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Comment by closeparen | Hacker News Reader

You are slamming an entire generation by claiming that the problem is spending irresponsibly on frivolous things. I don't blame you - it must feel great to feel that the problems of the world are rooted in others being less virtuous than you.

The trouble is, my generation faces lower real wages and higher housing costs, and those effects are so large that Starbucks habits are basically noise in comparison.

That narrative doesn't pat you on the back for your superior discipline, so you're not impresssed with it, and you pivot to anecdata about the moral weakness of kids these days.

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Millennial here. I just got the property assessment notice on my modest 1 bedroom condo. The "value" of it has gone up by $200,000 (around 30%) in the last two years according to the assessment office. So I can expect a nice fat tax bill later this year.

The boomer generation, in full control of politics my entire adult life and for the foreseeable future, has made real estate in my city into a ponzi scheme, and I don't ever expect to live in a house here.

What I can expect is to shoulder the tax burden of a large population of people who have not saved nearly enough for retirement, are leveraged against their massively overpriced properties, and are projected to live for a very, very long time. And the data shows that quite clearly.

> Between 1982 and 2010, mortgage debt grew from $99 billion to $994 billion (in current dollars), while consumer debt increased from $48 billion to $460 billion. [1]

> The average market value of an owned dwelling quadrupled, from $71,800 to $303,500 (current dollars) between 1982 and 2008. [1]

> The indebtedness of Canadian households increased from $147 billion in 1982 to $1,454 billion by 2010—in current dollars. [1]

> More than 1.5 million families who have a main provider between 45 and 64 had no private pension savings in 1999, the agency reported Friday. These households will have to rely almost solely on public retirement plans Old Age Security and the Canada or Quebec Pension Plans. [2]

[1] http://www.statcan.gc.ca/pub/75-001-x/2011002/article/11429-... [2] http://www.cbc.ca/news/canada/many-not-saving-enough-for-ret...

>What I can expect is to shoulder the tax burden of a large population of people who have not saved nearly enough for retirement

Them saving more wouldn't help much. Saving has a counter-party, someone who gets real goods and services now in exchange for repaying the debt later. Who's the counter-party for the retirees' savings? Obviously it can't be the retirees, since they're busy, you know, being retired.

What'd increased saving would cash out to is shoveling money into repaying education loans held by pension funds that pay the boomers, rather than paying taxes that fund retirement programs. It doesn't mean you don't support retiring boomers, it just means that you get better compensation today for doing so.

I'm sorry, did you just complain about making 30% ROI on $200k over two years? Oh no, your tax burden.

It's unrealized earnings. They don't have $200k to spend on taxes, and if they sell the home they still need to buy (or rent) in an area that's very expensive to live. That extra tax burden is not something most people plan on (smart or not, sometimes these booms are more unexpected than others).

Some people just want a place to live close to work/whatever that doesn't have high maintenance (e.g. rent/mortgage/taxes).

In a "hot" city it's trivial to get very modest places that have monthly tax bills more than rent is on a similar sized place in the mid-tier NFL city I grew up in. That's a lot of cashflow to be burning - even if the investment is appreciating faster than the burn. It eventually forces you to sell and move, when your goal was not an investment but a place to live and make a home.

This is nonsensical. I have to pay that extra tax NOW. That's real money that I have to pay out. An extra 30% on something I nominally own? That's not real. I can't pay the taxes with that. What should I do to get that extra 30%? Take out an extra mortgage on that alleged increase in house value? Sell it and move to a worse house in a worse neighbourhood, somewhere I don't really want to live that I can still afford the taxes?

I bought a house that I wanted to live in, that I could afford the taxes on, and now I can't afford the taxes through no fault of my own. There is no solace to be taken in the fact that if I sold it, I might get 30% more than I paid. I don't want the money. If I wanted the money, I wouldn't have bought the house to live in, in the first place. I want what I bought two years ago; the house I could afford to live in. 30% increase in alleged value is of no use to me, and it's costing me money.

That is exactly the kind of thinking that brought Prop 13 to California back in the 70s.

The thinking is fine. The thinking is identifying a problem. Prop 13 was wrongfooted and created a new set of problems. We shouldn't ignore a problem just because someone else once royally screwed up a solution to it.

It's only effectively realizable if I move to a different city, so yes, I did complain about that. I want real estate prices to stabilize.

> The trouble is, my generation faces lower real wages and higher housing costs, and those effects are so large that Starbucks habits are basically noise in comparison.

