I don’t think you realize how many $100,000 jobs there are. You also don’t need a $100,000 job to become rich.
Both you and your brother can and will eventually be millionaires if you choose to be. Again, go to this link and play around with the data.
$30,000 a year is fine. Putting 10% a year pre-tax will make you a millionaire by age 65, and allow you to retire comfortably. The hard part is then realizing you only have 90% of your salary to “play with” right now. That means you don’t get to live like someone making $50k a year, you need to live like someone earning $20k. It means you only have $9,000 a year to spend on housing costs.
I used to work with kids who would not take advantage of the companies 401k plan with matching up to 6% or the employee stock purchase plan that offered 15% off the lower of the stock price at the beginning and end of each six month period. That is basically like taking a pay cut.
Nobody saves their way to being wealthy though you are earning $50,000 a year. And even if you did, what good does it do to be a millionare at 50 having spent your entire life with no SO, no kids, no hobbies, no friends because you can never afford to go out and do stuff?
I honestly don’t believe that. You dont’ have to live like a pauper to do it either. I use the example I did with my daughter. She gets an allowance of $15 week. So for about six months I waited to see if she would save anything, but of course being 14 she didn’t. So one day I told her that she needed to start saving 20% and as I gave her the $15, she had to give me $3 back (it was important to me that she handed the money back, so that she can see she was paying herself first). So it now has been 6 months and I showed her the other day she now has $78 saved–but more important l asked her if she missed it. She said not really–her enjoyment out of life was the same. Now clearly no one is getting rich on $78 every 6 months But the mindset of paying herself first will serve her well in her life in my opinion.
Now I am NOT comparing a 14 year old to an adult but the basic issue still stands. If you are making $50,000 a year you should live like you are making $45,000 a year and put that $5,000 a year toward retirement. If your mindset is you make $45,000 a year you will live like you make $45,000 a year–no one is saying you don’t have a SO, no kids, no hobbies, etc. There are many happy families out there who live on $45k a year, and $40k a year and $30k a year, etc. Just because you make $50k a year doesn’t mean you have to live like you make $50k a year I think is the issue.
Regardless of my initial OP and the sidetrack it started, I do think that it is reasonable for an average family to be able to attain $1m in assets by retirement. But you won’t get there if you live to the amount that you earn though. It will take tough choices and they are value choices. Each family/person has to decide that for themselves but I honestly think it is doable.
In your hypothetical family making $50k, if they suddenly got a raise to $60k do you think if they put that extra $10k away that their day to day life is worse then it was before?
First of all, what good does it do? It means you are a millionaire and have the advantages that come with being a millionaire–ie the ability to retire and not HAVE to work every day (note you can still choose to work everyday).
So tell me, what is the point of living your life until you are 65, and then realizing you have to continue working until you die?
The concept here isn’t that difficult. You delay some pleasure now in return for more pleasure later. They do these psych experiments with kids where they offer them a cookie, and then say, “you can have two cookies if you wait 15min.” A lot of kids eat the cookie. And why not, why deny yourself the enjoyment the cookie brings. Well, because now the cookie is gone, and you won’t get another. Had you waited 15min you’d get your cookie, plus have another cookie that will continue to earn you future cookies.
The middle class mindset seems to be that you aren’t willing to deny yourself the small amount of pleasure that comes from 10% of your pre-tax income. And an unwillingness to live within your means–where means is what you have AFTER savings.
There is a fascinating amount of resentment towards “being rich” displayed in this thread:* "The rich are jerks, they’re assholes, it means having a shitty marriage and no life. " *
Like I said before, a person making $30k can become rich, but it means living like they make $20k because they put money away into savings. Having savings isn’t a bad thing, it means if you want a car you pay for it without financing at 6%. It means you can get a house with a better interest rate without mortgage insurance. It means you don’t run to a payday loan office or run up credit card debt when you run into problems.
If, on the other hand, a person making $30k a year says that they NEED a house and car NOW, they need kids, they need a boat, they need to go to the movies, they will forever be poor. In the end, the mindset that separates the from the poor is understanding the concept of discretionary spending.
To my mind, the answer to this is balance. Tough to do, but necessary - to live every aspect of life that one can. That includes working hard & battening down the financial hatches, so to speak, for the storms - and it also includes getting the most out of life along the way.
