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

[Anonymous]

Anonymous wrote: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.

+1, my DH just qualified for a deferred comp plan, and we are saving 45% of his base salary in it. This on top of maxing out pre tax 401K and Mega backdoor Roth for both of us. I think once you get to a certain income level, and get basics taken care of (house, car) there is a quite a bit of disposable income. We have $2M+ invested in index funds. Just today S&P is up 1.5% which is 30K. Our kids are in HS, and we have a limited time to take vacations with them before they go off to college, I am definitely prioritizing the $$'s on my Dec vacation. Yes, if I have to work an extra year, I am happy to, as I won't get this time back.

It's all about balance

[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.

NP here and I agree their net worth is low. Mid-40s as well, HHI was $300k until Oct last year and we have a similar $3 mil+ net worth.

[Anonymous]

Anonymous wrote:

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.

NP here and I agree their net worth is low. Mid-40s as well, HHI was $300k until Oct last year and we have a similar $3 mil+ net worth.

Thanks for the comment, how much do you save per year? We did make some bad investment choices early in career, plus had substantial student loan debts from MBA and masters. I started working when I was 31 in US (my India savings/work experience didn't really count). Now we have majority of investments in Index funds. I thought we were doing okay, but based on other comments, doesn't seem like

[Anonymous]

Anonymous wrote:

Anonymous wrote:

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.

NP here and I agree their net worth is low. Mid-40s as well, HHI was $300k until Oct last year and we have a similar $3 mil+ net worth.

Thanks for the comment, how much do you save per year? We did make some bad investment choices early in career, plus had substantial student loan debts from MBA and masters. I started working when I was 31 in US (my India savings/work experience didn't really count). Now we have majority of investments in Index funds. I thought we were doing okay, but based on other comments, doesn't seem like

Forgot to add 0 family help, in fact we provided some financial help to siblings back in India

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

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.

NP here and I agree their net worth is low. Mid-40s as well, HHI was $300k until Oct last year and we have a similar $3 mil+ net worth.

Thanks for the comment, how much do you save per year? We did make some bad investment choices early in career, plus had substantial student loan debts from MBA and masters. I started working when I was 31 in US (my India savings/work experience didn't really count). Now we have majority of investments in Index funds. I thought we were doing okay, but based on other comments, doesn't seem like

Forgot to add 0 family help, in fact we provided some financial help to siblings back in India

DP but we have a similar net worth ($3 million), early 40s and $350-$400K HHI. We max out 529s and 401ks and have no student loan debt. Investments are all in diversified vanguard mutual funds. We also have real estate investments.

[Anonymous]

Anonymous wrote:It will not be evident until retirement. People can live on cash flow while they have that cash flow. When the source of that cash flow is employment income, and employment ends, income has to be replaced by something else. That can be income from deferred compensation, pensions, Social Security, annuities, or investments/savings. People with little real wealth will have correspondingly few or only low-value such post-employment income sources, and their lifestyles will have to adapt accordingly.

PP talking about cashflow is correct. Leaving above means can't be seen until something happens and there's a money pinch, such as retirement or injury.

The #1 example that comes to mind when talking about people living above their means are my in-laws, so I'll use them as an example. My sister in law has 150k+ vet school debt that she will never be able to pay down (she doesn't actually want to work as a vet, despite the degree)...in fact, she's basically ignoring it until the loan is forgiven somehow. She and her husband are always putting bills on credit cards, yet the moment they get into a good financial state, they will buy something big such as a 2000$ grill or 40k car. They do not have ANY retirement savings outside of their 401k - no investment portfolio, nothing. They do not have an emergency fund, they were shocked when DH and I told them we have 10k in the bank at all times to cover emergencies because they never have more than 1k in their accounts (it goes to bills or something fun almost immediately).

On the outside, they look UMC. They are landlords (although they are losing money on their rental property), they take 1 beach and 1 city vacation every year (think Ocean City and then Chicago), and often a Caribbean vacation as well. They have cars less than 5 years old. They are often doing updates on their house. But they will burn through their retirement in a snap, and when some surprise does happen (eg surprise house repair), they become very aggressive towards each other and stressed out. Unfortunately, they won't even be ok by selling their rental properties, because I'm sure they will use the bolus of money for something silly and drain it instantly. (For example, sis-in-law got 40k inheritance from her passed grandmother, and instantly spent 10k of it having the driveway paved).

