The Home Ownership Obsession
Personal Finance blogger Ramit Sethi lays it out in "The Truth: What Obama and McCain won't tell you about your money":
Not all homeowners deserve to stay in their houses.
Renting is a perfectly reasonable alternative, but the idea of Americans "losing their houses" is politically untenable. Why? Because America perpetuates a mistaken culture of homeownership. Owning your own home is the kind of BS sacred cow that got us into this mess: Our parents tell us to buy a house. Our friends are impressed if we own a house in our twenties. The government literally encourages us to own a house by offering tax deductions. Homeownership is the American Dream!The truth is, if you're making the largest purchase of your life, you need more than a slogan -- you need to take the responsibility to do some research. (And note that you can't advocate for increased homeownership and also argue for Americans to keep their houses. By not reducing the prices, younger people cannot buy houses at these inflated prices.)
I love this guy. Here's more:
Yes, there was an exceptional amount of predatory lending.
For every blogger who argues loudly about personal responsibility, an angel dies and an Ogilvy executive lights a marshmallow in hell and eats a delicious snack. Wall Street and realtors are also to blame for this. But so are average Americans. It's difficult to have a nuanced discussion about real estate on the campaign trail, so we resort to cartoonishly simplistic caricatures of things like Wall Street's corruption. True -- but also take a look in the mirror.
Even more:
Americans don't know how to be frugal -- yet
Things will get more expensive. Taxes will eventually go up. They have to. Costs of ordinary goods will go up. They always do. If you're expecting it to get easier, you're wrong. The key is to make more money and cut your costs. Sadly, Americans are poorly versed in being frugal. You think it makes sense to buy a new car every few years? You think it's normal to eat out 5 times per week (lunch and dinner)? You feel good about yourself for ordering water when you go to a restaurant, but you blew $50,000 because you didn't take the time to understand your mortgage? You're not frugal. But a few more years of an economy like this and things just might change.
There are areas you cheap out and areas you don't. For example, I have an amazing woman who works for me, editing my stuff. I just gave her a raise, and whenever I make extra money (book advance, article), I cut her in. She deserves it, and it's not right to gouge people who do good work for you.
And while I have an HMO, I pay the top rate there in case something goes catastrophically wrong. It maybe costs me an extra $1,000 or $1,500 a year. But, if I get cancer or something, I don't want financial troubles to be the death of me.
Otherwise, I don't buy new things when old things still work. And I get almost everything for less than everybody else usually pays. For example:
I bought toner this morning -- regular price $90 each at Staples for HP cartridges for my laser printer. My price -- $35.99 for two off-brand ones on eBay.
Glasses prescription? $35.99 plus about $5 shipping online, from eyeglassdirect.com.
Clothes? Designer resale sale rack. I don't even buy retail clothing at Target. $49.99 Isaac Mizrahi dress at Target? $14.99 on eBay, plus $6.50 shipping. Cute, huh?
And, now, I'm supposed to bail out the housing market gamblers and the guys who made millions running companies into the ground? Thanks, but no thanks. (Grrr...as if I have a choice.)
Links within the text are live at Sethi's site.
via lifehacker
Oh yeah baby, and check out what my sister-in-law just sent me:
"STORE CLOSINGS AND LAYOFFS
If you have gift cards, hurry up and use them!!
Just passing this along - FYI
Ann Taylor closing 117 stores nationwide A company spokeswoman said the company hasn't revealed which stores will be shuttered. It will let the stores that will close this fiscal year know over the next month.
Eddie Bauer to close more stores
Eddie Bauer has already closed 27 shops in the first quarter and plans to close up to two more outlet stores by the end of the year.
Cache closing stores
Women's retailer Cache announced that it is closing 20 to 23 stores this year.
Lane Bryant, Fashion Bug, Catherines closing 150 stores nationwide
The owner of retailers Lane Bryant, Fashion Bug, Catherines Plus Sizes will close about 150 underperforming stores this year. The company hasn't provided a list of specific store closures and can't say when it will offer that info, spokeswoman Brooke Perry said today.
