The Wisconsin Martins

I’ve written a few posts over on Minor thoughts, that you may find interesting: Creation, Evolution, and God’s Temple ; First Madison Vote ; and Getting Comfortable With Debt.

Minor Thoughts, in case you weren’t aware, is where I post anything I write that isn’t directly related to Christine and me.

David Friedman has written a short guide to understanding accounting. After a quick read, I didn’t. The problem isn’t with his write-up, though. The problem is with accounting itself. I’ll keep re-reading it until I get it.

While I’m on the subject of buying a house, I’ll pass along a question I’ve been mulling over. Three months ago, I read a post at The Bored Investor where talked about paying down his mortgage. He talked about something I’ve considered: is it better to pay extra on the mortgage each month or is it better to save that extra money and pay the mortgage off in a big lump sum? The primary benefit of the former is that I’d pay less interest overall. The primary benefit of the latter is that I’d leave my money available for emergencies and other unexpected expenses.

Like I said, I read this three months ago. I still don’t have an answer, but if I ever do make up my mind, I’ll let you know.

While reading around the Internet this morning, I stumbled on a blogpost that offers 7 simple steps to grow your fortune. All of the steps on that list are good ideas. My wife and I already do most of them. While reading through the comments on the post, however, I found this statement:

One of the best pieces of advice I give my friends and family isn’t on your list – and that’s to buy a house.

An apartment is a money pit – you spend anywhere from $500-$1000/month for a place to live. What many people in their 20s don’t realize is that they may already be paying just as much as a house mortgage – or more.

The benefits are huge – you have your own place, you improve your credit, and you build equity. While you can’t cash out the equity in your house as easily as you would a savings account, many homes continue to appreciate in value – making you even more money.

Five or ten years from now when you move on to another home, you sell your house and all those months of paying mortgage aren’t lost – you use those as a down payment on an even better home.

It’s good advice and it’s advice that I’ve heard more than once. Unfortunately, it’s a little unrealistic for us for several reasons. To begin, let’s take a quick review of our finances:

• We currently have a little over $76,000 in student loan debt.
• Our student loan payments consume a little under 16% of my net income.
• Our current rent payments consume a little over 24% of my net income.
• In our current apartment, we are only responsible for our electric bill. That’s another 2% of my net income.

As you can see, 26% of my net income is tied up in housing expenses and 16% is tied up in debt. (I should mention that student loan debt is the only debt we currently have. Our car is paid off and we’ve paid off the other short term debt we had.) A grand total of 42% of my net income is currently tied up in either housing or long-term debt.

Now, let’s review the housing market in southern Wisconsin:

• The average 3-bedroom house in our area sells for $190,000 to $240,000.
• Property taxes for a house this size would be somewhere around $300 a month.
• The best case scenario for a monthly mortgage payment involves buying a $190,000 house with a $40,000 down payment. Assuming that’s the case, our monthly mortgage payments (on a 30-year mortgage) would be around $800 a month. If, for any reason, the down payment were smaller or the home were more expensive our mortgage payments could be as expensive as $1,200 a month.

Even in the best case scenario, we would need to spend at least 38% of my net income on housing. The actual amount would be even higher considering that we would need to pay for our own heat, water, trash removal, other utilities, and property taxes if we owned our own home.

As attractive as owning our own home would be, it would cost us almost twice as much as renting would. We’ve concentrated on cutting the fat out of our budget for the last 2 months. And while we do have a small budget surplus for incidental expenses, it’s simply not large enough to allow us to increase our required monthly expenses 12% or more. Until we’ve saved enough money for a large down-payment, home ownership simply isn’t affordable in Dane County.

I very much enjoyed Jonah Goldberg’s talk last night at the UW. He touched on a lot of topics during the talk, but kept things moving light and quick by constantly throwing in jokes and quips (“I apologize for drinking so much water up here, it’s just that I smoked all that pot before I came in.”). The talk took place in Grainger Hall, Room 1100. It was a fairly typical, medium-sized lecture hall, about half full.

I admit, I wasn’t sure what to expect from the rest of the audience, Jonah being conservative and Madison being, well, not. Everyone was very attentive however and seemed to enjoy the evening as much as I did. The Badger Herald published a write-up this morning: Goldberg slams liberal media bias. The write-up is generally very good. I do have a slight issue with some of the content at the end:

In relation to his criticisms on natural disasters, Goldberg said the number of hurricanes has not increased in recent years and the data “flatly does not support it.”

But Brian Shactman, chairman of College Democrats, said the numbers of Hurricane Katrina speak for themselves, and pictures do not lie. Shactman also said everyone saw the faulty relief response by the government, and added it is the “typical Republican response to blame the liberal media.”

Shactman said the increase in the number of hurricanes each year and the warming of ocean water temperatures necessitates a deeper look into the possible effects of global warming.

This part of the article is somewhat misleading. The reporter allows Shactman to say that “the numbers speak for themselves”, “pictures do not lie”, and there has been an “increase in the number of hurricanes each year”. Jonah spent about 10 minutes of his speech refuting these very points. He pointed out that coastal areas are far more built up now than they were 50 years ago. Ergo, coastal hurricanes cause far more damage than they did 50 years ago. The strength of the hurricanes is the same, but today they’re blowing over “Lifestyles of the Rich and Famous” instead of shanties and moonshine factories. The numbers may not lie, but they’re certainly misleading.

Secondly, Jonah specifically addressed the question of an increase in hurricanes. He pointed out that hurricane intensity is on a 30-year cycle. Right now, we are in the high side of the cycle. Later on, we will move to the low side of the cycle. Again, the number of hurricanes may be increasing, but it would be misleading to imply that global warming is the only cause. (This is a great example of confirmation bias, which is another topic that Jonah covered extensively in his talk.)

I would hate to imply that the Badger Herald (or just Joanna Pliner) is biased, but I do find it interesting that they allowed the chairman of the College Democrats to get in some emotionally loaded statements while printing only that Goldberg said the data “flatly does not support it”. The end result is to portray Goldberg as a man who is unable to see the blatantly obvious and who has no response to Democratic logic. Had I written the article, I would have printed Shactman’s statements but also printed Goldberg’s response to those statements. Alas, I am merely a blogger and cannot hope to compete with objective reporters.

UPDATE: Several Madison bloggers were in attendance last night: Uncle Jimbo, Bob Thelan / The Freedom Fighter and both members of Letters in Bottles. Apparently Ann Althouse was also in attendence, although she didn’t blog about it. I’ve really got to get my blog back up and running so I can actually hang out with the bloggers. It would be somewhat awkward to say “Hi, I’m a blogger too! Well, no, I don’t actually have a blog at the moment…”.

UPDATE, the second: Jonah mentioned Groundhog Day as one of his favorite movies. He also mentioned that he’d written a column, last year, about the movie. This morning, National Review was kind enough to post A Movie for All Time.

I’ll be visiting UW’s Grainger Hall tonight for a speech by Jonah Goldberg, Editor-At-Large of the National Review. CFACT (Collegians For A Constructive Tomorrow, a conservative environmental group at UW) is sponsoring his speech. I think it’ll be fun.