Author Topic: Does talking to other people ever cause you to doubt your own finances?  (Read 26934 times)

Metta

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Does talking to other people ever cause you to doubt your own finances? I had lunch with three lovely people yesterday and one of them asked me to explain to everyone the 4% rule (and the 25x your spending rule). So I started out with, "To make the math easy, let's say that you spend $50000 a year..." and went on from there. The first question was "What if the final amount is too high?" and I said, "You can cut your expenses to get it down to something do-able."

They looked dubious so I explained that figuring out the bare bones expenses is really useful and used myself as an example, saying that if 1.25 million was too much money to save, we could always cut our expenses down to $30,000, which is our minimum happy-with-life amount of yearly spending and that reduces the amount I need to $750,000. $50,000 give me enough for lots of trips and electronic toys. (Yes, I know that I look like a spendthrift to the rest of you here.)

$30,000 was apparently too extreme because one of them sputtered, "That's impossible! I couldn't figure out how you were living on $50,000 but $30,000 is just ridiculous. Something is wrong with your math! Your real expenses are probably closer to $100,000."

Could there be something wrong with my math, I thought. Am I deluded? Filled with ridiculous hope when everyone else is sober and responsible? I went back to my budget last night and ran the numbers again. Everything is fine.

I started thinking. Everyone at the table was childless but everyone except me has dogs. Is that the difference? Dogs? Two of us have husbands. Two do not. Is that it? All of them go out to eat everyday, but that's not enough to make such a big difference in financial perceptions. They don't dress much better than me. In fact, I may be the best dressed of the crowd and I'm far from a fashionista. (One of the best dressed women in our office is our admin, who buys all her clothing from thrift stores so dressing well and spending lots don't necessarily go together.) I did pay off my mortgage this year, which opens up some space in my budget, but I don't think it is enough of a difference to account for their shock.

Me and my husband have kept cash-flow accounts for more than twenty years, so I trust our numbers. But I don't really understand where their money goes. They were so firmly convinced that living on $50,000 a year was nearly impossible that I temporarily lost my confidence. Has this ever happened to you?

Million2000

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I doubt they really know where their money goes. They're most likely looking at their present salaries and assuming you need that much live on.

Alex321

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Paying off a mortgage makes a big difference, as does minimizing the number of meals out. Dining out is really expensive, and you just get used to it. This is true even if you're just doing fast-casual places.

The other thing is, people tend to see their salaries, see that they're not saving much, and assume they're spending all of their salary. But a good chunk of it is going to SS/FICA payments and federal taxes and state taxes.

On the other hand, just be sure that you have figured the cost of privately procured health insurance premiums into your plan.

Chranstronaut

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If someone is doubting my calculations (that's the wrong equation/you have an operation error here), I would be so grateful to talk with them about it.  If someone is telling me I don't know how much I spend, as in your example, I can refer them to Mint and they will see my min/max/average per monthly spending for the last three years.  Can't argue with that.  They probably have never tracked their finances that closely, so how would they know?

I do sometimes doubt my own determination of what my "minimum" really is, but generally I believe that it could be even lower than I think.  I prefer to be conservative.

Do these kinds of people buy a lot of house decor/furniture?  This is one of few things I notice that I don't have compared to others.  That, and going out to the bars every week.  Wow, is that stupidly expensive...

Melf

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I would agree with Timodeus.  You have a budget and you know where your money goes. You probably know your net worth and have a target for FIRE.  Your friends most likely don't have a clue about any of that.  I don't think the majority of people have a clue.  I don't have a budget but I do track spending and net worth with Personal Capital.  In my mind, I'm close to calling it quits within the next year because I believe in the 4% SWR and I believe I can make it work.  I have my worries and doubts at times but I think that's just normal.

spokey doke

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Don't doubt your finances, doubt theirs...I have plenty of colleagues who do not appear to be profligate over lunch, but who actually are from a MMM perspective - cell phone plans, mortgages, vacations, food shopping, cable packages, cars.  That is the basic MMM insight - people spend WAY more than they need to - just look at all the postings about 'discovering' MMM and having a 'breakthrough' about their wasteful ways - and those are the people on MMM, just think about all the rest.

regulator

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I think that you can safely assume that your friends have no real idea where their money is going.  That is pretty typical in the US.

FWIW, I don't understand some of the low expense numbers I see posted here.  We have been gradually slashing expenses over the last couple of years and are getting close to the point where we have reached the maximum of milk for the minimum of moo.  That said, I would have a really hard time getting our expenses under 60k.  This is for a family of 4 (and 2 dogs) in a mid-cost area of the country with a $1200 mortgage payments (including escrows) and an exchange health insurance policy.  Aside from the mortgage, I assume the really low numbers I see are either not real, failing to account for certain infrequent items, for smaller families, or for very low cost areas.

SailorGirl

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I used to hang out on a retirement board but kind of lost interest after one poster commented that anyone earning less than $50,000 had to be living on government subsidies. 

Some people just have no concept of money.

Gone Fishing

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Nah, in general, people are idiots when it comes to money, at least when it comes down to making it work for you instead of you working for it.   I count myself fortunate that modern technology has allowed us that get it and those who want to get it to gather together and discuss it without all the usual social implications. 

