Minimum wage: how much is too much?

[mike]

I don't really see what financial advice I can give to someone who is making, say, $25/hr (that rate includes mandatory overtime) at his job, with 3 kids, who overall is being a much more responsible person than he used to be in the past. There really is no "advice" that will square the circle of how he can translate that into buying a $250,000 house.

Of course not. You're setting up a ridiculously impossible scenario. Good advice would be to find something affordable for that income level. Don't know your town exactly, but in Berlin Ohio there are homes available for half that.

Rather amusing - by the time I clicked this link the results were gone. 0 results now.

Berlin OH has 2 pending, one for $1, and then some bare ground for $225k.

Here's what it shows for me - I see that it automatically increases the search area to include within 22 miles.



Try this link.

[Neto]

I don't really see what financial advice I can give to someone who is making, say, $25/hr (that rate includes mandatory overtime) at his job, with 3 kids, who overall is being a much more responsible person than he used to be in the past. There really is no "advice" that will square the circle of how he can translate that into buying a $250,000 house.

Of course not. You're setting up a ridiculously impossible scenario. Good advice would be to find something affordable for that income level. Don't know your town exactly, but in Berlin Ohio there are homes available for half that.

I looked at those listings, because the house across the street from us here in Berlin recently sold for 413K. 2 bedroom. It's going to be an Air B&B. Some of those houses ARE in Holmes County, but none are even located in the East Holmes School District. Some are actually pretty far from Berlin, especially if you want to have the type of fellowship opportunities Josh is talking about.

[Ken]

Well yes, at first glance, it really seemed ridiculously impossible to buy a $250,000 home on a $50,000 a year income (which is about what $25/hour makes you sans overtime). However, I guess that may depend on how much a person is willing to financially strap himself. On a 30-year fixed at 3.92% the payment is $1182 a month. I suppose one could do that if they were careful. That's less than $15K a year, so yes, I suppose that may not be ridiculously impossible.

Except that you need to add maybe $5,000/yr in property taxes ($416/mo.) depending on jurisdiction and another $1000/yr in homeowners insurance ($83/mo.) and then you need to budget for home maintenance. One rule of thumb is 1% of the purchase price per year for home maintenance so your $250,000 home is going to cost $2500/yr to maintain long term. That's another $208/mo. to add to your housing budget. And now your $250,000 home bought on a 30-year mortgage is going to cost:

$1182 (mortgage)
$416 (taxes)
$83 (insurance)
$209 (maintenance)
--------------------------
$1890/month or $22,320/year which is probably going to be far north of 50% of the take-home income of someone earning $50,000/yr.

[Sudsy]

And my God shall supply all your need according to His riches in glory by Christ Jesus.

Philippians 4:19

For we walk by faith, not by sight.

2 Cor 5:7

Now if God so clothes the grass of the field, which today is, and tomorrow is thrown into the oven, will He not much more clothe you, O you of little faith?

Mathew 6:30

[mike]

I think part of the problem is that we have utterly unrealistic ideas of what is reasonable and normal in terms of lifestyle and incomes in this country. It simply isn't sustainable to think that every blue collar worker can afford a 2500 sf home in the suburbs with two cars and a boat.

Bingo. Exactly what I was trying to say. We are spoiled in this country on many levels such our expectations for lifestyle, working hours, leisure time, etc.

[mike]

Well yes, at first glance, it really seemed ridiculously impossible to buy a $250,000 home on a $50,000 a year income (which is about what $25/hour makes you sans overtime). However, I guess that may depend on how much a person is willing to financially strap himself. On a 30-year fixed at 3.92% the payment is $1182 a month. I suppose one could do that if they were careful. That's less than $15K a year, so yes, I suppose that may not be ridiculously impossible.

Except that you need to add maybe $5,000/yr in property taxes ($416/mo.) depending on jurisdiction and another $1000/yr in homeowners insurance ($83/mo.) and then you need to budget for home maintenance. One rule of thumb is 1% of the purchase price per year for home maintenance so your $250,000 home is going to cost $2500/yr to maintain long term. That's another $208/mo. to add to your housing budget. And now your $250,000 home bought on a 30-year mortgage is going to cost:

$1182 (mortgage)
$416 (taxes)
$83 (insurance)
$209 (maintenance)
--------------------------
$1890/month or $22,320/year which is probably going to be far north of 50% of the take-home income of someone earning $50,000/yr.

All true. Dave Ramsey's advice is, I think, to spend no more than 25% of your take home pay on a mortgage. I do however know people that spend significantly more than that and do well because they live carefully within their means. It can be done but doesn't leave you much cushion in case something goes wrong. There are a lot of factors that go into whether X% is too high of a percentage of income to spend on housing.

[Sliceitup]

I think part of the problem is that we have utterly unrealistic ideas of what is reasonable and normal in terms of lifestyle and incomes in this country. It simply isn't sustainable to think that every blue collar worker can afford a 2500 sf home in the suburbs with two cars and a boat.

Bingo. Exactly what I was trying to say. We are spoiled in this country on many levels such our expectations for lifestyle, working hours, leisure time, etc.

I would love to know what you would consider to be a reasonable expectation with regards to lifestyle, working hours, leisure time, etc. Also any other random things that you think are unrealistic for blue collar workers. I’m genuinely curious what people’s thoughts are on this.

[Wade]

I think part of the problem is that we have utterly unrealistic ideas of what is reasonable and normal in terms of lifestyle and incomes in this country. It simply isn't sustainable to think that every blue collar worker can afford a 2500 sf home in the suburbs with two cars and a boat.

Bingo. Exactly what I was trying to say. We are spoiled in this country on many levels such our expectations for lifestyle, working hours, leisure time, etc.

Says the guy who owns an RV and goes on vacation for weeks while others posting here don't even dream of such priveliges and are losing sleep to work extra to just buy food for their family... We don't expect the luxuries you have - and since you don't get that it seems your focus is on expectations - don't place your mindset on us please.

[Ken]

Ken,

The problem is that affordable, safe housing on small city lots basically doesn’t exist anymore. You can only do it if you live in a dangerous neighbourhood.

If you have access to a private school this decision is a little easier since you can at least choose a place with bad public schools.

For non Mennonites, the outlook is very bleak.

So what is the better solution? Work to make existing neighborhoods safer and improve public schools? Or pave over productive urban farmland to build $700,000 homes on 3/4 acre lots?

I grant you the situation is more grim in some of the crumbling rust-belt cities in your part of the world. I have a cousin who is in real estate in suburban Columbus. She buys urban homes in places like Dayton for $10k and flips them. Which seems ridiculous to me as that is the price of an average used car. But I guess it is working out as she hasn't gone broke yet.

[Neto]

Ken mentioned public transportation in his wife's parent's home area. Public transportation has gone severely backwards here in the States. When my mom was still living at home with her parents (she attended a Christian HS for a couple of years, in a Mennonite community around 4 hours away) she could catch a city bus into Tulsa, where she worked for some filthy-rich people, getting their children dressed & ready for school, and house cleaning. They (my grandparents) lived around 18 to 20 miles from downtown Tulsa, and the people she worked for probably lived on the other side of Tulsa, as that's where the wealthy lived. Her bus fare was less than a penny. (The bus line issued mil tokens - 10 per one cent.) Now, even though there are thousands more fancy houses within a radius of several miles of where the farm was located, I'm nigh on to certain that there is absolutely no public transportation of any kind.)