Is this a common feeling in your early 40s? Feels like friends are getting rich and we're stagnant

[Anonymous]

Anonymous wrote:Age 35-45 for a lot of people is when -
Drs finish residency and specialty training.
Lawyers and consultants make Director / Partner - or know they won’t take that path.
PhDs finish post-docs and fellowships and get a well paying job.
GS15s decide to go to non-fed industry jobs.
Stock options vest,
Couples know how many kids they will have.
The highest daycare and nanny bills dwindle down to after school care and some camps.
The student loans are paid off.
Parents start dying and leaving inheritance.

If just a few of these things are true, it can seem like a family’s finances change overnight. In a 5 year span, our HHI went from $200k to $300k, my company’s stock doubled, and our childcare bills went from $50k/yr to $20k/yr.

Yeah this is all true. In the past 3 years alone, SO and I (ages 37 and 39) finished paying off his grad school loans; each got significantly higher-paying jobs; stopped paying for daycare for our two kids; and my grandparents passed and I inherited about $500k. I didn't really plan for all of those things to happen at once, but they did - and at the same time that the market was doing really well. I'm still reeling a little bit from all of the changes. We're not in the Big Law salary realm, but we are actually very, very comfortable, for the first time in our adult lives. But a decade+ of pinching pennies has left me unable to loosen the reigns, and so as a result we are just stuffing our savings accounts.

It also comes at the time that we're outgrowing our starter house, and now as we think about our next home, we're realizing that we're positioned to make a bigger lifestyle change than we had imagined. So I can imagine that maybe in 2 years or so, we'll be the ones moving into an expensive neighborhood and our friends will be wondering when and how this happened.

We're not, like, private school rich. But I do think we'll be looking at houses in the $1.5m+ range, and doing maybe 1-2 overseas trips per year. And those two things alone are both big changes from our lives to date, and honestly probably out of reach for many of our friends who work in nonprofits or government jobs.

[Anonymous]

Envy is a bad trait

[Anonymous]

OP, stop trying to keep up with the Joneses. There is always going to be someone out there with more money, so the hedonic treadmill never ends. Comparison is also the theif of joy. In the end, all that matters is family and health, which are two things money cannot buy. What's the point of owning a mansion if you get cancer anyway?

Also, keep in mind there are a lot of stupid people out there who love a debt fueled lifestyle. They live far beyond their means in order to project a desired image.

[Anonymous]

Stop trying to keep up. Stop comparing yourself to them. That way madness lies. If it means you lose some friends, so be it.

I know it's easier said than done, but this is truly the answer if what you are seeking is happiness and contentment. That's all there is to it.

[Anonymous]

Give me a break. People make money in so many ways other than their primary profession or inheritance. But I'm sure a common trait is that they are all good at managing money which can be self-taught.

Sources of income outside your primary profession:

(1) Stock Market/Investing - This is a big one. Invest early and often. Live below your means early in your career and invest and let the growth and compounding work its wonders. They may have taken more risk and invested in individual stocks and hit it big. High Risk/High Reward. Perhaps these people invested a small sum in Tesla stock before its meteoric rise and multiple stock splits. Ted Weschler turned his $70K retirement account into a $264M Roth IRA investing in stocks that everyone else had access to.
(2) Side Hustles/Entrepreneurship - Another big one. Especially with the rise of social media influencing.
(3) Real Estate Investing. They probably started small and built up from there. Rents they collect more than cover expenses.
(4) Two income households. Allows more of #1.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:On DCUM, every time someone asks this question, multiple people say: "family money" because then they don't have to think about what they themselves could have done differently. I really don't think receiving large gifts or inheritances from family is as prevalent as you think. Minor downpayments are the most common form of help, but usually don't run into paying for the entire house.

Practically no one ever says: "stock market". Yet for us, that's been the sole driver of our wealth, and I suspect it contributes to the wealth of a lot of my neighbors in Bethesda, along with people who manage or sell successful businesses. We bought high tech stocks when they were cheap because we believed in the product and decades later can sell some stocks to meet our needs.