I have trimmed most of my money conversations down to the following:

Be sure to utilize retirement accounts as able
Invest in target retirement funds (Vanguard is a good option).
Don't buy stupid stuff.

From there I might inject little tips for specific things they may be doing (financing a house/car, taxes, etc).  Usually setting them up with questions for their CPA, banker, or, gasp, "advisor".  If someone seems to have promise or asks how I did it (haven't yet) I might refer them to the MMM blog or go deeper into it, but I know I might get met with doubt, fear, and/or even complete bewilderment.

To really give solid, accurate advice, you need as much information as what is contained in a case study, or what many people would equate to a financial colonoscopy, which is probably the main reason why I have shied away from discussing the matter.   I do have to fight the desire though, especially since I am in a particularly exciting stage in the journey, but also because some people find it taboo, and/or I may be taken as bragging.

I'm not a Suze Orman fan, but one thing I think she gets right is the way she describes people's "relationship" with money, because just like many relationships, it is deeply intertwined with peoples perceptions, behaviors, and emotions, things that are very difficult to change. 
Flipping the "frugal switch" is darn near impossible for some people, they will never get it.

If you do get into examples, you can use more vague terms to allow people to frame it within their own contexts.  For example you can reduce your stache requirement by 10% if you reduce your spending by 10%.

And remember, you don't really have to talk about it at all. 
 
           

James

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Sure, I absolutely doubt my own thoughts/plans at times. And talking to others who spend and earn and live differently than me can certainly cause those self doubts. Usually it doesn't of course, it takes a decent amount to make me think I might be wrong, but it certainly happens. Don't worry about the fact that you doubted yourself or your plan, focus on the fact that you went home and checked your numbers and didn't act differently based on that doubt your friends caused. Social pressure is very strong, so when they suggest it takes a certain amount it's fair to wonder about it. But like others have said, they don't have a clue, and you don't need to figure out why they said what they said, just know that it is common to feel that way after hearing what complainypants consumer sucker spenders burn through and expect you to do the same. Glad to hear you have a solid plan so just stick with it.

going2ER

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Re: Does talking to other people ever cause you to doubt your own finances?
« Reply #10 on: October 21, 2015, 08:40:05 AM »
FWIW, I don't understand some of the low expense numbers I see posted here.  We have been gradually slashing expenses over the last couple of years and are getting close to the point where we have reached the maximum of milk for the minimum of moo.  That said, I would have a really hard time getting our expenses under 60k.  This is for a family of 4 (and 2 dogs) in a mid-cost area of the country with a $1200 mortgage payments (including escrows) and an exchange health insurance policy.  Aside from the mortgage, I assume the really low numbers I see are either not real, failing to account for certain infrequent items, for smaller families, or for very low cost areas.

And for me, I don't know how I would spend $60k a year. Right now we spend under $30K per year with 2 adults, 2 teenagers, and occassionally another teenager, she is away at university, and 2 cats. Plus we like to invite people over for supper, we go through alot of food. Mind you I am in Canada so I don't have to pay medical insurance, although I do through my employer $46.73 biweekly, and I likely pay more in taxes. We occasionally travel, although I travel for work so sometimes other family members tag along, but we do travel on our own dime most of the time for vacations. We live in an area where homes are inexpensive, but other costs such as groceries, oil, insurance are expensive.

solon

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Re: Does talking to other people ever cause you to doubt your own finances?
« Reply #11 on: October 21, 2015, 09:06:58 AM »
FWIW, I don't understand some of the low expense numbers I see posted here.  We have been gradually slashing expenses over the last couple of years and are getting close to the point where we have reached the maximum of milk for the minimum of moo.  That said, I would have a really hard time getting our expenses under 60k.  This is for a family of 4 (and 2 dogs) in a mid-cost area of the country with a $1200 mortgage payments (including escrows) and an exchange health insurance policy.  Aside from the mortgage, I assume the really low numbers I see are either not real, failing to account for certain infrequent items, for smaller families, or for very low cost areas.

And for me, I don't know how I would spend $60k a year. Right now we spend under $30K per year with 2 adults, 2 teenagers, and occassionally another teenager, she is away at university, and 2 cats. Plus we like to invite people over for supper, we go through alot of food. Mind you I am in Canada so I don't have to pay medical insurance, although I do through my employer $46.73 biweekly, and I likely pay more in taxes. We occasionally travel, although I travel for work so sometimes other family members tag along, but we do travel on our own dime most of the time for vacations. We live in an area where homes are inexpensive, but other costs such as groceries, oil, insurance are expensive.

I think the difference is housing. We spend $60-65k/year, but we have a house payment. If we didn't have a house payment, our spending would rival Pete himself.

mrteacher

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Re: Does talking to other people ever cause you to doubt your own finances?
« Reply #12 on: October 21, 2015, 09:29:43 AM »
Replying to follow.

Gone Fishing

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Re: Does talking to other people ever cause you to doubt your own finances?
« Reply #13 on: October 21, 2015, 09:44:54 AM »
I think that you can safely assume that your friends have no real idea where their money is going.  That is pretty typical in the US.

FWIW, I don't understand some of the low expense numbers I see posted here.  We have been gradually slashing expenses over the last couple of years and are getting close to the point where we have reached the maximum of milk for the minimum of moo.  That said, I would have a really hard time getting our expenses under 60k.  This is for a family of 4 (and 2 dogs) in a mid-cost area of the country with a $1200 mortgage payments (including escrows) and an exchange health insurance policy.  Aside from the mortgage, I assume the really low numbers I see are either not real, failing to account for certain infrequent items, for smaller families, or for very low cost areas.

