Although we now know the metaphor is flawed, I don’t have a better one: people are like goldfish*: their spending increases to match their income. You make $100,000/y and buy a $300,000 house with a mortgage. The average person who makes $1,000,000 isn’t going to buy a $300,000; they buy a $3,000,000 and still need a mortgage. If they make $30,000,000, they’ll still take a mortgage because they also want to buy that G500 Gulfstream and a megayacht.
Maybe when you get into the billionaire range, they’re just paying cash. But the “just slightly” folks aren’t paying cash; they’re buying more expensive houses.
A paid-off house is just a house someone’s lived in, continuously, for 30 years.
I think I got the point; I was using the mega rich to illustrate the point. Someone slightly better off than you is still likely to increase their spending proportionally, rather than living at the same level and spending their money more wisely. For example, instead of buying the cheaper house and paying it off, they’re more likely to just buy a more expensive house. I was suggesting that having a house paid-off is less a sign of being more well-off than a sign of self-control and a good use of the funds they have. In other words, you could have your house paid off if you were willing to live in a much cheaper house.
Another example: my wife and I both came out of college with debt: school loans and credit card balances. One of the few fiscally responsible things we’ve done were to aggressively pay down those debts first. We lived as cheaply as we could and funneled all our excess cash into paying off debt. Actually, we do that with our car purchases, too; we always pay down the principal on car loans aggressively. It’s not like we’re otherwise fiscally responsible people; we just both hate debt, and paying interest. Consequently, in over 20 years we haven’t had a credit card balances or payed CC interest. When we buy new cars, we get 0- interest-for-X-years loans and make sure we pay it off before interest kicks in. The only thing we do pay interest on - the only debt we have - is a home mortgage: we’re not going that well off, and we’ve never lived in one place long enough to pay it off. But if we were willing to live more modestly and focus on paying down the mortgage instead of going on vacation, we could be entirely debt-free.
Unless your economic circumstances are dire - that is, of you’re middle-class or up - there are few reasons you can’t live debt-free. Terminal illness. Lots of kids, or aging parents, to support. It’s just that most people choose to spend money on comfort and convenience.
Incidentally, this is the foundation of the fight over avocado toast and Starbucks. It’s not a single Starbucks; it’s not even daily Starbucks. It’s a indication of a broader lifestyle decision; it’s a reflection of how you prioritize spending. If you buy Starbucks, you’re also likely to spend your surplus income on other frivolities, rather than, say, paying down the credit card debt, or your car loan, or whatever. No, giving up Starbucks isn’t going to make you rich; giving up all of your conveniences, your weekly bar visits, your ski trips with friends, your Apple TV, Netflix, and Amazon Prime subscriptions - it all adds up. The avocado toast is just a reflection of someone’s priorities, and a pretty reliable measure that their priority isn’t to save money or pay down their debt.
I want to reiterate: I’m not claiming superiority. It’s only been our mutual hatred of interest and debt that has driven us to make lifestyle sacrifices so that we never build up debt. We’re not rationally fiscally responsible, only emotionally.
Is the house paid off?
Even rich people don’t do that.
Although we now know the metaphor is flawed, I don’t have a better one: people are like goldfish*: their spending increases to match their income. You make $100,000/y and buy a $300,000 house with a mortgage. The average person who makes $1,000,000 isn’t going to buy a $300,000; they buy a $3,000,000 and still need a mortgage. If they make $30,000,000, they’ll still take a mortgage because they also want to buy that G500 Gulfstream and a megayacht.
Maybe when you get into the billionaire range, they’re just paying cash. But the “just slightly” folks aren’t paying cash; they’re buying more expensive houses.
A paid-off house is just a house someone’s lived in, continuously, for 30 years.
Good point, but misses the brief. We’re talking normal people who are doing well, not mega yacht rich.
I think I got the point; I was using the mega rich to illustrate the point. Someone slightly better off than you is still likely to increase their spending proportionally, rather than living at the same level and spending their money more wisely. For example, instead of buying the cheaper house and paying it off, they’re more likely to just buy a more expensive house. I was suggesting that having a house paid-off is less a sign of being more well-off than a sign of self-control and a good use of the funds they have. In other words, you could have your house paid off if you were willing to live in a much cheaper house.
Another example: my wife and I both came out of college with debt: school loans and credit card balances. One of the few fiscally responsible things we’ve done were to aggressively pay down those debts first. We lived as cheaply as we could and funneled all our excess cash into paying off debt. Actually, we do that with our car purchases, too; we always pay down the principal on car loans aggressively. It’s not like we’re otherwise fiscally responsible people; we just both hate debt, and paying interest. Consequently, in over 20 years we haven’t had a credit card balances or payed CC interest. When we buy new cars, we get 0- interest-for-X-years loans and make sure we pay it off before interest kicks in. The only thing we do pay interest on - the only debt we have - is a home mortgage: we’re not going that well off, and we’ve never lived in one place long enough to pay it off. But if we were willing to live more modestly and focus on paying down the mortgage instead of going on vacation, we could be entirely debt-free.
Unless your economic circumstances are dire - that is, of you’re middle-class or up - there are few reasons you can’t live debt-free. Terminal illness. Lots of kids, or aging parents, to support. It’s just that most people choose to spend money on comfort and convenience.
Incidentally, this is the foundation of the fight over avocado toast and Starbucks. It’s not a single Starbucks; it’s not even daily Starbucks. It’s a indication of a broader lifestyle decision; it’s a reflection of how you prioritize spending. If you buy Starbucks, you’re also likely to spend your surplus income on other frivolities, rather than, say, paying down the credit card debt, or your car loan, or whatever. No, giving up Starbucks isn’t going to make you rich; giving up all of your conveniences, your weekly bar visits, your ski trips with friends, your Apple TV, Netflix, and Amazon Prime subscriptions - it all adds up. The avocado toast is just a reflection of someone’s priorities, and a pretty reliable measure that their priority isn’t to save money or pay down their debt.
I want to reiterate: I’m not claiming superiority. It’s only been our mutual hatred of interest and debt that has driven us to make lifestyle sacrifices so that we never build up debt. We’re not rationally fiscally responsible, only emotionally.