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Old 08-29-2018, 01:40 PM
 
Location: Raleigh
6,964 posts, read 5,183,151 times
Reputation: 9390

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Quote:
Originally Posted by reed067 View Post
This might be in the wrong place but, why come tax season and when weíre buying a car, renting a apt/house.
Why do these people look at our gross income and not what we bring home?

Iíve never understood this.
Quote:
Originally Posted by davidt1 View Post
Me neither. What you take home after taxes is what you have to live on and that is what everything should be based on.
Quote:
Originally Posted by MrRational View Post
It doesn't matter what number THEY use or why.
What matters is that WE use the net number.
Bingo...letting the bank write your budget is a great way to get financially tight in a hurry.

You could have a 10% tithe going to your church. You could be one of those that likes an enormous check at tax time from your interest free loan to the GOVT. You might have some ridiculous ticky-tacky payroll deductions.
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Old 08-29-2018, 02:10 PM
 
2,391 posts, read 2,117,164 times
Reputation: 2549
Quote:
Originally Posted by JONOV View Post
Bingo...letting the bank write your budget is a great way to get financially tight in a hurry.

Similarly, going by hard and fast rules without exception like "you need to make X dollars per year to get a Y mortgage" is a great way to never get ahead.

I've got two friends who make similar amounts of money. Neither is frivolous with their money, but one is much more conservative than the other.

The conservative one has been saving up money for a down payment for a first house. Needs that 20%! And with real estate prices rising over the last few years, it has taken him several years to get there because his rate of savings has barely outpaced real estate appreciation.

The more liberal one bought a home with 5% down payment and in 3 years has over $150k of equity due to appreciation.
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Old 08-29-2018, 02:17 PM
 
17,749 posts, read 15,023,452 times
Reputation: 6377
Quote:
Originally Posted by steveklein View Post
Similarly, going by hard and fast rules without exception like "you need to make X dollars per year to get a Y mortgage" is a great way to never get ahead.

I've got two friends who make similar amounts of money. Neither is frivolous with their money, but one is much more conservative than the other.

The conservative one has been saving up money for a down payment for a first house. Needs that 20%! And with real estate prices rising over the last few years, it has taken him several years to get there because his rate of savings has barely outpaced real estate appreciation.

The more liberal one bought a home with 5% down payment and in 3 years has over $150k of equity due to appreciation.

Excellent observation. The housing bubble existed because it was a marriage between spendthrifts in the pursuit of luxury and those who acted in their financial interests. When assets rise in value faster than one can save , saving is not a good financial move.
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Old 08-29-2018, 02:52 PM
 
Location: The Triad (NC)
26,837 posts, read 57,830,396 times
Reputation: 29220
Quote:
Originally Posted by steveklein View Post
Similarly, going by hard and fast rules without exception...
Sure there can be exceptions and for all sorts of circumstances.
Some might even be objectively valid ones.

The instruction I'm seeing here is to not START by looking for those exceptions:
Start with, maintain the norm at, the lesser expense approach.

But you have the right to over commit yourself to the limit of the credit you can get.
Just don't try to present that approach as being the better course.
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Old 08-29-2018, 05:00 PM
 
Location: Phoenix-Valley of the Sun
2,461 posts, read 1,200,617 times
Reputation: 3046
I haven't had a car loan in years, but when my mom had hers in 2003, they took her gross amount.




totally unrelated story:

Your title of your thread reminds me of a pastor from my OLD church. He did a sermon about giving and someone asked him if we should give 10 percent from our gross income or net income. He laughed and said, "c'mon guys. It's 10 percent of your gross income, not your net income. Don't be cheap." Needless to say that I no longer attend that particular church.
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Old 08-29-2018, 05:14 PM
 
3,027 posts, read 1,206,807 times
Reputation: 5985
Quote:
Originally Posted by MrRational View Post
Absent unique and likely desperate circumstance... do you intend to withdraw those deposits?
I'll assume not.

As these other amounts are no longer available... don't count them as if they were.
Buy the $275,000 home not the $400,000 choice. The Buick not the BMW.
And so forth.


Budget off your net.
It is not unique to change your contributions into a 401K, HSA, etc. People can do that easily to manipulate their net. If you are putting in the max into your 401K each year driving around a beater because you figure you can make more with the company match than getting a car loan, that doesnít mean you necessarily have (or want) to do $18,500 next year.
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Old 08-29-2018, 05:31 PM
 
Location: Washington State
15,352 posts, read 8,020,336 times
Reputation: 13158
Quote:
Originally Posted by reed067 View Post
This might be in the wrong place but, why come tax season and when weíre buying a car, renting a apt/house.
Why do these people look at our gross income and not what we bring home?

Iíve never understood this.
They're relevant for different things. When buying a house, because yo can deduct the interest, property taxes etc. gross is quite relevant as a large mortgage will effectively increase your net depending on your income and situation.
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Old 08-29-2018, 05:53 PM
 
17,612 posts, read 12,197,156 times
Reputation: 12836
Quote:
Originally Posted by Chint View Post
So money going into your retirement savings is not part of your net?
Contributions to your 401k occur before your net so take that as you will as itís a pretty simple concept


Quote:
How about money going into your kids 529 plan, your health savings account etc?


Itís rare that 529 contributions are occurring prior to your payroll hitting so Iím not sure what your eye rolls are for
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Old 08-30-2018, 01:59 AM
 
5,470 posts, read 8,160,530 times
Reputation: 7284
Quote:
Originally Posted by Chint View Post
How is that relevant? $15 k going into your retirement funds is part of your net. You end up with that money. The money going to taxes is not - that never accrues to you. How you choose to partition your net - into spending, savings, deferred savings etc is not relevant.
401k was merely an example.
There are a variety of choices, such as ROTH or regular IRA' S that are pre or post tax.
Health savings plans etc.

Please see the response below as a continuation of answering your question:


Quote:
Originally Posted by CaptainNJ View Post
im not sure what you mean by same job but it would seem to mean that you have about the same amount of cash available to pay for your car as that $35k breadwinner.
But it doesn't.

Let me continue the train of thought:
I was talking to a friend of mine about how I live on <$2k\month.
I budget $1,925, (by choice) and live very well on this .

My healthcare is $0 due to tricare and the VA. (They pay $700+)
Not very GOOD healthcare, but still $0

I have a federal pension, they are self employed.

Gross isn't a comprehensive picture (As I've illustrated above)
But it's a MORE comprehensive picture.
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Old 08-30-2018, 02:21 AM
 
24,710 posts, read 26,777,106 times
Reputation: 22704
Quote:
Originally Posted by Themanwithnoname View Post
If you make $50k and stick $15k into your retirement funds does that mean your doing the same job as a $35k breadwinner?
^^Yes, this.

No matter what number you use, there is always going to be a wrinkle. Gross income is as good a number as any. And besides, most people don't really know their after tax income.
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