But how did you have so much excess wealth 20 years ago to invest substantial sums on individual stocks?

We followed the “prudent advice”:

Paid down student loans (guaranteed return as they say) but not too fast as they were tax deductible
Invested in diversified index funds through maxed out 401ks
Kept adding to some long term CDs for building up a down payment on a house (which took a LONG time since houses appreciated faster than the $50k/year we were saving).
Then we had kids, and whose there went $28k/year/kid for daycare
Then we bought a house and suddenly we are dropping $20k for waterproofing a basement…

Dabbling in the stock market is fun, but a) in 2023 you can say tech was great, but you have survivor bias (and honestly most high flying tech are not profitable enough to justify their valuation, like Uber or Tesla, or have already past their prime like Facebook).
In general they recommend against investing large sums in individual stocks unless you don’t care to lose it. And if you don’t care to lose $20Ks of dollars, you are already WAY richer than us and likely OP.

You followed the “prudent advice”. This is exactly your problem. This is OP’s problem.
This is the reason she is left behind. She doesn’t play to win. She plays not to lose.
“Prudent advice” will not get you rich overnight. It will make you comfortable when you get old.
OP’s friends that are getting richer are probably playing more aggressively and taking more risks.
“Prudent advice” is what most people choose to follow. Go to college and get a 9-5 corporate job instead of the
more riskier path of entrepreneurship. Same with investing.

I bet some of OP’s friends took more risks with their investments and got rewarded.

And the data shows that the majority of people who can take risks are wealthy or have a wealthy family etc.

This, but the problem is that the people who do this don't understand the ways in which they are wealthy.

No one is getting rich by working a 60k a year job and playing the stock market on the side with their "disposable income" instead of sinking it into retirement. No one, sorry.

Some small number of people may work jobs like this, work their way up the ladder, while saving very aggressively and then using *some* of their savings (on top of what they are saving for retirement) to play the stock market, and are successful. You need a lot of things to cut your way for this to work -- you need to not have any sudden surprise expenses that would eat up those savings, like a medical crisis or needing to replace a car at an inopportune time, and you also need to get somewhat lucky on the market. This is the "risk" part of taking risks. You might lose. Some people save up money, invest it, and it doesn't work out. And you can assume you're smarter than everyone else if that doesn't happen to you, but if that were true, then these investments wouldn't be risks. The reason the rewards are higher is because there is a high risk of failure. If it works, you got lucky.

But the most common way people get rich via "risky" investments is by making them with play money. This means they are not investing their income or even savings built out of income. They are investing lump sums they got from inheritances, trust funds, or other extra sources of income that most people do not have. They can take bigger risks with this money because if they lose it, they still haven't touched their income or retirement or ordinary savings. I know people who have bought investment properties or worked brokerage fund using lump sums ranging from 20k to 500k that they received through no work on their part -- inheritance from a grandparent, trust fund coming due upon a certain age, etc. And yes, these people have done well for themselves and built real wealth. But the reason they were able to take bigger risks is that they were playing with house money. If you walk into a casino and the casino gives (not lends) you 100k, you are going to behave differently than if you are playing with your own money.

This idea that peopel who are just tucking money into retirement and emergency funds and refusing to take "big risks" are being dumb ignores the fact that most people making money off of investing are not doing so with money they earned as ordinary income.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:On DCUM, every time someone asks this question, multiple people say: "family money" because then they don't have to think about what they themselves could have done differently. I really don't think receiving large gifts or inheritances from family is as prevalent as you think. Minor downpayments are the most common form of help, but usually don't run into paying for the entire house.

Practically no one ever says: "stock market". Yet for us, that's been the sole driver of our wealth, and I suspect it contributes to the wealth of a lot of my neighbors in Bethesda, along with people who manage or sell successful businesses. We bought high tech stocks when they were cheap because we believed in the product and decades later can sell some stocks to meet our needs.

But how did you have so much excess wealth 20 years ago to invest substantial sums on individual stocks?

