What Is It Like to Be You?
Posted on May 17, 2007 by Her and tagged afford
Him and I now make a combined income of (just barely) over six figures. This is far more than we've ever made before. At this new income level, life has become easier. We are able to make large payments toward our credit card debt, while saving a lot for our wedding and retirement. We can go out to a reasonably nice dinner on special occasions. We can use our rewards credit card and pay it off every month. We can buy new clothes when we need to. We could move to a slightly more expensive apartment if we chose to. If our car needed repairs, we could probably pay for them. Bill paying is no longer a stressful and depressing ordeal. We can buy nice gifts for our friends and families. But we still worry about money. Anything over $250 is a big expense to us. We can't afford to take a big vacation, although we can swing a weekend camping trip or a night in a decent hotel. We have to save up for things we want.
So, I am curious what it is like for others who earn more or less than us. How does money impact your daily stress level? How much freedom can you afford? Are you happy? How much money do you wish you made?
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BD | May 17, 2007
I was stressed when earning entry-level salary in northern California, but I still managed to save a little bit for retirement and a little bit of an emergency fund - but to be honest, my emergency plan was to sleep on friends' couches.
When I got a raise into the high $50's, I was able to open an IRA, bump up the 401k contributions, and begin chilling out slightly.
When I made it to the high $60's I maxed out all my retirement contributions, opened an investment account, and stopped stressing out about buying reasonable new clothes.
Now, I just focus on keeping my lifestyle reasonable so if my job changes I can handle it.
I can't imagine the stress I would have felt if I had been trying to pay for individual health insurance out of that entry-level salary, or if I had encountered any real emergencies. It would have wiped me out and delayed my financial start significantly. I think a lot of financial success later in life can be attributed to good luck early on.
Jeremy | May 17, 2007
That's about what our (girlfriend and myself) combined income is. I remember reading an earlier entry (here) about your allowance and was shocked by the $50/week amount. I have no idea how you do it.
I do $150/week; however, that does include all groceries (and meals, entertainment, and anything else). I can't figure out how you guys do it at $50/week.
There's, also, cost of living -- a 6 figure household income in the Midwest is a lot different than one in NYC.
I would love to hear more about your budget. Specifically, how much goes to groceries, expenses like oil changes and new clothes and the like and how that relates to the $50/week allowance.
no name please | May 17, 2007
I agree with BD re: success later in life can be attributed to good luck early on.
I went straight from college to grad school, and my first job was a temp job earning $25/hour. That only lasted 5 months before I got laid off, temped at $13/hour for 3 months, then got another temporary job making $45k a year. That turned into a permanent position and I've gotten a few promotions and raises, had retirement, savings, bought a house and was quite comfortable.
Then I met my husband. He, on the other hand, didn't have a good financial background. Had too many student loans out for his salary, and his family offered to help him out until his consolidation went through. His mom subsequently defaulted on one of his loans (6 weeks before our wedding!) and I transferred the balance ($10k) to an interest free credit card to save his credit. We just finished paying off that balance, so I can breath easier.
I don't necessarily think its the amount of money that we make, it is the decisions that we make and how it impacts money. My husband learned many lessons too late about financial responsibilities and ended up having a family member betray him in the process. I was lucky to have gotten a good job out of grad school and the knowledge that goes with having a decent paycheck, plus I didn't encounter any medical or vehicular emergencies that I saw so many of my friends encountering.
The wonderful team that Him and Her have created on how to work through any sort of matter (financial, family, personal) is inspiring to me. There are times when I am a little bit bitter that I have to deal with my husband's financial past and wish that I could go on more vacations, have a nicer house, but really though, it's just money. We are a team, and we will meet our goals faster when we work together and I don't allow any jealously to come between us. Slowly but surely we're snowballing debt and now have plans for a big vacation to Hawaii next year. We are finding the ncessary balance between wants and needs. It's fun to eliminate debts from our balance sheet, and now that we've crossed out a few this year, we can really see progress being made. Plus that frees up some extra $$$ in case we want to do something special.
My stress level is diminishing regarding money as we pay things down and savings go up. That is a good feeling. We still have to save for things and can't do any real impulse buys, but that is ok. It is good to have goals, plus I appreciate anything we buy just a little bit more.
Deena | May 17, 2007
I make in the high 40's but will be getting somewhere in the 50s by early next year. I am a single mom with 2 kids and a live-in bf who pays for half the bills. I am in my early 30's
That being said, with the cost of childcare (even though one is on scholarship, I feel like I barely have discretionary funds. Yes, I'm putting away $554 into my retirement and $300 in investments per month, but beyond that, I'm barely making ends meet.
I sold my house after my divorce two years ago and made a little off that, but I don't want to touch that money. That's going towards a down payment on a new place.
