How do people afford...

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I’m a mortgage underwriter and see a ton of broke rich people. We give them loans anyways. They just gotta keep running in that golden hampster wheel.

This makes me feel a bit better. Can you give some details into this observation?

Why does it make you feel better? If they buy a $2m house and pay it off after 30 years, at least they will have $2m which is a lot more than most Americans will have.

Except most that are "on the hamster wheel" don't actually pay off the house, they keep refinancing over time, often taking out money each time. So that only works if you actually pay off the mortgage.

+1. Our big law partner friend and his SAH wife are very honest about being bad with money. They openly state that they “have no idea where it all goes” and if the partner lost his job they would have to “put a for sale sign in their front yard” the next day. We make less than half what they do and have at least double the NW.

You believe everything people tell you, eh? No one would have any idea how much I actually have because I live more simply and frugally than many do, although still nicely enough.

I don't believe you.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I’m a mortgage underwriter and see a ton of broke rich people. We give them loans anyways. They just gotta keep running in that golden hampster wheel.

This makes me feel a bit better. Can you give some details into this observation?

Why does it make you feel better? If they buy a $2m house and pay it off after 30 years, at least they will have $2m which is a lot more than most Americans will have.

Except most that are "on the hamster wheel" don't actually pay off the house, they keep refinancing over time, often taking out money each time. So that only works if you actually pay off the mortgage.

+1. Our big law partner friend and his SAH wife are very honest about being bad with money. They openly state that they “have no idea where it all goes” and if the partner lost his job they would have to “put a for sale sign in their front yard” the next day. We make less than half what they do and have at least double the NW.

You believe everything people tell you, eh? No one would have any idea how much I actually have because I live more simply and frugally than many do, although still nicely enough.

NP: when people live a luxury lifestyle and say that, yes I believe them. Know way too many people like that. Majority of people are not "live simply and frugally".

I Know people who paid 30% over list for a home (only way to get them at that point in CA--this was over $200K extra), exercised stock options in advance so they would be LT Cap Gains when sold. Except the price went down and they were worthless. And they owed over $500K in federal and state taxes but had nothing. Lost the house and a lot more. Extremely smart person, stupid with money and liked living large. It burned them and took them over a decade to recover, as well as moving to a lower COL area in order to live decently

SO yeah people do shit like that. More than you think

[Anonymous]

Anonymous wrote:I learned that many people with high incomes, who look and seem very responsible at work, are very leveraged in their personal lives.

About a decade ago I was a VP at a company that went bankrupt (various reasons including some bad luck). The company was bought out by a small group of private investors. There was a long transition, almost 6 months, tons of layoffs. These investors were horrible and unethical, it was very clear. They absolutely were in some shady, illegal business. Many of the people one level above me, c-suite and EVPs, and I had the option to stay on. Everyone wanted to leave but about half stayed on and all gave me a similar story that they couldn’t afford to be unemployed for any significant amount of time. All had been there years, and were making from 400-900k for many years. I was much younger, making 300k (and much less just a few years earlier). I wasn’t worried at all, I had savings and knew I would find a job fairly quick. They were making on average double what I made, and for many more years. They had little to no savings! All of them also had much nicer houses than I did….leveraged! I couldn’t believe it for most of them, even the super conservative CFO told me he made some bad financial decisions in his life. People leverage…lots of people, not just a few outliers.

Aaaand this is why the "paying off your mortgage is dumb" crowd are idiots. So often, leverage is simply an excuse to live beyond one's means. If you are the type of person who will plow an extra $5-$10K in principal to your mortgage every month, you basically never get in trouble financially.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I learned that many people with high incomes, who look and seem very responsible at work, are very leveraged in their personal lives.

About a decade ago I was a VP at a company that went bankrupt (various reasons including some bad luck). The company was bought out by a small group of private investors. There was a long transition, almost 6 months, tons of layoffs. These investors were horrible and unethical, it was very clear. They absolutely were in some shady, illegal business. Many of the people one level above me, c-suite and EVPs, and I had the option to stay on. Everyone wanted to leave but about half stayed on and all gave me a similar story that they couldn’t afford to be unemployed for any significant amount of time. All had been there years, and were making from 400-900k for many years. I was much younger, making 300k (and much less just a few years earlier). I wasn’t worried at all, I had savings and knew I would find a job fairly quick. They were making on average double what I made, and for many more years. They had little to no savings! All of them also had much nicer houses than I did….leveraged! I couldn’t believe it for most of them, even the super conservative CFO told me he made some bad financial decisions in his life. People leverage…lots of people, not just a few outliers.

Aaaand this is why the "paying off your mortgage is dumb" crowd are idiots. So often, leverage is simply an excuse to live beyond one's means. If you are the type of person who will plow an extra $5-$10K in principal to your mortgage every month, you basically never get in trouble financially.

Paying off your mortgage instead of investing is dumb. Paying off your mortgage instead of spending down every dollar of your $400-900k salary would not be dumb.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I learned that many people with high incomes, who look and seem very responsible at work, are very leveraged in their personal lives.

