I always hear that people are living beyond their means, but…

[Anonymous]

I live in Arlington in a neighborhood of $1-1.5M homes. Some people drive fancier cars, take fancier vacations, or choose more expensive camps. I can only think of one family who I am 90% sure lives beyond their means - and that’s only because the husband is a cop and the wife works part time. I assume her parents paid for their house or a good portion of it.

Some people bought in 2012-2015 and paid $550k and some people bought in 2020-22 and paid $1M+. Presumably the late buyers have higher incomes that those of us in the middle. When kids start applying to college I’m sure differences will surface.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:It's honestly really hard to gauge how other people are doing financially. There's their income, which you could guess at pretty easily, and their housing costs, which you can also probably guess at pretty easily.

But there are all these other factors. Student loan debt, family money, whether they are needing to support other family members in some way, what kinds of other help they get from family (like grandparents paying for private school, or funding down payments, or maxing out annual gifts), there might be health expenses you can't possibly know about. It can go one way or the other and you just have no idea.

And it's psychological, too. I have some friends who I would assume are very well off -- Big Law partner at a firm where I know what that means in terms of income. They live in a big house in a very pricy neighborhood. But they probably talk about "affording things" more than any of my other friends. They do not take a lot of vacations and the ones they take often aren't particularly extravagant. They do spend money on cars but nothing insane for what I know their income must be. I honestly don't know if maybe they have other expenses that are putting pressure on them, or potentially they are just the sort of people who stress about money a lot. Both grew up UMC but that doesn't mean they didn't grow up without money stress (UMC people can get laid off, their businesses run into rough patches, they have unanticipated medical expenses, etc.).

Meanwhile, we have other friends who might seem overextended from the outside (both of student debt, bought a house even they admitted at the time was more than they could afford, working for government or NGOs where income can never go that high) and they take two foreign vacations a year, always have new everything, and never express any money concerns. Are they just good with money, have secret sources of money we don't know about, or just chill people who don't talk about it publicly? Could be any of the above or something else I haven't thought of.



Which is why you can't compare yourself to other people on this point. You just don't know. Keep your head down and focus on your own finances. Look for advice from neutral resources, not your peers. Their situation is unlikely to be as similar to yours as you might think.

DP, Agreed, for context, as immigrant Asians we have a frugal mentality. Our HHI is 600K, PITI is less than 3K, mid 40's, kids in public school.. ~$3M NW but we still stress about money. I am just the type of person who just stresses about the money. Even if our HHI was a $1M, it's just a personality trait

How do you have PITI under $3k! Do you live in Loudoun County?

DP but PITI of $3.2K and HHI of $400K and $3MM net worth. We refinanced to conforming mortgage that's 2.750% and originally put down 30% many years ago.

Same here. Had piti at $2,700. Paid off early and had also put 40% down. HHI fluctuated from 375 - 600k. Net worth 7m+

[Anonymous]

Anonymous wrote:UMC has $100,000 of credit card debt??

yikes

Exactly. I thought everybody on this board paid off their ccs in full each month

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:No, I don’t think a good portion of people who seem to be doing well really aren’t. This is what people who don’t have a decent money like to think. From what I cans see, it’s just not true. Maybe they have a bad year and don’t go skiing in vail one year, but they still go away for a big summer and spring break trip.

I see people mention that a lot (mostly on this board) and use the term house poor but its like a comfort to assume others are in a bigger nicer home because of a bad choice that will not end well. Therefore, you are actually in the smarter position long run. I think it's a common sentiment/salve in neighborhoods with a wild mix of housing (teardowns to modern luxury). I think in established multi million neighborhoods people don't second guess wealth as much.

Eh, maybe some people feel that way, but I think it's that most people just know a few people who really are living beyond their means (usually family members or friends where you know the real situation and see how the house of cards is built) and want to caution others who ask about their finances on a forum. I'll caution people on this forum who ask about whether they can afford a house that's at their limit that they don't want to be "house poor" because I've known actual people in that situation and it sucks for them. But I don't go around thinking about other people's finances if they're not asking on a forum.

