What happens when you trade up? Is there a right and a wrong way to trade up a home or car? I mentioned earlier this week that we’re “bumped up in class.”
But are we stuck on what we think we deserve or want? That we can’t imagine living in a one bedroom condo and so we say we can’t afford a “home” but refuse to consider alternatives? Why as a society do we pretend we can’t afford a home or car.
Truth is we can afford a home and car, but it may not be to our satisfation. That we might have to live in a smaller home, okay neighborhood before we can “trade up” to what we really want. Same with cars.
In fact Dave Ramsey says you drive for 2 years a beater, then trade up, and keep flipping upwards until you get to the car you want. Apparently he feels that you can move upwards slowly. Same with homes, he preaches buying what you can afford and moving as you are able to. Many financial gurus feel this way.
So does it mean that a person should hold off on buying the car, home, or big purchase they really want? And whine about not being able to “afford” it? Or are they able to afford something smaller and still save for their end desire?
It sort of applies to retirement savings. Not everyone can save the maximum in every account. But perhaps some people start out with 1%, then 2%, etc until they reach their final goal of savings. And perhaps others plan on saving 50% of their income from the start.
So which is better, living at the lowest level you can stand and then making the jump to your final home, car, etc? Or slowly trading up and still striving for something better? I think either way is fine, as long as you realize that both ways can work.
What way did you use to increase your lifestyle, savings, etc?
19 responses so far ↓
1 Mrs. Micah // Sep 7, 2008 at 10:32 am
I think slowly, but consciously, trading up is probably the best way to do it. Unless you enjoy living at the lowest level and anticipating the rewards. For us, that means probably renting a house before we buy, for instance.
The problem is if you get sucked into trading up, then I think some people trade up because they’re in the habit, they feel like it. They don’t ask “is this the next step I want to take?”. So it has to be conscious trading up.
2 LivingAlmostLarge // Sep 7, 2008 at 1:06 pm
Unfortunately my DH and I have fallen into the lowest level of living and then trading up in one fell swoop.
I am trying to upgrade however slowly. We bought a new couch, new tv, new pots and pans. All stuff to replace the old, not top of the line but better than the used, inherited stuff we had.
3 FruWiki Meg // Sep 7, 2008 at 1:56 pm
It depends…but personally, I wish I had thought more about what I wanted from a product before buying the cheap version.
For example, I’m slowly learning that cheaply made clothing often isn’t worth the thread it’s made of.
My husband and I have bought a lot of “cheap plastic crap” over the years only to realize how awful some of it looks and how bad the overall quality is. Sure, we have plastic bread boxes, but now that we’re making homemade bread and eating it regularly, we want something that’ll look decent on the kitchen counter. And we just finally replaced our watering can because the one we got on a whim was actually pretty terrible about pouring water.
With larger purchases, it’s tougher. Sure, we’d love a bigger, better house, but we bought what we could afford and have been fixing it up. (Though, on second thought, it’s been a bit of a money pit.)
On the other hand, we’re trying to wait to replace our car so we can buy one that we really want, even though we have a lot of miles on our current car and it’s had a rough life including being rolled.
I guess, if you can’t afford what you want and you can wait, then wait and save your money. Besides, that gives you time to decide what you really want and do the proper research so that the item you get is worth the wait.
4 Tim // Sep 7, 2008 at 2:54 pm
want items are inherently a matter of personal choice. if you can afford the want item, then how you can you possibly argue against someone’s personal choice in the matter? affordability isn’t necessary a black and white matter of plus and white numbers, because value has to be included in. Value is also something that is a matter of personal choice, especially when you are talking about want items.
why should anyone feel guilty about spending more money on something that they perceive as nicer, if they can afford it? I don’t get it. it seems people expect you to give everything away that you’ve earned or worked towards and maintain a standard of living the same as someone who is less then them.
personal choice is very ambiguous and I would never fault anyone for spending tons on comic books or someone else on a larger house or someone else on cigars when i would not so long as they can “afford” it.
i think you waste more money slowly moving up. smaller incriments aren’t as apparent and there is a tendency to spend more this way. i always am of the belief save and pay for quality. If i can’t afford a want item like a house, i won’t buy it. I’m not beholden to the idea that we must have a house. I do not believe buying a one bedroom condo is worth the expense or hassle, thus not affordable, because a one bedroom condo does not meet our family plans and needs. I would much rather wait and save more to buy a four bedroom house when the conditions are right for me to buy. That’s not whining. Last time I checked, we weren’t living in a dictatorship where people dictate what others deem affordable or suitable to live in. I also do not believe a house is an investment.
there’s also a huge difference between spending money and saving it. Slowly saving over a period of time has benefits and appreciable gains at the end. spending money on generally depreciating assets is another thing entirely.
