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SA Blogs = Lightbulb Moments

August 22nd, 2011 at 01:00 pm

I got around to picking my free 8 x 10 up from Walgreens, today. Really confused the cashier, who was skeptical and could not quite believe my picture order would be free. Big Grin

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I had 2 great "lightbulb" moments today - just reading SA blogs.

So thank you everyone for the enlightenment!!

**From Baselle**

Do You Suffer From Decision Fatigue?

http://www.nytimes.com/2011/08/21/magazine/do-you-suffer-fro...

Per Baselle:

"The basic point of the article is that decisions of any size require energy. The more you make during a day, the more likely you will either make a crappy one or that you will go with what is recommended to you ... and in a sales situation, its always going to cost."

"People sometimes consider my tactic of setting a routine to be ho-hum, but it means that I don't have to re-make routine decisions and I free myself for the biggies during the day."

"Every so often the question, "what is the most frugal skill one can develop?" pops up. I thought it was math estimation skills but I might make the case that preventing decision fatigue might well be it."

So true!

On a simplistic level, I also think that being anti-debt also sinplifies the decision making process. It's pretty simple to arrive at a "Can I afford that or not?" conclusion. The answer is if I have the cash or not (on a very basic level). Having access to large amounts of readily accessible debt really makes the answer to this question harder to pinpoint. (Or - if you don't have any form of a budget or spending limit!) That, I have observed over the years. But I never thought beyond that to how fatiguing it would be to have to constantly evaluate those type decisions. For me, I simply don't. Just one more way in how simplicity brings a level of peace and happiness that is hard for people deep in the debt cycle to comprehend. (What appears to be deprivation and "ho hum" on one level, is actually very simplifying and freeing!)

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Petunia shared an article today that gave me a huge "aha!" moment.

Housing horror: Worse than you think

http://money.msn.com/home-loans/housing-horror-worse-than-yo...

She was sharing the article just as another doom and gloom real estate report.

OF course, I think real estate is very doom and gloom (just looking around me), but I have mentioned that I seem to be in a sea of people who have no clue, and think real estate is the next big thing! (I see a *bubble repeat* in buying behaviors in our own region. People still buying more than they can really afford, and buying far more frantically than they need to).

There was this quote in the article:

"Simon also points to the affordability index, which measures the ability of a family with the median national income to buy a median-price home at current mortgage rates. The index is near an all-time high and double its level in 2006 at the peak of the bubble.

"I would never have believed this index could get so high," he says. A rise in affordability should have spurred purchases, boosting prices and keeping a lid on the index. "What this instead means to me is that the credit is not available to most people," he says. "Houses aren't cheap if you can't get the loan." Simon worries that the problem will get worse in October, when Fannie Mae, Freddie Mac and the Federal Housing Administration drop the maximum mortgage they will buy to $625,000 from $729,750 as a temporary increase expires."

I had to read these paragraphs a few times to get it to sink in. I know everyone around me is chanting, "home prices are lower than ever - deal of the century," blahblahblah. & I have no idea what planet these people are on - beyond maybe not having an inkling what real estate did before the year 2001 or 2002. (& I do think that is a big part of the problem. Society today equals such SHORT TERM thinking).

So, this is why I had to do a double take that some affordability index was supporting this *crazy thinking.*

**Lightbulb Moment**

People are looking at home affordability based on monthly payments. *ding ding ding*

Sure, you could buy a home for significantly cheaper as recently as 1999, say. BUT, interest rates were twice as high then.

BINGO!

I finally *get it.*

I look at things at full price and big picture. I can't get all excited, myself, just because loan rates are temporarily down. This only really matters if refinancing was never an option. But, the truth is most people who bought just a decade ago, have refinanced and are enjoying these record low rates, too. Thus, they bought when affordability was far better (in a big picture way).

& so now I get it.

& I personally ain't buying it!

But at least now I know what everyone else is talking about! & I Feel stupid for not realizing it sooner. I know that most of my peers think in terms of payments versus actual price (when it comes to everything else). I should have figured this out ages ago!

5 Responses to “SA Blogs = Lightbulb Moments”

  1. LuckyRobin Says:

    I was always taught to look at the full price of something before you look at the price of your payments. My mother always said you need to be able to afford both these things, but the full price was the most important thing to look at (and not just the top line, but the bottom line as in how much it will cost you with interest over the years).

  2. PatientSaver Says:

    It's the same thing with cars. Most people make the mistake, and the car dealers encourage this, of thinking only in terms of "how affordable are the monthly payments?"

    It's better to think of the total price, and can you afford it to begin with? If you look at it that way, most middle class families have no business buying anything more than a $20,000 vehicle, but oh well.

  3. Jenn Says:

    Patient Saver - you're so right! I just got (junk) mail this week from a local auto dealer advertising a "big" sale. And the funniest part was that NOWHERE on the flyer was the price of any of the pictured vehicles. Each picture had "Only $xxx/month!" next to it. I couldn't help wonder who that appeals to.

  4. MonkeyMama Says:

    I suppose what I am trying to say is that homes are the only purchases that people regularly talk about in terms of actual sales price. Since, I don't think in terms of *payments,* I tend to forget that everyone else does! But, when it comes to cars it's pretty obvious that's all people think about. Ask anyone what they paid for their car - most will only know the monthly payment. Car salesmen want to discuss payments, not sticker price. Everyone knows the cost of their home, but maybe because it is such a HUGE purchase. (Obviously people think in terms of payments when it comes to buying homes - but actual price is just more openly known and discussed in the sales process. & it is a number that people remember. For me, makes it easy to forget how payment centric the home buying process really is for most).

  5. ClintDavis Says:

    My wife and i were craving some ice cream the other night, so i made a quick run to the grocery store. Apparently they have leased some space to a Rent-To-Own electronics store. So they have big TV's W/D, etc... all set up. I made a comment to my wife about it, and the teenage cashier must have not quite heard what I said. He responded to us saying, "I know, what a great deal. I can get a Plasma screen for only $23/week." I told him to do a little math and see how long it would take to pay that off. Poor kid...made me want to smack his mama for not teaching him better!

    In Freedom,

    Clint

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