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

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.

NP here and I agree their net worth is low. Mid-40s as well, HHI was $300k until Oct last year and we have a similar $3 mil+ net worth.

Thanks for the comment, how much do you save per year? We did make some bad investment choices early in career, plus had substantial student loan debts from MBA and masters. I started working when I was 31 in US (my India savings/work experience didn't really count). Now we have majority of investments in Index funds. I thought we were doing okay, but based on other comments, doesn't seem like

Forgot to add 0 family help, in fact we provided some financial help to siblings back in India

You should be proud to be doing so well as a recent

[Anonymous]

Anonymous wrote:

Anonymous wrote:It will not be evident until retirement. People can live on cash flow while they have that cash flow. When the source of that cash flow is employment income, and employment ends, income has to be replaced by something else. That can be income from deferred compensation, pensions, Social Security, annuities, or investments/savings. People with little real wealth will have correspondingly few or only low-value such post-employment income sources, and their lifestyles will have to adapt accordingly.

PP talking about cashflow is correct. Leaving above means can't be seen until something happens and there's a money pinch, such as retirement or injury.

The #1 example that comes to mind when talking about people living above their means are my in-laws, so I'll use them as an example. My sister in law has 150k+ vet school debt that she will never be able to pay down (she doesn't actually want to work as a vet, despite the degree)...in fact, she's basically ignoring it until the loan is forgiven somehow. She and her husband are always putting bills on credit cards, yet the moment they get into a good financial state, they will buy something big such as a 2000$ grill or 40k car. They do not have ANY retirement savings outside of their 401k - no investment portfolio, nothing. They do not have an emergency fund, they were shocked when DH and I told them we have 10k in the bank at all times to cover emergencies because they never have more than 1k in their accounts (it goes to bills or something fun almost immediately).

On the outside, they look UMC. They are landlords (although they are losing money on their rental property), they take 1 beach and 1 city vacation every year (think Ocean City and then Chicago), and often a Caribbean vacation as well. They have cars less than 5 years old. They are often doing updates on their house. But they will burn through their retirement in a snap, and when some surprise does happen (eg surprise house repair), they become very aggressive towards each other and stressed out. Unfortunately, they won't even be ok by selling their rental properties, because I'm sure they will use the bolus of money for something silly and drain it instantly. (For example, sis-in-law got 40k inheritance from her passed grandmother, and instantly spent 10k of it having the driveway paved).

You sound like a terrible family member. Either you’re making this up (who knows this level of detail about their family members’ finances?) or you’re extremely nosy and then use that information to bad talk your family.

[Anonymous]

So many couples in much lower COL areas than DC make $200K/year. Many of these same couples also have a ton of home equity. This fact alone means that they are very comfortable.

[Anonymous]

Anonymous wrote:

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!

That's a gracious remark and impressive willingness to change your mind!

[Anonymous]

Anonymous wrote:

Anonymous wrote:

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!

That's a gracious remark and impressive willingness to change your mind!

+1 yes very rare to see on DCUM

[Anonymous]

Anonymous wrote:

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?

Yes, equivalent spending, not all activities obviously.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:It will not be evident until retirement. People can live on cash flow while they have that cash flow. When the source of that cash flow is employment income, and employment ends, income has to be replaced by something else. That can be income from deferred compensation, pensions, Social Security, annuities, or investments/savings. People with little real wealth will have correspondingly few or only low-value such post-employment income sources, and their lifestyles will have to adapt accordingly.

PP talking about cashflow is correct. Leaving above means can't be seen until something happens and there's a money pinch, such as retirement or injury.

The #1 example that comes to mind when talking about people living above their means are my in-laws, so I'll use them as an example. My sister in law has 150k+ vet school debt that she will never be able to pay down (she doesn't actually want to work as a vet, despite the degree)...in fact, she's basically ignoring it until the loan is forgiven somehow. She and her husband are always putting bills on credit cards, yet the moment they get into a good financial state, they will buy something big such as a 2000$ grill or 40k car. They do not have ANY retirement savings outside of their 401k - no investment portfolio, nothing. They do not have an emergency fund, they were shocked when DH and I told them we have 10k in the bank at all times to cover emergencies because they never have more than 1k in their accounts (it goes to bills or something fun almost immediately).