Into every life a bit of nose-to-grindstone must fall - unless you are born wealthy (though that has its own problems). I certainly am not one, like some on this thread, who are exclusively focused on saving as much as possible for retirement - but I do see a lot of value in living below, rather than above, my means, and in that way saving money for whatever befalls.
I took it as sorta the opposite of the classic “ants and the grasshopper” story.
I’d agree, the class definitions are so broad as to be meaningless. I’d divide the classes along functional lines, thus:
Criminal class: does not work at legimate occupations, but rather earns money from drugs, prostitution, scams, B&E, etc.
Poor: reduced willingly or not to long-term social assistance.
Working class: earning a salary in manufacturing or service industries, but not in something that is widely considered a profession (examples: sales clerk, auto factory worker, waiter/waitress). Low autonomy over how they do their jobs and low autonomy over what tasks to do.
Lower middle class: earning a salary, in a profession of the sort more likely to be represented by a union (example: teachers), middle-type managers, etc. Person employing them is more likely to be an “employer”. Some autonomy over how they do their jobs, but not much over what tasks they must do.
Upper middle class: working in a profession dealing with manipulation of information; one more likely to be represented by a guild (example: lawyers). Person employing them is as likely to be a “client” as an “employer”. High autonomy over how to do their jobs (often, they are the experts in their field) and usually some autonomy over what jobs they will do.
Upper class: need not work manipulating information directly, but rather earns money from what they own (investments) or by virtue of an appointment to office (CEO, Directorships). Hires information-manipulators of various sorts.
Often, but not always, the pay increases with the class. There are of course anomalies - what is a superstar baseball player or actress?
This is the most important question here. What it means for people making any where from $30-80k a year is that next year if/when you get a raise, I assume you’ll continue to live happily as you do now. You are okay with what you have, which means you plan to save all of your future earnings and live happily with your current income.
During the mortgage meltdown, NPR spent an hour talking to a bankruptcy/foreclosure lawyer, picking his brain about what was going on with all the new foreclosures. Keep in mind that for decades foreclosure rates were very steady then shot up 50-100% IIRC. He first described his career for the past 20 years as being entirely consistent day in and day out; almost everyone had the same story of lost my job, fell on hard times, can’t get on my feet soon enough. Then suddenly it all changed. In 2008 the answer to “why can’t you afford your mortgage” changed dramatically. He started getting answer like:
My spouse lost her job: meaning, they based their housing payments on duel income, a very new concept.
I didn’t get my bonus/raise this year: people were leveraging based on EXPECTED earnings. They weren’t saying, “what can we afford now” they were saying “what can we afford in two years?”
We expected the value of our house would go up [an unreasonable amount]: again, basing current decisions on future gains. And completely disregarding the notion that it could ever go down or even stay flat.
Sure, but the point is: It’s a life choice that is counter to your one true way to financially exist
Good of you to equate it in such a clinical fashion. Have kids, do ya?
And I’m saying that life has a tendency to throw curveballs, and I’ve seen people ‘manage’ just fine in retirement with a tenth of the assets they’d hoped to accrue. If you’re sick to death of working, and that multi-million nest egg you had planned on evaporated in a puff of wiggly economics, and the only way you can retire is to sell everything off, buy a used RV, and work for various KOA campgrounds*…it’s not a bad lifestyle.
= true story. I have others.
I think you like oversimplifying things. I have a pension (I hope), I have a 401k. I’ve ALSO seen my parents lose more than 2/3rds of their retirement nest egg because the boat they were living in was out of radio contact for two months. Decades of hard saving and financial discipline, GONE. All because a financial event occurred that NO ONE had ever seen before. Had they been in port, I’m sure they could have gotten away with a 20% cut. I have a VERY well developed opinion of the financial investment industry in general, and their long-term financial advisor in particular.
Some might say approaching none…I’m not one of them. Your problem is your inability to see that OTHER people have OTHER base assumptions and have decided to do OTHER things with what life has given them.
I have to do no such thing. Nor do I have to buy your book. I’ll also point out that there’s no guarantee how long you’ll live. I’ve seen people draw nearly 30 years pension…I’ve seen people die before retirement.
The one truism I’ve seen is: You rest, you rust. Part of staying employed is keeping mentally and physically vital.
BECAUSE I LIKE THE HOUSE!
But I HAVE accounted for it. IF you look at my figures above, I’m living ENTIRELY on a part-time paycheck. I am in no way drawing against my savings. Interest OR Principal.