No, that Starbucks habit isn't noise. I consumed Starbucks coffee daily after Christmas a few years back (got a lot of gift cards for them for some reason). It was $2/day for a cup of coffee. $10/week. Continued through the year, $500 (holidays and such mean I won't commute, vacations I may still indulge). That's 2 car payments if you buy a modest car. That's a significant chunk of your rent, possibly all of it, if you're not in NYC or SF or somewhere equally absurdly expensive.

It's like a code smell. If you're consuming pricy drinks on a frequent basis, what else are you doing that you could do for a fraction of the price yourself? Look at every other $1/day habit you have. Sodas? Modest 1/day habit (along with being unhealthy) if you don't buy them at the grocery store is around $2/day (bottle or fountain). That's another $500/year. Netflix + Hulu + Spotify + HBO Now + Amazon Prime + Cable? Do you really need all of them? I didn't, kept Netflix + Amazon Prime and saved $1200/year, more than a rent payment.

There, between coffee, soda, and media, I've saved > $2000. If your income is low, as this article discusses, this is a significant percentage of your income. 4% if your income is only $50k. Higher if you consider your net-income on that and not your gross-income. You still want coffee? I'm in an espresso club at work, 8 people, espresso twice a day, costs me $20/year for my contribution. Drop the sodas, they aren't healthy for you anyways, drink one once a week or so as a treat.

Examine your spending, really look at it. You'll find that you likely have a lot of places where you "leak" money, because it's just a coffee, or just a soda, or just a cocktail. Then it doesn't become an occasional spending thing, like once a week or month. But more frequent, daily or several times a week. Your money is gone and you don't know where it went.

On the question of "why is Alice poor and Bob well-off" a difference of $10k on the income side is 5x more interesting than a difference of $2k on the expense side, no?

But more generally. "Do you really need this?" is the right question to ask about the expense, effort, and unpleasantness you tolerate from the overhead in life, such as education, work, housing, transportation, sustenance, etc. And yes, you probably need at least the minimum viable product in each category, and the savings to continue purchasing it during unemployment and retirement.

For the rest, I'm much more interested in, "is this worth it?" Good food, books, TV, movies, concerts, theater, and yes, Sunday afternoons at the coffee shop are what all that overhead is for, particularly when shared with people whose company I enjoy.

If I need to find an additional $2k, I will pull it from overheard (be slightly less picky about my next apartment, or put up with a less pleasant commute). Not cut all the enjoyment from my life.

I use (and love) You Need a Budget. My entertainment category is about 5% of my take-home, with savings of about 25%, and I'm satisfied with this. (Of course, I am extremely fortunate to be early in life with a great education, high income, and good health).

Fair enough, my goal was to respectfully look at the number of additional expense items that are available today which were not part of the "Baby Boomer" menu.

Since I'm an engineer and have been since the 80's and a hiring manager for much of the last 15 years I can tell you that the starting wage for an electrical engineer or a computer programmer with a four year degree is around $85,000 (that was IBM's "standard offer" regardless of geography for a New College Grad with a 4 year degree). My starting wage in 1984 was $25,500 (which was Intel's standard offer for New College Grads with a 4 year degree). According to (https://data.bls.gov/cgi-bin/cpicalc.pl) my salary in 1984 would be $60,000 today. That suggests to me that for my job and education there has been a 42% increase in salary.

I certainly agree that where I live (the Bay Area) the price of housing has outpaced that increase in salary, especially in home ownership. That appears to be stabilizing a bit as additional housing comes on line but it remains to be seen if that truly reflects what it costs. I also got married to an engineer and so we were both bringing home "engineering" salaries and that gave us the ability to get into a house in 1988 with a 12% adjustable mortgage rate.

So what does this anecdote tell us? Not a whole lot. Engineers make more today out of college than they did in the 80's. Not really a huge surprise.

I think Internet access is essential today, at its cheapest its probably $30/month, more if you combine it with a phone. That is a cost I didn't have to pay. But its an example of things that people today do have to pay.

Informational value? Not high.

The truth is that not all people born between 1985 and 1995 make 20% less than their parents in 2016 than people who were born from 1955 to 1965 made in 1986. Some make more, some make less, some make about the same. How many? That would be an interesting thing to know but this article doesn't tell us how to understand that. It picks out some anecdotes, sprinkles in some common boogeymen (student loan debt) and implies we're all headed for the crapper.

So it didn't impress me very much.

