How many of you Dopers have made the leap from poverty to middle class? How many know others who have? How did you or they do it?
We’ve been in the low end of middle class for some time now.
We’re climbing out because a of a few things.
Pay yourself first. 10% of your pay-cheque should go into a savings account. Rich people pay themselves first.
My wife says…“if the bills are using 98% of our money, where’s this elusive 10% you speak of?”
Good question…but you still have to commit to paying yourself. Maybe ALL the bills don’t get paid in full, maybe you put 7% of your net pay into savings instead of 10%…or 5%…whatever.
The secret path to middle class is to pay yourself 1st.
Effective if you do it.
I stopped being a junkie and got a job. (several, actually)
In 1991, the year I was married, I personally had about $8,000 in income. Last year, I personally had about $42,000 in income (my wife had a similar number).
I don’t know how I did it, except for finishing college and getting a decent job with a good company that rewards performance and loyalty. And paying off my credit-card debt.
Hmmm… I don’t know about ‘poverty’ but we never had much money growing up. My father owned a construction business that did pretty well until I was about 8 or 10, then the early eighties recession put him out of business. When I was a young kid, we were doing OK. During my teenage years, though, things were tight. We always had food, clothes, and a roof over our heads, but my parents drove old cars, and money was always an issue.
I think I’m pretty solidly middle class now. Maybe even upper middle. I know a lot of people are going to tell you to avoid credit cards and/or getting in debt, save a certain percentage of your income, etc. etc. but the number one thing that’s made a difference for me is having the skills to get a job that pays well. Go to college, get a degree in a field that has a lot of job openings. I’m an engineer, and businesses are crying to hire people with my skills right now. You also don’t see many impoverished doctors, lawyers, even skilled tradesmen (master plumbers and electricians make good money.)
Another big good thing I did was buying a house when I was fairly young (23). At least in my area, houses appreciate pretty quickly. Buy a house, live in it a few years, and bang - you have several thousand dollars worth of equity built up. It’s like free money. My house was worth 40K more than I bought it for 3 years in.
Also - marry someone who also has good job skills. Don’t have a lot of kids (3 kids will eat up your income pretty quickly). Don’t be afraid of getting in debt, but do make informed decisions about it. It’s OK to have a mortgage, or take out a loan to pay living expenses and tuition so you can go to school, as long as the job you’ll get after you get out will pay for the loans (ie, don’t take out 100K worth of loans to go to Princeton to get a teaching degree - you’ll never pay off that much money on what a teacher makes. Do take out 100K worth of loans if you’re getting a PhD.)
I’ve never accepted a job that didn’t pay more than my last one. I have very few expenses - no car, no kids, no pets. I have a very generous BF. At 19 I was making $10,000/yr. Now, at 24, I’m making +$40,000/yr. and taking night classes. It’s a slow and steady climb.
First: Got my electrical engineering degree - I worked, my wife worked, and the GI bill helped.
Second: Worked my butt off - first one into work, last one out.
Third: Didn’t buy stuff I couldn’t afford.
Fourth: Was very lucky - in several ways; was born with an IQ a little higher than most and we had no major setbacks (example divorce or kids on drugs, etc) and no major health problems.
Looking back, number four should probably be number one.
As recently as 1993, I was failing to meet basic financial obligations (power and phone bills, to name only a couple of examples), despite making $35K/yr., mainly because I just didn’t pay any attention to how I spent my money. I didn’t have any credit card debt, because I couldn’t get any credit cards based on my credit, but I was in default on my student loans, and I had no money in the bank.
Some of this was learned helplessness from my early days after college, when I was trying to live in Atlanta on about $6K/yr. in grad school fellowship stipend money, or just after when I was trying to get by on $14.5K/yr. With student loan payments, etc., there was simply no way to make ends meet (or so I thought at the time), so I didn’t try too hard. Even as my income rose, I continued to behave as if it didn’t matter what I did, frittering away everything that was left over after paying the rent (which was often paid late, though always paid). I lived with no phone for years at a time, without electricity for months, usually writing checks for everything for the last several days before payday, counting on the float to allow me to deposit funds to cover them.