So...I make a decent amount, but the cost of living in Hawai'i is pretty steep. For what I make, I could be living a lot more nicely elsewhere.
I'm currently still an undergrad so my income is pretty much non-existent. My stress level is indirectly proportional to the amount of money I can make and save during the summer months. My on-campus job will keep a slight income coming, but with moving into an apartment and having to buy groceries for the first time, I'm a little worried.
I make $32K and I live in Manhattan. Frankly, it sucks a lot of the time.
Thankfully, I have no debt. I put 8% in my 401(k) and have managed to save close to $2,000 this year so far. Nevertheless, I have to live pretty close to the bone. I have to think about money all the time, and turn down overly expensive social opportunities, and skip the mimosa with brunch, and buy clothes only when really necessary.
I'm thinking about changing jobs and would hope to bump myself up at least to the $40K mark.
Grad Student | May 17, 2007
I make just under 20,000 as a teaching assistant on the central coast of CA. Money matters are really stressful, but we (husband, same income) choose to try and keep things positive. We can't afford to go out to eat, but we do spend money on good quality groceries and have learned to be great cooks.
Both of our families are on the East coast, so any vacation money we have goes towards the yearly trip home. We have only taken one non-family vacation together in 4 years of marriage, where we went camping for a few nights. Fortunately, camping around the CA coast is a pretty nice vacation.
About 40% of our paychecks goes towards our apartment, and there isn't anything much cheaper where we live. We have no retirement savings, and a small emergency fund.
Keep posting, I love your blog!
Ariella | May 17, 2007
My husband and I make around 105k combined, plus any bonuses either of might happen to get (probably bumps it up to about 115k, in the end). We have no consumer debt and own our own house; we are 26 and 28, respectively.
We put away almost my entire salary into savings. I make less than he does, but that will change (I think) because I am an attorney and will eventually make more than the pittance I currently make. Our goal is to always be able to live off of one salary and use the other one for either fun, savings or (preferably) both.
We don't stress about buying clothes or other items, but we buy intelligently and don't overspend. We're both incredibly fortunate. Funnily enough, he has better saving habits than I do, and I come from a fairly wealthy family. He, on the other hand, has a family who has almost no retirement savings. I surmise that the reason he's able to save so well is because he doesn't want to end up in his family's retirement situation.
We both love to travel, and that's where the majority of our discretionary money goes.
After reading this post, I thought you were going to catch some flack in the comments. I'm glad to see that everyone has been reasonable. The income is nice, but obviously, the bigger picture is the new worth number screaming on the right side of your blog.
I agree with Jim, continue to live with the mindset of scarcity. It is easy to allow your lifestyle to pace (or surpass) your income. Keep the "reasonably nice dinners" and "new clothes" to a minimum. Stay in the cheaper apartment.
You'll reach your goals so much faster, you won't believe it.
pookie | May 17, 2007
Wow, this is so refreshing to read. I am a 35-year old single guy, no kids, making $75K/year in Atlanta. I rent a great space for only $850. My car is paid for. I contribute the max to my 401(k). I started the year off with 9,500 in low-interest credit card debt. I have paid it down to 5K already and am determined to get out of cc debt this year. (It's all the debt I have.) I'm sending the same $250 I always have, but I'm also adding the $350 from my recently paid off car note.
That said, I still find that I am always down to the wire on dollars. I feel like at this salary I should not be feeling deprived even as I make strides in reducing my debt. I'm not out buying designer clothes or taking crazy exotic trips! I just want to be able to buy a bunch of good groceries and some music and not worry. I am I just living in dream land and all of my friends who seem to never worry about money as they buy homes and shop all the time are really in secret debt?
anon | May 17, 2007
I make $38000/year with no dependents other than a cat. The boyfriend makes about $15000/year. Out of my $2400 take home/month, $500 goes to student loan (I am paying way more than the minimum but the interest rates are 8.5%. ew.), $400 goes to rent, $130 for internet/cable/phone and $325 goes to savings. I have just recently reached the goal of two months take home pay for emergencies and am now debating whether to start saving for retirement or throw more money at the student loans.
I'm waiting to become eligible for the benefits and pension plan at my place of employment (I put in 2.5%, workplace contributes 7.5%). And I want to start an investment portfolio sometime.
I would like to be able to earn enough so that I can buy quality clothing/shoes, nicer gifts and eat out at *nice* places more often without feeling the squeeze. I'd love to be able to replace the remainder of the college-era hand-me-down furniture and take a vacation for once. Also, I need to start putting away money for medium-term goals - new car, down payment, wedding.
Overall I'd feel a lot more secure if I could make at least $12,000 more per year. And some way to pay off the student loans in a lump sum.
