The Story of Our Down Payment

A few months ago I happened across an article that had been written by Jillian B. White in July of 2015 in a magazine that I have read both in print and online for many years, the Atlantic.

The title of the article is "Millennials who are thriving financially have one thing in common... Rich parents.”

Being the kind of money mensch that I am, a middle-aged Jewish man with a strong fascination with the workings of all things money, I thought about this quite a bit. White's article cites the often stated issue that millions of  younger American millennials are struggling financially. She cites the percentage of about 30% of them living with their parents while many others are coping with stagnant wages, underemployment, i.e. the gig economy, and sky high rents. 

We've all heard and read quite a bit about this very large cohort of millennials who struggle to get ahead in today's ultra-competitive and financially insecure economy.

On the flip side, there are many millennials like my five cousins, three of whom are on my late father's side, and the other two are on the East Coast and from my mother's side. All five of them seem to be doing fairly well financially, living in sky high rent areas (two in Brooklyn, one in D.C., one in Chicago and one in Ann Arbor), pursuing advanced degrees, making big money in their various endeavors, and traveling the world in their late twenties and early thirties more than I have in my entire life.  That includes the cousin who I am closest with, who has a baby girl and is expecting her second child early next year.  Her husband is in med school at the University of Michigan.  

My three girl cousins on my father's side have something that's easy to identify in common in relation to this article. Their father, my uncle, is very successful and wealthy. While they travel through Europe, live in high-rent areas, purchase all organic foods at Whole Foods, they all also benefited from having their entire college educations paid for as well as cars purchased for them, trips paid for, the latest iPhones every year, and many other financial benefits that I undoubtedly do not know about and never will.

Likewise, the children of my mother's brother have benefited from similar financial circumstances, though not as much as the three girl cousins on my father's side. My Washington DC based uncle has paid for their college educations, extensive traveling, technology used to launch their careers, automobiles to get them to where they need to be, and undoubtedly some help paying their rent and furnishing their homes.  I should mention that all five of my cousins and their parents are politically to the left of Bernie Sanders, as are most of my relatives.  

White's article states that these upwardly-mobile millennials have had help paying their tuition, meaning that they graduate in far better financial shape than their peers who have had to finance their own way through college through a mix of working, scholarships, and taking out student loans.

Although the article and the studies that it's a few years old, it was interesting to see that of the 46% of millennials who pursued post-secondary education,  61% of them receive some financial help with their educational expenses from their parents.

Even with this help, the average student with loans from a four year college graduated with about $26,000 in student loan debt. those millennials who were lucky enough to have some or majority of their college tuition's burden reduced by their parents have a leg up on those who are saddled with massive debt, and those are the same ones that we hear and read about these days that are able to purchase their own homes, cars, and generally start their lives as young adults have for many generations.

Simply said, this can be considered just another instance of the time-proven theory that the Haves continue getting ahead of the Have-Nots in terms of turning their wealth into larger wealth because they are investing in the housing market, while those with massive student debt cannot. As has happened for generation upon generation, those millennials who are able to purchase properties that appreciate over the many years, rather than throwing away tens or hundreds of thousands of dollar on rent over the years, will have a greater amount of wealth to pass down to their own children, thus continuing the cycle as it has for many generations.

The story of my own down payment.

What this article made me think of was the story of how my wife and I moved from being renters to becoming "homeowners" in our late twenties, around the time that many of these millennials were young children. In late 2018, I receive a little bit over $3,100 in take-home pay every other Friday. My wife works part-time, earning a few hundred dollars per week working at the magnet school that both of our children previously attended.

As I have shared, our family's middle class suburban existence typically totals about $10,000 to $12,000 per month combining our expenditures and Paying Ourselves First about $1,400 per month or so. I realize that while these numbers may seem high to some readers, it will also seem paltry to others. For many folks, it will seem fairly average, and by those people, what I mean is those who are middle-class suburban American families like our own.

But twenty-and-a-half years ago, my wife of almost two years was very pregnant with our son and we lived in a large apartment in east Rogers Park, a neighborhood just a few blocks away from Lake Michigan on the far north side of Chicago.  It was at that apartment that I witnessed the only two shootings that I have to this date. One was of the drive-by variety and the other one would best be classified as a run by that woke me up in the middle of the night. Waking up to the sound of rapid gunfire, I woke up just in time to see to Hispanic youths running quickly away for my house about five doors west from us that they had just shot up with two semi-automatic rifles. It was a sight that I will never forget, and hope to never witness again. A few minutes later, the homeowner whose home was shot up came running out with a handgun looking up and down the street for the offenders, but they had fled away from the scene by that time.

The reason that I mention that is it was not really a neighborhood that I was extremely proud of to have my sweet young wife who I had met at the University of Wisconsin  nearly eight years earlier living in, not to mention our soon-to-be-born baby. I was still up P.O. at the time, is detailed in a tome that I wrote detailing several individual days throughout my tenure.

Why I share this is because, more than anything in else in the world at the time, my wife and I wanted to purchase our own home. I recall that our combined take-home pay in those days was about $1,000 every other Friday, which was just barely enough for us to get by at that time considering we both had car payments to make and we were paying $800 per month in rent at the time. Besides having cable and phones, our other indulgence was $20 per month that we paid for the benefit of having America Online by dial-up internet. We would order a pizza every Friday night, and spent a few extra dollars here and they are going out with friends to various restaurants on occasion.  We went to a lot of movies, but always at budget theaters.  