We followed the “prudent advice”:

Paid down student loans (guaranteed return as they say) but not too fast as they were tax deductible
Invested in diversified index funds through maxed out 401ks
Kept adding to some long term CDs for building up a down payment on a house (which took a LONG time since houses appreciated faster than the $50k/year we were saving).
Then we had kids, and whose there went $28k/year/kid for daycare
Then we bought a house and suddenly we are dropping $20k for waterproofing a basement…

Dabbling in the stock market is fun, but a) in 2023 you can say tech was great, but you have survivor bias (and honestly most high flying tech are not profitable enough to justify their valuation, like Uber or Tesla, or have already past their prime like Facebook).
In general they recommend against investing large sums in individual stocks unless you don’t care to lose it. And if you don’t care to lose $20Ks of dollars, you are already WAY richer than us and likely OP.

You followed the “prudent advice”. This is exactly your problem. This is OP’s problem.
This is the reason she is left behind. She doesn’t play to win. She plays not to lose.
“Prudent advice” will not get you rich overnight. It will make you comfortable when you get old.
OP’s friends that are getting richer are probably playing more aggressively and taking more risks.
“Prudent advice” is what most people choose to follow. Go to college and get a 9-5 corporate job instead of the
more riskier path of entrepreneurship. Same with investing.

I bet some of OP’s friends took more risks with their investments and got rewarded.

And the data shows that the majority of people who can take risks are wealthy or have a wealthy family etc.

Spot on. If you want to get ahead you have to take risks or be very lucky.

[Anonymous]

Anonymous wrote:Envy is a bad trait

What you're likely experiencing is the compounding of relatively small differences with time a 10k difference in salary at 23 invested and then multiplied through raises and bonuses ends up being a much larger difference at 43. Same reason why you (like me) might find yourself 15 lbs heavier in your 40s than in your 20s--just the compounding effects of a little less movement and a little slower metabolism without a corresponding reduction in food over a decade and a half.

But comparison is the thief of joy. I think the main thing to focus on is your own ability to appreciate what you have and avoid thinking about what others have. While your feeling of embarrassment sounds authentic, it just feels kind of juvenile too. So maybe work on why you feel this way? I would say my friend group has generally but not universally has gotten richer than me but I haven't really thought about it much and definitely don't feel bothered or embarrassed by it.

[Anonymous]

Anonymous wrote:I am upper middle class woman raised by a single mother who never broke $50K a year. Because I have attended elite universities, I know tons of the people you are describing. And family money is the key (I dont care what these other posters are saying). Here are several examples of ways the rich/upper middle class pass on wealth:

- Undergraduate paid for by parents. It's really hard to invest when you have educational debt.

-Down payments for first house

-At least two of my friends receive yearly gifts from their parents- the max gift amount. Clearing an extra 36K on top of your salary without paying taxes on it is an amazing leg up. Imagine if both sets of parents are doing this.

-Parents or grandparents paying for kids private and/or college.

-Some inherited from parents or grandparents.

So OP if this is you or your spouse and any of these amazing gifts are yours and you are still behind, then yes you are blowing your money. But if none of this applies to you then don't be hard on yourself and remember comparison is the thief of joy. I am always pinching myself about how lucky I am.

Yup, the world of the truly middle class is so much different compared to people from UMC that border wealthy. My parents were a social worker and a nurse. My mom never broke more than $40k working for the state, and my dad made $80k at most. I went to an elite university, where I met lots of kids from extremely privileged households. They got way ahead immediately out of the gate, because they never had to pay years of student loans, had their weddings paid for by their parents, had down payments for a home given to them by their parents, and a few even had jobs lined up for them by their parents at their family companies. It's amazing how fast you can build wealth when you come from wealth.

[Anonymous]

Anonymous wrote:

Anonymous wrote:The explanation is they made partner at (fill in the blank thing everyone around here does- law firm/consulting). That often happens around 40, give or take a few years. Plus, most firms have just had 2 years of killer returns.

