To be honest, at times it kind of makes me feel dumb and sometimes even like a failure at what I do.
Is it really just all fueled by debt?
I think much of it is - or at least paid for by "leverage".
What I mean is, for many of these people, they use credit to leverage their future cash flow into current instant gratification. IF they can maintain the cash flow, they will be OK for the most part. It is when the cash flow ends OR they let their instant greed/need get too far out of control OR both. Thus is why so many are one paycheck away from crises, or one unexpected expense away from crises.
But, I know how you feel. I almost never spent money I didn't have yet (or even money I had), and have watched peers take more trips, buy grander houses or vacation homes, and wear nicer clothes. But I retired last year (@ 55 yo - a bit late to the MMM or FIRE game, but I caught up quickly). Had I been more aware years ago, I could have retired earlier.
I regularly have the same thoughts as you and haven't really comes to terms with what I really think is going on. It's the vacations that really get me that I see on Facebook. I live in a pretty modest neighborhood - houses are between 150K and top out at 400K. The 400K homes are huge ass places that in nicer areas would be closer to a million. These are the families that attend school with my kids. Over the break, I noticed two families who took skiing vacations to Vail. What does something like that run?
I regularly have the same thoughts as you and haven't really comes to terms with what I really think is going on. It's the vacations that really get me that I see on Facebook. I live in a pretty modest neighborhood - houses are between 150K and top out at 400K. The 400K homes are huge ass places that in nicer areas would be closer to a million. These are the families that attend school with my kids. Over the break, I noticed two families who took skiing vacations to Vail. What does something like that run?
The other one that throws me are dinners out that people ubiquitously post on FB. We go out to eat fairly regularly, but it's usually to cheap places. I often see "girl's night outs" or "date nights" that clearly are at expensive restaurants that I just would never pay for. I really don't think we can afford them AND reach all of our saving's goals AND maintain our house AND feel like we can breath financially.
I think many of these people might not be in debt, but, like someone said above, if the gravy train of lucrative employment ends, they are royally screwed. I'd like to think that my husband and I have positioned ourselves differently. But I try not to judge and just try to avoid the feelings of jealousy. That's my biggest goal: to be happy with less, but not in a holier-than-thou way.
I think there's a lot more money floating around in the world than most people have any concept of. A lot of small businesses/consultants/etc. are doing ludicrously well, but don't really talk about, because, well they got a good thing going. In addition there's a huge amount of inherited wealth out there supplementing people's incomes in various ways. These people don't talk about it either, because there's a stigma against inherited wealth in most circles.
But I also think that the people who have more money (and that people don't know why they have money) is what drives people going into debt. People see their neighbor who's "just like them" get a pool, so they figure they must be able to afford it too. What they don't realize is that that neighbor is getting a "gift" of 56k a year from their parents. This cycle then self-perpetuates because people now see both of those people with a pool. So maybe by now it is primarily fueled by debt?
Cars are my big confusion. I live in a very modest neighborhood (gentrifying as we speak) and one of the houses on the block has peeling paint and a shedding roof. It also has a brand new SUV in the driveway. My unemployed neighbor has a boat, a giant new truck to pull said boat, a new smaller truck and a new sedan (his girlfriend's, who actually has a job). Though maybe he's a lesson in FI!
Before we all pat ourselves on the back, consider that the US has over 10m millionaire households: that's people with $1m in assets excluding their primary residence. Wealth is not rare.
To be honest, at times it kind of makes me feel dumb and sometimes even like a failure at what I do.
Is it really just all fueled by debt?
Another thing is that for people with high incomes, even if they aren't in consumer debt, they may just be living right at the line.
My husband and I often say we can't afford a vacation. But we have hundreds of thousands in an investment account. Of course we COULD afford it.
So people who have all the ANDs may be able to do it without debt; but I doubt many of them do it with significant cushion either. The ones who do are TRULY wealthy. I don't think too much of that actually exists in my neighborhood.
I regularly have the same thoughts as you and haven't really comes to terms with what I really think is going on. It's the vacations that really get me that I see on Facebook. I live in a pretty modest neighborhood - houses are between 150K and top out at 400K. The 400K homes are huge ass places that in nicer areas would be closer to a million. These are the families that attend school with my kids. Over the break, I noticed two families who took skiing vacations to Vail. What does something like that run?
That one riles me up too. Have a couple of friends who post almost every other week that they've gone somewhere new... then at the end of the year "brand new gigantic ass 4WD" which would have cost something like $50,000.
New friend of mine is planning 3 overseas holidays this year. And since Australia is a world a away from most places and with our currency falling it's going to cost a bomb.
Just don't understand where the money comes from...
I guess it's just hard to figure out other people's financial situation. At the end of the day, I only know my own - what I can afford and what I can't. Right now, with credit card hacking and $6k a year set aside for vacations, we can afford multiple exotic vacations throughout the year while still saving 50+% of our income. I post it all on FB - but do feel a little guilty and wonder if it promotes an unrealistic lifestyle expectation. I continue doing it because it is my personal scrapbook and my friends and family tell me they like seeing where we go next.Don't feel guilty! I love seeing pictures of my friends and family enjoying themselves, and I'm sure your friends and family feel the same.
Like most have said....
It isn't all debt, I take a few decent vacations(Maui, Vegas, FL, Dubai), and own a fancy pants sports car and do some track events. All very outwardly 'rich' activities.
Though we live in a small townhouse (by choice) and have a very high income of around 250k. (Mortgage being under 70k)
We still end up saving 50% or more yearly and are on target for a total working career of 10-15 years before FIRE in our mid 30s. So we could sell the car, cut the travel and retire a year or two earlier, but it seems like a small price to pay to keep our 'standard' of living.
Most of my buddies are scraping by unfortunately, and cannot fathom the ability to save large amounts AND splurge on a few fun activities. So I avoid the finance topic with them. The OP, somewhat reminds me of a some things I have heard my friends say.
Like most have said....
It isn't all debt, I take a few decent vacations(Maui, Vegas, FL, Dubai), and own a fancy pants sports car and do some track events. All very outwardly 'rich' activities.
Though we live in a small townhouse (by choice) and have a very high income of around 250k. (Mortgage being under 70k)
We still end up saving 50% or more yearly and are on target for a total working career of 10-15 years before FIRE in our mid 30s. So we could sell the car, cut the travel and retire a year or two earlier, but it seems like a small price to pay to keep our 'standard' of living.
Most of my buddies are scraping by unfortunately, and cannot fathom the ability to save large amounts AND splurge on a few fun activities. So I avoid the finance topic with them. The OP, somewhat reminds me of a some things I have heard my friends say.
The $250k income make a HUGE difference. I just can't fathom that everyone I see with signs of wealth are making $250k, but maybe there are more big earners out there than I realize. To my way of thinking, those are rare jobs. Maybe I'm way out of touch with reality (more than I'm aware of, that is).
Again, comes down to cognitive dissonance of hearing about the average or median incomes which are nowhere near $250k, basing my mental calculations on that. Based on incomes of $250k, nothing would be confusing at all. But just doesn't seem like there could be that many jobs paying that much out there.
You ride by and wonder how a single income family can afford an $800k house, two new cars, vacations and not be drowning in debt. I made that same assumption initially as well. Truth is they're doing just fine. Could they already be retired if they lived more frugally? Sure. Could they retire right now if they sold their house and moved to a LCOL area? Absolutely. But the point is they're not financially inept, just lucky and smart in equal measure.
You ride by and wonder how a single income family can afford an $800k house, two new cars, vacations and not be drowning in debt. I made that same assumption initially as well. Truth is they're doing just fine. Could they already be retired if they lived more frugally? Sure. Could they retire right now if they sold their house and moved to a LCOL area? Absolutely. But the point is they're not financially inept, just lucky and smart in equal measure.
I've always wondered how many people absolutely cleaned up on housing in the 2000's. Had you bought a house in the 90's, you probably could have sold it in the 2000's for a 2-300% profit. Then you move into a bigger house and maybe repeat the process. Now you're suddenly living in a upper six figures or even million dollar house.
It also makes me wonder what will happen in another 20-30 years when those people start dying. The next generation will never be able to afford those houses. Are we due for another massive crash at some point?
You ride by and wonder how a single income family can afford an $800k house, two new cars, vacations and not be drowning in debt. I made that same assumption initially as well. Truth is they're doing just fine. Could they already be retired if they lived more frugally? Sure. Could they retire right now if they sold their house and moved to a LCOL area? Absolutely. But the point is they're not financially inept, just lucky and smart in equal measure.
I've always wondered how many people absolutely cleaned up on housing in the 2000's. Had you bought a house in the 90's, you probably could have sold it in the 2000's for a 2-300% profit. Then you move into a bigger house and maybe repeat the process. Now you're suddenly living in a upper six figures or even million dollar house.
It also makes me wonder what will happen in another 20-30 years when those people start dying. The next generation will never be able to afford those houses. Are we due for another massive crash at some point?
Housing over the entire US, read not specific cities/towns, generally raises at inflation rates. The next generation will be able to afford it just fine.
It also makes me wonder what will happen in another 20-30 years when those people start dying. The next generation will never be able to afford those houses. Are we due for another massive crash at some point?
If you don't max a 401k/IRA, that's almost $2,000 a month per person. That will fund a lot of vacations/car payments.I regularly have the same thoughts as you and haven't really comes to terms with what I really think is going on. It's the vacations that really get me that I see on Facebook. I live in a pretty modest neighborhood - houses are between 150K and top out at 400K. The 400K homes are huge ass places that in nicer areas would be closer to a million. These are the families that attend school with my kids. Over the break, I noticed two families who took skiing vacations to Vail. What does something like that run?
That one riles me up too. Have a couple of friends who post almost every other week that they've gone somewhere new... then at the end of the year "brand new gigantic ass 4WD" which would have cost something like $50,000.
New friend of mine is planning 3 overseas holidays this year. And since Australia is a world a away from most places and with our currency falling it's going to cost a bomb.
Just don't understand where the money comes from...
...
It's mostly just perspective. In some ways, I wish we could blow more money. I know my husband would likely be more free with his money, but he's married to me so....
A lot of good discussion here, I wonder about where everyone is getting all their money from as well. I know the best approach is to practice stoicism but it can be hard sometimes.
If you don't max a 401k/IRA, that's almost $2,000 a month per person. That will fund a lot of vacations/car payments.I regularly have the same thoughts as you and haven't really comes to terms with what I really think is going on. It's the vacations that really get me that I see on Facebook. I live in a pretty modest neighborhood - houses are between 150K and top out at 400K. The 400K homes are huge ass places that in nicer areas would be closer to a million. These are the families that attend school with my kids. Over the break, I noticed two families who took skiing vacations to Vail. What does something like that run?
That one riles me up too. Have a couple of friends who post almost every other week that they've gone somewhere new... then at the end of the year "brand new gigantic ass 4WD" which would have cost something like $50,000.
New friend of mine is planning 3 overseas holidays this year. And since Australia is a world a away from most places and with our currency falling it's going to cost a bomb.
Just don't understand where the money comes from...
It's incredibly entitled to think that maxing a 401k is accessible to most people.
The median household, not individual, household income is $50k. You think all the workers in a household with that income have $18k to put aside? What about the 50% of households with lower incomes. The savings rate would be extremely mustachian; while some principals are good, it's pretty damn extremist for most.
I know a shocking number of people that don't max 401k. Our employer matches 50% up to federal max, free money!!! And people are leaving it on the table for cars. :(
Some people fuel it with debt, but the most common I've seen is just a lack of any saving.
I think there are a lot of people who do things like that; but since they trade off things other people don't think about, all other people see are the big things. And since everyone has different "big things" eventually all the trade offs seem to disappear. (The Smiths have a big house, the Jones have fancy cars, the Browns always go out to eat- so people then think they should get ALL of that).
Many are over their heads in debt, and a whole lot are simply cash flowing things living right at the edge of what their incomes can pay for. They have little if any safety net, and very little net worth. Creditors own most of the shiny things they enjoy daily.
I see this daily with employees (I know how much they make). My first home was $25,000 and when the kids were young a nice vacation was to rent a small cabin on a lake for $700 a week. I see these young folks driving brand new cars, some have had new homes built, they frequently go to expensive restaurants, and take fancy western skiing and Caribbean beach vacations.
A few missed paychecks and they would be in trouble.
It's incredibly entitled to think that maxing a 401k is accessible to most people.agreed
The median household in the US, not individual, the household income is $50k. You think all the workers in a household with that income have $18k to put aside? What about the 50% of households with lower incomes? Do you really expect someone making $25k a year and supporting a family of 4 to max a 401k?
Being able to set aside $18k a year is a massive privelage!
Many are over their heads in debt, and a whole lot are simply cash flowing things living right at the edge of what their incomes can pay for. They have little if any safety net, and very little net worth. Creditors own most of the shiny things they enjoy daily.
I see this daily with employees (I know how much they make). My first home was $25,000 and when the kids were young a nice vacation was to rent a small cabin on a lake for $700 a week. I see these young folks driving brand new cars, some have had new homes built, they frequently go to expensive restaurants, and take fancy western skiing and Caribbean beach vacations.
A few missed paychecks and they would be in trouble.
And it's all about perspective, as you implied. I can't even imagine spending $700 for a week's accommodations. Not of my own money,anyway, though I've had to on business trips.
That income is going to depend on what you do and where you live.Like most have said....
It isn't all debt, I take a few decent vacations(Maui, Vegas, FL, Dubai), and own a fancy pants sports car and do some track events. All very outwardly 'rich' activities.
Though we live in a small townhouse (by choice) and have a very high income of around 250k. (Mortgage being under 70k)
We still end up saving 50% or more yearly and are on target for a total working career of 10-15 years before FIRE in our mid 30s. So we could sell the car, cut the travel and retire a year or two earlier, but it seems like a small price to pay to keep our 'standard' of living.
Most of my buddies are scraping by unfortunately, and cannot fathom the ability to save large amounts AND splurge on a few fun activities. So I avoid the finance topic with them. The OP, somewhat reminds me of a some things I have heard my friends say.
The $250k income make a HUGE difference. I just can't fathom that everyone I see with signs of wealth are making $250k, but maybe there are more big earners out there than I realize. To my way of thinking, those are rare jobs. Maybe I'm way out of touch with reality (more than I'm aware of, that is).
Again, comes down to cognitive dissonance of hearing about the average or median incomes which are nowhere near $250k, basing my mental calculations on that. Based on incomes of $250k, nothing would be confusing at all. But just doesn't seem like there could be that many jobs paying that much out there.
That income is going to depend on what you do and where you live.Like most have said....
It isn't all debt, I take a few decent vacations(Maui, Vegas, FL, Dubai), and own a fancy pants sports car and do some track events. All very outwardly 'rich' activities.
Though we live in a small townhouse (by choice) and have a very high income of around 250k. (Mortgage being under 70k)
We still end up saving 50% or more yearly and are on target for a total working career of 10-15 years before FIRE in our mid 30s. So we could sell the car, cut the travel and retire a year or two earlier, but it seems like a small price to pay to keep our 'standard' of living.
Most of my buddies are scraping by unfortunately, and cannot fathom the ability to save large amounts AND splurge on a few fun activities. So I avoid the finance topic with them. The OP, somewhat reminds me of a some things I have heard my friends say.
The $250k income make a HUGE difference. I just can't fathom that everyone I see with signs of wealth are making $250k, but maybe there are more big earners out there than I realize. To my way of thinking, those are rare jobs. Maybe I'm way out of touch with reality (more than I'm aware of, that is).
Again, comes down to cognitive dissonance of hearing about the average or median incomes which are nowhere near $250k, basing my mental calculations on that. Based on incomes of $250k, nothing would be confusing at all. But just doesn't seem like there could be that many jobs paying that much out there.
I'm an engineer in my 40's, and a bit underpaid. My husband has a PhD in engineering. Our total household income is about that. We live in CA, but not the Bay area.