Sorry for the drift, but have you done a case study?

regulator

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Re: Does talking to other people ever cause you to doubt your own finances?
« Reply #14 on: October 21, 2015, 09:50:44 AM »
I think that you can safely assume that your friends have no real idea where their money is going.  That is pretty typical in the US.

FWIW, I don't understand some of the low expense numbers I see posted here.  We have been gradually slashing expenses over the last couple of years and are getting close to the point where we have reached the maximum of milk for the minimum of moo.  That said, I would have a really hard time getting our expenses under 60k.  This is for a family of 4 (and 2 dogs) in a mid-cost area of the country with a $1200 mortgage payments (including escrows) and an exchange health insurance policy.  Aside from the mortgage, I assume the really low numbers I see are either not real, failing to account for certain infrequent items, for smaller families, or for very low cost areas.

Sorry for the drift, but have you done a case study?

Nope.  I am too private a person for that and know where we spend money already.  We have optimized what we can, continue chipping away at the edges, and a lot of the remaining costs are simply fixed and there is nothing we can do about them (can't change mortgage payment, outsized premiums for HDHP, minimized utilities, etc. - that stuff is north of 2k/month).  I would say our biggest area for improvement left is food.  So far I am working on that by stretching out the time between grocery store runs and making do with whatever is on hand.  Since cooking is a hobby and a joy, there is a limit to what we are willing to slash.

gt7152b

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Re: Does talking to other people ever cause you to doubt your own finances?
« Reply #15 on: October 21, 2015, 09:56:06 AM »
Most folks spend a ridiculous amount of money on things that bring them no enjoyment and they don't even notice how much it costs. Just a few dollars here, $20 there, $200 somewhere else. Mower won't start: chuck it and go buy a new, much fancier one at Home Depot. Shop at the most expensive grocery store even thought it's no better than Aldi. Upgrade to new car every 3 years and drive it all over creation. Really expensive airfare for last minute travel plans on a whim. It all adds up to massive expenses and nobody tracks it to see the real cost.

Jack

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Re: Does talking to other people ever cause you to doubt your own finances?
« Reply #16 on: October 21, 2015, 09:59:47 AM »
FWIW, I don't understand some of the low expense numbers I see posted here.  We have been gradually slashing expenses over the last couple of years and are getting close to the point where we have reached the maximum of milk for the minimum of moo.  That said, I would have a really hard time getting our expenses under 60k.  This is for a family of 4 (and 2 dogs) in a mid-cost area of the country with a $1200 mortgage payments (including escrows) and an exchange health insurance policy.  Aside from the mortgage, I assume the really low numbers I see are either not real, failing to account for certain infrequent items, for smaller families, or for very low cost areas.

And for me, I don't know how I would spend $60k a year. Right now we spend under $30K per year with 2 adults, 2 teenagers, and occassionally another teenager, she is away at university, and 2 cats. Plus we like to invite people over for supper, we go through alot of food. Mind you I am in Canada so I don't have to pay medical insurance, although I do through my employer $46.73 biweekly, and I likely pay more in taxes. We occasionally travel, although I travel for work so sometimes other family members tag along, but we do travel on our own dime most of the time for vacations. We live in an area where homes are inexpensive, but other costs such as groceries, oil, insurance are expensive.

I think the difference is housing. We spend $60-65k/year, but we have a house payment. If we didn't have a house payment, our spending would rival Pete himself.

My spending (for a family of two) over the last 12 months was $48k, but that included $12K of student loan repayment and $6K of mortgage. If I had no student loan debt and my house were paid off, my spending would have been almost exactly $30k/year.

regulator

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Re: Does talking to other people ever cause you to doubt your own finances?
« Reply #17 on: October 21, 2015, 10:04:19 AM »
FWIW, I don't understand some of the low expense numbers I see posted here.  We have been gradually slashing expenses over the last couple of years and are getting close to the point where we have reached the maximum of milk for the minimum of moo.  That said, I would have a really hard time getting our expenses under 60k.  This is for a family of 4 (and 2 dogs) in a mid-cost area of the country with a $1200 mortgage payments (including escrows) and an exchange health insurance policy.  Aside from the mortgage, I assume the really low numbers I see are either not real, failing to account for certain infrequent items, for smaller families, or for very low cost areas.

And for me, I don't know how I would spend $60k a year. Right now we spend under $30K per year with 2 adults, 2 teenagers, and occassionally another teenager, she is away at university, and 2 cats. Plus we like to invite people over for supper, we go through alot of food. Mind you I am in Canada so I don't have to pay medical insurance, although I do through my employer $46.73 biweekly, and I likely pay more in taxes. We occasionally travel, although I travel for work so sometimes other family members tag along, but we do travel on our own dime most of the time for vacations. We live in an area where homes are inexpensive, but other costs such as groceries, oil, insurance are expensive.

I think the difference is housing. We spend $60-65k/year, but we have a house payment. If we didn't have a house payment, our spending would rival Pete himself.

My spending (for a family of two) over the last 12 months was $48k, but that included $12K of student loan repayment and $6K of mortgage. If I had no student loan debt and my house were paid off, my spending would have been almost exactly $30k/year.