I know someone who is head partner (don’t know the proper name, and this is for one of the accounting divisions) for their city’s office of a big 4 firm.

They live in a $600,000 house in a middling part of their city, and the kids go to the local parochial school. I am not sure if they’re just being frugal?

I’ve know a lot of people who take this approach. This is not only a graceful move but also a good financial choice. These are the people who are super enviable, but through their choices they avoid generating much envy.

[Anonymous]

I know what you’re talking about OP. The friends I know who are doing well either a) work in fields like big law, tech, or finance; b) have family money (trusts/inheritances/financial gifts each year/kids college paid for by grandparents, etc.), or c) are on their second career in the 40s. I know quite a few people who started with the military or the higher levels of law enforcement who are eligible for retirement after 20 years. They then collect their pensions and go into some new field where they’re fairly sought after because they were pretty high ranking.

Maybe there are other variations out there like picking the right stocks or getting in on the ground level of a booming startup. But the three I mentioned above are what I see the most.

When the envy bug hits me (because let’s be real, I’m human) I focus on the fact that they are in fields I have no interest in. I have zero desire to work crazy hours, I made the choice to have a flexible, secure job so I could volunteer at my kids’ school, be home to meet the school bus, and so on. Flexibility is its own perk. Also, our friends in tech seem to work a boom and bust life. I’ve seen some go through multiple lay offs and periods of unemployment when things go sour. DH and I don’t have the risk tolerance for that. And well, family money would be nice but I love my family. Can’t say I’d be better off if they were gone and left me everything. I am blessed that my kids have involved grandparents even if they can’t fund private school tuition.

There’s pros and cons to everything, so it helps to focus on the things you do have even if non-monetary.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Age 35-45 for a lot of people is when -
Drs finish residency and specialty training.
Lawyers and consultants make Director / Partner - or know they won’t take that path.
PhDs finish post-docs and fellowships and get a well paying job.
GS15s decide to go to non-fed industry jobs.
Stock options vest,
Couples know how many kids they will have.
The highest daycare and nanny bills dwindle down to after school care and some camps.
The student loans are paid off.
Parents start dying and leaving inheritance.

If just a few of these things are true, it can seem like a family’s finances change overnight. In a 5 year span, our HHI went from $200k to $300k, my company’s stock doubled, and our childcare bills went from $50k/yr to $20k/yr.

Yeah this is all true. In the past 3 years alone, SO and I (ages 37 and 39) finished paying off his grad school loans; each got significantly higher-paying jobs; stopped paying for daycare for our two kids; and my grandparents passed and I inherited about $500k. I didn't really plan for all of those things to happen at once, but they did - and at the same time that the market was doing really well. I'm still reeling a little bit from all of the changes. We're not in the Big Law salary realm, but we are actually very, very comfortable, for the first time in our adult lives. But a decade+ of pinching pennies has left me unable to loosen the reigns, and so as a result we are just stuffing our savings accounts.

It also comes at the time that we're outgrowing our starter house, and now as we think about our next home, we're realizing that we're positioned to make a bigger lifestyle change than we had imagined. So I can imagine that maybe in 2 years or so, we'll be the ones moving into an expensive neighborhood and our friends will be wondering when and how this happened.

We're not, like, private school rich. But I do think we'll be looking at houses in the $1.5m+ range, and doing maybe 1-2 overseas trips per year. And those two things alone are both big changes from our lives to date, and honestly probably out of reach for many of our friends who work in nonprofits or government jobs.

Your friends would have to be pretty poor to be wondrous of a 1.5-2m house in this area.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Age 35-45 for a lot of people is when -
Drs finish residency and specialty training.
Lawyers and consultants make Director / Partner - or know they won’t take that path.
PhDs finish post-docs and fellowships and get a well paying job.
GS15s decide to go to non-fed industry jobs.
Stock options vest,
Couples know how many kids they will have.
The highest daycare and nanny bills dwindle down to after school care and some camps.
The student loans are paid off.
Parents start dying and leaving inheritance.