NP | May 17, 2007
We were on six figure income since graduation from college, and its grown nicely with raises and promotions (it is our fourth year of full time work). I had $50,000 of student loan debt (which will be paid off within a year and a half, currently down to $20,000), and that keeps me on my toes for budgeting purposes. But we still managed to live quite comfortably all this time - we bought a townhouse, furnished the place, one new car paid off and second one in process, able to start our 401k and Roths, and travel, both in the states and overseas (both sets of parents are abroad). I had to have nice clothes for my job, but went for professional look more than for brand/price tag (although good suits aren't cheap). It does not feel like we have a lot of money - everything is pre-assigned and we need to plan for things to happen. But overall, once student loan goes, this is comfortable enough. We do live in inexpensive midwest town, so that helps a lot with the amount of expenses. I think more things will need to be juggled once we have kids, I don't think I know at this point how expensive this will be. Wedding will have to be reasonably cheap, I just don't see the point of spending a lot of money on it.
I read your blog for a while, and I always wondered what kind of education did Her get to be in such enourmous amount of student loans? I thought maybe it was law school or med school, in which case it's understandable and in most cases it does pay off as the future income is very high for such graduates. But reading about your salary makes me think otherwise. I graduated with $50K in debt to a job that paid me $45K to start, and I thought that I made a mistake as it seemed to much (and I still think I should have thought harder about cheaper options). But your education bill leaves me speechless. What was it that you studied and what is it that you do now?
My first job out of college, I made $32k and I was friggin miserable and living paycheck to paycheck. It took me two years to reach $50k and that's when I finally reach a point when I was "comfortable." As a single mom, that still wasn't much, but I was able to pay my bills ON TIME, put a little away and eat out every now and then.
Now that I earn twice that amount, I maintain the same lifestyle (as far as luxuries and entertainment), but my housing expenses have increased because I moved to a more expensive area for a better school system.
To be honest, I was happy and stress-free at $50k. Although I wasn't able to take elaborate vacations and buy expensive things, I was content with life. My current income affords me all those things, but I choose to pay off debt, prepare for my daughter's college expenses, and pad our emergency fund. With one income, an emergency can throw a wrench into your financial plan so I have to be prepared.
BTW, anything over $100 (if it isn't a bill) is a HUGE expense to me. Individual perspective is funny. LOL
Chris | May 18, 2007
My girlfiend and I are 24 and 25 years old, respectively, and we have a base salary of about $100,000 and another $20,000 in bonuses. Obviously, for our age we make a great deal of money for living in the midwest.
However, we make it a practice to not live above our means. We (I) bought a house 2 years ago that was well under the 28% debt rule of thumb ratio. We both do not have any car payments, we have 401K's, IRA's and savings. The only concern we have is her student loan debt ($60K).
We make sure we save first, but we like to have fun as well. We go on 2 vacations a year, go out to dinner atleast once a weekend and buy nice things for ourselves when we want them.
Very rarely do either of us feel guilty since we do such a great job saving.
Me | May 18, 2007
I make right around 6 figures, depending on the bonus. This year, I'll probably be at around $98,000, which is lower than it has been in the past. My wife has been a stay-at home mom (or mother-to-be) for a little over three years now. We bought (20% of) a house 6 years ago, just a year out of college when our combined income was about $75k. I didn't have any student loans to pay off since I had a full scholarship. Other than that, money hasn't been stressful, but now that we have a kid and another one on the way, I'm starting to worry about how I'll save for college for them.
As far as freedom goes, our lack of debt has allowed us to put money in a place that's very important to us - charitable donations. Close to 20% of my income gets donated to charity. About 30% goes to taxes/retirement/other savings. We live comfortably on the rest.
happychica | May 18, 2007
I am blessed as a single mom of 2 who, while under-employed at the moment, am in the process of earning a 2nd master's degree (90% paid for) to become a teacher...(a much more meaningful and kid&mom friendly schedule and career). I have no cc debt yet do have a school loan out there which is getting paid automatically.
Wise planning in my earlier years allowed me to tap into savings to tide us over this period of time. And while there are struggles, we order out 2x a month, just bought a backyard swingset with B-day gift $$ and have lots of fun with free activities and entertainment.
Is this a shift from earning 65K? you bet! Yet I don't feel stressed nor poor, nor would my kids think they are "poor" since they put $ in our "savings" banks. Together we make decisions on what we need or want to buy...hopefully I'm modeling good decisionmaking for them. Do my friends have "more" and eat out more often? Sure yet they also have cc debt and refinance their mortgages multiple times to incorporate their debt into it. (Ouch!) Am I happier and less stressed? You Bet!
Catrijn | May 18, 2007
Although when I think about it rationally, I know that we have more than enough to meet our needs and are really quite blessed, I've been feeling anxious about money. I think it probably has more to do with the lack of control over our financial situation that I'm feeling, rather than the actual numbers involved.