5 Livingalmostlarge // Sep 7, 2008 at 10:45 pm
I think it depends. I have seen definite benefits to buying it now and buying it later.
There is a lot to be said for buying things to improve your quality of life. I didn’t say everything was a want, somethings are needs but it’s a choice.
Like I said you need a place to live, but who said stuffing your family into a tiny place isn’t the answer for 10 years?
6 Tim // Sep 8, 2008 at 5:49 am
LAL said, “Like I said you need a place to live, but who said stuffing your family into a tiny place isn’t the answer for 10 years?”
1. if you are having a family of ten and don’t have the resources to have that many, then again that’s a personal responsibility issue.
2. home ownership is not the end all. i’m sure the family of ten gets enough tax credits that they don’t need to get a mortgage on a tiny place for the tax benefit. You need a place to live, but you do not need a house. you can rent.
7 Tim // Sep 8, 2008 at 5:51 am
i agree, there are plenty of need things; however, when people spend three quarters of their food stamps on sugary name brand foods, i have to wonder what’s going through their minds.
8 Kristy // Sep 8, 2008 at 6:04 am
My opinion is that savings should come first, then your wants like a home or car. I have tons of friends who are broke but drive nice cars. Yet they make fun of my 8 year old car with no car payment. DH and I have not had a car payment since we were married 6 years ago. Because of that we were able to upgrade and max out our retirement accounts and buy a house for our family.
So I guess it is about choices and which choices should come first are personal.
10 LivingAlmostLarge // Sep 8, 2008 at 11:06 am
Definitely and if you really wanted to label it a need, it would be renting a 1 bedroom or studio apartment for 10 years. Like I said that’s all you need.
And if you have two kids renting a 2 bedroom apartment. You don’t need a house even to rent. YOU can make do even living with family if you really wanted to save money and buy a home or a new car, etc.
I’ve never listened to what others say. And renting is a great option especially when you move a lot. Why do you think military personal rent? But do they need to rent a house? Why rent something nicer when something cheaper will do?
11 Tim // Sep 8, 2008 at 11:38 am
LAL, you can define need however you want to, but need is variable just like everything else. people do often confuse want and need though. if you can “afford” to rent something nicer, then why not? again it’s a combination of need and want. people should make the determination based off of their personal finances.
12 LivingAlmostLarge // Sep 8, 2008 at 11:47 am
Why is why the question is asked is there a right or wrong way to trade up? Is there a difference a between trading up renting? Or trading up buying?
Is there a diffrence bewteen trading up like Dave Ramsey suggests in cars every 2 years or buying much better in one fell swoop?
No one really knows. BUT stop whining about not affording it. According to most personal finance gurus you can afford anything you want. If you decide it’s important.
Like a car every two years is possible.
13 Meg // Sep 8, 2008 at 10:24 pm
It depends on the item, I think. When I graduated from college I bought a $50 TV from a rent-a-center which I intended to replace in 3 or 4 months with a “new flat screen.” But the more research I did on TV’s, the more I realized I didn’t want to drop $2K on something that was obviously going to be cheaper and probably obsolete in a couple of years. It’s been 2 years now, and I’m still watching that $50 TV – and watching the price and development of flat screen technology. I’d rather wait it out than waste thousands moving up every 3 years. I want to settle on something that is great that I like and have it for at least 10 yrs.
I’m the same with cars. I bought a “nice” car right out of college, a slightly used luxury auto, but I intend to drive it for at least 10 years as well. If I’d bought a “beater” I’d want to move up soon, and then over the same 10 yr period I would probably spend the same amount of money driving 3 increasingly nice cars as I will have driving my one really nice car (which I bought in cash, so I’m not considering finance charges here).
14 Tim // Sep 9, 2008 at 5:38 am
LAL, i never whine about not being able to afford anything, because it doesn’t do me any good. The one thing I keep trying to convey is that affordability means different things. Sure my wife and I make between $100k-$200k; however, our definition of affordability means that we have to be able to afford the purchase, like a house, as if we are on one income taking into consideration our other expenses. others surely wouldn’t define affordable that way, but we do because we are more risk adverse when it comes to “wanting” a house.
if most financial gurus are saying anyone can afford anything you want, they are idiots. i doubt that most financial gurus would be this naive or wreckless to suggest such a thing. Moreover, making a generalized statement like that is simply absurd.
when did dave ramsey become the sayer of all things? trading up a car every two years and getting hit by depreciation is stupid, especially if the pure numbers don’t even work.
i don’t thing there is necessarily a right or wrong way to trade up so long as you can afford to do so. At the same time, though, you have to be able to put personal desires and urges aside at times and not get the newest and greatest thing and/or wait to get enough saved to buy quality. Every two years would really depend on the item you are trading up. I don’t think you can make a flat timeframe for which to trade up on everything.
