Thanks. I’m trying. You know I used to be a mess with finances. I’ve come a long way.
And you deserve a fucking comfy bathrobe. Come on.
I have the opposite problem which is a good problem to have and it served me well but I am retired and need to get out of the poverty mindset. For example, I got married in 1993 and got a very nice quality set of no stick pans. I still had them over 25 years later. They were beat to shit and I’d have to soak them overnight to clean them. In my mind it was, “well they still work”. I had a revelation one day and went to Target and replaced the fry pan for $25 and it made my life so much better.
Saving’s like spending or anything else - people can take it too far. As mentioned above, I started investing by living in a SRO (an apt with no kitchen or bath), working overtime every week, and walking back and forth to work 3 miles each way. But at one point I was walking down the hall to take a shower and thought “Shit, I’ve got over $100k saved up - just get a place with its own bathroom!” I’d do it again, though. Having $100k invested after 3 years was a significant headstart over the usual “I’ll put $500/month in a nice index fund for 40 years” strategy. But I didn’t go thru that period to spend my life worrying about money - I did it so I don’t have to worry about money. I bought my first Porsche (used) not long after.
While not completely on-topic I thought this article was interesting in some of the ramifications of changing expectations as life happens.
He was a Goldman Sachs banker worth $3 million generating $380k a year in passive income and he couldn’t figure out how to finance a house without selling off a bunch of his revenue-generating income and now he’s struggling to make ends meet on $230k a year?
Did he pay “cash” for the house as in paid for it outright without a mortgage? Is the $60k in housing costs include the mortgage or just furnishing and upkeep?
It’s interesting as a case study in entitlement, lifestyle creep, and keeping up with the Jones’s. They are passively earning more money than most Americans make ever and yet it’s not enough. All because they don’t want to say “we can’t afford this”.
First of all, you pretty much either need to be a Goldman Sach investment banker or good enough at investing to become a Goldman Sach investment banker in order to amass millions of dollars by age 35 or so. There are very few jobs that you can just start out making that much money that young where you can live in SF or NYC and have enough left over to make wise investment.
I also feel a need to point out that it sounds like a lot of high risk, highly leveraged speculation if these people are are seeing returns that beat the market by that much.
I’m always amazed by these stories about people making that kind of money who can’t make ends meet. Mostly because I make that kind of money working in Manhattan and I constantly have to track my finances.
Let’s say my household income is in the neighborhood of $400k a year for a family of 4. Based on various calculi including commute, my wife’s aging parents, access to work in Manhattan, we’ve landed on owning two homes - a nice (but crowded) 2 br on the Hudson River in NJ and a second 5 BR home with a pool near the Poconos about 90 minutes away (with no traffic).
But aside from that, we don’t incur a lot of major expenses. We go out to eat a lot but we aren’t spending thousands on the latest fashions. We both drive reliable, decade-old used cars. Credit card bills are payed off each month. The furniture in the house is new because we only bought it a few years ago, but the apartment furniture is pretty worn (no sense buying new furniture until the kids are older).
And I’m super excited I haven’t had to shell out $40k a year for childcare since COVID.
The point is, even with our income, we still have to spend within our means. We aren’t running out buying new Mercedes every other year or sending our kids to $40k a year private schools or shelling out thousands of dollars for country club memberships (that I wouldn’t have time to enjoy anyway). Fortunately I hate boats.
You see, the problem with places like New York and San Francisco is that there is always someone who makes a lot more money so it’s easy to get sucked into constantly wanting a bit more and not wanted to ever say “I can’t afford that shit”.
Yeah. 400K plus is common in my world too.
The guys who screw themselves (and they are legion) are the ones who think that’s infinite money. Compared to the actually rich folks all around them that’s pocket change. So they start the cycle of “I don’t care what it costs” and pretty soon they’re living paycheck to paycheck.
BK a few years later the first time their luck turns is also common.
Idjits.
I’ve been looking at my kids’ 529 balances and thinking, wow, that’s a lot of pretty nice vacations.
I have a Tale of Two Nieces. Niece A went to a decent engineering college, had a job contract before graduation, married directly after graduation to a fellow engineer classmate. She left school with almost no student loan debt (her husband had enough for two), making over $70K straight from college, ten years ago. She now has a suburban home, 3 kids and a company car. No debt but her mortgage. Good savings, rarely goes out to eat, and a big weekend splurge with her daughter was going to Target and letting the 7 year old buy something with her own money.
Niece B divorced her wife almost 2 years ago. The wife was the primary breadwinner, niece was in college to get her nursing degree. I offered to let her live rent-free in my rental house while she finished her degree. She ended up dropping out, but got a decent job. Which doesn’t pay anywhere near an RN would make. She lived rent-free for over a year, and at less than 1/2 the going rent the next year, she could’ve saved up enough maybe for a down payment on her own home. But she didn’t. Finally she was told that I want to sell the rental house and she’d have to find other living arrangements. She’s moved in with some friends, renting a room. She’s not in serious debt, but she’s also not moving forward financially.
