Yeah, I ran an income of $100k through a mortgage calculator and assuming no other huge debts you can afford $350k house with a 20k down. Even toning that down a bit you can supposedly afford a $300k house. As for people staying middle class, it really is hard. Like others said, 1 layoff or sick spouse and you can be hurt. Especially if you go from $80k family income to 40k. Especially since most $80k families spend $81k a year, consider our savings rate in America is negative. Americans Have Negative Savings Rate I have a friend making a decent salary (~$75k) and his wife does alright too. But with their 2nd child coming it'll only be his salary. Seems like it wouldn't be bad with a salary like that but he's been spending like they made $120k. Second mortgages on the house and the new cars. Now all that debt is going to obliterate his salary.
I agree that that's what the minimum requirement of being a middle class family is. But the middle class is a very large and nebulous description. Being able to afford a $30k Mercedes does not mean you're well off. And you can take that to be a poke at both sides. Lower-middle class families shouldn't front by buying one. And just because you drive a Mercedes shouldn't mean you're some rich snob looking down your noses at people. Middle and Upper Middle-class people can surely afford them too. I agree with all the above. And if the term is well-off for people in that range then so be it. Definitely not rich but no longer having to live paycheck to paycheck.
I think what most mortgage companies go by is the total payment including taxes and insurance be no more than 30 percent of your gross monthly income unless you have really good credit or you have a lot of money in the bank. It also depends on other debt payments you may have such as cars and student loans. 60K/12 months= 5k*.3= $1500 for mortage, taxes, and insurance. That would give you a 150-200K house based on a 10-20 percent down payment. Here is crazy piece of info to think about. According to real estate experts, for a real estate market to reach a point where it can not sustain itself anymore, the average selling price of a house has to be 7 times the median income for the area. So in the case of Austin where the median income is around 70K, the price would be almost a half million dollars.
Well, considering Californians aren't making that much more than Austinites and their median home price is $550,000 then I believe those experts.
Still doesn't make sense to me. If someone is making $50k and they spend 40-50k... well, let's keep it simple... let's say they spend $40k, that leaves them $10k. And then lets take someone making $200k and they spend 160-200k... keeping it simple and the ratios the same, that family saves $40k a year. What Invisible is saying is that even though the savings vs. earnings rate is the same, there is no way you can consider these two situations equal. Even if the family making 4 times as much money spends an equivalent 4 times as much. Taking this to the level of someone like Gates or Buffet and assuming they made $1 billion last year and spent twenty thousand (20,000) times as much as your average middle class person making $50k, their savings would also be 20,000 times as much... meaning $200 mil.
Not everyone saves etc etc....I've used loose examples....some people spend more than they have, some people spend less, some people save this percent some people save that percent. This isnt my point. Let me take the numbers out to get to exactly what I'm saying, so there can be less confusion. The problem comes in when people spend what they make, leading them to want to make more so that they can spend more. This is our societies trend. No matter how much you make, you always want more. If your making 50k you want more....If you make 300k you want more...Its human nature.. This is what is meant by the boat analogy.. If you make 50k now.. and in 6 years you make 200k, as time goes by you want more. 200k's not enough anymore in your mind. Why? Because you spend near that amount and want more.....
I don't disagree with that. Look at my post above with my link to American's negative savings rate. So it's not even that people spend as much as they make, but more. But the likelihood that someone making 200k spending all of their earnings is a lot less than someone making 80k. The person making 80k will spend a good portion of their salary on the basic necessities of life and then will overreach their ability and spend the rest on stuff they don't really need but would be nice, like maybe a Mercedes. The family making 200k will have plenty left over after taking care of the basics and would have to have no willpower to spend all that up.
I agree up to the point about not spending up the 200k.....I believe they do...You try to fit with the class above the one you are actually in. Excluding the top and bottom 10% of people...Of course the 200k wont be struggling as a 80k might....thats a giving...But it eventually creeps up to where you are spending the same percent of the 200k that the 80k person is spending of the 80k... Instead of a mercedes they may add on to their house/get a lambo/summer home/etc etc ..Once again this is all relative...But on the Norm this is the case...I'd show you the stats and case studies but its to late for that and I don't care that much....we can just agree to disagree if you doubt it..
What's a real trip is that even with the housing markets on both coasts, Florida included, being way overpriced, in a bubble similar to the one that popped in the '80's in Austin, the housing is underpriced in Austin compared to income, as you pointed out. Homeowners here are in pretty good shape. I read that recently in a national study. Wish I had a link, but it's out there. We may yet see a bubble in Austin again, but it's not here now. I think what everyone needs to remember is that for every family you see spending way above their income, there is one doing the opposite. You just notice the overspending ones. The people taking care of business are usually just bee-boppin' along, driving the car with 120,000 miles, and sockin' away for retirement and putting the kids through college, if they need the help. And some people buy Hondas instead of Acuras, not because they can't afford the nicer car, but because they'd rather do something else with the money. Looks can be deceiving. I remember my grandfather driving a Chrysler until it fell apart, then he'd buy one with a year on it to save money. The guy had the Federal deposit insurance maxed in two banks. You would never had known it to see him. I wish I was more like he was.
Of course the more you make the more you spend. But if you're saying that there is savings rate between low-income, middle-income, and high-income are the same then I welcome your stats. Everything I've ever read show that there is a huge discrepancy between the savings rate and it is a big problem.
Gotcha, I had the impression that one group is spending above their means while another is spending within it. Couldn't you then make another grouping with upper-middle class and upper class? I hope I won't turn out like that no matter what class I'm in....
I don't think i get what youre saying?.....There are groupings of upper middle class and upper class. It's real hard to go against human nature...But not impossible....I know if I have 5k in the bank all I'm thinking about is what i can buy after bills are paid....Be it tv's or whatever..
I thought you meant that the upper middle class and the middle class were the same when you said that "everyone is in the same boat". I misunderstood again. I guess my cheap parents rubbed off on me because I'd find ways to increase equity with 4 out the 5k. It doesn't mean I'll live cheap. I can make due without one less TV screen. The pleasures of life can be simple. And if I rise up, I and whoever's with me would probably travel instead of buying extravagant objects. As a marketer, I wonder what's your word for my type of consumer. Probably cheap.
