(no subject)
PLEASE HELP! I have no idea where people get certain ideas. Please explain the other thought processes below, if you can. Your explanation may just end my confusion.
There are so many confused people in this world, and I think I must be one of them. I have people who give some of the strangest explanations for seemingly simple topics. Age is an initial value problem, as everyday I get a day older just like everyone else, but I guess I just reject some of the concepts that some people try to sell me, and I may be wrong.
My first confusion:
I know a single mother, and this single mother's annual income has increased every year for the last seven years. At the same time, she had high expenses--high car payments, high rent, high utilities. High is a relative term that can be measured against income and society norms.
Seven years ago she was renting a large 3 bedroom house, and the utilities were not included in the rent. Now she rents a 2 bedroom apartment with all utilities included for considerably less than the rent in the former house. She was paying $350 per month on a high-interest car loan. Now she drives a paid up $1,200 car that has required little maintenance.
In any event, her income has increased for the last seven years while her rent, transportation and other basic expenses have decreased.
MY OBSERVATION: Increased income with lower expenses => BIG SAVINGS.
Her statement to me: She is now in more debt now than she ever has been in the past, and she struggles to make it from day-to-day.
MY CONFUSION: All I can think is WTF!
==== NUMBER TWO ====
My second confusion:
Rent versus buy... Which one is better from a cost perspective? I certainly understand that there are some advantages to buying--and usually advantages equate to a greater cost.
I once had a friend explain how 'buying is always cheaper than renting.' When I asked a complicated question like, 'Why do you think that,' I received the summary, 'Well, when you rent, you are just throwing your money away, as you only make the landlord rich and have nothing in the end. When you buy, you actually are getting value for your money.'
Me: 'What if the rent was cheaper?'
Him: 'You'd just be throwing away less money.'
Me: 'What if the rent was even cheaper?'
Him: 'You'd just be throwing away less money.'
Me: 'What if the rent was free?'
Him: 'You'd still have nothing in the end.'
My confusion must be in the fact that the money that I don't spend magically disappears. Also, there is something about how real estate always increases in value, and I guess that is true even in Detroit, where the population has been decreasing for many years and the auto industry currently is in trouble. I guess it's also true in New Orleans, where the change in the rate of population change changed so drastically.
Don't get me wrong, if you own property in Florida, then you probably have experienced a very nice increase in the value of the property. Most parts of Florida have experienced annual gains of 25% for a few years now. There are also areas on the west coast that have experienced high property value gains, including Las Vegas and parts of the I-5 corridor.
How do we know which direction property value will go? Who knew that values in New Orleans would plummet so quickly? What happens if an earthquake hits the west coast? What about a volcanic eruption, such as Mt. Saint Helens in 1980? Who knows when Rainier will wake up? Who knows when the value in Florida will cascade down like Dominoes?
Part of the confusion, I believe, stems from real estate agents. If a seller's agent said, 'It may be in your best interest to rent,' then I doubt that they would make a sale, and the seller may have a claim against the agent.
Maybe there is an underlying assumption that the efficiency is equal on the rent versus buy, but I am still not entirely certain. Maybe you can help explain!
Maybe I need to go do a few more calculus proofs?
.
There are so many confused people in this world, and I think I must be one of them. I have people who give some of the strangest explanations for seemingly simple topics. Age is an initial value problem, as everyday I get a day older just like everyone else, but I guess I just reject some of the concepts that some people try to sell me, and I may be wrong.
My first confusion:
I know a single mother, and this single mother's annual income has increased every year for the last seven years. At the same time, she had high expenses--high car payments, high rent, high utilities. High is a relative term that can be measured against income and society norms.
Seven years ago she was renting a large 3 bedroom house, and the utilities were not included in the rent. Now she rents a 2 bedroom apartment with all utilities included for considerably less than the rent in the former house. She was paying $350 per month on a high-interest car loan. Now she drives a paid up $1,200 car that has required little maintenance.
In any event, her income has increased for the last seven years while her rent, transportation and other basic expenses have decreased.
MY OBSERVATION: Increased income with lower expenses => BIG SAVINGS.
Her statement to me: She is now in more debt now than she ever has been in the past, and she struggles to make it from day-to-day.
MY CONFUSION: All I can think is WTF!
==== NUMBER TWO ====
My second confusion:
Rent versus buy... Which one is better from a cost perspective? I certainly understand that there are some advantages to buying--and usually advantages equate to a greater cost.
I once had a friend explain how 'buying is always cheaper than renting.' When I asked a complicated question like, 'Why do you think that,' I received the summary, 'Well, when you rent, you are just throwing your money away, as you only make the landlord rich and have nothing in the end. When you buy, you actually are getting value for your money.'
Me: 'What if the rent was cheaper?'
Him: 'You'd just be throwing away less money.'
Me: 'What if the rent was even cheaper?'
Him: 'You'd just be throwing away less money.'
Me: 'What if the rent was free?'
Him: 'You'd still have nothing in the end.'
My confusion must be in the fact that the money that I don't spend magically disappears. Also, there is something about how real estate always increases in value, and I guess that is true even in Detroit, where the population has been decreasing for many years and the auto industry currently is in trouble. I guess it's also true in New Orleans, where the change in the rate of population change changed so drastically.
Don't get me wrong, if you own property in Florida, then you probably have experienced a very nice increase in the value of the property. Most parts of Florida have experienced annual gains of 25% for a few years now. There are also areas on the west coast that have experienced high property value gains, including Las Vegas and parts of the I-5 corridor.
How do we know which direction property value will go? Who knew that values in New Orleans would plummet so quickly? What happens if an earthquake hits the west coast? What about a volcanic eruption, such as Mt. Saint Helens in 1980? Who knows when Rainier will wake up? Who knows when the value in Florida will cascade down like Dominoes?
Part of the confusion, I believe, stems from real estate agents. If a seller's agent said, 'It may be in your best interest to rent,' then I doubt that they would make a sale, and the seller may have a claim against the agent.
Maybe there is an underlying assumption that the efficiency is equal on the rent versus buy, but I am still not entirely certain. Maybe you can help explain!
Maybe I need to go do a few more calculus proofs?
.