ForumGarden

I was advised many years ago that if I wanted to be and stay in financial good order, to keep my housing costs at or under 20% of my net income. Housing costs meaning rent/mortgage, taxes, insurance & utilities. I am fortunate to have made a nice profit on the five homes that I have purchased during my lifetime, none of which were purchased as investments. I am also fortunate that now as a aging senior citizen to own a home free of mortgage and still keep housing costs under 20% of my net income.

I cringe when I hear of those whose housing costs have been and are as much as 60% (sometimes even more) of their net income and can't help wondering if the problem is having CHAMPAGNE TASTE WITH BEER INCOME.

Sure, lenders were dead wrong and overly zealous in making loans to unqualified buyers, but the buyers must take responsibility for their financial stupidity as well.

Lon;1352890 wrote: I was advised many years ago that if I wanted to be and stay in financial good order, to keep my housing costs at or under 20% of my net income. Housing costs meaning rent/mortgage, taxes, insurance & utilities. I am fortunate to have made a nice profit on the five homes that I have purchased during my lifetime, none of which were purchased as investments. I am also fortunate that now as a aging senior citizen to own a home free of mortgage and still keep housing costs under 20% of my net income.

I cringe when I hear of those whose housing costs have been and are as much as 60% (sometimes even more) of their net income and can't help wondering if the problem is having CHAMPAGNE TASTE WITH BEER INCOME.

Sure, lenders were dead wrong and overly zealous in making loans to unqualified buyers, but the buyers must take responsibility for their financial stupidity as well.Perhaps just as you weren't aware prior to the advice you received some others are equally ignorant. Finances are not adequately taught in school AFAIK (or can recall), and even if it is, it's not going to get the attention it warrants from kids who are more interested in sports, science, math or religion.

You've learned this in life and it's important to everyone, why not take the opportunity you now have with the availability of the internet audience afforded you and teach through sharing with others like you did in your first paragraph? I'm sure you took the time to teach your children as they grew, why not continue the practice on forums.

Lon;1352890 wrote: I was advised many years ago that if I wanted to be and stay in financial good order, to keep my housing costs at or under 20% of my net income. Housing costs meaning rent/mortgage, taxes, insurance & utilities. I am fortunate to have made a nice profit on the five homes that I have purchased during my lifetime, none of which were purchased as investments. I am also fortunate that now as a aging senior citizen to own a home free of mortgage and still keep housing costs under 20% of my net income.

I cringe when I hear of those whose housing costs have been and are as much as 60% (sometimes even more) of their net income and can't help wondering if the problem is having CHAMPAGNE TASTE WITH BEER INCOME.

Sure, lenders were dead wrong and overly zealous in making loans to unqualified buyers, but the buyers must take responsibility for their financial stupidity as well.


Thank you and good post, Lon.

Patience. People want what they want when they want it. All good things come in time but not without sacrifice.

Great advice but it's all relative to what you earn. It's not always possible to rent property at only 20% of your net income you have to pay what it takes. The typical rental round here is more than 20% of the average salary, and average means a lot of people are actually below that amount. You pay more in rent than a mortgage on the same property would cost but because you are renting there is little chance you will be able to save up the deposit to buy. It's a poverty trap.

Lon bought his first house when you could actually pay for it over a reasonable span of time. These days it's near impossible for the average person to do all that is needed over a span of 15 or even 30 years and pay off the home, to really be a homeowner.

They system is feudal in nature with only the most highly paid people in society ever being able to truly own a home. Low wages and propaganda about the "American Dream" ensure aspiring homeowners find themselves enslaved and quite often lose everything. Of course it is the idiots that only have themselves to blame.

Anyway to answer your question my cost of living is about 75% of me and my wifes current income in total. We save the rest and have been for more than a decade. We rent as buying is sheer idiocy here in the PacNW. It's servitude. We were thinking of buying a good trailer for cash but we really like our location now. We have access to great views, secure living conditions, a heated pool in summer. We live pretty good all in all and are well prepared for the future.

gmc;1352907 wrote: Great advice but it's all relative to what you earn. It's not always possible to rent property at only 20% of your net income you have to pay what it takes. The typical rental round here is more than 20% of the average salary, and average means a lot of people are actually below that amount. You pay more in rent than a mortgage on the same property would cost but because you are renting there is little chance you will be able to save up the deposit to buy. It's a poverty trap.


