Generation Wrecked 1667
Ryosen writes "Fortune magazine has an interesting article discussing how members of Generation X (those born between 1966 and 1975) have been damaged by the fall of the economy and the life-long ramifications of the dot.com boom-bust, stating 'No generation since the Depression has been set up for failure like this.' Particularly disturbing is the statement 'Worse yet, for some Gen Xers, their peak earning years are behind them. Buried in college and credit card debt, a lot of them won't be able to catch up as they approach their prime spending years.'
Are the best years of our lives truly behind us?"
As a representative of Gen X (Score:2, Informative)
9.11 baby boom a myth (Score:4, Informative)
Apparently it's all an urban legend.
Re:Catholics countries may have the last laugh (Score:1, Informative)
Re:Their 'peak' isn't here yet (Score:3, Informative)
M@
Re:Catholics countries may have the last laugh (Score:2, Informative)
They're at under replacement rate while we've just gone over 2.1 births/woman/lifetime.
Go secular humanism!
Please find a dictionary. (Score:1, Informative)
Generations and Circumstances (Score:2, Informative)
Written in 1997, "The Fourth Turning" stated that the U.S. was (then) in an "Unraveling" and would be entering a "Crisis" period around 2005.
It is a fascinating book, and I highly recommend it.
Re:Thank GOD I was born in 1976! (Score:3, Informative)
See their web site [fourthturning.com] for more.
Re:Over for you maybe. (Score:4, Informative)
What happens if he buys a house, spends that savings on a big down payment, and then 3 months down the road he gets laid off? If he can no longer make his house payment, he's out on the street, having lost his capital investment. If he's renting, on the other hand, he's not used that capital yet, and retains the flexibility to move to a cheaper place, as well.
Now, if he wants to start saving up separately from that 8 months' salary, then using that other saved amount to buy into a house, that would be a great idea. But it would be foolish for him to give up his position of security by using his major savings up and going into a position of debt if he doesn't have to.
Re:This ticks me off (Score:2, Informative)
What? [monster.com]
And a lot of people who might be able to take jobs in another geographic location can't because they're flat broke and can't afford to move
So you didn't save any money when you had a job? That is whose fault?
house != investment (Score:4, Informative)
However in the mean time, my monthly payment GOES somewhere (part to interest (which is TAX free!) and part to equity) AND my rent doesn't raise every year.
And if you aren't going to be in a house for 5 years, DO NOT BUY! I REPEAT, DO NOT BUY!
I have a fixed cost per month. Also, I have a town house well situated close to schools in a pretty good neighborhood. When I go to sell in a few years I will have no problems.
So lets see, instead of paying 1200 for a 1 bdroom apt, I pay 1000 for a 3 level town house.
Hmmmm, do the math. Never mind equity and investment... I get more space for less money. Plus my income keeps rising while my mortgage stays fixed. Sounds like a great deal to me!
Oh, and the reason why I am not paying extra money to bring down the principal: This is the starter home. In 4-5 years when the market drops I will be in a prime position to buy a fat lot of land. All the money that I could have put towards principal will instead be in a REAL investment vehicle (short term, we're talking about 5 years here) which I will then use towards downpayment of the house- getting me a teensy-weensy mortgage.
Re:Over for you maybe. (Score:2, Informative)
I've owned for three years. Only 17% of my payment currently goes towards principal. I put away more than 4x my principal each month in non-house-related accounts.
I really hate how the interest rates are the lowest they have been in at least a decade.
Interest rates are tied to inflation. Inflation causes the effect where after 10 years, you are earning 25% more, your house is worth 25% more, and you are making the same monthly payments. Inflation is very low. The entire own-your-home mythos is based around that. You aren't going to like your mortgage much if the economy tips over into deflation, and you're making constant payments based on lower income for a reduced-price house...
I really hate the five digit deduction I get on my Federal income tax.
You're getting that deduction because you're investing in your bank via interest payments. It's not related to owning a house, it's related to having house-related debt. Also, everywhere I've lived, the cost of renting versus the cost of owning was always very comparable after tax considerations, so the deduction isn't a gain, it's what makes it all a wash. [Amazing how markets work to arbitrage such things away!]
