Where do they get all the money from?

[bleedingheart]

I work, my hubby works, but we live modestly and at times we find that our budget is tight and we are both professionals.

So I ask...where are people getting all the money to buy these big houses? The multiple cars, the video stuff, the multiple cellphones for parents as well as kids, the clothes...all the Stuff!

My husband and I recently drove over to a friend's house in a large subdivision (dropping off political stuff) and we saw a lot of new houses with 4 car garages...3 car garages were the average and the "poorer" folks had the dinky 2 car garages....
The houses were huge!!!

How do they do it?

Are they really all mortgaging on ARM's? Are they inheriting from parents?

[TlalocW]

1. You're the exception

You probably rein in your spending when times are tough, and you are smart with your money to begin with. These people are mortgaging their lives away (the pieces of their lives that don't belong to the credit card companies).

TlalocW

[bleedingheart]

5. we aren't perfect by far...but I recall when we bought our house

we were just starting out and I remember the realtors that tried to push us into building a huge house, but when I figured out what the mortgage with taxes would be I knew that we would have to postpone having children, because we wouldn't be able to swing that kind of mortgage on my hubby's or my salary alone.....

[TlalocW]

12. More proof

You actually took a hard look at when you could afford to have children - most people don't do that. I wouldn't worry about what you have - if you're happy who cares if other people have the shoddily-built McMansions and fancy toys. They'll have a few years of fun, but it will bite them in the end.

TlalocW

[bleedingheart]

15. My question is more out of curiousity...

I have a small home that overwhelms me at times so I am content....it is just that my hubby and I sit and wonder where all the money comes from for the lifestyles we see others leading.

We did find out that the local fire department asks for donations and the highest percentage of donations come from the less expensive housing areas...the people living in the large homes give very little...which says a lot.

[alcuno]

2. I recommend that you read the book...

"The Millionaire Next Door." I think that's the title. The author contends that the majority of wealth in this country is created by people who save. The wealthy lifestyle demands that you spend all that you earn. Great stories and a great read.

[htuttle]

3. They borrow it

Not just mortaging their houses, but getting in deep with credit cards, buying vehicles on payments, etc...

Lucky for me, I had lousy credit after college, so I had to learn how to live within my means. I have absolutely no debts. I like it. I like it a lot.

[Walt Starr]

4. The new trend is "Interest only payments"

Yep, I'm completely serious here. Had a builder suggest going down that road. It's an ARM where the payments for the first five years are INTEREST ONLY! You do not touch the principle on the loan for five years and after that, you then begin payments that include the principle. It's all on an adjustable rate, too.

The "logic" is that the value of the home will increase over the five year period and you'll be able to sell it for a profit and move on.

People are morans(sic).

[bleedingheart]

7. Do you really think that many are doing that? Geez that is scary..

[candy]

8. interest only for 5 years?

God Almighty,people are fools!

[guinivere]

9. Um...but...what?

That doesn't make a lick of sense to me. I'm no financial wizard though.

[Walt Starr]

11. It doesn't make sense to me, either

People ARE doing it, though.

The world has gone insane!

[theboss]

24. It makes perfect sense

See my post below.

[Stinky The Clown]

17. Japan had 100 year mortgages for a time

they may still have them ... :shrug:

Makes noooo sense to me ......

[theboss]

23. That's how I bought my condo

I don't see how it is moronic. It's either do that or buy the house five years from now when it is twice as expensive.

This is how it works. I am paying the interest on the loan now and paying a few thousand a year on the principal at my discretion. In ten years, it becomes a regular loan and I begin paying on the principal as well as the interest.

However, this is a super-heated housing market now. I bought the place a year ago and could sell it for a $50K profit today if I wanted. So I've built that much equity. I plan on selling the place before I need to pay on the principal anyway.

So, let's see, I have built $50K in euqity. I get to deduct all the interest on my taxes. And I have a bigger home for less a month than I was paying in rent last year.

How am I a moron?

[SouthernDem2004]

6. The way we do it....

I am a Police Officer and my wife makes about the same as I do. I worked alot of overtime in the begining. Needless to say we do not make alot of money. Once we finished college we lived rather modestly until we paid off our student loans and credit cards. That took about 5 years actually. During that time we saved what we could. With a good down payment we where able to get a rather nice home in an upper-middle class area. The payments were actually not that much more then rent. We have one car paid for and are paying on the other. We never pay on two cars at once. We do not use credit cards, ever. We have one Visa and one Amex for emergencies only like airfare and the like if someone dies or something. We are able to live rather well and spoil our kids.

Of course we did not have kids until we bought a home. Kids are a black hole for money and saving would have been hard. If you are already in a whole it is very difficult to dig out.


Peace

[bleedingheart]

10. Technically we could afford more but we have a severe budget

because of the nature of my husband's work, he has no pension, so we put an automatic 10% of our income into 401K's which have matching funds. Then we put money in our Roth IRA's, savings and the kid's 529 plan.