Talbots, J. Jill closing stores
About a month ago, Talbots announced that it will be shuttering all 78 of its kids and men's store s. Now the company says it will close another 22 underperforming stores.. The 22 stores will be a mix of Talbots women's and J. Jill, another chain it owns. The closures will occur this fiscal year, according to a company press release.
Gap Inc. closing 85 stores
In addition to its namesake chain, Gap also owns Old Navy and Banana Republic. The company said the closures - all planned for fiscal 2008 - will be weighted toward the Gap brand.
Foot Locker to close 140 stores
In the company press release and during its conference call with analysts today, it did not specify where the future store closures - all planned in fiscal 2008 - will be. The company could not be immediately reached for comment
Wickes is going out of business
Wickes Furniture is going out of business and closing all of its stores, Wickes, a 37-year-old retailer that targets middle-income customers, filed for bankruptcy protection last month.
Goodbye Levitz/BOMBAY - closed already
The furniture retailer, which is going out of business. Levitz first announced it was going out of business and closing all 76 of its stores in December. The retailer dates back to 1910 when Richard Levitz opened his first furniture store in Lebanon, PA. In the 1960s, the warehouse/showroom concept brought Levitz to the forefront of the furniture industry. The local Levitz closures will follow the shutdown of Bombay.
Zales, Piercing Pagoda closing stores
The owner of Zales and Piercing Pagoda previously said it plans to close 82 stores by July 31. Today, it announced that it is closing another 23 underperforming stores. The company said it's not providing a list of specific store closures. Of the 105 locations planned for closure, 50 are kiosks and 55 are stores.
Disney Store owner has the right to close 98 stores
The Walt Disney Company announced it acquired about 220 Disney Stores from
subsidiaries of The Children's Place Retail Stores. The exact number of stores
acquired will depend on negotiations with landlords. Those subsidiaries of
Children's Place filed for bankruptcy protection in late March. Walt Disney in
the news release said it has also obtained the right to close about 98 Disney Stores in the U.S.
The press release didn't list those stores.
Home Depot store closings (E. Brunswick, Rte 18 just put up their closing sign)
ATLANTA - Nearly 7+ months after its chief executive said there were no plans to cut the number of its core retail stores, The Home Depot Inc. announced Thursday that it is shuttering 15 of them amid a slumping U.S. economy and housing market. The move will affect 1,300 employees. It is the first time the world's largest home improvement store chain has ever closed a flagship store for performance reasons. Its shares rose almost 5 percent. The Atlanta-based company said the underperforming U.S. stores being closed represent less than 1 percent of its existing stores. They will be shuttered within the next two months.
CompUSA (CLOSED) clarifies details on store closings
Any extended warranties purchased for products through CompUSA will be honored
by a third-party provider, Assurant Solutions. Gift cards, rain checks, and
rebates purchased prior to Dec ember 12 can be redeemed at any time during the
final sale. For those who have a gadget currently in for service with CompUSA,
the repair will be completed and the gadget will be returned to owners.
Macy's - 9 stores
Movie Gallery - 160 stores as part of reorganization
plan to exit bankruptcy. The video rental company plans to close
400 of 3,500 Movie Gallery and Hollywood Video stores in addition to the 520
locations the video rental chain closed last fall.
Pacific Sunwear - 153 Demo stores
Pep Boys - 33 stores
Sprint Nextel - 125 retail locations New Sprint
Nextel CEO Dan Hesse appears to have inherited a company bleeding subscribers by
the thousands, and will now officially be dropping the ax on 4,000 employees and 125 retail locations. Amid the loss of 639,000 postpaid customers in the fourth quarter, Sprint will be cutting a tot al of 6.7% of its work force (following the 5,000 layoffs last year) and 8% of company-owned brick-and-mortar
stores, while remaining mute on other rumors that it will consolidate its
headquarters in Kansas . Sprint Nextel shares are down $2.89, or nearly 25%, at
the time of this writing.