We moved from the midwest to the east coast about a year ago, and our salary went from 60K to a little over 90K, but with the increased cost of living it doesn't even seem to go as far as what we had before. Rent doubled, and is 30% of our budget, which feels enormous. I'm feeling vastly underpaid, since we moved for my job, yet I got absolutely no raise. (My husband miraculously managed to double his salary, or else we'd be in bad shape.)
Yet if I sit back and look at the big picture, I have to remind myself that things are OK. We're out of debt, and we were able to start retirement accounts this year. We have enough of an emergency fund to cover an unexpected move next month, even though its setting our savings back by a couple months. I'm in graduate school full-time and not only am I not accruing student loans, I'm actually getting paid without taking on a side job. We have to be pretty restrained about things like new clothes and eating out, but there's no question that we can pay the bills and even save at a decent rate.
So, in answer to your questions, I'm not happy, but it's not the money's fault. I could be perfectly content with my standard of living if I liked my environment, and my social and professional situations (none of which are good right now). Making 120K or 150K without changing anything else might make me less stressed, and I could maybe buy myself some more diversion to distract me, but I don't think I'd be any happier.
Livingalmostlarge | May 18, 2007
I thought making what we make also would ease our worries. Instead it compounded it. Now we worry that we're not saving enough. Maybe if we make 2x what we make now it would be better, but who really knows?
I'm engaged also and currently working on paying off debt before the wedding. Since my debt isn't that large, money doesn't stress me that much..but I'm a mom of 2 so I do have my moments of 'how and i going to do..this or that" but I make it work. All bills are paid and we do limit our luxury expenses. We cook more then eat out, stay in more the go out (gas prices are just too much) and we're both trying to pay off our cars quickly.
Claire in CA | May 18, 2007
I think I'm older than most of you: I'm 41, dh is 42. We incurred alot of debt via a room addition and BIG garage (dh is a "car guy"). We're now trying to dig out. Property values what they are, we own more than 2/3s of our home, but that doesn't help us make the house payment.
We make about 75K. I'm self-employed, and my income is up and down, so we incurred some cc debt because of that. With two kids (pre-teens), involved in dance, theater, and music, we spend a chunk on classes, costumes and the like.
I'm heartened to see so many of you younger folks doing the right thing.
One poster said: "I am I just living in dream land and all of my friends who seem to never worry about money as they buy homes and shop all the time are really in secret debt?" The answer is a resounding "YES," especially here in So Cal where everyone is trying to keep up with the Joneses.
If you consistently live below your means, you will always stay out of debt, and have a healthy savings account. I wish we had figured this out sooner, but we're working hard (especially dh) to earn extra income and pay off about 16K in cc debt. No car payments, no other debt, just cc. I know it doesn't sound like much (comparing to others I hear about), but for us, on our income, it's huge.
Another thing we do is "give away." No matter what our income is, we now consistently give to our church, or other charities we believe in. We have seen God truly bless us when we are sacrificially giving.
Elly | May 18, 2007
I graduated college with low school loans but a considerable about of cc debt. My first year on the job I was lucky enough to be able to live with my parents, which saved me tons of money and allowed me to pay down my cc. Now, three years later, I make more than double my starting salary and am living in a beautiful apartment with my boyfriend. Our combined income is well over 6 figures. After watching my parents struggle for years trying to make ends meet, I have been a dilligent saver ever since college. I am contributing the max to my 401(k) and have an additional Roth IRA and savings accounts. The bf and I go out quite frequently, living in Chicago surrounded by so many friends and entertainment it's hard not to. Sometimes we cringe when we see how much we spend, but we both feel that our savings are sufficient. We have started thinking about weddings and kids and homeownership and feel that very shortly we'll be able to take the plunge.
Diana | May 18, 2007
Like Claire, I'm also bit older: I'm 42, dh is 46. When we married 11 years ago, we made just over $100K. We now make 2x that, but have made some mistakes along the way, by either thinking we could afford more than we could, or by being otherwise distracted by house, children, and life to pay attention. In 2004, I quit my job to stay home with the kids, and that's when we took a hard look at finances. I went back to work fulltime the following year (more for the challenge than finances). We're diligently paying off debt and building up savings. We can pay off our rewards card while paying down debt, as well as the kids' activities, home improvements, vacations, etc. But I still feel like I'm looking over my shoulder, and hope to breathe easier when the debt is paid (goal: all but mortgage by the end of 2008). Hindsight is 20/20, and had we been paying more attention to our finances, we could have had a larger house and bigger savings. But always looking back will drive us crazy; better to look forward and see those balances dropping every month. Him and Her, you are SO doing the right things - be responsible, but enjoy your life too.