[SouthernDem2004]

13. Retirement...

Fortunately my wife's job has a retirement and so does mine. Not to mention my military retirement once I finish that. We also have IRAs. We are fortunate that we were able to get out of debt earlly. If we still had the bills we did then we would barely make it by. No easy answer I am afraid.

[ashmanonar]

14. way to go!

:thumbsup:

my uncle bill is like you, i'd say. saved money for years, got a modest house, paid it off, STILL has the 89 jeep he bought brand new and it STILL looks brand new.

[morgan2]

16. I get mine from internet porn

I'm quite a star.

[ashmanonar]

18. indeed!

where at? ;)

[kick-ass-bob]

19. They are in hock up to their eyeballs.

Everyone has to keep up. One bad month and it all comes crashing down...

[HughBeaumont]

20. It's called "Display".

I don't know about them, but even if we were collectively making 100-150k/year, a McMansion is still not good value, and combined with an enormous PCV or two, you're looking at being in debt the rest of your days for a few years of looking beautiful.

Sort of along the lines of following the administration they worship.

[SpaceCatMeetsMars]

21. What's kind of funny too, is how people end up using all that space

They think they have to have a family room plus a TV/den plus a formal living room plus a formal dining room and so on. Then they end up having the un-put-away laundry and all kinds of other junk filling up all these different rooms and everybody just congregates in the kitchen, like always.

It seems like the more room you have, the more junk you buy and the more disorganized you get. I would not want that for-show lifestyle with all that debt -- it's like a big treadmill.

It seems like people think they just HAVE to have a certain way of living and don't consider any different ways.

[newportdadde]

22. There are a lot of people out there who still make a lot of money...

for instance my buddy is an example of those out there still make a lot of cash, he makes more then me in the same company and his wife makes something like 75k at a financial company as a manager.. so you have a 33 and 28 year old couple with no kids tapping 135k or so.... D-A-M-N. I could easily pay off my modest house in a year with that inflow.

Thats where a lot of these homes, like theres(almost 300k) are coming from. And they are doing it with Interest only ARMS. Or the nice "no money down" method. You borrow 80% from a bank via regular loan, then borrow the other 20% by means of a home equity line of credit... so you have nothing in the house.

He can't figure out for the life of him how I make it on less then his salary with a young child. The reason is that we are very thrifty, very careful. We have two paid for cars. My wife is a stay at home mom so although we dont have her income we also don't spend as much on eating out and convience food etc, she is also a GREAT bargain shopper.

In addition your probably like us and very good savers.

Also don't equate big home, gadgets and cars with net worth or hardwork. They could all be maxed to the hilt on credit cards and couldn't survive even a month with one of them taking a job loss. They may also and this happens a lot INHERITED money... I've seen so many times in life someone with a huge house and thinkg 'damn they must work hard' only to find out that they got 200k from Dad dieing etc.

[minerva50]

27. There is a lot of inherited wealth around.

Perhaps more than you might realize. We have eight kids in our family, so anything my folks might leave will not really be noticable, but the estate might be substancial if divided fewer ways. My parents were never big earners, an engineer and a teacher, but they lived frugally, saved what they could, and the home they bought in 1955 for $14,000 appreciated greatly. There are a lot of people around of their generation who accumulated much, much more.

[loudestchick]

25. I ask this alllll the time! What kind of jobs do these people have?

300k home, 2 monster SUVs, 3 kids in parochial school, stay-at-home mom. I see these families all around me. I don't get it. It must be inherited money. I do know one family that used a moderate inheritance to buy a larger house and a BIG lot.

[Serial Mom]

26. Some get it from

Daddy's business that has been avoiding taxes for so long and voting repuke OR just from daddy, who gave kid college education, big wedding and money for house

OR

Some get the money from inheritance, whose parents had purchased big life insurance policies (our realtor mentioned this to us as to why so many BIG homes)

BUT

I believe a lot have jobs that overpay, are in debt up to their ears, and one life crisis could change their way of life suddenly.


When my hubby & I drive around, I am shocked at the size of the houses, how many are in the community now selling/appraised at over 1/2 million! Where do they WORK?!?!? Hubby just got job last week after 18 months without one but at 1/2 the salary he had been earning.

[earth mom]

28. I'm from California originally

and housing prices there have more than doubled in the past few years. We're talking over half a million bucks for little rinky dink tract homes! We moved to Oregon before the price spike and now we are seeing lots of Californians moving here with loads of cash, who are buying up all the McMansions around here that are being built just for them no doubt. Since we know what this area was like before the McMansions were built, we know for sure most of the people around here don't make the kind of money to buy those type of homes-we for sure can not. The good news is that this has had a ripple effect and has caused existing homes here to appreciate. I'm hoping our house has gone up too....though since it needs work it's probably not enough to retire on-LOL!