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

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[quote=Anonymous][quote=Anonymous]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.  [/quote]

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). [/quote]

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