Here it comes, the march of the "it takes $10000000./year to barely live a middle class lifestyle in San Francisco".
Can someone explain to me how a teacher making $30k a year is saving two cents let alone 20% of their salary? No matter where they live, they are living paycheck to paycheck, and probably working a second job. Combine that with the fact that teacher salaries rise at the same pace as a turtle with two broken legs, walks, it's more like about fifteen years or more before they could even qualify for a mortgage, and that's if the parents lend them the down payment.
Add in Journalism to the list of jobs where you won't see anyone buying a house very soon. I've been working for local news broadcasting stations for five years now and I can't even envision owning a home until I'm maybe in my late 30's. And that's a big maybe.
I want to know where this idea comes from. My brother, a software engineer, earns $175,000 annually, but with a wife and two small children, college loans, medical costs, and a $3000/month rent for a modest 2-bedroom apartment, home ownership is still 5 years or more away - and he graduated in 2008.
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He's paying too much for rent. Tell him to move to someplace less expensive.
In addition to the factors listed below, this totally ignores location. A "rich" tech grad in Silicon Valley isn't buying a house anytime soon. An accountant in Tennesee may be able to find a cheap starter house quite quickly.
Not to say that early childhood head isn't tough financially no matter where you go, which is sad for our kids.
Not to say that early childhood head isn't tough financially no matter where you go, which is sad for our kids.
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The reason why the pastors and youth ministry workers can buy so easily is because of double dipping. Their housing allowance is not taxable by the IRS plus they can deduct the mortgage costs.
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"a savings rate of 20% ..." I just stopped reading. Do the authors really believe that every graduate, whether they make $30,000 a year or $70,000 is going to save that much right out of college? With student loans? Living in cities like NY, SF? Is this article really supposed to provide guidance to which degree a student should pick? Do 17 and 18 year olds pick their professions based on how quickly they will be able to own a home? Should that be the most important factor in choosing a profession?
I know kids are different than they were 50 years ago. However, I have several younger friends and relatives with college age kids who wouldn't even bother to read this article.
I know kids are different than they were 50 years ago. However, I have several younger friends and relatives with college age kids who wouldn't even bother to read this article.
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Why would a doctor buy a home in school or soon after graduating? Have you ever heard of match day? I'm sure engineers are bringing home bank but there is such a thing as geographic flexibility. This isn't a very good metric.
7
As it should be. Those who worked the hardest earn the most, and any engineering degree from a reputable university is no walk in the park. You don't make money with the fuzzy degrees at the low end of the university scales.
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There are fuzzy degrees, but no fuzzy subjects. Engineering isn't intrinsically harder than Child Development, and it's almost sexist to suggest that. The financial reward is not due to hard work, but to the fact that some subjects are more lucrative.
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@John Fox: who are you kidding? ANYONE can go into Child Development or Education -- they take any warm body. You need to actually have math and science courses to even contemplate applying to an Engineering program.
Actually that's the dividing line: math and science, and maybe really just advanced math (algebra, calculus, etc.). Most Americans barely have 10th grade competency in math (I include myself, a "D" student in math in high school).
I was quite aware, even 40+ years ago, that my inability to do the slightest bit of math prevented me from entering about 70% of all the college programs out there -- among them, the most lucrative.
Actually that's the dividing line: math and science, and maybe really just advanced math (algebra, calculus, etc.). Most Americans barely have 10th grade competency in math (I include myself, a "D" student in math in high school).
I was quite aware, even 40+ years ago, that my inability to do the slightest bit of math prevented me from entering about 70% of all the college programs out there -- among them, the most lucrative.
5
While I grant you that more students can qualify for teaching degrees than STEM degrees, like in any field there are incredibly gifted practitioners including those who are early childhood educators. For the record I've also met engineers who couldn't craft a compelling sentence to save their life and I find many to be social misfits. Successs is the product of many attributes not just quantitative horsepower.
6
Do you have a link to the article? I can't find it on their website.
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Bless the Time's heart, $250,000 "starter" home in just a few years.
Who exactly are these people?
Trust funders?
In danger of being pedestrian, this simply does not apply to "average Americans". It just doesn't work that easy. Loan repayment takes A LOT of after tax income. Unlike real estate developers, the tax code is not chock full of deductions for the rest of us. Many positions are well paying, but require mobility and purchasing a home is very impractical.
Before being declared a Bolshevik or just a whiner, I have a great career and would take responsibility for the same loans almost all of which I have repaid.
It simply is harder for those who are not connected by wealth or status to achieve home ownership. While this has been grudgingly acknowledged by a few "elites", the trend is for politicians to blame people for being lazy welfare cheats and then cram tax cuts down throats of the wealthy.
Class war indeed.
Who exactly are these people?
Trust funders?
In danger of being pedestrian, this simply does not apply to "average Americans". It just doesn't work that easy. Loan repayment takes A LOT of after tax income. Unlike real estate developers, the tax code is not chock full of deductions for the rest of us. Many positions are well paying, but require mobility and purchasing a home is very impractical.
