What’s Your Plan B?
Readers suggested a topic on housing options. “Weekend topic suggestion: where should I move to after my wife finishes graduate school? Maybe a smallish type town in N.Georgia? I can’t wrap my mind around flat, hot, and no fall foliage for the rest of my life. I can’t imagine my kids missing out on these things, too. My original idea of being a teacher in Florida and traveling a lot has not panned out.”
“So, that’s my question for everybody: what’s your plan B now that the bubble is going sideways?”
A reply, “Unfortunately, I don’t have much of a Plan B as I bought a house and have a job I can’t give up. Even if I go underwater I’ll probably keep making payments as long as I keep my job. At this point I’m counting on long-term inflation and the job security of the US government. Neither has failed yet, over the longish term.”
“If you want seasons and rolling hills, the upper South/lower Midwest still has good land, adequate rainfall, and cheap housing. Outskirts of Appalachia like Cincinnati/Columbus, Greensboro or Charlotte, Southern Illinois, Lexington. College towns like Blacksburg VA or Knoxville… even south Jersey and Eastern Shore of Maryland are worth a look.”
“A lot will depend on how marketable the two of you are for jobs. Can you find a medium-sized city where you believe at least one of you can always bring in an income? Can you adjust your living to where you can live long-term on one income; i.e. if you both work it’s gravy but if one is laid off you can get by on one income? Would you be averse to living in a trailer park if you didn’t want to throw money away on rent but didn’t want to lose much if you need to move fast?”
“Stay away from DC. I heard that there are plenty of educated but underemployed spouses available to snap up skilled jobs, and every college offers night-class degrees to people hoping to advancing. It’s a high-octane metropolis where the name of the game is over-educated workers, over-scheduled kids, and overloaded arterial roads full of cars commuting to night classes, airports, jobs in the inner burbs, soccer games, and weekend warrior activities either down at the museums or out in the natural areas. I think you’d be better off in a less-educated area where your education makes you more unique.”
And another, “If the plan is for you to both work outside the home, then you need to carefully assess where both of your best opportunities lie, then find the geographic intersection. Ideally, one of you has a relatively broad range of geographic options, that will accommodate the spouse with more constrained job location choices. Such is the case in our household.”
“More challenging is the case where both of you have limited geographic options. A fellow who sat by me on the plane two months back is a good case in point: His wife is a professor at a reputable university in the Midwest, and he just landed a software engineering job at Amazon.com HQ. Either they have to live half a country apart, or else she has to find a professorship at a PNW university. Good luck!”
The Puget Sound Business Journal. “The condo my husband and I own in Maine (where we lived before moving to Seattle) is underwater. We are trying to get the bank to agree to a short sale, but so far we’ve been rejected. More than half of homeowners under 40 are underwater, which has serious implications for a generation of Americans. When I shared my story, I heard from people all over the country with similar experiences. Here are a few of their stories, reprinted with their permission.”
“Where’s the consumer bailout? My son purchased a house in 2006 in Massachusetts with the thought that it would be a starter home, one where they would build a little equity and then move in three to five years. It cost $254,000 and is now worth $180,000. Thank goodness, they didn’t listen to the mortgage broker who tried to lend them $1 million, with balloon terms that would see their payments rise at the three-year mark, claiming if they didn’t have the money to pay that mortgage they could always sell the place and make a few bucks over what they paid for the place.”
“When I hear the housing mess was caused by people who shouldn’t have bought houses, I could just scream. The housing crisis was caused by people like the broker who wanted to give my son a million-dollar mortgage. The financial wizards saw no need to be concerned about putting that type of money in the housing market because they never thought housing prices would fall. The seriousness of the damage being done to the economy is completely missed by certain politicians today and hence I don’t know if there’s anything that will cause a major change in the way people like you and my son will get out from under a horrible situation that none of you created. Without a ‘bailout’ for consumers like what went to the banks, this economy is never going to start really growing again.”
“Can’t even refinance. Where are the advocates for the consumers who are paying their bills on time and trying to do the right thing by not going into foreclosure? I am attempting to refinance. Last week, a professional appraiser valued my house at 40 percent less than when I bought it for five years ago! Being in North Georgia, I expected some drop in value. I did not expect the shock I received.”
“Refinancing itself has been difficult because the original bank (where I work, no less) saddled me with primary mortgage insurance, even though the appraisal at the time of sale was much more than the 20 percent financed. Fortunately, the current lien holder (the mortgage was later sold) is looking into refinancing under HARP (the federal Home Affordable Refinance Program). Your article clearly reflects the burdens of an underwater mortgage — the uncertainties of retirement (I am 50 years old), the feelings of entrapment and helplessness, and a disheartened view of the future.”
“Not paying my mortgage. I am in a similar situation with a home in Las Vegas. My wife and I lived there for nearly five years, in our home for which we paid $280,000. In December 2011, I accepted a job in San Francisco, and, after consulting attorneys, real estate agents and Bank of America, I was told either short sale or bankruptcy were my only options. Well, Bank of America wouldn’t … lower my interest rate to current market rates or negotiate a lower principal balance until I stopped paying the mortgage. I offered to keep the home and continue payments but they refused. Subsequently, our house was appraised at $126,000. Here I am almost 10 months later, and due to delays on Bank of America’s end (including claims that they lost my paperwork), still owning a home in Las Vegas. Mind you, I haven’t made a payment since January and they haven’t even threatened a foreclosure!”
“The ‘lost decade’. I read your article twice now and have already sent it around to a number of colleagues and industry leaders. I feel your pain and appreciate your willingness to use your platform to tell your personal story. As someone under 40 representing many others under 40, the long-term ramifications of the ‘lost decade’ are sweeping to say the least. Speaking with potential clients, 25 and under is particularly telling because purchasing isn’t even on many of their radars right now.”
“Not your parents’ home market. You’re beginning to understand what I tried to contact our senators here in Washington state about (four years ago) during the banking crisis, as they carelessly chose to pass the bailout package. Someone has to take the fall for the bailout, the bad banks, the derivatives, etc., sooner or later. And that’s you. The U.S. taxpayer and the millions like you. You are going to be literally hit from all sides.”