I moved to a different city because I was able to make the same income and properties were 20 to 30% less than where I was living. I know this is not possible for everyone, but sometimes relocating can be advantageous. Even now, I would not do it, but if I sold my present home here in California I could move to Kentucky, Iowa, Ark., Tenn, and a number of other states and buy a similar home for 2/3 less and have $$$ left over to play with, or buy a much,much larger home.

Scrat;1352920 wrote: Lon bought his first house when you could actually pay for it over a reasonable span of time. These days it's near impossible for the average person to do all that is needed over a span of 15 or even 30 years and pay off the home, to really be a homeowner.

They system is feudal in nature with only the most highly paid people in society ever being able to truly own a home. Low wages and propaganda about the "American Dream" ensure aspiring homeowners find themselves enslaved and quite often lose everything. Of course it is the idiots that only have themselves to blame.

Anyway to answer your question my cost of living is about 75% of me and my wifes current income in total. We save the rest and have been for more than a decade. We rent as buying is sheer idiocy here in the PacNW. It's servitude. We were thinking of buying a good trailer for cash but we really like our location now. We have access to great views, secure living conditions, a heated pool in summer. We live pretty good all in all and are well prepared for the future.


Wrong Scrat---------Every house that I purchased was with a 30 year fixed interest mortgage, except the last one which was paid for in cash. The first loan was a 30year 3.5% Cal Vet Loan, second was a 30 year 6% Conventional Loan, same with the next two homes.

Lon;1352890 wrote: I was advised many years ago that if I wanted to be and stay in financial good order, to keep my housing costs at or under 20% of my net income.I spent some time systems-designing in mortgage specialist societies in the UK during the 70s and 80s. The advice you describe was enforced as official policy (the 20% recommended limit had a society cap at 25% tops) and the deposit required was only in exceptional circumstances less than 10% of the purchase price. The banks subsequently took a role as an alternative source of mortgages, many of the societies adopted for-profit constitutions and the game turned into maximizing market share regardless of risk because risk could, suddenly and magically, be insured against with new-fangled unexplainable finance instruments. I'm glad I left before all the crookery started.

Wrong Scrat---------Every house that I purchased was with a 30 year fixed interest mortgage, except the last one which was paid for in cash. The first loan was a 30year 3.5% Cal Vet Loan, second was a 30 year 6% Conventional Loan, same with the next two homes.


When was your first house bought.

Scrat;1352952 wrote: When was your first house bought.


My error--------first house purchased 1959 3.5% 20 year mortgage---the others were 30 year.

Well then you played your cards right and had some luck. I can respect that as my parents did the same thing, only with 2 homes though. They bought their first home in 1960.

I don't think people starting their adult lives since about the '80s have the same opportunities you have had though, the system is too different from that of the '60s. You began your adult life and lived a major portion of it during the heydays of America. It seems my generation saw the beginning of Americas decline and our current flock of youngsters have to live with globalization and Americas inability to compete in this new world.

Yes, Gen Xers and others were reckless but was that not what was expected of them? Consume!!! Consume!!! Consume!!! The world you began your life in respected good common sense and wise planning. In todays society it's a different story all around. I seriously doubt an 18 year old stepping from his home today will ever be able to accomplish what you did simply because of the mechanisms of our modern global society.

Scrat;1353008 wrote: Well then you played your cards right and had some luck. I can respect that as my parents did the same thing, only with 2 homes though. They bought their first home in 1960.

I don't think people starting their adult lives since about the '80s have the same opportunities you have had though, the system is too different from that of the '60s. You began your adult life and lived a major portion of it during the heydays of America. It seems my generation saw the beginning of Americas decline and our current flock of youngsters have to live with globalization and Americas inability to compete in this new world.

Yes, Gen Xers and others were reckless but was that not what was expected of them? Consume!!! Consume!!! Consume!!! The world you began your life in respected good common sense and wise planning. In todays society it's a different story all around. I seriously doubt an 18 year old stepping from his home today will ever be able to accomplish what you did simply because of the mechanisms of our modern global society.


