I remember back in the mid-70's, here in Alberta, friends of mine were attending university, not working during the school months but working from May to August at factory jobs, earning $12 to $14 per hour. So, 30 years ago they were able to earn enough money working just 4 months of the year to pay for their tuition and have spending money the rest of the year. They were frugal in their spending, but still - contrast that to students today, working one or two jobs all year long for minimum wage.

The erosion of pension plans will also cause the middle class to shrink. Years ago, if you put in 25 years working as a locomotive engineer, or put in the same time in the army or a good factory job in the private sector, you would receive an attractive pension that, added to your RRSP's and any work that you did afterwards, would ensure you enjoyed the same standard of living during your retirement.

Yep, I agree we are going to have to adjust our expectations downwards quite a bit, and it won't be pleasant. I'd wager that many people have started this process already. I think many businesses will also have to adjust their expectations downwards a whole lot as the buying power of the middle class disappears.

Same here! We have pretty much resigned ourselves to this reality, athough we do have a very independent 20-year-old who is SO looking forward to having her own place, even though she loves the lot of us and realizes she has to get established first, somehow.

I think if not for the fact that our kids could very well need to be in our home longer, we would downsize our home from the modest 1100 sq. ft. we have to one size smaller.

Always rented. Always will.

I can understand somebody renting if they know they cannot establish roots in a community, due to a transient nature of their work. But the inherent satisfaction of owning your own home, even outside the financial, carry a lot of weight in the decision. To be honest, would our communities be so attractive if everybody rented? Who would invest the time and and the money into landscaping for instance?

And then the financial. I just estimated that if I rented my home it would take the post-tax interest from an approximately similar investment just to pay the rent. At least this year. Lord knows what it will be ten years from now.

Also, there seems to be a social imperative to own, that its like a badge of success, even if one's place if fairly modest. Isn't that why the Central Mortgage and Housing Corporation was set upo by the government after World War II, so more of the public could get access to decent rated mortgages?

Many many moons ago, my wife got so pissed at me for not buying a home ( 2 yuppies, no kids, $90G home, 4 story, 3000sq ft, etc etc ), she rounded up my SSN, went to the bank, got us pre approved for the mortgage she needed for the house she wanted to buy, and brought all the papers home for me to sign, plunked them down on the kitchen table, and was just raring to go.

2 days later I asked for a divorce.

Wife #2 refuses to take the same risk. Smart woman.

My children were born, and brought home, and lived in, a rental house until they were both better than 6 years old. When we needed a bigger place last year, I cast an eye about the neighborhood, choose carefully, and paid $50/month less, 3 blocks away, for an additional 1500 sq ft, 2 more bedrooms, 1 more bathroom, and located on a cul-de-sac for bicycles rather than the more busy residential road where we had been previously. And as icing on the cake, I went halfsy's with the landlord, installed a second swamp cooler, and dropped my summer cooling bills by $200/month over DirectX. Heating bills went up slightly.

I pay approximately $500/month less in rent than what the mortgage costs the landlord. With luck, I'll get at least the 9 year old out of the house into college before I have to move again.

My income for my "impossible" lifestyle doesn't repair concrete, fix roof's, hot water tank, doors or anything else. My "impossible" lifestyle is nothing more than careful choices designed for maximum family time, relaxed after work living, and a desire to enjoy life with the family before teenagerhood hits the children.

I consider my quality of living reduced if I have to dig a water line ditch, repair the back porch, fix a water pipe, install new carpet or any of the other myriad tasks associated with home ownership which I consider wastes of time compared to reading a good book or playing with the kids. When I invest my money, I do it pretax in a 401K equivalent which I have day to day control over, I get as close to the IRS max as possible, and when I retire, if I can't live the rest of my life in nice hotels and drive nice cars and take nice vacations and spend frivilously on the children from my RV, until I keel over, and still give them a larger than normal inheritance, I will consider my long term planning a failure.

Until I stopped in here I didn't realize what I was doing was impossible. I am an advocate of learning something new every day.

There are lots of ways of living. I like owning a house that doesn't cost much to keep going. Soon we will only have to pay the water bill, the taxes and maintenance. That's security. The world may go crackerdog, but we can still get around the house on PV solar, take a bath with solar hot water and eat stuff from the garden. We get our wood from our woodlot, and maple syrup in the spring, so if we can still get a bag of flour we can make pancakes on the woodstove. We're walking distance to downtown and we're building a solar car to get around. Here's the website:

www.sunnev.com

It should be fun!

I read this thread right up to your post Thuja, and I have to say it slapped me across the head.



How about a different example. My numbers.

Mortgage+insurance/taxes= We rent / 800$ month

-one day my wife and I will build the home we want.

Utilities= 50$

Food= 400$

Car payment= 0$

-we don't buy cars unless we can pay cash

School debt= 150$

Daycare= 0$

-We will have kids when we have time for them, and something
to teach them worth learning. Right now we are focusing on
developing ourselves. Skills. Talents. Achieving goals.