Before being declared a Bolshevik or just a whiner, I have a great career and would take responsibility for the same loans almost all of which I have repaid.
It simply is harder for those who are not connected by wealth or status to achieve home ownership. While this has been grudgingly acknowledged by a few "elites", the trend is for politicians to blame people for being lazy welfare cheats and then cram tax cuts down throats of the wealthy.
Class war indeed.
12
Not every career requires constant moving about. I know people in the medical field, as well as engineering and computers, who after graduating college....picked where they wished to live and that was that. They all own homes. Medical people have unusually long educations and high debts, so they buy at a later age -- but are so much wealthier than most Americans, they get to buy luxury homes from the get-go. (I notice the examples do not use any physicians, but instead "nurse practitioners" who earn less than half as much as an entry level doctor.)
My daughter and her husband are computer systems engineers; they attended and graduated from the same college program and both got superb jobs at big corporation right out of school -- indeed, were recruited BEFORE graduation -- since they live in the Midwest, they were able to buy a house immediately. That was 4 years ago. They are now looking to "move up" to a larger, more expensive home.
I should add: $250,000 won't buy the cheapest shack or tiniest condo in San Francisco, Boston or NYC -- but in the Midwest or South, it will buy you a moderately upscale house in a nice suburb with good schools. It's a pretty useless metric, because in the big blue coastal cities, there is virtually no housing anymore under about $400,000 and in a few places, nothing even at that price.
My daughter and her husband are computer systems engineers; they attended and graduated from the same college program and both got superb jobs at big corporation right out of school -- indeed, were recruited BEFORE graduation -- since they live in the Midwest, they were able to buy a house immediately. That was 4 years ago. They are now looking to "move up" to a larger, more expensive home.
I should add: $250,000 won't buy the cheapest shack or tiniest condo in San Francisco, Boston or NYC -- but in the Midwest or South, it will buy you a moderately upscale house in a nice suburb with good schools. It's a pretty useless metric, because in the big blue coastal cities, there is virtually no housing anymore under about $400,000 and in a few places, nothing even at that price.
3
Reminds me of an old "joke":
A Pre-Med graduate asks - "Which anatomical structures are involved?"
An Engineering graduate asks - "How can we most efficiently solve this problem?"
A Social Science graduate asks - "Would you like fries with that?"
A Pre-Med graduate asks - "Which anatomical structures are involved?"
An Engineering graduate asks - "How can we most efficiently solve this problem?"
A Social Science graduate asks - "Would you like fries with that?"
13
Savings, especially into tax advantaged retirement accounts, is the highest priority for anyone seeking meaningful household financial security.
Living cheaply while pouring money into these accounts is far superior to rushing out to buy a house as soon as one can. It is alarming that Mr. Kolomatsky doesn't understand this basic point. But, given the savings rates of most Americans, it shouldn't be surprising.
Living cheaply while pouring money into these accounts is far superior to rushing out to buy a house as soon as one can. It is alarming that Mr. Kolomatsky doesn't understand this basic point. But, given the savings rates of most Americans, it shouldn't be surprising.
7
That may have been true once up on a time, but thanks to OBAMA...interest rates on such accounts are now at statistical zero. I have several IRAs to which I contributed over the past 35 years, and they are earning 0.1% interest. That is not a typo. I've talked to my banks, and have been told the last 4-5 years that my ONLY option was the stock market or annuities, neither of which I consider safe nor practical.
I am all in favor of savings, but the tax advantages of IRAs was that you did not pay taxes on the INTEREST over your working lifetime, so the money grew tax free until retirement. Your money cannot grow whatsoever with an interest rate of 0.1% -- yet if you put money in an IRA today, you are STILL taxed on it at retirement. It's a losing proposition.
I am all in favor of savings, but the tax advantages of IRAs was that you did not pay taxes on the INTEREST over your working lifetime, so the money grew tax free until retirement. Your money cannot grow whatsoever with an interest rate of 0.1% -- yet if you put money in an IRA today, you are STILL taxed on it at retirement. It's a losing proposition.
1
Two words: Bond ladders.
Someone working ifor <$31,000/year is in no way going to be able to save enough to purchase a home in 8 years: unless: they live rent free with parents, have absolutely no other debts, never use a penny on unnecessary expenses, and don't buy a newish car. And I don't think that saving for 8.1 years is a hardship - - I just question the conclusion. Of course someone earning $31,000 in New Jersey could buy a home in, say, Detroit, but that isn;t going to help them.
11
I agree; at the low end, you are just surviving and if you live frugally, paying your bills -- the idea that you could earn $50,000 (20% down on a $250,000 home) is laughable. That would take you 30 years, if you could ever do it -- not 8 years. And it would take living like a monk -- no vacations, no eating out, no cable TV, no new cars, etc. For 30 years.