I agree------It's a different ball game and though my daughter and sil are in their early 50's , in their second home which is paid for, it' not likely that they will be able to retire as early as I did (I was 58) due to age extension for Social Security, big question mark about future medical costs and long term care, lack of pensions etc.

My grandchildren in their 20's will have an even more difficult time despite the fact that they have good careers.

To buy or not to buy, consume or not to consume are personal decisions and choices and individuals are accountable for decisions they make. To say that they are pressured or enticed into consumption by advertising or what is currently in vogue is a cop out.

THE DEVIL MADE ME DO IT MENTALITY :-3

I pay 60% of my income for housing. I'm really lucky. I looked around and can't find anything cheaper with the required number of rooms and compared to what's available I ended up with a beautiful place that I really enjoy with lots of character home nooks and crannies instead of a boxed in dive in a highrise.

The cost of living in BC is absurd.

koan;1353032 wrote: I pay 60% of my income for housing. I'm really lucky. I looked around and can't find anything cheaper with the required number of rooms and compared to what's available I ended up with a beautiful place that I really enjoy with lots of character home nooks and crannies instead of a boxed in dive in a highrise.

The cost of living in BC is absurd.


That's your choice. To each his own.

Typical mortgage length in the UK is 25 years. People don't go for lifetime fixed rates - you can get them there is just no take up on them. Bought my first flat when mortgage rates were in double figures.

The following is a table of average interest rates for each year.

1971 7.92% 1988 12.13%

1972 8.08% 1989 15.75%

1973 12.10% 1990 16.63%

1974 13.90% 1991 13.42%

1975 12.77% 1992 11.29%

1976 13.90% 1993 7.79%

1977 10.21% 1994 7.35%

1978 11.25% 1995 8.15%

1979 15.96% 1996 7.89%

1980 18.17% 1997 8.56%

1981 15.23% 1998 9.21%

1982 13.80% 1999 7.33%

1983 11.84% 2000 7.98%

1984 11.64% 2001 7.08%

1985 14.17% 2002 6.00%

1986 12.71% 2003 5.69%

1987 11.50% 2004 TBA


It's not the rates that stop people buying houses it's the size of the deposits, we've gone back to needing 5%-10% as a minimum, if are renting it is almost impossible to save that kind of money.

gmc;1353047 wrote: Typical mortgage length in the UK is 25 years. People don't go for lifetime fixed rates - you can get them there is just no take up on them. Bought my first flat when mortgage rates were in double figures.

The following is a table of average interest rates for each year.



It's not the rates that stop people buying houses it's the size of the deposits, we've gone back to needing 5%-10% as a minimum, if are renting it is almost impossible to save that kind of money.


Although the 30 year fixed rate mortgage was typical of my generation, primarily to keep monthly payments lower. As incomes rose many homeowners accelerated their mortgage payments without prepayment penalty and there fore were able to pay off the home much sooner than 30 years. Others (like me) relocated for career opportunity and rolled all the equity from one home into the next one. Some of course took that equity and bought cars, boats, etc. and then started out with a new 30 year loan.

The cars and boats have depreciated and are no more of course, and the mortgage is still there. It's a choice isn't it?

Ahso!;1352892 wrote: Perhaps just as you weren't aware prior to the advice you received some others are equally ignorant. Finances are not adequately taught in school AFAIK (or can recall), and even if it is, it's not going to get the attention it warrants from kids who are more interested in sports, science, math or religion.

You've learned this in life and it's important to everyone, why not take the opportunity you now have with the availability of the internet audience afforded you and teach through sharing with others like you did in your first paragraph? I'm sure you took the time to teach your children as they grew, why not continue the practice on forums.


Other than occasional posts like this one, I am reluctant to try and teach Finance, Common Sense & Logic to any internet audience. It's sad that such things are not taught regularly starting in grades 6 and continuing through 12. It would be nice to see high school graduates know how to balance a check book, have some knowledge of compound interest, understand finance charges, budgeting, basic economics (Econ 101 minus 50). Unfortunately many in the teaching profession are as clueless as their students.

