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Comment by hnaccount141 | Hacker News Reader

> Like, how do so many young people have a favorite island in Hawaii? How is everyone out there affording new cars?

The reality is that oftentimes they simply can't, at least according to a responsible definition of "afford".

All we see from the outside is the brand new Jeep, we don't see the fact that they're underwater on a 72 month loan with 6% interest. The average car loan term in 2019 was 69 months, that's insane. Something like 30% of trade ins have negative equity.

Even ignoring debt, I've spoken to a surprising number of people who make great money and live lavishly but have effectively no retirement savings. The level of financial literacy in the US is abysmal.

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I would strengthen your statement to say that almost everyone can't afford it. Median household income is around $67K in the US, and the median household assets (minus the house) at age 65-69 is $75K. So even if a third of your income is being replaced by social security, a typical household has not even two years of income saved. A 25th percentile household has less than 5 months! Most people save basically nothing, on net. Even 75th percentile households only have 4 years of income. Assuming reasonable investment returns, that's only saving 2.5% on average. Pensions aren't expensive, retirement is expensive! People, even ones who can easily afford it, often won't save.

https://dqydj.com/household-income-percentile-calculator/ https://dqydj.com/average-median-top-net-worth-percentiles-b...

> median household assets (minus the house) at age 65-69 is $75K

Why would you take out the house? For most people that's a key part of their retirement.

Going into retirement as a renter or with a $500k home paid outright is one of the biggest difference makers.

Selling your house takes time. In a bad economy, it could take a lot of time. Knowing your "liquid" net worth has some value.

But if you own your home you don’t have to worry about paying for a place to live (taxes aside.)

I do see how knowing what your liquid net worth is has some value, but knowing your expenses has value, too.

True. Taxes and utilities do add up. Some neighborhoods also have HOA fees. A lot of people are living month-to-month on their paycheck, so expense is key.

Note: I own my home outright. I bought it in 2000, before the real estate bubble really took off, had a 15 year mortgage, paid it off early.

Right, but that $500k is tied up in your housing, so not really accessible.

I wouldn’t discount it entirely, but home equity should clearly be evaluated differently than cash in the bank.

I’m not sure the, everyone is in debt, is a good explanation for what you’re seeing. Everyone is in debt but that doesn’t allow you to sustainably live beyond your means. Sure you’ll get a small bump on your way to maxing out your credit cards but it won’t take long to reach your limit and then you’re worse off than you were before.

I think a better explanation is small inheritances. I think there are a number of people that have come into small inheritances. Enough to change their situation but not enough to move out of their social circles and because of that they’re very unlikely to let you know.

Say someone gets $500k from their uncle. Not a small sum of money but not a gigantic inheritance. You’re not going to immediately retire if you get that but you might pay off your mortgage. Now ask yourself what your lifestyle might be if someone came along and wiped out your mortgage. Now that Jeep or Audi might not be such a big deal and your looking at them thinking, “how on earth can they be doing that? They’re working the same job I am and I can’t do that”.

> Something like 30% of trade ins have negative equity

Could you please clarify what this means. E.g., A car "X" is traded in for a car "Y". X gets a trade-in-value of $2,000. That is, the cost to buy Y is reduced by 2,000. Where does the negative-equity in your point apply here please? Thanks.

Your old car has more debt left on it than you get in the trade-in.

The dealership gives me 10k, but it still has a 12k loan on it. So on top of the cost of the new car, I am still out $2k.

We can help you out and roll that into the loan for the new car.

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