In my town, that would not be uncommon - an engineer and a pharmacist. A PA and a contractor. A nurse and a scientist. A partner in an engineering firm and an accountant.
It would be equivalent, say, to my relatives who were both teachers in my home town. By the time they retired, they were making $75k a piece, but the cost of living was very low.
When you also consider that a vast majority of those at the bottom of that graph effectively live in a different society than nearly everyone on this board (let's say the poorest 20% of households, 21k), those percentages become even higher. Keep in mind this is probably the case - most of us on this forum, with the exception of some shopping, probably never interact with people making the bottom 20% of income much in our daily lives.
Page 39 of this PDF (http://www.census.gov/content/dam/Census/library/publications/2015/demo/p60-252.pdf) indicates that in 2013:
- 5% of households made 200k+
- 10% made 150k+
- 20% made 112k+
- 40% made 68k+
In other words, one in five households earns a fair bit over 100k a year. Yes, probably not location adjusted, but still insightful for this question.
When you also consider that a vast majority of those at the bottom of that graph effectively live in a different society than nearly everyone on this board (let's say the poorest 20% of households, 21k), those percentages become even higher. Keep in mind this is probably the case - most of us on this forum, with the exception of some shopping, probably never interact with people making the bottom 20% of income much in our daily lives.
It's incredibly entitled to think that maxing a 401k is accessible to most people.Unless this family of four earning $25k/yr is buying new cars every 2-3 years and is taking $5000 vacations, I'm not sure how that's relevant.
The median household in the US, not individual, the household income is $50k. You think all the workers in a household with that income have $18k to put aside? What about the 50% of households with lower incomes? Do you really expect someone making $25k a year and supporting a family of 4 to max a 401k?
Being able to set aside $18k a year is a massive privelage!
It's incredibly entitled to think that maxing a 401k is accessible to most people.Unless this family of four earning $25k/yr is buying new cars every 2-3 years and is taking $5000 vacations, I'm not sure how that's relevant.
The median household in the US, not individual, the household income is $50k. You think all the workers in a household with that income have $18k to put aside? What about the 50% of households with lower incomes? Do you really expect someone making $25k a year and supporting a family of 4 to max a 401k?
Being able to set aside $18k a year is a massive privelage!
Two $5000 vacations and two $500 car payments = $22k *net* per year. That's easily a maxed 401k and IRA....hence my comment.
It's incredibly entitled to think that maxing a 401k is accessible to most people.Unless this family of four earning $25k/yr is buying new cars every 2-3 years and is taking $5000 vacations, I'm not sure how that's relevant.
The median household in the US, not individual, the household income is $50k. You think all the workers in a household with that income have $18k to put aside? What about the 50% of households with lower incomes? Do you really expect someone making $25k a year and supporting a family of 4 to max a 401k?
Being able to set aside $18k a year is a massive privelage!
Two $5000 vacations and two $500 car payments = $22k *net* per year. That's easily a maxed 401k and IRA....hence my comment.
The comment was not to yours- it was to the person who said a "shocking" number of people don't max their 401k.
It's not shocking to me at all the the vast majority of people do not max their 401ks. It is shocking to me the number of professionals who do not take advantage of a match, but to max? That is a LOT of money.
We could easily have a much 'nicer' life on paper and we are a one income family, making 100K with a 16k/yr defined retirement contribution on top of that.
We have about 2500 a month extra for investing. We already have a huge house, but it's in a poorer area. Upgrade to a fancy pants house in our area would be about $500 a month. So 2K left. - low cost of living area here-
If both of us had fancy cars (on credit), at $500 a month each, then we'd still have 1K a month to spend.
Fancy meals each month? Sure. Let's spend $200 on that.
That leaves $800 a month for vacations. We could take 1 really luxurious vacation or 2 moderate ones (we usually spend 3K a year on vacations).
And then we look rich. And we would be 'saving' 16K a year with the company contribution, so it's not like we were in a huge amounts of trouble. And that's on one income. Say I become a teacher, we then have $2500 extra a month to spend, whether that's on retirement or other fancy pants expenditures. But that's after contributing the required 15% to my pension while the district matches that. So we'd still be saving a good deal for retirement, but we'd be spending a heck of a lot, too.
We would look super wealthy if we started blowing my teacher's pay. And that's on a 140K gross income. Not too hard to reach that level of income with two earners with degrees at the ages of 35/34.
Understand that there are two worldviews out there with regards to healthy finances. There are those that have a problem with debt, they recognize the risk you take on by obliging yourself to a negative cashflow situation.
...
But then there are those that do not have a problem with debt. Their risk tolerance for the negative cashflow situation is very high.
I know a shocking number of people that don't max 401k. Our employer matches 50% up to federal max, free money!!! And people are leaving it on the table for cars. :(
Holy crap! Is this a typo? Did you accidentally hit the 0 key after the 5 somehow? That's insane!
I could probably cut my time to FIRE in half working there.
Seriously, and there is no vesting periods like most companies. Free 9k+ a year. And up to 15% of your income in 10% discounted stock. I say again: Free. Money. And people don't immediately max it, they're buying cars and shopping at Nordstrom. :(
Seriously, and there is no vesting periods like most companies. Free 9k+ a year. And up to 15% of your income in 10% discounted stock. I say again: Free. Money. And people don't immediately max it, they're buying cars and shopping at Nordstrom. :(
That is a really nice match.
I'm really lucky as my company puts in 13% and requires you to put in 2% (no match). But we have 2 year vesting.
However, I recently found out that because the 2% is compulsory it doesn't count towards the $18k limit, so I can put in 18k in addition to that 2%.
Seriously, and there is no vesting periods like most companies. Free 9k+ a year. And up to 15% of your income in 10% discounted stock. I say again: Free. Money. And people don't immediately max it, they're buying cars and shopping at Nordstrom. :(
That is a really nice match.
I'm really lucky as my company puts in 13% and requires you to put in 2% (no match). But we have 2 year vesting.
However, I recently found out that because the 2% is compulsory it doesn't count towards the $18k limit, so I can put in 18k in addition to that 2%.
Are you sure? I've not seen that before.
THIS. Sums it all up in two sentences. Well done.
If you don't max a 401k/IRA, that's almost $2,000 a month per person. That will fund a lot of vacations/car payments.
When you also consider that a vast majority of those at the bottom of that graph effectively live in a different society than nearly everyone on this board (let's say the poorest 20% of households, 21k), those percentages become even higher. Keep in mind this is probably the case - most of us on this forum, with the exception of some shopping, probably never interact with people making the bottom 20% of income much in our daily lives.
Ideal yearly savings for a dual income couple in the U.S. = $18k*2 (401k) + $5.5k*2 (Roth/Trad IRA) + $6750 (HSA) = $53.75k. Obviously some will save more/less depending on income.
I know a shocking number of people that don't max 401k. Our employer matches 50% up to federal max, free money!!! And people are leaving it on the table for cars. :(
Holy crap! Is this a typo? Did you accidentally hit the 0 key after the 5 somehow? That's insane!
I could probably cut my time to FIRE in half working there.
Seriously, and there is no vesting periods like most companies. Free 9k+ a year. And up to 15% of your income in 10% discounted stock. I say again: Free. Money. And people don't immediately max it, they're buying cars and shopping at Nordstrom. :(
georgec, I wonder this as well. The vacations on Facebook are the ones I find most baffling. A friend who bought a Wii from me a couple of years ago (on a payment plan!) posted from a fancy resort in the Caribbean. I thought WTF?! how did he afford that? Parents is probably the answer but still strange.Our last vacation probably looked expensive, we went to NYC. But the rooms were free because of points. And our major event was Xmas to each other plus a serious amount of fun money saved.
Cars are my big confusion. I live in a very modest neighborhood (gentrifying as we speak) and one of the houses on the block has peeling paint and a shedding roof. It also has a brand new SUV in the driveway. My unemployed neighbor has a boat, a giant new truck to pull said boat, a new smaller truck and a new sedan (his girlfriend's, who actually has a job). Though maybe he's a lesson in FI!
I used to wonder the same, especially in higher COL areas. I've lived in LA and now NYC and the way I see some people live, boggles the mind. Then I think about the fact that I'm saving ~70% of my income and how I would live if I didn't. Heck, even if all I did was simply max out my 401k I'd have a pretty fly lifestyle.
If you're on the MMM forums, chances are you are saving a goodly portion of your income, far and above what 90% of Americans are. For most of us, that's going to mean a drastic difference between your lifestyle and that of your coworkers.
I don't think it's debt, at least entirely, but also lack of savings.
I know a shocking number of people that don't max 401k. Our employer matches 50% up to federal max, free money!!! And people are leaving it on the table for cars. :(
Holy crap! Is this a typo? Did you accidentally hit the 0 key after the 5 somehow? That's insane!
I could probably cut my time to FIRE in half working there.
Seriously, and there is no vesting periods like most companies. Free 9k+ a year. And up to 15% of your income in 10% discounted stock. I say again: Free. Money. And people don't immediately max it, they're buying cars and shopping at Nordstrom. :(
I hate going to Wal Mart because I rarely see people in the stores. I probably average about 1-3 people when I go. The rest are just slaves to the system. I see nothingness in their eyes. It's like I see poor shadowy figures in Purgatory trudging along aimlessly. Exhausted, no soul, inner truth, life.
Scary.
I also wonder about this.
We've got friends who have giant fancy houses, new cars, private school for the kiddos, off on luxury vacations, twice daily dog walkers... the whole shebang.
Are their incomes freakin' amazing OR is that shiny veneer of consumer goods covering up a mountain of shitty debt and despair?
I wanna sidle up to them and whisper... Hey! Are you super-rich or are you just faking it?
But that's really none of my business. And it would be super rude of me to ask. So I don't.
I'm super curious though.
SIS
Right, if my Wife and I stopped putting any money in taxable accounts, maxing both 401k's, and maxing IRAs, we could blow about $100,000 more yearly and we already live pretty good IMO.
What could 100k YEARLY do?(After tax in pure spend...)
Well, it could be a Lambo....Or a million dollar house..... Or some sort of mega world trip(yearly)..... Or a new Corvette every 6 months (Without selling them at all) and enough to build a hangar to keep them in.
It's pretty impressive.... Yet, I prefer to attempt to buy my freedom. If I want the above items, I can just work a year or two longer after my FIRE date, and get it all.
I'm now 46, and I used to feel like this a lot back in my 20s. Most of my friends spent everything they earned, and maxxed out whatever credit they had. So back then, they were always buying much more 'stuff' then I ever did. In contrast, my wife and I saved up a deposit, and generally avoided non-mortgage debt, and over the years built up investments. Now, they seem the most financially limited - many of them live in rented apartments, have no assets, and periodically complain about how much debt, how little money they have. If I ever mention my retirement plans, the usual reply is that they don't know how they'd ever do it.
So, debt/non-investing can certainly allow people to consume more, but not forever. And for most people, their spending only has a loose correlation with how much assets they have.
I'm 32 now, and its a pretty interesting age to be at in terms of financials. It seems like half my friends are finally waking up and aggressively paying off debt and upping 401k contributions, while the other half are still in la la land totally oblivious to the fact they'll be working until the day they die if they keep their current habits up...but who cares...they have a nice car and fancy smart phone lol.
I'm 32 now, and its a pretty interesting age to be at in terms of financials. It seems like half my friends are finally waking up and aggressively paying off debt and upping 401k contributions, while the other half are still in la la land totally oblivious to the fact they'll be working until the day they die if they keep their current habits up...but who cares...they have a nice car and fancy smart phone lol.
I have a nice car and a fancy smart phone... and yes I have been FI for over 10 years. What am I saying is it is very easy to judge people based on their watch, bag, jewelry, car, phone etc. With my car and a pair of giant simulated diamond earrings (looks great and totally not expensive), my friend's mother watched me step out of my car and she laughingly said "You look like someone's mistress!". Haha! This is much much worse than being seen as stupid with money if you ask me!
Unless I really know what their situation is, I try not make these kinds of assessments of people based on these items.
i think one of the issues is people only really post to social media the good things. I know I won't put a picture of the 4th PB&J sandwich I bought from home to save money. so if you only show off the good stuff, it's really easy to look like you're doing better than you are.If you're eating 4 PB&J sandwiches in one sitting, then I think that's post worthy!
the other idea i'm having is a quote, not sure where I heard it, maybe here. "I can have anything I want, but I can't have everything I want."I think I first heard a similar comment at Afford Anything.
Friend of mine took ten, TEN, trips last year. Places like Hawaii, San Fran. A week, a long weekend, ten days. Now she will "scale back" for 2016 . . . By buying a new $30k SUV!
Thing is, two good 6 figure incomes, no kids, a great but "modest" house (under a million) means this is EASY. My only question is why they still work. But hey like the spending. It's fun. They also have decent savings.
Upper middle class Canadians--world's most comfortable people.
It's incredibly entitled to think that maxing a 401k is accessible to most people.
The median household in the US, not individual, the household income is $50k. You think all the workers in a household with that income have $18k to put aside? What about the 50% of households with lower incomes? Do you really expect someone making $25k a year and supporting a family of 4 to max a 401k?
Being able to set aside $18k a year is a massive privelage!
i think one of the issues is people only really post to social media the good things. I know I won't put a picture of the 4th PB&J sandwich I bought from home to save money. so if you only show off the good stuff, it's really easy to look like you're doing better than you are.If you're eating 4 PB&J sandwiches in one sitting, then I think that's post worthy!
haha not in a row... every day for a week, and I get half days on friday. Everyone goes out and averages like $15 a day/4 days a week for lunch. and I eat some much fancier left overs than they get
I think a lot of this has to do with how you prioritize your spending.
I think a lot of this has to do with how you prioritize your spending.
In 2015 I earned $80k, spent $20k, and invested $60k.
I can only imagine how lavish I could make my lifestyle look if I spent 4X my actual spending for the year......we are talking a nice house, a high end sports car, vacations to exotic places, etc. At the cost of having to work forever.
"All hat, no cattle."
"All hat, no cattle."
One of my favorite phrases
Look: on the surface, if you see me, I'm in my early 30s, with a large-ish and full-of-gorgeous-antiques house, dress in cashmere sweaters and wear pearls and diamonds on a regular basis, and we eat excellent food that we reguarly invite people over to share (duck magret in a brandy and peach sauce, anyone?)
I'm sure someone could say the same about us. We spend a lot in certain areas and in others we don't. Our income is close to 400k and we purchased a 750k home in a hot neighborhood. Our plan is to pay it off before early retirement. We only have one car and I ride my bike to work.
We save around 100k plus each year when including 401k matching, defined pension contribution, emergency savings, stock grants etc. but we also go on some fancy vacations and I have some luxury clothing items. Life is short. While I want to ensure we can retire early I also want to enjoy my relative youth and time with my husband. I try to balance things. We also stand to inherit a pretty penny and I try to not count on this.
I'm sure someone could say the same about us. We spend a lot in certain areas and in others we don't. Our income is close to 400k and we purchased a 750k home in a hot neighborhood. Our plan is to pay it off before early retirement. We only have one car and I ride my bike to work.
We save around 100k plus each year when including 401k matching, defined pension contribution, emergency savings, stock grants etc. but we also go on some fancy vacations and I have some luxury clothing items. Life is short. While I want to ensure we can retire early I also want to enjoy my relative youth and time with my husband. I try to balance things. We also stand to inherit a pretty penny and I try to not count on this.
That's because you are wealthy - it's not an illusion. :P
I'm sure someone could say the same about us. We spend a lot in certain areas and in others we don't. Our income is close to 400k and we purchased a 750k home in a hot neighborhood. Our plan is to pay it off before early retirement. We only have one car and I ride my bike to work.