If just a few of these things are true, it can seem like a family’s finances change overnight. In a 5 year span, our HHI went from $200k to $300k, my company’s stock doubled, and our childcare bills went from $50k/yr to $20k/yr.

Yeah this is all true. In the past 3 years alone, SO and I (ages 37 and 39) finished paying off his grad school loans; each got significantly higher-paying jobs; stopped paying for daycare for our two kids; and my grandparents passed and I inherited about $500k. I didn't really plan for all of those things to happen at once, but they did - and at the same time that the market was doing really well. I'm still reeling a little bit from all of the changes. We're not in the Big Law salary realm, but we are actually very, very comfortable, for the first time in our adult lives. But a decade+ of pinching pennies has left me unable to loosen the reigns, and so as a result we are just stuffing our savings accounts.

It also comes at the time that we're outgrowing our starter house, and now as we think about our next home, we're realizing that we're positioned to make a bigger lifestyle change than we had imagined. So I can imagine that maybe in 2 years or so, we'll be the ones moving into an expensive neighborhood and our friends will be wondering when and how this happened.

We're not, like, private school rich. But I do think we'll be looking at houses in the $1.5m+ range, and doing maybe 1-2 overseas trips per year. And those two things alone are both big changes from our lives to date, and honestly probably out of reach for many of our friends who work in nonprofits or government jobs.

Your friends would have to be pretty poor to be wondrous of a 1.5-2m house in this area.

DP here. Oh stop, a $1.5-2m house is out of reach for more than just “poor” people. DH and I make 300k HHI in stable jobs unlikely to ever generate high levels of wealth, but I would still say we’re on the lower end of UMC. We had grad school loans to pay off while saving to buy our home, and now 2 kids to send to college someday (will be done with preschool in 2 years so we’ll reallocate some of that). We bought an 850k house (did another 200k in updates) and that is as far as we will likely ever stretch.

I recently saw a friend (part of a dual fed couple) sell their home valued similar to ours (around $1.2) and move into a home that per Redfin they paid $1.8m for. They have 3 kids, 2 of which are still in childcare. They’ve also started taking fancy ski vacations and international trips. But I know one lost their last living parent a couple years ago so I’m guessing that is where this money is coming from. It’s still a shock to see their lifestyle change and I would not consider myself poor by any means. But I know my friend went through a tough time losing both parents in a short time span. So I’m glad to see her family enjoying some happiness.

[Anonymous]

Anonymous wrote:OP, stop trying to keep up with the Joneses. There is always going to be someone out there with more money, so the hedonic treadmill never ends. Comparison is also the theif of joy. In the end, all that matters is family and health, which are two things money cannot buy. What's the point of owning a mansion if you get cancer anyway?

Also, keep in mind there are a lot of stupid people out there who love a debt fueled lifestyle. They live far beyond their means in order to project a desired image.

Not just “someone” and it’s not isolated when it’s basically all of your friends.

[Anonymous]

Anonymous wrote:I am upper middle class woman raised by a single mother who never broke $50K a year. Because I have attended elite universities, I know tons of the people you are describing. And family money is the key (I dont care what these other posters are saying). Here are several examples of ways the rich/upper middle class pass on wealth:

- Undergraduate paid for by parents. It's really hard to invest when you have educational debt.

-Down payments for first house

-At least two of my friends receive yearly gifts from their parents- the max gift amount. Clearing an extra 36K on top of your salary without paying taxes on it is an amazing leg up. Imagine if both sets of parents are doing this.

-Parents or grandparents paying for kids private and/or college.

-Some inherited from parents or grandparents.

So OP if this is you or your spouse and any of these amazing gifts are yours and you are still behind, then yes you are blowing your money. But if none of this applies to you then don't be hard on yourself and remember comparison is the thief of joy. I am always pinching myself about how lucky I am.

I have all of this (mins inheritance--parents are still alive) from family money and I am nowhere close to being able to afford a $3 million house. we are very comfortable but still cannot afford that kind of lifestyle. At some point you need massive salaries and/or equity events, or luck with real estate or the stock market as some others have described.