Lessee, if you find a job you like doing…and can get paid to do it, that beats eating into your savings every single time.
This is also a good time to point out that beyond saving 10% for retirement, the next step is putting away 15% for near term needs. This is the money used to buy a car, put a down payment on a house, go on vacation.
Now, no more than a 1/3 of what’s left goes to housing, and what ever you have left is “living with in your means.” This applies to EVERYONE above the poverty level. If you decide to have kids, they have to fit into that.
I think part of the problem is the use of the word “rich”. The average person will never be “rich” through savings and avoiding traps like credit card debt, at least in the way most people think of the word. It simply cannot be done.
What they can be, is “financially prudent and secure”. This need not be only a matter of saving for retirement, either, but for any sort of rainy day, or expense either predictable or not. No matter how poor you are, unless you are in truly dire straights it always makes sense to get rid of debt and increase savings, and the key is always to live below your means somewhat, within limits - I’d never consider not having a family as an acceptable sacrifice for mere financial security!
By making it an issue of being “rich” or not, it simply gives the impression that you are looking to achieve a certain status - and, naturally enough, lots of folks do not want to make sacrifices simply to achieve a status. Particularly where the descriptive word for that status (“rich”) isn’t all that accurate for any possible status they could achieve.
I don’t think anyone in this thread is really focused on saving to the extent that they aren’t aware the roses and blooming and take time to smell them. You and I and some others have an advantage in that our incomes allow us to not have to choose - we can establish financial security (and I think the real issue here isn’t getting “wealthy” but establishing financial security and - by retirement - financial independence) AND we can live nice middle class lifestyles, save for our kids college, take a vacation. Other people don’t make that sort of money, which doesn’t mean that they CAN’T establish financial security, its just going to be a lot more of a sacrifice if they CHOOSE to.
And I suspect everyone here knows someone who makes six figures a year and yet lives beyond their means. They may be “rich” in terms of income and live a life that looks very plush - but they have no financial security. I’ve met a few who can’t afford to put away money in their 401ks. But they can afford to go skiing in Aspen every year. To me, those are the really fascinating people - they are so convinced that they need a housekeeper and a lawn service and a country club membership today that they can’t afford to set money aside for tomorrow.
Well, yes, absolutely. But that freedom, which I admit is a privilege, isn’t what I was thinking of. As you know, people in our position have money but lack time. It isn’t a financial effort to, as it were, smell the roses by the way - but it is an effort, and requires some sacrifices and some willingness to face down opposition. To stay balanced is always an effort, I think - I’ve known all sorts of people, from starving artists (I used to be one), academics, working-class folks of all sorts, lawyers (my group) and trustifarians - no-one finds it easy to stay balanced between financial issues, quality-of-life issues, family, search for self-expression, meaning, etc. It is always going to be a struggle, albeit obviously actual deprivation is more of a struggle than affluence!
My point is that one ought not to be too focussed on one thing over another - and one ought not to neglect anything, either. Financial security is one aspect of life, but it ought not to dominate all others; nor should it be neglected.
As can be seen in my post above, I totally agree on the notion that establishing financial security is the key, not chasing some rainbow about becomming “rich”.
I know these people in droves. The problem is that the more money you have, the more ways there are to spend it; it is easy to fall out of balance, in search of status etc.
It’s hardly that. Are you telling me that saving some of your money for a raining day is some sort of foreign concept?
No, we cannot afford children right now, nor can we afford a boat, a cottage, or a larger house. Lots of things we’d like to have, but we can’t afford. Is it wrong of us to wait to have children? Are you telling me that I’m some how inferior?
Great for them, and that is actually my point, you can be happy with any level of nest egg above the poverty level. Part of retirement planning is to figure how how much you personally will be happy with, was that not clear? You don’t have to save what someone else tells you to save.
But if you do plan to retire, you are going to need enough saved to live off of. Do you understand that?
What you are describing is an exception to the rule. Retirement savings only go poof when managed incorrectly. What excuse do people have for not being bothered to learn about investment options? Every single adult in America should know what an index fund is. If you have a retirement account you have a responsibility to know how it is managed. No one is going to do it for you. Stocks, bonds, gold, cash, foreign currency, company stock plans.
This head in the sand mentality is a piss pour excuse. Wouldn’t you agree that owning a car comes with a certain responsibility. Change the oil, rotate the tires, get the breaks check. Is it wrong to suggest that a person know if they have power steering? You don’t have to know how it works, but at least know if your car has it or not.