We save around 100k plus each year when including 401k matching, defined pension contribution, emergency savings, stock grants etc. but we also go on some fancy vacations and I have some luxury clothing items. Life is short. While I want to ensure we can retire early I also want to enjoy my relative youth and time with my husband. I try to balance things. We also stand to inherit a pretty penny and I try to not count on this.
That's because you are wealthy - it's not an illusion. :P
Funny because I don't consider us wealthy but I suppose to many we are.
I'm sure someone could say the same about us. We spend a lot in certain areas and in others we don't. Our income is close to 400k and we purchased a 750k home in a hot neighborhood. Our plan is to pay it off before early retirement. We only have one car and I ride my bike to work.
We save around 100k plus each year when including 401k matching, defined pension contribution, emergency savings, stock grants etc. but we also go on some fancy vacations and I have some luxury clothing items. Life is short. While I want to ensure we can retire early I also want to enjoy my relative youth and time with my husband. I try to balance things. We also stand to inherit a pretty penny and I try to not count on this.
That's because you are wealthy - it's not an illusion. :P
Funny because I don't consider us wealthy but I suppose to many we are.
Top 1% income is about $400k a year, so yes, whether you feel like it or not, you are wealthy.I'm sure someone could say the same about us. We spend a lot in certain areas and in others we don't. Our income is close to 400k and we purchased a 750k home in a hot neighborhood. Our plan is to pay it off before early retirement. We only have one car and I ride my bike to work.
We save around 100k plus each year when including 401k matching, defined pension contribution, emergency savings, stock grants etc. but we also go on some fancy vacations and I have some luxury clothing items. Life is short. While I want to ensure we can retire early I also want to enjoy my relative youth and time with my husband. I try to balance things. We also stand to inherit a pretty penny and I try to not count on this.
That's because you are wealthy - it's not an illusion. :P
Funny because I don't consider us wealthy but I suppose to many we are.
That's because you are wealthy - it's not an illusion. :P
Funny because I don't consider us wealthy but I suppose to many we are.
Funny because I don't consider us wealthy but I suppose to many we are.
I really want this to be sarcasm, but it reads so sincerely!
That's because you are wealthy - it's not an illusion. :PQuoteFunny because I don't consider us wealthy but I suppose to many we are.
Yes, with the US median household income at $51,000, you earn 8 times more than 1/2
of all US households.
This is 3 years old, but it will put you in your place, I mean that in a good way. :-) Congrats.
http://money.cnn.com/calculator/pf/income-rank/
Move the slider to your income.
I might add this income creates an additional burden, if your saving $100K, your spending $300k. It will take $7.5 million to replace that spending, using the 4% withdrawal rule.
A bit exaggerated, because I expect your tax bill will be less in retirement.
Going on Facebook to judge other people might skew your perspective. People love posting expensive dinners and fancy vacations. If they're struggling financially or living a modest lifestyle, that's probably not going to be reflected in their posts.
I might add this income creates an additional burden, if your saving $100K, your spending $300k. It will take $7.5 million to replace that spending, using the 4% withdrawal rule.
A bit exaggerated, because I expect your tax bill will be less in retirement.
Our income is close to 400k and we purchased a 750k home in a hot neighborhood. Our plan is to pay it off before early retirement.
All I'm saying is Accounting and Feelings are not the same thing, and that I think, to OP's original question, the difference between "millionaires next door" and "just millionaires" is a confidence gap. Spenders (who may or may not be balance-sheet wealthy) feel rich, feel like there's always going to be more money, feel like they can trade this cash for that item and be just fine later. Savers (who may or may not be balance-sheet wealthy) would prefer to keep cash on hand for the proverbial rainy day.
All I'm saying is Accounting and Feelings are not the same thing, and that I think, to OP's original question, the difference between "millionaires next door" and "just millionaires" is a confidence gap. Spenders (who may or may not be balance-sheet wealthy) feel rich, feel like there's always going to be more money, feel like they can trade this cash for that item and be just fine later. Savers (who may or may not be balance-sheet wealthy) would prefer to keep cash on hand for the proverbial rainy day.
There's also an acronym, HENRY, for High Earners Not Rich Yet. If one is young and makes a lot money, they still may be in the "Setting up" phase of life where you're buying a house, furnishing it, maybe buying a car, paying for daycare, paying off student loans, etc, and simply haven't had time to accumulate any money yet. Year 1 of making $400k is very different than year 10 of the same income. I'd put my wife and I in this category; we're in our early 30s, each have a six-figure income, but only a few years ago we were making half that income. And we've been laying out for things like house down payments, etc. We don't have a particularly high NW simply because we haven't been making this money for long and we haven't had a long time for our investments to grow and compound.
That's because you are wealthy - it's not an illusion. :PQuoteFunny because I don't consider us wealthy but I suppose to many we are.
Yes, with the US median household income at $51,000, you earn 8 times more than 1/2
of all US households.
This is 3 years old, but it will put you in your place, I mean that in a good way. :-) Congrats.
http://money.cnn.com/calculator/pf/income-rank/
Move the slider to your income.
I might add this income creates an additional burden, if your saving $100K, your spending $300k. It will take $7.5 million to replace that spending, using the 4% withdrawal rule.
A bit exaggerated, because I expect your tax bill will be less in retirement.
I imagine that a decent sum of their gross income goes to taxes, which most wouldn't consider that spending. They are probably spending closer to 180K or so, if I guessed, and will need about 4.5million in order to retire at that level of spending.
That's because you are wealthy - it's not an illusion. :PQuoteFunny because I don't consider us wealthy but I suppose to many we are.
Yes, with the US median household income at $51,000, you earn 8 times more than 1/2
of all US households.
This is 3 years old, but it will put you in your place, I mean that in a good way. :-) Congrats.
http://money.cnn.com/calculator/pf/income-rank/
Move the slider to your income.
I might add this income creates an additional burden, if your saving $100K, your spending $300k. It will take $7.5 million to replace that spending, using the 4% withdrawal rule.
A bit exaggerated, because I expect your tax bill will be less in retirement.
I imagine that a decent sum of their gross income goes to taxes, which most wouldn't consider that spending. They are probably spending closer to 180K or so, if I guessed, and will need about 4.5million in order to retire at that level of spending.
Yes. pp here. We paid around 100k in income taxes last year. Of the approx 300k take home , we save around 100-125k. We spend 60k paying down our mortgage.
I might add this income creates an additional burden, if your saving $100K, your spending $300k. It will take $7.5 million to replace that spending, using the 4% withdrawal rule.
A bit exaggerated, because I expect your tax bill will be less in retirement.QuoteOur income is close to 400k and we purchased a 750k home in a hot neighborhood. Our plan is to pay it off before early retirement.
Good chance a big lump of $300k of spending is going there.
I might add this income creates an additional burden, if your saving $100K, your spending $300k. It will take $7.5 million to replace that spending, using the 4% withdrawal rule.
A bit exaggerated, because I expect your tax bill will be less in retirement.QuoteOur income is close to 400k and we purchased a 750k home in a hot neighborhood. Our plan is to pay it off before early retirement.
Good chance a big lump of $300k of spending is going there.
Also you have to take into account we live in a hcol city. While we earn high incomes, we could maintain the same lifestyle in another city while earning 50 percent. The 400k may seem high but would you be as impressed with 200k in say, Houston? Probably not.
That's because you are wealthy - it's not an illusion. :PQuoteFunny because I don't consider us wealthy but I suppose to many we are.
Yes, with the US median household income at $51,000, you earn 8 times more than 1/2
of all US households.
This is 3 years old, but it will put you in your place, I mean that in a good way. :-) Congrats.
http://money.cnn.com/calculator/pf/income-rank/
Move the slider to your income.
I might add this income creates an additional burden, if your saving $100K, your spending $300k. It will take $7.5 million to replace that spending, using the 4% withdrawal rule.
A bit exaggerated, because I expect your tax bill will be less in retirement.
I imagine that a decent sum of their gross income goes to taxes, which most wouldn't consider that spending. They are probably spending closer to 180K or so, if I guessed, and will need about 4.5million in order to retire at that level of spending.
Yes. pp here. We paid around 100k in income taxes last year. Of the approx 300k take home , we save around 100-125k. We spend 60k paying down our mortgage.
lol, I can't even imagine.
Hopefully I'll get there someday. : )
I might add this income creates an additional burden, if your saving $100K, your spending $300k. It will take $7.5 million to replace that spending, using the 4% withdrawal rule.
A bit exaggerated, because I expect your tax bill will be less in retirement.QuoteOur income is close to 400k and we purchased a 750k home in a hot neighborhood. Our plan is to pay it off before early retirement.
Good chance a big lump of $300k of spending is going there.
Also you have to take into account we live in a hcol city. While we earn high incomes, we could maintain the same lifestyle in another city while earning 50 percent. The 400k may seem high but would you be as impressed with 200k in say, Houston? Probably not.
People here get very angry when someone says that, for some reason.
I might add this income creates an additional burden, if your saving $100K, your spending $300k. It will take $7.5 million to replace that spending, using the 4% withdrawal rule.
A bit exaggerated, because I expect your tax bill will be less in retirement.QuoteOur income is close to 400k and we purchased a 750k home in a hot neighborhood. Our plan is to pay it off before early retirement.
Good chance a big lump of $300k of spending is going there.
Also you have to take into account we live in a hcol city. While we earn high incomes, we could maintain the same lifestyle in another city while earning 50 percent. The 400k may seem high but would you be as impressed with 200k in say, Houston? Probably not.
People here get very angry when someone says that, for some reason.
Going on Facebook to judge other people might skew your perspective. People love posting expensive dinners and fancy vacations. If they're struggling financially or living a modest lifestyle, that's probably not going to be reflected in their posts.
Last night for dinner, I cooked two filets (seared indoors on my new $16 Target cast iron skillet!) and boiled a couple lobster tails and had a bottle of red wine for dinner.
Lunch was a ham sandwich.
I skipped breakfast.
Guess which meal went on Facebook? :)
Oh easily...I'm just outside of NYC and I'm renting a furnished room, which costs me ~$100/mo less than the mortgage/tax/insurance on my house in AZ.I might add this income creates an additional burden, if your saving $100K, your spending $300k. It will take $7.5 million to replace that spending, using the 4% withdrawal rule.
A bit exaggerated, because I expect your tax bill will be less in retirement.QuoteOur income is close to 400k and we purchased a 750k home in a hot neighborhood. Our plan is to pay it off before early retirement.
Good chance a big lump of $300k of spending is going there.
Also you have to take into account we live in a hcol city. While we earn high incomes, we could maintain the same lifestyle in another city while earning 50 percent. The 400k may seem high but would you be as impressed with 200k in say, Houston? Probably not.
People here get very angry when someone says that, for some reason.
I've noticed that. I grew up in a lcol city. I think you have to live somewhere like SF or ny to really get it. To put it in perspective, you could make 100k in these cities and probably only afford a one bedroom apartment in a desirable area.
Oh easily...I'm just outside of NYC and I'm renting a furnished room, which costs me ~$100/mo less than the mortgage/tax/insurance on my house in AZ.Also you have to take into account we live in a hcol city. While we earn high incomes, we could maintain the same lifestyle in another city while earning 50 percent. The 400k may seem high but would you be as impressed with 200k in say, Houston? Probably not.
People here get very angry when someone says that, for some reason.
I've noticed that. I grew up in a lcol city. I think you have to live somewhere like SF or ny to really get it. To put it in perspective, you could make 100k in these cities and probably only afford a one bedroom apartment in a desirable area.
I would still bet that it's possible to save more on a 400k NYC salary than on a 200k TX salary, unless you insist on the same standard of living (i.e. the big house, etc). I moved from Phoenix to northern NJ for a 36k raise and I am financially far better off than I was.
Oh easily...I'm just outside of NYC and I'm renting a furnished room, which costs me ~$100/mo less than the mortgage/tax/insurance on my house in AZ.Also you have to take into account we live in a hcol city. While we earn high incomes, we could maintain the same lifestyle in another city while earning 50 percent. The 400k may seem high but would you be as impressed with 200k in say, Houston? Probably not.
People here get very angry when someone says that, for some reason.
I've noticed that. I grew up in a lcol city. I think you have to live somewhere like SF or ny to really get it. To put it in perspective, you could make 100k in these cities and probably only afford a one bedroom apartment in a desirable area.
I would still bet that it's possible to save more on a 400k NYC salary than on a 200k TX salary, unless you insist on the same standard of living (i.e. the big house, etc). I moved from Phoenix to northern NJ for a 36k raise and I am financially far better off than I was.
People usually talk about the same "standard of living" when talking about the "cost of living." Otherwise it's a meaningless comparison.
How much of your being financially far better off is because you're living in a single room instead of a house?
But I try not to judge and just try to avoid the feelings of jealousy. That's my biggest goal: to be happy with less, but not in a holier-than-thou way.This is the hard part for me. I was born in the GDR to a bourgeois family, meaning we were impoverished and everything had been taken from my family a generation or two above me. So I grew up surrounded by some sort of undignified bitterness that runs in my veins. I had to start from scratch, and when my mother died shortly before I went to university, there wasn't much to inherit - about what I had saved myself in one year of work. I'm doing well enough now, but I strive really hard with accepting how other people's birth luck and choices create an uneven playing field, and have done so forever. I see people around me changing careers like underwear, because that's an easy way to climb in salaries, and I struggle with the disloyalty they display and the unfinished projects they leave behind. It's stupid, yet I can't help it! I see friends my age buy cabins worth more than our house, and I can't help but think about the vast challenge they load upon themselves financially ("We eat cheap bread now") and timewise (all property tends to fall apart in rainy, windy, icy Norway). There's a distance left to not caring and just enjoying life. Got to say I am surprised at the massive, constant relief that having paid off the house is though.
I think there's a lot more money floating around in the world than most people have any concept of. A lot of small businesses/consultants/etc. are doing ludicrously well, but don't really talk about, because, well they got a good thing going. In addition there's a huge amount of inherited wealth out there supplementing people's incomes in various ways. These people don't talk about it either, because there's a stigma against inherited wealth in most circles.Agreed! Just today I paid a bill to a friendly little IT lady who helped us setting up a new software at work. Two days, 6 + 4 hours, she charged us a tad below 2 average monthly posttax saψaries. Splendid way of earning money! Lots of people with the gusto to jump to self-employment earn a lot of money, surprisingly quickly. Then again, they do shoulder a lot of risk.
Agreed! Just today I paid a bill to a friendly little IT lady who helped us setting up a new software at work. Two days, 6 + 4 hours, she charged us a tad below 2 average monthly posttax saψaries. Splendid way of earning money! Lots of people with the gusto to jump to self-employment earn a lot of money, surprisingly quickly. Then again, they do shoulder a lot of risk.Yes! This is on my long-term career plan...we happily pay IT contractors $10k a week, and nobody even blinks!
I've come to the conclusion that most of Facebook (and indeed a lot of social life) is an illusion since what is seen is not taken in context. People post their best moments or socially present their best selves, and unless you know them very well, cannot compare your life with theirs.I've been helping out with that lately.
a CW of mine appeared to have a fantastic life, and it was all an illusion - she suddenly decided to move out of country... long story short, she owed the CRA a bunch of money, then people showed up at our workplace looking to serve a subpeona...
Going on Facebook to judge other people might skew your perspective. People love posting expensive dinners and fancy vacations. If they're struggling financially or living a modest lifestyle, that's probably not going to be reflected in their posts.
Last night for dinner, I cooked two filets (seared indoors on my new $16 Target cast iron skillet!) and boiled a couple lobster tails and had a bottle of red wine for dinner.
Lunch was a ham sandwich.
I skipped breakfast.
Guess which meal went on Facebook? :)
I think most of us mentioning meals aren't talking about home cooked meals, even the fancy ones. I'm talking about the weekly pictures of expensive restaurant meals.
One thing to add to this discussion is that we are not all in the same stage of life.
