Right now I’m reading “The Wal-Mart Effect” by Charles Fishman. I’m not sure how I feel about the book yet (I’m a little disturbed by the lack of footnotes) but one of the interesting parts of it, which has been repeated lots of places, is how much Wal-Mart puts the squeeze on their suppliers. In fact, one could argue that it is the practices of this giant retailer which has pushed some suppliers to take their manufacturing overseas. They must cut costs.

My parents and my in-laws are terrific consumers: wasteful and always looking for the bottom line dollar. It got me thinking today, how much is the next generation getting squeezed by the generation before? Is there any way to not go into debt? If millions of jobs go overseas and we are in some price war race to the bottom, is it suprising that there is a lack of opportunity across the board? Anyway, food for thought today.

I have done much better since then in reducing that debt, but of course it is not an easy task.

I think the problems with the debt of youth today are: the lack of financial education, increasing student loans and education costs, and the effect of consumerism. Most young people just don’t understand money. They understand that when they have it they can buy things… and there are so many things to buy that are waved in front of their faces on a constant basis, that the little money (or credit) young people do have is put in the wrong places.

I am very happy to have to found this post today as I recently have been writing about this same topic as I am trying to chronicle my way out of debt as a result of these mentioned problems.

Shameless plug, but I am also hoping that I can educate people in mistakes I have made in the past and how to learn from this: http://www.gettingdebtdone.com/

No problem. We’re all on the same “team” here, rooting for responsible personal finances. I totally agree with your sentiments, I’ve seen the same things.

J.D. & icup,

I should make it clear that I’m in no way against buying a house, and I hope to be able to buy one myself some day. Under most normal circumstances, buying a home is definitely a smart financial move. I just don’t think that we’re living in a normal time (in many parts of the country that is–mine included).

That was years ago now, and I’ve learned a few things. But some of what I’ve learned is that the credit card companies play some games with us that need to stop. Now I’m at Consumers Union, publisher of Consumer Reports (where some really smart financial wizards work) and we’re getting the word out–using a funny song about credit card debt by the Austin Lounge Lizards– about something we can do to stop card company tricks that can trap people into higher interest or greater debt than they can afford.

http://www.creditcardreform.org

You don’t get that with an apartment.

Another thing is you will only have to pay your mortgage for 30 years (heh, only ;)) or less (if you’re smart). Rent is forever. The key is that *when you retire* is when that 30 year investment really begins to pay off. After buying a house, that fixed monthly expense of your mortgage basically becomes (in theory) tax and insurance. Retire after renting for 30 years and you just have to pay more rent.

Not to mention the opportunity to trade down and capitalize a small bundle in cash.

And then there’s the tax deductions, potential to rent rooms out, ability to stay in one place for 30 years if you want.

To me, the benefits of buying a house outweigh the risk of carrying more debt and the risk of depreciation. Even if the market is a bit insane right now as someone said.

Granted, I think buying a house fresh out of college at 22 is just looney, unless you don’t have debt at that point, and really do have the money to be smart about it.

What I’ve found is that our standard of living takes an immediate dive post-college. How you deal with that goes a way toward determining your financial future. You can either spend your way out of it by continuing to live the way you have with the same habits that now cost so much more– going out to eat all the time, drinking every weekend, going to bars, concerts, etc. Or, you can embrace it and sacrifice the ‘nice things’ for a few years and end up way ahead. Too many of my cohorts don’t change their lifestyle and end up regretting it when they’re 30.

The young people buy some much useless stuff, I’m not surprised they’ve got some much debt.

Seems like they have to learn it the hard way …

Perhaps now they’ll cut back on mobiles phones, ringtones, videogames, etc.

This is key. As always, do what works for you. Do what helps you reach your goals. If owning a home isn’t a priority, then by all means use the money to meet your other goals. But if owning a home is a priority, then sacrifice in other areas.

I’m not sure why you seemed to latch on to that particular minor point in my comment, but I feel obligated to clarify. The “nice things” don’t really approach the kinds of “stuff” that many of my coworkers have accumulated. I’m talking about a few video games here and there, some DVDs, one sub-$1,000 PC… that sort of thing. Heck, even the newest car we’ve purchased has been five years old.

If we had been dead-set on getting a house four years ago, we could have. However, we would have had unacceptable (to me) levels of debt in addition to the mortgage, and been in a much worse-off financial situation today.

Each situation is indeed individual, of course. I was just pointing out that whether the bullet point of “Rising home prices” affects you or not is a personal choice, not an inescapable reality.

I would gladly sacrifice being able to buy as many nice things as the Jones’s to get a head start on home buying. Though, in our case it’s different because we live in one of the few areas in the country where home prices are still increasing (Richmond, VA). It just shows that each situation is individual, however, those individual situations paint a story that is important- as demonstrated by the USA Today article.

Looks like it will be an interesting series, I look forward to what the next segment has to say.

By not buying a home after getting married at the age of 22, my wife and I have been able to:

- pay off $40,000+ in (mostly college) debt
- contribute steadily to a 401(k)
- save some cash
- invest some money in other accounts
- buy two vehicles (with cash)
- pay for a year of education for my wife at the Art Institute (with cash)

…all on a slightly above-median income.

Had we purchased a home, we would have been rolling in “equity,” but at the expense of having tens of thousands of dollars debt hanging over our heads, and not being able to buy nearly as many nice things as we have been able to.

However, as you say, it’s easier to complain than to make the hard choices and do what’s best with your money.

Found this post about a guy who ran up an tab from 8,000 downloads on iTunes (via Get Rich Slowly )….