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<p>You know, everyone, including me, uses the expression “living below one’s means” to refer to people who plan, pay off debt, and save for the future. But IMO someone who spends every penny and doesn’t save is, by definition, “living above their means.” It’s interesting how even the language reflects a spending mindset.</p>
<p>I am only a year out of college and only have about 5k in savings… I could save much more, I am putting a lot away every month right now, but this is a phase of life where a lot of big ticket purchases need to be made… cars, etc, and any little emergency can wipe out what I have pretty quickly before I can really get started… I’ve had to start over a few times in the last year, I’d probably have twice as much or more otherwise. While I try to always have enough to cover an emergency and looming big ticket necessities, I imagine it will be a few years before I am even able to start amassing that kind of money… we’re buying a house this year (boyfriend is further along in his finances than I am, which I’ll get to in a minute), we’ll be getting married a while after that and will have a wedding to pay for, then there should only be a few years before kids… settling down is expensive, even if you budget modestly on these things. While the time before you have kids is a great time to buckle down and put money away to prepare for the more expensive years to come, the 20s aren’t necessarily cheap either and you’re usually just embarking on your career and making less money. You won’t save money in that period of your life unless you are making an effort to, and not everybody does.</p>
<p>My boyfriend is 27 and has about 65k put away… a small-ish portion of that will be the downpayment on our house. He was able to do that because he didn’t go to college and started life out with no debts, started his career almost ten years ago, and he’s been single and has made no major purchases besides his car in those ten years. Comparing him to others I know, I think he is way ahead of the game… especially as someone who isn’t educated and who only makes 60k a year. Together we are living very frugally right now, and the houses we’re looking at are ones we can easily afford on his salary alone-- so any money I make is extra, the period between when we buy the house and when we have kids we will have a LOT of extra money every month to pack into savings from my income, and I won’t have to work full time once we have kids unless I want/need to. We’re planning ahead and trying to live well enough within our means that we have flexibility depending on what the future brings, and having a healthy savings account is a huge priority. Not everybody in our position does that.</p>
<p>Quite frankly, I’d be surprised if even my parents have ever had 200k in savings they could access without penalty… I am sure they have some significant retirement savings but given their reaction to mild financial crises I am under the impression they don’t have much more than I do in liquid cash. My dad grosses somewhere between 70k-100k a year depending on how his business does… they tend not to make big purchases. I am not sure what the story is there. But I definitely hadn’t grown up under the impression that it’s normal to have hundreds of thousands of dollars in savings outside of 401k, etc…</p>
<p>the simple fact is that far too many just don’t know how to save or just don’t want to save.
Bigger house, better car, fancier vacations are more appealing to the majority…especially when that’s what they see their peers doing. I chose to save.</p>
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<p>What, you state your after tax income? I’ve almost never heard of it. </p>
<p>The one exception was a teacher who was trying to convince her high school class that she was underpaid. So she told them her take home pay (after state & local taxes, and all other paycheck deductions) rather than her pretax income.</p>
<p>My 22 year old son has over 20k so far in savings . He is going into a PhD program in Sept in Nuclear Eng . where he gets a stipend of 1800 a month .When he was 15 ,he was a lifeguard at a JCC and worked 35 hours a week ! He is a hard worker ,and his siblings have already borrowed from him ! I am very proud . He hardly spends .</p>
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<p>I think part of the problem is that we come from somewhere that people move when they have “new money”. Your hometown a bit more than mine was built up VERY quickly. When my dad grew up in P, C was all farm country (so 30-40 years ago). These people bought very large houses and many of them are now under water. I think that’s part of why we’re not used to it.</p>
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Just curious. But, what led you to this habit? And, do you only use after-tax numbers? Or is it after tax, after 401k, after medical coverage, etc? </p>
<p>If I stated my income in terms of pure take-home pay, it would be only 56% of the gross. I’d feel funny using that number as it’s so far off from what people commonly refer to as “salary” or “what I make,” etc.</p>
<p>Since consumer spending is such a significant part of our economy,being frugal is a negative for the economy in general</p>