And I really hate the fact that even if I sell my house for exactly what I paid for it, I will still come out at least 15% ahead.
Err, well, you must live in a different world than me. If I sell the house for exactly what I paid for it, I would be +0 in terms of cashflow (no month-to-month savings versus renting - actually, right now renting is cheaper), +0 in terms of gains, -6% for the agent's commission, and -4% for staging and prep work. I'd be +2% because part of my monthly costs goes towards principal. That's -8% or so. [Keep in mind that your down-payment is simply a return of capital, not a gain of any sort.]
Of course, I own my home, I can do whatever I want, I've already got a 20% gain as a cushion, and I plan to stay for a couple more years. But I certainly wouldn't be buying right now if I had any choice in the matter.
A HOUSE IS NOT AN INVESTMENT! IT'S A PLACE TO LIVE!
Learn how to budget and do it early (Score:5, Informative)
In high school I got a job at a grocery store and also got a bank account. Now I had a little more spending power but by this time, I knew how to be conservative with my money and to keep a close eye on my accounts, using software to track my spending and keep track of checks I had written.
By the time I got a credit card, I knew well how to live within my means. I made sure to ALWAYS pay off the card in full each month unless it was an absolute emergency expenditure that I couldn't cover with one months pay. I also make sure not to have more than 2 credit cards and to try to never use more than one each month. I also make sure I can pay them in full each time unless its an extreme situation.
On top of that, I also set a "Paranoia level" on my Savings account. What that means is I choose an amount, in my case $5000 (started at $500 when I first got my bank account all those years ago) and I go VERY conservative on spending if I go below that until I've built it back up to above that level. So far that has saved me from every major disaster (car breaking down expensively, sudden big bill or need to buy something expensive like furniture) I've had in the 10 years I've had a bank account. It also reduces the need to use the credit card to cover sudden needs, as I do not like spending money I don't have at all.
Because of that, and driving a modest car ('95 Grand AM) and eeking out the most time I can from my computer (using a 5 year old Mac G3) rather than blowing it all on the latest and greatest every 6-12 months, I have managed to get a $120K home just this June and maintain over 5k in savings since then. I am going to try to raise that up to 10K soon as well as start cautiously getting into investing (maybe should have sooner but after the latest rounds of disasters in the financial world, glad I waited).
The main thing is to learn how to budget, keep a paranoia level of cash in the bank and don't spend money you don't have when you can avoid it (i.e. no credit card debt or loans unless necessary).
If you do that, you should be able to weather all but armageddon or the next great plague.
Re:Over for you maybe. (Score:2, Informative)
No way man. There has only been one year in which property value did not increase overall in the US and that was during the Great Depression.
Much safer than stocks. Population increases, land doesn't, it's not rocket science.
Re:Americans waste what they have got. (Score:2, Informative)
Over there, they are not allowed to work more than 40 hours a week (35 is usual). They serve beer in the cafeteria and spend about 3 months of of work on vacation. All things get done, eventually. They have great family and social lives.
When I recommended that the people scraping by leave the US, it's not because I don't want you here. It's completely because I think you'll be happier - both in the short and long run.
Re:US stats even worse (Score:5, Informative)
Nevermind that the social security tax rate has already gone up %700!
Assuming you're talking about just doubling your social security taxes (Rather than all taxes) then that would mean social security alone would be taking %30 of your income!
(Right now it takes %15. Though only half of that is reported on your paychecks.)
http://www.ssa.gov/OACT/COLA/taxRates.html
If a private pension plan were administered in this way the perpetrators would be in jail the money returned and everyone would be really angry.
And nobody would be joining the scheme-- its reputation would be ruined.
Yet why are people paying social security now? Cause they get shot by thugs with guns if they don't.
Aint it great to be the government? You can commit widespread fraud on the people and they don't have a choice-- they HAVE to pay!
THIS is what everyone is talking about when they say the government should take care of something-- they are talking about tyranny and oppression the government will take care of it by using lethal force to coerce compliance with whatever scheme it comes up with.