“You’re realizing what the big boys (government, the Fed, etc) don’t want you to fathom. They rely on you following what your parents told you. It’s imperative for them that you do. You are now personally ahead of the curve, and probably thinking within the new framework that 95 percent of Americans are either unable, or unwilling, to believe.”
“You’re realizing what the big boys (government, the Fed, etc) don’t want you to fathom. They rely on you following what your parents told you. It’s imperative for them that you do.”
IOW it’s their Big Game and they are desperate to have you as a player.
Their Game, their rules. They spent a lot of time and money setting up the Game and they are spending a lot of time and money trying to convince you that you should play.
It’s a private club, a Player’s Club, and you may be invited in now and then to play (and be played) but don’t expect to become a member.
We can destroy them by simply getting people to stop borrowing.
This is a pipe dream.
Household debt is at the lowest level since 2006 (bfd) and savings rates are going back up at a fast clip. More to the point, a whole lot of folks got majorly burned in the crash, and the optimist in me says they’ve learned a lesson about debt and borrowing — at least for a generation or so.
As housing and student debt are retired and chastised Boomers learn to make do with less, I’m betting that borrowing Scads ‘o Cash and living beyond one’s means will be seriously curtailed, and in the coming decade, the consumerist zeitgeist upon which Wall Street fed is toast.
The Great Turning.
Churn ‘em, and burn ‘em enough and eventually you will turn ‘em.
(Except for the slow learners, that is.)
ahansen, how do you propose this will work when incomes are holding steady (decreasing in real dollars) and the price of necessities keeps going up?
Yes, they days of paying for granite and an Escalade with a HELOC are over. But what about the formerly $55K worker whose job went to who-knows-where and had to take a $28K job because that’s all there was? “Learning a lesson” isn’t going to bring back that $55k job.
“Learning a lesson” isn’t going to bring back that $55k job….”
No, oxy, it sure won’t. But people can live without electronics and 24-hour-a-day media. They can live without processed foods and drive-through eateries. They can wear sweaters in the winter and they can sweat in the summer.
They can live without new clothing every year and telephones for their children and a bedroom for every person in the family. They can live without streetlights and sidewalks, and trash liners and seven administrators for every nurse. They can walk places or ride a bike or take a bus or carpool, or stay home and read. They can fix stuff again instead of throwing it out. They can stop taking pills. They can buy second or third hand goods or do without that diamond bezeled coffee grinder in the first place.
I know this is possible because when I was a kid that’s what we did, and life went along just fine. Maybe our day-to-day won’t be quite as simple at 10K a year median salaries, but there are more than a few perfectly tolerable places on this planet where that’s a damned good middle class income. It’s just that our American expectations (I refuse to use the word “entitlements”) have far exceeded our abilities. (And I don’t mean welfare for poor people or CEOs, either, but that’s another thing…)
You’d be AMAZED at what people can live without– and often with a better overall quality of life. And even if you can’t imagine it, you might as well get used to it, because that’s what’s coming.
“You’d be AMAZED at what people can live without– and often with a better overall quality of life.”
Well said ahansen, especially the above sentence. I am guilty of getting rid of the TV 6 years ago, never missed it. I am using the time available to exercise, cultivate new hobbies, including the last 2 years, learning a new language.
Some time back I mentioned in this blog that the new electronic devices are actually making the average joe/jane below average - I have a suspicion that it was designed that way to keep the masses occupied with titillating stuff. Of course, used properly these devices can be very helpful in learning… but who wants to learn these days, eh!
There it is. Done one dollar at a time.
Milton Friedman to his class: “Did anyone vote today?”
Class: “Vote? There’s no election today.”
MF: “Did any of you buy anything today?”
“Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one.”
(from Charles Kindleberger’s book. A work of genius.)
Until everyone who is underwater bails themselves out by short selling or walking away - this won’t be over. Until households get their debt levels in order (as in very little to none), this won’t be over.
And yes, it will crush banks and crush the economy. But after that Main Street can build up again. No solvent Main Street means no solvent economy.
“Unfortunately, I don’t have much of a Plan B as I bought a house and have a job I can’t give up. Even if I go underwater I’ll probably keep making payments as long as I keep my job. At this point I’m counting on long-term inflation and the job security of the US government. Neither has failed yet, over the longish term.”
Has it dawned on America yet that buying an overpriced home at a deflationary point in the economic cycle amounts to signing an indentured servitude contract?
“Has it dawned on America yet that buying an overpriced home at a deflationary point in the economic cycle amounts to signing an indentured servitide contract?”
The first step is convincing people that we are “at a delfationary point in the economic cycle”.
After this is done (if it can be done) all else should naturally follow.
It is hard to fight the Fed when it comes to such convincing.
In spite of the Fed, as reported on this blog, something like 40 percent of Americans could not get their hands on five-hundred dollars of cash if they needed to.
“In spite of the Fed, as reported on this blog, something like 40 percent of Americans could not get their hands on five-hundred dollars of cash if they needed to.”
Isn’t it 47%.
I thought it said they didn’t have $500 in savings. Doesn’t mean the Fed can’t help them get their hands on $500.
Yeah, didn’t have $500 in savings, maybe that was it.
Luckily for some we have payday loan stores popping up everywhere.
(sarc)
Oh, also the WE BUY GOLD! stores. You stand in line to do what? To trade in your precious and get back worthless fiats?
(snort)
Oh, also the WE BUY GOLD! stores. You stand in line to do what? To trade in your precious and get back worthless fiats? (snort)
They might have 1 ounce gold coins worth today 1,750 fiats that they bought 11 years ago for 265 fiats.
Or a bit over 30 years ago for $700 fiats.
I don’t recognize some of the quotes in this entry and normally I see them all. Anybody know where the link is to the “lost decade” story referred to above? Sounds interesting…
Not sure this is the right one; there are too many “lost decade” articles out there to choose from!