I do think though there's a certain genre of these popular personal finance gurus like Dave Ramsey whose schtick is to try to create a sense that other people are living beyond their means and by taking his advice you're one of the select few who is not. I've seen that sometimes gets echoed in advice here not realizing that a lot of his audience are people who are in circles where everyone has a lot of cc debt and not a lot of money. He --and other gurus of that type--I think do appeal to people who get comfort by thinking that others are somehow deluded and they are not. They don't realize that they are overgeneralizing when they see people who have a high income, high net worth, can afford their spending and use low interest rate debt strategically. It doesn't fit into their gurus "rules" so they assume they are one of the deluded types he rails against.

Wow. PP, thank you for writing this so succinctly. I just realized I've been in that thought trap. Shaking free of it now!

[Anonymous]

Anonymous wrote:I live in Arlington in a neighborhood of $1-1.5M homes. Some people drive fancier cars, take fancier vacations, or choose more expensive camps. I can only think of one family who I am 90% sure lives beyond their means - and that’s only because the husband is a cop and the wife works part time. I assume her parents paid for their house or a good portion of it.

Some people bought in 2012-2015 and paid $550k and some people bought in 2020-22 and paid $1M+. Presumably the late buyers have higher incomes that those of us in the middle. When kids start applying to college I’m sure differences will surface.

Lol why are they living there?

[Anonymous]

They probably assume inheritances are coming that will wipe out their mortgage and all other debt. So for now, spend away

[Anonymous]

Anonymous wrote:It's honestly really hard to gauge how other people are doing financially. There's their income, which you could guess at pretty easily, and their housing costs, which you can also probably guess at pretty easily.

But there are all these other factors. Student loan debt, family money, whether they are needing to support other family members in some way, what kinds of other help they get from family (like grandparents paying for private school, or funding down payments, or maxing out annual gifts), there might be health expenses you can't possibly know about. It can go one way or the other and you just have no idea.

And it's psychological, too. I have some friends who I would assume are very well off -- Big Law partner at a firm where I know what that means in terms of income. They live in a big house in a very pricy neighborhood. But they probably talk about "affording things" more than any of my other friends. They do not take a lot of vacations and the ones they take often aren't particularly extravagant. They do spend money on cars but nothing insane for what I know their income must be. I honestly don't know if maybe they have other expenses that are putting pressure on them, or potentially they are just the sort of people who stress about money a lot. Both grew up UMC but that doesn't mean they didn't grow up without money stress (UMC people can get laid off, their businesses run into rough patches, they have unanticipated medical expenses, etc.).

Meanwhile, we have other friends who might seem overextended from the outside (both of student debt, bought a house even they admitted at the time was more than they could afford, working for government or NGOs where income can never go that high) and they take two foreign vacations a year, always have new everything, and never express any money concerns. Are they just good with money, have secret sources of money we don't know about, or just chill people who don't talk about it publicly? Could be any of the above or something else I haven't thought of.

Which is why you can't compare yourself to other people on this point. You just don't know. Keep your head down and focus on your own finances. Look for advice from neutral resources, not your peers. Their situation is unlikely to be as similar to yours as you might think.

Don't assume govt workers only live off their salaries. I now plenty who work for the govt because they believe in the mission or need something to do and not necessarily for the paycheck. Also, govt employees who put in 20 plus years will receive cushy pensions, healthcare subsidies, etc....they can spend more while working, take more risks with investments aware they have a safety net.

[Anonymous]

Anonymous wrote:

Anonymous wrote:It's honestly really hard to gauge how other people are doing financially. There's their income, which you could guess at pretty easily, and their housing costs, which you can also probably guess at pretty easily.

But there are all these other factors. Student loan debt, family money, whether they are needing to support other family members in some way, what kinds of other help they get from family (like grandparents paying for private school, or funding down payments, or maxing out annual gifts), there might be health expenses you can't possibly know about. It can go one way or the other and you just have no idea.

And it's psychological, too. I have some friends who I would assume are very well off -- Big Law partner at a firm where I know what that means in terms of income. They live in a big house in a very pricy neighborhood. But they probably talk about "affording things" more than any of my other friends. They do not take a lot of vacations and the ones they take often aren't particularly extravagant. They do spend money on cars but nothing insane for what I know their income must be. I honestly don't know if maybe they have other expenses that are putting pressure on them, or potentially they are just the sort of people who stress about money a lot. Both grew up UMC but that doesn't mean they didn't grow up without money stress (UMC people can get laid off, their businesses run into rough patches, they have unanticipated medical expenses, etc.).

