A burning, ongoing question- I just don't get it

[emdeecee_sierra]

I'll start with an example: DH and I noticed the other day the following: new house (built last year), the usual assortment of vehicles (a truck or two and car or two), at least one atv in the driveway (I think DH said he saw multiple atvs in the garage), a handful of horses, a nice shelter for the horses (not a big barn, but a nicer shelter with metal fencing, etc., not homemade from scraps), and a large, detached garage being constructed. We see this type of setup ALL THE TIME. The myriad toys. Boats, horses, atvs, campers, etc. Our big question is: what on earth is going on??? HOW do people afford this??? Just given the above example, DH and I would surmise that the people have two incomes. However, then I question how the people have TIME for any of it??? How do they have time to even feed the horses let alone ride them ever or let's say show them? Get out on the atvs? How do they even have time to shop for a contractor to build the garage? (p.s. we are rural and the drive to town is about an hour, so that is a factor, too- these people driving to and from their jobs eats up ~2 hours per day and that's a conservative estimate)
Are there just that many people out there who are independently wealthy? Does the majority of the populace just simply never sleep in order to have time to make money and buy things and use them?
We see this in town as well- the big, new mcmansion with the latest and greatest new rigs parked in the garage and driveway, the boat on the sideyard, the incredible landscaping that is cared for by a yard service, etc. So, it is everywhere, all around us, and we cannot figure it out. We know our situation which is granted "only" one income, but we live pretty much extremely frugally and can't imagine that even were we to add another income that we would even at that point be able to indulge in all the goodies it seems everyone else has. I'm probably rambling and may sound envious, but that's not where I'm coming from. It's not envy, it is pure and simple bafflement: . I'm just wondering if anyone has any insight as to what we might be doing wrong It just seems everyone else has money sprouting out their wazoos.

[Panthira]

I've had the same question for years.

[gottaknit]

Debt. Lots of people live in debt, and they don't even care.

We are shopping for a new house right now. We went to the bank to get pre-approval for a mortgage, and they approved us for an astronomical amount of money (which we do not plan to use!) If we took out as much of a mortgage as we were approved for, our monthly payment would be 67% of DH's take-home pay. The bank seemed to think this is perfectly reasonable. :

The other possibility is that they just make a ton of money. All of DH's old friends from college earn upper six- and even seven-figure salaries. They are not smarter than him. They do not work harder than him. But they do have much lower moral/ethical standards, IMO. :

[majikfaerie]

I have two words for you:
overdraft.
debt.
mortgage.
credit cards.

people who live like that just cant count. its not about having time for horses or atvs or boats. its about having them displayed in the yard.

[kijip]

Or maybe they just went to school for a decade or so and are now earning 6 figures+. It is not unethical by definition to go into a highly paid profession.

I think debt plays a large part of it for many but it's not any of my business unless it is my debt.

[ASusan]

I wonder the same sort of thing all the time. DH and I are not wealthy, but we do have higher than average incomes, and no children (yet). However, we drive a 9-yr-old car with 240,000 miles on it (and 4-yr old car), we live in a relatively inexpensive apartment in an area with a fairly low cost of living. We buy clothing only when we really need it; I have 2 pairs of shoes I wear regularly and have used the same handbag for well over a year. And we DO have some credit card debt and student loans so we try not to buy what we do not need.

I write all this because these are other areas in which I see people spending a lot of money. Clothes, shoes, cars/SUVs...and we do see the ATVs, boats, etc. It's just crazy the amount of consumerism that occurs.

[Knittin' in the Shade]

Originally Posted by kijip

Or maybe they just went to school for a decade or so and are now earning 6 figures+. It is not unethical by definition to go into a highly paid profession.

I think though, when you see it in house after house after house that it's not all people in highly paid professions. It just not statistically possible - a lot of those people are just heavy with consumer debt.

I think debt plays a large part of it for many but it's not any of my business unless it is my debt.

I completely (respectfully ) disagree with that. It is all of our business, because when there's large consumer debt and people start defaulting on that debt (or foreclosing on their homes because they've got so much debt that they can't pay the mortgage) it adversely affects the economy which then has an impact on all of us. I think it's incredibly unfair that even though DH and I pay cash for everything and have no credit card debt that we can be affected by the rampant consumerism of our neighbors.

[superstella]

My dh aspires to be one of those people. : Not me! As a pp said, the consumerism is phenomenal. We too are a 1 income family, and drive old cars, live in a modest old house, etc. If I went to work then we probably could afford a lot more, but it's not worth the trade off to me.