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<p>I’m not sure which is worse… this or the people who try to figure out every dollar “benefits from” and includes that as “their salary.” I saw one website who had my dad (a high school teacher) listed as making nearly $90k when he realistically makes
closer to $70k. </p>
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<p>Yeah I would agree with you. That just doesn’t sound right… Maybe you could use that to get a raise ;)</p>
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<p>Good job in having an emergency fund! There are middle aged people I know who live month to month–it’s not pretty. Keep up your good work!</p>
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<p>I know what you mean! After all the things taken out of your paycheck (taxes, 401K, insurance premiums, medicare, SS, etc.), I suspect that we’d see the same thing. </p>
<p>I’m always surprised when we get the W-2. I puzzle, “If I made this much money, why don’t I feel rich?!”</p>
<p>I can’t fathom not putting money away for an emergency unless it’s literally absolutely impossible… I’d feel like I was walking around with a gun pointed at my head constantly. I don’t know how people do it… especially those with kids.</p>
<p>I am very, very lucky that my boyfriend has been so responsible since he started working… he really got us started off on the right foot.</p>
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<p>That’s an interesting theory. We don’t live in one of the newer, big subdivisions, and my parents were pretty low on cash when they bought. C is so diverse economically (relatively speaking, of course)… it’s hard to figure out what it’s deal is. lol. There is everything from trailer parks to McMansions. I’ve been looking at houses there, though, and there are a LOT more foreclosures than the other neighborhoods we’re looking in… sometimes dozens on one street. They seem to have suffered a lot more than some of the other areas in the vicinity, or perhaps at least have not recovered as much as some areas seem to be. We’re looking at Oakland County instead. The crime where we grew up is not what it used to be so we’re not even considering it anymore. :</p>
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<p>The person that I’m thinking of has a full cable package and no emergency fund. :eek: It’s all about priorities.</p>
<p>There is a thought of not having an emergency fund…The belief is that a true emergency fund is in a 100% safe account with quick access…Since the return on these accounts is nearly zero,and even in good times ,not much above inflation,you might be better off investing this money, and have a line of credit in case of emergency…An emergency fund is not normally needed…This is not to say you shouldn’t have some funds available for routine maintenence and such…</p>
<p>A lot of times, we, the parents are their emergency fund. That’s why
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<p>Son has $22,000 saved (he’s 22 and started working full-time a few
months ago). He should be able to save $10K/year on his current
budget.</p>
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<p>We’re talking $80K each, right? Our household makes a lot less than
that but we’ve saved a lot more.</p>
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BC- don’t sell yourself short. You’ve indicated you have made a LOT in unearned income (investments,etc), so imagine your savings comes from more than just earned income.</p>
<p>Student loans could be the issue here. Our son is married to a beautiful young women who had $100K in vet school loans when they married. They did not want to live with that debt so they live very much below their means in a modest home they own, and they pay in excess of $3000 a month toward these loans. They are also saving between $500-$1000 a month. And this is on just her salary and his part time job as he is in graduate school. So by the time they hit 30, they might not have your key $200K in savings but they won’t have any debt either.</p>
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<p>My impression was that was combined, after taxes and such. I could be wrong but are there are lot of nurses making $80k after taxes, etc?</p>
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<p>Do not become too confident about the future of Social Security and Medicare. With the ratio of workers paying taxes to retirees getting benefits falling, the politically difficult choice of raising taxes and/or cutting benefits will become unavoidable.</p>
<p>I agree that graduate school or professional school debt is good debt if it leads to a higher income that will even continue to increase over time. If these people are fiscally responsible, and fortunate in their careers, they can usually “catch up” or surpass some of those early savers. In effect, paying down this kind of debt is an investment in yourself. But at a certain point, these high earners will get in trouble if they spend what they earn, just like everyone else. </p>
<p>As for looking at salary in terms of after tax dollars, some people would be a lot better off if that’s exactly what they did! Too many people tell themselves that they “should” be entitled to lead a lifestyle based on a salary that sounds better than it is.</p>