Anonymous
Post 06/30/2020 15:06     Subject: Middle class life has me completely baffled
Anonymous wrote:I feel like with no kids you should be able to save more. We make less than you (105k) with a 1800 rent and managed to save each month. We won’t be able to save much though once our baby arrives but we can afford daycare for her (2k a month) but we saved in anticipation of this.


OP is putting $55.8k into retirement each year. They're saving, just not toward their stated priority of a down payment.
Anonymous
Post 06/30/2020 15:05     Subject: Re:Middle class life has me completely baffled
OP, we make $140k with two kids and similar fixed costs to yours, excluding childcare. We don't max out retirement, which sucks, but we just don't have the money for that right now. We stopped saving for emergencies once we hit $24k. We don't save for new cars because we wouldn't buy a new car, we'd by a used one out of savings and then replenish; we run our cars into the ground. We rarely buy new clothes. We are planning to buy a small house far out in the $300-350k range this summer.

So...the other posters are right. Other people don't live the lifestyles you are imagining, and they don't save as much as you. You will have a very nice standard of living in retirement though!
Anonymous
Post 06/30/2020 15:04     Subject: Middle class life has me completely baffled
I feel like with no kids you should be able to save more. We make less than you (105k) with a 1800 rent and managed to save each month. We won’t be able to save much though once our baby arrives but we can afford daycare for her (2k a month) but we saved in anticipation of this.
Anonymous
Post 06/30/2020 15:04     Subject: Middle class life has me completely baffled
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.
Anonymous
Post 06/30/2020 15:03     Subject: Middle class life has me completely baffled
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%.


No, they are in the 5%. The top 1 percent is earning 475k or more per year for a family. For an individual it was 328k. They are not the 1 percent.

Anonymous
Post 06/30/2020 15:00     Subject: Middle class life has me completely baffled
Anonymous wrote:Your idea of what "middle class" can afford is what is totally off. We can afford all of the things on your list, but we make $350K not $180K.


+1 We make just under $300K and drive our cars into the ground because we'd rather put car payment money in retirement and college savings. I grew up comfortable "middle class" and my parents bought a car at most every 10 years. And, except for one big trip in my teens, our only travel was to visit out-of-state family.
Anonymous
Post 06/30/2020 14:49     Subject: Middle class life has me completely baffled
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.


+1 OP you're oversaving for retirement (which is a great problem to have!). Cut that back to 10% each (plus pension contributions) until you have your down payment saved up. Likewise the $1000/month to the EF is a great thing to have done, but by now you should have a pretty substantial EF built up. Don't let that get bigger than 3-6 months. Based on your budget now you can clearly cash-flow at least $1k/month for non job-loss emergencies, so this is really just for when s*** hits the fan. Redirect the extra 401k savings and $1k/month to the down payment fund. The car replacement fund doesn't have to be "purchase a new car in cash replacement" - once you have $5-8k in there to serve as a down payment on the next car redirect that $300/month to the down payment fund too. That's an additional $27k this year.

I don't know how old you are, but we could afford our house partly because DH put 3% down on a two-bedroom condo in Columbia Heights that appreciated 100k in 4 years. That was our down payment for our SFH in NWDC. You can save more than you're currently saving, but you should also consider getting on the property ladder.
Anonymous
Post 06/30/2020 14:38     Subject: Middle class life has me completely baffled
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%.


No they aren't. Not even close. They're not even in the top 5%. This is literally 1 Google query you could have done in 5 seconds.

Anonymous
Post 06/30/2020 14:23     Subject: Re:Middle class life has me completely baffled
OP, I actually think more people should be like you and rent a place that works for your needs while saving up early for retirement. Home ownership is overrated and tax efficient wealth compounding in 401ks/IRA's/etc. is underrated.

I think you are doing great. I'm early 30's and had $400K+ in retirement assets before buying a house and throwing in $39K / year will get you to a good place really quickly. Friends thought I was crazy for maxing out since right after college (and these were fellow high income people who had the ability to do so).

I think if you really want a house/condo though; something will have to give. You'll either have to borrow at a higher LTV than your debt adverse risk adverse self will be comfortable with, wait to accumulate enough money (potentially to your detriment to the extent prices rise), or not save as much in emergency/retirement/etc.

Great job though!
Anonymous
Post 06/30/2020 14:16     Subject: Middle class life has me completely baffled
Costs for certain things have skyrocketed in relation to gains in real incomes. College costs are the obvious examples here- someone working a minimum wage job to put themselves through college has to work a LOT more now than in the past. Even something like catholic school- my middle class grandparents put all of their kids though catholic school in the 50s/60s. My parents wanted to do that for us but there was just no way.

Retirement too- fewer employeR-provided pensions, people are living longer, and health care/long term care costs have skyrocketed. So it’s necessary to save more.
Anonymous
Post 06/30/2020 14:12     Subject: Middle class life has me completely baffled
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.
Anonymous
Post 06/30/2020 14:12     Subject: Middle class life has me completely baffled
Anonymous wrote:
Anonymous wrote:Do you own your own business? Why are you paying for taxes and healthcare and pension outside of your take home???

Your numbers don't add up at all. At $180K your should be have a take home income close to $8500 per month. Your bills are only $2500 per month. Where is the 6K going?