Liberals are just fascists who want someone else to hold the gun for them because it scares them.
The Myth of the Spoiled "Boomer" (Score:3, Informative)
But for every Gates, Jobs and McNealy, there are millions who never found a good niche.
Look at the following quote from the Fortune article for a blatent lie in this regard:
Oh really? Let's look at these graphs [geocities.com].Notice that age of first marriage of baby boomer females as given in http://aspe.hhs.gov/hsp/trends/change.pdf matches closely the peak cohort for 1980 as well as the peak in crude oil prices in constant (1996) dollars near 1980. Onset and drop-offs of these variables also match.
Also notice that mortgage rates, crucial for nesting and reproduction at first marriage, accurately match these same trends. Finally note the radically different way government policy affected WW II GI's seeking their first mortgages compared to the treatment of their children at the same phase of life. Those who were 30 in 1984 were subject to delayed marriages from a variety of factors, not the least of which was the 1970s "stagflation" under which early boomers and GI generation bosses applied mandated "wage and price controls" preferentially to wages but not to prices -- which hit those just entering the job market the hardest. That's when people started jumping jobs to get better pay, but even that wasn't enough given the explosion of prices in real estate, energy and interest rates toward the late 1970s.
You know "boomer" programmers born after 1950? I know quite a few and there aren't many who are looking any better than Gen-X'ers. Look around and see if they're really as good off compared to Gen-X programmers as you would think given the article in Fortune and the comments on "boomers" here at ./ -- then report here.
PS: I was born in 1954 and the only ways I feel even remotely more advantaged by my birth year over Gen-Xers are due to the fact that microprocessors may have been more "real" as a frontier opportunity than the Internet -- and herpes was merely incurable while AIDS kills you. However even that last advantage (Herpes vs AIDS) evaporates when you consider that the disco studs were far lower in number than disco whores. "She can wait if she wants... blame it a all on yourself cuz she's always a woman to me..." -- Billy Joel
Re:Some comments (Score:3, Informative)
Easy. Follow simple rules that have worked for me:
1) Never drive a car that is worth more than two months gross pay. Only drive affordable reliable cars-- the insurance is much lower the taxes are lower, and obviously the payments are lower. Early to mid 80s Toyotas run like champs and can be had for cheap.
2) DON'T BUY A HOUSE! Even when you factor in the tax savings, the costs of owning a house for most people do not make sense. It is not a wise investment for anyone who's being reasonably prudent with their money. Yes, a small apartment is chepaer. Not on a per-square feet basis, but people buy houses bigger than they need.
YES IF YOU INVEST THE DIFFERENCE you make a lot more money living in an apartment than buying a house. BTW- there are alternatives. You could buy 2 acres about 30 miles out of town for $10,000 and put a mobile home on it (you can build a house on it later)... and have a place to live that cost little and will see appreciation AND the tax advantages of owning where you live.
3) Get out of debt. Well, you shouldn't be in debt in the first place. First off, for most careers if you get a years worth of apprenticeship and a job right afterwards, you can be productive at an entry level without going to college. 8 years later you will have 8 years of experience and people your same age will only have four. But if you're in a profession where you have to go to college then work your way thru it. Don't go into debt. The best option is to work your way doing the same job you're training for.
Basically, don't spend money. If you are wise with your money, you may well be retired by the time you're 40. Otherwise, when are you going to retire? 65? Never?
I don't know your living situation but if you had a roomate and weren't able to make ends meet then you were spending too much money (by definition, actually.) Where was your money going?
Re:Numbers don't add up. (Score:2, Informative)
The other aspect of this is that if you want to "sustain the lifestyle" of someone making $100,000 you have to figure in that:
a) while making the $100,000 you we're paying taxes on the income (say 25%)
b) You we're saving $31,000 per year for retirement (that you no longer need to - $2,600 * 12)
So, $100K - 25K taxes - $31K saving = $44K
Net result is that you only need to spend less than half of $100K/year to maintain your lifestyle.
Do their calculation figure this in?