[EmsMom]

I am sure that there are some folks who really make that much money and can just afford what they have so why not? However, I also feel that there is tremendous debting going on to afford these things. I live in a middle class community and we have a salary that puts us squarely in the middle class incomes of our area. I see folks with their new cars, ATVs, etc. Things we could never afford. So what are they not affording? Savings, retirement funds, emergency funds, etc. Many people on these frugal boards are working on their emergency funds and retirement savings. Most average Americans are not. And when emergencies, small or large, come up they are in trouble. I remember when Oprah did a show about solving debt problems -- the folks on the show made good money but were in serious trouble. I imagine the same is the case with the showy neighbors. They have lots of "toys" but their net worth may very well be in the negative. But, hey, I sometimes do think what in the world are we missing out on?

[ASusan]

excess consumption

Originally Posted by Knittin' in the Shade

It is all of our business, because when there's large consumer debt and people start defaulting on that debt (or foreclosing on their homes because they've got so much debt that they can't pay the mortgage) it adversely affects the economy which then has an impact on all of us. I think it's incredibly unfair that even though DH and I pay cash for everything and have no credit card debt that we can be affected by the rampant consumerism of our neighbors.

I agree with this. In addition, excess consumption costs us in other ways - our country is in debt to other countries. We - as a society - pay the environmental costs of excess production and transportation of (largely) unneeded goods. We also pay to dispose of the packaging and, eventually, those goods when they are replaced by newer goods.

A high demand for goods pushes producers to make goods for smaller costs and greater output. This increases the likelihood that the goods will be produced in countries/factories with poor labor laws and multiple workers' rights violations (e.g., child labor). This concerns me, even if I can't "see" it.

The problem is not limited to visible consumerism ---

When those around you pay more to be in a better school district, you, too, must pay more to be in that better district (assuming you want your children to go to good public schools - and I respect those who do not send their children to school). The demand for houses in a good school district increases prices in that district.

Drivers of large SUVs put the drivers and passangers of smaller cars at greater risk on the road. It is much more dangerous to have a collision with an SUV than a regular passenger car. Also, because of their sheer size, SUVs on the road make it more difficult for the rest of us to see cars and other traffic around us.

So, it DOES affect me if others purchase more than they need. And this bothers me.

[BetsyS]

I wonder about this, too. We can't seem to afford all the toys and new houses and whatever that we want. Heck, we can't even afford to max out our 401K like we want.

We are one income as well, and I think my dh makes decent money. Solidly middle class for around here, anyway. I do know that we have $700 minimum payments on our school debt, and we have paid off about $40,000 in debt in the last 3 years (I was working as well).

If we hadn't gone into so much debt, we would have SOOOOO much more disposable income, and we'd probably be able to afford a lot more stuff. That's how we make ourselves feel better, anyway. We tell ourselves that those folks parents paid for their education, as we hope to do for our children.

[velochic]

Originally Posted by emdeecee_sierra

It just seems everyone else has money sprouting out their wazoos.

You're right it does just seem, because it's all smoke and mirrors. The PP's hit the nail on the head. A few do have the means, but most are lying in bed at night worrying themselves sick about how to pay for it. Some are even spending, spending, spending with the mindset that "Oh, we'll just file bankruptcy and then we won't really have to pay for all of this... it's actually free, so why worry about it." (This is how my sister has dealt with it these past 30 years she's been married and she's waking up to a very cruel reality that there is no free-ride anymore.)

But, IMHO, the real culprit is the sense of entitlement that is almost epidemic in the US. People think that they "deserve" to have these things simply because they were born in the land of the free and home of the brave. This extends to (as a pp mentioned) retirement and savings... these people think that somehow they will be able to continue this lifestyle without saving for it. The piper will be paid, however. But most people are able to borrow just a little more to keep that day at bay. I also think that when people get a little extra money, they buy something to "show for it" or increase their spending. The thought that the little extra can be used to help the needy doesn't enter many people's minds.

So, I guess the short answer is... I think materialism has left much of America morally bankrupt and image is more important than what really counts... family, friends, charity, and self-worth.

[happymomma]

A lot of people that I have run into don't consider what they owe on all the toys, but what their monthly payment is....I've heard things like, I traded in my (perfectly fine $20,000) truck for this (huge $35,000) truck and my payment only went up $400 or whatever...they base everything on how much the payments will be, never intending to pay it off....they just say that if things get tight they will just sell stuff....I guess never thinking that they might very well be upside in a loan....but anyway, thats what I've seen here. Its all about how much a month and as long as they can swing it they get it.

