Friday, April 27, 2007

Living in America at Twenty-Seven

As the title of this article suggests, I am currently twenty-seven years old and American born. I am probably a statistics person’s wet dream for someone in this age range: recently engaged and looking to get married next year, shopping for a house, doing a little bit above average in my career but not setting the world on fire (which bothers me more than it probably should).

Many of my friends are in similar situations, looking for houses and getting married (or already did a few years before). I look at them and wonder how the hell they are getting by. Housing prices are totally out of control (even in the current “busted bubble” housing market), wedding prices are nuts (unless you want to have a reception at a fire hall), New Jersey taxes are horrid (for those in other states it is 2.5% for every dollar your house is worth – so for a $200,000 dollar home – taxes are about $5,000). But does it stop there?
You need to keep that capitalist machine going: paying off that $100,000 school loan, buying new TVs that blow out in 5 years, appliances, iPods, baby cribs, diapers…

How is that credit card feeling? You probably don’t lose too much sleep over it. You have managed to get your payments down to a reasonable number every month (while your dept continues to grow at 24%). That debt keeps growing and now the job that you planned at staying for only 2 years has become close to 10 because you can’t afford to take a risk. Is there anything wrong with that? Not all at, but doesn’t it bother you just a little bit that the choice hasn’t become totally yours?

A friend of mine (who isn’t known for his wisdom with money) said something brilliant to me a few years ago: “America’s economy is designed to put you in debt, it WANTS you in debt.” I have always been brought up to save, but it is become harder and the baby bomb hasn’t even hit my bank account yet. The conventional wisdom says you should put 10% in savings and no more than 28% on your mortgage that leaves you free to send the rest of your salary on stuff… WRONG.

First if you are in the process of saving up for a house (and let’s say it is a modest one) how long is it going to take you to save up 50,000 dollars for the 20% down payment? I am guessing that 10% just isn’t going to cut it. Oh don’t want to put 20% down, ok well now you get to pay PMI or get a second loan to cover the 20%, but don’t forget closing costs which will probably be in the 8,000 range (do you even want to discuss furnishing or minor repairs to the new place?). Now let’s say that you bought a house the last 2 years; I am going to assume you got a conventional 30 year and hope your didn’t go for some sketchy ARM loan, how much is your monthly payment? I am betting it is probably more than 28%. Oh any how much debt do you have going into your housing situation?

My point is that your freedom, your ability to make decisions that will better your spirit is being limited by locking you into the economic system and before you ask, I don’t know what the solution is. People have been saying it all started to go to hell during Reagan era, but it start going bad before then (want a good snap shot of the dissention of the 70’s read “ Hunter S. Thompson’s: Fear and Loathing on the Campaign Trail”). Ever think that all this manageable debt we willingly strap ourselves down to is a means of distracting ourselves? Why worry about what is going on with our government and the world when you can barely pay the rent? What would society be like if we spend our free mental cycles on actual issues instead of subscribing to escapist thought patterns (how many home runs did Barry Bonds hit last year?).

I am going to make this long article a lot short… stop spending money, live below your means, and focus on saving your money instead of getting rich quick schemes and maybe we all can make the world a better place.

Think these guys are wondering what A-Rod is hitting this year?