Re:Their 'peak' isn't here yet (Score:5, Informative)
Baby boomers are all the people currently in very high positions (VPs, and other execs). The baby boomers are starting to retire, so in the next five to ten years, we'll see a drastic increase in jobs and promotions in attempt to fill the void left by the them.
(1) I expect that the baby boomers retirements/deaths may open up some jobs, but that this will not significantly impact on Gen X earnings. Gaining additional marketable skills will.
(2) Baby boomer retirements will also have a negative effect in the following manner: They will live longer than prior generations of old people (better health care) and they will follow the established trend of voting more as they get older (old people just vote more).
The impact of this will be devastating, as the ratio of people employed per social security recipient drops to around 1.5 or 2.0. The addition of a prescription drug benefit for the elderly (who incidentally are the wealthiest people in the country -- ignore the B.S. about "income") will likely require benefit cuts or massive tax increases. Given the fact that the boomers are a massive group and that they will be voting disproportionately more than the rest of the population, and you can guess the result.
(3) Boomers are about to receive an enormous amount of money from their parents, the Depression and WWII crowd -- those folks knew how to save for hard times, and even in good times, they kept spending under control. As a result, a large number of people can be expected to have nice, high-paying jobs such as waitresses and caddies as the boomers piss away the "Greatest Generation's" (I hate that) money having a good time.
(4) Student debt is probably one of the biggest problems facing kids. My wife and I have a huge amount (law school), and if we throw that out, we're doing great. As it is, we're effectively living as well as factory workers. We made the choice, we're happy we did it, and we expect that in five years, we'll be debt-free and saving like fiends for our kids' college and for our retirements.
Nevertheless, this is what many boomers did: Go to school on loans, get out of school, declare bankruptcy, live happily ever after. Once they got done, the bankruptcy rules were changed to make student loans non-dischargeable in bankruptcy barring a "hardship" (which nobody ever can prove).
College costs are out of control, and there is a point (which I wonder whether we have crossed) where the time you lose paying college loans is more detrimental than the benefit of increased income. The lesson may be to avoid student loans altogether -- if you can't, don't go to college. I can see a day not too far off where that is a reasonable financial decision. Definitely consider state schools as opposed to private schools, even if the private school is objectively "better" statistically.
The quality of life implications for the financing problems with college education are huge -- it's not just about increasing earnings capacity, although from a naked economic perspective it is. There are collateral issues -- educated people are healthier, less likely to get into jail, less violent, etc., etc.
The costs of higher education (and healthcare) are largely driven by desires for lower class sizes (doctors to patients) and have a high percentage of the service costs made up of labor Neither of those industries has benefitted much from increased productivity resulting from application of technology to their businesses -- warm bodies are still needed for the primary, labor-intensive tasks. I don't know how to fix this. Bacta tanks? "Jacks" to allow uploading of subject matter to the nervous system? Where is Ray Kurzweil? What is he doing right now?
(5) The Fortune article mentioned a lot of scary things -- people not saving for retirement, but banking on Social Security being busted. Are they planning on dying young (one person in the article specifically mentioned her death wish as a financial planning tool).
People not paying off student loans and not saving for retirement. Where is their money going? Why is there such ignorance of financial issues? Why is there so much credit card debt?
People: Spend less money. Very few people ever earn their way out of financial trouble.
Here's a plan, sort of top-down. Start at one and try to work your way through. It's not perfect, but it's working pretty well for me:
1. Think about your finances, don't ignore them.
2. Buy less stuff. Stuff does not make you happy. Debt definitely makes you unhappy.
3. Get health insurance or a job that provides it. Most personal bankruptcies result from the use of credit cards to pay unexpected medical expenses. Be willing to take less money for a job that has health care coverage, even shitty coverage.
4. Try to get at least $10,000.00 in cash in a savings account. Save it as "crisis cash". Do not spend it unless there is a terrible emergency. Many people float along ok, but an unexpected expense (the water heater goes, or the car needs a new engine) screws up everything. Everybody needs crisis cash. Once you have it, pretend it doesn't exist. Think "break glass in case of emergency".
5. Pay off the credit cards. Then pay them off every month. Use only no-fee credit cards that give you something, like cash back or free gas (BP).