Out of curiosity, are you including things like depreciation on vehicles, periodic repair/replacement on house/appliances/etc., having to meet deductibles on health and other insurance policies some years, etc.?

KarefulKactus15

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Re: Does talking to other people ever cause you to doubt your own finances?
« Reply #18 on: October 21, 2015, 10:04:26 AM »
I don't even talk to people any more about finance. If someone ask me, ill tell them everything I know. But in general, its a waste of time.   So many debbie downers that can't comprehend how its possible. 

And also me and my wife are in the 25k yearly spending group. But we have no pets or kids and also live in a low cost of living area.
(our house was 68k)   so that greatly lowers our cost.


captainawesome

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Re: Does talking to other people ever cause you to doubt your own finances?
« Reply #19 on: October 21, 2015, 10:09:14 AM »
I doubt my spending and saving habits all the time.  No matter how much I optimize, cut, or save, I don't think it is nearly enough.  Mind you my undergrad degree was in Operations Research and Computer Analysis, so you would think I could look objectively at numbers and utilize formulas to calculate how much money I will need. It may be easy to evaluate someone else's finances, but with my own I second guess everything.  Even more so I start talking to other people.  While I scrutinize their methods, I wonder if they are doing something better. Most often, no. But that doesn't stop me from wondering and running my numbers.

okits

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Re: Does talking to other people ever cause you to doubt your own finances?
« Reply #20 on: October 21, 2015, 10:11:27 AM »
I don't ever doubt the math or our expenses (they are not impressively low, though. Yay, HCOLA!)  I doubt myself when others urge the need to cling to a job for security (the "what if, what if, what if?") If you've been meticulously tracking your expenses and have added a buffer for the unexpected, I think you're good.

People bleed money from places you wouldn't expect. I'm a little stubborn and resist buying things that aren't on sale.  With coupons and rebates sometimes I get things for as little as 1/3 the ridiculous regular price.  That adds up over the course of a year when it's groceries, household supplies, clothes, gifts, etc.  Some people just buy what they want when they want it, and pay the regular price.

As PP mentioned, eating out daily gets crazy expensive.

I know plenty of lovely people who view enjoyment-via-consumption as a main driver of their existence.  They cannot conceive of spending less money, voluntarily.  That kind of attitude makes life expensive.

You may have gotten the incredulous reactions because among that circle of people, saving $X is considered a lot/out of reach. I know people for whom having $5-10k on hand is unheard-of wealth. Then somewhere (article posted on the forum?) I recently read that New Yorkers with NW under $5MM are derided as "nickel millionaires".  People have preconceived notions of what is an achievable and reasonable amount to save.

I'm with So Close on a lot of this.  Unless I see real receptivity I don't delve very deeply into the details with people.  If they aren't willing to consider a different approach it just creates negative feelings towards you.

mtn

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Re: Does talking to other people ever cause you to doubt your own finances?
« Reply #21 on: October 21, 2015, 10:13:05 AM »
Nope. I know where my money is going. They do not know where my money isn't going, and they have no clue where their money is or is not going.


clarkfan1979

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Re: Does talking to other people ever cause you to doubt your own finances?
« Reply #22 on: October 21, 2015, 10:15:08 AM »
I don't even talk to people any more about finance. If someone ask me, ill tell them everything I know. But in general, its a waste of time.   So many debbie downers that can't comprehend how its possible. 

And also me and my wife are in the 25k yearly spending group. But we have no pets or kids and also live in a low cost of living area.
(our house was 68k)   so that greatly lowers our cost.

I wouldn't try to explain this to anyone at work. It's very much against the norm and not considered possible. I agree that there are many Debbie downers (even some on this forum), but obviously much less than at work. Having a paid off mortgage is huge. Your expenses will be really low. Now you can afford to work less and be in a lower tax bracket.

solon

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Re: Does talking to other people ever cause you to doubt your own finances?
« Reply #23 on: October 21, 2015, 10:16:34 AM »
FWIW, I don't understand some of the low expense numbers I see posted here.  We have been gradually slashing expenses over the last couple of years and are getting close to the point where we have reached the maximum of milk for the minimum of moo.  That said, I would have a really hard time getting our expenses under 60k.  This is for a family of 4 (and 2 dogs) in a mid-cost area of the country with a $1200 mortgage payments (including escrows) and an exchange health insurance policy.  Aside from the mortgage, I assume the really low numbers I see are either not real, failing to account for certain infrequent items, for smaller families, or for very low cost areas.

And for me, I don't know how I would spend $60k a year. Right now we spend under $30K per year with 2 adults, 2 teenagers, and occassionally another teenager, she is away at university, and 2 cats. Plus we like to invite people over for supper, we go through alot of food. Mind you I am in Canada so I don't have to pay medical insurance, although I do through my employer $46.73 biweekly, and I likely pay more in taxes. We occasionally travel, although I travel for work so sometimes other family members tag along, but we do travel on our own dime most of the time for vacations. We live in an area where homes are inexpensive, but other costs such as groceries, oil, insurance are expensive.

I think the difference is housing. We spend $60-65k/year, but we have a house payment. If we didn't have a house payment, our spending would rival Pete himself.