About a decade ago I was a VP at a company that went bankrupt (various reasons including some bad luck). The company was bought out by a small group of private investors. There was a long transition, almost 6 months, tons of layoffs. These investors were horrible and unethical, it was very clear. They absolutely were in some shady, illegal business. Many of the people one level above me, c-suite and EVPs, and I had the option to stay on. Everyone wanted to leave but about half stayed on and all gave me a similar story that they couldn’t afford to be unemployed for any significant amount of time. All had been there years, and were making from 400-900k for many years. I was much younger, making 300k (and much less just a few years earlier). I wasn’t worried at all, I had savings and knew I would find a job fairly quick. They were making on average double what I made, and for many more years. They had little to no savings! All of them also had much nicer houses than I did….leveraged! I couldn’t believe it for most of them, even the super conservative CFO told me he made some bad financial decisions in his life. People leverage…lots of people, not just a few outliers.

Aaaand this is why the "paying off your mortgage is dumb" crowd are idiots. So often, leverage is simply an excuse to live beyond one's means. If you are the type of person who will plow an extra $5-$10K in principal to your mortgage every month, you basically never get in trouble financially.

Well typically, you don't/shouldn't pay off your mortgage without having 6-9 months in living expenses set aside. Because the time to get a HELOC or remortgage your home is not when you are unemployed.
But once you have done that, yes the people who quickly pay off a mortgage are likely also saving and won't have financial issues.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I learned that many people with high incomes, who look and seem very responsible at work, are very leveraged in their personal lives.

About a decade ago I was a VP at a company that went bankrupt (various reasons including some bad luck). The company was bought out by a small group of private investors. There was a long transition, almost 6 months, tons of layoffs. These investors were horrible and unethical, it was very clear. They absolutely were in some shady, illegal business. Many of the people one level above me, c-suite and EVPs, and I had the option to stay on. Everyone wanted to leave but about half stayed on and all gave me a similar story that they couldn’t afford to be unemployed for any significant amount of time. All had been there years, and were making from 400-900k for many years. I was much younger, making 300k (and much less just a few years earlier). I wasn’t worried at all, I had savings and knew I would find a job fairly quick. They were making on average double what I made, and for many more years. They had little to no savings! All of them also had much nicer houses than I did….leveraged! I couldn’t believe it for most of them, even the super conservative CFO told me he made some bad financial decisions in his life. People leverage…lots of people, not just a few outliers.

Aaaand this is why the "paying off your mortgage is dumb" crowd are idiots. So often, leverage is simply an excuse to live beyond one's means. If you are the type of person who will plow an extra $5-$10K in principal to your mortgage every month, you basically never get in trouble financially.

Paying off your mortgage instead of investing is dumb. Paying off your mortgage instead of spending down every dollar of your $400-900k salary would not be dumb.

I agree with the 2nd part.
But paying off your mortgage instead of investing in not dumb. Paying off your mortgage is a guaranteed rate of return. Investing is not guaranteed. So yes, if your interest rate is 2% then you should just ride it out and invest. But once you have a few million saved, there is a lot to be said for simply paying off your home, and then you invest your monthly payment going ahead.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I’m a mortgage underwriter and see a ton of broke rich people. We give them loans anyways. They just gotta keep running in that golden hampster wheel.

This makes me feel a bit better. Can you give some details into this observation?

Why does it make you feel better? If they buy a $2m house and pay it off after 30 years, at least they will have $2m which is a lot more than most Americans will have.

Except most that are "on the hamster wheel" don't actually pay off the house, they keep refinancing over time, often taking out money each time. So that only works if you actually pay off the mortgage.

+1. Our big law partner friend and his SAH wife are very honest about being bad with money. They openly state that they “have no idea where it all goes” and if the partner lost his job they would have to “put a for sale sign in their front yard” the next day. We make less than half what they do and have at least double the NW.

You believe everything people tell you, eh? No one would have any idea how much I actually have because I live more simply and frugally than many do, although still nicely enough.

NP: when people live a luxury lifestyle and say that, yes I believe them. Know way too many people like that. Majority of people are not "live simply and frugally".

I Know people who paid 30% over list for a home (only way to get them at that point in CA--this was over $200K extra), exercised stock options in advance so they would be LT Cap Gains when sold. Except the price went down and they were worthless. And they owed over $500K in federal and state taxes but had nothing. Lost the house and a lot more. Extremely smart person, stupid with money and liked living large. It burned them and took them over a decade to recover, as well as moving to a lower COL area in order to live decently

SO yeah people do shit like that. More than you think

Sure. Some do. But most don't. All these stories are anecdotal. People will also have different meanings for savings. Someone with an affluent lifestyle telling you they spend every penny and don't save anything may very well not be including that they do max out all the benefits and 401ks and 529s. And others may go through high expenditure years where they seemingly spend all their income but they also still have hundreds of Ks in investments and 401ks and equity in their house. The latter isn't uncommon for some people at certain ages when they have children while higher incomes haven't really started paying for itself. And, then, of course, are those who deliberately laugh off their expenditures specifically to downplay their real wealth.