This past week, after a Thanksgiving feast wherein the average American is said to have enjoyed chowing down 2,000+ calories (equivalent to 3 Whoppers), the average American is said to have either trooped off to an early bird Black Friday sale mob scene or else (more likely) settled onto the couch to behold, in tryptophan-induced stupor, either the NFL football marathon or a Thanksgiving special like When Turkeys Attack! (“home video footage plucked from real families terrorized by turkeys”).
For those who waited until the actual Black Friday sales, some may have experienced moments of hesitation as they opened wallets and purses to hand over the credit cards. Certainly those who listen to the financial gurus would have had second thoughts— the basic wisdom of a debt-free lifestyle has been pounded into their consciousness.
One radio expert had been exhorting everyone to shop with cash and cash only as the singular way to hold to a holiday gift-buying budget. The expert did admit that store clerks would probably suspect you of being a Mafia family member every time you pulled out your envelope stuffed with cash—but the rewards would be worth it (never mind the security issues).
Naples Fort Myers and Cape Coral mortgage holders (and soon-to-be Naples Fort Myers and Cape Coral mortgage holders) who listened would have had to be wondering how many typical families actually succeed in following that advice. However laudable the whole idea of a no-debt-at-all lifestyle might be, you wouldn’t think it works out to be terribly practical vis-a-vis home ownership. For those of us who interact with the Collier & Lee mortgage industry, it certainly feels like a non-starter.
But what are the actual numbers?
There is statistical mumbo-jumbo galore when you try to dig into the official stats, but if you take the middle of the middle group (‘middle quintile’), the givens are as follows:
- Median American family income is $67,802
- After taxes, that works out to $59,000
- Median American single family home costs $223,500
Now, the most recent median annual American family savings is nothing like 10% (some say it’s closer to zero); but for those who could manage the 10%, even pre-tax that works out to socking away $6,780 per year. In other words, you could finally buy your median American home after saving up for (wait for it)…33 years.
I’d say that should alleviate any residual guilt Naples Fort Myers and Cape Coral mortgage holders might have felt about not living a totally debt-free existence. All the more so when you take into account the miniscule interest rate that savings accounts are currently earning (again, closer to zero than not)—as well as the historically low interest rates being quoted for today’s Collier & Lee mortgages.
You might still try the all-cash holiday shopping experiment, but probably don’t need to put off your homeownership hopes for that three decades. A better idea: send me an email to work out the real world details!
Brant Keller, CFP
The BuySellGroup - MVP Realty Associates, Broker