I read that half of Americans couldn’t cover an unexpected $1,000 expense. This sounds crazy to me. I understand that poverty exists, but the idea that an adult with a job doesn’t even have that amount saved up seems really strange.
What’s your relationship or philosophy with money? What do you credit for your financial success, or alternatively, what do you blame for your failures?
For the extra brave ones: how much savings do you have, and what are you planning to do with them?
It comes down to if you rent.
If you have a fixed mortgage, shit gets easier fast. If you rent, any wage increases is often offset by rent increases.
Less people are able to save, because they never get out of those “tough first years” of a mortgage
Renting is such bullshit these days. The payments they ask for rivals mortgage payments from just 15 years ago.
Less than that, especially in areas that used to be cheap.
It took less than 5 years for my decent sized house on almost an acre in a middle sized city to be less than a 2/2 apartment.
It’s fucking insane.
I have rent control. Buying is the worse financial choice for me.
Idk it’s pricy to own a home nowadays unfortunately. I bought only last year and my mortgage payments are a bit higher per month than people seem to pay for rent on a similar type of unit. It’s not that I got a “bad deal” on the residence either. Home prices just don’t make sense nowadays.
I will say that around 2931, rent prices in my area skyrocketed up a whopping $400-600 in one year, but they have since seemed to stabilize.
While your fixed rate mortgage costs don’t go up every year, your property taxes, insurance, and HOA fees will. So with the above in mind, it doesn’t really seem as economical anymore to own a home.
School and medical debt as well… The more you make, the more they take… Always keeping you at barely scraping by
Live below my means, invest the rest.
I don’t dress or act like people in my pay range. My house is small and in a quiet neighborhood and cost less than my salary. Car is older but paid off and I know all the quirks and have the toolbox in the back to fix it. It is probably one of the top 5 most reliable cars in history. My work dress shoes are 10 years old and my around the house shoes were new in 2019.
I spend my money where I spend my time. So I have a nice phone, a very nice monitor and mechanical keyboard, and a good computer. And all with the right to repair philosophy. Same for my wife and kids. And also good running shoes, good exercise equipment.
The plan is to get to a point where I can just not work at all and maintain my lifestyle. Three percent rule and all that. And also help launch my kids.
Something about a 25 year roof and a Japanese shit box car in my fortress of solitude.
FWIW I grew up really really really poor like you wouldn’t believe so I’m okay with this.
I grew up upper-middle class and have largely the same philosophy. Always thought my friends’ parents were idiots for buying these gas guzzling Ford/Chevy monstrosities just to haul around 1-2 kids and a dog on occasion. Regular salaried people spending/financing more than half their annual income every few years on cars they don’t need just to keep up with the Joneses who don’t really care in the first place.
I don’t skimp on quality when I buy something, but I only buy what I actually need and if something serves its purpose, I hold onto it for as long as it works. My wife and I do very well now, but aside from living in a fairly nice neighborhood with great public schools and amenities, you wouldn’t think it from the cars we drive and the way we dress.
I just don’t understand it. I see some people with $1000 car payments and nothing toward retirement. What ever happened to looking for good deals? We had a kind of “rugged ingenuity” thing growing up where you respected people who took care of their older stuff, and I guess that still holds true today. $1000 car payments, I would have paid off my car in under a year.
Honestly, I’m scared to spend. Which I guess is okay because I’m comfortable with how we live and sometimes you have to spend on life events out of your control.
So I have a nice phone, a very nice monitor and mechanical keyboard, and a good computer. And all with the right to repair philosophy. Same for my wife and kids.
Jeez man, I’m happy for you, but most of us are stuck with stock model bullshit that broke in 2016. Go brag about your consumer friendly right-to-repair family in c/BuyItForLife.
(I kid, of course 😊 Solid approach you have there, smart and sustainable)
Yeah, thanks. Between ThinkPads and system76 and Fairphone, it’s pretty easy to maintain. Monitor is a Dell U3014. It was over a thousand dollars new but these days it’s under $200 used and I’ve replaced the mainboard in it twice for about $145 each time. Everything was purchased slightly used so that saves a lot.