15 LivingAlmostLarge // Sep 9, 2008 at 2:42 pm
You should be careful the dave ramsey police will say you are the one being facetious now.
I think that he’s teaching that delayed gratification will allow you to get what you want.
Does it work? It can. Can it be enough? It could.
But instead Tim you complain non-stop about affording things and people can’t afford it. They can’t afford it in the book according to Tim, which I haven’t seen published yet.
But maybe they can. Who the heck knows? We haven’t gotten all their privvy info like inheritances, trusts, etc.
So yes, you make all this money and you spent a ton. And paid it back. Now you feel like you are high and mighty making all this money and that you can only buy a house on one salary. I hate to break it to you many people buy homes only on one salary, I know quite a few.
We’re paying it on one salary our mortgage and bought it that way. Cracks me up that it’s “unaffordable”. Renting is just as unaffordable then because it costs just as much to rent.
Like I said in another post, you like to only look after yourself and preach personal responsibility without giving suggestions on how people can learn personal responsibility.
16 Tim // Sep 10, 2008 at 8:21 am
LAL, I think you are taking what I say about affordability out of context and somehow taking as me whining. I’ve said from the start that affordability cannot be generalized, and have given what affordability to me means. The basic premise, though, is living within or below your means.
i agree, delayed gratification gives you time to consider and reconsider whether you want to spend the money.
most people depend on two incomes to qualify for a home, and most assuredly this was the case for the past 10 years when people over extended their credit to get into too much home than they couldn’t afford. again, this mortgage mess wouldn’t have been caused if this weren’t the case. I know far more people who rely on two incomes to buy a house than on one. you may be able to afford your mortgage on one income, I don’t know, i have no idea about your financials. at the same time, to suggest that i can afford something is equally presumptuous considering you have no idea about my finances other than we make between $100k-$200k per year.
second, home ownership consists of more than your mortgage payment. is there a point where home ownership cost and renting could meet? yes. i never said that it wasn’t possible to rent at the same cost of home ownership; however, in general renting costs less in expenditure than home ownership. i never contended that buying a house cannot be done on one income nor was it wrong to be done on one income. however, for me, i consider many other factors besides the cost of the home such as retirement savings or some other major savings, then i would forgo wanting to buy a house. a house isn’t an end all.
again, there are plenty of people who buy a house on one income, there are plenty of people buy on two incomes, there are plenty more who buy a house and have no other savings, either. if the exception to the rule was not an exception, we would not have negative savings rates in this country. i have no idea about the people you know, i don’t know if you are inimately aware of the whole financial picture of the people you know either. i know that more people are prone to lie about their true financial situation than not. they may all in fact have no debt, have a mortgage that they can afford, have retirement savings, have an emergency fund, pay for health insurace, and have savings for everything else too, or they may not. i can say one thing for certain, though, is that there are far more people who can not. again, mortgage mess and zero to negative savings rate both indicate my point.
I’m not being high and mighty at all, although i can see how you would think that if you are picking and choosing what to focus on. I never said that my experiences or the people I know represent the entire human race in aggregate. you seem to like to pick and choose what you want to focus on and not take what i’ve written in context. i use my personal example, and I’m not alone in it, as demonstration that it can be done. There are plenty of people out there who focus their efforts on blaming others rather than focusing on their consumption problem and saying that it cannot be done when it can be done. just read any of the media outlets that are doing exposes on how the economy is affecting them. they read as an expose on it’s not my fault. Just like I didn’t expect other people to pay for my indiscretions, i do not think it is right for me or anyone else to have to pay for the indiscretions of others now. that’s not high and mighty at all. that is just being fair.