J. C. Penney, Lowe's and Office Depot are scaling back
Ethan Allen Interiors: The company announced plans to close 12 of 300+ stores in an effort to cut costs.
Wilsons the Leather Experts - 158 stores
Pacific Sunwear will close its 154 Demo stores after a review of strategic alternatives for the urban-apparel brand. Seventy-four underperforming Demo stores closed last May.
Sharper Image: The company recently filed for bankruptcy protection and announced that 90 of its 184 stores are closing. The retailer will still operate 94 stores to pay off debts, but 90 of these stores
have performed poorly and also may close.
Bombay Company: (Freehold Mall store closed) The company unveiled plan s to close all 384 U.S.-based Bombay Company stores. The company's online storefront has discontinued operations.
KB Toys posted a list of 356 stores that it is closing around the United States as part of its bankruptcy reorganization. To see the list of s tore closings, go to the KB Toys Information web site, and click on Press Information
Dillard's to Close More Stores
Dillard's Inc. said it will continue to focus on closing underperforming stores, reducing expenses and improving its merchandise in 2008. At the company's annual shareholder meeting, CEO William Dillard II said the company will close another six underperforming stores this year.
THANK YOU MR. BUSH AND THE ENTIRE REPUBLICAN PARTY.
WE ALL HOPE THE 16 TRILLION DOLLARS SPENT IN IRAQ WAS WORTH IT! OUR ENEMIES
SUPPORT YOUR EFFORTS."
(This crap about "Mr. Bush and the entire Republican party" shouldn't even enter into it, but I figured I'd leave it on so you could see just how small minded these people truly are. If people had brains, they'd know you can't pin the whole thing on Bush and Co. Everybody needs to have a "look in the mirror"! o_O
Flynne at October 8, 2008 9:59 AM
When I bought a house five years ago, I found a lot of people that would try every tactic they could to get me to buy more than I could afford. Mainly the home "communities" with their own sales staff. Each one I went to was trying to sell me on ARM's, "the taxes are on the property only for x years - later you'll be able to afford the increase, right", and all sorts of other things.
After having enough of that, I worked with a real estate agent, and told him specifically what I wanted, and what range price wise I wanted. I based the range on what I could comfortably afford NOW, not what I MIGHT make later. He found homes at the bottom and the top.
Since then, I've gotten married and had raises. We have no issues getting our bills paid on time, and still have extra left. And I'm not anywhere NEAR as thrifty as my parents. Compared to them, I'm reckless with money.
It's no wonder the school mentoring program I'm part of tries to insert at least a little "financial literacy" in there when they can.
Jamie (SMS) at October 8, 2008 10:31 AM
Recently, I have paid 800$ for two pairs of prescription glasses. It was my choice and I am assuming it. I am not screaming for a bailout right now.
The true crisis right now is a crisis of responsibilities. Too many people out there have failed to take care of their life. Why should we?
Toubrouk at October 8, 2008 10:33 AM
I do have to say, when Gregg broke his expensive Gucci frames, I found them for $40 on eBay Canada.
And something I forgot in the post. Getting clothes on eBay is a bit like waiting for the movie to go to video.
Amy Alkon at October 8, 2008 12:07 PM
Whine!!!! But I'm entitled!!!
Anybody see the connection between spoiled rotten kids and spoiled rotten adults?
Chrissy at October 8, 2008 1:07 PM
Flynne - half of the companies you listed are either closing underperforming stores, are suffering from piss-poor management, or grew too fast.
Which, I'll agree with you, has nothing to do with Bush. But it also has nothing to do with the economy either. The economy becomes a convenient crutch.
brian at October 8, 2008 1:20 PM
I have to say, Amy, Ebay is getting more and more interesting. I brought there batteries and electronic sundries at record price but I never thought applying it to clothing. Thank you for the hint.
Toubrouk at October 8, 2008 3:07 PM
Hmm. Take a look back and see when you think construction methods started going "cheap and fast". Maybe you can find the point the public started thinking credit was actually cash.