All of this is great except the shoes, get some new/better shoes it’s worth it, your body will thank you later.
top 5 most reliable cars in history.
i’m listening. is it an old corolla?
Camry
This is essentially my situation too. I spend quite a bit of money on these small purchases for hobbies. But I’m easily clearing a couple hundred a month to buy stocks, save, do something really stupid, et cetera.
I’m with you on most of this but I think having a reliable car is pretty important in the US due to lack of good public transport. In many cases, after a car gets to be a certain age you end up having to repair too many things on it and it becomes an unreliable money pit. I’m very glad that hasn’t happened to you, but I think for a lot of people it makes sense to get rid of their car once it gets too old. And then try to buy a lightly used car outright.
I kind of don’t really drive much. Between biking and living close to a lot of things, I’ve put about 40,000 miles on the car in 7 years. Car is in its third decade and has about 70k miles on it.
What’s your relationship or philosophy with money?
A life-changing shift to my approach has been to worry about absolute amounts rather than percentages. Saving $10 on a $20 item feels great but ultimately is the same thing as saving $10 on a $500 item (which feels like nothing).
I grew up lower middle class: never had to worry about not having a roof over my head, but there were times we were somewhat food insecure, and spending money on leisure/entertainment or anything unnecessary for survival was a foreign concept until I got to high school and some my parents’ career moves paid off and put us in upper middle class. It took them a good 10+ years before they could relax a little bit and feel secure with their money, though, and that was as much driven by the fact that their kids were adults who had moved out.
So life has been about deciding which of my parents’ frugal attitudes and approaches to money to keep and which to discard.
Things I decided not to adopt:
- I slowly learned to stop caring as much about wasted food. Food is just cheaper now compared to when I was growing up (even if the last 5 years has shown an uptick), and as a society we have more issues with obesity than hunger, so cleaning off a plate seems like it doesn’t actually do that much good.
- My time is worth something to me. I will gladly pay the few dollars here and there for convenience.
- I’m glad I ignored my parents advice to buy a home as soon as I could and build equity or whatever. I rented and it worked out great for me, giving me the flexibility to make changes at different stages of my life.
Things I kept:
- Life is uncertain. Always be prepared with whatever you can accumulate for financial resilience: cash, other property, lines of credit, marketable job skills, literal insurance policies, etc. Don’t underestimate the importance of personal relationships, whether it’s “credit” from friends and family who can help you out of a bind, colleagues who can refer work to you, bosses who will fight for your career, etc.
- Develop your career. Education and credentials are important early on, and up-to-date skills and a good understanding of the landscape in your field (both in the type of job and the type of industry you work in), plus solid relationships with people, can help you know when switching jobs is right for you.
Things I had to learn on my own:
- Life is unfair. Many types of unfairness are systematic. So why not position yourself to where the unfairness works in your favor, if available?
- Higher income makes it easier to survive mistakes on the spending side. To flip around Ben Franklin’s quote, a penny earned is a penny saved.
- Know yourself and your own laziness. Set up automatic functions wherever possible: automatic bill pay, automatic savings, automatic investments, etc. Steer away from any strategy that requires active management, and towards strategies that tend towards a set it and forget it philosophy.
I’ve also made a shitload of mistakes, some of them pretty costly, especially back in my 20’s:
- Paid probably thousands in credit card interest in my early 20’s chasing lifestyle bullshit.
- Paid thousands in unnecessary car loan interest in my mid 20’s by getting suckered by a dealer.
- Paid hundreds, maybe thousands, in late fees and interest from forgetting deadlines to pay shit I actually already had the money on hand for.
I’m rich now, most of it from luck (especially timing), much of it from personal relationships (good family, good marriage, good friends), some of it from actual effort (good grades from a good law school), and some of it from conscious decisions to steer towards my strengths and away from my weaknesses (lazy but smart, prototypical “gifted” slacker with undiagnosed ADHD).
