Are you living beyond your means?

[Anonymous]

PP here. Meant PITI is same as rent.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I took risks and some paid off some haven't. You don't become rich being a worker b ea, saving 401k and avoiding debt.

I beg to differ. I accumulated my first million from a negative net worth position in only 13 years, all through plain old saving and investing in mutual funds. Made my second million the same way.

Vey good. How much did you put into investments/savings each year? The market has had a poor return for 10 out of the last 13 years.

[Anonymous]

Anonymous wrote:I took risks and some paid off some haven't. You don't become rich being a worker b ea, saving 401k and avoiding debt.

Meh, I don't know. I'm 32 and have about $1.5M total or $1.1M net. I'll likely retire with at least $5M and possibly even as much as $10M. I'm a working stiff and am boring

[Anonymous]

Anonymous wrote:I was living within my means but just bought a house. PITI is exactly same as mortgage but losing the down payment savings makes me nervous.

First year home expenses suck. You discover everything the prior owner neglected. Just remember that it'll taper off a bit in year 2/3.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Ok, I have a question related to this. Can anyone explain to me the rational that some couples use that the wife working would put them into a higher bracket, which is why she doesn't work.

Is that pretty much BS, can you not plow the ultimate max into tax preferred accounts to reduce taxable income or what? I realize there's limits on Roth's, is this a big part of it?

TIA

Makes no sense. Only her salary would be taxed at that rate. Now if they had kids and the childcare costs were more than she was bringing in net, that's another issue. My guess is that they don't understand marginal tax rates.

I know the issue for us is that the marriage penalty is huge. For example, under the new rates passed last night, rates go up on individuals making 220k and couples making 250k. Thus, the second earner gets taxed at the highest marginal rate for everything he/she makes if the first earner makes more than 250. Add AMT on top of that, and the effective total tax rate on the second salary can be almost 50 percent (including state taxes). Add in commuting expenses, day care, clothes, dry cleaning, etc, and it barely makes sense to work, even at a salary of over 100k. I think I calculated that I would need to make at least 150 to make it worthwhile.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I took risks and some paid off some haven't. You don't become rich being a worker b ea, saving 401k and avoiding debt.

Meh, I don't know. I'm 32 and have about $1.5M total or $1.1M net. I'll likely retire with at least $5M and possibly even as much as $10M. I'm a working stiff and am boring

So you saved/invested an average of about $90K every year you've worked?

[Anonymous]

I

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I took risks and some paid off some haven't. You don't become rich being a worker b ea, saving 401k and avoiding debt.

Meh, I don't know. I'm 32 and have about $1.5M total or $1.1M net. I'll likely retire with at least $5M and possibly even as much as $10M. I'm a working stiff and am boring

So you saved/invested an average of about $90K every year you've worked?

No. When I was in my early 20s I worked in investment banking. By 22 I was clearing $200k. I made a large amount of money early on and invested it heavily. After that, got married, switched jobs and started saving less - about $100k a year.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I took risks and some paid off some haven't. You don't become rich being a worker b ea, saving 401k and avoiding debt.

Meh, I don't know. I'm 32 and have about $1.5M total or $1.1M net. I'll likely retire with at least $5M and possibly even as much as $10M. I'm a working stiff and am boring

So you saved/invested an average of about $90K every year you've worked?

No. When I was in my early 20s I worked in investment banking. By 22 I was clearing $200k. I made a large amount of money early on and invested it heavily. After that, got married, switched jobs and started saving less - about $100k a year.

Wow- what do you do now? Did you clear 200k after all your expenses?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I took risks and some paid off some haven't. You don't become rich being a worker b ea, saving 401k and avoiding debt.

Meh, I don't know. I'm 32 and have about $1.5M total or $1.1M net. I'll likely retire with at least $5M and possibly even as much as $10M. I'm a working stiff and am boring

So you saved/invested an average of about $90K every year you've worked?

No. When I was in my early 20s I worked in investment banking. By 22 I was clearing $200k. I made a large amount of money early on and invested it heavily. After that, got married, switched jobs and started saving less - about $100k a year.

Wow- what do you do now? Did you clear 200k after all your expenses?

Something far less lucrative. In fact, I made more at 22 than I do now, but I have my soul... Ibanking is awful- 100 hour weeks, week in week out. A private sedan home is cool for about a week and then you just don't care cause it's two am and you just want to go home to get 4 hours of sleep. My expenses were low back then - I lived in the same place I did in college so I didn't really have much in the way of rent, etc. I used to raid the office fruit basket for breakfast. I had some lucky breaks to be sure, but the formula for retirement isn't that complex: keep your expenses low despite rising income. My mortgage is $2,000. I have no other debts. Kids go to public schools. I drive regular cars (Toyota, not BMW). If I'd stayed in banking I'd likely be clearing $700 to $800k a year by now, possibly more - but I'd have sacrificed my 20s, I'd probably not ever met my wife, I'd have no kids as a result - or if I did, I'd be a pretty absent father.

[Anonymous]

Anonymous wrote:Yes, we live paycheck to paycheck on 290,000. Very high mortgage that we are stuck with because we don't have enough equity to sell, 2 in private school (will probably change this next year) but no fancy cars or vacations. Mortgage and school is our main problem. We'd really like to leave kids in but haven't saved for college or enough for retirement.

This was us. Three in private but we couldn't hack it (and we made even less than you do). Moved the kids to public. Still have occasional pangs of guilt but they are doing fine.

[Anonymous]

I think a lot of people are in that boat now. I am a contractor. In past years, most people living in "mansions" were good customers to have. Gladly willing to pay for good work, some called on a regular basis. Now, most shop work out more, haggle more over price, try to work me down below cost. Then sometimes want to split payments. I look at the house and all the "toys" they have & get irritated.

[Anonymous]

Add AMT on top of that, and the effective total tax rate on the second salary can be almost 50 percent (including state taxes).

The new bill fixed the AMT.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I took risks and some paid off some haven't. You don't become rich being a worker b ea, saving 401k and avoiding debt.

Meh, I don't know. I'm 32 and have about $1.5M total or $1.1M net. I'll likely retire with at least $5M and possibly even as much as $10M. I'm a working stiff and am boring

So you saved/invested an average of about $90K every year you've worked?

No. When I was in my early 20s I worked in investment banking. By 22 I was clearing $200k. I made a large amount of money early on and invested it heavily. After that, got married, switched jobs and started saving less - about $100k a year.

Wow- what do you do now? Did you clear 200k after all your expenses?

Something far less lucrative. In fact, I made more at 22 than I do now, but I have my soul... Ibanking is awful- 100 hour weeks, week in week out. A private sedan home is cool for about a week and then you just don't care cause it's two am and you just want to go home to get 4 hours of sleep. My expenses were low back then - I lived in the same place I did in college so I didn't really have much in the way of rent, etc. I used to raid the office fruit basket for breakfast. I had some lucky breaks to be sure, but the formula for retirement isn't that complex: keep your expenses low despite rising income. My mortgage is $2,000. I have no other debts. Kids go to public schools. I drive regular cars (Toyota, not BMW). If I'd stayed in banking I'd likely be clearing $700 to $800k a year by now, possibly more - but I'd have sacrificed my 20s, I'd probably not ever met my wife, I'd have no kids as a result - or if I did, I'd be a pretty absent father.

Good for you!