Everyone’s 401k went down in 2008, and if you look, most of it went back up in 2009.
Are you aware that if you contributed following the the crash in 2008 that money has gained 66%?
I think that’s a great lifestyle. If that’s what you want, plan for it and make it happen.
Bullshit, I’m sorry but that is complete an utter bullshit. I fucking hate people that keep repeating this.
At the very least, you should understand this very simple rule:
Don’t put money in the stock market that you’ll need within 5 years.
If your parents needed that money, it shouldn’t have been anywhere near something that had even the slightest bit of risk. That is why there are CDs, bonds, treasuries. And you know what, when they put their money in that account, they signed a form that said something like, “this money is not insured, there are no guarantees of returns, I the undersigned understand the risks involved with investing.”
I’m sorry to crap on your parents, but you act as if there was nothing they could have done. But you’re wrong, they should have at the very least understood the level of risk their money was subjected to.
Someone in their 20s and 30s should have upwards of 85% of their investments in high risk accounts. And every year after 50 that percentage should go towards 0. There is no excuse for not knowing this.
What’s sadly ironic about the stock market is that this crash has scared people in their 20s and 30s from investing at the exact time they need to. And they probably won’t until the market sores in a decade, at which point they’ll dump all their money into the next bubble.
I’m well aware that other people have ways of living their life. I don’t personally give a fuck how you want to live your life. You are free to take out as many pay day loans as you want, run up all your credit cards, lease two cars, and get a house too big to afford. Enjoy.
This thread is about *opinions *on the mindset of the middle class. You have your opinion, I have mine.
That’s right, you don’t. And neither did your parents. They could have, and had they done that they’d still have their retirement savings. If you want to plan on dying at 65 go for it. Just do me a favour and when you’re 66 remember we had this conversation.
I don’t know what you said that. If being employed in your retirement interests you go for it.
Good! Live in a house you like. Now realize living in it will cost $6000 a year and plan your retirement accordingly. Might not be a bad idea to include tax increases, and the extra maintenance that goes with an old house, plus the changes required for when you can’t climb stairs.
Congrats, so what’s your issue? What has you so bent out of shape?
By the way, I’ve posted my theory on financial status before, but here it is again for reference.
Destitute - you have nothing.
Not making ends meet - On average, every month you are worse off than the previous month - you can be here and make $30k a year, or you can be here making $300k a year with a really nice car and a faux chateau in the burbs.
Making ends meet - you live paycheck to paycheck, but God help you if the transmission on the car goes out.
Getting ahead - every month you have a little more. Again, you can do this on $30k a year or $300k a year.
Financially secure - whatever lifestyle you have, you’ve set yourself up to weather a storm like a job loss or a short term disability without much of a impact to your lifestyle. You probably have no debt (maybe a mortgage), assets liquid.
Financially independent - you don’t need a job. Whatever lifestyle you choose to have, you can support it off your assets and investment income. Its nice when you reach this point around retirement age - social security income not being a lot to live on.
Socio-economic class is a different and far more complex thing. Its also very relative.
I think this thread is really more about “why aren’t more of the middle class interested in becoming financially independent - or sometimes even secure.”
Why do you care? You’ve already told me you don’t give a fuck what I think.
I’m stating your rules of thumb, while admirable, are not applicable in all cases.
I also like that your personal world view has only your math, and:
As if you assume I’m also a crackwhore and wifebeater, too.
I didn’t ask for twins…now that I have them, they’re absolutely great kids…but that right there is a prime example where life can come and fuck with your percentages. knowhutImean?
Well, yes, obviously we can go back and forth about what the term “rich” means and create definitions that will or won’t be attainable.
What if we said, rich means having enough in savings to not have to work? Would you say that is unattainable?
If you want to define rich as opulant then no, few people with ever achieve opulence.
Yes, this is what I’m trying to say.
Why? Is having a family so important that you would risk financial ruin? Why aren’t people willing to consider the cost of having children? Why is that such a taboo thing to say. Before buying a house, or a car, I thought about what they would cost to own.
The path to financial ruin is to forgo that decision process in place of some imminent desire. Oddly enough, it is usually classified as irresponsible behaviour: buy something first, then figure out how you’ll pay for it and how much it will cost.
Right, again going back to how you want to define rich. The US has created a system where everyone can have the same “status.” The mortgage meltdown was based on that principle: want something? Get a loan.