Many of my co-workers are 20 somethings just starting out while I'm a 52 year old guy who's been working and saving for 30 years. Of course I have a nicer house than the person who's just out of college. If I didn't there would be something wrong.
I guess I should start saying what's really on my mind on Facebook and to people in general. I just feel like no one wants to hear about my excitement regarding my frugal wins (a flight bought with airline miles, a grocery store checkout snafu in my favor, etc.). Most people are spendypants who don't see the point in considering such things and find it silly to care about them. I don't brag about the flashy parts of my life (mostly because there aren't any!). And so the cycle continues.
One thing to add to this discussion is that we are not all in the same stage of life.Good point, that. In a conversation with my cousin (~10yrs younger) who just started investing in the last year, our $1k+/wk investment pace came up and he almost sounded disheartened because he was pretty excited about hitting $1k/mo. Had to reassure him this is the product of years of streamlining and he's well ahead of his peers - I'm genuinely proud.
Many of my co-workers are 20 somethings just starting out while I'm a 52 year old guy who's been working and saving for 30 years. Of course I have a nicer house than the person who's just out of college. If I didn't there would be something wrong.
Or maybe don't try to derive value in your life by what banner you hang in your virtual representation of the life you're presenting to the world?
Then there is no cycle to continue.
This is the hard part for me. I was born in the GDR to a bourgeois family, meaning we were impoverished and everything had been taken from my family a generation or two above me. So I grew up surrounded by some sort of undignified bitterness that runs in my veins. I had to start from scratch, and when my mother died shortly before I went to university, there wasn't much to inherit - about what I had saved myself in one year of work. I'm doing well enough now, but I strive really hard with accepting how other people's birth luck and choices create an uneven playing field, and have done so forever. I see people around me changing careers like underwear, because that's an easy way to climb in salaries, and I struggle with the disloyalty they display and the unfinished projects they leave behind. It's stupid, yet I can't help it! I see friends my age buy cabins worth more than our house, and I can't help but think about the vast challenge they load upon themselves financially ("We eat cheap bread now") and timewise (all property tends to fall apart in rainy, windy, icy Norway). There's a distance left to not caring and just enjoying life. Got to say I am surprised at the massive, constant relief that having paid off the house is though.
A "wealthy lifestyle" does not have to be fueled by debt to be unsustainable. The more you spend now, you less you save, and the more likely the house of cards will collapse at some point. With a big income (and there are plenty of people making good money), you can pull off the illusion of wealth for a while without getting yourself into debt, but without actual accumulated wealth it will all come tumbling down around you if you are asked to turn in your badge. The more of your income you spend now, the harder the fall (and that won't make it on Facebook).
A "wealthy lifestyle" does not have to be fueled by debt to be unsustainable. The more you spend now, you less you save, and the more likely the house of cards will collapse at some point. With a big income (and there are plenty of people making good money), you can pull off the illusion of wealth for a while without getting yourself into debt, but without actual accumulated wealth it will all come tumbling down around you if you are asked to turn in your badge. The more of your income you spend now, the harder the fall (and that won't make it on Facebook).
Depends. If your lifestyle is new fancy material items every year, you're right, but if one spends time acquiring fancy things (house, car, etc) and pays them off and keeps them, it's not nearly as expensive to continue to own them as it is to acquire them. And hell, if you buy an expensive house in a desirable area and pay it off and live in it for years, it's entirely likely that you can sell that fancy house and retire somewhere less $$, or to a condo or something, and fund your retirement.
A "wealthy lifestyle" does not have to be fueled by debt to be unsustainable. The more you spend now, you less you save, and the more likely the house of cards will collapse at some point. With a big income (and there are plenty of people making good money), you can pull off the illusion of wealth for a while without getting yourself into debt, but without actual accumulated wealth it will all come tumbling down around you if you are asked to turn in your badge. The more of your income you spend now, the harder the fall (and that won't make it on Facebook).
Depends. If your lifestyle is new fancy material items every year, you're right, but if one spends time acquiring fancy things (house, car, etc) and pays them off and keeps them, it's not nearly as expensive to continue to own them as it is to acquire them. And hell, if you buy an expensive house in a desirable area and pay it off and live in it for years, it's entirely likely that you can sell that fancy house and retire somewhere less $$, or to a condo or something, and fund your retirement.
But if you sell the house in the desirable area and retire in a condo so where else, you lose the wealthy lifestyle.
And acquiring fancy things and pay them off still cost a lot in upkeep.
Friend of mine took ten, TEN, trips last year. Places like Hawaii, San Fran. A week, a long weekend, ten days. Now she will "scale back" for 2016 . . . By buying a new $30k SUV!
Thing is, two good 6 figure incomes, no kids, a great but "modest" house (under a million) means this is EASY. My only question is why they still work. But hey like the spending. It's fun. They also have decent savings.
Upper middle class Canadians--world's most comfortable people.
From my days working in a bank, I can tell you that many of these people are funding these lifestyles with debt. Not all of course, but the majority for sure. In fact it was very rare for me to encounter someone in their 20's, 30's or even 40's with any sort of existing savings or savings plan. Even the "big shot" lawyers and other highly paid occupations would often have maxed LOCs and HELOC's etc.
From my days working in a bank, I can tell you that many of these people are funding these lifestyles with debt. Not all of course, but the majority for sure. In fact it was very rare for me to encounter someone in their 20's, 30's or even 40's with any sort of existing savings or savings plan. Even the "big shot" lawyers and other highly paid occupations would often have maxed LOCs and HELOC's etc.
How do you know though? For even my modest holdings I deal with 5-6+ different banks. Couple checking and small savings account in one, 529, credit card, and IRAs in another, 401ks for wife and I in different banks, credit union with more cash, two mortgages (residence + rental) in two other banks, and then mutual fund holdings. I always wonder what my main bank thinks of me with relatively small checking and savings balances, and no visibility to where the bulk of my savings is. And I am a little different than most in that I do a lot of leveraging, so I have a fair amount of low interest debt that I make minimum payments on so I can invest more. If you don't have the whole picture, you can make lots of incorrect assumptions.
I made a conscious effort to avoid social media in 2015 and, as a result, I don't notice it nearly as much. It's the pics-or-it-didn't-happen mentality. I am floored by how many folks in the Gen X generation (parents like myself) are subsidized by their parents or even trust funders. I can't imagine, at 46, having a parent give me money, vacations, down payments, etc.
I often have this struggle where it seems as if everybody around me is wealthy. Friends, strangers, whoever. It happens in all sorts of ways from the houses I ride my bike past on my way to the grocery store, to online friends always taking off on extended trips or living in pricey areas of the country.I haven't read the entire thread, but to answer the OP:
Is it all just amassing of debt for immediate gratification? <snip>
Is it really just all fueled by debt?
From my days working in a bank, I can tell you that many of these people are funding these lifestyles with debt. Not all of course, but the majority for sure. In fact it was very rare for me to encounter someone in their 20's, 30's or even 40's with any sort of existing savings or savings plan. Even the "big shot" lawyers and other highly paid occupations would often have maxed LOCs and HELOC's etc.
How do you know though? For even my modest holdings I deal with 5-6+ different banks. Couple checking and small savings account in one, 529, credit card, and IRAs in another, 401ks for wife and I in different banks, credit union with more cash, two mortgages (residence + rental) in two other banks, and then mutual fund holdings. I always wonder what my main bank thinks of me with relatively small checking and savings balances, and no visibility to where the bulk of my savings is. And I am a little different than most in that I do a lot of leveraging, so I have a fair amount of low interest debt that I make minimum payments on so I can invest more. If you don't have the whole picture, you can make lots of incorrect assumptions.
From my days working in a bank, I can tell you that many of these people are funding these lifestyles with debt. Not all of course, but the majority for sure. In fact it was very rare for me to encounter someone in their 20's, 30's or even 40's with any sort of existing savings or savings plan. Even the "big shot" lawyers and other highly paid occupations would often have maxed LOCs and HELOC's etc.
How do you know though? For even my modest holdings I deal with 5-6+ different banks. Couple checking and small savings account in one, 529, credit card, and IRAs in another, 401ks for wife and I in different banks, credit union with more cash, two mortgages (residence + rental) in two other banks, and then mutual fund holdings. I always wonder what my main bank thinks of me with relatively small checking and savings balances, and no visibility to where the bulk of my savings is. And I am a little different than most in that I do a lot of leveraging, so I have a fair amount of low interest debt that I make minimum payments on so I can invest more. If you don't have the whole picture, you can make lots of incorrect assumptions.
Correct...but if you work at a bank and someone comes in to apply for a loan or CC or whatever, you get the person's whole picture real quick. Income, assets, debts. Boom, there you have it. Perhaps that's what they were referring to?
We argued about this for pages on another thread and seemed to come to the idea that X/yr salary is high income, X in liquid assets is rich/wealthy.
I said in that thread my idea of rich is $1m in liquid assets, wealthy would be beyond that quite a bit.
I'm sure someone could say the same about us. We spend a lot in certain areas and in others we don't. Our income is close to 400k and we purchased a 750k home in a hot neighborhood. Our plan is to pay it off before early retirement. We only have one car and I ride my bike to work.
We save around 100k plus each year when including 401k matching, defined pension contribution, emergency savings, stock grants etc. but we also go on some fancy vacations and I have some luxury clothing items. Life is short. While I want to ensure we can retire early I also want to enjoy my relative youth and time with my husband. I try to balance things. We also stand to inherit a pretty penny and I try to not count on this.
That's because you are wealthy - it's not an illusion. :P
Funny because I don't consider us wealthy but I suppose to many we are.
Imagine a $350,000/yr pay cut, then you'd be where most people are. :P
For example, my brother in law works in Chicago and spends $10 a day easy on lunch.
For example, my brother in law works in Chicago and spends $10 a day easy on lunch.
I have been thinking about that lately. I bring lunched to work everyday and it's the trouble of preparing it, transporting another bag on the bus and then lining up for the microwaves. It costs me probably around 5$ to bring my lunch. 20 days of work per month and the difference between 5$ lunch and 10$ prepared meal is just 100$ per month. Not a big item in my budget and a lot of convenience for the decade or so of work I still have to do before retirement. Maybe I am being too frugal.
Sure, but it's also a health thing. Even eating out at a 'healthy' restaurant/sandwich shop is not going to compare to a from-home meal - assuming, of course, that you are cooking/preparing healthy meals.
For example, my brother in law works in Chicago and spends $10 a day easy on lunch.
I have been thinking about that lately. I bring lunched to work everyday and it's the trouble of preparing it, transporting another bag on the bus and then lining up for the microwaves. It costs me probably around 5$ to bring my lunch. 20 days of work per month and the difference between 5$ lunch and 10$ prepared meal is just 100$ per month. Not a big item in my budget and a lot of convenience for the decade or so of work I still have to do before retirement. Maybe I am being too frugal.
For example, my brother in law works in Chicago and spends $10 a day easy on lunch.
I have been thinking about that lately. I bring lunched to work everyday and it's the trouble of preparing it, transporting another bag on the bus and then lining up for the microwaves. It costs me probably around 5$ to bring my lunch. 20 days of work per month and the difference between 5$ lunch and 10$ prepared meal is just 100$ per month. Not a big item in my budget and a lot of convenience for the decade or so of work I still have to do before retirement. Maybe I am being too frugal.
$5 seems like a pretty expensive homemade lunch. I estimate mine is around $1-2. But I eat the same thing just about every day and I know that probably isn't for everyone.
I agree with a few of the other posts. The spending may not be all on credit, but it's at the expense of SOMETHING else. If we didn't have the goal of early retirement, we would have an extra $8k a month. That is a lot of change to spend.
For example, my brother in law works in Chicago and spends $10 a day easy on lunch.
I have been thinking about that lately. I bring lunched to work everyday and it's the trouble of preparing it, transporting another bag on the bus and then lining up for the microwaves. It costs me probably around 5$ to bring my lunch. 20 days of work per month and the difference between 5$ lunch and 10$ prepared meal is just 100$ per month. Not a big item in my budget and a lot of convenience for the decade or so of work I still have to do before retirement. Maybe I am being too frugal.
$5 seems like a pretty expensive homemade lunch. I estimate mine is around $1-2. But I eat the same thing just about every day and I know that probably isn't for everyone.
Round numbers, I eat lunchmeat, bread, fruit, bag of chips for lunch 4 days a week (x 2 people = 8 lunches).
Estimates:
Lunchmeat (1lb) $8
Bread $3
Fruit $6
Chips $3
$20/8 = $2.50
Throw a drink from a vending machine on there, you're at $4, bring it from home, it's maybe $3 (or water is free).
For example, my brother in law works in Chicago and spends $10 a day easy on lunch.
I have been thinking about that lately. I bring lunched to work everyday and it's the trouble of preparing it, transporting another bag on the bus and then lining up for the microwaves. It costs me probably around 5$ to bring my lunch. 20 days of work per month and the difference between 5$ lunch and 10$ prepared meal is just 100$ per month. Not a big item in my budget and a lot of convenience for the decade or so of work I still have to do before retirement. Maybe I am being too frugal.
$5 seems like a pretty expensive homemade lunch. I estimate mine is around $1-2. But I eat the same thing just about every day and I know that probably isn't for everyone.
Round numbers, I eat lunchmeat, bread, fruit, bag of chips for lunch 4 days a week (x 2 people = 8 lunches).
Estimates:
Lunchmeat (1lb) $8
Bread $3
Fruit $6
Chips $3
$20/8 = $2.50
Throw a drink from a vending machine on there, you're at $4, bring it from home, it's maybe $3 (or water is free).
Yeah that sounds more accurate. I only drink water at work, and I eat a PB&J and a hard boiled egg pretty much every day for lunch with an afternoon snack of fruit or veggies depending on what we bought that week/month.
This is the hard part for me. I was born in the GDR to a bourgeois family, meaning we were impoverished and everything had been taken from my family a generation or two above me. So I grew up surrounded by some sort of undignified bitterness that runs in my veins. I had to start from scratch, and when my mother died shortly before I went to university, there wasn't much to inherit - about what I had saved myself in one year of work. I'm doing well enough now, but I strive really hard with accepting how other people's birth luck and choices create an uneven playing field, and have done so forever. I see people around me changing careers like underwear, because that's an easy way to climb in salaries, and I struggle with the disloyalty they display and the unfinished projects they leave behind. It's stupid, yet I can't help it! I see friends my age buy cabins worth more than our house, and I can't help but think about the vast challenge they load upon themselves financially ("We eat cheap bread now") and timewise (all property tends to fall apart in rainy, windy, icy Norway). There's a distance left to not caring and just enjoying life. Got to say I am surprised at the massive, constant relief that having paid off the house is though.Would you feel better knowing that your small inheritance made me envious of you? At least you got something (positive and didn't inherit someone else's debt).
At least you got something (positive and didn't inherit someone else's debt).
I agree with a few of the other posts. The spending may not be all on credit, but it's at the expense of SOMETHING else. If we didn't have the goal of early retirement, we would have an extra $8k a month. That is a lot of change to spend.
I always think of this when I read sob stories in the NY Times or other outlets about people who were making six figures and then were laid off. "Mary Jones had a $150K a year job but was laid off in her 40s. Within a few months, her house had been foreclosed on and she had no savings left." Where does all the money go?
For example, my brother in law works in Chicago and spends $10 a day easy on lunch.
I have been thinking about that lately. I bring lunched to work everyday and it's the trouble of preparing it, transporting another bag on the bus and then lining up for the microwaves. It costs me probably around 5$ to bring my lunch. 20 days of work per month and the difference between 5$ lunch and 10$ prepared meal is just 100$ per month. Not a big item in my budget and a lot of convenience for the decade or so of work I still have to do before retirement. Maybe I am being too frugal.
Sure, but it's also a health thing. Even eating out at a 'healthy' restaurant/sandwich shop is not going to compare to a from-home meal - assuming, of course, that you are cooking/preparing healthy meals.