I'm not saying that we were poor, but I don't think I'll ever forget telling my wife not to spend more than $30 on a grocery shopping trip to the long-defunct Dominick's Finer Foods on Ridge because we wouldn't have any more money than that until our next payday at the end of the week. One thing that we certainly did not have was $3,000 or more to make a down payment on a small condominium.

That's where my parents came in.

We had looked at a couple of North Side Chicago neighborhoods and Skokie for condominium to purchase, but couldn't really find any that we could afford and that would also allow us to have our pet rabbit with us. We actually did go under contract on one ground floor condominium unit in Skokie just a few blocks from Old Orchard Shopping Center, but we had to cancel the deal when they would not allow us to bring our little fuzzy white bunny with us. We didn't think so at the time, but that actually turned out for the best.

My mother being a large proponent at the time of us living close to her and my father, she graciously offered us $3,000 as a gift toward our down payment with the caveat that we try to get something relatively close to their home; the same house that my mother still resides in to this day.

Ultimately, we purchased a small two bedroom condominium a few blocks away from downtown Evanston, right off of Dempster and just steps from the el. with the $3,000 that my parents gifted to us, we were able to put 3% down, using a few hundred dollars of our own as well, and purchased a condominium that cost about a hundred and five thousand. I remember signing the mortgage papers for our purchase, thinking that to be all the money in the world.

I could tell you quite a few stories about the trials and tribulations of the condominium that we lived in, which ended up becoming more travails then triumph the final year that we live there, forcing us to seek a better home for our young family. We really wanted to buy a nice house in Evanston, as I had moved up slightly in the world from being a P.O. to an economic development planner, but we could not nearly afford a decent house in the neighborhood that we wanted to live in. We were forced to look in far-flung suburbs many miles west of the city, ranging from good to bad to ugly.

For those of us of a certain age, you may be able to remember that the real estate market was red hot in 2001, the year that we decided that we must sell our condominium and purchase a house with a decent-sized yard in a safe suburb with a good school district. The same type of goal that millions upon millions of families had set out for over the years, and the millennials will be no different with their goals. We happen to have many couples in their early thirties with young children moving into our neighborhood these past few years, after our neighborhood went through a lot of pain throughout the recession.

After living in our condo for a little over three years, we were able to sell it by owner for $50,000 more than we purchased it for in the spring of 1998. Going from having about $200 in our account three years ago to $50,000 after selling a condo, we finally started feeling like we might become card-carrying members of the American middle class.

After touring many homes in many different neighborhoods in several different suburbs over a period of about four Sundays in a row, we visited the house where I am writing this post that you are reading. We didn't exactly get into a bidding war for it, but we offered $202,500 for it, nearly a hundred thousand more than we had purchased the condominium for just over three years ago.

We were able to strike a bargain with the seller, a widow who was moving out to Arizona to be closer to her daughter, and we were able to put 20% down on our house or a little bit over $40,000. The closing went through, and we became owners of a split-level ranch in a decent suburb with a decent-sized yard in a very good school district. Our son had just turned three years old and we moved in on the Saturday before Labor Day in 2001, ten days before 9/11.

What does this have to do with anything, you may ask?

As my mother was telling me about my privileged girl cousins and their travels and exploits and rentals of new apartments and one of them purchasing a condominium like my wife and I had done twenty years ago, I reminded my mother of the $3,000 gift that she and my late father had given us when we were purchasing our own condominium. She didn't remember doing it, although I remember it well. and so did my wife.

I told her that what she essentially did was to launch us into home ownership. It would have been very difficult for us to save up $3,000 in those years, and it might have taken us another year or two to do it at the time. Especially after my wife became a stay-at-home mom while I was still only making about $30,000 per year as a probation officer. $30,000 happens to be the same amount that I now pay every year for our son to enjoy the privilege of earning a bachelor's degree in music at a Chicago area private college.

I told my mother that by giving us that $3,000 for a down payment, we were able to afford the monthly payments for our condominium, which included about a $200 per month association fee also.  Despite our unit's many problems including a mouse infestation and being right over the parking lot where we had to endure a large amount of noise basically every night, we were able to sell it for a tidy profit after three-plus years, which allowed us to then make a good down payment and offer on the house where we continue living to this day.

Of course, had you told me in 2001 that we would still be living in our so-called starter house in late 2018 with no particular moving date or year in mind, I wouldn't have believed it. I would have assumed that I would have continued ascending some type of career ladder to the point where we would be able to buy a much nicer home or that I would sell the home that we bought for $200,000 for $400,000 after a few years and then maybe buy something in the 500 to $600,000 range, but that was not meant to be. The home that we purchased for just over $200,000 back in 2001, and subsequently invested fifty to sixty thousand in it over the years, is perhaps worth the $250,000 or $260,000 we have put into it today.

The point is that when we try to pay for our own children's college, we are trying to give them the same type of leg up that our own parents gave us. I can't say that my children will never struggle financially or will be able to own their own home, and consistently put money away for their retirement when they get to their twenties, or mid-to-late twenties considering that our son is already twenty years old. We are not nearly as wealthy as my successful uncle and aunt are, or my Washington DC-based uncle, who I'm not very close with.

But that doesn't mean that we don't want to help give our own children a leg up in life if we can.

It won't be long until the articles about successful Gen Z kids come out, and I want both of our children to be a part of that.