It took a while to get here, though, and I was financially insecure well into my 30’s. Sorta figured shit out then, and then married someone who complements me pretty well on these things, and covers my blind spots.
For the extra brave ones: how much savings do you have, and what are you planning to do with them?
I have some savings, and it’s an emergency fund. It’s representing 1-2 months of typical spending, that could be stretched to 3-4 months if I needed to stop the frivolous spending. But I have credit beyond that, and less liquid assets I’d be able to tap into if I were facing a longer term issue.
But I’m not saving for any particular thing other than retirement. If things accumulate and grow, great. I’ll make a judgment call on when to retire based on how I feel and how much I have and what I want to do. I anticipate my wife and I will probably want to retire in our early 60’s, based on our anticipated career trajectories and the ages of our children.
Really interesting read. Thanks for the response.
Why do you only have a few months’ worth of savings despite considering yourself rich? Or are you just speaking about cash reserves?
Or are you just speaking about cash reserves?
Yes. Cash reserves are like unused RAM to me: I have it, so I might as well put it to work. If it turns out I need it somewhere else, I can always go rearrange things to make that possible.
Realistically, I think I’m rich because my wife and I both have strong ability to command high salaries, switch jobs, etc., even in a pretty severe downturn. The main things that might tank the value of that expected future cash flow are disability or death, and we at least insure against those.
We also only need one of our two incomes to support our lifestyle, so we have a certain resilience that just comes from having that buffer. At our current ages, we also already have substantial retirement savings, so we have some resilience there, too.
The but about higher income making it easier to have mistakes is a big one.
I have a friend online who wants to make money, but doesn’t seem to have the ability to do so without going back to school. Going back to school would incur student loan debt, so they do not wish to do so.
I have a crazy amount of student loan debt, maybe $150k. But people don’t understand that federal student loan debt is absolutely nothing like credit card debt. There are basically no downsides to it besides paying another monthly bill (that you can use an income based repayment plan for).
People don’t understand how incredibly useful excess income is even if it ends up with a lot of loan debt. I had a similar hesitancy back before I went back to school, but I don’t regret it at all. I think I ended up like tripling my income.
Even if you end up with a lot of loans, making say $80k/yr is astronomically easier to survive on than $40k/yr for example. You have to think that something like rent or food prices are going to be somewhat similar in your area no matter how much you make. Sure, you could choose to live in a lavish place I suppose, but if you live reasonably then it’s more than worth it.
As an example, the average rent price for a not shitty one bedroom apartment in my area is maybe around $1.6k, which would equate to $19.2k/yr. That’s almost 50% of the gross income of the person making $40k/yr while only around 25% of the person making $80k/yr. So even if the person making $80k/yr has a $1k/mo student loan bill (you can get it cheaper if you wish), the difference is dramatic.
The person making $40k/yr will have a little over $20k left over at the end of the year for remaining expenses and savings, but the person making $80k/yr will have more than double that at $48k left over. Obviously there are a lot of nuances in this but still.
So it’s absolutely worth it to incur federal student loan debt if it means you will make a lot more more money. Private loan debt is a bit different.
Yeah, I’m not going to pretend like I’m good with money. I’m not. I have a decade of experience of being a young adult on a tight budget to know that’s not one of my strengths. I wasn’t great at stretching each dollar to its most efficient use. And I still am not.
I won’t speak on whether student loans are worth it. I think, like everything, it depends. I think a bachelor’s degree is definitely worth the cost (both in tuition and time), but it might still be worth doing it cheaper if there’s a cheaper path available.
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But it’s even worse than that - what kind of emergency is that cheap? Sure I could replace tires in my car within that amount, but could not repair a car accident. I could visit an ER within the amount but could not pay for medical care for sickness or injury. I could call a plumber within that amount, but not not repair or replace things after a leak. I could travel to see my elderly Mom if she were sick, but could not afford a place to stay there within that amount
I have $15k liquid savings and another $50k I could pull from my Roth IRA in a dire emergency. It’s not as much as I’d like, but I’d be ok if I lost my job. I live in a HCOL area so it doesn’t last as long as you’d think.