My spending (for a family of two) over the last 12 months was $48k, but that included $12K of student loan repayment and $6K of mortgage. If I had no student loan debt and my house were paid off, my spending would have been almost exactly $30k/year.

Out of curiosity, are you including things like depreciation on vehicles, periodic repair/replacement on house/appliances/etc., having to meet deductibles on health and other insurance policies some years, etc.?

I don't include vehicle depreciation, because our vehicles are too old to depreciate any further. I include all other expenses, including repairs, replacements, deductibles, etc.

Thegoblinchief

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Re: Does talking to other people ever cause you to doubt your own finances?
« Reply #24 on: October 21, 2015, 11:01:29 AM »
regulator - we're having a stupid expensive year compared to historical averages and I think we'll end up about $50K with $13K of that being student loan payments. We have a cheap house but an expensive underwater mortgage ($1100/month) and 3 kids.

Debt-free with all capital replacement averages taken into account our baseline is in the same $30K territory several others have posted.

Don't "doubt us" just accept that everyone has different value judgments and unique history of expenses.

regulator

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Re: Does talking to other people ever cause you to doubt your own finances?
« Reply #25 on: October 21, 2015, 11:33:40 AM »
regulator - we're having a stupid expensive year compared to historical averages and I think we'll end up about $50K with $13K of that being student loan payments. We have a cheap house but an expensive underwater mortgage ($1100/month) and 3 kids.

Debt-free with all capital replacement averages taken into account our baseline is in the same $30K territory several others have posted.

Don't "doubt us" just accept that everyone has different value judgments and unique history of expenses.

Well, good for all of you who can "limbo lower."  It does not seem to be reality for my family, hence my skepticism.  I guess a lot of this also depends on lifestyle/standard of living choices as well.

backyardfeast

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Re: Does talking to other people ever cause you to doubt your own finances?
« Reply #26 on: October 21, 2015, 11:34:15 AM »
I'm constantly amazed at how much other people must spend on life.  I wander around stores still reeling from all the things that we DON'T buy, and marvel at how others who do buy these things manage.  And we are NOT mustachian by any of this forum's measures! :)

A few weeks ago, we decided we would go ahead with a splurgey weekend.  We met close friends in another city to celebrate a birthday.  We stayed with them, so no hotel expense, they took us out to dinner the first night, and we took them out the second night.  We went to the liquor store and splurged on lots of fancy beer (some of which we're still drinking!) for ourselves, and bought some booze to share with them over the weekend.  We also ate out (just the 2 of us) 2 breakfasts, one of which was just a cheap diner.  We made the conscious decision to not count the money, but just to enjoy ourselves.  We had an awesome time, but we did no other shopping; the point was to visit with them.

It took me a week or two to get my courage up to see how much we had spent.  It was almost $1000!!!  I have no regrets, but it was a real eye-opener in how much eating out and drinking can add up to.  If a couple did that regularly, even a couple of times a month, even if they remained low-consuming in other ways (which of course isn't usually the case--the friends we were meeting talked about how they would be taking a week off each month to do this kind of trip, and they were doing lots of other shopping), it would add up to 10s of thousands pretty quickly. 

And they (and many of our other friends) would be amazed at how little we spend on food and eating out, while I see it as a leak I can't quite plug, even at $150-200/mo.  That would be one meal out if you added drinks to a nice restaurant meal!

HPstache

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Re: Does talking to other people ever cause you to doubt your own finances?
« Reply #27 on: October 21, 2015, 11:36:05 AM »
I account for every dollar, every month, so there is no doubt in my mind.

ooeei

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Re: Does talking to other people ever cause you to doubt your own finances?
« Reply #28 on: October 21, 2015, 12:03:52 PM »
Eating at retaurants can get REALLY expensive.  In Austin/Houston it's easy to spend $15 on lunch somewhere for a good but not fancy place.  Assuming a homemade lunch costs $3 to make, you're looking at $12 extra cost a day.  $12/day x 300 days a year (assuming they actually eat in 65 days) is $3600.  If you get a $20 lunch instead it's $5100 a year.

At my last and current job there are plenty of people who eat out for lunch every day, and I know more than a few who eat breakfast (or get a fancy coffee) or dinner as well most days. I had an old roommate who loved ordering delivery pizza for himself, but didn't like chain pizza places so went with a fancy gourmet shop.  Easy $25 for dinner including tip and delivery fee.

All of that is for one person.  If a married couple each eats lunch out they could easily clear $10k in just lunch for a year.  Add in some beer or wine with dinner or a kid or two and eating out can demolish a budget.

HazelStone

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Re: Does talking to other people ever cause you to doubt your own finances?
« Reply #29 on: October 21, 2015, 12:16:26 PM »
Taking care of dogs can add up. Especially older dogs. What my MIL spent on her two dogs in the last year of their life was enough to buy a decent used car. She's called it quits on dogs now. (And these were a low-maintenance breed. It was just a matter of age).

Metta

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Re: Does talking to other people ever cause you to doubt your own finances?
« Reply #30 on: October 21, 2015, 12:37:52 PM »
We have about $1.1 million at this point (not including the house or pensions or other stuff) so I could leave my job now if I wanted to. (We are waiting in order to allow me to qualify for my company's retiree health care plan and the retiree travel benefits, which includes a lot of free airfare.)