Radwaste at October 8, 2008 3:08 PM
Amy Alkon
http://www.advicegoddess.com/archives/2008/10/08/the_home_owners.html#comment-1596184">comment from ToubroukToubrouk, I know what sizes I wear in certain brands/things, and that makes it easy. It's pretty amazing. Whatever I need to buy, I think about how I can get it without paying through the nose.
Amy Alkon at October 8, 2008 3:12 PM
Re the store closings...
I'm not surprised on the Footlocker deal. They seem to be every where these days. I was in a mall last month with 2 stores in it. One of the stores being right across from some other athletic shoe store. Guess it made it easy for price comparisons at least.
Sio at October 8, 2008 4:15 PM
Another good article about this. It quotes Nozick, who'd probably be an intellectual hero if I ever got around to reading books.
Crid [cridcridatgmail] at October 8, 2008 10:16 PM
For every blogger who argues loudly about personal responsibility, an angel dies and an Ogilvy executive lights a marshmallow in hell and eats a delicious snack.
That is good shit. I'm going back to my O&M notes from a project in 1992 to check something...
There is an old joke about being frugal, and thanks to insomnia, I will tell it now. Please don't hate me in the morning.
A young girl heard a new word and had to ask her mommy about it. "What does the word 'frugal' mean?" she asked. The mother thought for a moment, and then said to her daughter, "to save." Years later, the girl was off at college. She was skiing when she fell off a bank into a drift. She was stuck in a hole, and very frightened. Afraid she might lose her life, she began desparately shouting out "FRUGAL ME! FRUGAL ME!" Alas, a handsome young ski patroller heard her cries. He skiid to the location, jumped down into the drift, and frugaled her. And they lived happily ever after.
Please tip your bartender, thank you, good night.
Sterling at October 8, 2008 11:02 PM
I'd guess that, one way or another, we're gonna get a real good frugalling come November.
Pour me another one, bartender.
old rpm daddy at October 9, 2008 3:59 AM
See now, at least the Scots know from frugal - to wit:
A captain of a Scots army regiment was on leave, and went into a cobbler's shop. "Well, now, what can I be doing fer you on this fine dae?" said the cobbler.
"Well," says the captain, "Oi've got this 'ere condom, ye see, and it's got a wee hole in it. I was wonderin' if you could be fixin' it fer me."
"Aye, let's have a look, laddie," said the old cobbler. "Well, yeah, I believe I can be fixin' this. It'll cost ye 35 pence."
"Thirty-five pence," says the captain. "Hmmm."
"Well, then," says the cobbler, "Oi've got a new condom 'ere I can let ye have fer 70 pence."
"Seventy pence?" says the captain. "Well, I need ta be thinkin' about that now. I'll get back to ye." And with that, he takes his condom and leaves.
Couple hours later, he comes back to the cobbler's, holds up the condom and says "The regiment says ye should be fixin' this!"
o_O
Flynne at October 9, 2008 5:53 AM
i'd like the government to buy me a big house w/a big yard too! the house i could afford when i was shopping - which is the house i bought - is less than 600 square feet. that's not a typo. less than six hundred square feet. i live within my means. it's a frugal(frugalled when i'm lucky) and humble existence and it's just fine. this bailout is rewarding the most irresponsible and reckless in our society and it has me so steamed but alas, vat you can do? if you were responsible and careful, you don't get bailed out.
trina at October 9, 2008 8:23 AM
"Financial Literacy". I like that phrase. I like it a lot.
See, what I think our focus should be in the senior year of high school should be "How to Get By in the Real World". There should be less concentration on Shakespeare & calculus, and more on things like How Insurance Works, Credit 101, and ECONOMICS.
