Middle class life has me completely baffled

[Anonymous]

Anonymous wrote:

Anonymous wrote: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.

This person nailed it.

Wrong. Without kids, they should still be able to max the IRA and then stash at least 24k a year for a downpayment. If they stopped maxing IRAs, I would only do it 1-2 years to save for a house, but when buying a house, do that math to go back to maxing IRAs. When people stop saving as much, it is hard to go back. The time spent in the IRAs matters so much due to the compound interest.

[Anonymous]

Anonymous wrote:

Anonymous wrote: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.

This person nailed it.

This.

[Anonymous]

Anonymous wrote:

Anonymous wrote:HHI is currently $280k. We are very comfortably middle class with two kids and no debt, but wouldn't have been able to afford our house without downpayment help from parents.

LOL. You are not middle class by any definition. You are in the 1%.

You are rich 1%ers.

[Anonymous]

OP,

You need to check out Mr. Money Mustache.

Many people relocate to lower cost of living areas.
Many people take on side work to generate a down payment.

I can't tell you how many men I've met who were driving Ubers so that they could get a house down payment.

Drive your car into the ground. Thrift shop for your clothes.

[Anonymous]

People don't max out retirement. I still don't. My husband does but I stick with 10%. If you've been maxing out fora number of years ,and are relatively young, I'd say drop to 10% for 2 years to help save for downpayment.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote: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.

This person nailed it.

This.

Yep. For a year or two only put in up to your employer match. Once you have a downpayment and then the house, saving is easier. My mortgage has always been lower than rent.

Also, your car insurance is pricey. I'm in VA and DH and I combined pay $400 every 6 months.

[Anonymous]

You don't make enough to max out your 401ks and save aggressively for a down payment. You won't be able to max when you have kids, either. Cut your contributions and concentrate on climbing the salary ladder.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote: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.

This person nailed it.

This.

+1. You're going to need to reduce retirement savings to save for a downpayment. This is not a bad problem to have. If you have public sector jobs, I'd quit putting money into an emergency fund. Is your Roth vested? If so, I'd consider using the EF for a downpayment. You could always pull $ from your Roth if shit really hit the fan. If your credit is excellent, I'd also stop the car fund. When it is time to get a car, put down a small downpayment and get a 0% interest loan.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote: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.

This person nailed it.

This.

Yep. For a year or two only put in up to your employer match. Once you have a downpayment and then the house, saving is easier. My mortgage has always been lower than rent.

Also, your car insurance is pricey. I'm in VA and DH and I combined pay $400 every 6 months.

Maryland laws.

[Anonymous]

Anonymous wrote:Driving a new car every 5 years and buying fancy new clothes all the time is considered middle class? That's your problem - you think the average joe and jane is doing this and feel inadequate. Hint - the people doing this are either not middle class, or they have a lot of debt.

I missed this point. Yeah, we make twice than you and drive our cars for ten years. We do tend to buy new though, not used.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I am completely perplexed as to how so many people can afford a 'middle class' lifestyle in this region where they own a decent home, buy new clothes all of the time, drive a new car ever 5 years or so, save for college, pay for childcare and have money left over for savings. We make $180HHI. Not the highest for the region, I know, but according to US census data for the areas of the DMV, in-line with the crowd. We max out our retirement accounts, live in a modest $1700 per mo apartment, and have no debt. We drive a very reasonably priced Mazda 3 that is paid off. We are trying to save for a house, but by the time we factor in the cost of living for everything and sock away savings for retirement, there isn't a whole lot to save per month for a house. At the rate we can save liquid cash, it'll take quite a long time to have a downpayment on a modest place that costs less than $600k. We don't have kids yet though. But for the life of me, I have no idea how in the hell people are affording kids, homes, cars, and new clothes all of the time in this area. Are people really that much in debt or are saving very little for retirement?

SO MANY of the people you are talking about use family money for the downpayment of their first home. it's the not-so-secret secret to making this work.

+Getting college paid for by your parents with no student loans.

Also, consider when your neighbors bought their homes. People a bit older than you were able to buy a condo much cheaper than they are now, build equity and roll it into an expensive house and have a lower mortgage payment than you might think.

[Anonymous]

You're saving a sht ton of money. That's great - I'm jealous! - but yeah, most people can't save that much AND buy all kinds of things AND go on nice vacations. (Most people can't even save that much without lots of extra spending.)

What do you think you should have that you don't have, is what I'd ask? And are you willing to reprioritize any of the money you're putting into retirement to get it?

Also, we did leave DC to have a higher quality of life on about that much money. We bought a house we love for $330k in our new city. And we still can't save as much as you do!

Anyway, you're doing great. And yeah, people who have more probably are either putting it on credit cards, using family money, or not saving as much as you do. There's only so much money, even when you earn more than 95 percent of Americans.

[Anonymous]

People pick & choose. You can’t have everything.

More savings, means less home or less nice “things”
More home & more things, means less savings.

[Anonymous]

I am completely perplexed as to how so many people can afford a 'middle class' lifestyle in this region where they own a decent home, buy new clothes all of the time, drive a new car ever 5 years or so, save for college, pay for childcare and have money left over for savings. We make $180HHI.

You can't buy new clothes all the time, drive a new car every 5 years or so, or pay for child care for more than two kids. That's how. Everything else is workable on that budget.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Honestly, I'm wondering where your money goes. Our mortgage is lower than your rent, but we save about 40k a year after maxing retirement.

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.

I don’t understand how this is all you have in take home pay even with maxing out retirement. My husband maxes his retirement and makes 160k and his take home pay after everything else taken out is 8600 per month. Yours is adding up to about 2k less.

I don’t really understand where all your money is going but 3.5 years ago we were making a HHI the same as you and not only paid for our own modest wedding but then was able to save for a small down payment on a house in one year (like 25k) and bought a starter home for 450k at the time. We had no help from parents other than setting us up without students loans. Our hhi has increased to 300k since then and we have one kid in preschool and another on the way plus 200k in equity in the starter home.

It wasn’t that difficult honestly and it’s not like we were eating rice and beans when we were in your position either.