my money. I understood interest rates were about to rise and used car prices wouldn't fall anytime soon. Nothing I did in that regard was something they don't teach you in 9th Grade Macroeconomics. I take small loans if the rate is right because I'm pretty sure I can use that $30k to generate more than 3% a year, so, it's free money. Other than that, I'd never take a loan for anything, ever. That seems to be the fundamental piece of logic most people haven't been acculturated to. Yet... I know a lot of people who are otherwise uneducated (high school, if that) who understand this implicitly. I don't think it's exceptionally American or even related to education level. It's learned by going through actual deprivation and remembering how hard it is to earn every dollar you make. [edit] what I'm referring to here as 'it' is: Never take a loan unless you are sure the value of the money over time in interest or investment favors you. A loan is just a bet that you can do better with that money than the interest rate you have to pay for it. Why don't they explain this to children anymore? [/edit] I'm a 3rd generation American. I've had a view, for my whole life, that America is a machine that turns ambitious producers into lazy consumers over the course of a couple generations. Being ambitious, and producing, is at least as much about making wise decisions with your savings as it is about earning. Personal observation: The immigrant tendency to save their money used to be racially judged and regarded as a type of "cheap" "hoarding" - always, of course, by the 3+ gen stock of old money. But the phrase "a fool and his money are soon separated" is as true today as it ever was: the tendency of the children of the rich to be idiots and blow it all is the greatest bulwark against generational wealth we possess in a free market democracy. Far more effective than any tax. Deprivation is key not just to the hunger to create, but the hunger to conserve. It has to be experienced or taught.