That's your choice. To each his own.


Where you live is not always your choice. I could live farther out and pay up to 1/3 less rent than I do. This would mean 1 hour or more (that's on a good day) commutes for both me and my wife. This means more wear and tear on the vehicles, higher fuel costs and generally a waste of precious time. In more rural areas choices are limited for shopping thus you have higher prices for food and goods. Any money we would save would most likely be eaten away. Public transportation is not an option. I imagine Koan has made the best choice all things considered.

It used to be you could find ways around these problems. It's not easy anymore.

Lon;1353033 wrote: That's your choice. To each his own.


Choice? When the alternative is living on the street, is paying more than your preferred limit a choice?

One of the basic requirements of living is a roof over you head. As you are not in control of either the entry level cost of providing a roof over the head of you and your dependants or the ceiling to your available income, there is a given minimum to the percentage of your income that goes on housing.

Certainly, in the UK, that starting percentage is now over twenty for anyone without old money to ease the burden.

Just to give you an example, before I bought the flat I was in a bedsit (a single bedroom with shared shower and shared kitchen) that was costing me £520PCM. The starting wage for the average school-leaver is £10,000 - after tax maybe £800PCM. To even dream of keeping housing costs to 20% is laughable for those starting out in life.

I suppose you could say it's a choice but I have to live here to have custody of my daughter. So... not really a choice.

koan;1353080 wrote: I suppose you could say it's a choice but I have to live here to have custody of my daughter. So... not really a choice.


That's understandable.

Lon;1353057 wrote: Other than occasional posts like this one, I am reluctant to try and teach Finance, Common Sense & Logic to any internet audience. It's sad that such things are not taught regularly starting in grades 6 and continuing through 12. It would be nice to see high school graduates know how to balance a check book, have some knowledge of compound interest, understand finance charges, budgeting, basic economics (Econ 101 minus 50). Unfortunately many in the teaching profession are as clueless as their students.Schools don't teach consumption either, what's the difference?

Lon;1353057 wrote: Other than occasional posts like this one, I am reluctant to try and teach Finance, Common Sense & Logic to any internet audience. It's sad that such things are not taught regularly starting in grades 6 and continuing through 12. It would be nice to see high school graduates know how to balance a check book, have some knowledge of compound interest, understand finance charges, budgeting, basic economics (Econ 101 minus 50). Unfortunately many in the teaching profession are as clueless as their students.


Wouldn't need to be a detailed course if they can count all they need is the basics pointed out to them. You're right even teachers don't understand it, I know a business studies teachers who can't understand what the APR% on a car loan was telling him, car salesmen talk about flat rates to obscure the real cost and don't give the legally required APR or point out that the car belongs to the finance company until it's paid for. Given what he taught it seemed ovious that he should have understood, not onkly for car loans but for credit cards. It's not mortgage loans that cause problems so much as punitive rates on credit and store cards, you still get some at 29% just don'y take it in.

gmc;1353195 wrote: Wouldn't need to be a detailed course if they can count all they need is the basics pointed out to them. You're right even teachers don't understand it, I know a business studies teachers who can't understand what the APR% on a car loan was telling him, car salesmen talk about flat rates to obscure the real cost and don't give the legally required APR or point out that the car belongs to the finance company until it's paid for. Given what he taught it seemed ovious that he should have understood, not onkly for car loans but for credit cards. It's not mortgage loans that cause problems so much as punitive rates on credit and store cards, you still get some at 29% just don'y take it in.


The car ads that make me cringe are the ones that say $3,000 CASH BACK the retail ones that say BUY ONE AND THE SECOND ONE FREE----or how about NO PAYMENTS UNTIL OCTOBER 2012.

Lon;1353215 wrote: The car ads that make me cringe are the ones that say $3,000 CASH BACK the retail ones that say BUY ONE AND THE SECOND ONE FREE----or how about NO PAYMENTS UNTIL OCTOBER 2012.


Actually chrysler were doing a buy one get one free deal for their sebrings and 300c but still couldn't shift them. They really are pretty poor build. There's dealer near me that also has a citroen franchise, it's saying something when the build quality on a citroan is better.