On the outside, they look UMC. They are landlords (although they are losing money on their rental property), they take 1 beach and 1 city vacation every year (think Ocean City and then Chicago), and often a Caribbean vacation as well. They have cars less than 5 years old. They are often doing updates on their house. But they will burn through their retirement in a snap, and when some surprise does happen (eg surprise house repair), they become very aggressive towards each other and stressed out. Unfortunately, they won't even be ok by selling their rental properties, because I'm sure they will use the bolus of money for something silly and drain it instantly. (For example, sis-in-law got 40k inheritance from her passed grandmother, and instantly spent 10k of it having the driveway paved).

You sound like a terrible family member. Either you’re making this up (who knows this level of detail about their family members’ finances?) or you’re extremely nosy and then use that information to bad talk your family.

+1. You sound like an envious sibling.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:It will not be evident until retirement. People can live on cash flow while they have that cash flow. When the source of that cash flow is employment income, and employment ends, income has to be replaced by something else. That can be income from deferred compensation, pensions, Social Security, annuities, or investments/savings. People with little real wealth will have correspondingly few or only low-value such post-employment income sources, and their lifestyles will have to adapt accordingly.

PP talking about cashflow is correct. Leaving above means can't be seen until something happens and there's a money pinch, such as retirement or injury.

The #1 example that comes to mind when talking about people living above their means are my in-laws, so I'll use them as an example. My sister in law has 150k+ vet school debt that she will never be able to pay down (she doesn't actually want to work as a vet, despite the degree)...in fact, she's basically ignoring it until the loan is forgiven somehow. She and her husband are always putting bills on credit cards, yet the moment they get into a good financial state, they will buy something big such as a 2000$ grill or 40k car. They do not have ANY retirement savings outside of their 401k - no investment portfolio, nothing. They do not have an emergency fund, they were shocked when DH and I told them we have 10k in the bank at all times to cover emergencies because they never have more than 1k in their accounts (it goes to bills or something fun almost immediately).

On the outside, they look UMC. They are landlords (although they are losing money on their rental property), they take 1 beach and 1 city vacation every year (think Ocean City and then Chicago), and often a Caribbean vacation as well. They have cars less than 5 years old. They are often doing updates on their house. But they will burn through their retirement in a snap, and when some surprise does happen (eg surprise house repair), they become very aggressive towards each other and stressed out. Unfortunately, they won't even be ok by selling their rental properties, because I'm sure they will use the bolus of money for something silly and drain it instantly. (For example, sis-in-law got 40k inheritance from her passed grandmother, and instantly spent 10k of it having the driveway paved).

You sound like a terrible family member. Either you’re making this up (who knows this level of detail about their family members’ finances?) or you’re extremely nosy and then use that information to bad talk your family.

+1. You sound like an envious sibling.

-1 I know this much about my brother-in-law and his wife's finances even though I'd rather not. My DH vents to me all the time because his brother asks his financial advice, tells them their situation in detail, DH works out a plan with him and then his brother does the opposite. So I've heard ad infinitum about things like how they sold their boat because the boat storage fees were so high and they rarely used it and then went and bought a new boat with the money. This is an anonymous forum, who cares if PP reports anonymously on relatives who fit the bill.

[Anonymous]

Anonymous wrote:I hear how many people live beyond their means. And that those people’s lifestyles will change as they get older and have to figure out retirement (or they aren’t able to retire). I’m just not seeing this with the UMC people I know. The people that seemed to have money just continue to. They really do, it seems. People don’t seem stressed about being overextended on CC debt etc. Obviously, people don’t always share their financial stresses but there would be signs. Is this just because I roll in boring circles with people in “boring” jobs who are risk averse? Or do you think a good portion of people who seem to be doing well financially really aren’t?

Because the whole ‘everyone doing well is aCTUaLlY poor’ thing is just a prole cope.