[reader18]

I understand your bafflement. My DH makes good money, and we do spend it, but only after we have maxed our retirement accounts, etc. And we have no CC debt, only mortgage and car loans. Once they are paid off we intend to continue to drive them until we have enough money to pay cash for new ones.

I think it can be dangerous to assume "how" other people afford things. You never know their situation, some people get a lot of help from family, or inherit money from grandparents. Of course, lots of people are high in debt. I personally know people in both camps, so I try not so assume the worst about them.

[Denvergirlie]

Originally Posted by reader18

I understand your bafflement. My DH makes good money, and we do spend it, but only after we have maxed our retirement accounts, etc. And we have no CC debt, only mortgage and car loans. Once they are paid off we intend to continue to drive them until we have enough money to pay cash for new ones.

I think it can be dangerous to assume "how" other people afford things. You never know their situation, some people get a lot of help from family, or inherit money from grandparents. Of course, lots of people are high in debt. I personally know people in both camps, so I try not so assume the worst about them.

Yeah this... my folks have almost all of what the OP listed and more including the second house/ vacation property. Everything is all paid for, they have no revolving debt.

[swimswamswum]

Originally Posted by happymomma

A lot of people that I have run into don't consider what they owe on all the toys, but what their monthly payment is....I've heard things like, I traded in my (perfectly fine $20,000) truck for this (huge $35,000) truck and my payment only went up $400 or whatever...they base everything on how much the payments will be, never intending to pay it off....they just say that if things get tight they will just sell stuff....I guess never thinking that they might very well be upside in a loan....but anyway, thats what I've seen here. Its all about how much a month and as long as they can swing it they get it.

That is so true. We just bought a new car. The salesman was really shocked that we cared so much about the actual price and so little about the monthly payment. He said that most people don't care very much about the total cost, but are much more concerned about how much it's going to cost every month. We want to pay it off early and we're not interested in paying more interest than necessary.

[mrskennedy]

IMO it's called debt--building debt, hiring people to care fot ehr buildings debt, horse groomer etc debt, and probably credit card and/or loan debt too.

Personally, I take the PP's comment about not wanting to pay any more interest than necessary farther and say I don't want to pay any interest at all. So DH and I wait until we can afford things without paying interest. It works for us.

[SleeplessMommy]

The McMansions near us go for $400-500K. The families in them ALL commute 45-min to 1 hr to Baltimore to work. (engineer, electrician, pediatric nurse, police detective, soda bottling plant manger.. I expect them to earn $70K to $120K each person with the higher Baltimore salaries) My guess at household income is $80 - $170K. [If you want to be in this salary range, I suggest looking into employers offering tuition reimbursement...]

These are not the first homes for anyone - so they have made some profit on a previous home to cover the down payment on $400K.

The family with an engineer and pediatric nurse is in mid 30s with no kids yet (but planning on it I think.) Delaying children until mid-30s does help with the financial situation. The police detective is single and in early 40s I think.

If a person bought a McMansion 5 years ago (slightly lower pricing then) and got a home equity line of credit last year, they could easily have a HELOC of $100K or more to buy boats, cars, horses, etc. It is also very possible to get "underwater" in this situation as appraisals are sometimes inflated, or house values go down.

I know many people that have taken out a HELOC and ended up waaay underwater on this. For example, a house in Montgomery Country MD (expensive county!) appraised well over $300K in 2005. Owner used home equity loan to buy a lower cost property elsewhere, and promptly listed the property for sale. Over 1.5 years, the house failed to sell when listed at $230K, and went to foreclosure auction where it sold for about $230K.

Also, many working professionals in their 30s or older have 401K plans. They can get 401K loans of up to $50K, for up to 50% of the 401K balance. This is enough to buy a car AND a big boat. Loan terms are usually 5 years and no credit check required.

[annethcz]

Originally Posted by reader18

I think it can be dangerous to assume "how" other people afford things. You never know their situation, some people get a lot of help from family, or inherit money from grandparents. Of course, lots of people are high in debt. I personally know people in both camps, so I try not so assume the worst about them.

I agree with this. I recently had similar thoughts when I drove through a very expensive, lake-front area (the type of area where a million-dollar shack is a tear-down). How is it possible that there are so many people who make enough money to afford this lifestyle?

