Middle class life has me completely baffled
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Anonymous
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OP, something is really off on your math or your discretionary spending. We make just a bit more than you (190) and have three kids and put away 2k a month after maxing out retirement. We own a house and are looking at buying another much more expensive one on which we will easily afford a 20% down payment (we are mid thirties).
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Anonymous
$280k poster here. Fair, we live very comfortably and I accept my view of 'middle class' is probably skewed. Spouse and I are in the nonprofit/public sectors, while a lot of our peers from grad school and law school are making exorbitant salaries in the private sector. So we certainly don't feel "rich", especially compared to our peer group. But also not complaining. |
Anonymous
Bills (quoted below all in per mo.) Car insurance: $150 Phone bill: 100 internet: 90 gas+electric: 80 rent: 1700 groceries: 300 parking: 70 About $2900 per month in left over cash after subtracting out all taxes and required payments for healthcare and pension contributions. We are also also putting away $300 per mo. right now into a 'new car pot' for the eventual day that we will need to buy a new car (ours is 4 years old right now), $1000 per month into free cash flow for emergency savings and rainy day funds that I really wouldn't want to tap in case of job loss or health care disaster. That only leaves about $1600 per month to save for a new house. Mind you, I also assumed $0 for leisurely activities, expenses if a wedding comes up, buying new clothes, car maintenance/repair, and other miscellaneous expenses. In reality, the amount we are able to save is more close to $1000-1200 per month for a house after all is said and done. Even 10% down on a modestly priced house of $500-600k will take several years, assuming absolutely zero goes wrong financially. |
Anonymous
| Shop around on your car insurance. We insure with Geico: new $45K luxury car and old $5K car, cost $1200/year for both. |
Anonymous
+1 but, I did not buy new clothes all the time. I lived pretty frugally and was able to save enough to put 10% down on a $720K house. My then BF (DH now) put up the other 10%. We got a bit of equity on the house when we sold after the kids were born, and then of course, by that time, we combined our income. By this time, we were in our late 30s/early 40s. We certainly did not do all this in our 20s. I was 32 when I bought the house (DH was almost 40), but again, I was living pretty frugally and saving a ton. We still live somewhat frugally compared to our HHI, per our financial advisor. We are able to save for retirement and college. And we don't drive expensive cars nor do we buy new cars every few years. My last car was almost 20 yrs old. We also don't buy expensive iphones every couple of years. We have cheap android phones. |
Anonymous
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Do you own your own business? Why are you paying for taxes and healthcare and pension outside of your take home???
Your numbers don't add up at all. At $180K your should be have a take home income close to $8500 per month. Your bills are only $2500 per month. Where is the 6K going? |
Anonymous
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OP, post your budget if you want advice on how to do better. You make more than enough to save a decent down payment. Your spending is out of whack somewhere.
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Anonymous
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I think you actually are saving a lot and if the above is true have reaosonable expenses. you are just financially conservative by pre-funding your car replacement and building a big emergency fund. Both of these decisions may be sound, but they are more conservative than what many people will do. There are a limited number of homes and you are in competition with people who may have higher incomes, more wealth (inherited or not) and have higher risk tolerance or are less good about maxing their retirement.
You’ll have to make some decisions about priorities, since you don’t make enough to simultaneously maximize all of your goals. |
Anonymous
Let me do a better job here: $180,000 HHI -26,000 Federal -16,000 State -11,000 Social security and medicare -39,000 for pre-tax retirement contributions -3000 for health care per year -4800 per year for required pension contribution After tax/401k/health/pension = ~$80,000 per year left over in free cash. $80k/12 = $6667 per mo in cash. Expenses per mo. : -1000 for maxing out Roth IRAs -1700 rent -100 phone bill -150 car insurance -300 groceries -80 electric/gas -70 parking -90 internet ___________________ total: $3500 Free cash left over = $6667 - 3500 = $3100 (a little higher than what I had before because I had to go back and look at my pension contributions, which I was estimating before from memory). $3100 - $300 per mo towards new car funds - $1000 for emergencies = $1800 per mo left over for a house. Again, I've assume $0 for clothes, entertainment, car maintenance/repair, and miscellaneous. The bigger picture here is that I cannot fathom tacking on $3000 more per mo. for childcare if I had children, another $300-400 car payment if we had to buy and finance a new car, spending more money than we do on clothes for ourselves or children, contribute to college savings, and have enough left over for retirement.....and oh, also afford a house. That's what I mean when I say I really don't understand how in the hell people are affording a middle class life with a family, a house, a car, and savings for college/emergency/retirement assuming there are zero health care disasters, no job loss, and other extremely expensive setbacks. |
Anonymous
| "All the time"?? What are you blathering on about Op? |
Anonymous
You just save a lot more than most people. If you have kids, your savings will go down while they are in daycare and that's ok because it seems like you'll have all your savings built up nicely already. As far as saving for down payment, a lot of people get help from family. DH and I have around the same HHI and saved more for down payment by not maxing out retirement (no family help). It's a trade off but you do have the means. |
Anonymous
| Your definition of "middle class" is my definition of "upper middle class" or higher. Middle class isn't heaps of college savings, it's scholarships and loans. It isn't nice cars, it's practical used cars, etc... |
Anonymous
Everyone is in debt. I could not believe college kids were ponying up $3000/mo for apartments when I moved to NOVA but then I learned you can pay your rent with credit. What a fabulously lousy idea. |
Anonymous
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OK I never say this, but you are saving too much for retirement right now. You are saving 21% of your gross income and then another 6.7% in after tax income for the Roth. All of this is fine, except that you clearly have a pension (you and your DH? or just one of you?). And on top of that another $1000 for emergencies? You don't own a house, you have (I'm assuming) decent medical insurance. What emergencies are you thinking you will have aside from job loss (which I'm going to guess is unlikely given you have a pension which to me means you work for the government). All told you are saving 37.6% of your gross income!
Your fixed expenses are only $2500 per month so you need about $15K in emergency savings (6 months worth). Stop saving for emergencies, stop saving in your Roth, and decrease your retirement savings to 10% of your income and you will be able to put away $50K per year towards a home. It will take you only two years to build up a decent down payment. Get on the property ladder and start building some equity. |
Anonymous
Some people chose to stay at home in part for this reason, though it may not necessarily be the right choice for you. |