I’ve given plenty of suggestions on how people learn personal responsibility. I’ve been pretty consistent, in contending that the economic situation is far more a function of bad personal consumption than of any other factor. I would say that if anyone makes a blanket statement that people don’t know the basic of you don’t spend more than you earn, they misrepresent people as a whole. People aren’t that stupid, or perhaps you are suggesting they are? The issue is that people who have overextended themselves ignored the basic principles they knew and over consumed. ok, there are plenty of lenders and creditors out there who made it attractive and easier for them to consume, but at the end of the day, it was a personal choice. lenders and creditors even make it painful, if you do go over your credit limits, if you do bounce a check, if you do keep a rolling balance, if you do not pay on time, etc. They obviously aren’t making it painful enough since those fees are the highest source of revenue generated from credit. What I simply do not understand is why people want to blame high interest rates, high over limit fees, high late fees, cash advance places as the problem. We’ve had plenty of congressional hearings on these topics, and hey here is a clever idea. don’t have a rolling balance, don’t pay late, don’t over draft, don’t spend more than you earn and those fees and interests won’t be an issue. however, the problem is that there are far more people in our society blaming the creditors, when it is they who have control over whether or not they get hit with a late fee, over draft fee, interest, etc.
are there exceptions? of course they are, and i continually suggest there are. you seem to consider the exception the rule though.
17 LivingAlmostLarge // Sep 10, 2008 at 1:37 pm
I think you think people are overexaggerting their problems. And not taking enough personal responsibility.
I think that your media is showcasing the worse of the worse, but the average family isn’t in that circumstances and they are trying.
They didn’t have the same basis as others but are still moving forward. And trying. You seem to think that they should all hurry and take responsibility.
Perhaps they are. But the only people you think represent them are the ones personified by the media.
18 Tim // Sep 11, 2008 at 1:46 pm
LAL, I don’t think that people are over exaggerating their problems at all. Not everyone is irresponsible, I never said that. However, there are far more people who have been irresponsible with credit/debt: again, negative savings rates, increase in personal credit defaults, mortgage mess etc. i agree, what is reported on the media is sometimes pidgeon hole focused; however, you do get a consistent drum beat and i’m not judging my contentions purely based on people’s responses to media polls and exposes. the fact is, you don’t get negative savings rates, spikes in consumer discretionary spendings, increased debt, huge mortgage defaults, propogation of leases to higher costs things, etc, without having a consumer base that is living within their means. there wouldn’t be a surge of mortgage defaults if people could actually afford their homes. so, although I agree that sometimes exposes etc are a microcosm, ther reality is far more people are living beyond their means and pointing the blame on other people/institutions than themselves. are there plenty of responsible people paying their debts on time, not walking away from mortgages etc? sure are, and congress’s recent home owner bailout makes it easier for people to continue chipping away at mortgages that they cannot afford. i do think there is a difference between being responsible if you have debt and having responsible financial behavior.
people should hurry up and come to jesus with their personal consumption behaviors. if not, people are going to continue over extending themselves, and in the end, there won’t be mechanisms to prop up the economy or provide some sort of way out for them and their debt. the US is running out of options for the current mess. i fear that the reliance on the govt in future econimic crisis, especially with negative savings and increased personal debt, will make people think that the govt can do it again in future credit crunches. the end result is people who are responsible, who do save, who live within their means will be penalized heavily, because their years of working hard and savings will be worth little to nothing. so, yes, i believe people now should be forced to lose everything, so in the future those who are responsible don’t have to lose everything to save irresponsible people.
here’s a nice read
http://www.cnbc.com/id/26645137
I have contended that this economic downturn will hopefully be a come to jesus good thing if it forces people to start opening their eyes. at the same time, the continued bailouts, and i believe things would definitely be different it weren’t election year, i fear will not force people to change behavior. the focus everywhere you read seems to be focused on everything but personal responsibility. this is the troubling part.
19 LAL // Sep 11, 2008 at 1:53 pm
Here’s the thing you are focusing on a smaller subset of people than you imagine.
How’s this statistic? The average credit card debt is $9k/per person in the US. However something like 25% of people have no credit cards and 35% never carry a balance.
And of those in debt, meaning like 40% of people, something like 50% of them have less than $2k. So 50% of the people in debt or 20% of the population have to have an average of $16k debt+. So a smaller population makes the rest of the people look really bad.
Same thing. Are people really not savers? I think we’re going to have to address it soon yes.
But it’s hard to tell because there’s a lot of people still in old-fashioned pensions so they don’t have to save. A lot of government, state, and military workers who have pensions and don’t have to save as much. And those enforced pension savings don’t count as savings.
Granted I don’t know if it’s enough or it should be counted on. But I know my counsin in the military is counting on his 50% salary for life!
So he’s saving less than what is reccomended. He plans on 20 years and out and then working another government job to “double” dip.
So it’s hard to say if people are really not saving enough. We have to see how the lack of pensions, which really started in the 1980s plays out. And pension are almost extinct in private sector now, except a few companies.
Kristy’s Weekly Roundup - Sep 8, 2008
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