Retirement= 0$

-Whatever we have left at the end of each month goes into
savings.

Gas for car= 200-500$

-Depends on which of our cars we drive I love my new sports
car but its a gas guzzler.

Miscellaneous= 500$

-The family you are talking about, if they are average Americans,
probably spend most of their Misc. cash paying credit card
interest. My wife and I have never had credit cards. We fear
them. When we first met both of us could name more thrift store
chains than department store chains.

Total= 2100-2400 per month$

By putting ourselves in a position where we are only spending $1200 per person per month, we have watched our savings and investments grow substantially.

I am not saying: "I got mine."

I am saying my wife and I spent a lot of time thinking about what we wanted and the best way to get there. We knew there would be periods where we would work 15 hour days and eat Ramen. We knew our path would be a lot harder if we buried ourselves in a huge mortgage, or had kids right off the bat.

Now, because of our planning, we have much more control of our lives. This does not mean that I look down on folks experiencing tough times. I have argued both side of this issue, and I do believe "the system" has a great deal to do with the decay of the middle class dream. My grandfather raised 5 kids solely on his paycheck, and they lacked nothing essential.

But the example you give Thuja is a bit different in my head.

It reminds me of too many folks I know personally who really haven't taken any responsibility for their actions of late. I have never felt the world owed me anything. Many folks I know, do. They don't have a clue how blessed they are.

I have friends who have bought homes they couldn't afford because they were competing with peers.

I have friends who have decided to have kids before they were anywhere close to being able to financially support them.

They really feel they deserve to have things work out for them. I hope things do work out for them.

But, in the cases when I have watched things go sour, they almost always seem to find someone or something else to blame. They never look in the mirror. Because if they were looking in the mirror, and being honest with themselves, they would have to face the truth.








This is the world we live in. Prepare for it.

Vexed, I think you are on the right track there. I think for a couple, without children, you keep a lot of flexiblility by not owning a residence.

Your only downside risk is being outside the loop as real estate rises in value. But, if you invest well, you can overcome that too. For instance having a good share of your investment in REIT's. Which also reduces the investment income tax load.

Making interest, instead of paying it, is smart. Not to brag, but that is the same philosophy my wife and I used in our first couple of years.

We finally did buy a smaller home, but we were able to pay half the principal cost of it upfront, and we had an open mortgage and we put every bit of overtime money I made into estinguishing that, which I was able to do 3.5 years later. And, by then, my first born had come along, and my wife stayed home full time. We camped for our vacations. My wife drove a 13 year old car that I learned to repair, often, but not always that well. We used a wringer washing machine, and had no VCR or even a dishwasher for those years while we had the mortgage. Mind you back then, a VCR cost about $500, like about $1,000 today. And, I would not change it for the world. It was an adventure, and gave me a sense of accomplishment to follow this path. I was also blessed with a wife who had good common sense and few materialistic ambitions.

Two years later, I saved up enough to do a cash deal on a larger four bedroom home. So, we have lived mortgage free for about 22 years now. And, in addition to a free and clear home, I have enough retirement savings to earn about $30K a year, right now, if I parked the savings in a mix of income trusts.

This has gone up quite a bit too in recent years. It's now around the top 1% owning 50% and the top 10% approaching 90%

Can you imagine though given a serious depression in the coming years the top 1% could come to own 90% along with the top 10% owning 99% !

That ought to tell you which side of the scale you need to be on. America is still lively enough to get you there if you want it enough. The question is, can you stand to make $70k a year and live in a $300 / month apartment with fuzzy TV..

Definitely. It's a few years within my grasp done right. I'm currently in the top 1% salary range for my age group and debt free. I need to take it up a notch or two.

Bingo!

And sad.

Why said? America lets people choose their paths as they see fit. Some want to live for the here and now, some want to leave life with neither debt nor asset, some want to leave substantial assets in the control of their children. Some are positioned to where the object is to take the reins of an existing set of assets, then improve and expand them to hand on to the next generation.

Pick the path that suits you best, and run with it. No apologies necessary for anyone.

Depends on where you think real estate is going. In our area, down is the only direction for the next couple of years.



I agree. Making interest is like free money. It is free money. Its a wierd feeling.



Absolutely with you. I remember watching the gun battles that took place in the apartment complex outside our back window - my wife and I of course ducking behind the couch (which we had "rescued" off a street corner previously).

These days we still utter some of the curse words we heard those gangsters shout. They were very inventive folks who gave us much incentive to move up in the world.



We are lucky men.



Our goal is to one day build the home we want. A McMansion isn't going to cut it. I just can't plop down $800,000 for a house I know I could build with my own hands for $200,000.



It's always good to hear from someone who is actually capable of retiring comfortably these days. All I ever hear anymore is how the boomers are going to all work till they're dead.

AgentRepublican wrote:


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