I'm a recent product of our public school system. And while my opportunities to name the different types of triangles have been few (and mostly thanks to Jeopardy), I find myself struggling to understand the real things I need to worry about. When this whole mortgage crisis and subsequent economic thing happened, my head was swimming. We barely covered how the Stock Market works in my shitty Economics class, let alone what the hell a Freddie or a Fannie was! I'm terrified of getting a credit card because I have no clue what all the little jargon on the bottom of the application means! This is stuff I actually need to know, and I have almost NO ONE to help me understand. Why? Because all my friends got the same crappy education I did! Luckily, unlike my friends, my dad is willing to sit down and explain to me the basics. Also, the Internet is awesome for this kinda thing.
I'm not saying that we should act like every American will buy a house. But almost every American will get a credit card, or acquire debt of some kind. Why can't we start explaining these things in high school classes? And since not everyone will go to college, we should have raise our standards for the teaching of Government and Economics. And how it impacts everyday life.
Sorry, I'll get off my soapbox now.
CornerDemon at October 9, 2008 9:00 AM
By the way, that's not to knock Shakespeare or calculus. If anything, I've been reading novels from the 1940's and my mouth has dropped every time they've mentioned elementary aged kids reading (and understanding) Shakespeare. How the heck did our standards lower so quickly, to where he's only taught in high school?
CornerDemon at October 9, 2008 9:03 AM
I truly believe it's only been within the last 20 or 30 years, CD. I remember being taught Shakespeare in 8th grade, in preperation for a class trip to the now-defunct Shakespeare Theatre in Stratford, CT. 'The Tempest' was the play, and I thoroughly enjoyed it! (I graduated from high school in 1975. Yes, I am old!)
This year, Daughter #1's (she's a junior) English Lit class is studying Macbeth. She had all kinds of questions for me about the witches (seeing as how am one, and not all warty and crone-like). I explained to her about all the misconceptions, and had her read a couple of books re: modern witchcraft, as opposed to the Shakespeareanesque type. She was quite intrigued.
Flynne at October 9, 2008 9:31 AM
Amy Alkon
http://www.advicegoddess.com/archives/2008/10/08/the_home_owners.html#comment-1596321">comment from CornerDemonI've been working on becoming more financially literate, and when people I'm around know more about finance than I do (which is often), I ask them questions. One guy, in listening to my response, pointed out an essential point: That I used the word "save" not "invest." That said, I think it's pretty hard to know where to invest!
Amy Alkon at October 9, 2008 10:12 AM
I think it's because of the recent mythology that says all kids are equally brilliant and equally entitled to succeed. Since all kids are not, in fact, equally brilliant (don't blame me), the only way we can ensure that all kids succeed equally is to set the bar so low that nobody can fail. Sure, nobody benefits, but we can all feel equally good about ourselves. Whee.
Bread and circuses, people, in the end it really is nothing more than bread and circuses...
Scott at October 9, 2008 10:23 AM
Amy Alkon
http://www.advicegoddess.com/archives/2008/10/08/the_home_owners.html#comment-1596324">comment from ScottAt the rate we're going, pretty soon it'll be crackers and circuses.
Amy Alkon at October 9, 2008 10:27 AM
I was taught Shakespeare in 8th grade, only 10ish years ago. Wow. I'm getting to the point where I can say 'a decade ago'.
christina at October 9, 2008 10:46 AM
People are indeed obsessed with home ownership. My wife and I currently rent. I have lost count of the number of people who consistently push us to buy. Thank God we didn't buy when they wanted us to! We'd be paying twice what we could afford for a house that was worth 1/2 what we paid for it.
I literally had to start preemptively telling people (only half joking) that I will punch the next person who tells me, "You're flushing your money down the toilet!" Literally. The same phrasing each time. I always get, "Oh, but you could get a mortgage for what you pay for rent!" To which I respond, "Who's going to furnish the house? What about property taxes? Insurance? Repairs?" Them: "Oh, but the tax break!" Ah, the Holy Grail of the Homeowner... Me: "Right now, if my A/C breaks down, I call the rental office and by the time I get home, it's fixed. If we owned, I would have to call a repair person, stay home from work and pay out of pocket to have it repaired or replaced. Who's going to pay for that? You?" Them: "......."