Meanwhile, we have other friends who might seem overextended from the outside (both of student debt, bought a house even they admitted at the time was more than they could afford, working for government or NGOs where income can never go that high) and they take two foreign vacations a year, always have new everything, and never express any money concerns. Are they just good with money, have secret sources of money we don't know about, or just chill people who don't talk about it publicly? Could be any of the above or something else I haven't thought of.

Which is why you can't compare yourself to other people on this point. You just don't know. Keep your head down and focus on your own finances. Look for advice from neutral resources, not your peers. Their situation is unlikely to be as similar to yours as you might think.

Don't assume govt workers only live off their salaries. I now plenty who work for the govt because they believe in the mission or need something to do and not necessarily for the paycheck. Also, govt employees who put in 20 plus years will receive cushy pensions, healthcare subsidies, etc....they can spend more while working, take more risks with investments aware they have a safety net.

This is really true! Some govt employees I know are the most speculative investors out there with at least a portion of their investments. While mostly this causes them to lose money (though money they can afford to lose bc of pension), for some it pays off wildly.

[Anonymous]

I think the issue is usually with low income people living beyond their means.

Even when rich people live beyond their means they often still have high incomes or the capacity to earn high incomes, assets, savings, inheritances, etc. That they can fall back on.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

DP, Agreed, for context, as immigrant Asians we have a frugal mentality. Our HHI is 600K, PITI is less than 3K, mid 40's, kids in public school.. ~$3M NW but we still stress about money. I am just the type of person who just stresses about the money. Even if our HHI was a $1M, it's just a personality trait

For 600k HHI and that low PITI, your NW is kind of low.

Ha, you wish. Their HHI a has obviously grown over time.

Asian poster.. Yep, HHI has increased ... till 3 years ago, we were at 350K. Now, we save $200K+ every year since 2020 (pre and post tax). We did spend a bit on the house renovation and made a few bad investment decisions early in career. We take an INTL vacation to Europe, but heavily subsidized on miles and points. We do spend quite a bit on kids activities and vacations

[Anonymous]

I assume people aren’t saving as much for retirement as we are, but who knows.

I agree that it seems like people have a lot of money to spend.

[Anonymous]

Anonymous wrote:

Anonymous wrote:The rapid rise in housing has/will offset the current set of UMC people living beyond their means. If they've paid off their house while it shot up in value, that's a lot of equity to pull out through a reverse mortgage to keep the money flowing.

We have a ton of equity in our large home. At some point, we will tire of keeping it up with the kids gone and downsize to something we can devote minimal time to running. We should be able to maintain our current lifestyle into our late 90s.

90s?

[Anonymous]

Anonymous wrote:I assume people aren’t saving as much for retirement as we are, but who knows.

I agree that it seems like people have a lot of money to spend.

From a person who uses credit cards strategically to fund Intl vacations, ( +pulled out kids from elementary school for cheaper vacation lodging), sometimes what you see can be misleading. Some people are smarter than others about their money and can get nicer things at a fraction of the cost. We bought a Tesla MY, but we replaced a car that was 18 years old. For 5 years , we just had only one car, as my husband worked a remote job

[Anonymous]

Anonymous wrote:I cannot tell you how many people I know who will do things like go on vacation to Europe in the summer but then let it slip that they don't have a child fund for their kids. Just seems wildly reckless to me, but different priorities I guess.

On another thread people were stating how they can fly to Europe for $350 per person and then basically spend nothing while there. So maybe they did that?

[Anonymous]

Because of the way that partners are able to save pretax income in tax advantaged ways, we save more than a third of our income for retirement. Honestly, we will have way more money than we need in retirement. And, we have been saving for college for 20 years and our oldest kid is 9 because we saved for a decade before he was born since is was tax advantaged. We will have a few tight years in terms of cash flow while all three kids are in private school, but long term we have tons of savings that just can’t be made liquid. For people who are not employees but partners or business owners, I think this is often the case because of how tax laws work.