Released: August 22, 2012
The Lost Decade of the Middle Class
Fewer, Poorer, Gloomier
Chapter 1: Overview
As the 2012 presidential candidates prepare their closing arguments to America’s middle class, they are courting a group that has endured a lost decade for economic well-being. Since 2000, the middle class has shrunk in size, fallen backward in income and wealth, and shed some—but by no means all—of its characteristic faith in the future.
These stark assessments are based on findings from a new nationally representative Pew Research Center survey that includes 1,287 adults who describe themselves as middle class, supplemented by the Center’s analysis of data from the U.S. Census Bureau and Federal Reserve Board of Governors.
Fully 85% of self-described middle-class adults say it is more difficult now than it was a decade ago for middle-class people to maintain their standard of living. Of those who feel this way, 62% say “a lot” of the blame lies with Congress, while 54% say the same about banks and financial institutions, 47% about large corporations, 44% about the Bush administration, 39% about foreign competition and 34% about the Obama administration. Just 8% blame the middle class itself a lot.
…
Thanks. It’s interesting that with middle class wealth back to 1992 levels, you’d think housing would go back to those prices.
I think in Vegas prices are pretty much there.
I agree…I think there may be many area’s that have re-set to 1992 or even earlier…
Once city (detroit) hardly qualifies as “many areas”.
They haven’t gotten the memo yet.
They think that if they could roll the dice on housing just one more time, they’ll manage to come out on top.
At the end of the 80’s in Houston, there was a classic sign, “Please God, just one more bubble and we promise not to p1ss it away this time.”
Repeated as a bumper sticker in Silicon Valley in 2002.
Insanity dies hard but it will die surely.
It will be the lost century by the time something changes.
“More challenging is the case where both of you have limited geographic options. A fellow who sat by me on the plane two months back is a good case in point: His wife is a professor at a reputable university in the Midwest, and he just landed a software engineering job at Amazon.com HQ. Either they have to live half a country apart, or else she has to find a professorship at a PNW university. Good luck!”
I forgot to mention the two homes they own in the said Midwestern city.
BwahahahahahahahahhahahHAHAAHAHHAAAAAAAAAAAAAAAAAA!!!!!!
This is beyond idiotic.
Everyone knows the two-body problem in academia. Even worse is when one of the two is geographically limited and the other is not.
Two homes in the Midwest? Seriously?!?
Couldn’t they just rent a cabin on the lake in the summer and be done with it?
Nooooooooooo. They were gonna get rich, rich, rich and anybody that argued otherwise was a dolt.
“This is beyond idiotic.
Everyone knows the two-body problem in academia.
Two homes in the Midwest? Seriously?!?”
I guess I also forgot to mention she is a finance professor; guess that like many financiers, she had no clue the housing market was headed into the toilet.
However, much to my amusement, my travel companion seemed quite certain the housing market was in the eye of the hurricane, with another major onslaught after the eye is past…
“Even worse is when one of the two is geographically limited and the other is not.”
In fairness, the Amazon gig came later, and was clearly a game-changer for their household.
Can I attempt to read between the lines?
The wife is in Madison, right?
That’s the only place with a lot of software companies (because of UW’s dominance in the database field.)
STL
Aah, WUSTL.
Bet he worked for the university then.
Getting closer to correct now…but for confidentiality reasons, I’m gonna stop dropping hints.
Gee, pursuing a highly specialized, non-portable profession seems like a bad idea anymore. Better off to be a nurse, secretary, mechanic or waiter. Even teaching seems hard to move with now. Almost as bad as buying a house.
Do you think that turning our professional class into freelancers and migrants is a good thing?
The ABA seems hellbent on destroying that particular profession.
Graduating 45K lawyers each year when there are only about 22K jobs is guaranteed to destroy the “profession”.
Government-sponsored loans, non-dischargeable in bankruptcy, IBR (which is a joke.)
They make Wall St. look like amateurs.
Make while the getting is good seems to be the name of game. (And incidentally, all that non-dischargeable debt is ABSURDLY deflationary.)
“Graduating 45K lawyers each year when there are only about 22K jobs is guaranteed to destroy the “profession”.
This is what puzzles me about all of the engineering folks who say that English majors should have studied STEM subjects and if they are doing poorly, it is their own fault for picking the wrong major. I can understand that lawyers could be math challenged, but I would expect engineering graduates to comprehend that increasing supply would drop salaries in STEM fields.
Your logic is useless against the power of smug.
LOL
Good lawyers are NOT math challenged. Vast swaths of the law require being able to manipulate and explain numbers.
Good lawyers may not be math-challenged but incoming law students (as a collective whole) are definitely math-challenged.
The absurd dreams of the English major aligned with the “special snowflake syndrome” means they don’t understand the basic math.
45K lawyers annually, 22K jobs, non-dischargeable debt.
What’s so hard?
At my previous job we had a fellow who went to law school and passed the state bar exam. He couldn’t find a job as a lawyer and instead works as a $50K per year software tester.
One has to good to begin with. And even then one needs the right opportunity to come along to find out what one’s skills really are.
These days the universities are handing Bachelor’s degrees to anybody that ponies up the tuition. Similar to “if you fog a mirror you can get a loan…” It rather amuses me that with this graduation churn rate people still can’t hold a 3.0 GPA. And the ones with 3.0 GPA have a memory so poor that they have to google basic math and use wikipedia for basic physics.
The sad thing is that most of these people do not know they have below average skills but have a sense of entitlement that is far greater than their ability & aptitude. I guess it is one way for middle class parents to part with their hard earned money to support the education of their off-spring.
“Not your parents’ home market. You’re beginning to understand what I tried to contact our senators here in Washington state about (four years ago) during the banking crisis, as they carelessly chose to pass the bailout package. Someone has to take the fall for the bailout, the bad banks, the derivatives, etc., sooner or later. And that’s you. The U.S. taxpayer and the millions like you. You are going to be literally hit from all sides.”
Household financial survival from here on out amounts to ensuring that your household does not become one of the primary bagholders for the Wall Street bailout.
But we will, in the form of high food and energy costs, along with limited employment and future financial prospects.
OK, so knowing all that is coming, have you downsized your expenses so that you can capitalize yourself?
