Finances in the Golden Era and today

[LizzieMaine]

What about cars? I find transportation costs to be very high, one reason being that one needs to drive everywhere these days. Communities just are not as small as they once were.

I went without a car for 12 years in San Francisco and loved it. When I lived outside Denver in Boulder however I just couldn't run all my errands walking, I had to drive since everything is so spread out. Same goes for Reno where I've temporarily relocated. No one walks here or takes public transportation since it's so bad.

The postwar infrastructure -- meaning most of suburbia -- was built entirely on the expectation that gasoline would always be cheap. When gasoline ceases to be cheap, those communities cease to be viable. It might not happen tomorrow or next year, but it's going to happen. Hence the "new urbanism," which is basically just the old pedestrian/public transportation oriented village/neighborhood life under a fancy new name.

Somewhere tonight, Robert Moses is being poked really hard by a laughing devil with a very sharp, sizzling hot poker.

 

[vintage68]

I read a book a while back by James Howard Kunstler called "The Long Emergency: Surviving the End of Oil Climate Change, and Other Converging Catastrophes of the Twenty-First Century" that discusses this very point and how we need to get back to walkable communities. Very thought provoking stuff for when I get my parents settled and I'm able to move on.

 

[vintage68]

The above is not off topic btw because I've been thinking a lot lately about how I can simplify my life, walk more, and live more frugally, or as the OP would say be more "money conscious."

 

[dr greg]

a roof over

Housing is the killer in this country, I bought a house in Sydney for 75k in 1987, and sold it for 350K 10 years later to the day, yet the deeds showed that it had sold in 1957 for $200!!!!! No way had the rest of society's expenses kept up with that!
Consequently I am a debt-free property owner except for 10 grand I just invested in solar power that is already turning a profit on my energy bills and will pay itself off in about 10 years...I live frugally so I owe nothin to nobody...peace of mind is priceless.

 

[jamespowers]

Housing is the killer in this country, I bought a house in Sydney for 75k in 1987, and sold it for 350K 10 years later to the day, yet the deeds showed that it had sold in 1957 for $200!!!!! No way had the rest of society's expenses kept up with that!
Consequently I am a debt-free property owner except for 10 grand I just invested in solar power that is already turning a profit on my energy bills and will pay itself off in about 10 years...I live frugally so I owe nothin to nobody...peace of mind is priceless.

$200!? I thought $4,000 was cheap in 1943! Geez, you are in quite a growth country there.
If only I had money to invest in real estate here in the 80s. I would be a millionaire now. [huh] :eusa_doh:

 

[dr greg]

city life

Well it wasn't a nice suburban block..by the 50's the area had been a violent slum full of brothels and opium dens for a hundred years...even when I moved in there were 10 murders within 100 yards of the house in the first year.
It took some serious gentrification before the lawyers and gays moved in and property prices took off...I took some lumps, (and handed some out), taming my little corner.

 

[MikeBravo]

I wonder if household incomes were higher?

Many men (and women) were in the armed forces, they had their clothing, food and accommodation all paid for, there was not much to spend their pay on if they were overseas especially, so they sent it home.

With the men away, more women were in the workforce. Not just doing the work the men had been doing before joining the forces, but in munitions and war-related work which had been at a much smaller scale than before the war.

More income and less to spend it on meant more savings

 

[Paisley]

The U.S. Census document that I linked to in post #8 includes contributions from members of the armed forces in their income figures (see p. 3, item #8). However, the sample did not include actual members of the armed forces, so we're looking at money that was sent home.

It's worth keeping in mind that households generally had more people than they do now. There was a housing shortage in WWII; not so today in most places. And more people in a household will drive up the household income; fewer people bring it down. You can see this trend on p. 9 of the U.S. Census report: in the top part of the table, you can see urban and rural non-farm income v. size of households. For example, 18.1% of families of seven or more had income of $6,000 to $9,999, whereas only 3.4% of families of two had that level of income. (That's in unadjusted dollars, obviously.)

Says Thomas Sowell in Economic Facts and Fallacies,

It has often been claimed that there has been very little change in the average real income of American households over a period of decades. It is an undisputed fact that the average real income--that is, money income adjusted for inflation--of American households rose by only 6% over the entire period from 1969 to 1996. That might well be considered to qualify as stagnation. But it is an equally undisputed fact that the average real income per person in the United States rose by 51% over that very same period.* How can both these statistics be true? Because the average number of people per household was declining during those years.

*U.S. Bureau of the Census, "Changes in Median Household Income: 1969 to 1996," Current Population Reports, P23-196, p.1.​

I do agree with you, MikeBravo, that there was a lot less to spend money on than there is now.

 

[Mid-fogey]

Youve got...

...to be really careful comparing costs over time. I know there are tables and programs that claim a dollar this year is worth so many dollars that year, but because of technology, the ratios between items keeps changing. I think that after just a few years they just don't work. I think that is borne out by the fact that the results often just don't make sense.