Under threat of ugly ramifications otherwise, I eventually managed to refinance my student loan debt with a loan co-signed by my parents. In doing so, my account came out of default status and showed as paid in full; in fact, a considerable amount of back interest and penalties were waived in exchange for full payment up front.
In early 1993, I determined to convince my long-time girlfriend to move back from overseas so that we could be together and eventually marry. I’d realized that she was the right person for me to commit to spending my life with, and I decided to do whatever it took to make that happen. When I got a substantial raise and promotion in April of 1993, the first thing I did was go to my bank and set up an automatic transfer from my checking account to a new savings account, to occur twice each month, two days after each payday. I set things up so that most of the increase in my take-home pay went right into savings, while still leaving myself a little extra each month so that I could enjoy the feeling of achievement that went with the raise/promotion. In the course of the next eighteen months, I was able to save enough to spend $1000 on an engagement ring without emptying my savings account – not an enormous sum, but an impressive achievement given my track record.
I’d also set up all of my recurring monthly payments so that they were paid automatically (using CheckFree), preventing me from procrastinating about paying them until I’d spent the money elsewhere.
Once my girlfriend returned, I turned over responsibility for managing my money to her. I’d made a horrible mess of it on my own, and while I had partially turned things around, there was still a long way to go and she was far better at it than I. I continued to save a significant part of each paycheck over the next couple of years, so that by the time we were married in 1996, I’d once again built up enough savings that we were able to take a long, if not particularly expensive, honeymoon.
Having conceived our son on our wedding night, we determined that we should consider buying a house while we still had two incomes and her excellent credit history to help out. Early in the process, however, our mortgage broker convinced me that, since I hadn’t really had bad credit, other than with a couple of utilities, in quite a while (I either paid cash for things or did without them), had made payments regularly and promptly on the loan to refinance my student loans, had a respectable income and had been at my job for several years, and had enough cash on hand to make a significant downpayment, I should apply on my own. It was one of the proudest moments of my life when I got word that I’d been approved for a mortgage of over $100,000 based on my income and credit alone.
My income has increased by about 70% since then, and we have a respectable nest egg in retirement accounts and enough in various investments to sustain us for a while, should I find myself unemployed (my wife has stayed home to raise our kids since my son was born in early 1997). We’re probably on the cusp between middle and upper class, at least statistically speaking.
What allowed me to get where I am? First, I got a good education; despite the grief my student loans caused me over the years, they still represented a sound investment in my future. By good education, don’t mistake me to mean technical training in a particular field. My degree is in English, while most of my career has been spent in managerial and executive positions in the software industry. I learned to process information quickly, analyze that information, synthesize new information and ideas from it, and communicate what I’d learned and created to others. That’s what I mean by a good education – if you can do those things, you need never worry about finding a job.
Second, I was lucky in a way that I hosed up my credit early on with student loans and some other minor stuff; that kept me from really digging myself a huge hole with credit card debt. While I didn’t manage my money well at all for a long time, I didn’t have the means to really screw things up, so I lived on cash for many years.
Third, I finally took responsibility for what happened to me financially. While I ultimately passed the day-to-day management of things on to my girlfriend/wife, I had already begun saving on my own and had taken steps to ensure that the bills got paid and that I didn’t have the chance to piss away most of what I earned. I began to pay attention (or at least to have my attention called to) the ways in which I spent my money, and to make better choices.
Fourth, I never went long without a job. In fact, other than two months in 1989, I’ve managed to stay continuously employed since leaving graduate school. There’s always been some money coming in (though in pitifully small amounts at times). Even during that one period of unemployment, I made some money doing freelance proofreading, copyediting, and indexing of books for university presses.
Fifth, I’ve always worked hard and performed well above expectations in the jobs I’ve had (with the possible exception of the one just before I was unemployed in 1989). Wherever I’ve been, I’ve consistently and rapidly advanced in both responsibility and compensation. While I’d like to think that’s because I’m especially brilliant and talented, the real reason is that I’ve been willing to invest the effort to learn what I’ve needed to know to do both my job and other jobs within the organization, and to see that the things that need to be done are in fact done, whether they’re in my job description or not. (N.B., this strategy is much more likely to work in smaller organizations where everyone is expected to perform a variety of tasks).