My friends at work know that I intend to officially retire in about a year. Since, most of them hate their jobs right now, they want to know how we are able to afford to retire early, which is why the topic comes up often.  We get that question along with questions on how we managed to pay off our mortgage so quickly (11 years).

I don't actually think we are remarkably frugal. We live pretty luxurious lives. So I'm hard-pressed to see how other people (who often make more than we do) are unable to save money. We understand that children are expensive, so I give something of a pass to anyone with children. But dogs?

I suppose that eating out can play merry hell with a budget. We eat out rarely so that is clearly a savings. On the other hand, we're foodies and wine snobs, so we're not exactly eating cheaply. I expect to bring our food budget way down once I have more time to shop intelligently and grow more of our food. But we are still saving 50%-60% of our take-home pay so we're ok, if not perfectly optimized.

That's us. I'm pretty sure my co-workers make more than I do (the comment about needing at least $100,000 came from a single person, so I know she must make more than me). But looking at them, I just don't see where their money goes. Perhaps they have very large homes with fancy furniture.

Jakejake

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Re: Does talking to other people ever cause you to doubt your own finances?
« Reply #31 on: October 21, 2015, 12:57:22 PM »
Along with other things mentioned, I bet new car payments are a big part of their expenses. If we added two leased cars to our budget, it would change our expenses dramatically.

Explaining living frugally and saving for retirement - even when asked - is a whole lot like losing weight. Coworkers want to lose weight, they see that about 5 years ago I dropped about 50 pounds and have kept it off. When they ask for details I can tell them exactly what I used for restrictions (don't count calories, don't eat over x number of carbs 6 days a week, etc). But then the coworker will reply with "I can't give up pasta every night; I'm Italian." I don't know how to respond; I can't say "That's fine and it's your choice, just be aware that you have prioritized a pile of noodles over your health, I don't know how to help you."

Obviously low carb isn't the only weight loss option, but the point is they have a reason why anything that requires a change in their habits won't work for them because that's just not what they do.

etotheix

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Re: Does talking to other people ever cause you to doubt your own finances?
« Reply #32 on: October 21, 2015, 12:57:51 PM »
I think that you can safely assume that your friends have no real idea where their money is going.  That is pretty typical in the US.

FWIW, I don't understand some of the low expense numbers I see posted here.  We have been gradually slashing expenses over the last couple of years and are getting close to the point where we have reached the maximum of milk for the minimum of moo.  That said, I would have a really hard time getting our expenses under 60k.  This is for a family of 4 (and 2 dogs) in a mid-cost area of the country with a $1200 mortgage payments (including escrows) and an exchange health insurance policy.  Aside from the mortgage, I assume the really low numbers I see are either not real, failing to account for certain infrequent items, for smaller families, or for very low cost areas.

Sorry for the drift, but have you done a case study?

Nope.  I am too private a person for that and know where we spend money already.  We have optimized what we can, continue chipping away at the edges, and a lot of the remaining costs are simply fixed and there is nothing we can do about them (can't change mortgage payment, outsized premiums for HDHP, minimized utilities, etc. - that stuff is north of 2k/month).  I would say our biggest area for improvement left is food.  So far I am working on that by stretching out the time between grocery store runs and making do with whatever is on hand.  Since cooking is a hobby and a joy, there is a limit to what we are willing to slash.

I'm with you.  At our current rate we would spend about $60k (DINK + dog) a year.  $28k is just mortgage/PMI/Property Tax/Homeowners.  Even when our cars are paid off we'll be ~$50k.

And I did do a case study (or at least a Journal):
http://forum.mrmoneymustache.com/journals/just-another-journal/msg818166/#msg818166

jms493

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Re: Does talking to other people ever cause you to doubt your own finances?
« Reply #33 on: October 21, 2015, 02:19:18 PM »
Yeah we live in a suburb of NYC...we would need 50K a year for expenses.  That being if we kicked the kids out and had no debt at all including no mortgage.

My Property Taxes alone are 15K and insurance is 1K...right off the bat we are at 16K.  Granted once the kids are gone we will move to a lower COL area.

KarefulKactus15

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Re: Does talking to other people ever cause you to doubt your own finances?
« Reply #34 on: October 21, 2015, 02:30:04 PM »
Those property taxes are insane! I just got my bill for the year, its $606.20   which seemed high to me till I saw yours lol.

jms493

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Re: Does talking to other people ever cause you to doubt your own finances?
« Reply #35 on: October 21, 2015, 02:43:37 PM »
Yes they are but my house is also worth 450K, the schooling is top notch, and we live close to the biggest city in the world.  My wife and I have never been unemployed in-fact we turn job offers down.  While I HATE that I have to pay these taxes...there is some benefit to them.  If you think mine are high...check out some of the taxes in LI.  20-30K a year.

Genevieve

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Re: Does talking to other people ever cause you to doubt your own finances?
« Reply #36 on: October 21, 2015, 03:03:54 PM »
I try not to say too much to others about my finances unless they've made some sign that we'd be somewhat close in agreement. Nothing good seems to come of talking to  people who are pretty far off of mine in terms of spending, whether too high or too low.

For what it's worth, we spend about ~4500 a month including a bit of saving. That's the number we want to use to consider ourselves FI since we'll have big expenses in FI too. We have about $800 to cut by renting a cheaper place and getting our grocery bill down. Right now, we feel like that will be our happy point, but we'll see. This is for two people.