Marie | May 18, 2007
I'm 40, DH is 48, and we make $250,000 a year. Our only debt is a small mortgage, less than 5% of our gross income, with ten years to run. We live below our means, in a 1200 sq ft house, driving 6- and 9-year-old midrange cars. We don't worry or argue about money; we have more than we need.
I know what it's like to stress over every dollar, though. Ten years ago, I was married to a different man, with a joint income of about $70,000 and $30,000 in credit card debt. We fought constantly about money, and we could never manage to act like we were on the same team.
The peace of mind that you'll gain from paying off your debts is totally worth the effort. You already have a big advantage with a supportive partner who shares your financial goals. That's a great predictor of eventual success.
My fiance and I make just over the six figure mark ourselves (not including his yearly bonus and benifits). However, we too have to save and the money isn't free flowing - yet ;) Once we pay off our consumer debt and my student loans we will be laughing! The key is, obviously, not to take on any further debt in the meantime. Someone please remind me this in the next few weeks - I am dying to purchase a new digital camera - but it would most likely be on credit...boo
Steve | May 19, 2007
I make about $170K but worry more about money than when I made $9k. We have no credit card debt, old cars, and don't take fancy vacations. "Enough money" would be to have 8 years of tuition in the bank for each of my two sons, plus enough in retirement savings to live off the income. Not too likely.
Combined we make $127,500, plus I get about $10,000 at the end of the year, so $137,500. We live pretty frugally and can afford a big expense every month, which always seems to happen. One month it was the brakes on the car ($998), the next it was the other car (had to buy a new one--registration taxes/title/etc. were $1,498), the next was our tax bill ($1,618). We build that into our budget and it seems to be working pretty well.
MVP | May 19, 2007
I'm sorry. I'm just completely in awe about how financially secure Her feels, given how seriously deep in debt she is. We earn about $75K and still manage to pay at least $2,000 on our debt each month. You guys earn at least $25K more than that and are FAR more in the hole (actually HER is, until you're married) than we are. Do you ever truly expect to eliminate your debt? If so, how can you justify to yourselves continuing to save large amounts for retirement, attending expensive bachelorette parties and considering anything less than $250 not a "big expense"? It just amazes me how many commenters congratulate you on a job well done, while you continue to be somewhat frivelous with your money, at the same time claiming to prioritize paying off your debt. I apologize if this sounds harsh, but I just find it really entertaining to read your blog.
Gary | May 20, 2007
I wish I made a million a year, but alas, I am a lowly teacher. I will not complain about what I make. When I graduated college, my first job paid just over $16,000. I lived in a room at my parents. Fortunately I loved where I worked and stayed there a lot. My second year, I got a place with a friend and lived quite well. We were never in need of beer, but I did pay rent by myself most months. Now I own a portion of a home, have a wonderful wife, and can still afford beer from time to time, depending on what our budget allows. I am happy most of the time. Between the two of us, we make $80,000. Half of that has been used to pay off debt for the past year. In 3 months we will be debt free except the mortgage. Making what we make, we have paid off $40,000 in a year and a half. We don't go out much, but we have each other and are happy. No need to have money or spend money to be happy. Just enjoy what you have and always stay positive about life. It's all good.
Gary | May 20, 2007
Sorry about the double post.
By the way, making as much as you do, Her should have had that credit card debt paid off long ago.
The key is using any extra money in you budget for it. Set yourself a goal/timeline of when your debt will be paid off, and don't deviate from it. Do you have any timeline of when things will be paid off? or are you just simply working to pay it off?
PS: when I was single, I went out most weekends and still didn't need $200 of personal spending money.
We do have goals. It just isn't the singular goal of paying off debt.
Parker | May 21, 2007
Ultimately, it is their money to do as they please with it. If they feel, with recent raises, they can afford more luxuries but still stick to their plan with the debt; let them do so with criticizing them.
joe | May 21, 2007
You don't say how old "we" are or where "we' live. But if your earnings are in the low six figures you should have no debt save house and possibly car payments.
Starting my own business in North Carolina at 25 (am now 53) making 20,000 a year, my wife and I (she works with me) have made 100,000 to 120,000 for the past ten years.
We have a portfolio of around 300,000, house paid for, buisness property paid for, beach house paid for this year, no credit card debt, cars paid for and hoping to retire in two more years.
What are your goals? Wy are you renting instead of owning? We bought our house 25 years ago for 50,000 (now worth 250,000), The beach house 8 years ago for 185,000 (now worth 900,000). True taxes and insurance on the three properties we own now run 12,000 a year, but appreciation is outpacing taxes.
Financial freedom has reduced much of the stress in our lives. In the beginning stress was a major strife as we worried if we had made the right decisions. The freedom we have had (traveled to New Zealand, Austailia, Iceland, Hawaii and the states, plus looking forward to retirement (will sell the business and rent property to the new owner) is what I believe everyone strives for.