PS. Don't dismiss the coffee habit out of hand. $500 a year compounded at 4% a year over 40 years (21 -> 61) is a bit more than $50,000 you don't get to spend in retirement.

Googling "Young Invincibles" (mentioned in the article) quickly leads us to:

http://younginvincibles.org/wp-content/uploads/2017/01/FHYA-...

(admittedly, by way of

http://younginvincibles.org/

http://younginvincibles.org/financial-security-report/

http://younginvincibles.org/financial-health/

)

They don't particularly show their work there, but it is believable that they are generating the various analyses from the Survey of Consumer Finances done by the Fed (aka decent statistics).

Thank you for the report link.

Sure Internet is $30, but it replaces a whole bundle of other services. Back in 1984 the cost to develop a couple rolls of film and make some long-distance phone calls would easily equal today's internet bill.

The cost of education and health care is what is crushing today's generation, not backup cameras, Starbucks, and iPhones.

It compounds, though. You can't tackle your debt if your other cash outflows are too high. iPhone, Starbucks, sodas, cable TV (versus Hulu + Netflix + Amazon, which many have in addition to cable TV), that's 2-4k/year. If your debt is $100k or less, that's 2-4% of the principle that you can pay off as extra in one year of living more modestly, which means you can get your home and other things much earlier.

>> those effects are so large that Starbucks habits are basically noise in comparison

Right, because spending $1500-2000/year on Starbucks and another $2000-$4000+/year on McDonald's and other takeout for 2-3 meals a day is "noise". Consumerism is a very real thing today. There are lower middle class people who blow $30-50 a day on Starbucks, energy drinks, going out for lunch, and ordering pizza for dinner. Throw in alcohol, cigarettes, and/or weed.

You can talk about wages and the price of a home all you want. Nobody 20-40 years ago threw 30-60%+ of their net pay away on daily impulse/routine purchases. Now it's extremely common.

For the pool of people who work 40+ hours a week, while not spending money on any of the stupid things listed above, who still find it hard to make ends meet - those are the people I sympathize with. However, even many people who claim to be wise with their spending like to think that their $7/day Starbucks is just a "small indulgence". $7/day * 5 work days a week * 50 weeks a year = $1750/year. Make it $9-10 dollars a day, for $2500/year, to add a muffin to your morning coffee.

I completely agree here. I genuinely feel bad for those who do work hard and try their best. But that is not the case for most of the people I personally know.

I really get tired of hearing people complain about low wages and being broke, but aren't willing on doing anything about it. Ranting on Facebook from their $700 - $800 Iphone while drinking a $5 coffee.

I've worked really hard for everything I have. Late nights on my own, studying to better myself. Missing opportunities to hang out with friends, concerts, etc. But, at the end of the day, I chose to focus on my skills, knowledge, and career. So, when I see these same people complaining, I feel like they are degrading the time I spent and luxuries I gave up to get to where I am.

I forgot about the phone. My sister and her husband fell for that trap. They went further into debt and locked themselves into an expensive family plan for 3 years for their new iPhones.

We live in a really odd time. The concept of money is abstracted away in virtual credit cards - at amounts our parents never had access to. We buy computers and cell phones - things our parents never had. The very idea of spending that kind of money for what you get in return would have been entirely inconceivable for their generation. Today, these things are considered as necessary essentials rather than luxuries.

Good on you for your hard work. I can attest to the fact that it is extremely difficult to ignore conventional modern consumerism. It took me a suicidal "early life crisis" 4 years ago - at the age of 27 - to "get it". I went from being severely in debt (no student loans, just a voluntarily repossessed car and maxed out credit cards), to responsibly paying off every penny. For the first time in my life, I actually have a savings account with some money put away. My spending habits are still not ideal, but I'm doing far better now than I ever did before I hit bottom.

Putting anecdata in spreadsheet form doesn't fix the problem. If you look at spending data people are putting less into things like food and clothing and transportation than ever before in part because housing and medical costs are out of control. That isn't some made up feel good story pulled out of the air, it is solid verifiable data from government agencies that collect this data as part of tracking people and transaction for tax collection and other reasons.

Housing costs are probable twice as much... unless you live in CA...then they are 10 times as much. Imagine buying that ranch in the Oakland hills for 70k in the 80s that's worth 800k. There is the ability of these same boomers to fight new construction. Oh and prop 12! Why not defer all the taxes until the sale of the house!? Boomers in CA living in 800k houses paying taxes frozen at 70k. Awesome deal.

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