I’ve been noticing that at least half of the people who acknowledge these trends, only offer lip service to it. If they get extra money, they spend it. Their expenses always expand to fill their incomes. A significant minority of people seem to have no savings at all, and the majority are woefully unprepared due to having no savings or having stuck what little they have into the Wall Street casino.
Hollywood and Wall Street have done a heckuva job convincing us to be this way, but I’m suspecting they don’t have to work that hard at it. We as Americans are prone to spend ourselves into bankruptcy, health issues, divorce, foreclosure and lifelong despondency.
Better question would be, Is your Plan B covered by Insurance?
My plan B is the same as my plan A. Keep working. There are people in my office in their late 60s and early 70s who are still there and don’t seem to have any particular plans to leave. There are others who are saying good bye in their early 60s. I’ll be in the first group. Barring winning the lottery (and since I don’t buy lottery tickets my chance of doing that is just a miniscule fraction less likely than the chance of the people who do), that is my only choice. I spent some time unemployed. That was my “retirement.” Its over now. If the current plans to allow for partial retirement (collect 50% of your salary and 50% of your pension while working half time) goes through, that could be a good option eventually. It has to pass first.
I talked through retirement plans in our office with one of the women who will be leaving at the end of the year. We counted at least 12 people within the next 12 months, maybe as many as 16.
Same here, work til 70 if they’ll let me. I had too much fun when I was young.
It’s okay, since I’ve blown through so many hobbies and avocations that I really don’t have anything better to do now anyway.
“There are people in my office in their late 60s and early 70s who are still there and don’t seem to have any particular plans to leave.”
Same in my shop. What is really sad is when someone in that group has a life-changing health status change that scraps the post-retirement-age employment plan overnight.
You guys do realize that Ross Peroxide was referring to Plan B the morning after contraceptive. As far as I know, it’s not covered.
“Where’s the consumer bailout? My son purchased a house in 2006 in Massachusetts with the thought that it would be a starter home, one where they would build a little equity and then move in three to five years. It cost $254,000 and is now worth $180,000. Thank goodness, they didn’t listen to the mortgage broker who tried to lend them $1 million, with balloon terms that would see their payments rise at the three-year mark,”
I know someone who did that and stopped paying when their payments ballooned at the three year mark. In fact she was a corporate fraud lawyer and said that the ballon payment was unexpected. She searched for a foreclosure defence, discovered Robo signing and ended up on 60 minutes. In the end she recieved an $18 million whistle blower settlement.
So as it turns out your kid should have taken the $1 million.
Hindsight is 20:20.
Everyone can’t be the “first” whistle-blower. In fact, “most” people are not first.
Starter home is $254K.
Hilarious!
What a dumb@ss. Guess what, pal? “Starter” homes aren’t $180K either.
Most of these @sswipes couldn’t save up $20K and they take on debt of a quarter of a million with such insouciance that it just boggles the mind.
FB, indeed!
I know a couple who just bought a house. Their Realtor was telling stories of how broke the people are who are buying right now. Lots of future FB’s signing on the dotted line right now.
Free entertainment as far as the eye can see.
LOLsies.
Apparently, it’s easy to do if you have no concept of money and what it takes to earn and save it.
Two types of folks don’t know the value of money:
(1) Those on the parental/bank dole;
(2) Those on the government dole.
That must be about half the total population these days, maybe more.
A great many 20-somethings have no concept of what $254,000 is. Helicopter Mamma & Dadda and/or Helicopter Ben have made sure of it.
Further, mamma and dadda likely have no idea, either. From about 1975 to 2006, knowing didn’t matter much. Highly favorable demographics early on combined later with Ponzi credit resulted in lots of false ideas of money.
It was quite the deal for Mumsie and Dadda for 30 years.
Leaving Dadda sputtering, fuming and fretting about the lack of standards in the press.
Bail out, Bubba, baby!
Apparently, it’s easy to do if you have no concept of money and what it takes to earn and save it.
A great many 20-somethings have no concept of what $254,000 is.
Absolutely 100% truth.
The understanding of the value of a dollar eludes 99% of people. Too numerous are the times I hear people talking about large sums of money as if it’s petty cash.
“I’m going to buy a house” really means “I’m going to pay a massively inflated price for a depreciating asset. And furthermore, I’m going to borrow that inflated amount and pay interest on it for 30 years”.
That is the reality in the current environment. Massively inflated borrowed money for a depreciating asset.
Two types of folks don’t know the value of money:
You missed one type: those who are spending borrowed money, where said borrowing has always been easy…
couldn’t save up $20K and they take on debt of a quarter of a million with such insouciance
The thing is, many of them can make the $1400 a month payment on a $250,000k mortgage, and even do it for the entire thirty years. But they’ll never be able to save up that $20k. It’s just how some people are. If they’ve got $20k, they spend it. But they’ll still pay the bills. I know people like that.
For these people, home-ownership is probably a good thing. It’s a form of forced savings, and given that they’d blow the money otherwise, at least they’ll have a house at the end of the road, whereas otherwise they’d probably have nothing. They’d take the money they’d save renting, and spend it on tattoos and wet bikes.
at least they’ll have a house at the end of the road,
That’s how it worked before we started encouraging them to liberate their equity. Not so much any more.
“My son purchased a house in 2006…”
At least he identified the absolute market peak.
In the end she recieved an $18 million whistle blower settlement.
I deem her Ultimate Deadbeat.
(You kind of have it for her, don’t you, Jethro?)
When I hear the housing mess was caused by people who shouldn’t have bought houses, I could just scream. The housing crisis was caused by people like the broker who wanted to give my son a million-dollar mortgage.
Yeah sure, gramps!
Whatever you say.
Bet you and your son didn’t pull out a spreadsheet either. You were speculating and now you want to scream.
Aaah, Galbraith. You nailed the psychology so well.
It’s not my fault, it’s not my son’s fault, it must be Suzanne and the bankers.
Whine, whine, whine. You want some cheese with that?
Bet gramps wouldn’t have blamed the broker if the house sold for a cool million instead.
Bet he didn’t blame the broker when gramps sold his last house at an exhorbitant price.
