How to Save Money, Slowly
How to Save Money, Slowly
The housing market is a big player in our economy. For the housing market to be strong and stable we need young buyers to buy their first home allowing sellers to move up to their next home.
The real estate market is a bit stagnant now because many young buyers have student debt, in some cases a poor credit rating and stagnant incomes. If that is what is – that is what is. If you are young what are you going to do about it? Inertia is not a strategy.
In my August newsletter, I noted there is a personality psychology theory referred to as Locus of Control. The short summary is:
Locus of control refers to how you ascribe responsibility for the things that happen to you. If you have an internal locus of control, you believe that the quality of your life is largely determined by your own choices and actions.
Reality: If you came out of college in a high period of unemployment (as many young buyers have) you could be scarred for a decade. Notre Dame Professor Abigail Wozniak, in a paper published in the Journal of Human Resources, noted that individuals who begin their careers during an economic downturn earn lower wages than similar workers who begin careers at other times. That negative impact lasts for 5-10 years after starting work.
Simply said, it is the difference between growing up a boomer vs. a millennial. As an example, I read recently that the average debt for UWM graduates was $24,000. I recalled my college debt and – adjusted for inflation – discovered that the average debt is 3 times higher than my debt at graduation.
Young homebuyers are saddled with higher college debt while starting their careers with lower incomes. It’s a bit like the real estate board game Monopoly. Shake the dice and see where you land – Boardwalk or St. Charles Pl. This is luck. Not hard work.
As Number 4 used to say, “It is what it is.” Ex-Coach Holloway (basketball) would add and ask, “What are you going to do about it?” I suggest you develop a plan and not let inertia limit your wealth building. Why?
Studies show most people only save money when it is easy and automatic. Paying off a home is mechanically simple and automatic and provides a place to live. It may not be your dream home but it will be something that creates equity and building equity over 5-10 years has value. It is not a get rich quick scheme it is a get rich slow process – but you need a plan and you need to implement that plan if it is to work.
Develop your internal locus of control. How? Be curious. Ask questions. Begin to understand money, ask the question and question the answer. Recognize when you bump into someone who has knowledge and from whom you can learn.
If you have questions about buying a home – what to look for and what to look out for Seamus and I are available to listen, answer your questions and discuss a plan. Beyond real estate you may have basketball (Michael) or music (Seamus) questions. I don’t know your skill set but I’m sure we will also learn something from you – the beauty of being curious and a cup of coffee.
P.S. My condo had an Offer – and then a divorce (not mine) caused it to fall apart. If you know of anyone looking for a nice condo in a walkable community on the Eastside of Milwaukee please have them contact me. The condo link is below.
Thanks for reading.