It wasn’t that long ago that credit cards didn’t even exist, and mortgages were 5 years long. If you wanted something you saved. Now you can get 45 year mortgages!
It has morphed in that by now for sure! But I had to post I like your definitions. I like them much better then poor, middle class, etc. As they have relative lifestyle choices associated with the terms.
I think you can be any of those levels on just about any income. Someone making $15k a year could easily be in the first two levels but very likely could also be in the next two levels depending upon how they live and where they live. I do think it would be difficult to get into the last two catagories for that person.
But I know (like you mentioned above) tons of people who make $200k a year and I would classify them as not making ends meet or just making ends meet.
thanks for posting this–I will file it away for future reference!
That’s a pretty good scale, and I agree that this scale is really what the thread is about.
There is a relationship between this scale and socio-economic class - in that (for example) Upper Middle Class is more likely to have more money, and so more likely to be financially secure - but it is not a straightforward one.
Certainly, the goal of most folks is to achieve financial independance by retirement; the term “rich” though implies more than mere financial independance, which is I think throwing some people.
Because, for many, having a family is more of a major goal in their life than owning a house or a car.
People can get by without a house or car (certainly I did, for years), but in some people’s opinion, they cannot get by without a family.
Also, obtaining a family is something best done when reasonably young, if you want to do it through biological reproduction rather than through adoption. Yet when you are young you are less likely to have any money.
If you wait until you are already financially secure to have a family, you may find you are not able to do so. Which, if that is a major goal in your life, would be a problem.
So having children (if that is your goal) requires taking a bit of a chance. Note that getting truly rich, as opposed to merely financially secure, also often requires taking a chance.
Taking a risk is not the same as feckless living, in my opinion. Being too secure, taking no chances, can be penny-wise and pound-foolish. Not having a family because you are not already financially secure in advance, and thus waiting until you are too old to have children easily and safely, seems an example of penny-wise, pound-foolish to me.
This is so vitally important for people of all income levels to understand. But the crucial piece of info you left out was that the “income” referred to here is AFTER retirement savings, and AFTER mid to short term savings.
It doesn’t matter what your income level is, essentially if we say the poverty line is $18k a year, you won’t have “extra cash” until you are up around $24k a year. That means you continue to live like someone earning $18k a year, but you are now financially secure. You have a retirement plan, and mid term savings.
Life will continue to suck for a few years, then they gradually you will begin to lift out of “poverty.” And it is an amazing process to watch. The first thing that happens is that debt is completely avoided, when things happen (life throws a curve ball) you have cash reserves to avoid debt.
The next thing that happens is you can take advantage of capital. Instead of paying $200 a week for a long term hotel, you have enough saved to put first and last months rent on a $500 apartment. A few years later you have enough to put a down payment on a house, with a $400 a month mortgage.
What’s interesting here is that the person with the $200/week hotel could afford a $300/week hotel that would be “more opulent.” He has to forgo that opulence for a year in order to leap OVER that life and rent an apartment. And although he could afford a slightly better one, he delays that for a couple years to afford a house/condo.
Did you notice that in each stage, quality of life actually goes up, but cost of living actually goes down. But it requires having the capital (and good credit). You can’t have either until you are willing to save.
Exactly. From this thread I get the impression they write it all off as unattainable, and not worth sacrificing for. After all, what’s the point of having financial security if you didn’t get to “live.”
While in general I agree with most of what you are posting (as it parallels my thinking! woo hoo confirmation bias!) I do think that you need to also understand that there are risks and there are risks.
Risk is a balancing act for me. I didn’t consider my financial situation when my daughter was born, just not part of the equation. Part of it is that I wanted a child and some things for me don’t fall into financial considerations–although I do see your point. I guess for me some things can’t be put on a excel spread sheet and this is one of those items.
I could plan for a child and then when she was born she had severe medical issues. I can’t plan for that beyond a certain point. So the risk is relative (no pun intended). Yes I can afford a child with normal needs, etc but if I had only planned on one child and had twins it would be an adjustment. That is life. Doesn’t mean you should have children willy-nilly, but you can only plan so much and then it is a leap of faith beyond that. Just my two cents anyways.
Same with retirement funds, etc. I can plan for every contingency out there but that would be too much planning. It isn’t balanced and for me overall balance is very important.
But the mindset of paying herself first will serve her well in her life in my opinion.