As far as for how much I wish we had made? The question's answer is enough to live comfortably, if you have accomplished that what else do you need?
DJ81 | May 21, 2007
MVP, I am continually overwhelmed by the theme of your comments. They seem to disregard very important factors like 'good vs. bad debt' and 'quality of life.'
Where I'm coming from...my wife and I are in essentially the exact same financial position as Him and Her regarding income, student loans and retirement.
I think this goes without saying...but putting more money into investments at 10% is still a better move than doubling payments on loans at 7%. This is good debt.
I'm concerned that you've developed a fear of debt that may be destroying your quality of life. We could very well payoff our loans in 5yrs by living a miserable life with no allowance but why would you throw away that time? I believe we should make the best of every year we have, which means taking a $600/mo allowance and responsibly paying down our debt at the same time.
I can only assume that the pessimism in your posts is a direct reflection of your fear of debt. Kudos to Him and Her for living life comfortably and responsibly.
MVP | May 21, 2007
DJ81, you've hit the nail on the head: I have a healthy fear of debt! For us, there is NO good debt, that's why I'm constantly amazed at those, like you, who fool yourselves into thinking it's great to have multiple "rewards" cards or interest-earning accounts, while owing thousands. It just doesn't make sense. If it works for you, great, but most people don't have the time to play Russian roulette against credit card companies with their money - i.e., moving money from account to account to save a few pennies. And by the way, if you think "stuff" gives you a good quality of life, you're mistaken. We tend to put all of our focus on our loved ones and creating a happy, peaceful home for ourselves, one that's far from "miserable." Are you telling me that doesn't contribute to quality of life?
Also, to Parker, Him and Her graciously opened their lives to us as public Internet bloggers. Since they invite comments, I assume they want to hear others' opinions. For some, that may include kudos and pats on the back, for others, we may be able to offer a different perspective. If that were a problem, I imagine they'd close their site to comments.
DJ81 | May 21, 2007
MVP, interesting...you and I are more alike than I had presumed. I also try to avoid playing the credit card game; nearly all of our debt is in student loans much like Him and Her. Also, our focus on loved ones is equally as important. So important in fact that we allocate about 80% of our monthly allowance to either flying to visit family or entertaining family when they visit us. We've found a nice middle ground between all of our siblings and parents but it still leaves us about 500 miles from the closest one.
On the other hand, I believe that having good debt now is securing a future for my family. Taking on student loans (an investment in my book) allowed us to get a good education and well paying jobs. Now we can slowly pay back the student loans and heavily invest into our 401ks. By the time our loans are paid off we will have well over $1 million in savings. Imagine how much family time we will accumulate with that kind of financial stability. Until then we will continue to spend as much time/money as necessary to keep in touch with our families.
In regards to your response, I'm intrigued that you view your opinion as that of "most people" given the number of accolades posted to Him and Her's financial plan. Who is this debt fearing majority that you speak of?
Also, I would like to hear your opinions on higher education. Do you sincerely advise your family (children, whomever) that "owing thousands" in student loans is a waste of money?
Regards
Jill | May 21, 2007
MVP-
I don't know who you think you are to come on here and bash Him and Her when they are making positive changes in their lives to get out of debt. You really must consider getting off of your high horse. They are focused on getting out of debt and I have been reading this blog for long enough to feel proud every time I see their debt go down.
Him and Her- I love your blog! I think it's terrific that you are working together to rid yourselves of debt and I wish you the best.
NP | May 21, 2007
DJ81, I agree with you for the most part, and see the need to find a balance between paying down debt and having a decent quality of life. As far as "owing thousands in student loans" goes, it depends on whether the student loan bill allowed you to get a well-paying job (and what is the proportion of student loan debt vs. annual income). While it is a big problem right now to finance higher education, I would argue that student debt that is more than 1.5 of what you are making a year is too much. This simply means education did not pay off well enough. Either the profession acquired was not worth the money paid for it, or the school was too expensive, and maybe there were other alternatives. I speak as someone who had a sizeable student loan graduating because of going to a more prestigious school. And while student loans is not the worst in the world and do allow most of us to get one of the most important assets - education, there is nothing great about being 100,000 or more in debt if it can be reduced or avoided. Don't fool yourself with "good debt" thing - servicing this debt alone costs you thousands and tens of thousands in investment/retirement funds every year.