We've worked to get to this point too, so I can imagine someone who has no idea about money would really spend much more. Then they'd probably mentally inflate it a bunch because they don't really know what they're spending.

okits

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Re: Does talking to other people ever cause you to doubt your own finances?
« Reply #37 on: October 21, 2015, 03:10:25 PM »
We have about $1.1 million at this point (not including the house or pensions or other stuff) so I could leave my job now if I wanted to. (We are waiting in order to allow me to qualify for my company's retiree health care plan and the retiree travel benefits, which includes a lot of free airfare.)

My friends at work know that I intend to officially retire in about a year. Since, most of them hate their jobs right now, they want to know how we are able to afford to retire early, which is why the topic comes up often.  We get that question along with questions on how we managed to pay off our mortgage so quickly (11 years).

I don't actually think we are remarkably frugal. We live pretty luxurious lives. So I'm hard-pressed to see how other people (who often make more than we do) are unable to save money. We understand that children are expensive, so I give something of a pass to anyone with children. But dogs?

I suppose that eating out can play merry hell with a budget. We eat out rarely so that is clearly a savings. On the other hand, we're foodies and wine snobs, so we're not exactly eating cheaply. I expect to bring our food budget way down once I have more time to shop intelligently and grow more of our food. But we are still saving 50%-60% of our take-home pay so we're ok, if not perfectly optimized.

That's us. I'm pretty sure my co-workers make more than I do (the comment about needing at least $100,000 came from a single person, so I know she must make more than me). But looking at them, I just don't see where their money goes. Perhaps they have very large homes with fancy furniture.

That clarification helps. So the next time someone questions your budget just say, "we track all expenses and have made some choices, $50k is accurate and doable."  If co-workers persist that it's impossible, offer to do a detailed review of their budgets with them (the "financial colonoscopy").  I expect most will drop the subject by that point as they don't want ER if it involves scrutinizing their own behaviour and making trade offs different to what they've already chosen.  But one or two may surprise you with their willingness to prioritize ER.

jakejake, congrats on losing it and keeping it off!  As someone who has lost it and not kept it off, I know how much effort and discipline it must be.  Tough choices, and you have to really, really want it.

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Re: Does talking to other people ever cause you to doubt your own finances?
« Reply #38 on: October 21, 2015, 05:15:37 PM »
We have optimized what we can, continue chipping away at the edges, and a lot of the remaining costs are simply fixed and there is nothing we can do about them (can't change mortgage payment, outsized premiums for HDHP, minimized utilities, etc. - that stuff is north of 2k/month).  I would say our biggest area for improvement left is food.  So far I am working on that by stretching out the time between grocery store runs and making do with whatever is on hand.  Since cooking is a hobby and a joy, there is a limit to what we are willing to slash.

I'm with you.  At our current rate we would spend about $60k (DINK + dog) a year.  $28k is just mortgage/PMI/Property Tax/Homeowners.  Even when our cars are paid off we'll be ~$50k.


Our PITI is around 21K. We're SINKs in Silicon Valley (HCOL). We also have significant uninsured medical expenses that take a big chunk. 

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Re: Does talking to other people ever cause you to doubt your own finances?
« Reply #39 on: October 21, 2015, 07:07:05 PM »
Questioning yourself isn't a bad thing. It can lead to reviewing your numbers, and they won't lie.  The results can only be positive:  Either you'll find places where you can improve, or you'll walk away more confident that you're already where you need to be. 

But once you go back to your numbers and feel secure about your choices, don't continue to dwell on other people's comments, opinions, or thoughts. 

soupcxan

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Re: Does talking to other people ever cause you to doubt your own finances?
« Reply #40 on: October 21, 2015, 07:32:41 PM »
FWIW, I don't understand some of the low expense numbers I see posted here.  We have been gradually slashing expenses over the last couple of years and are getting close to the point where we have reached the maximum of milk for the minimum of moo.  That said, I would have a really hard time getting our expenses under 60k.  This is for a family of 4 (and 2 dogs) in a mid-cost area of the country with a $1200 mortgage payments (including escrows) and an exchange health insurance policy.  Aside from the mortgage, I assume the really low numbers I see are either not real, failing to account for certain infrequent items, for smaller families, or for very low cost areas.

I agree with you. I think a lot of people ignore stuff like health/dental insurance ($5k for us next year) or house maintenance (which can easily be +$5k a pop for things like a new roof or AC). Our mortgage PITI is $24k/year. Could we live somewhere cheaper? Yes, if we each wanted to commute 2 hours a day. Not everyone has daycare but we will be paying $16k for it next year.
« Last Edit: October 21, 2015, 07:54:31 PM by soupcxan »

Jack

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Re: Does talking to other people ever cause you to doubt your own finances?
« Reply #41 on: October 22, 2015, 07:59:47 PM »
Yes they are but my house is also worth 450K, the schooling is top notch, and we live close to the biggest city in the world.  My wife and I have never been unemployed in-fact we turn job offers down.  While I HATE that I have to pay these taxes...there is some benefit to them.  If you think mine are high...check out some of the taxes in LI.  20-30K a year.