However: it varies across the country. I live in the Rustbelt (not Detroit) and you can buy a halfway decent house here for $65,000 still -- 3 years ago, you could have bought that home for $35,000 -- which puts it well within range for a $31,000 social worker.
Indeed, I have many such neighbors here -- social workers, day care workers, home health aides, musicians, artists, etc. -- because it's a halfway decent neighborhood with an easy commute of downtown, yet the housing costs are very modest.
On the other hand: in the big blue coastal cities, a worker earning $31,000 is locked out of the housing market for all eternity. Their only hope is either winning the Lotto, or inheriting a huge sum when their parents die.
However: it varies across the country. I live in the Rustbelt (not Detroit) and you can buy a halfway decent house here for $65,000 still -- 3 years ago, you could have bought that home for $35,000 -- which puts it well within range for a $31,000 social worker.
Indeed, I have many such neighbors here -- social workers, day care workers, home health aides, musicians, artists, etc. -- because it's a halfway decent neighborhood with an easy commute of downtown, yet the housing costs are very modest.
On the other hand: in the big blue coastal cities, a worker earning $31,000 is locked out of the housing market for all eternity. Their only hope is either winning the Lotto, or inheriting a huge sum when their parents die.
This is hilarious. They forgot about student loans (reportedly students graduating in 2016 had an average of $37K in debt) and the fact that the intersection of places with jobs that pay this well and have houses available for $250K is quite small.
I graduated with my Ph.D. in Electrical Engineering 6 years ago. My wife and I moved across the country for my job. It took us nearly 2.5 years to pay off $60K in student loans and credit card debt ($50K/$10K split) and another 2.5 years to save enough for a down payment on a house (fortunately, we do live in an area with cheap housing). As far as I can tell, we have been quite fortunate compared to many others.
I graduated with my Ph.D. in Electrical Engineering 6 years ago. My wife and I moved across the country for my job. It took us nearly 2.5 years to pay off $60K in student loans and credit card debt ($50K/$10K split) and another 2.5 years to save enough for a down payment on a house (fortunately, we do live in an area with cheap housing). As far as I can tell, we have been quite fortunate compared to many others.
21
Yes, totally agree the article is completely and utterly tone deaf about student loans.
9
They didn't "forget" about student loans. They didn't actually do anything. All they did is 50,000 / (.2 * pre-tax starting salary).
Is this an advertisement or an actual real article published by the NY Times? I would have thought it might actually have some interesting thoughts about geographical location etc. For example, most computer engineers will live in a much higher COL area than, say, petroleum engineers. Nope... just a mindless formula.
Is this an advertisement or an actual real article published by the NY Times? I would have thought it might actually have some interesting thoughts about geographical location etc. For example, most computer engineers will live in a much higher COL area than, say, petroleum engineers. Nope... just a mindless formula.
3
I agree, but Nick -- you make the point that a person with a PhD in Engineering can find a good job in an affordable housing market like Buffalo.
If you moved instead to Seattle or San Francisco or Boston or NYC....you might be earning 50% more money, but you'd be living in a SMALL apartment and struggling to pay for even that. You be locked out of homeownership forever, short of a Lotto win or big inheritance.
If you moved instead to Seattle or San Francisco or Boston or NYC....you might be earning 50% more money, but you'd be living in a SMALL apartment and struggling to pay for even that. You be locked out of homeownership forever, short of a Lotto win or big inheritance.
$250,000 starter house? 20% savings rate...while repaying college loan(s)? I wonder.
12
Yes, I hate the naivete and "advice" in such columns. Earn even $100K and you have to save 20% for a house...also put 10% into retirement savings....also save up 6 months of full salary to cover emergencies...also pay off all credit card balances each month...also pay off $100K in college loans...also have a decent, safe car to drive (not new, just decent)...also save up for a wedding or baby by your early 30s....any brainiacs ever add any of that up? It ends up being pretty close to 100% of your paycheck after taxes, leaving you NOTHING to live on in the present -- unless you are living in your parents basement -- and forget about vacations or even the slightest bit of fun....FOREVER.
Oh and in a booming, runaway housing market, which is the case in much of the country (certainly the most desirable big blue coastal cities)....in the years you "save" 20% of your income for a house....the house itself will go up 25-30% each year and sometimes MORE....so it's an endless cycle, like the Red Queen in "Through The Looking Glass" who tells Alice, "it takes running in place as fast as you can, just to stay where you are! (let alone go anywhere else)"!!!
Oh and in a booming, runaway housing market, which is the case in much of the country (certainly the most desirable big blue coastal cities)....in the years you "save" 20% of your income for a house....the house itself will go up 25-30% each year and sometimes MORE....so it's an endless cycle, like the Red Queen in "Through The Looking Glass" who tells Alice, "it takes running in place as fast as you can, just to stay where you are! (let alone go anywhere else)"!!!
2