MVP | May 21, 2007
DJ81, It seems you've got your priorities straight. Not to continue going back and forth, but just to answer your questions...Unfortunately, I'm likely in the debt-fearing minority, which is evidenced by the millions of Americans getting foreclosed on due to multiple mortgages, car loans, etc. Higher education is what you make of it. If you're getting a $100K+ education and will eventually earn enough to pay that loan back, great, no problem! But there ARE other options. Why not work to pay for your education, or choose a less expensive school? My husband and I both have bachelor's degrees from state schools, which didn't require us to go into a ton of debt. We finished paying it all off last year. Now, we budget and are paying cash for him to get his Master's degree - again, at a highly regarded state school. No debt needed for that higher education. I hope that makes clear my feelings on the value of higher education. An aside: our goal is for me to be a stay-at-home mom, so I'm especially glad I didn't rack up tens or hundreds of thousands in school debt that I'd likely never be able to pay off. My issue isn't against having an education, it's against putting off paying student loans and other debt with the excuse of wanting a better quality of life now.
Gary | May 21, 2007
Ok, you do have goals. Not very ambitious goals, but I like that you do have timelines. You could easily pay off that credit card debt quicker if you chose, but at least you have a plan.
Gary | May 21, 2007
I agree that it is their money to do with as they choose. Is the purpose of this blog an experiment in blogging? an ego trip? or a way to help others become informed on proper handling of debt? I tend to look at it as primarily the latter, with some of the first mixed in. If it is to inform others about debt, then they should actually discuss responsible debt reduction behaviors.
I'd recommend a few of the followers check out this website
http://www.daveramsey.com/shop/Audio_CD_Special_With_Free_Boo_P227C48.cfm?afid=7
It may help clear up how bad debt really is.
Gary | May 21, 2007
Great idea. You may as well live life to the fullest, because you could get hit walking across the street tomorrow. If you didn't die from it, you could be laid up for quite a while and not be able to afford that nice life. Well, you would still have all that debt, and payments, and then strife between spouses. The number one cause of arguements in marriages is over finances. Why would you get married owing as much as you do, just waiting for problems to arise. If your plan of trying to capitalize on that extra 3% (of course that doesn't include the fees incured by your broker) were so great, why would NO financial advisor recommend it? They would all tell people to take out extra interest loans and invest it in the stock market, because that is the only investment, outside of real estate, that makes 10%.
Gary | May 21, 2007
Jill,
One thing that I have learned is that positive feedback is very important. You are good at that. I looked at their financial statements for the month, one credit card did go down, and the other when up. The amount that the credit card when down was actaully subtracted from their savings account. Really the amount that they paid off that improved their financial status was a couple of hundred, they amount that him uses for personal allowences. It's good that you are proud. I'm proud every time my 4th graders can add 1+1. They aren't accomplishing what they are capable of. You shouldn't let them sell themselves short when you praise them so highly.
Gary | May 21, 2007
Well spoken NP. I do want to clarify something between your comments and their finances though. You state that their debt is 1.5 times their income. The truth is Her debt is 1.5 times both of their income. I'd assume that she earns about half of the 100K. Therefore Her debt is 3 times what her income is.
Good comments on the fees incured.
Gary | May 21, 2007
Imagine for a second that you lent a friend in need a couple of hundred dollars. They earn a lot of money but had a bad month. They decide that they will pay you back $25 a month. They you see them at nice restaurants and bars. They are spending plenty of money on fun, but still paying $25 a month. How would you feel? Do you feel they have an obligation to pay you back when they can or when they want?
I also have to congradulate Him and Her on their blog. It does seem to elicite strong responses. I'd say you are having a successful experiment in blogging.
DJ81 | May 22, 2007
MVP, touche...the one thing I would do differently if I had the chance is go to a state school. I have a dozen peers in the same position as I that went to state schools. This proves to me that achieving top ten in my expensive private school gave me zero advatage over my peers in state schools. Good debate ;)
DJ81 | May 22, 2007
Gary, I can honestly say that when the time came for my wife and I to vow our lives to each other, there was no place for doubting our love based upon something as materialistic as finances. This is exactly the reason so many marriages fail, if you're making marital decisions based upon your partner's financial debt or wealth, there are priorities that need to be aligned first. We do have a detailed and thorough financial plan but in no way does it have an affect on our dedication to one another.
In regards to choosing investments over doubled student loan payments, find a retirement calculator and take a look at the affect of beginning contributions at age 25 as opposed to age 30 (potentially when we could payoff our loans). You'll notice that the differences is hundreds of thousands of dollars 20yrs down the road. Gotta love compounding interest :)
NP | May 22, 2007
DJ81, in calculating the advantage of retirement contributions over paying down student loans, did you count in the fact that student loans do carry interest and you would not have to pay the interest for X years if you paid them down earlier? Depending on the amount of debt and interest rate it carries, I would argue that there is a break-even point and that it is not automatic that one should invest in 401k/IRA over extra loan payments. If debt is over a 100,000, a large chunk of it is in private, or alternative loans (stafford does not give that much), which currently carries 8.25% interest (prime), and may be variable (ouch, if you initially took it out when prime was 4%). With those kind of variables I am not convinced that investment in stock market is always a better option. Thousands of dollars saved by paying early could well compensate for a later entrance into retirement investments. Granted, you have to be committed to paying down debt with every spare penny and have a goal, including timeframe, so that you don't delay forever.
