<p>We are still in the house we bought when are oldest was one - 19 years ago! We actually just paid the last mortgage payment last month. We live in the Midwest so it is affordable. We did send our kids to private schools but we make less than $150k. The oldest is in college and the second is a senior. They both should have enough in their 529’s to pay for most of their school. Both will have some scholarship money - one academic, one athletic. We have always lived below our means! That really is the key. But I am sure it is harder in high cost areas. We did have some help funding the 529’s from my dh’s parents - they started them when the kids were born! I thank them now! We put “something” in their 529’s every quarter - I work on commission so that something varied but we always contributed something. Personally I think it’s crazy to remortgage your house to pay for kids to go to a 60k school. Tell the kid that it is not affordable and then figure out how to get them to a cheaper option for undergrad. It will be good for the kid in the long run to learn to live within their means. </p>
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My husband made less than $20,000 per year before he got his city job, all the way until D1 was in high school. When he hit the top of the pay scale and I got the promotion that I have, we tripled our income in about two years, but by then we had three kids, one in high school and one finishing middle school. Before that we were really, really struggling just to get by. People who may be in graduate school a llittle longer or later, people who may change careers, people who may work in public interest law and then join law firms can go from not much to a lot in a short space of time.</p>
<p>My 27 year old was born 12 houses ago. We owned one of those and it was a nightmare when we couldn’t sell it and the tenants had to be evicted and trashed the place. My youngest has only lived in 8 houses.</p>
<p>Maybe the CC lot is more virtuous than the rest of the US, but the savings rate in the US is dreadfully low. See <a href=“Too thin a cushion”>http://www.economist.com/blogs/freeexchange/2013/04/saving</a>. In NY or San Francisco, a $200K income is not nearly as high as it seems and I can see people finding it hard to save, given the lifestyle choices they made.</p>
<p>As I mentioned,we intentionally bought a house in the lower income end of an affluent suburb when my kids were 2 and 5. We’re still there. Ours was the biggest house in the neighborhood when we moved in and then we added 1000 sf to the house and build a 1000 sf studio. Now our house is nowhere near the largest in the neighborhood. Most sales become tear-downs or get substantial additions. But, when we moved in, our income was probably 2 to 5 times the income of folks in the neighborhood (maybe more) and I was impressed that their consumption levels were often as high as ours (except for our vacation travel, but even that was pretty under control early on). They had newer cars and their kids actually dressed more nicely than ours. I assume that this meant that a number of our neighbors were either not saving or actually living on debt from mortgage refinancings but certainly not saving.</p>
<p>“In NY or San Francisco, a $200K income is not nearly as high as it seems and I can see people finding it hard to save, given the lifestyle choices they made.”</p>
<p>Given the lifestyle choices they made.</p>
<p>That’s the key part. The US has moved away from a culture of saving and toward greater consumption.</p>
<p>I would love to see the overall stats on potato consumption and percentage of income saved.</p>
<p>Just speaking for someone with a high savings to earnings ratio and a huge potato consuming family.</p>
<p>We don’t eat many potatoes but do eat a lot of rice–we do have a healthy savings rate and live below our means.</p>
<p>We live in the house we bought when I was pregnant with D in 1989. We plan to keep it forever. It has 3 bedrooms and 2 bathrooms. It is a good size and pretty good for aging in place, all on one level and near good neighbors and relatives. More than half of our marriage, our income was well under $100K, but we were still able to send our kids to private HS and private college. We did get some help from my sis-IL. We were full pay for both kids’ private HS and one kid’s college, tho we got merit aid for 50% other kid’s college tuition.</p>
<p>I thought of this thread when someone on Facebook linked to this article, about roommates who spent the last year buying nothing, <a href=“The Buy Nothing Year: How Two Roommates Saved More Than $55,000”>http://www.forbes.com/sites/laurashin/2014/08/20/the-buy-nothing-year-how-two-roommates-saved-more-than-55000/</a>. They saved $55,000 in one year, and I didn’t get the sense they were high earners.</p>
<p>Granted, a lot of what they did was extreme – they biked and walked, grew their own food, made laundry detergent. And would be harder to do with growing kids. But I was struck by this quote: “I would go into London Drugs to buy toothpaste or one simple thing and leave with $75 worth of stuff — makeup, a magazine, shampoo.” I think that happens to a lot of people – retailers and marketers are good at what they do. </p>
<p>The lesson I took is that I think if a family earning $200,000/year really worked at it, they could save a lot of money in a year. </p>
<p>“Let’s say that you lived on a 100k income before you made 200k. Assuming you lived within your means, why would your lifestyle have to change when your income went up?”</p>
<p>It doesn’t have to. It’s just very difficult for most people to resist spending what they have. I have weathered extreme income shifts during my career (grad school to 60k job to $180k job to $60k job and now self-employed). I barely changed my lifestyle at all during these shifts. That’s not because I have more will power than other people. It’s because I understood how I would be tempted to spend when I was making law-firm money, and I set up automatic investments so that I never saw the extra money and didn’t have immediate access to it. If I have to call my advisor guy and tell him to cash out investments before I can spend money on some luxury, I’m going to do it a lot less, and never on impulse.</p>
<p>It’s exactly the same thing as making a diet easier for yourself by not having cookies in the house. Heaven knows, when there are cookies here, I eat them.</p>