The line for the microwave can get long where I work, too, so many days I'll bring a beast of a salad: lettuce, tons of chopped veggies, nuts, hard boiled egg, beans, etc.
For example, my brother in law works in Chicago and spends $10 a day easy on lunch.
I have been thinking about that lately. I bring lunched to work everyday and it's the trouble of preparing it, transporting another bag on the bus and then lining up for the microwaves. It costs me probably around 5$ to bring my lunch. 20 days of work per month and the difference between 5$ lunch and 10$ prepared meal is just 100$ per month. Not a big item in my budget and a lot of convenience for the decade or so of work I still have to do before retirement. Maybe I am being too frugal.
Sure, but it's also a health thing. Even eating out at a 'healthy' restaurant/sandwich shop is not going to compare to a from-home meal - assuming, of course, that you are cooking/preparing healthy meals.
The line for the microwave can get long where I work, too, so many days I'll bring a beast of a salad: lettuce, tons of chopped veggies, nuts, hard boiled egg, beans, etc.
+1. My BIL once made a statement about how he didn't like going out to restaurants unless he thought they could make a better meal than his wife and he could.
At the time, I didn't think much of it...but after I really, really got into healthy eating, I agreed with him, although by "better," I mean "healthier."
When we cook, which is every night except for the occasional leftover from the previous night's cooking, it's whole wheat this, fresh vegetable that, only canola or olive oil, cage-free eggs, organic meats, ocean-caught fish, etc etc.
I know exactly what goes into every meal, and I know it's about as healthy as food gets without growing it ourselves, rather than simply sourced from the cheapest ingredients on the shelf.
I never thought I'd become a health nut, food-wise, but yeah...I can still eat out when it's a family occasion, no problem, but I definitely don't miss it the 95% of the year when we aren't eating out. It's been an interesting change.
I created an account just to chime in on this one. First off, don't be fooled by what everyone else seems to have going for them. The truth is that there is often more going on behind the scenes than people let on.
I have a friend who graduated a year after me, but we ended up working at the same company and with almost identical salaries. However, I ended up working another job on the weekend just to pay the bills. He went out and bought a BMW, would go out to bars every weekend and take trips to Vegas 3-4 times a year. I finally asked him how he was doing it and come to find out that his parents had been paying for his student loans, his cell phone and numerous other bills.
Everyone out there is going to have a different story, but all mustachians know something others don't, we're playing the long game. I've talked to this same friend about my desire for FI and while I have plans to retire early he keeps the mindset that if he just had X (nicer car, a house, etc) that it's going to take his life to the next level. We've both been experiencing increased incomes, but while I've been trying to trim as many expenses as possible, he's adding more (buying a new motorcycle, more extravagant nights out, planning a big home purchase).
The goal of all this is not to bash on my friend, whom I love dearly. But it's to illustrate that while the rest of the world may seem to "have it all", keep in mind that most of them will be working much longer than the average mustachian to "keep it all". At the end of the day, you have to remind yourself that you're making the right decision for you and while you don't have all the shiny stuff to show for it, you do have comfort in the knowledge that you're investing in the future you want and it'll be here sooner because of all your decisions now.
Well he started poking fun about my car and where I live...I had enough and told him "I would never judge you just because you can't afford my lifestyle". He laughed his ass off and said "Dude...I make like $130K a year". So I said "Fine, quit your job and lets go travel for a year". I don't think it made much of a dent but he piped down pretty quick. Maybe it was a dick move on my end but sometimes I gets to me.
One thing to add to this discussion is that we are not all in the same stage of life.
Many of my co-workers are 20 somethings just starting out while I'm a 52 year old guy who's been working and saving for 30 years. Of course I have a nicer house than the person who's just out of college. If I didn't there would be something wrong.
Well some of my coworkers still live in their parent's basement. If you are still doing that at 52, then something IS wrong.
I agree with the first part of your statement BUT not that because your 52 if you dont have a nicer house there is something wrong.
Well he started poking fun about my car and where I live...I had enough and told him "I would never judge you just because you can't afford my lifestyle". He laughed his ass off and said "Dude...I make like $130K a year". So I said "Fine, quit your job and lets go travel for a year". I don't think it made much of a dent but he piped down pretty quick. Maybe it was a dick move on my end but sometimes I gets to me.
Haha...well played sir, sometimes people like this need smacked back to reality. There is nothing better than a "rich" person with no significant amount of money in the bank get called out by a "poor" person with their finances in order.
For example, my brother in law works in Chicago and spends $10 a day easy on lunch.
I have been thinking about that lately. I bring lunched to work everyday and it's the trouble of preparing it, transporting another bag on the bus and then lining up for the microwaves. It costs me probably around 5$ to bring my lunch. 20 days of work per month and the difference between 5$ lunch and 10$ prepared meal is just 100$ per month. Not a big item in my budget and a lot of convenience for the decade or so of work I still have to do before retirement. Maybe I am being too frugal.
Sure, but it's also a health thing. Even eating out at a 'healthy' restaurant/sandwich shop is not going to compare to a from-home meal - assuming, of course, that you are cooking/preparing healthy meals.
The line for the microwave can get long where I work, too, so many days I'll bring a beast of a salad: lettuce, tons of chopped veggies, nuts, hard boiled egg, beans, etc.
+1. My BIL once made a statement about how he didn't like going out to restaurants unless he thought they could make a better meal than his wife and he could.
At the time, I didn't think much of it...but after I really, really got into healthy eating, I agreed with him, although by "better," I mean "healthier."
When we cook, which is every night except for the occasional leftover from the previous night's cooking, it's whole wheat this, fresh vegetable that, only canola or olive oil, cage-free eggs, organic meats, ocean-caught fish, etc etc.
I know exactly what goes into every meal, and I know it's about as healthy as food gets without growing it ourselves, rather than simply sourced from the cheapest ingredients on the shelf.
I never thought I'd become a health nut, food-wise, but yeah...I can still eat out when it's a family occasion, no problem, but I definitely don't miss it the 95% of the year when we aren't eating out. It's been an interesting change.
This is exactly how I feel.
Yes, of course you're right. Merely trying to make a point that some peoples' woes look awfully good to others.At least you got something (positive and didn't inherit someone else's debt).
?? Except in very specific circumstances (prior arranged business deals, etc), it is impossible to inherit debt. If an estate is in a negative worth position, you inherit nothing.
Little did I know--never having looked into it--that those trips are actually in the $4-600 per person range, all-inclusive. All this time I've thought people were throwing away outrageous sums just to lay on a beach, when they're actually--quite Mustachianly, all things considered--been getting a week's food and accommodation, plus flights, for a price I would have assumed would barely cover the plane tickets.
Great thread!
Pretty much sums up social media
(http://media1.popsugar-assets.com/files/2014/09/08/967/n/1922507/e22d44998dc04895_thumb_temp_cover_file32304521410210684.xxxlarge/i/Instagram-vs-Reality.jpg)
I come across a lot of people on social media and their lives look like they have won last week's PowerBall. However, I look closer and see a lot of holes in their story of wealth. One guy for example, posts photos of stacks of cash, $1,000 shoes, $10,000 bar tabs, and I end up seeing his neighborhood and that he has an entry level luxury car for his car even though he posts videos of himself driving exotics.
Many people have hundreds of friends on social media. If those friends have just one post of their yearly trip, you'd see a vacation everyday. When viewing social media, we are constantly seeing people "have" "have" "have". We don't see what they sacrifice as the person mentioned earlier about Friday nights on the couch.
I go to Disneyland pretty frequently and have had to train myself not to judge some larger families who are there with food, snacks, hats, souvenirs, etc. I have to realize that they may have been saving for this vacation for 10 years and have lived a frugal life and this is their splurge.
I like the point that someone brought up priorities.
Some people live very frugally during day-to-day stuff and then splurge on higher end items or larger items.
I do not buy video games, game consoles, nor do I care about DVDs, CDs, and electronics. There are times that I am very thirsty and would love to get a drink or a snack, but I just wait until I get home to drink something or snack.
I'd love to purchase foods that aren't on sale at the grocery store or to purchase every ingredient in the recipe, but I don't. ($2 for that ingredient! is it really going to make that much of a difference, haha)
But my mountain bike is one of the best mountain bikes money can buy.
Do I have the bike AND the car AND the foods AND the traveling AND this AND that? No... I make a lot of small sacrifices. At the end of the day, I probably spend the same though hahaha oops.
Daily starbucks = $50/mo
One massage = $ $60/mo
cut/style/nails = $100/mo
That's $210/mo on three items that are relatively common for women in Orange County. $210/mo on top of a simple $300/mo car allowance, opens up new doors.
Great thread!
Pretty much sums up social media
(http://media1.popsugar-assets.com/files/2014/09/08/967/n/1922507/e22d44998dc04895_thumb_temp_cover_file32304521410210684.xxxlarge/i/Instagram-vs-Reality.jpg)
I come across a lot of people on social media and their lives look like they have won last week's PowerBall. However, I look closer and see a lot of holes in their story of wealth. One guy for example, posts photos of stacks of cash, $1,000 shoes, $10,000 bar tabs, and I end up seeing his neighborhood and that he has an entry level luxury car for his car even though he posts videos of himself driving exotics.
Many people have hundreds of friends on social media. If those friends have just one post of their yearly trip, you'd see a vacation everyday. When viewing social media, we are constantly seeing people "have" "have" "have". We don't see what they sacrifice as the person mentioned earlier about Friday nights on the couch.
I go to Disneyland pretty frequently and have had to train myself not to judge some larger families who are there with food, snacks, hats, souvenirs, etc. I have to realize that they may have been saving for this vacation for 10 years and have lived a frugal life and this is their splurge.
I like the point that someone brought up priorities.
Some people live very frugally during day-to-day stuff and then splurge on higher end items or larger items.
I do not buy video games, game consoles, nor do I care about DVDs, CDs, and electronics. There are times that I am very thirsty and would love to get a drink or a snack, but I just wait until I get home to drink something or snack.
I'd love to purchase foods that aren't on sale at the grocery store or to purchase every ingredient in the recipe, but I don't. ($2 for that ingredient! is it really going to make that much of a difference, haha)
But my mountain bike is one of the best mountain bikes money can buy.
Do I have the bike AND the car AND the foods AND the traveling AND this AND that? No... I make a lot of small sacrifices. At the end of the day, I probably spend the same though hahaha oops.
Daily starbucks = $50/mo
One massage = $ $60/mo
cut/style/nails = $100/mo
That's $210/mo on three items that are relatively common for women in Orange County. $210/mo on top of a simple $300/mo car allowance, opens up new doors.
Before we all pat ourselves on the back, consider that the US has over 10m millionaire households: that's people with $1m in assets excluding their primary residence. Wealth is not rare.
That's 3% of the population. It's not that common.
I also know people with over a million in assets who will say they aren't wealthy, and compare themselves to people with all the stuff named in this thread. Wealth is very relative.
To everyone mentioning parental help or inheritance, doesn't that imply the parents were good savers? Has there been a delay of consumerism from the 50s to today?
For example, my brother in law works in Chicago and spends $10 a day easy on lunch.
I have been thinking about that lately. I bring lunched to work everyday and it's the trouble of preparing it, transporting another bag on the bus and then lining up for the microwaves. It costs me probably around 5$ to bring my lunch. 20 days of work per month and the difference between 5$ lunch and 10$ prepared meal is just 100$ per month. Not a big item in my budget and a lot of convenience for the decade or so of work I still have to do before retirement. Maybe I am being too frugal.
To everyone mentioning parental help or inheritance, doesn't that imply the parents were good savers? Has there been a delay of consumerism from the 50s to today?
The cutoff for being in the top 1% of wealth is $9 million. So roughly 1 in 100-200 (less than 100 because parents often have multiple kids) is going to be inheriting $9 million or more. Maybe 1 in 10 will get more than $1 million when all is said and done (in HCOL areas it's probably more like 1 in 5). These amounts fund a lifetime of extravagant spending, and there's no way you'd know if they're just a co-worker.
The cutoff for being in the top 1% of wealth is $9 million. So roughly 1 in 100-200 (less than 100 because parents often have multiple kids) is going to be inheriting $9 million or more. Maybe 1 in 10 will get more than $1 million when all is said and done (in HCOL areas it's probably more like 1 in 5). These amounts fund a lifetime of extravagant spending, and there's no way you'd know if they're just a co-worker.
Its probably a heck of a lot lower than that. Like you said...you have to account for multiple kids, plus chances are its not even all going to their kids to begin with...charities, churches, friends, family other than kids, etc, all might get something. That is not even mentioning that your peak net worth for many people won't be the day you die...most people tend to spend it down for various reasons in retirement.
Its a bit dated at 2003, but I found this article...would be interesting if anyone has any more up to date statistics.
http://money.cnn.com/2003/11/25/retirement/inheritance/
Inheritance� % of population�
$0� 91.9%�
$1 - $25,000� 4.3%�
$25,000 - $50,000� 1.1%�
$50,000 - $100,000� 0.1%�
More than $100,000� 1.6%�
https://www.google.com/url?sa=t&source=web&rct=j&url=https://www.metlife.com/assets/cao/mmi/publications/studies/2010/mmi-inheritance-wealth-transfer-baby-boomers.pdf&ved=0ahUKEwjlmrPZ37nKAhXksYMKHc0tAMEQFgg1MAc&usg=AFQjCNFQNA1vYh7qH3AObjIlAQGAimL-eA&sig2=FZWYcpk-ULdraYaAuch4Ig
Millenials will get a proportionally higher inheritance due to inflation and economic growth.
But only economists care about the large scale average. There are a lot of cities where essentially all middle class family homes bought in the 1960s/70s is now worth lottery winning money.
Back in the 90s I knew graduates in London who decided at age 21 they wouldn't need to worry about a career because their parent's suburban London house was worth >£1M
https://www.google.com/url?sa=t&source=web&rct=j&url=https://www.metlife.com/assets/cao/mmi/publications/studies/2010/mmi-inheritance-wealth-transfer-baby-boomers.pdf&ved=0ahUKEwjlmrPZ37nKAhXksYMKHc0tAMEQFgg1MAc&usg=AFQjCNFQNA1vYh7qH3AObjIlAQGAimL-eA&sig2=FZWYcpk-ULdraYaAuch4Ig
Nice link, this one had a lot of good data in it. Mainly...it claims...
About three-quarters expect either no inheritance or less than $100,000, and 97% expect either no inheritance or less than $1 million. page 9
21% of those born 19461964 had no surviving parent in 2007. page 7
So 4 out of 5 boomers still have a living parent meaning they probably haven't seen their inheritance yet, and 3% of them expect to inherit a million. In other words 21% of 3%, or 0.63% of Boomer's have inherited a million at this point. Pretty low odds your neighbor is a total failure with money and just inherited a fortune. If those inheriting 9 million+ are even 1/10th as numerous as those inheriting 1 million plus your boomer neighbor would be about 1 in 1600.
Even if the average house is 200k the average family size of the boomer generation was larger...so its probably getting split on average 3 ways, and that is assuming the house was paid off to begin with, there was no reverse mortgage or home equity loan or anything of the sort, the house wasn't sold to pay for a nursing home, or the family house wasn't simply sold so they could downsize to a condo or apartment.Millenials will get a proportionally higher inheritance due to inflation and economic growth.
The above factors could lead one to conclude that the Boomers might be less likely than previous birth cohorts to leave bequests to succeeding generations. page 14
Us younger generations actually stand to inherit less since most of our parents did a crappy job preparing for retirement compared to their parents and statistically will live longer :P
Plus we are less likely to have received inheritance from our parents yet since our parents are more likely to be alive. Your odds of a friend/neighbor/coworker younger than the boomer generation being an inheritance millionaire at this point are ridiculously slim.