Niece A has always been a saver and a budgetter, and had the stick-to-itiveness to finish school in 4 years while working a part-time job. Niece B has learned a bit from her mother’s financial catastrophes, enough to stay out of the debt hole, but isn’t as interested in doing what needs to be done today for a better tomorrow.
StG
I suppose I’m in this category. I’m looking to semi-retire in two years when I hit 50.
I made low end doctor money for about 15 years, then took a more administrative job three years ago and it got a fair bit better. I live in a very low COL area, have no kids, haven’t been divorced, and I made some prudent investments early on, so it hasn’t been hard to build a nest egg. (I read somewhere a few days ago that not having kids is like having a cheat code for retirement.)
I live pretty well, by my standards. I get the good tickets when I go to music festivals, I have an impressive music studio, and I don’t think much about how much I spend at the grocery store. But the truth is that all the things I consider extravagant really don’t add up to much in the big picture.
If I quit right now I wouldn’t have to change a whole lot, and I could manage for a good long while off my savings and investments, though maybe not indefinitely.
What I really want to do is find a super-part-time version of what I do now that lets me do the parts of it I enjoy, still make some money (and ideally keep health insurance, which is no small thing) and have enough time and energy left over to consider my second act.
No mystery there. Kids cost a fortune.
But I suppose that sort of feeds into IMHO the biggest flaw of the FIRE mindset. Do you really want a life of extreme austerity, no family, saving every penny so you can retire early to do…what with who exactly?
As we discussed, there are obviously all sorts of degrees of a FIRE mindset. But I think you need to live life too.
Are you asking me? I definitely didn’t have anything close to an austere life but I did save and retired at 56 in Santa Barbara. It’s been lots of fuck buddies, great times with my huge friend group, beach walks and three to four live music events a week. I am having so much fun. I never imagined in a million years that I’d have such a great life. I do whatever the fuck I want whenever I get the whim to do it. I’m having a difficult time finding a flaw in my plan.
There don’t seem to be any flaws in your plan to me but you also don’t seem to have been one of those people who save 70% of your income so you could retire at 40 or 45 and continue to live the same frugal life that you did before retirement. That’s what I don’t get - why save so much of your income to retire early and still not be able to afford to travel or have a hobby or whatever? I retired at 58 - and I went on vacations both before and after I retired.
You’re correct but that’s Lean FIRE, a subset of FIRE that most advocates don’t do. It’s generally being somewhat frugal by not spending on expensive cars or too big a house or extravagant luxury items. You still get vacations and reasonable hobbies. Then you get to do the same stuff without working or working a part time fun job like my friend who repairs bicycles.
I never knew anyone like that until my father got remarried after my mother died. My step-sister and her husband were exactly like that. He was a psychiatrist, making good money. They bought property on a hill in Southern California. Oops, it was zoned to not allow building. That was a loss. They moved to La Jolla, and got the smallest house on the block. Can’t have that - they added a second floor. And complained about money.
They were greedy too, but we won’t go into that.
Yeah, I’m continually gobsmacked by that sort of thing. I live on $32,000 a year - I have no debt, I live in a safe neighborhood, and if I eat beans and rice it’s because I want to - no reason I can’t have steak and potatoes. I have six months worth of money to live on in the bank (well… I did, last year I had some emergencies so it’s down to two months, but that sort of thing is what the money was for. I’m rebuilding that account.) I have a retirement savings plan. I have a retirement plan. Yes, I have to plan ahead for major purchases or travel but if I want to make it a priority I can do that.
If I can do that on $32k a year why can’t someone do that on $230k a year?
Lean FIRE is what I’m planning and hoping to do. I’m under no illusion that I’ll ever make big money, but I plan to save what I can, then move to a very low-cost-of-living area with the hopes that I can extract passive income out of a portfolio/CD/high-yield/whatever. I’ve always lived a somewhat embarassingly-cheap lifestyle anyway.
I’ve long said that if someone were to cover my salary (& healthcare) & said I didn’t have to work I’d be poorer. I wouldn’t sit at home all day. Even just going out for a ride costs gas & some fraction of wear items - tires, brakes, etc., maybe some lunches out & some impulse purchases because I’m out & about so much. Even if I put a lot of the extra time towards running & hiking those shoes would wear out faster & need to be replaced more often. You’d have to make that (salary + x%) for me to just break even.
The issue isn’t that they can’t. It’s that they won’t.
And once they decide they’re unwilling to not have leased new cars, big houses, private schools for the kids, 2-week high end vacations, whatever, then the won’t quickly turns into can’t because they no longer have any free cashflow at all. And then they cannot afford to drop the cars, sell the house, etc., because of the losses, depreciation, and transaction costs.
I think I live a fairly modest lifestyle, but I still would have to take a huge hit to live on $32K/year:
Monthly expenses:
Health insurance for my wife and myself is $1,500
Internet: $100
Cell Phone for both of us: $150
Dog food: $50
Gas: $100
Utilities: $400
Food: $1000
Property taxes: $200
So, that’s $3,500/month or $42K/year without anything special like travel or repairs or medical.
Where you live makes all the difference of course. Getting by in Indiana on $32K a year is doable, in California it is much less doable.