I think that a big part of it depends on how long people have lived in their homes. Due to inflation and the increases in the real estate market, people who have lived in their homes for 10+ years probably have a smaller mortgage payment than those who have bought their homes more recently. I know someone who lives in a home like what you described. They bought the house as a fixer-upper 15 years ago, and have a $400/month mortgage payment on a property that's now worth $350,000. The people who own the house DO have 2 good incomes (their kids are now in high school) and have lots of extra money for toys, vacations, etc.

I can also say that as DH and I have gotten older, as DH has moved up in his job, life is easier for us. We're also a one-income family, but in 9 years of marriage, DH's income has more than doubled. Things were much harder for us when we had 3 kids under the age of 4 and DH was working as a night supervisor. Of course, not everyone is able to increase their income in this way. But I think that for many middle-class people, people have more disposable income as they become more experienced in their jobs. When we first got married, I couldn't even conceive of having the income we now have (and it's really not all that great, just your median family income for our area).

I guess what I'm trying to say is that yes, some people can afford to buy "toys" because they're going into debt to do so. But there are others who truly can afford it. My parents have 2 houses that are completely paid for, and always pay cash for their vehicles. They were very frugal when I was growing up. But now that their kids are grown and their expenses are lower and their income is higher, they absolutely can afford to buy "toys" and other things to improve their lifestyle.

I'm going to say one more thing, and then I'll stop. I disagree that people buy acreage properties and new vehicles and horses and ATVs simply because they are materialistic or they want to show off. I personally have never bought a new vehicle, but I've heard several people in this forum advise a poster to buy a new vehicle, or not sell a new vehicle, because newer vehicles are safer and more reliabe, and require less maintenance. As for acreage properties- I am the proud new owner of a house on almost 5 acres, and we bought not to show off, but so that we'd have room for gardens and chickens (maybe a family cow in the future?) and because we want to raise our kids in the country. Other people just like the tranquility of the country. Acreage properties aren't always expensive- our house and land cost as much as an average 1970's rambler in the suburb we moved from. As for horses and ATVs, although they are non-essential items, they are things that can be enjoyed with your family. My DD wants a horse sooooo badly. Although we don't have one (and have no plans to buy one in the near future), I know that I would really enjoy teaching my kids how to ride- having a horse would be a family affair for us. And I know of several families who ride ATVs (and snowmobiles) as a family. They spend weekends together riding ATVs, or using the ATVs to get to hunting areas where they hunt together. The ATVs weren't purchased to impress other people, they were puchased as a family amusement.

So while I do agree that Americans are very materialistic and more consumeristic than they need to be (myself included), I also acknowledge that people buy things because it improves their quality of life. And it's hard for me to pass judgement on people who buy things that improve their quality of life... Sure, I'm happy without things that other people want, but does that mean that no one should be able to have those things???

[CarrieMF]

The ATV's can be used for rounding up the horses. Alot of people who have acreages/farms have ATV's for their stock.

ATV's, RV's, boats, etc can be taken out forever. You can take them out for 30 years if you really want to.

Right now people are probably wondering about dh & I. Our car is fairly new(2000), our new truck is a 2003. Both are toyotas so not cheap. Dh has a brand new quad.

however we also took out a large HELOC that we put the house, quad, truck & a couple other miscellaneous stuff on. We are getting some home renovations done(if it ever stops raining,lol) that are getting put on there. Dh got his quad in the spring, is it brand new. We have 2(or 3, I tend to lose track) quads sitting in our yard too. Only 1 of them is ours. The others are friends and we store them here(and we live in town so it isn't like we have alot of storeage. We also have a newish skidoo though it isn't here. Now our house is not fancy or brand new by any means & we have an old tent trailer that we seem to do more work on than anything. Our car will be paid off in about 6 months. We are selling our place in a year & moving. When we move away we will most likely be building a new house becuase where we're moving does not have houses to suit our needs. When we move there then we'll really look like we have tonnes of money due to our vehicles, toys, etc. But both of our vehicles will be paid off, the quad will be paid off, the skidoo I guess Dad decided he doesn't need it anymore & apparently gave it to dh(Dad won't let us give him money for it).

My point is, appearances can be misleading. Unless you know them & they're up to their eyeballs in debt you have no idea how they're affording these things. We do know plenty of people who are like that, have the toys but can't afford to pay their power because they are trying to keep up with the neighbors.

Here SUV's aren't the problem when driving there are actually few of them. There are plenty of Money Trucks though the worse are the Semi's.

We got the HELOC because of our plan to move away to an area that is much, much cheaper. If we buy an older house there until we can build we can pay cash for it