I make a good wage, but I work my ass off for it. I credit my financial success largely to luck, my work ethic, and the great state of California. 10 years ago I was making $20k a year, now it’s close to $200k. The main difference was I moved to California. No college degree, blue collar job. Skilled labor. I took jobs with companies that would train me, took promotions, and job hopped a lot.
I pay a ton of taxes and I’m happy to. I’m giving back to the community that enabled my success. If anything, I should be paying more taxes. I do donate about $80 a month to various causes, mostly carbon capture to eliminate my personal carbon footprint, because the environment is very important to me and I like to feel I’m not part of the problem.
I still have $20k in debt, on credit cards but at a promo 2% interest. I hope to pay it off in 2 years.
My philosophy with money is honesty not very healthy in some respects. I’ve been chasing dollars for years, to the complete atrophy of my social life. I’ve been pouring money into my retirement and have about $300k saved up in 401ks and IRAs. I also send a ton of money to my parents who are still stuck in the poor Southern state I grew up in.
In my next phase of my career I hope to transition to a job that will keep the same wage but give me a better work/life balance. I work 60 hours a week, add commute time and it’s 75 hours a week.
I’m also fucking sick of working with all dudes. The trades are overwhelmingly male. I can go weeks without even talking to a woman.
I’m in my mid 30s. I came to California homeless in a beat up '92 coupe with $30 in my pocket. I’m the poster child for pulling yourself up by your bootstraps, so listen to me when I say I would not be where I am without the support of a pro-worker government and a huge dose of luck. Taxes are good. Unions are good. Worker protections are good. Even with all that, I am an outlier. We (the fortunate) need to do more to help others.
Wow, you make $200k/yr and only have $15k in savings? Not that $15k is a bad amount to have for the average person, but it just sounds so unbelievably low for your very high income. I mean, I knew the cost of living in California was wild but I didn’t realize it was that out of control.
I only made $160k last year, this is my first $200k year. About $120k the year before. And I spent $18k on replacing my moms sewer system this year after hers failed.
It’s a balancing act. I’m sending about $60k to mine and my parents’ retirement accounts. Most people would recommend padding out my emergency fund before that, but I play things with a bit more risk.
But also yes, cost of living. Box of cereal, $8. Even if you’re frugal, it’s a lot.
I have a decent amount of money in a 401K that I can’t touch, and some stocks I bought during a time when I fell into a bunch of money, but an unexpected $1000 would not be possible. I’m a 42 year old married man with 5 kids and a full time job at a small college.
I should be doing better than this.
With 5 kids, I’d say you’re doing alright. Kids are so damn expensive.
Yeah being able to afford 5 kids is insane to me.
Im doing pretty well. Living in Germany, educated parents. Did okay in school, never studied much though. Went to university, got my Masters in Mathematics (needed to study a lot for that, but its my passion anyway). Started working at an IT company in the same city.
3 years later, I have around 50k in savings now. We live in a small apartment, are in the middle of buying a house.
Capitalism is really fckd up, especially in the US. I try not to take advantage of it too much, up my monthly donations with every raise, vote left-ish, dont support big corporations.
I think the biggest factor for success is luck for being born under the right circumstances. Thats like 99%, the rest is having some self control.
Since I left college and started out into the “adult world”, I’ve always spent less than I made, the rest going to savings or investments toward retirement. I accomplish this by “paying myself first”. If I have already saved the money as my first priority, I can’t spend it on things like rent or groceries. So my financial choices are forced to be more conservative by design.
Example: I forget what the max limit to IRAs were at the time (say $5k/yr) but for my first job I set up auto contributions each month and mentally took a $5k/yr salary “cut” for that job. Every time I got a raise, I made sure that at least a portion of that raise went to increasing my savings rate and attempted to avoid lifestyle creep.