Even if I go underwater
You’re already underwater in the tens of thousands of dollars range.
Oh stop p00ping on her parade. Let her be under the delusion for a few more years.
Have you heard the ol’ joke about the man who was condemned to die?
He petitions the king, and says that he will teach the king’s horse how to talk in a year, and if not, he can be executed then. The king is intrigued. He mulls over it and acquiesces.
Afterwards, the man’s friend angrily tells him, “Are you insane? There’s no way that horse is going to talk.”
The man says, “My friend, in a year’s time anything can happen. I might die. The king might die. The horse might die. And who knows, maybe the horse will learn how to talk!”
Ironically, if I stay under the delusion about being above water for a few more years, then inflation alone may put me above water.
As it is, I’m probably not underwater because of the down payment I made.
lol.
I don’t care if you paid cash. You’re underwater.
“Even if I go underwater”
Give em a SNORKEL!
“Give em a SNORKEL!”
Yeah . . . and get back to work!
Plan A: Stay footloose. Rent cheap, continue to get engineering gigs wherever pay is reasonable (stay with L.A. client until they kick me out), continue building up cash for stock buying opportunities (big correction is due) and living expenses.
Plan B: buy a house in North Scottsdale and downsize my job/income.
Fiscal year 2012 taxes on me will be very high. I figure total of $60,000 federal income tax and perhaps another $8,000 on long term capital gains. The thugernment will love this victim for complying and funding their destructive socialist engineering schemes. But they will get verrrry little from me in 2014 for the 2013 tax year!
You’re a smart dude. Stick with Plan A as it has worked well for guys like you and me for a long time.
Plan A has certainly worked well. It will continue to work well…until it won’t. When will it cease? When my Excel spreadsheet numbers show that becoming a direct hire is more profitable than working as a contractor. Even so, it probably will continue to be smart to rent cheap and just hop to another company as a direct hire when opportunities run out at the stale company.
I had a chance of becoming a direct hire in late 2007 versus consulting. The direct job was $70 per hour in Phoenix. The other place in Maryland was close. I said yes on the Friday night to the direct job. Then over the weekend forgot I did not factor in the company match I would forfeit if I left my job shop (one of few who do company matches on 401ks). I reversed on Monday and became “Bill In Maryland.” spreadsheets don’t lie but they are only good if you include all the relevant data.
But they will get verrrry little from me in 2014 for the 2013 tax year!
Shouldn’t the logical position be that conditional on whatever tax structure there is in the first place (irrespective of whether you like it or not), you work to maximize your take-home?
What “they” get from me or not is largely irrelevant. I just work to maximize my take-home. How that happens is all that matters.
Come on Bill $60K is that all? You have some explaining to do to Measton, Oxide and others about your unwillingness to a pay a “fair” share.
Come on Bill $60K is that all?
FWIU Bill’s taxes that he pays is mostly money that originally comes from……..taxes. I guess the Government’s getting a rebate.
Seems kind of governmental for them to even give it out in the first place doesn’t it..
You forgot to include school marm. She obeys all speed limits. She never does a rolling stop. She always uses turn signals. Should her turn signal light break, she will make her own self-arrest to pay a fine to Washinton d.c. police and get her light repaired. and so on ad nauseum.
From the IRS website (go to site and type “tax home” in the search box):
Topic 511 - Business Travel Expenses
Travel expenses are the ordinary and necessary expenses of traveling away from home for your business, profession, or job. Generally, employees deduct these expenses using Form 2106 (PDF) or Form 2106-EZ (PDF) and on Form 1040, Schedule A. You cannot deduct expenses that are lavish or extravagant or that are for personal purposes.
You are traveling away from home if your duties require you to be away from the general area of your tax home for a period substantially longer than an ordinary day’s work, and you need to get sleep or rest to meet the demands of your work while away.
Generally, your tax home is the entire city or general area where your main place of business or work is located, regardless of where you maintain your family home. For example, you live with your family in Chicago but work in Milwaukee where you stay in a hotel and eat in restaurants. You return to Chicago every weekend. You may not deduct any of your travel, meals, or lodging in Milwaukee because that is your tax home.
This is really interesting. If I read it correctly, a telecommuter should pay tax in the state and municipality in which the company is located.
This means that if the company is located in Texas and the telecommuter is located in New Jersey, then Texas (no state income tax) is the tax home.
Or is this tax home only used for determining business travel expenses? And state taxes are owed based on actual residence?
Bill in LA, you could get yourself in tax trouble if you do not do this correctly. Calling polly a school marm for pointing out potential trouble does not help you if you are audited.
How does this apply if the employer pays for the travel expenses? In that case, the employee would not be deducting the expenses on their tax form. The expenses would be deducted on the company’s tax form.
The tax home rules are primarily used for deciding whether expenses are business or personal. It has NOTHING to do with whether a state considers you a resident. States usually want to count you as a resident if they can possibly manage it. A number of years ago, NYC called you an NYC resident if you had a permanent place to live there (even if it was just a studio and your main house was gigantic) and spent 30 days a year in the city. I don’t think any of the states are that aggressive, but they sure won’t take your word for it that you don’t live there. And they don’t care that you pay taxes to some other state.
Bill is clearly in violation of this rule. He thinks visiting his furniture every few weeks, paying rent, voting and a few other things will protect him in an audit. It is, perhaps, the most obvious example of bad tax advice I have ever read about. His accountant is either warning him that he is taking a huge risk (doubtful for a person as fearful as Bill) or a moron.
No you folks are ignorant. You do not know my legal situation. I follow the contacts I sign with my company and that is all I need to do, according to my saffi g company’s legal counsel.
You folks are too much in awe of the school marm just because she is a lawyer. But don’t be awed. She does not know all the law. She has the same disease as phd syndrome, I.e. if she is an expert on one thing, she is an expert on everything.
In essence, Polly is just plain arrogant and is no more impressive than a 13 year old talking “valley talk.”
PhD Syndrome=Law Lover Syndrome
“In essence, Polly is just plain arrogant and is no more impressive than a 13 year old talking “valley talk.””