<p>There is a pop business book called The Millionaire Next Door or something like that, which notes that people tend to adjust their spending to their neighborhood. If someone buys a house in an affluent town to get the good public schools and if his/her neighbors have gardeners come in once a week to mow and landscape and then replace their cars fairly regularly, he/she is likely to do that also without thinking consciously as that level of spending seems normal. That’s why going from $100K to $200K or even to $400K in New York doesn’t necessarily lead to lots of savings.</p>
<p>The three key insights of the book were:
- The people who accumulate wealth are not necessarily people with high incomes but people who spend less than they make (who often turn out to be small entrepreneurs like dry cleaners, etc.);
- Your spending is highly influenced by the folks around you;
- If you subsidize adult children’s lifestyles, they will never learn to save because they never have to adjust spending to match income.</p>
<p>^Good points. Also, in addition to people starting to spend more when their income rises, the reverse can be true. when income falls suddenly (perhaps through a job loss or divorce), it can be difficult to adjust quickly–especially when one thinks the job will be quickly replaced or the divorce won’t hurt that much financially. I think in general people tend to underestimate how resourceful they will have to be to respond to changes in income or spending–even when they have had plenty of warning, as with college costs.</p>
<p>What I most remember from that book is that, disproportionally, “millionaires” drive F-150’s.</p>
<p>Ah, ok. I see now. I live in a middle to upper-middle class neighborhood but never really understood the keeping up with the Jones thing. I don’t make anywhere near the money talked about in this thread but I’ve made more in the last few months than I made in the last year or so. Between my fiance and I, we’re more than paying our bills, saving, and having plenty left over. Not one thing has changed- although I did allow myself to travel down to Florida for a few days when my best friend moved down there. I took the cheapest flights possible though. My income is going to more than double starting next month and I honestly just can’t see myself spending it. I already have more than enough to make me happy. I might go out to eat once or twice more a month, but that’s it. </p>
<p>It’s the mentality I don’t understand, that’s all. I mean, objectively, I understand wanting nicer things but I’ve never felt that pressure to keep up with everyone else. I think it’s likely because I live in my own head and just don’t care about what people think. If I was rich, my one goal would be to open up an animal sanctuary 
To each his/her own, but I will never understand feeling that one is “punished” for making “too much” </p>
<p>I will say that where you work can dictate some of your spending. The firm I was at had no problems telling people what they expected as far as dressing and the car you drive. You couldn’t go around in your JCP suit and old Camry for very long.</p>
<p>It’s not just lifestyle choices. The cost of living is really fundamentally different in different places. We make about $200K/year in Saint Paul, MN and are sending two daughters to expensive private colleges as full-pays–not that it’s easy, but we’re swinging it. We’ve lived frugally for the most part (though we don’t skimp on organic fruit and vegetables), saved for years, and tightened our belts even further in the college years because our daughters’ education is our top priority, along with saving for retirement. We don’t take the fancy vacations or drive the flashy cars that many of my colleagues do, but we don’t mind. But $200K/year is a lot of money in Saint Paul. The online cost-of-living calculator I’m using says if we were in Manhattan we’d need an income of $410K to maintain the same standard of living–groceries 39% more, housing 293% more, utilities 41% more, transportation 20% more, health care 7% more. For San Francisco, the comparable figure would be $301K. We’ve lived in both places, and that seems about right. On the other hand, if we lived in Des Moines, IA it would take only $169K to live at a comparable standard of living to what we have now on $200K in Saint Paul. I really think people are talking past each other in this thread. If you’ve never lived in Manhattan or San Francisco, $200K sounds like an enormous income, but in those places, it’s not. The cost-of-living calculator says that someone earning $200K in Manhattan can maintain the same standard of living as someone making $83K in Des Moines or $97K in Saint Paul. That’s still a comfortably middle class living standard, but that’s all it is.</p>
<p>@sally305, in another pop business book (but an outstanding one) called The Only Investment Guide You Will Ever Need, Andrew Tobias writes (brilliantly), “A luxury once sampled becomes a necessity.” That’s why ratcheting down expenses seems harder than it ought to be. Plus spending is a result of a bunch of discrete choices. So, you can’t easily say I’m going to cut spending 25% tomorrow. But, you can sell the house and buy a cheaper one or move to a less expensive apartment when your lease ends. You usually just can’t ratchet down in big steps tomorrow. </p>
<p>^Right. And sometimes there are calculation errors. When I knew I was losing my job due to my company relocating out of state, I (wisely, I thought) moved to a house half the size and two-thirds the cost in a cheaper neighborhood. We cut out a lot of “necessary luxuries” and I thought that would be enough. But it has taken me six years to restore my salary to the level it was when I lost my job, and meanwhile the cost of living has continued to rise. (For instance, I pay more than $6500 in property tax for a house valued at only $269K–ridiculous!) Thankfully, I had put as much as I could into my kids’ 529 funds when I was earning more, so we are in okay shape–but it hasn’t been easy, and if I had had a crystal ball we might have moved to a small apartment rather than another house.</p>
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<p>I know that’s a joke but no one is homeless unless they have absolutely no other choice. It could be an adventure for a single person (for a short time, and knowing that s/he has alternatives) but it is a truly scary prospect if you have children.</p>
<p>OK, I edited my post. Certainly didn’t mean to insult the homeless at all but rather had Chris Farley on the brain. It is horrible to have such instability–especially with kids, as you say.</p>
<p>People who make $200K when their kids are applying to college probably did not make that much when the children were younger. Their income started out much lower than that, and then rose as the parents were promoted, or as their business grew.</p>