Let me do a better job here:

$180,000 HHI

-26,000 Federal
-16,000 State
-11,000 Social security and medicare
-39,000 for pre-tax retirement contributions
-3000 for health care per year
-4800 per year for required pension contribution

After tax/401k/health/pension = ~$80,000 per year left over in free cash. $80k/12 = $6667 per mo in cash.

Expenses per mo. :

-1000 for maxing out Roth IRAs
-1700 rent
-100 phone bill
-150 car insurance
-300 groceries
-80 electric/gas
-70 parking
-90 internet
___________________
total: $3500

Free cash left over = $6667 - 3500 = $3100 (a little higher than what I had before because I had to go back and look at my pension contributions, which I was estimating before from memory).

$3100 - $300 per mo towards new car funds - $1000 for emergencies = $1800 per mo left over for a house.

Again, I've assume $0 for clothes, entertainment, car maintenance/repair, and miscellaneous.


The bigger picture here is that I cannot fathom tacking on $3000 more per mo. for childcare if I had children, another $300-400 car payment if we had to buy and finance a new car, spending more money than we do on clothes for ourselves or children, contribute to college savings, and have enough left over for retirement.....and oh, also afford a house. That's what I mean when I say I really don't understand how in the hell people are affording a middle class life with a family, a house, a car, and savings for college/emergency/retirement assuming there are zero health care disasters, no job loss, and other extremely expensive setbacks.


You can’t save for EVERYTHING at once. That is the whole point. You want a house, you retool your calculations and contribute less for a while to save up your down payment more quickly. At your ages you don’t need to max 401k and your Roth every single year.

The ironic thing is your tax burden will be lower if and when you buy Aw house. So, you just make it work if you want to make it work.
I’m fiscally conservative but you make a lot of money and have extremely low expenses for DINKs - you just need to suck it up and temporarily prioritize the house if you want the house.
Anonymous
Post 06/30/2020 14:12     Subject: Middle class life has me completely baffled
Anonymous wrote:OP. I feel you. It is harder than you think on that kind of salary.

Just looking at your post...maybe you are oversaving on retirement if you are maxing out? And maybe you don't need new clothes all the time?


Maxing out on retirement contribution early will set them up for long term wealth opportunities. Conservatively, if they only contribute max amount to 401K for 30 years at 6% they will have over 3M.
Anonymous
Post 06/30/2020 14:08     Subject: Middle class life has me completely baffled
Anonymous wrote:
Anonymous wrote:Do you own your own business? Why are you paying for taxes and healthcare and pension outside of your take home???

Your numbers don't add up at all. At $180K your should be have a take home income close to $8500 per month. Your bills are only $2500 per month. Where is the 6K going?


Let me do a better job here:

$180,000 HHI

-26,000 Federal
-16,000 State
-11,000 Social security and medicare
-39,000 for pre-tax retirement contributions
-3000 for health care per year
-4800 per year for required pension contribution

After tax/401k/health/pension = ~$80,000 per year left over in free cash. $80k/12 = $6667 per mo in cash.

Expenses per mo. :

-1000 for maxing out Roth IRAs
-1700 rent
-100 phone bill
-150 car insurance
-300 groceries
-80 electric/gas
-70 parking
-90 internet
___________________
total: $3500

Free cash left over = $6667 - 3500 = $3100 (a little higher than what I had before because I had to go back and look at my pension contributions, which I was estimating before from memory).

$3100 - $300 per mo towards new car funds - $1000 for emergencies = $1800 per mo left over for a house.

Again, I've assume $0 for clothes, entertainment, car maintenance/repair, and miscellaneous.


The bigger picture here is that I cannot fathom tacking on $3000 more per mo. for childcare if I had children, another $300-400 car payment if we had to buy and finance a new car, spending more money than we do on clothes for ourselves or children, contribute to college savings, and have enough left over for retirement.....and oh, also afford a house. That's what I mean when I say I really don't understand how in the hell people are affording a middle class life with a family, a house, a car, and savings for college/emergency/retirement assuming there are zero health care disasters, no job loss, and other extremely expensive setbacks.


House: Lots of people buy in condos and/or up and coming neighborhoods to get on the property ladder. Time is on your side for this.

Kids: Childcare is only That expensive for the first few years (assuming post covid world); you can pause retirement contributions during then. We bought far out (<500K) to live on one salary similar to your numbers but can still splurge on a part time nanny. You spend less on travel and leisure when you have young kids (you cant buy sleep heh heh)

College: your income will likely rise and as long as you don’t go house debt crazy you will be able to pick up a 529 eventually.

Bottom line: it’s a high COL area but there are big benefits to raising your kids here in terms of education and opportunities if you play your cards right.

You will make it work.
Anonymous
Post 06/30/2020 14:07     Subject: Middle class life has me completely baffled
Anonymous wrote:No one who can afford that list of things in the DMV is middle class. That’s the way it is these days. The superrich have hollowed out the middle class.


+1. I grew up real middle-class. Never wanted for food or shelter, but no way were we getting new clothes all the time. My mom sewed most of our clothes until we rebelled and we had a very strict budget. Only one extra-curricular activity that cost money, and even then, if it was dance, then one dance class. Rec soccer, not a travel league. Very small college savings.

We have a similar HHI to OP, and no we can’t do everything, we have to make compromises, but we can sure do a lot more, and have more financial security, than my parents had. I complain about my shitty 1940s house all the time, but still try to keep in perspective how fortunate we are.