And our governments at all levels are just full of these clowns.
Just as long as Bill realizes that the staffing co counsel does not represent his interests.
You know how when you’re watching a teen horror movie and the rich puke stands there all smug with a beer in one hand and his other on the doorknob and tosses off a couple of lines about what a bunch of wussies everybody is, then he opens the cellar door and starts to head down the stairs and everybody in the theater is thinking “Don’t go down those stairs you freaking idiot” and yet you’re still all hoping he does…?
That.
“In essence, Polly is just plain arrogant and is no more impressive than a 13 year old talking “valley talk.””
Hardly. Polly has an impressive mind. You, on the other hand, are and arrogant SOB who acts like a 13 year old.
If you don’t pay the lawyer, the lawyer doesn’t work for you.
Does your contract include a provision that requires the company to compensate you for all taxes, penalties and interest owed if you are audited and found to be in violation despite following the advice they gave you? Will they pay someone to represent you at the audit? If not, the advice is totally worthless. People who are sure they are right, put their money where their mouths are. The ONLY thing that could actually protect is a private letter ruling, and the company can’t get that for you - you have to do it yourself, though the company could pay for you to get one.
Comment by polly
2012-10-21 22:30:15
If you don’t pay the lawyer, the lawyer doesn’t work for you.
———
Even when you do pay a lawyer, they often still won’t work for you.
Ever heard of the term “collusion?”
I have.
Gonna be hard to be footloose in the pen, Bill. But your living expenses will be cheap.
And he’ll get all the commitment-free action he wants, with no danger of getting arrested :-).
First this—> we paid $280,000
Then this—-> our house was appraised at $126,000
Hmmm…. Your house is now worth $60/square foot. That is precisely what it was worth when you bought it. Why? Because that’s roughly our cost to build a stick framed structure…. with overhead and profit.
You allowed yourself to be ripped off because you simply don’t understand the value of a dollar. Like tens of millions of others…….. You got ripped off on depreciating houses at grossly inflated prices.
Are you including the cost of land in your calculation?
Oh, right, it’s Vegas… yeah, land is 0. Carry on.
RAL never includes the cost of the lot.
Hey chamber chump…… You couldn’t figure out the value of a lot either.
RAL doesn’t include the cost of the utility hookups, driveway, off street parking, walkways and landscaping. Or permits in a high cost locale.
But he’s right about the $60/sf raw building cost. Especially for McMansions where most of what you are selling is air.
Site package? <$20k. Permit? <$2k.
$60k/sq +22k.
plus paying for the dirt
And that one eludes you too.
I have a plan B overseas, but plan B overseas always looks good to Americans because being American still carries with it various privileges that you wouldn’t have if you were from someplace else. Within reason, of course. I used to watch “Locked Up Abroad” and the subjects were unintentionally hilarious, thinking that because they were American, foreign drug trafficking laws wouldn’t apply to them, and that even if they did there was no way they would do hard time in a foreign prison.
I believe this to be urban legend, but there was a persistent rumor years ago that the Bush family and/or other prominent neoconservatives were buying extensive tracts of land in Paraguay, as their own version of plan B.
Like Polly, I plan to work until I cannot. I don’t think retirement will be an option for anyone my age or younger.
The Bush family DID buy extensive land in Paraguay but it’s not because they need to flee the country.
They bought the land which came with the aquifer rights underneath. They were buying the water. The land was just a means to an end.
I was intrigued by this rumor when it first occurred around 2005, because I’d ridden through the Guarani Preserve between regime changes in the late 90’s and loved the place. There’s a lot of circumstantial evidence, but as of yet, I’ve found no reliable authentication or documentation (other than this report) of the reputed purchase:
http://www.guardian.co.uk/world/2006/oct/23/mainsection.tomphillips
This was in 2006. Anyone care to update?
Overseas my only choice would be Switzerland where every man is required to own a gun. I love The Second Amendment we have. I cannot imagine living in anyplace that forbids anyone to defend himself from government thugs.
Thugernment comes for my gold and silver? I will deliver lead to them.
I cannot imagine living in anyplace that forbids anyone to defend himself from government thugs.
The government thugs have bigger and a lot more guns than you do.
Not to mention drones. Delivering lead to them is likely to get some lead delivered to you in return.
Not foreigners.
Please don’t expect Bill to understand that you can’t just move to other countries and then be treated like the folks who are born there. There is very little likelihood that you even be allowed to stay for more than 6 months - especially when the only reason you are highly employable in the US is that you have a security clearance.
Colorado gets it with getting his whole family EU passports.
That’s right. Other countries, at least the ones you’d want to live in, don’t have open doors for immigrants.
Heck, even sucky Mexico is stingy as Scrooge McDuck with their version of a green card. When I lived there in the 70’s I had a coveted FM2 visa which we were able to get because of an inside connection. We met a family from Texas who wasn’t so lucky. The mom was Mexican and the rest were born in Texas. She couldn’t get FM2’s for her family. The only option offered to her kids was to renounce their US citizenship and naturalize Mexican, which they did (I told them they were nuts).
My late mother was also a Mexican national. I contacted the local Mexican consulate about becoming a dual citizen a few years ago. Talk about hemming and hawing. They didn’t seem to care one bit that my mother was Mexican either. Since I wasn’t serious about it, I didn’t pursue it.
One of the problems with an overseas plan B is the question of whether your target country would want you when you are ready to exercise that option.
Right.
I always raise that issue when racists discuss deporting me/black people back to Africa.
If nobody wanted the Jews…
Get that foreign passport first.
My plan C is to sell my house, leave this country and move to someplace warm with white sandy beaches, nice people, universal or affordable health-care and a relaxed pace of life.
But so far, even though far from perfect, my plan B is still going OK.
Actually in light of my friend of 35 years dying Tuesday at 50,
and all the misery around us, I’m pretty much blessed right now to be healthy along with most of my loved ones.
Thank you God!
I’ve been living the plan B all of my life.
And I’ve followed Plan B about five times already now. I can’t say I regret any of the twists and turns I made in my life trajectory to stay afloat during a period turbulent in U.S. economic history…
Jericoacoara?