I think its just easy to assume people inherit a lot more than they do because most the time when someone has a family member that dies and they get left some inheritance, they immediately run out and spend it on a new car or vacations or something. But that is just it, they spend it all, its not like they are inheriting millions and just spending a little while setting the rest aside for a retirement.
Bb8, you can't have it both ways. Either parents were good savers who leave a house to kids (who will likely sell it off to split the proceeds, thereby increasing supply which is hypothesized to lead to a crash) or parents were not good savers, cash-out refinanced a lot and the kids MUST sell because equity is so low. They can't be huge spenders AND leave a lot to their kids except in very high earning circumstances
Bb8, you can't have it both ways. Either parents were good savers who leave a house to kids (who will likely sell it off to split the proceeds, thereby increasing supply which is hypothesized to lead to a crash) or parents were not good savers, cash-out refinanced a lot and the kids MUST sell because equity is so low. They can't be huge spenders AND leave a lot to their kids except in very high earning circumstances
Bb8, you can't have it both ways. Either parents were good savers who leave a house to kids (who will likely sell it off to split the proceeds, thereby increasing supply which is hypothesized to lead to a crash) or parents were not good savers, cash-out refinanced a lot and the kids MUST sell because equity is so low. They can't be huge spenders AND leave a lot to their kids except in very high earning circumstances
You're not addressing any point I made (I'm assuming you meant "bb11" by "bb8").
I'm saying regarding the crazy expensive lifestyles you see others living without matching incomes, some of it is because those people received inheritances or other parental assistance, a lot of it is just people not saving much and/or using debt to fund it, and some of it is that there are others who have higher incomes than you do.
Bb8, you can't have it both ways.
You're not addressing any point I made (I'm assuming you meant "bb11" by "bb8").
Must've been watching Star Wars: The Force Awakens while posting ;)
Bb8, you can't have it both ways.
You're not addressing any point I made (I'm assuming you meant "bb11" by "bb8").
Must've been watching Star Wars: The Force Awakens while posting ;)
"these aren't the droids you're looking for"
Bb8, you can't have it both ways. Either parents were good savers who leave a house to kids (who will likely sell it off to split the proceeds, thereby increasing supply which is hypothesized to lead to a crash) or parents were not good savers, cash-out refinanced a lot and the kids MUST sell because equity is so low. They can't be huge spenders AND leave a lot to their kids except in very high earning circumstances
You're not addressing any point I made (I'm assuming you meant "bb11" by "bb8").
I'm saying regarding the crazy expensive lifestyles you see others living without matching incomes, some of it is because those people received inheritances or other parental assistance, a lot of it is just people not saving much and/or using debt to fund it, and some of it is that there are others who have higher incomes than you do.
Bb8, you can't have it both ways.
You're not addressing any point I made (I'm assuming you meant "bb11" by "bb8").
Must've been watching Star Wars: The Force Awakens while posting ;)
"these aren't the droids you're looking for"
G-3PO: you got itBb8, you can't have it both ways. Either parents were good savers who leave a house to kids (who will likely sell it off to split the proceeds, thereby increasing supply which is hypothesized to lead to a crash) or parents were not good savers, cash-out refinanced a lot and the kids MUST sell because equity is so low. They can't be huge spenders AND leave a lot to their kids except in very high earning circumstances
You're not addressing any point I made (I'm assuming you meant "bb11" by "bb8").
I'm saying regarding the crazy expensive lifestyles you see others living without matching incomes, some of it is because those people received inheritances or other parental assistance, a lot of it is just people not saving much and/or using debt to fund it, and some of it is that there are others who have higher incomes than you do.
Yeah, so parents can only "assist" in two circumstances: they are using debt to fund the assistance or they saved a bunch of money with which they can assist. If the former, then the answer to this thread is "yes, it is fueled by debt," if the latter, the answer is "no, the baby boomers saved a bunch of money and are transferring it to their children, thereby moving consumption from the 60s-90s to today"
Not really. Some people were good savers and some weren't, just like today. Some of the parents inherited themselves, and also get the huge headstart. That's why the talk about a housing crisis because boomers are dying doesn't make sense. Most of them will leave the house to their kids, who get a $1M boost (an entire lifetime's worth of saving for a Mustachian) just by being born to the right set of parents. Just owning a home in the Bay Area, LA, or NYC at this point gets you near to being a millionaire. Most of those homes are going to be inherited by the kids.
The cutoff for being in the top 1% of wealth is $9 million. So roughly 1 in 100-200 (less than 100 because parents often have multiple kids) is going to be inheriting $9 million or more. Maybe 1 in 10 will get more than $1 million when all is said and done (in HCOL areas it's probably more like 1 in 5). These amounts fund a lifetime of extravagant spending, and there's no way you'd know if they're just a co-worker.
Incorrect. For one, wealth is often passed down multiple times. Example:
Joe saves up and buys a house. Joe gets old and dies. House goes to his daughter. She gets old, dies. Proceeds from the house sale are split up amongst her two children. They use some of that money to each buy a house (Joe's house was in a prime area because the population of their city was smaller back then, so lower land values). Both of them pass their house to their kids, and use the rest of their inheritance to pay for the kids' college. The kids now don't need to pay a mortgage payment and had all of their college completely paid for, despite neither their parents nor their grandmother saving any money. The OP sees the two of them using their incomes to fund large vacations, while the OP has to pay down a mortgage and student loans. Confusion results. ;)
Incorrect. For one, wealth is often passed down multiple times. Example:
Joe saves up and buys a house. Joe gets old and dies. House goes to his daughter. She gets old, dies. Proceeds from the house sale are split up amongst her two children. They use some of that money to each buy a house (Joe's house was in a prime area because the population of their city was smaller back then, so lower land values). Both of them pass their house to their kids, and use the rest of their inheritance to pay for the kids' college. The kids now don't need to pay a mortgage payment and had all of their college completely paid for, despite neither their parents nor their grandmother saving any money. The OP sees the two of them using their incomes to fund large vacations, while the OP has to pay down a mortgage and student loans. Confusion results. ;)
rolleyes! Inherited wealth that is passed onto children was by definition saved since it was not spent If the kids parents has mortgaged the house and spent the equity, the kids would not have an inflated lifestyle
Incorrect. For one, wealth is often passed down multiple times. Example:
Joe saves up and buys a house. Joe gets old and dies. House goes to his daughter. She gets old, dies. Proceeds from the house sale are split up amongst her two children. They use some of that money to each buy a house (Joe's house was in a prime area because the population of their city was smaller back then, so lower land values). Both of them pass their house to their kids, and use the rest of their inheritance to pay for the kids' college. The kids now don't need to pay a mortgage payment and had all of their college completely paid for, despite neither their parents nor their grandmother saving any money. The OP sees the two of them using their incomes to fund large vacations, while the OP has to pay down a mortgage and student loans. Confusion results. ;)
rolleyes! Inherited wealth that is passed onto children was by definition saved since it was not spent If the kids parents has mortgaged the house and spent the equity, the kids would not have an inflated lifestyle
Sure they technically had the capability to spend even more than they did. But if I inherit a $1 million dollar portfolio, then spend the passive income from it so that I die with exactly $1 million in it (adjusted for inflation if you want), you would say I saved money?
I would think saving is spending less than you earn. Not when you're given a large amount up front and then spend 100% of your income the rest of your life, just not the principal.
Anyway, I'm not sure the point of this particular nitpick. Lots of people are advantaged by inheritance and parental assistance, and it allows them to outspend what you'd think they have based on their income from their day job. Label that however you want.
Incorrect. For one, wealth is often passed down multiple times. Example:
Joe saves up and buys a house. Joe gets old and dies. House goes to his daughter. She gets old, dies. Proceeds from the house sale are split up amongst her two children. They use some of that money to each buy a house (Joe's house was in a prime area because the population of their city was smaller back then, so lower land values). Both of them pass their house to their kids, and use the rest of their inheritance to pay for the kids' college. The kids now don't need to pay a mortgage payment and had all of their college completely paid for, despite neither their parents nor their grandmother saving any money. The OP sees the two of them using their incomes to fund large vacations, while the OP has to pay down a mortgage and student loans. Confusion results. ;)
rolleyes! Inherited wealth that is passed onto children was by definition saved since it was not spent If the kids parents has mortgaged the house and spent the equity, the kids would not have an inflated lifestyle
Sure they technically had the capability to spend even more than they did. But if I inherit a $1 million dollar portfolio, then spend the passive income from it so that I die with exactly $1 million in it (adjusted for inflation if you want), you would say I saved money?
I would think saving is spending less than you earn. Not when you're given a large amount up front and then spend 100% of your income the rest of your life, just not the principal.
Anyway, I'm not sure the point of this particular nitpick. Lots of people are advantaged by inheritance and parental assistance, and it allows them to outspend what you'd think they have based on their income from their day job. Label that however you want.
The "this particular nitpick" was started by you in response to my conjecture that consumption has been moved forwards in time when wealth is passed on to children. Your responses were "not exactly" and "incorrect." But I like how you try to portray me as the nitpicker.
As to your examples above, yes if I inherit $1 million and don't spend it then I've saved it. From an accounting perspective, Inheritance is recorded the same as any other income.
If I inherit $900k, earn $100k at my job, and spend $100k, my savings rate is 90%, not zero. If I spend 900k, my savings rate is 10%, not 100%.
Are you trying to say that inheritance unspent does NOT count as savings, but inheritance spent DOES count as spending?
Incorrect. For one, wealth is often passed down multiple times. Example:
Joe saves up and buys a house. Joe gets old and dies. House goes to his daughter. She gets old, dies. Proceeds from the house sale are split up amongst her two children. They use some of that money to each buy a house (Joe's house was in a prime area because the population of their city was smaller back then, so lower land values). Both of them pass their house to their kids, and use the rest of their inheritance to pay for the kids' college. The kids now don't need to pay a mortgage payment and had all of their college completely paid for, despite neither their parents nor their grandmother saving any money. The OP sees the two of them using their incomes to fund large vacations, while the OP has to pay down a mortgage and student loans. Confusion results. ;)
rolleyes! Inherited wealth that is passed onto children was by definition saved since it was not spent If the kids parents has mortgaged the house and spent the equity, the kids would not have an inflated lifestyle
Sure they technically had the capability to spend even more than they did. But if I inherit a $1 million dollar portfolio, then spend the passive income from it so that I die with exactly $1 million in it (adjusted for inflation if you want), you would say I saved money?
I would think saving is spending less than you earn. Not when you're given a large amount up front and then spend 100% of your income the rest of your life, just not the principal.
Anyway, I'm not sure the point of this particular nitpick. Lots of people are advantaged by inheritance and parental assistance, and it allows them to outspend what you'd think they have based on their income from their day job. Label that however you want.
The "this particular nitpick" was started by you in response to my conjecture that consumption has been moved forwards in time when wealth is passed on to children. Your responses were "not exactly" and "incorrect." But I like how you try to portray me as the nitpicker.
As to your examples above, yes if I inherit $1 million and don't spend it then I've saved it. From an accounting perspective, Inheritance is recorded the same as any other income.
If I inherit $900k, earn $100k at my job, and spend $100k, my savings rate is 90%, not zero. If I spend 900k, my savings rate is 10%, not 100%.
Are you trying to say that inheritance unspent does NOT count as savings, but inheritance spent DOES count as spending?
It really is irrelevant to the OP. But if someone says they saved up a million dollars, then no I don't think they're implying they just inherited it. Nor would I consider an heir a "saver" just because they haven't spent their entire big inheritance. But again, what does it matter? Either way they got help that a lot of people may not have.
Incorrect. For one, wealth is often passed down multiple times. Example:
Joe saves up and buys a house. Joe gets old and dies. House goes to his daughter. She gets old, dies. Proceeds from the house sale are split up amongst her two children. They use some of that money to each buy a house (Joe's house was in a prime area because the population of their city was smaller back then, so lower land values). Both of them pass their house to their kids, and use the rest of their inheritance to pay for the kids' college. The kids now don't need to pay a mortgage payment and had all of their college completely paid for, despite neither their parents nor their grandmother saving any money. The OP sees the two of them using their incomes to fund large vacations, while the OP has to pay down a mortgage and student loans. Confusion results. ;)
rolleyes! Inherited wealth that is passed onto children was by definition saved since it was not spent If the kids parents has mortgaged the house and spent the equity, the kids would not have an inflated lifestyle
Sure they technically had the capability to spend even more than they did. But if I inherit a $1 million dollar portfolio, then spend the passive income from it so that I die with exactly $1 million in it (adjusted for inflation if you want), you would say I saved money?
I would think saving is spending less than you earn. Not when you're given a large amount up front and then spend 100% of your income the rest of your life, just not the principal.
Anyway, I'm not sure the point of this particular nitpick. Lots of people are advantaged by inheritance and parental assistance, and it allows them to outspend what you'd think they have based on their income from their day job. Label that however you want.
The "this particular nitpick" was started by you in response to my conjecture that consumption has been moved forwards in time when wealth is passed on to children. Your responses were "not exactly" and "incorrect." But I like how you try to portray me as the nitpicker.
As to your examples above, yes if I inherit $1 million and don't spend it then I've saved it. From an accounting perspective, Inheritance is recorded the same as any other income.
If I inherit $900k, earn $100k at my job, and spend $100k, my savings rate is 90%, not zero. If I spend 900k, my savings rate is 10%, not 100%.
Are you trying to say that inheritance unspent does NOT count as savings, but inheritance spent DOES count as spending?
It really is irrelevant to the OP. But if someone says they saved up a million dollars, then no I don't think they're implying they just inherited it. Nor would I consider an heir a "saver" just because they haven't spent their entire big inheritance. But again, what does it matter? Either way they got help that a lot of people may not have.
No one is making the bold argument or denying the underlined argument. The point you seem to be missing is that at some point someone saved that money. So we may see kids living beyond their means now but if not debt fueled, it's the result of delayed consumption from past generations
No one is making the bold argument or denying the underlined argument. The point you seem to be missing is that at some point someone saved that money. So we may see kids living beyond their means now but if not debt fueled, it's the result of delayed consumption from past generations
Paying down principle on an appreciating asset is definitely "savings".
So when you guys calculate your savings rate, you are including your mortgage payments, or even the part going to principle, as savings?
I do not count my house in my savings nor in my net worth. As long as I'm living in it, it doesn't have value as far as I'm concerned. I don't count anything else I've bought in my net worth.
I do not count my house in my savings nor in my net worth. As long as I'm living in it, it doesn't have value as far as I'm concerned. I don't count anything else I've bought in my net worth.
At the bare minimum, your house has the value of the equivalent rent you would need to pay to live in a similar property.
I do not count my house in my savings nor in my net worth. As long as I'm living in it, it doesn't have value as far as I'm concerned. I don't count anything else I've bought in my net worth.
I do not count my house in my savings nor in my net worth. As long as I'm living in it, it doesn't have value as far as I'm concerned. I don't count anything else I've bought in my net worth.
At the bare minimum, your house has the value of the equivalent rent you would need to pay to live in a similar property.
It would cost a lot more to rent a similar property than to pay my mortgage, so I don't think that's true.
I do not count my house in my savings nor in my net worth. As long as I'm living in it, it doesn't have value as far as I'm concerned. I don't count anything else I've bought in my net worth.
This comes up very often here, but IMO it's a bit silly not to count your house as an investment and principal payments as savings. The spending part is what you pay in interest (i.e., the cost of money borrowed), maintenance, taxes, HOA if applicable, etc. Principal is not spending because presumably you will get it back (and perhaps more) when you sell it. Now, depending on your local housing market, you may not get it back in full, but unless you have some kind of special insight into the future, you shouldn't be calculating your future net worth based on the idea that your house will be worth nothing when you sell it. A very clear example of why that approach is problematic: is someone with a 10-year or 15-year mortgage less frugal than someone with a 30-year mortgage of the same value? Of course not. What about someone who makes additional payments to the mortgage every month, as many on here do? Regular principal payments should not be counted as spending any more than those extra payments are counted as spending, because they are fungibly the exact same thing. I understand that counting all housing payments as spending makes some folks feel more conservative in their approach to wealth building or maybe they are using it as some kind of jedi mind trick to encourage a higher savings rate. That's fine, but it's no less arbitrary than not counting 401k contributions or than just knocking 100k off your networth, just because why not? Works for some people, but I think it runs counter to the analytical, fact-based approach to FIRE that people on this forum should aspire to.