6. Pay off the car loans.
7. Do not buy anything else, except a house, that you cannot pay cash for. Avoid debt like you avoid syphilis.
8. Do not try to spend as much as possible. Just because a bank will lend you $200,000.00 for a house doesn't mean you should borrow that much. My wife and I "qualified" for a loan that was grossly more than we spent on our run-down, dumpy little house. In an area where the average 3BR house costs $150,000, we paid $72,500 for a livable house in a safe neighborhood. It isn't fancy, and it isn't as pretty as a new house in a new development, but it didn't take long for it to become "home" for us. We're proud of being frugal.
9. Never borrow money to buy a new car. It loses 20% of the value the instant it's off the lot. Pay cash for a used car. No cash? Guess you shouldn't be buying a car, or at least not an expensive one. As soon as you buy a car, you should be setting aside money to pay for the next one. That way, the interest works for you instead of against you.
10. Once the above steps are under control, start saving for retirement. Go for your 401(k) first to the extent that you can get matching funds. Max your Roth IRA next. Open and fund a 529 plan for your kids' college education. Save additional money for retirement.
The media can say our "generation" is going to hell in a handbasket, but you can take care of yourself. You aren't a statistical aggregate, you are a person, but you have to think for yourself, defer gratification, and take pride in being the cheapest person you feel comfortable being. I feel stupid if I buy a new CD for $15 when I see it later at the used CD store for $5. Why rip yourself off like that by being lazy?
I am sick (and tired) of people who cry about the future, but never think to sit down and try to deal with their financial planning. Every situation is different, and I am not fully along on the plan I outlined above, and my plan won't work for everybody. The point is that you need to plan, starting by prioritizing for basic needs:
1. Health insurance
2. Shelter
3. Food
4. Clothing
5. Transportation
6. Money for your kids in case you die before they are adults (term life)
7. Disability insurance
8. Retirement savings
9. Kids education
No self-respecting
guac-foo
Problem w/deflation (Score:3, Informative)
Okay, deflation happens. Groceries go down in price, but your salary goes down too. Let's say we get 25% deflation. Suddenly instead of clearing $3,000 a month you are clearing $2,000 a month. Uh oh, *BIG* problemo. Suddenly half your income is going to housing.
You default on the house because you can't make the payments. The bank now has a house that it lent you $140,000 to buy. But the house is now only worth $100,000. There's no way for the bank to make up that missing $40,000 other than to curtail its lending. So no more lending by the bank. So people cannot get bank loans to expand their businesses. So you can't get a bank loan to buy another house (even if you could didn't have the default on your credit report). So you get the anomoly of homeless people wandering the streets while houses sit empty.
That's what happened in the Great Depression. Farmers bought farm supplies and equipment at the inflated price. 9 months later, when they got their crops, they could only sell crops at the deflated price, and could not repay the loans used to buy the farm supplies and equipment. So they lost their farms to the bank. But the bank could not get back its money on the farms. So the banks ended up collapsing. So there was no longer any money to loan to farmers for them to buy seed and supplies for the next year. So production collapsed. It was a downward spiral that Herbert Hoover did nothing to end, saying "government intervention in the economy is wrong".
We are nowhere near that bad off today. But if housing prices go into the crapper and oil suddenly gets cheaper because we kick out Saddam and take all his oil for ourselves, we very well COULD enter a deflationary cycle -- and the consequences would be just as bad as in the Great Depression.
-E
Re:Consume on! Bring on the SUV's! Supersize mine! (Score:2, Informative)
I remember reading an article from a 1950s geology magazine. In it, a surveying geophysicist by the name of Dr. M. K. Hubbert predicted that US oil production would peak in the early 1970s. He was right; US oil production peaked in 1970, and has never risen since.
His study has now been applied to the rest of the world. That study was concluded last year, and their prediction was that world oil production would peak in 2002, never to rise again . That's right. That's this year. We'd better move our economy off oil pretty damn fast if we're going to survive. Conservation is more critical than you realize.
You can find Hubbert's study at the Hubbert Peak of Oil Production [hubbertpeak.com] website.