I realize that much of this may read as being self-congratulatory; so be it. While I’m not particularly proud of how I conducted myself for most of my twenties, I’m quite proud of having reversed course and made a successful life for myself and my family over the last several years. I also don’t attribute what I’ve done to any special qualities I possess; if anything, I’ve achieved what I have in spite of my natural propensities and in spite of numerous character flaws.
Nothing wrong with that when it’s deserved. 
I had a bit of a rude awakening in college when I returned from a vacation to find my roommate had stolen everything I owned with the exception of the dishes and my bed and drafting table. Seriously, clothes, towels, electronics, books, cd’s everything. I learned at that time how little you can have and still get by. I borrowed some clothes and a walkman from a friend and was pretty much set. I picked up things here and there from thrift stores as the need arose, but I found that living with next to nothing for a bit really reduced the need to waste money on everyday junk. (Most of the stuff that was taken I never even missed.) Even though I’m in a much better position now I still have an aversion to wasting money on stuff I don’t need, and as a result find I have more in savings for large purchases or emergencies. On the surface we may not seem to be middle or upperclass, but considering our only outstanding debt is our mortgage (we have no student loans, credit card debt, and we paid cash for our cars) we’re MILES ahead of someone with a mansion, two leased cars, and a home furnished with maxed out credit cards. I know it won’t be taken away from me at the drop of a hat (or missed payment) and since I HAVE lived with next to nothing, I don’t FEAR what would happen if it were suddenly gone.
rackensack…I just want to tell you that you’re story is an inspiration to me. Mine is very similar, only I am still in the throes of credit card and student loan debt from hell…and I know it is all my own fault. Today, I seriously considered calling an attorney about bankruptcy, then sat down for some serious thinking. Would I feel better about myself for doing that? Would I learn the lessons I need to learn? The answers, of course, are no. So now, I have to come up with a plan(this originally said another plan…but since there wasn’t one in the first place, I can’t very well say that).
sigh
any additional suggestions? I would truly appreciate them. Oh, and the worst part of this is that I am an accountant. I should know better. It makes me feel so low to even admit it to people here-the idea of talking to my family makes me cringe.
My family used to be so poor we were often locked out of our apartment because we would not pay the rent on time, and had to sleep in the hall of a rotten, downtown apartment in a crime-ridden area. Our meals were things like tomato soup, crackers, and cereal. We had no AC, no TV, and heat was a luxury in the Winter. We barely had a car, and it often didn’t work so we had to walk everywhere on dangerous streets. Fun outings were going to the library and reading. It was scary - we were very close to being homeless several times.
I now am 32. I can retire when I am 40 if I so choose. How? Went to Engineering school, working full-time or overtime the throughout (40-50 hours/week DURING the school year, not just over the summer). Got a high GPA, and a great job. The SO and I lived like 2 female monks for 4 years, all the while I was making from $35k - $50k per year (over the 4 years). Rent was $300/month, utilities $120-150, and food and sundry items $300/month. Two old cars, with no car payments, and I’m a great mechanic who can keep the cars running. Meanwhile, we were stuffing all the rest of the money into the bank, and a real estate investment, and maxing out the 401k and IRA contributions.
The second 4 years we started ratcheting up our standard of living - slowly, and carefully. We found we still didn’t want at all the “sparkly, pretty things” that all our friends wanted. So we kept saving. The SO got a full scholarship to Med School, which also paid a large living stipend. We bought 2 new cars, and paid them off quickly or with cash. We never, in all the last 8 years, have paid a finance charge on a credit card or loan, except for the home mortgage.
Now, it is 8 years out of school. The real estate investment, through blind, stupid luck, gave more than $60k in profit. It’s been sitting in a CD for almost a year now, as the “emergency fund”. After 8 years of continuously contributing 18% of gross earnings to a 401k, and an additional amount to IRA’s, the retirement fund is enormous. I make more than $70k/year, the SO about $35k/year, but when she finishes residency in 1.5 years that will increase to about $100k/year. We still save, and save, and save though, and watch every dollar. We make more than double many couples we know, yet they are always tsk-tsking at us for not buying a mondo-screen digital TV like they did, or not getting cable TV AND a satelite dish, like they have, etc., etc. “You guys live like you’re poor!” they say, with a sort of pity and humor in their voice. Yup, I guess we don’t know what we’re doing.
