Are you living beyond your means?

[Anonymous]

We do. We are frugal on a daily basis but we have crazy debt from health care costs and an underwater home. We have been trying to get to zero for three years but every time we get close, we are hit with another health care bill. It does look like 2013 might finally be the year that we get it done and I can't wait. We pay over 70% of our monthly after rax and 401k income to debt. Once our health care bills go away, that will drop to 30% and we'll finally be in a good position. We wint be able to retire until 75 tho. Pray you never have a serious health care crisis in your family.

[Anonymous]

Anonymous wrote:How common do you think it is for people to live beyong their means? I'm talking about the people who live in gorgeous and huge houses, send their kids to private school, drive the fanciest cars, etc. but have no savings, pay their credit cards in installments, are late on payments for things, etc.

I think it's very common. My SIL told me once that she and BIL are "not afraid of debt." LOL! That means they don't have a pot to piss in, even though they take their kids to Disney for two weeks at least every other summer. Huge house, huge mortgage. Tons of student loan debt.

[Anonymous]

Anonymous wrote:I'm starting to realize that a lot of people in this area actually have a TON of money.

We don't live beyond our means, per se. We save for retirement, put a few k away for college for our young kids, don't have any credit card debt or student loans or anything, but we have two car payments and a heafty mortgage. We could certainly stand to save more. We have a decent HHI but like to spend a lot too.

That said, we've got friends that we always thought were in similar situations as us. We are starting to realize that's not the case. As we've gotten closer to some of our friends, we have learned about trust funds, inheritances, the insane success of seemingly modest businesses, etc.

Kinda makes me feel like we are living beyond our means for the sheer fact that we are even in the same circles as some of our friends

A lot is also age related. We have no trust funds or successful businesses, just two W-2s. But we are getting into our late 40s, and we are way better off than we were 10 years ago. No mortgage, car loans or any other kind of debt, and we're beyond the years we spent $40K + on childcare.

[Anonymous]

I am about to make some gross generalizations.
I think that most higher earning households - think 200k - are probably not living beyond their means. As a PP pointed out, most wealthier people in this area are going to tend toward financial savviness.
I think most of the people that I suspect/know of living beyond their means are solidly middle class, just trying to keep up with the Joneses or something.
-BFF who loves shopping, buys anything, etc - but has ZERO saved for retirement. And apparently is quite fine with that.
-relatives who constantly flaunt how much the husband makes, and say things like "It doesn't make sense for DW to work because that would be taking a job away from a poor person (no really, they say that)", take expensive vacations, etc - but have recently mentioned needing to pay down cc debt and have to ask mom and dad to help them buy their kids' Christmas presents.

[Anonymous]

Interesting topic today. We went through a period of that years ago but have paid off all the major debt. Long story but the upshot is that it bothered me much more than dh. But dh is coming into some extra money this spring and has decided he is going to spend a lot on Christmas and that he's justified in doing it because of the extra bit of money. I get emails when the credit card charge goes over a certain amount, and have had two so far which is making me a little nervous. I don't say much about it because everyone once in awhile being able to do this is important to him and we are able to pay it off with a little effort - nothing like the long-term huge debt we had before.

But I have PTSD from the past and it makes me nervous!

[Anonymous]

Anonymous wrote:How common do you think it is for people to live beyong their means? I'm talking about the people who live in gorgeous and huge houses, send their kids to private school, drive the fanciest cars, etc. but have no savings, pay their credit cards in installments, are late on payments for things, etc.

At this extreme level of spending, I'd say it's more likely they're rich.

[Anonymous]

Anonymous wrote:

A lot is also age related. We have no trust funds or successful businesses, just two W-2s. But we are getting into our late 40s, and we are way better off than we were 10 years ago. No mortgage, car loans or any other kind of debt, and we're beyond the years we spent $40K + on childcare.

I dream of those days. I'm in my early 30s.... student loans paid, cars paid, only thing left is the mortgage (300k to go!)... By the time I hit my late 40s, I'll be mortgage free - plus, I imagine/hope, making quite a bit more than I am now. Sometimes, I actually sit down and calculate what my situation would be under that scenario, and its seems nearly unimaginably rich to me.

