“Anyone who has ever struggled with poverty knows how extremely expensive it is to be poor; and if one is a member of a captive population, economically speaking, one’s feet have simply been placed on the treadmill forever.” - James Baldwin
“The reason that the rich were so rich, Vimes reasoned, was because they managed to spend less money. Take boots, for example. … A really good pair of leather boots cost fifty dollars. But an affordable pair of boots, which were sort of OK for a season or two and then leaked like hell when the cardboard gave out, cost about ten dollars. … But the thing was that good boots lasted for years and years. A man who could afford fifty dollars had a pair of boots that’d still be keeping his feet dry in ten years’ time, while a poor man who could only afford cheap boots would have spent a hundred dollars on boots in the same time and would still have wet feet.” - Terry Prachett
While the above is absolutely true, the rich are rich because of generational wealth. And if you go back far enough, that generational wealth is based on exploitation, environmental abuse, genocide, all the hits.
Pratchett mentions generational wealth as well, noting the attics full of furniture and sturdy tweeds which could be handed down, and the estate itself, which could not only house innumerable family members and friends and their servants, but also provided income from rents and food from the gardens, fields, and animal pens. It’s just more spread about, whereas the Boots Theory of Poverty is a complete thought.
It’s about the lock in of poverty. It’s not meant to be taken literally. It’s about the increased costs levied on the poor that make it impossible to get out once you are in.
The other side of that coin is that the poor have to buy from the rich, and the rich have bigger profit margins when selling cheaper items to the poor. This is exploitation of a captive market.
Usually, it’s not even going back at all. The generational wealth kids I grew up around still had their parents stealing their workers’ wages and engaging in fucked up business practices.
It might not be exterminating a native population kind of thing, but there’s that whole thing about the banality of evil and generally accepted insanity, so I still think it counts.
You are completely missing the point. Because they have money to begin with the have the money to invest. For example, buying a home instead of paying twice as much to live in a motel because you can’t get a loan because you weren’t born with wealth.
The principal is about the cost of poverty. It’s not meant to be taken literally.
…ish. My wife and I just did this calculation and (at least in America) property taxes throw a wrench into it.
A decent rental home in Texas costs about $2650 per month. A similar house costs about $460k to buy, and run about $1000/mo in taxes. So you’ll only save about $1650 per month.
Even putting that 460k into a bank account at 4.5% interest will give you $1725/mo, let alone stocks, index funds, and all the other investments you could be doing that will out-perform real estate.
Of course, that doesn’t disprove your point about poverty since you need to have the money to buy/invest. But it’s just a reminder that houses are not the wealth builder that a lot of people imagine them to be.
Always research and determine the best option for your financial situation. Gate-keeping financial literacy is another tool the wealthy use to keep people in poverty.
A decent rental home in Texas costs about $2650 per month. A similar house costs about $460k to buy, and run about $1000/mo in taxes. So you’ll only save about $1650 per month.
This would amount to an annual tax rate of 2.6% which is possibly some of the highest property tax rate in all of the United States. The median property taxes paid by homeowners in the US is only $2000 per year.
Even putting that 460k into a bank account at 4.5% interest will give you $1725/mo, let alone stocks, index funds, and all the other investments you could be doing that will out-perform real estate.
I agree that real estate as an investment is generally not the best option, but I don’t think that says anything about real estate as a wealth building tool for the middle class. If you compare renting to buying using a mortgage (the typical options) over, say, a 50 year period, buying will almost certainly come ahead in terms of wealth built.
For a primary residence that you plan to occupy long term, i would recommend buying almost every time. If you’re looking to build more wealth after that, I think there’s usually better options than e.g. buying a second house and renting it out.
I agree with your last sentiment too. Warren Buffett said the memories he made in his house are worth way more than the money he lost by not investing it. We’re thinking of buying for the same reason.
And that’s not even getting into the realities that it was a statement made some 30, 40 years ago(?) and the qualities of “quality” can shift in much less time than that.