Things are great now, and the poverty of long ago seems unreal.
I probably can’t tell you anything you don’t already know about what you should do. The things I’d have to say all deal with how you should go about it.
Obviously, coming up with a plan is important, but taking some steps now is even more important. You don’t have to be perfect or know exactly how you’re going to deal with everything; pick things you can manage now and start doing them right away. Better you should start a savings account with no other plans, or start chipping away at the credit card debt with no other plans, than do nothing until you have a complete roadmap. There’s not much mystery to what you should be doing, so odds are you won’t go far wrong in any event.
Your comments that it’s “all my own fault” and that “I am an accountant. I should know better” sound very familiar to me. Even in the depths, I never blamed anyone else for the circumstances I was in or expected anyone else to get me out. Like me, I’m sure you pride yourself on being competent in most ways and are loath to surrender any control over things, but I ultimately had to admit that I was pretty bad at handling certain aspects of my life and had to delegate responsibility for those to things to others; I still called the shots, but I let someone else write the checks, for instance. Recognizing that you’re responsible for what happens to you is important, but you can’t let that be a reason not to act, and sometimes the best action you can take is to hand over control to someone who will deal with things better than you will. Setting up the automatic transfers from checking to savings right after each paycheck, setting up automatic payment of student loans, rent, and other fixed monthly payments, etc., were all ways in which I relinquished some control over the details in order to get back control over the big picture. This also entails giving up some flexibility; you’re tying your own hands so that you can’t let something slide “just this month” in order to indulge yourself in something else that you’re convinced you “deserve”. These things are even easier now, with banks and various other entities offering automatic payment of your bills, even those that vary in amount from month to month.
Pride and its flip side, embarassment, can be your best friends or your worst enemy in this sort of situation. You need to feed the pride you feel at every success you have, and avoidance of embarassment can be a powerful motivator, but you can’t let embarassment at past failures prevent you from taking steps that you know you need to take. Even setting up an automatic savings plan was a stressful step for me, not least because I was convinced that the people in the bank were going to be contemptuous of me on reviewing my history of overdrafts and pitifully small balances. If they did, they concealed it well and treated me in a professional and respectful manner, which did much to restore my confidence in myself. I developed good working relationships with each of the various branch managers who cycled through my branch, and overcame my embarassment about my past failures so that I could approach them without fear and loathing when I needed something (even when it was to skip an automatic transfer on those two or three occasions when it was necessary to do so).
More than anything else, it was that fear of embarassment, of being disdained, that often kept me from taking steps I knew were needed. Once I began to get over that, to realize that most other people weren’t concerned in the least about my affairs and weren’t going to go home and snicker about me over dinner to their spouse or anything, I found it much easier to cope.
I’m sure that dealing with money on a professional basis makes this fear of scorn even more difficult, but ask yourself which is more likely to attract scorn: an accountant who used to have screwed up finances but straightened things out, or one who still has screwed up finances?
Remember too that these things take time to fix, often longer than they take to create. However, they won’t get fixed any earlier than whatever time you pick to start working on them. And you may be, as I was, surprised at how quickly things improved once you begin taking positive steps. Things will go wrong along the way: unavoidable, unexpected expenses will wipe out part of the gains you’ve made, you’ll get frustrated and blow money on things you don’t really need, etc. Even if you screw up in the worst possible way and do something really dumb, however, you can’t continue to obsess or tear yourself down about it. You take a cold, hard look at it, say “I screwed up”, and set in to deal with the situation. Don’t worry about making up lost ground, just worry about getting back to dealing with things they way you know you need to. As a palliative, take time to remind yourself that even if you’ve screwed up or had a setback, you’re better off than you’d have been had you continued down your old path.
I have to say too that I doubt I’d have come as far as I have as fast as I have without the help of the wonderful woman I married, both because of the motivation she provided for me to take action and for the kind and loving way she helped me get my affairs in order without making me fell worse about things than I already did. I’m constantly thankful that she saw enough positive things in me to wait for literally years for me to get myself together.
Sorry to sound so much like Polonius in this. None of it represents stunningly original insight, I realize, but I hope it’s of some use, if only as a case history describing one person’s experiences in dealing with these problems.