[Anonymous]

Late 20s and living above my means. It's really an income problem. Fortunately, income jumps considerably next year (finally) and should be debt free in 1-2 years. My mortage is cheap (less than rent would be) and childcare expenses just dropped off (yea!). Silver lining is I have very healthy retirement savings. I could be free of student loans and credit card debt if I took a 401K loan or cashed out Roth IRA, but feel I am at the age where its ok to struggle.

Should be mortgage free in early 40s.

[Anonymous]

Anonymous wrote:I know of people who make 100k hhi but their parents bought them a 2 million dollar house. kind of weird to think they didn't earn or pay for their home and everyone knows it.

I am not sure it was a good gift. the real estate taxes on a 2 million dollar house are like a mortgage payment on a 100K salary. and furnishing and maintenance costs may be significant, just heating and cooling a, I assume, large home will not be fun

[Anonymous]

Anonymous wrote:Not uncommon.

This is what our financial planner says.

[Anonymous]

Anonymous wrote:Late 20s and living above my means. It's really an income problem. Fortunately, income jumps considerably next year (finally) and should be debt free in 1-2 years. My mortage is cheap (less than rent would be) and childcare expenses just dropped off (yea!). Silver lining is I have very healthy retirement savings. I could be free of student loans and credit card debt if I took a 401K loan or cashed out Roth IRA, but feel I am at the age where its ok to struggle.

Should be mortgage free in early 40s.

Actually it is a spending problem.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Late 20s and living above my means. It's really an income problem. Fortunately, income jumps considerably next year (finally) and should be debt free in 1-2 years. My mortage is cheap (less than rent would be) and childcare expenses just dropped off (yea!). Silver lining is I have very healthy retirement savings. I could be free of student loans and credit card debt if I took a 401K loan or cashed out Roth IRA, but feel I am at the age where its ok to struggle.

Should be mortgage free in early 40s.

Actually it is a spending problem.

How do you propose I remedy childcare thats more than my mortgage? Kill my infant?

[Anonymous]

Anonymous wrote:I'm starting to realize that a lot of people in this area actually have a TON of money.

We don't live beyond our means, per se. We save for retirement, put a few k away for college for our young kids, don't have any credit card debt or student loans or anything, but we have two car payments and a heafty mortgage. We could certainly stand to save more. We have a decent HHI but like to spend a lot too.

That said, we've got friends that we always thought were in similar situations as us. We are starting to realize that's not the case. As we've gotten closer to some of our friends, we have learned about trust funds, inheritances, the insane success of seemingly modest businesses, etc.

Kinda makes me feel like we are living beyond our means for the sheer fact that we are even in the same circles as some of our friends

+1

we are in almost an identical situation. saving solidly for retirement and college. no debt aside from one car loan and modest mortgage. but we still seem to spend too much and aren't saving like we did 5-10 years ago. and we keep finding out that various friends have significant wealth that wasn't obvious upfront. so we joke to ourselves that we are poor.

[Anonymous]

Anonymous wrote:

Anonymous wrote:We had a physician friend with four kids (who each had every possession imaginable and were in college w/o financial aid to boot) and when he had a heart attack they almost lost everything.

I heard that the IRS auditors love to go after the doctors because they make a lot of money, but are so bad with their finances and make lots of mistakes on their tax returns.

I know a plastic surgeon who cheats on his taxes, lied to the county about his house addition so he wouldn't have to pay more in property taxes, and is entirely unethical in every aspect of his life. He cheated on his wife. He definitely should be audited.

[Anonymous]

Ok, I have a question related to this. Can anyone explain to me the rational that some couples use that the wife working would put them into a higher bracket, which is why she doesn't work.

Is that pretty much BS, can you not plow the ultimate max into tax preferred accounts to reduce taxable income or what? I realize there's limits on Roth's, is this a big part of it?

TIA