“Anyone who has ever struggled with poverty knows how extremely expensive it is to be poor; and if one is a member of a captive population, economically speaking, one’s feet have simply been placed on the treadmill forever.” - James Baldwin
“The reason that the rich were so rich, Vimes reasoned, was because they managed to spend less money. Take boots, for example. … A really good pair of leather boots cost fifty dollars. But an affordable pair of boots, which were sort of OK for a season or two and then leaked like hell when the cardboard gave out, cost about ten dollars. … But the thing was that good boots lasted for years and years. A man who could afford fifty dollars had a pair of boots that’d still be keeping his feet dry in ten years’ time, while a poor man who could only afford cheap boots would have spent a hundred dollars on boots in the same time and would still have wet feet.” - Terry Prachett
https://en.m.wikipedia.org/wiki/Boots_theory
While the above is absolutely true, the rich are rich because of generational wealth. And if you go back far enough, that generational wealth is based on exploitation, environmental abuse, genocide, all the hits.
Pratchett mentions generational wealth as well, noting the attics full of furniture and sturdy tweeds which could be handed down, and the estate itself, which could not only house innumerable family members and friends and their servants, but also provided income from rents and food from the gardens, fields, and animal pens. It’s just more spread about, whereas the Boots Theory of Poverty is a complete thought.
It’s about the lock in of poverty. It’s not meant to be taken literally. It’s about the increased costs levied on the poor that make it impossible to get out once you are in.
The other side of that coin is that the poor have to buy from the rich, and the rich have bigger profit margins when selling cheaper items to the poor. This is exploitation of a captive market.
Usually, it’s not even going back at all. The generational wealth kids I grew up around still had their parents stealing their workers’ wages and engaging in fucked up business practices.
It might not be exterminating a native population kind of thing, but there’s that whole thing about the banality of evil and generally accepted insanity, so I still think it counts.
The boots theory is bullshit.
Price does not reflect quality of goods. Price reflects what the market will pay.
Cheap things can be better quality than expensive things.
Rich people aren’t rich because of some “wise” investment in necessities, the idea that that’s even considered a factor is insulting.
You are completely missing the point. Because they have money to begin with the have the money to invest. For example, buying a home instead of paying twice as much to live in a motel because you can’t get a loan because you weren’t born with wealth.
The principal is about the cost of poverty. It’s not meant to be taken literally.
Exactly. To use another example it’s cheaper to simply own your home outright than to pay rent for the rest of your life.
…ish. My wife and I just did this calculation and (at least in America) property taxes throw a wrench into it.
A decent rental home in Texas costs about $2650 per month. A similar house costs about $460k to buy, and run about $1000/mo in taxes. So you’ll only save about $1650 per month.
Even putting that 460k into a bank account at 4.5% interest will give you $1725/mo, let alone stocks, index funds, and all the other investments you could be doing that will out-perform real estate.
Of course, that doesn’t disprove your point about poverty since you need to have the money to buy/invest. But it’s just a reminder that houses are not the wealth builder that a lot of people imagine them to be.
Always research and determine the best option for your financial situation. Gate-keeping financial literacy is another tool the wealthy use to keep people in poverty.
This would amount to an annual tax rate of 2.6% which is possibly some of the highest property tax rate in all of the United States. The median property taxes paid by homeowners in the US is only $2000 per year.
I agree that real estate as an investment is generally not the best option, but I don’t think that says anything about real estate as a wealth building tool for the middle class. If you compare renting to buying using a mortgage (the typical options) over, say, a 50 year period, buying will almost certainly come ahead in terms of wealth built.
For a primary residence that you plan to occupy long term, i would recommend buying almost every time. If you’re looking to build more wealth after that, I think there’s usually better options than e.g. buying a second house and renting it out.
Eeeeeeeyup!
1.9% for the county: http://www.tax-rates.org/texas/travis_county_property_tax
0.7% for the Public Improvement District: https://spdpid.comptroller.texas.gov/view/2024/103225659
I agree with your last sentiment too. Warren Buffett said the memories he made in his house are worth way more than the money he lost by not investing it. We’re thinking of buying for the same reason.
And that’s not even getting into the realities that it was a statement made some 30, 40 years ago(?) and the qualities of “quality” can shift in much less time than that.
This so much. It is so hard to beat out of the older generation that you cannot SAVE YOUR WAY TO WEALTH!!!
My grandma thinks rich ppl are rich cuz they just spend less and have nice things.