Lastly, given the historical returns of the housing market (appreciation of about ~3% a year), buying a house is no more consumption than buying a bond is consumption. The interest you pay on your mortgage, if you have one, is consumption (i.e., you are "consuming" the time value of money). The often significant transaction costs are consumption (i.e, you are consuming the services of realtors, mortgage brokers, and local government services via the taxes you might pay). Maintenance costs, which also can be quite significant, are obviously consumption. But unless you live in a car, a boat, or a trailer, the house itself is no more consumed than any other appreciating asset is "consumed."
If you sold your house, how much would 4% of the net proceeds cover in rent?
QuoteIf you sold your house, how much would 4% of the net proceeds cover in rent?
Do you do this for every possession you own? I could sell my clothes, my wedding ring, my car, my dog. These things are all assets, though not as much as my house.
Until I sell it, I don't count it.
The question was "So when you guys calculate your savings rate, you are including your mortgage payments, or even the part going to principle, as savings?" My answer was "nope".
I see my house as an expense. I plan to live there until I die, or if I move, I'd be trading it for another house- so I'm not going to be cashing out on it. It isn't an investment, it isn't savings. It is a place to live that I purchased.
QuoteIf you sold your house, how much would 4% of the net proceeds cover in rent?
Do you do this for every possession you own? I could sell my clothes, my wedding ring, my car, my dog. These things are all assets, though not as much as my house.
QuoteIf you sold your house, how much would 4% of the net proceeds cover in rent?
Do you do this for every possession you own? I could sell my clothes, my wedding ring, my car, my dog. These things are all assets, though not as much as my house.
I don't for most things, because they aren't worth anything material. I do have three cars, so I figure one of the three could be sold off if I needed the cash, so I mentally add a little bit for that (~$10k) but overall, everything I own (outside of cars and house and wedding/engagement rings) would struggle to bring $5k total, so it isn't worth considering them. Dog in particular might be more of a liability ;)
I think much of it is - or at least paid for by "leverage".
What I mean is, for many of these people, they use credit to leverage their future cash flow into current instant gratification. IF they can maintain the cash flow, they will be OK for the most part. It is when the cash flow ends OR they let their instant greed/need get too far out of control OR both. Thus is why so many are one paycheck away from crises, or one unexpected expense away from crises.
But, I know how you feel. I almost never spent money I didn't have yet (or even money I had), and have watched peers take more trips, buy grander houses or vacation homes, and wear nicer clothes. But I retired last year (@ 55 yo - a bit late to the MMM or FIRE game, but I caught up quickly). Had I been more aware years ago, I could have retired earlier.
A house is an asset, part of your net worth. It may appreciate in value or depreciate. Paying off debt (including a mortgage) isn't saving. It's paying for something you already bought--no different than paying off a credit card balance for a new TV. If someone needs to tell themselves paying off the mortgage is "saving" in order to self-motivate, I can fully understand that. ...But to extoll it to others as such is delusional.
A house is an asset, part of your net worth. It may appreciate in value or depreciate. Paying off debt (including a mortgage) isn't saving. It's paying for something you already bought--no different than paying off a credit card balance for a new TV. If someone needs to tell themselves paying off the mortgage is "saving" in order to self-motivate, I can fully understand that. ...But to extoll it to others as such is delusional.
QuoteIf you sold your house, how much would 4% of the net proceeds cover in rent?
Do you do this for every possession you own? I could sell my clothes, my wedding ring, my car, my dog. These things are all assets, though not as much as my house.
Until I sell it, I don't count it.
The question was "So when you guys calculate your savings rate, you are including your mortgage payments, or even the part going to principle, as savings?" My answer was "nope".
I see my house as an expense. I plan to live there until I die, or if I move, I'd be trading it for another house- so I'm not going to be cashing out on it. It isn't an investment, it isn't savings. It is a place to live that I purchased.
GAH!
Forgive my pedantry, but it's "princiPAL".
A principle is an idea or a tenet, one you might hold dearly, or live by. Principal is the non-interest portion of your mortgage payment.
A house is an asset, part of your net worth. It may appreciate in value or depreciate. Paying off debt (including a mortgage) isn't saving. It's paying for something you already bought--no different than paying off a credit card balance for a new TV. If someone needs to tell themselves paying off the mortgage is "saving" in order to self-motivate, I can fully understand that. ...But to extoll it to others as such is delusional.
if you don't believe it is then you have no business owning a home or investing in any rental properties.
A house is an asset, part of your net worth. It may appreciate in value or depreciate. Paying off debt (including a mortgage) isn't saving. It's paying for something you already bought--no different than paying off a credit card balance for a new TV. If someone needs to tell themselves paying off the mortgage is "saving" in order to self-motivate, I can fully understand that. ...But to extoll it to others as such is delusional.
Ha, you need to revisit/take Accounting or Econ 101. By your very faulty logic, when I sell my real estate holdings and slow travel the world at FIRE, the duration of my mortgages and any additional principal payments I made are both immaterial...maybe I should just burn the principal returned - it was spent money after all.
A house is an asset, part of your net worth. It may appreciate in value or depreciate. Paying off debt (including a mortgage) isn't saving. It's paying for something you already bought--no different than paying off a credit card balance for a new TV. If someone needs to tell themselves paying off the mortgage is "saving" in order to self-motivate, I can fully understand that. ...But to extoll it to others as such is delusional.
Ha, you need to revisit/take Accounting or Econ 101. By your very faulty logic, when I sell my real estate holdings and slow travel the world at FIRE, the duration of my mortgages and any additional principal payments I made are both immaterial...maybe I should just burn the principal returned - it was spent money after all.
If I buy a car, make the payments on it, pay it off, and then sell it and take the $5k I make on the sale and go on vacation, is that savings?
A house is an asset, part of your net worth. It may appreciate in value or depreciate. Paying off debt (including a mortgage) isn't saving. It's paying for something you already bought--no different than paying off a credit card balance for a new TV. If someone needs to tell themselves paying off the mortgage is "saving" in order to self-motivate, I can fully understand that. ...But to extoll it to others as such is delusional.
Ha, you need to revisit/take Accounting or Econ 101. By your very faulty logic, when I sell my real estate holdings and slow travel the world at FIRE, the duration of my mortgages and any additional principal payments I made are both immaterial...maybe I should just burn the principal returned - it was spent money after all.
If I buy a car, make the payments on it, pay it off, and then sell it and take the $5k I make on the sale and go on vacation, is that savings?
If you still can't tell the difference between a steeply depreciating asset like a car and an appreciating asset like real estate, then I guess I see why this is confusing to you.
if you don't believe it is then you have no business owning a home or investing in any rental properties.
I own a home so I have somewhere to live. Just like I own clothes so I have something to wear.
I could sell my clothes too, but I don't count them as savings.
If you still can't tell the difference between a steeply depreciating asset like a car and an appreciating asset like real estate, then I guess I see why this is confusing to you.
A house is an asset, part of your net worth. It may appreciate in value or depreciate. Paying off debt (including a mortgage) isn't saving. It's paying for something you already bought--no different than paying off a credit card balance for a new TV. If someone needs to tell themselves paying off the mortgage is "saving" in order to self-motivate, I can fully understand that. ...But to extoll it to others as such is delusional.
Ha, you need to revisit/take Accounting or Econ 101. By your very faulty logic, when I sell my real estate holdings and slow travel the world at FIRE, the duration of my mortgages and any additional principal payments I made are both immaterial...maybe I should just burn the principal returned - it was spent money after all.
If I buy a car, make the payments on it, pay it off, and then sell it and take the $5k I make on the sale and go on vacation, is that savings?
If you still can't tell the difference between a steeply depreciating asset like a car and an appreciating asset like real estate, then I guess I see why this is confusing to you.
A house is an asset, part of your net worth. It may appreciate in value or depreciate. Paying off debt (including a mortgage) isn't saving. It's paying for something you already bought--no different than paying off a credit card balance for a new TV. If someone needs to tell themselves paying off the mortgage is "saving" in order to self-motivate, I can fully understand that. ...But to extol it to others as such is delusional.I don't count my paid off house in my networth.
A house is an asset, part of your net worth. It may appreciate in value or depreciate. Paying off debt (including a mortgage) isn't saving. It's paying for something you already bought--no different than paying off a credit card balance for a new TV. If someone needs to tell themselves paying off the mortgage is "saving" in order to self-motivate, I can fully understand that. ...But to extoll it to others as such is delusional.
A house is an asset, part of your net worth. It may appreciate in value or depreciate. Paying off debt (including a mortgage) isn't saving. It's paying for something you already bought--no different than paying off a credit card balance for a new TV. If someone needs to tell themselves paying off the mortgage is "saving" in order to self-motivate, I can fully understand that. ...But to extoll it to others as such is delusional.
^This. Paying off debt is not saving. Sure, it'll increase your networth, but it's not saving.
A house is an asset, part of your net worth. It may appreciate in value or depreciate. Paying off debt (including a mortgage) isn't saving. It's paying for something you already bought--no different than paying off a credit card balance for a new TV. If someone needs to tell themselves paying off the mortgage is "saving" in order to self-motivate, I can fully understand that. ...But to extoll it to others as such is delusional.
^This. Paying off debt is not saving. Sure, it'll increase your networth, but it's not saving.
A house is an asset, part of your net worth. It may appreciate in value or depreciate. Paying off debt (including a mortgage) isn't saving. It's paying for something you already bought--no different than paying off a credit card balance for a new TV. If someone needs to tell themselves paying off the mortgage is "saving" in order to self-motivate, I can fully understand that. ...But to extoll it to others as such is delusional.
^This. Paying off debt is not saving. Sure, it'll increase your networth, but it's not saving.
Plenty of people plan on retiring to a lower cost of living area - in those cases, paying down a mortgage early is a form of saving - because you actually will reclaim the additional mortgage principal when you downsize.
In this situation, paying more on your mortgage is an investment of sorts, just one with a lower expected return and minimal volatility than the market (at current mortgage rates).
Paying down a mortgage is a way of building equity, or acquiring an asset, or building wealth. I just don't think it meets the definition of "Saving".
Paying down a mortgage is a way of building equity, or acquiring an asset, or building wealth. I just don't think it meets the definition of "Saving".
Exactly! But unless you're buying a property solely to rent, real estate (or its payments) does not fall under "investment", it falls under "housing expense". If you seriously believe you're going to make money when you later sell your property, that falls under "real estate speculation". (Same as gold, silver, antiques, comic books, etc.)
Paying down a mortgage is a way of building equity, or acquiring an asset, or building wealth. I just don't think it meets the definition of "Saving".
Exactly! But unless you're buying a property solely to rent, real estate (or its payments) does not fall under "investment", it falls under "housing expense". If you seriously believe you're going to make money when you later sell your property, that falls under "real estate speculation". (Same as gold, silver, antiques, comic books, etc.)
Oy vey, where are all the engineers and finance minded folks? I had thought this forum was more precise in applying definitions and calculations than the population at large, but I guess not.
Some people are also a lot more comfortable living close to the edge
Oy vey, where are all the engineers and finance minded folks? I had thought this forum was more precise in applying definitions and calculations than the population at large, but I guess not.
As a finance person, I AM applying a precise definition: "keep and store up (something, especially money) for future use." I don't get how sending money to someone else to pay a debt meets the strict definition of "keep and store up." Your problem is that you are confusing "investing" with "saving".
If you buy a house for $200K and sell it 20 years later for $340K, it may look good on paper, but not necessarily the case once you factor in what you would have made with the money parked elsewhere.
Oy vey, where are all the engineers and finance minded folks? I had thought this forum was more precise in applying definitions and calculations than the population at large, but I guess not.
As a finance person, I AM applying a precise definition: "keep and store up (something, especially money) for future use." I don't get how sending money to someone else to pay a debt meets the strict definition of "keep and store up." Your problem is that you are confusing "investing" with "saving".
Savings is money you don't spend. Debt payoff is not an expenditure - the money was already spent. Likewise OF COURSE investments are savings.... We don't consume the assets we buy.
Consider that almost everyone on this web site is either paying off debt or investing aggressively.. Are you saying we don't save any money here?
The problem with this saving vs. spending discussion re: mortgage payments is that you're all answering different questions.
If you buy a house for $200K and sell it 20 years later for $340K, it may look good on paper, but not necessarily the case once you factor in what you would have made with the money parked elsewhere.
Correct, but there also may (or may not) be a non-trivial lifestyle cost in terms of quality of life for those 20 years. For instance, I would not live in an apartment for 20 years to save money on not having a house, that's a lifestyle hit not worth it to me. You would also have to correct for rent increases; my mortgage payment is not going to change over the next 20 years (property taxes likely will) but rents will likely increase over time. One of the key factors in buying versus renting is locking in your "shelter expense" for a long term.
QuoteConsider that almost everyone on this web site is either paying off debt or investing aggressively.. Are you saying we don't save any money here?
No, I'm saying that paying off debt isn't savings, and I'm saying you save money to make investments. Again, it's a pedantic distinction, but especially the part about debt repayment not being savings, it's a distinction.
QuoteConsider that almost everyone on this web site is either paying off debt or investing aggressively.. Are you saying we don't save any money here?
No, I'm saying that paying off debt isn't savings, and I'm saying you save money to make investments. Again, it's a pedantic distinction, but especially the part about debt repayment not being savings, it's a distinction.
Ok, so are you "happy" if someone says they are investing their savings by paying off their mortgage vs investing their savings in the stock market?
It feels like you are being intentionally pedantic about the word choice here, to the point you'd rather be "right" than use terminology which is more commonly understood.
You guys are killing this post!It died long ago.
It's not dead it's just resting, pining for the fjords etc etcYou guys are killing this post!It died long ago.
QuoteConsider that almost everyone on this web site is either paying off debt or investing aggressively.. Are you saying we don't save any money here?
No, I'm saying that paying off debt isn't savings, and I'm saying you save money to make investments. Again, it's a pedantic distinction, but especially the part about debt repayment not being savings, it's a distinction.
Ok, so are you "happy" if someone says they are investing their savings by paying off their mortgage vs investing their savings in the stock market?
No, one doesn't "invest in paying off" they "retire debt".QuoteIt feels like you are being intentionally pedantic about the word choice here, to the point you'd rather be "right" than use terminology which is more commonly understood.
I'd argue no one "understands" paying off debt as savings.
Oy vey, where are all the engineers and finance minded folks? I had thought this forum was more precise in applying definitions and calculations than the population at large, but I guess not.
As a finance person, I AM applying a precise definition: "keep and store up (something, especially money) for future use." I don't get how sending money to someone else to pay a debt meets the strict definition of "keep and store up." Your problem is that you are confusing "investing" with "saving".
I hate to stick my nose in this but I agree with counting the equity in your house...which is also "Real Property"...which is as considered a Capital Asset. If you sell a capital asset for more than you bought it then it's a capital gain. If it's less than you bought it then it's a capital loss.Oy vey, where are all the engineers and finance minded folks? I had thought this forum was more precise in applying definitions and calculations than the population at large, but I guess not.
As a finance person, I AM applying a precise definition: "keep and store up (something, especially money) for future use." I don't get how sending money to someone else to pay a debt meets the strict definition of "keep and store up." Your problem is that you are confusing "investing" with "saving".