The biggest city in the world is Tokyo, not New York.

regulator

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Re: Does talking to other people ever cause you to doubt your own finances?
« Reply #42 on: October 22, 2015, 08:45:40 PM »
Yes they are but my house is also worth 450K, the schooling is top notch, and we live close to the biggest city in the world.  My wife and I have never been unemployed in-fact we turn job offers down.  While I HATE that I have to pay these taxes...there is some benefit to them.  If you think mine are high...check out some of the taxes in LI.  20-30K a year.

The biggest city in the world is Tokyo, not New York.

Fair enough, but if you are in the field of finance the only place in the world that even comes close to the NYC labor market is London.

Zikoris

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Re: Does talking to other people ever cause you to doubt your own finances?
« Reply #43 on: October 22, 2015, 11:23:20 PM »
We spend a very small amount - around 18K/year, including everything for two people except our vacations. Sometimes we get the "HOW???" thing in real life, but I know our spending so inside-out that it's easy for me to give a rough breakdown of the $1500/month we spend (776 rent, 230 food, 50 cell phones, 30 internet, the rest on entertainment, ballet lessons, clothes/shoes, video games, and random things). I'm always amazed when people have no idea what they spend.

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Re: Does talking to other people ever cause you to doubt your own finances?
« Reply #44 on: October 23, 2015, 12:11:36 AM »
Me and my husband have kept cash-flow accounts for more than twenty years, so I trust our numbers. But I don't really understand where their money goes. They were so firmly convinced that living on $50,000 a year was nearly impossible that I temporarily lost my confidence. Has this ever happened to you?

Nope. Just like I don't suddenly doubt Science and logic when someone talks to me about Astrology.

Squirrel away

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Re: Does talking to other people ever cause you to doubt your own finances?
« Reply #45 on: October 23, 2015, 03:20:58 AM »
This discussion just made me double check what £25,000 x 25 was.:P I wasn't always so frugal but now I find it strange what some people spend their money on. We live in a HCOL area but we chose not to have kids and we don't drive but we do have pets.

I think some people must spend money on home improvements or holidays and days out or they have expensive phone or TV packages.

We don't have property taxes like the US and we have free healthcare here in the UK though.

justajane

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Re: Does talking to other people ever cause you to doubt your own finances?
« Reply #46 on: October 23, 2015, 06:06:44 AM »
Most folks spend a ridiculous amount of money on things that bring them no enjoyment and they don't even notice how much it costs. Just a few dollars here, $20 there, $200 somewhere else. Mower won't start: chuck it and go buy a new, much fancier one at Home Depot. Shop at the most expensive grocery store even thought it's no better than Aldi. Upgrade to new car every 3 years and drive it all over creation. Really expensive airfare for last minute travel plans on a whim. It all adds up to massive expenses and nobody tracks it to see the real cost.

Bingo. I'm always aware of what things cost, but I've noticed with some of our relatives that they don't ever think through the cost to value ratio. If they want it, they buy it. It doesn't matter that it costs $20 and they could get it for $15 online. Or if they waited a few months, the cost would drop to $10. Or that they could buy it used for $5. Not to mention the thought process, "Huh, I like this, but really, am I going to want it in two weeks or two years? Is it really going to add to my happiness?" If they want it, they buy it.

I realized a few years ago that some people don't even pay attention to prices on menus. I can't fathom that. Every time I go to dinner, I calculate the cost into my decision about what I order. (An aside, why the fuck don't they list the price of non-alcoholic beverages sometimes? As if cost doesn't factor at all into someone's decision).

We readily encounter this also in terms of the kids. Sometimes I'll say that we won't do X event because it costs $25 a ticket. It's like it has never occurred to people that you can not do something because of cost. Or they have just become so used to paying that kind of money for entertainment that they forget it's real money. Maybe credit cards are to blame for that. A friend of mine who complains about the fact that she only has $50 in her checking account will still ask me to go out to a movie. I -- the one with investment accounts -- is usually the one suggesting to do something cheaper.

Jags4186

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Re: Does talking to other people ever cause you to doubt your own finances?
« Reply #47 on: October 23, 2015, 07:52:23 AM »
I would really really love to see the balance sheets of people who live fabulous lives on Facebook.

I can only come to two conclusions--either they make a lot more money than me or they save a very paltry amount/are in debt.  That can be hard to determine.

zephyr911

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Re: Does talking to other people ever cause you to doubt your own finances?
« Reply #48 on: October 23, 2015, 08:47:51 AM »
Every time I talk to anyone else about finances, I become more convinced that MMM is the best thing that ever happened to me.

People who think it's impossible to live on less than 50k are idiots. Easy fact check: per the Census Bureau, the median family in the US earned $51k and change last year, and miraculously didn't die. That means half the people in the richest country on Earth live on less; if you factor in a paid-for house in your retirement scenario, the benchmark is probably more like two-thirds. Every day, they walk past people who are doing it. Nothing can explain the belief that it's impossible, other than willfull ignorance.

Stupid stupid stupid stupid stupid.

zephyr911

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Re: Does talking to other people ever cause you to doubt your own finances?
« Reply #49 on: October 23, 2015, 08:49:35 AM »
I would really really love to see the balance sheets of people who live fabulous lives on Facebook.

I can only come to two conclusions--either they make a lot more money than me or they save a very paltry amount/are in debt.  That can be hard to determine.
Everyone I know who brags about fancy shit online is generally running razor-thin margins IRL.