Thanks to my savings, I’ve been able to handle some emergencies in cash vs having to utilize debt to cover the expenses. It really is a snowball. I started out small, now my savings is significant compared to my income.
I attribute a lot of my “pay yourself first” approach to reading The Automatic Millionaire, Expanded and Updated: A Powerful One-Step Plan to Live and Finish Rich early on.
I’m digging myself out of a $13k credit card debt hole. I burned through my savings when a job that I had ended on my unexpectedly, and because it was contract work I wouldn’t qualify for benefits. They kept me around as a sub, promising me a full time position if I just stuck around long enough and I was foolish enough to believe them.
I’m self employed now and making do with the best I can, but I’m planning on ending my dream as a musician/ teacher and moving home. I don’t know who would want my skills, but I know they are specialized and strong. I just gotta see what kind of work would value them.
I’ve got $0.85 in savings, because I put my rent and car payment money in my savings account each month until I need to pay those bills. I did at one point have $1000 saved up as a rainy day fun, but then it rained for a whole year (financially speaking). Now I don’t even have credit cards to fall back on, as those have been maxed out and gone to collections. I’m looking for a job in an industry I left because it was driving me to alcoholism (software), but that job market sucks a little more than the service industry, so I’m not optimistic.
Oh yeah and I’d be homeless if I didn’t have family who were willing and able to loan me rent money.
I currently work on software in automotive. Everything seems completely insane. We have tons of process and technical debt, executives that are super out of touch and all have their own pet projects, we have hundreds of executives so we have 100 number one priority pet projects, we have a very distributed hardware/software footprint due to the affirmationed process/technical debt, each vehicle has a different hardware footprint which means we constantly have to make our distributed software work when a piece of the software needs to be rebuilt in a new controller, etc etc.
There’s also the whole mess of trying to run agile at scale, managinga very distributed backlog, trying to balance priorities across teams that have to coordinate work, everyone leading with “how they want it” instead of “what they want”, total disregard for WIP limits, etc.
I know where I work is a shit show. I really wonder if it’s much better elsewhere. I also wonder if this place has always been a shit show and I just have more exposure to it now.
And yeah, alcohol. I’m trying to cut back but the mood here seems to violently oscillate between “this is OK” to “what the hell” and back again. We’re probably due for another swing soon.
Some days I do think about going back to waiting tables. It took me years of working elsewhere to stop having the waiting weeds dreams though…
I know where I work is a shit show. I really wonder if it’s much better elsewhere.
Have you seen the state of almost every piece of software nowadays?
Hence my wonderment, lol. I meant more organizationally, but if you’re putting out a crappy product things probably aren’t great working there.
I am one broken leg away from being homeless and losing everything, and it’s been like that my entire working life. I’ve never been able to make enough to actually save. Currently I have -100 in the bank and some debt I’m trying to pay off on top of that. My rent is literally half my income.
A 200k expense won’t destroy me or lock me out of my house or completely destroy my retirement. No inheritance, went to college, and knew buying a house early was key, saved about 25% income for 3 years to put 45k down on house.
I have always strived to keep between 1-2 month’s worth of expenses in savings at all times. That small buffer has allowed me to ride out almost everything without going into debt, then when I am in debt I pay it off as quick as possible.
The worst thing you can do is get on a payment plan, as that normalizes having debt and you end up paying thousands in interest. All interest is, is you giving your money to someone else. I like to keep my money, so if I have to live off of ramen and hot dogs for a couple months, so be it.
All my jobs have been paycheck-to-paycheck until about 3 years ago. My last job allowed me to save up $24k, but then I lost my job. Now I’m down to $7k and getting worried.
I know the feels, you are not alone
I fall between the government won’t give me SSI because I’m not disabled enough in there fucking eyes. And being disabled and can’t work.
So financially I’m fucked and nothing I can do about it.
Even if I had said It would only be iirc around 800 a month.
It’s part of Amerikkka hidden eugenic programs. (Not verified but living with a disability it sure fuckin feels like it)