I think in so many cases, the answer to making things work just boils down to 'make enough money.' Which sucks, because I know that's not always something one can directly control, but I think it does need emphasizing when people plan career paths. My field (journalism) doesn't pay wonderfully -- I'll never make the six-figure salary I could in related fields like PR -- but I intentionally picked an area (trade business journalism) that pays way better than most of the field.
But it's also a flat fiscal reality that in the end, what matters is the actual cash dollars you have at your disposal, not how frugal you are. I can be more reckless with my money and still have more of a cash cushion than someone who squeezes their budget harder but has a lower salary to work with.
One extreme example of this made me scoff -- CNN's 'look at this successful young couple!' profile of a pair that live in Texas and have cash & retirement savings of around $200,000, while in their 20s. (If the link doesn't come through, it's http://money.cnn.com/2006/09/18/pf/millionaire/marchbanks/index.htm)/
That's great, but the couple make $185,000 a year and live in Texas, which is pretty affordable. It's commendable that they're being fiscally smart, since plenty of people with big salaries don't plan and blow 'em, but sheesh, CNN. given a salary of 185k and a low cost of living, I suspect most people could develop good savings!
Gary | May 22, 2007
DJ,
Well spoken with regards to marriage. I agree with you that finances shouldn't be the primary factor in determining whether or not to marry someone. I do believe that frack discussions about finances are important. I commend Him and Her on their blog, because at least they are on the same page, and less likely to have issues arise from it. The issue is, if you have the opportunity to improve your own financial situation before bringing another person into your debt, why wouldn't you?
I married into almost 40K of credit card debt!!! It didn't deter me. We just made plans together for how to take care of it. Heck, she married into a 100k mortgage of mine.
Mike | May 28, 2007
My wife and I make a combined income of $90,000 a year. We are in our late 20s and the cost of living in our state is very low. We have found at this income point, even though it is relatively small, life has gotten much more care free and easy. It wasn't always like this. When we got married, I was making $11 an hour working part time and my wife made $23,500. We went to a lot of free / cheap entertainment venues, drove old and unreliable cars, and rented. There was not money left at the end of the month.
I am grateful for that time - it makes me appreciate life now. It the past 2.5 years, we have saved around $30k. That is between both of our retirements and a savings account. We also own a nice home and have one small car payment. We have money left over every month and are planning for the future.
I have found that after a certain point, all you are doing is upgrading your "things" and that those things will not and cannot bring you any long term joy or happiness. We have a house, a boat (paid for), and two cars, one of which is paid for. Also have a nice TV, electronics etc. I really feel at this point, all that is left is bigger things. A larger house, a larger TV etc. And for what? Those things surely do not bring contentment.
For that reason, we are in the process of being aggressive with our money. Increasing savings, retirement contributions, paying down debt etc. I feel that in the long term, financial security is what will bring peace of mind, not new things.
We have friends that are hyper consumers. Brand new high end cars, huge houses, fancy watches, $$$$$ boats, European vacations etc. Yes, they can afford it but their debt load has to be staggering. I can't help but think that one day they will wake up and realize that could be off the earn and consume treadmill and retired. That would be depressing.
We plan to avoid that fate.
Elle | May 28, 2007
I earn $44,000 a year, which is a huge improvement over the $25,000 a year I started at a little more than 3 years ago. I save 13 percent in my 401 K and fully fund my IRA each year via tax refunds, bonuses and any other unexpected money. I will always be greatful for starting out on so little because I learned to live off a really small amount. I feel proud of the amount I save until I reflect on how much I spend on Sephora each month : )
These are all gross incomes, right? I would say that net income is what we should be going off of--after all, that is the money we actually see and make choices with.
So I make $50K gross but after all the deductions I will actually see about $38K.
I learned to live with my grad student's salary at $18K in Hawaii, then in SoCal I got a job at $42K. I echo other's sentiments: it wasn't until I rec'd a raise to $50K that I started to feel comfortable and confident in my financial setting.
LAS | Jun 20, 2007
Joe mentions that he and his wife bought a house for $50k in his 20s while making $20k, and then mentions that the same house is now worth $250k.
Joe, would you be able to afford that same house now, on your starting salary of $20k?
In much of the country, it is nearly impossible for a young couple/person to afford to buy. Where I live in central CA, the average home price in my county is $700k. Granted, that is at the higher end (I hope!). But still, I know very few homeowners under 30 these days.
jim | May 17, 2007
I think it's always important to maintain that "starving" mindset so that you keep working harder towards your goals, even if you think you've reached them. Six figures is a great household income but it should be a milestone when you reach it, not a goal (not saying you're doing either, just saying)
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