How many months/years of gross income?
01-13-2008, 10:41 AM
#21
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Originally Posted by CKit,Jan 13 2008, 02:35 PM
You mean 1/2, right? If people spent twice their income on their house....
I'm getting ready to buy a house 2.5x my income (at most, hopefully it will be more like 2.2x); I literally don't think there are any houses here for just 2x my income.
01-13-2008, 10:45 AM
#22
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Originally Posted by triman54,Jan 13 2008, 02:36 PM
If you have to buy a car by financing it, then you are spending too much.
01-13-2008, 10:45 AM
#23
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Originally Posted by Chris Stack,Jan 13 2008, 11:38 AM
I honestly don't worry about people who might read this thread. Maybe I'm full of it, but in my mind, there's a distinction between someone spending $35k on a new sports car, making $50k or $60k a year, and eating cup 'o noodles to support their habit, and someone making $50k buying a 3-series and making sure it matches their Coach bag and the Manolos and going to the trendy clubs every night.
I spend more money on my car than most of my peers (who drive new Civics or 3s or Jettas or whatever), but I look at my car spending as car + hobby in my monthly budget; and that equation means I'm generally spending less than most on those two items combined.
I dunno, for some reason I think there is a minor amount of nobility in living like a bit of a bum to support your hobby, but it's crap to live that way to try and fit in or project a certain image.
It's an argument my wife and I have almost every month, when she writes the two car payment checks (out of the joint account), and complains that mine is $60 more than hers....and then I remind her about the $300 worth of clothes, the $180 worth of haircut, the $75 spent on Crate and Barrel knick-knacks...and point out that all I bought that month was gas and lunch. I spend more than I should, probably, on my car. But I also spend a lot less on stuff like clothes and clubs than almost everyone else I know.
I spend more money on my car than most of my peers (who drive new Civics or 3s or Jettas or whatever), but I look at my car spending as car + hobby in my monthly budget; and that equation means I'm generally spending less than most on those two items combined.
I dunno, for some reason I think there is a minor amount of nobility in living like a bit of a bum to support your hobby, but it's crap to live that way to try and fit in or project a certain image.
It's an argument my wife and I have almost every month, when she writes the two car payment checks (out of the joint account), and complains that mine is $60 more than hers....and then I remind her about the $300 worth of clothes, the $180 worth of haircut, the $75 spent on Crate and Barrel knick-knacks...and point out that all I bought that month was gas and lunch. I spend more than I should, probably, on my car. But I also spend a lot less on stuff like clothes and clubs than almost everyone else I know.
You are doing the same thing I was doing several years ago and it's completely justifiable. I didn't go out and spend $50-100/night on clubbing, I didn't eat out at fancy steak houses all the time. I didn't buy a bunch of crap for the apartment nor did I spend a ton of money on clothes and other assorted stuff.
Your response to your wife is spot on. I'm buying my new Corvette and my wife is totally cool with it because she knows how important it is to me. Is it a sterling financial decision? Hell no, it would be better to put that money towards retirement. But who would be the sucker when I die early at 50 (or whatever) and wish I had had more fun earlier in life? It's all a balance.
01-13-2008, 10:47 AM
#24
Originally Posted by QUIKAG,Jan 13 2008, 11:40 AM
No. I meant what I said which is a home purchase being roughly double your annual household income. If you make $100k/year, you could comfortably afford to buy a $200k house and take out a mortgage.
In the 80s, the mortgage rate was >15%!!!!
And it assumes your earning power is constant for 15-30 years.
01-13-2008, 10:50 AM
#25
Thread Starter
Originally Posted by CKit,Jan 13 2008, 11:47 AM
C'mon, that is dependent on current mortgage rates.
In the 80s, the mortgage rate was >15%!!!!
And it assumes your earning power is constant for 15-30 years.
In the 80s, the mortgage rate was >15%!!!!
And it assumes your earning power is constant for 15-30 years.
Future earnings power should be irrelevant in a home purchase because it is not guaranteed. To be making a $100k household income and buying a $400k house because you 'think' you'll be making $200k in a few years is crazy.