 

[The Lonely Navigator]

This is all really interesting. I don't own a car as I live in town (and therefore can walk to all the places I would need to - bank, post office, hospital, grocery story [though for big runs I go with my mom as we get ours together], and cafes, dollar stores if I need something, thrift store...).

The only thing I am paying down on is my rent (which includes heat, water/sewer and trash) and then my gas and electric.

Being on a fixed income it's not easy to save - but I do my best to find bargains, etc.

To Dr. Greg - :eusa_clap on the solar energy! I also agree with being frugal and that a peace of mind is priceless.

 

[kamikat]

So, am I abnormal? This chart would say that I am. Who's on board with me? Who would like to be in a debt free position? (I'll be glad to council anyone who would like some guidance, shoot me a PM.) Who has always been debt free?

We were debt-free until my husband was laid off in 2008. We did ok with the severance and savings until one of my sons needed a trip to the ER for stitches. One minor trip to the ER wiped out would should have been living expenses for a few more months. We're still trying to recover.

 

[MikeBravo]

I wonder what were the figures for 10 years after

There was the depression before the war, rationing etc. during the war. Then there was the baby boom after the war

This meant an explosion in demand for housing and other consumables, not to mention a boom in marketing and advertising

 

[Lincsong]

You value investor you.
Good points about the War being responsible for the skew in investing and debt numbers. The cost of big ticket items such as housing and applainces that did not even exist then has also taken quite a toll on the debt structure of households today.
A house sold here in the 1940s for $4,000 will bring around $300,000 today. Even adjusted for inflation, that 4 grand would be $51,000 today. Good luck in finding something for that.

It could probably be found around 86th Avenue in East Oakland for $51,000.

 

[Geronimo]

Good luck in finding something for that.

Try Detroit.

 

[davestlouis]

You could buy a whole block in Detroit for $51k...not that you'd want it. By BIL lives in Redford MI, an inlying suburb of Detroit, which he calls Redfordtucky in honor of his hillbilly neighbors.

Anyway, I have been on a simplification/downsizing/thrift kick for several years, originally out of necessity. I have come to enjoy being a born-again tightwad. I'm starting to understand why my grandfather thought credit was evil, and paid cash for everything but his house.

 

[Paisley]

Wild West enthusiasts could move to Detroit. There's the crime, of course, and maybe the necessity of digging your own well and putting up a windmill:

Downsizing Detroit also presents political obstacles. Officials must identify neighborhoods whose city services would be withdrawn and whose residents would be relocated, a process certain to set off political fireworks.

From "Feral Detroit" by Steve Malanga, City Journal, Autumn 2009​

 

[Mid-fogey]

Sort of...

"A house sold here in the 1940s for $4,000 will bring around $300,000 today. Even adjusted for inflation, that 4 grand would be $51,000 today. Good luck in finding something for that."

...my point above. There's no point in comparing costs of things today to anything in the golden era, let alone something from longer ago.

About as close as you can get is something like: "that was cheap" or "that was expensive".

 

[Paisley]

You can compare the price of a house with wages. Using median income of $2,410 per year in 1944, the $4,000 house cost 20 months' income.

According to the U.S. Census Bureau, median household income was $52,029 in 2008. The house now selling for $300,000 now costs 69 months' income. (That's assuming no change in income taxes or interest rates.) If you use that measure, the $4,000 house would cost $86,666 today. However, the character of the house's location may have changed. What may have started as cheap housing on the outskirts of town may now be in a bustling neighborhood--something that tends to raise the price.

Still, I think it's fair to say that housing prices have gone way, way up. If I were in the same financial position I was in 14 years ago when I bought my house, there's no way I could afford to buy it now. And the area has changed little.

 

[Mid-fogey]

My point...

...is that we shouldn't be saying that something that was x dollars in 1940 would y dollars today. Even in cases where something appears to be directly applicable, such a gallon of gas or the exact same piece of real estate. Housing prices going up faster than incomes is part of a larger, worldwide story.

Population in the U.S. has more than doubled, population has shifted, technology has made some products cheap, government policies change, and world conditions change too. These change the ratios between items such as the average house costing x times more than the average car. Every wage, resource, and good for sale has a value that is in constant flux versus every other item. Some things (computers) arrive and other items go away (buggy whips) as every day consumer goods.

Part of my job requires me to use inflation factors for my work and I've been long aware of their shortcomings. I've yet to see a methodology that takes all these shifting factors fully into account.

 

[Paisley]

When you take every factor into account, what you end up with is that the $4,000 house now costs...$300,000.

What's interesting for me is to see how people lived in other times and to try to figure out WHY changes have taken place. Certain things go down in price because of technology and competition. Certain prices go up or down with regulation. Court decisions can have an impact. Funding and interest rates affect prices. So does more information.

Twenty months' median income vs. 69 months' income for a house is a whopping big difference--a difference that hasn't come to pass in all areas. The reasons for the differences are worth considering.

As you say, we can't just plug and chug for a specific item. That's clear from the example of the house that JamesPowers has given. I've used income in comparison to the price of the house because that's the main consideration in buying a house on credit.