Oh wait, you said leave the country.
Condolences on your loss, Rio. And congratulations on your realization of Plan C+++. Somehow it all evens out, even if everybody does get it in the end….
A gentle attitude makes all the difference.
Truly sorry to hear about your friend. I saw this this week and posted it but I don`t know if you saw it or not. It made me think about what is really important when it is all said and done.
http://www.legacy.com/obituaries/idahostatesman/obituary.aspx?n=sonia-todd&pid=160514162 -
“My plan C is to sell my house, leave this country and move to someplace warm with white sandy beaches, nice people, universal or affordable health-care and a relaxed pace of life.”
Cuba?
zzzzzzzzzzzzzzing!
Greenland (post global warming)?
Sorry about your loss Rio.
For some perspective, thing of what my wife and I were thinking in the late 1980s/early 1990s, before we had kids. At that time there was a housing price bubble just as large as in the 2000s, but more limited geographically — to the Northeast Corridor and California. Our relatives were yelling “buy before your are priced out forever,” but we realized we couldn’t afford to buy a house at those inflated prices, given what that would mean for the rest of our lives.
So we thought we’d live as cheap as we could in NYC, take our savings, and move to a lower cost area such as the ones described in the the post. Our idea at the time was upstate NY, because we went to school there and actually liked the climate.
What we found out over time is that even if we could find a job in a place like that, it would be the only job available. If we needed to change jobs, we would have to move and move again. And that’s what folks who live in mid-sized metro areas generally do.
The exception is those who hold jobs that are ubiquitous, such as teacher, health care worker, and retail/restaurant/service worker. The first two options are dependent on government spending, and that’s why everyone Upstate wants to work for the government or a government-subsidized company, because the third option is low-paid without benefits. (Upstate used to have lots of manufacturing, but its economic history has mirrored that of the Midwest, but with the decline happening earlier and Downstate NY to suck in money from).
Long story short the Northeast Corridor housing bubble deflated briefly, before inflating again. We bought a house in Brooklyn in between bubbles, and have been there ever since. I have had several jobs, all a different stop off the subway or a bike ride away, but we’ve lived in the same neighborhood since we were married, and in the same house since we had kids.
But now that house is in theory worth something like $1.2 million, based on comparable sales. If this continues for another ten years our kids will find themselves facing the same situation we were in during the late 1980s.
Bottom line: flyover country may have corrected back to realistic housing prices, while places such as NY and SF has not. But in those places you face the question “how are you going to earn a living?” Even if you get a job before you go, eventually someone will move your cheese. That’s why economic refugees continue to flood into Brooklyn from the Midwest, to live four to a room while working for tips. For now, it’s one of the only places with a dream alive.
“At that time there was a housing price bubble just as large as in the 2000s, but more limited geographically — to the Northeast Corridor and California.”
That’s a contradiction of terms. I suggest you try to remember the early-2000s, when the word from the top was that there was no national real estate bubble in the U.S., though coastal markets had become a bit frothy. What a difference the rear-view mirror perspective makes?
The other difference is with respect to magnitude of price increases. For a great example, a colleague moved to SD in 2000 to start his position. His dad, a Realtor™ in another state, advised him not to buy, as prices were too high and bound to correct. By the time we had this conversation, prices had more than doubled from their level in 2000.
Where in upstate?
UT
Checked out the Capital District, toyed with Syracuse/Rochester/ Buffalo. Some members of my wife’s family moved to and away from Rochester/Buffalo. One was transferred to the Capital District for now.
All these places are in worse shape now than then, except the Capital District, though I hear Rochester may be starting to improve now that there is nothing of Kodak left to lose.
CD is in much worse shape now.
Yes, that’s the issue with the Oil City plan. If you move to the cheap housing, how can you support yourself? Even lucky ducky jobs are dicey. Of course, if the jobs were better than luckyducky, then the housing prices would be accordingly higher.
If your home is really worth $1.2 mil, depending on your age you probably could go retire and go Oil City and live off the house money for quite a while. But would you want to.. even suburban life is more difficult and expensive that I thought, as I found out. Oil City is probably tougher. And Oil City is risky. One health problem and it’s game over. That’s why Polly and I are seeing so few people retire from the Fed government. By now their workplace is full of old friends and good money. Why not stay in a house where you’ve been for 15-20 years, pay the (now) cheap mortgage, and sock away the $$$ in case the grandkids need it.
“If you move to the cheap housing, how can you support yourself?”
There’s the health care thing, too.
I remember speaking with someone who had moved to various small towns/cities. Rental housing was non-existent in the places they were living. They always had to buy when they moved to a new place.
With small towns/cities being dependent on very few employers, there is a higher chance of being unable to sell when leaving than in larger areas with more diverse economies.
That’s why economic refugees continue to flood into Brooklyn from the Midwest, to live four to a room while working for tips. For now, it’s one of the only places with a dream alive.
GOOD. Get those F@#$%ers out of here, where they are looking for the same jobs I’m trying to find. The Midwest needs to have a very high % of depopulation, although that would cram them into other cities to create a large base of poor people. They’ll have services, but little liberty. But hey that beats starving.
As far as I’m concerned, I want to see at least 10% of the people in my metro area (about 60K people) just pack up and LEAVE. It doesn’t seem to be unreasonable to suspect that about 1 in 10 have options to perform the move, like relatives on the coasts and Texas, where there are jobs, even if low paying. Ultimately a low paying job beats having no job year after year… particularly when being unemployed for the expected amount of time, automatically disqualifies you for most open positions. Employers here had long become utterly vicious. I can understand with a sick little thrill why workplace shootings take place; I’m hoping future ones will start in the HR department.
Just returned from a week-long visit to San Jose, CA, but I remembered to make my HBB donation before leaving. Prices are rising on the trendy west side according to a couple of friends, but they’re confident that it’s a dead cat bounce. Certainly no sign of a recession with waiting lines at $60/plate restaurants. Great weather too; jealous.
