Author Topic: Hard to save when you earn only $176K a year  (Read 5879 times)

Gerard

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Hard to save when you earn only $176K a year
« on: July 19, 2012, 06:42:49 PM »
As a Canadian, I apologize for the entitlement of some of my compatriots (not like this is the first story of this type recently):

http://www.theglobeandmail.com/globe-investor/personal-finance/household-finances/how-to-save-when-surplus-cash-is-low/article4416274/

KMMK

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Re: Hard to save when you earn only $176K a year
« Reply #1 on: July 19, 2012, 07:29:46 PM »
Wow. With that area I understand the house price. Though I don't understand the 35 yr variable mortgage - do they realize how much interest that would be?
Apart from the housing, again wow - almost $600/month for clothing and grooming, for those careers?  Auto lease? Fuel? I know some things are more expensive in Ontario (I'm in MB), but that's crazy.
Maybe they should stop that $20/month charitable contribution - that might help. Obviously they aren't reading this forum.

gooki

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Re: Hard to save when you earn only $176K a year
« Reply #2 on: July 20, 2012, 01:39:52 AM »
My god their spending is insane.

Considering only one of them commutes to work, now can they justify $1200 a month on vehicle expenses?

Phones, cable and internet running close to $500 a month also seems excessive.

igthebold

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Re: Hard to save when you earn only $176K a year
« Reply #3 on: July 20, 2012, 07:21:58 AM »
Quote from: the article
What the expert says
Don and Carman are doing all the right things, Mr. Henri says. They are saving what they can, their expenses are reasonable, they have no debt other than their mortgage, they have begun saving for their children’s education, they have life insurance, a line of credit for emergencies and wills and powers of attorney for property and personal care.

We've got a culture problem. We've all been so poorly trained about what's reasonable that even the expert sees their spending as appropriate. No surprise.. that's what this blog is about, after all.

velocistar237

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Re: Hard to save when you earn only $176K a year
« Reply #4 on: July 20, 2012, 09:15:47 AM »
Hard to save when you spend all your money.

keith

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Re: Hard to save when you earn only $176K a year
« Reply #5 on: July 21, 2012, 01:17:54 AM »
Quote from: the article
What the expert says
Don and Carman are doing all the right things, Mr. Henri says. They are saving what they can, their expenses are reasonable, they have no debt other than their mortgage, they have begun saving for their children’s education, they have life insurance, a line of credit for emergencies and wills and powers of attorney for property and personal care.

We've got a culture problem. We've all been so poorly trained about what's reasonable that even the expert sees their spending as appropriate. No surprise.. that's what this blog is about, after all.

Yup, I just about laughed out loud when I saw the "What the expert says" in that article.

ShanghaiStashing

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Re: Hard to save when you earn only $176K a year
« Reply #6 on: July 24, 2012, 01:41:42 AM »
Well,

Actually by the time you break-down his wife working as a teacher she's actually costing the family money. The rough income distribution in Canada to get to 9975 after tax is 125K and 41K 41K after tax is 33.5K per year after tax.

They spend:
23.4K on child care
4.5K on commuting (50% of fuel, insurance and maintenance)
2K on grooming (assuming 50% is her grooming for work purposes)
1.2K on clothing (assuming 100 / month for work purposes)
1.5K on eating work lunch (assuming 10 lunches / month at 12.50 total cost)

Other than her DB pension which frankly as a teacher is in Canada is exceptionally iron clad, there is almost no reason for her to actually go to work. However, given the DB pension this equation changes substantially as after 25 years of of service she can retire with pretty solid pension (I think it's ~70% of last 5 years income at that point), more than enough to retire on.

I also don't understand how it is 'hard to save' when they are currently putting away $1000 / month. Finally, DON WORKS FROM HOME BUT THEY ARE PAYING FOR CHILD CARE. This is sheer and utter stupidity.

gooki

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Re: Hard to save when you earn only $176K a year
« Reply #7 on: July 24, 2012, 02:29:45 AM »
Finally, DON WORKS FROM HOME BUT THEY ARE PAYING FOR CHILD CARE. This is sheer and utter stupidity.

I entirely disagree, working from home doesn't mean one also has the time to provide the best care for a child.

ShanghaiStashing

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Re: Hard to save when you earn only $176K a year
« Reply #8 on: July 24, 2012, 02:38:53 AM »
Finally, DON WORKS FROM HOME BUT THEY ARE PAYING FOR CHILD CARE. This is sheer and utter stupidity.

I entirely disagree, working from home doesn't mean one also has the time to provide the best care for a child.

This is a very valid point that I agree entirely with. However, pre-tax one has to earn an additional ~32K in order to cover their child care costs, or ~25% of Don's income. There are likely ways to optimize this expenditure and Don's workflow in order to save on child care.

Dee

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Re: Hard to save when you earn only $176K a year
« Reply #9 on: July 24, 2012, 04:56:44 AM »
Hopefully they have looked for and found child care that is in synch with the school year, so that they are paying for it 10 months of the year, rather than 12 (given a typical teacher's two-month summer break).

If ShanghaiStashing is right and her job is actually costing them money (or having them break even), then I automatically jump to the solution that she quit her job. That may be the right move for some mustachian couples, but often not a wise move for women (or couples) who don't think through the long-term impacts (both financial and non-financial) including the vulnerability that can ensue for the non-working partner. If the relationship goes sour, it would be much more difficult to leave if one had been outside the work force. For mustachian couples who are interested in digging deep into the workings of their personal finances and understanding their core values and only spending in synch with those values, having one partner not work outside the home, especially when there are young children, might turn out to be the best solution. For most other couples, there are many reasons to caution against this, including the financial and emotional vulnerability that could ensue for the partner no longer in the work force.

If they were actually interested in reducing their expenses, then they could look into various aspects related to her job, including her commuting (maybe she could car pool, bicycle to work or use public transportation?), not to mention whether they've just got way more car than they need!

Two observations: The Wealthy Barber, David Chilton, likes to point to teachers as being the most frugal professional group he knows. She may have a lot of opportunities for reducing expenses if she talked with colleagues about their expenses and how they make their households work on what I would guess is a lot less money in most cases.

This couple is the same age (give or take a couple of years) as Mr and Mrs MM!

ShanghaiStashing

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Re: Hard to save when you earn only $176K a year
« Reply #10 on: July 24, 2012, 06:52:55 AM »
Dee!

Great points! I was assuming that one of two things happened there. First, their calculations of monthly costs were simple averages (e.g., they might spend more in any given month and not pay for two months of the year) or second, they did something along the lines of send the kids to camp for a couple of weeks in the summer.

I also made a mistake above, the number should have been 135K and 41K or so.