What's the secret?

[Anonymous]

My DH and I make a solid income (approx 225k) and live very frugally. We figured that after years of saving and having responsible spending habits that we would be further along financially. We see so many people around us, with nicer cars, houses, vacations, etc. What is the secret to building wealth - real estate, the market, or should we stick with our slow and steady approach? We are trying to get to that next level, and it doesn't seem like we can do it on this income!

[Anonymous]

Could you be more specific op? Like is there a specific goal you are having trouble reaching? Most of our friends have nicer stuff than us, but they also have debt, and we do not.

[Anonymous]

Ditto. You don't know what debt your friends are accumulating. Most people can look like they live a certain lifestyle. You just never know if they are maxed out. Be happy with what you have.

[Anonymous]

Op here. I think I am just looking for more financial freedom. We have to think about every single purchase and if not in budget, we have to wait. I really want to fix up our older home, and save for an addition, but it seems impossible to save up that kind of money on a steady income alone. Just wondering what others do to supplement their income. (In terms of investing)

[Anonymous]

FWIW, we make much less than you, are also frugal, and feel that we have a lot of financial freedom. Not sure how else we differ, though (fewer loans? lower mortgage? lower school/childcare expenses?). Early on, we did a lot a lot of reading--books like Eric Tyson's Personal Finance for Dummies, The Millionaire Next Door, etc.

There's no magic bullet, but it might be helpful to get an outsider's perspective. Maybe you need to meet with a fee-only financial planner to help you look at your savings and your portfolio.

[Anonymous]

Anonymous wrote:Op here. I think I am just looking for more financial freedom. We have to think about every single purchase and if not in budget, we have to wait. I really want to fix up our older home, and save for an addition, but it seems impossible to save up that kind of money on a steady income alone. Just wondering what others do to supplement their income. (In terms of investing)

My hhi is lower than yours, and I like reading about people's investing ideas too. But maybe the issue is your mentality and not the amount of money. You are being responsible and waiting until you have enough money to do things, and other people do not think this way. They just go on vacation and lease that BMW if the spirit moves them to. It used to be normal to have to save for a major project or purchase. You are doing things right, so OWN IT. We are fixing up our house too, but we are moving very slowly and doing as much as we can ourselves and waiting on nonessential projects. We certainly have enough money to just spend a lot of our savings all at once, but we choose not to do that. I've taught myself to enjoy spending money slowly and thoughtfully, and really appreciating what I buy, instead of just splurging. I found that if I think "I CHOOSE not to spend my money on this right now" instead of "I'm obliged to save," I just feel a lot better. Just a thought.

[Anonymous]

Have you checked our Mr Money Moustache? He is fun to read and will validate your approach.

[Anonymous]

It is entirely possible these other friends are just living at their means and not saving nearly as much as you are. It is amazing how many people do that.

[Anonymous]

So many questions beyond the simple income number (very nice, by the way).
How much debt did you each have on your first day of 'real work' after college? Some people had a drivable car and money in the bank, others had tens of thousands of debt.
When did you buy your first house and how crushing was the down payment and mortgage payment at the time? Some folks bought into the Washington real estate market early, got help from family and were able to get a "one-income" single family house that they now rent out after they bought their next house. Others bought in 2006 and are hosed to this day.
School for the kids? Some folks are doing great with public schools and other are getting a lot of help to have the kids in private. Others are paying more for schools than the average U.S. family makes for gross income ($52k).
And, like others say, some folks are just way over their heads with spending or are not saving for college/retirement. Keep working and good luck (yep, luck pays a big part too {health problems, abusive spouse, company folds/grows})

[Anonymous]

The secret is there is no secret.

[Anonymous]

Anonymous wrote:Have you checked our Mr Money Moustache? He is fun to read and will validate your approach.

Not OP, but what a great blog! Thanks for sharing!

[Anonymous]

The average savings rate in the US has historically been in the low single digits. Many people I know live like that. We make only a bit more than you (270ish) - and we try to save like mad. We max out 401k, we put $700 a month into savings on top of that, and I take advantage of every benefit I can: FSA matches, ESPP plans, etc. If you looked at us you'd find a family that drives a car with a dent and has crabgrass in their yard (which I can't seem to get rid of). It doesn't seem like we're anywhere near as well off as some of our friends, but we've got perhaps $700k invested. That's getting to the point now where the figure grows by nearly $100k a year - between 401k and matches plus 5 or 6% growth (average).

Point is - slow and steady wins the race.

[Anonymous]

OP, with your HHI you should be able to save up for an addition in a year. We make 90K and still put money aside for college and retirement each month. It's tight, but do-able.

But your slow-and-steady approach is absolutely the right call. We are heavily invested in real estate which is GREAT but it doesn't pay off until the properties are paid off - more of a 401(k) than a revenue stream for us.

There is no trick to savings - spend less than you make. Your HHI is wonderful, maybe revisit the budget to see if it's "leaking" somewhere? I can't fathom that you couldn't save at least 5K/month, minimum. That's going to add up fast!

[Anonymous]

2 things

Pay yourself first
and
It isn't what you make it is what you keep.

[Anonymous]

OP, the secret around here is that many people have incomes they are not telling you about. Inheritance, properties they own, help from parents, real estate run ups. It is emphatically not polite to talk about it, so very few do. Years later, after the fact, you find out the granny left them a little help. Also some people are in debt to their eyeballs. The best you can do is to mind your own financial house as best you can.