I decided to drive to Portland’s PDX airport for the flights, and upon returning yesterday I visited the Oregon Handmade Bicycle show before my five-hour drive home. Lots of very cool warez, but ‘ya better bring your printing pre$$. The ladies were all great looking tight-azz hard-bodies, and I forgot to pack my hoodie sweatshirt; gotta get to work on my time machine.
Nice…I checked out the show’s website…I will take the one in picture #33….
Where are you seeing numbered images? All I see are various galleries of images.
I am itching to buy a dirt road “gravel” 29r bike with a Rohloff 14-speed internal geared hub, and now that hub is available with 36-spokes! They also have the latest revision of Gates belt system called Center Track. They had several companies there with bikes built with these systems, and they look awesome from an engineering perspective. The creative folks at Co-Motion Cycles have also created their own shifter for the Rohloff 14-speed hub; very clean, simple, awesome!
eventually someone will move your cheese. That’s why economic refugees continue to flood into Brooklyn from the Midwest, to live four to a room while working for tips. For now, it’s one of the only places with a dream alive ??
Yep….The world is flat and the broad based carrear job opportunities like the 50′ & 60’s are gone…We really screwed the pooch here…
all your cheese are belong to us
RIP George McGovern. With his defeat, George Meany and Richard Nixon sealed this country’s moral fate.
Here’s an excellent obit by Joanie Walsh:
http://www.salon.com/2012/10/21/george_mcgovern_he_deserved_better/
Either the McGovern or the Goldwater solution are better than we we have now. Unless those guys actually cared about their country, and could act decently.
Towards the end of his life, Sen. Goldwater and I became pen pals of sorts, and though I never met the man in person, he stuck me as one of the most decent and reasoned people I’d ever known. Perhaps like his contemporary, Alabama Governor, George Wallace, the infirmities of age and circumstance sparked a reconsideration of his hitherto-for strongly held intolerances?
Or maybe it was for political show all along?
I really appreciate reading everyone’s plans. I was very busy the last few days and didn’t get a chance to catch up until now. We just celebrated my daughter’s 3rd birthday. Time flies.
I really don’t know what to do next. Neither plan A nor plan B is in effect as originally envisioned.
Plan A: move to FL, become teachers, travel a lot, spend tons of time with family all over the country during summers
Plan B: get creds and experience in FL and become teachers/administrators somewhere else
Both of these plans have been idled by massive time pressures, housing costs, increased living costs, etc. and some serious changes to education over the last few years. I haven’t quite devised a plan C, although maybe it will involve doing the half-back thing to E. Tennessee, N. Georgia or something like Delaware. I don’t know.
Florida is out of control for insurance, food, and… well just about everything. I’m not even sure I want a crapshack here anymore.
Palmy, we were at Hunsader Farms in Bradenton yesterday, and man, I do love pine scrub flats. Truly beautiful. What to do?
Plan D: I have international education experience, so we may take this show on the road in a few years. That might be an awesome thing.
The kiddos at a rehearsal dinner a few weeks ago:
http://i864.photobucket.com/albums/ab205/muggyflo/kiddos.jpg
absolutely adorable! (i’m a grandma, i’m qualified to make this assessment
)
Thanks.
For perspective, I was childless and living in a 450 sq. ft. 1br when I started reading Ben and this blog in 2006. There are days when all of this housing BS overwhelms me, but my kids always get me back on track.
Yikes! Now THERE’s a kick in the teeth, Mugs. I remember well the days before you were doing the parent thing, and now here they are, these walking talking people. More to the point, your daughter is my doppelganger at that age. Absolutely uncanny, right down to the eyebrows. I’m really happy for you, hon, you can tell they’re just beautiful children. (Awwwwwwww.)
Those kids are adorable. Mine are, too, but they make up for it with occasional rotten behavior…
The entire problem starts with bad lending. Lenders making bad loans which they then sell.
Now, the trick is this: If only market forces were at work, the end buyers would get burned once, and would learn their lesson. The system would be quickly self-correcting. However, government guarantees the debt, which removes the market-discipline counterbalance. The government guarantee is the cornerstone which allows the predatory financial sector to thrive.
Government should not be in the business of guaranteeing private debt.
Is there any hope of this ever changing? Our political system seems wired to just eventually implode. I had really hoped that something would be done to stop (or at least curtail) the “crony capitalist” shenanigans that pervade Washington. Not only was that promise not kept, but now I notice neither candidate even addresses it.
Is there any hope of this ever changing?
No. As long as you tolerate having a huge government at every level, you’re going to always have special interests corrupting it for their financial gain, balanced by your financial loss. And bankers are way ahead of the pack in the ability to bribe their way into controlling the government.
The Libertarians really do have the correct vision of truly sustainable government. It has to be the minimum, or at least the minimum that supports the formation documents, in our case our Declaration of Independence, national Constitution, and on a state-by-state basis your state constitution. If we merely followed those rules and only those rules, we’d have a government that’s about 8% of what we have today (judged purely from having a budget that only grew in line with population and incomes combined). That means 92% of your federal taxes are a pure waste of your money. Considering that the average middle class worker pays about 40% of his income in total taxes (all taxes and fees paid to feds, staties and locals), and at least half of that is due to government bloat, then about 20% of his income is totally stolen, taken in order to keep bloated government alive.
Just think how much better off you’d be if you kept that 20% of your income each year, determined by you where it goes. Many more people would be able to see how it’s natural for a lightly-governed Human being in a First World nation with access to resources, to be able to capitalize himself many times in his life. Small businesses would be everywhere. Large businesses would be rare, only existing due to large economies of scale, but unable to grow large from using their corruption of government to suppress competitors. THAT Libertarian vision should be the natural state of educated, developed mankind… not this depressed and suppressed CRAP world that we live in now.
Less government really is the answer. People are far too scared to allow it, much less understand it.
“Government should not be in the business of guaranteeing private debt.”
TGSGTFOOTW (for Alpha)
The Brokers are only part of the problem in housing. Franky, I am sick and tired of blaming Realtors for the mess we are in.The buyer made a decison to buy and he/she must take the blame as well. Stop blaming everyone else and look into the mirror.