01-13-2008, 10:50 AM
#26
I still think it's better estimated by the amount you spend amortized over the length of ownership. That way it is more equivalent as an opportunity cost to eating out and clubbing.
If you talk about "cost up front" of a car, you'd have to say, "well, my 7 year dining costs are xxx...." But monthly is easier to digest.
If you talk about "cost up front" of a car, you'd have to say, "well, my 7 year dining costs are xxx...." But monthly is easier to digest.
01-13-2008, 10:53 AM
#27
Originally Posted by QUIKAG,Jan 13 2008, 11:50 AM
Future earnings power should be irrelevant in a home purchase because it is not guaranteed. To be making a $100k household income and buying a $400k house because you 'think' you'll be making $200k in a few years is crazy.
There are people with $100k salaries that get laid off. They didn't budget for that. Nothing is guaranteed. You don't sign a 15 year contract for work.
So to say the flipside is crazy... is crazy.
ace123 can pretty much guarantee that his wife will be making $200k+ within 10 years...
01-13-2008, 11:01 AM
#28
Thread Starter
Originally Posted by CKit,Jan 13 2008, 11:53 AM
I don't think so at all.
There are people with $100k salaries that get laid off. They didn't budget for that. Nothing is guaranteed. You don't sign a 15 year contract for work.
So to say the flipside is crazy... is crazy.
ace123 can pretty much guarantee that his wife will be making $200k+ within 10 years...
There are people with $100k salaries that get laid off. They didn't budget for that. Nothing is guaranteed. You don't sign a 15 year contract for work.
So to say the flipside is crazy... is crazy.
ace123 can pretty much guarantee that his wife will be making $200k+ within 10 years...
My wife and I bought our house two years ago. It was a comfortable purchase at the time. I got a new job last year and am making dramatically more, so we could theoretically move into a much more expensive house. But, why not live here for a while, save up a bunch of money, and then get that really nice house in 5 years and practically have the option of paying cash for it? I think that's a bit more wise than buying the big house now and hoping my earnings continues to be as strong or stronger in the coming years, no?
01-13-2008, 11:03 AM
#29
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dude, I find that there is a huge bias towards paying cash for things on this forum. Fact is, it is always situation-dependent and there aren't any fixed numbers that work in all situations. For example:
I finished my MBA in mid 2006, and my wife finished law school and passed the bar exam in 2006 late 2006. We went from living on school loans to making very good money overnight, yet, we had no cash on hand (literally). Now, does not having cash on hand mean I'm an idiot if I finance a car? Does it mean I can't afford a car? Does it mean I can't spend more than $100,000 on a house? No and No and No.
What people miss on these boards is that financing is an expense. What you're getting in return for that expense is instant gratification. If I'm willing to shell out a few bucks a month in order to finance a car, then I don't think it is anyone's place to tell me I'm wrong anymore than it is their place to tell me I shouldn't spend money on coffee every morning or $15 a week on car washes. FWIW, I wouldn't pay cash for a car even if I had it sitting around (which I never do, because I prefer to keep my money working harder for me than it does when sitting in a money market account).
In regards to the original question, I think QUIKAG answered his own question when he said it wasn't a linear scale...add that to CKit's "it depends on your expected earning curve" and you have the answer: it depends.
I finished my MBA in mid 2006, and my wife finished law school and passed the bar exam in 2006 late 2006. We went from living on school loans to making very good money overnight, yet, we had no cash on hand (literally). Now, does not having cash on hand mean I'm an idiot if I finance a car? Does it mean I can't afford a car? Does it mean I can't spend more than $100,000 on a house? No and No and No.
What people miss on these boards is that financing is an expense. What you're getting in return for that expense is instant gratification. If I'm willing to shell out a few bucks a month in order to finance a car, then I don't think it is anyone's place to tell me I'm wrong anymore than it is their place to tell me I shouldn't spend money on coffee every morning or $15 a week on car washes. FWIW, I wouldn't pay cash for a car even if I had it sitting around (which I never do, because I prefer to keep my money working harder for me than it does when sitting in a money market account).
In regards to the original question, I think QUIKAG answered his own question when he said it wasn't a linear scale...add that to CKit's "it depends on your expected earning curve" and you have the answer: it depends.