I will admit, home ownership does have its advantages, and I fully intend to own a home at some point. However, renting has its advantages, too. If more owners spent more time worrying about their finances and less time worrying about mine, we might not be in this mess today.
fft5305 at October 9, 2008 11:44 AM
We read-at least parts-of MacBeth in elementary. That was in the 80's, in colorado. I have to watch myself that I don't have my expectations for my kids too low. It's an easy trap to fall into. Especially when I'm busy and don't really have the time to explain something to them, or have them help me. But I recognize this and work on it.
I was so upset when I heard that the Harry Potter books were being dumbed-down for americans. Like our kids are so stupid they could never understand british terms. It's like a modernized bible-if it's not King James, it's just not the bible!
momof3 at October 9, 2008 11:45 AM
My senior year of high school, I decided to take Math of Money (known as the joke course) instead of calculus. Best class I ever took, except perhaps statistics.
I fully agree gov't and finance need to be covered in high school.
momof3 at October 9, 2008 11:50 AM
Am slightly jealous here as we Canadians cannot write our mortgage payments off against our income taxes (or the interest portion or whatever). Then again, we also had no such thing as "sub-prime mortgages" in Canada either, so I guess it's a wash.
This whole mortgage collapse recalls what a friend of mine is fond of saying: "the only time you get burned in life is when you try to get something for nothing." Or perhaps in this case, when 100 million of your fellow citizens try to get something for nothing.
scott at October 9, 2008 11:56 AM
"I'm terrified of getting a credit card because I have no clue what all the little jargon on the bottom of the application means!"
-Just internalize the reality that you will be charged $35 for absolutly no reason several times per year and you'll be alright. Oh, and pay it every month, but not twice in the same month.
And a serious question for all those who buy their glasses online: Who heats up the frames and tweakes them so they fit and all that? If you take your mail order frames to an optomotrist do they laugh you out the door or will they fit them for a fee? I've been a little gun shy ordering online sine they are still several hundred dollars.
smurfy at October 9, 2008 3:52 PM
CornerDemon (love that name!), I graduated in 1976 and I still get where you're coming from.
I have spent an adult life wishing I had a better education when it came to dealing with adult life. I've been saying what you're saying for 30 years. And that's with an elective under my belt that did teach some simple basics such as balancing a checkbook.
You sound reasonably intelligent and show the sense to research (in my day, I had only the library, no internet and alas no parents like your dad to help, my parents were always throwing money away on get-rich-quick schemes) and to wait until you do have it figured out before acting. That patience will steer you well.
Stay patient, don't let anyone rush your financial decisions, don't lend what you can't afford to lose or borrow what you can't afford to pay and you should be okay. Common sense goes a long way and your post displayed a good dash of just that.
And, of course, continue to self-educate.
T's Grammy at October 10, 2008 7:34 AM
Thanks for the tips, T's Grammy, and the confidence booster! I try real hard, and I'm grateful for the help that I do have.
CornerDemon at October 10, 2008 8:28 AM
The course which should be taught in high school is money management, not Economics. I have my B.A. in Economics from a Canadian university, so I can safety say that this kind of theoretical knowledge is not what people need to balance a chequebook.
I took a finance course in grade 11, which taught how banks work, how credit cards, work, how to read the stock page in the newspaper, mortgages, etc. If you look around you could probably find a course like that at an adult learning place, or night school.
I get the same crap from home owners because I rent. I tell them that their mortgage payments for the first 10 years are just making the bank rich, because of the way capital and interest payments are skewed. I also tell them I have a life, travel 3 times a year, go out for dinner, buy clothes & shoes, and still manage to save scads of money (which is presently living in a Canadian bank - #1 system in the world-whoo hoo!)
I would have to agree that the standards are dumbed down so that nobody fails and 'everyone is a winner'. A woman I know graduated from some college near Boston (where she got her MRS), and she is unable to read a train schedule, but is convinced she knows everything.
Chrissy at October 12, 2008 9:44 AM
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