When you pay down principal, you "keep and store up (something, especially money) for future use" in the form of equity. What happens to the amount of that equity vis a vis the market is just as immaterial as what happens to index funds you've invested in. Look, I'm not arguing in favor of home ownership at all - I agree with Kaspian that there are opportunity costs people neglect to account for when deciding whether to buy or rent - I am simply arguing for an accurate, fact-based accounting system from which to calculate savings. Why some can't seem to grasp it boggles my mind.
It's obvious by this point that you won't believe me, but perhaps you'll take MMM's word for it? If so, see: http://www.mrmoneymustache.com/2015/01/26/calculating-net-worth/
In particular, the box titled "Joe's Spending" and the first line reading "Interest portion of his $2500 mortgage payment: ($2000)" (emphasis mine). The obvious implication is that the principal portion does not count towards spending, and thus counts towards savings.
[...]
I own a home so I have somewhere to live. Just like I own clothes so I have something to wear.
I could sell my clothes too, but I don't count them as savings.
I will pay you cash, the amount owing on your mortgage for your home and you can continue paying me rent in the amount of your current mortgage payment plus your taxes and insurance costs for a place to live. I'll even take on the capital expenditure costs going forward. ...
| It is inherent in the notion of enforceability of bargains that the exchange of values need not be an exchange of equivalents. In other words the parties are free to make good bargains and bad bargains, and the transaction does not cease to be a bargain because it is very profitable to one of the parties to it. |
[...]
I own a home so I have somewhere to live. Just like I own clothes so I have something to wear.
I could sell my clothes too, but I don't count them as savings.
Given the strength of Iowajes opinion on the matter, I'm surprised that he hasn't taken me up on the offer yet. :)
I will pay you cash, the amount owing on your mortgage for your home and you can continue paying me rent in the amount of your current mortgage payment plus your taxes and insurance costs for a place to live. I'll even take on the capital expenditure costs going forward. ...
There's actually a reported Alberta case where some guy persuaded his "friend", Mr. Hajduk, to enter into almost that exact transaction. Mr. Hajduk later sued his former friend. His basic argument was that the transaction was unfair, but the Court was not too sympathetic:Hajduk v. Gabourie, 2014 ABQB 177 (https://www.canlii.org/en/ab/abqb/doc/2014/2014abqb177/2014abqb177.html) at Ά 41 (quoting a secondary source).
It is inherent in the notion of enforceability of bargains that the exchange of values need not be an exchange of equivalents. In other words the parties are free to make good bargains and bad bargains, and the transaction does not cease to be a bargain because it is very profitable to one of the parties to it.
if you don't believe it is then you have no business owning a home or investing in any rental properties.
I own a home so I have somewhere to live. Just like I own clothes so I have something to wear.
I could sell my clothes too, but I don't count them as savings.
I will pay you cash, the amount owing on your mortgage for your home and you can continue paying me rent in the amount of your current mortgage payment plus your taxes and insurance costs for a place to live. I'll even take on the capital expenditure costs going forward.
This will give you access to cash for investing and still allow you to keep the same 'expense' for a place to live.
PM me with address to send my offer to purchase and rental contract agreement.
Deal?
Have you ever heard of the transitive property?Don't go dragging math into this conversation to confuse us!
if you don't believe it is then you have no business owning a home or investing in any rental properties.
I own a home so I have somewhere to live. Just like I own clothes so I have something to wear.
I could sell my clothes too, but I don't count them as savings.
I will pay you cash, the amount owing on your mortgage for your home and you can continue paying me rent in the amount of your current mortgage payment plus your taxes and insurance costs for a place to live. I'll even take on the capital expenditure costs going forward.
This will give you access to cash for investing and still allow you to keep the same 'expense' for a place to live.
PM me with address to send my offer to purchase and rental contract agreement.
Deal?
No. My neighborhood doesn't allow rentals.
I don't understand why it bothers you so much that some people keep track of their accounting in a different way than you do. When I no longer have a mortgage payment, I'll be able to save money- because I can essentially live "free" in a home already paid for- with a rental that would never happen. So buying is better in that respect, because eventually it will allow me to save money. But the money towards the house is a PURCHASE. It's not savings. I'm spending the money to buy something that I now own. Just like I do when I get a new pair of jeans or a dinner plate. That thing cost me money. After I bought it, it still has value. I could later transfer it to someone else and exchange money for it. But selling a house is no different than selling any of my other possessions. It may be worth more than I paid. It may be worth less. I don't know until the sale happens, so counting on it as "savings" is foolish, IMO. I actually did sell a dinner plate for twice what I paid- great investment. There is almost no way my house will sell for twice what I paid. The last house I sold sold for less than what I paid.
Forget fueled by debt, alot of it can be adequately explained as "fueled by not saving so much". If I had a savings rate of 5% instead of 50%, I'd be on a fairly typical retirement track and I would appear massively more wealthy/spendy than I currently appear, because alot of that extra spending would be on highly visible luxuries (travel, car, etc)Yeah, that too. I had a period of $120K+ gross and minimal savings... I don't even have expensive tastes, just little things that added up. It's wild.
In financial economics, capital refers to any asset used to make money, as opposed to assets used for personal enjoyment or consumption. This is an important distinction because two people can disagree sharply about the value of personal assets, one person might think a sports car is more valuable than a pickup truck, another person might have the opposite taste. But if an asset is held for the purpose of making money, taste has nothing to do with it, only differences of opinion about how much money the asset will produce. With the further assumption that people agree on the probability distribution of future cash flows, it is possible to have an objective Capital asset pricing model. Even without the assumption of agreement, it is possible to set rational limits on capital asset value.if you don't believe it is then you have no business owning a home or investing in any rental properties.
I own a home so I have somewhere to live. Just like I own clothes so I have something to wear.
I could sell my clothes too, but I don't count them as savings.
I will pay you cash, the amount owing on your mortgage for your home and you can continue paying me rent in the amount of your current mortgage payment plus your taxes and insurance costs for a place to live. I'll even take on the capital expenditure costs going forward.
This will give you access to cash for investing and still allow you to keep the same 'expense' for a place to live.
PM me with address to send my offer to purchase and rental contract agreement.
Deal?
No. My neighborhood doesn't allow rentals.
I don't understand why it bothers you so much that some people keep track of their accounting in a different way than you do. When I no longer have a mortgage payment, I'll be able to save money- because I can essentially live "free" in a home already paid for- with a rental that would never happen. So buying is better in that respect, because eventually it will allow me to save money. But the money towards the house is a PURCHASE. It's not savings. I'm spending the money to buy something that I now own. Just like I do when I get a new pair of jeans or a dinner plate. That thing cost me money. After I bought it, it still has value. I could later transfer it to someone else and exchange money for it. But selling a house is no different than selling any of my other possessions. It may be worth more than I paid. It may be worth less. I don't know until the sale happens, so counting on it as "savings" is foolish, IMO. I actually did sell a dinner plate for twice what I paid- great investment. There is almost no way my house will sell for twice what I paid. The last house I sold sold for less than what I paid.
A home is vastly different than a pair of jeans. You have to know this. You can't rent out your jeans and you lose money on jeans. If you took out a loan for a pair of jeans costing 100 you couldn't even expect to receive 100 when you sell, let alone appreciation.
Many people diversify their portfolios with real estate. Not with jeans.
If you don't believe real estate is an investment, then you have to apply that same rule to rental properties.
Have you heard of equity? Equity in real estate is actually not that different than equity in a house.
if you don't believe it is then you have no business owning a home or investing in any rental properties.
I own a home so I have somewhere to live. Just like I own clothes so I have something to wear.
I could sell my clothes too, but I don't count them as savings.
I will pay you cash, the amount owing on your mortgage for your home and you can continue paying me rent in the amount of your current mortgage payment plus your taxes and insurance costs for a place to live. I'll even take on the capital expenditure costs going forward.
This will give you access to cash for investing and still allow you to keep the same 'expense' for a place to live.
PM me with address to send my offer to purchase and rental contract agreement.
Deal?
No. My neighborhood doesn't allow rentals.
I don't understand why it bothers you so much that some people keep track of their accounting in a different way than you do. When I no longer have a mortgage payment, I'll be able to save money- because I can essentially live "free" in a home already paid for- with a rental that would never happen. So buying is better in that respect, because eventually it will allow me to save money. But the money towards the house is a PURCHASE. It's not savings. I'm spending the money to buy something that I now own. Just like I do when I get a new pair of jeans or a dinner plate. That thing cost me money. After I bought it, it still has value. I could later transfer it to someone else and exchange money for it. But selling a house is no different than selling any of my other possessions. It may be worth more than I paid. It may be worth less. I don't know until the sale happens, so counting on it as "savings" is foolish, IMO. I actually did sell a dinner plate for twice what I paid- great investment. There is almost no way my house will sell for twice what I paid. The last house I sold sold for less than what I paid.
First, you never live "free" in a house you paid for-- there's always opportunity cost for the cash, and conversely imputed rent regardless of whether your HOA actually allows rentals.
No, an investment is something you do because you expect it will give you monetary advantage.So the house isn't one. Because I don't expect that it will. The only expectation I have for it is that it gives me a place to live.
To reiterate, you don't have to count it as savings of you don't want... But in that case you have to ignore the original purchase of the home as an expense. You can't double count it as a $300k expense in year one, then a $1.5k (or whatever) monthly expense thereafter.I don't track my expenses, only the amount of money I don't spend (savings; which I compare against my salary to determine my savings rate. Expenses are meaningless to me.). But if I did- I would only record it as I spent it- as that is the money going out. Unless you pay cash, a house doesn't cost $300k one year and then $1.5k monthly. It more likely costs $80k one year, and then $1.5k monthly.
QuoteFirst, you never live "free" in a house you paid for-- there's always opportunity cost for the cash, and conversely imputed rent regardless of whether your HOA actually allows rentals.
Which is why I said "free" and not free.
QuoteNo, an investment is something you do because you expect it will give you monetary advantage.So the house isn't one. Because I don't expect that it will. The only expectation I have for it is that it gives me a place to live.
QuoteTo reiterate, you don't have to count it as savings of you don't want... But in that case you have to ignore the original purchase of the home as an expense. You can't double count it as a $300k expense in year one, then a $1.5k (or whatever) monthly expense thereafter.I don't track my expenses, only the amount of money I don't spend (savings; which I compare against my salary to determine my savings rate. Expenses are meaningless to me.). But if I did- I would only record it as I spent it- as that is the money going out. Unless you pay cash, a house doesn't cost $300k one year and then $1.5k monthly. It more likely costs $80k one year, and then $1.5k monthly.
I'm glad to see this discussion of paying off the mortgage versus "investing," because I think it needed a fresh take, er brawl, after the 374 similarly inconclusive threads on the subject...Excuse me sir, I reached a conclusion on the subject long ago. The inability of the benighted masses to see the light of my reasoning is truly N.M.F.P.~!
Interesting this thread was recently featured on the NYT (https://www.nytimes.com/2019/11/06/your-money/financial-security-envy.html).
I'd think that most of the display of wealth that doesn't make much sense to us Mustachian/FIRE folks is pretty simply just that it's...
...on display.
In other words, if we're in the process to FI, most of our wealth is not visible. It's in stocks, in bank accounts, in real estate investments elsewhere. Whatever the case may be.
Meanwhile, the Joneses next door don't have that sort of wealth invested. You see all their wealth on display: a bigger house, recent renovations, newer cars, fancier clothes. All that spending does come at a very real cost, though depending on your value of time (https://www.tictoclife.com/value-of-time/).
Seeing it in front of your face (rather than buried in an investment account) certainly makes it more apparent. I'd think many of the same neighbors will start wondering about your wealth, even if you're in jeans a few years older and slightly worn, when you're at home on a Tuesday consistently when everyone else is working. Pandemic remote work excluded. :)
Ultimately, we should aim not to compare ourselves of course. Easier said than done, sometimes!
I spend about $40k a year in net expenses (after tax adjustments) and I consider my lifestyle to be incredibly lavish.
The median Australian household has about $80k in disposable income of which they spend more than 90%, i.e. $72k.
So it's not just that "everyone seems wealthy". The truth is that everyone does live an extraordinarily wealthy, profligate life because they feel no need to save. After all, if you run out of money, the government bails you out - it applies to banks but it also applies to individuals. Fall into debt? Declare bankruptcy. Don't have a job? Get the dole. Retire without any savings? You get an extremely generous pension.
So I'd argue the "everyone seems wealthy" illusion is not an illusion. When the typical family can spend $70k+ per year, that is true wealth. The fact that people don't recognise this shows the insularity and spoiled nature of most western first class citizens.
...
most of our wealth is not visible. It's in stocks, in bank accounts, in real estate investments elsewhere.
...
You see all their wealth on display: a bigger house, recent renovations, newer cars, fancier clothes.
I feel like there are a few factors:
- Yes, some people just are borrowing from their future to fuel today. $70,000 cars on $70,000 salaries and replacing the cars every 2 years. In debt up to their eyeballs and if they don't get a raise or a bonus or some overtime this quarter they won't be able to get the credit cards to a number they can cash flow to maintain their perpetual balances.
- Others are maybe not as bad off as you think because sure they enjoy their cars, but they eat at home and don't vacation and do all of their own home repairs - it can be a matter of trade-offs. For close friends you may have a better picture of all of their trade-offs, but for many folks you only casually know they might advertise fancy vacations and yet you won't see that they do their own car maintenance, home repairs, clean their own home (no maids), do their own pest control and lawn service, etc.
- Some people have a lot of family support. This may be monetary in terms of $$ for down payment on house, no student loans, tons of support to move/start first job out of college, living at home for first 1-2 years after college, staying on parent's cell phone/netflix/health insturance plans, etc.......or it may be non-monetary such as free daycare for kids age 0-5.
- Most people simply *are not saving*. If you look at average 401k balances, that shit is depressing. Most people *might* contribute to 401k just to get the match and that's it. If they lose their job they immediately pull from 401k due to no savings.
- Imagine what luxurious life you would lead if you didnt save an extra 10% per year, you had $15k in free childcare, and/or no student loans.
I feel like there are a few factors:
- Yes, some people just are borrowing from their future to fuel today. $70,000 cars on $70,000 salaries and replacing the cars every 2 years. In debt up to their eyeballs and if they don't get a raise or a bonus or some overtime this quarter they won't be able to get the credit cards to a number they can cash flow to maintain their perpetual balances.
- Others are maybe not as bad off as you think because sure they enjoy their cars, but they eat at home and don't vacation and do all of their own home repairs - it can be a matter of trade-offs. For close friends you may have a better picture of all of their trade-offs, but for many folks you only casually know they might advertise fancy vacations and yet you won't see that they do their own car maintenance, home repairs, clean their own home (no maids), do their own pest control and lawn service, etc.
- Some people have a lot of family support. This may be monetary in terms of $$ for down payment on house, no student loans, tons of support to move/start first job out of college, living at home for first 1-2 years after college, staying on parent's cell phone/netflix/health insturance plans, etc.......or it may be non-monetary such as free daycare for kids age 0-5.
- Most people simply *are not saving*. If you look at average 401k balances, that shit is depressing. Most people *might* contribute to 401k just to get the match and that's it. If they lose their job they immediately pull from 401k due to no savings.
- Imagine what luxurious life you would lead if you didnt save an extra 10% per year, you had $15k in free childcare, and/or no student loans.
You left off a significant one, which is that quite a few people are just rich, by most people's measures, and can afford nice things and still save a reasonable proportion of their savings.
Even if only 1 in 8 or 1 in 10 households are like this, our selectivity bias can easily make us think this is "everyone", particularly when augmented by some households in those categories you mentioned who are social climbing.
Best decision I ever made for my own mental health was to choose to live in a neighborhood where the median income is well below ours -- where we share the similar consumption levels, even though our income is much higher.That makes perfect sense to me. I felt a lot better about my lifestyle choices when I lived in a cheaper zip code. Now that I live in a place where houses start at $500k and there's a Tesla in every other driveway, I feel poor (even though I know I have much more in savings than the average American).