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When people say they live on half or less of their income, do they mean pretax or after tax? If based on gross income, then yes, I live close to 50% of my income, but after taxes? No way can I do that and not enjoy some things in life. I mean, what's the point of working so hard if I can't enjoy some things now
and then?
While I'm astonished reading that others at my age can save 70% of their income, I just can't see
how anyone can do that unless they make a lot of money and live wayyyyyyy below their means.
If I live 70% below my means, that would mean a $40K annual gross income for my entire family. But if I made $500K a year and live the way I live now, then yes, I can see how I can live on only 30% of my income. A $40K income for a family of 3 would qualify my family for some state programs, meaning I'm poor!
We currently save about 20% of our income to retirement and other goals. Tell me how anyone can live
on only 30% of their income unless they are very rich and live wayyyyy below their means. Am I missing
something here?
How much of your income do you live on? If it's below 30% of your income, how do you do it?
"Tell me how anyone can live
on only 30% of their income unless they are very rich and live wayyyyy below their means. Am I missing
something here?"
Yep. You are missing planning, values clarification, and the rejection of consumerism as a way of life.
The 30% figure you posit may not be something that is instantly achievable.
Simple instances and examples:
A cable tv bill of $70/mo is $840 per year
A cell phone plan can easily be another $840 per year
A car payment of only $120 is over $1440 per year
Car insurance in some areas can be even more than that.
Housing costs, including mortgage, taxes, insurance, maintenance can be a huge drain.
All of those costs can be reduced or eliminated.
Drop cable and use over-the-air and internet streaming and save $840
I use a cell phone rarely, and only pay $40 per YEAR for service.
Our van was bought used and paid off years ago. Other than gas and repairs it is a free ride. Since it is older, the insurance is also much less expensive.
We own our energy efficient home with no mortgage. We bought in an area with low property taxes.
A family of 3 living on $40K around here would be easy and not incur any hardship. However, in other more densely populated areas that could be difficult.
When people say they live on half or less of their income, do they mean pretax or after tax? If based on gross income, then yes, I live close to 50% of my income, but after taxes? No way can I do that and not enjoy some things in life. I mean, what's the point of working so hard if I can't enjoy some things now
and then?
While I'm astonished reading that others at my age can save 70% of their income, I just can't see
how anyone can do that unless they make a lot of money and live wayyyyyyy below their means.
If I live 70% below my means, that would mean a $40K annual gross income for my entire family. But if I made $500K a year and live the way I live now, then yes, I can see how I can live on only 30% of my income. A $40K income for a family of 3 would qualify my family for some state programs, meaning I'm poor!
We currently save about 20% of our income to retirement and other goals. Tell me how anyone can live
on only 30% of their income unless they are very rich and live wayyyyy below their means. Am I missing
something here?
How much of your income do you live on? If it's below 30% of your income, how do you do it?
I think the answer to your question is not "if" it can be done, but do you chose to do it to achieve achieve financial independence sooner rather than later. No one says you must save at that accelerate rate. It is usually done to that extreme by people wanting to retire early and with substantial savings. This may not be a priority for you, and that is ok too.
But the fact is, that if you are willing to move (if you live in a high cost area) you can live on $40,000 a year. However, moving would make no sense if in doing so you lost your high paid salary with it. So in this case, perhaps saving 30% or 40% of your income is doable. What you have to decide is - when do you want to be able to retire. If $40,000 a year represents about 30% of your income, that means you are earning about $125,000 yearly income. Unless you live in New York City or an expensive area of California, you probably could live on $70,000 (or even $60,000) without sacrificing much, and save the rest. It really depends on your goals and your priorities.
I don't work any longer as I am retired. But when I was working I did not save like I should have.
I always lived in an expensive home in the most affluent areas, and had a live in maid. Now, divorced, with assets cut in half, and no pension and only one social security check to accompany my 1/2 of the savings, I must live on less than 1/3 of what I once did. I made all the necessary adjustments. Gave up the expensive house, moved to a lower cost of living area, and cut all my other extravagances. When you are retired however, you have the freedom to move anywhere. This most likely does not apply to you. But the adjustment to living standard does. I can now say, with very few exceptions, that I am not any less happy today than I was when I had a big fancy house and most other luxuries I enjoyed.(although I do miss the live in maid )
Last edited by modhatter; 07-16-2014 at 11:06 AM..
Question all of your expenses.. every time you spend money on something, ask yourself if there's any reasonable alternative to paying or if there's a reasonable yet cheaper substitute. In practice, start with your large recurring expenses like housing and car then move down to the smaller expenses.
I think you may be extrapolating the comments of a few to the general public. Nobody making $40K a year (or even the national median of ~$51K) is living on 30% of their income unless they're in a situation where they have very few monthly obligations. But it becomes feasible just above that point if a person/family is willing to make some sacrifices, and once you get into the low six figures it's very doable.
If I made $500K I'd currently be living on 6% of my income, so that example is a little extreme.
Last edited by duster1979; 07-16-2014 at 02:32 PM..
Nope, you are not missing anything. The answer is right in the question... bolded above.
Yep.
We're in our late forties, our family income puts us well beyond average, we're debt-free, we own our house outright, and we're generally not big spenders, although I wouldn't exactly call us frugal.
I live in $1874. a month and out of thiis I pay $75. for car insurance. I have a garden, chickens, a milk cow and my truck is paid off. Out of it I pay $1000. a month land payment and in 8 months it is paid in full. Oh, the $480. a year in property tax.....
When people say they live on half or less of their income, do they mean pretax or after tax? If based on gross income, then yes, I live close to 50% of my income, but after taxes? No way can I do that and not enjoy some things in life. I mean, what's the point of working so hard if I can't enjoy some things now
and then?
While I'm astonished reading that others at my age can save 70% of their income, I just can't see
how anyone can do that unless they make a lot of money and live wayyyyyyy below their means.
If I live 70% below my means, that would mean a $40K annual gross income for my entire family. But if I made $500K a year and live the way I live now, then yes, I can see how I can live on only 30% of my income. A $40K income for a family of 3 would qualify my family for some state programs, meaning I'm poor!
We currently save about 20% of our income to retirement and other goals. Tell me how anyone can live
on only 30% of their income unless they are very rich and live wayyyyy below their means. Am I missing
something here?
How much of your income do you live on? If it's below 30% of your income, how do you do it?
When both of us were working but we live off one income. Easy to do if you have minimal debt and a reasonable income level. We cut coupons, bought things on sale, shop around for insurance, drive inexpensive cars etc. to reduce our overhead. Our goal was to retire early, I retired last year at 53, my wife has about 18 months to go. It takes some planning and a cooperative partner to make it work. We also have no children
39% post tax, but that includes 9% for entertainment which is discretionary so it might fall into your 30% depending on how you look at things.
How do we keep it at 39% post tax with children? Well, kids are not so expensive as soon as they can eat what you're eating, and stay that way until school age (by then our income should be way up though, so we should be in the low 20%'s then).
-paid off, fuel efficient, reliable, hard to steal cars (cars are a huge expense)
-live 0.5 miles from work, and a mile from shopping (saves gas and time) in a small house
-dumb phones on a discounted plan
-slow internet, owned modem
-antenna sourced TV
-thrift store shopping for toys and clothes (for all of us)
-80° thermostat in summer, 66° in winter, ef bulbs and heavy curtains throughout the house
-We don't clip coupons, or shop sales for food items, just not appealing to us.
-We do get to take 5% each for personal savings (there is retirement, family, and personal savings), that money is not monitored by the other spouse (this is key, we both strive to be good guardians of the household savings, and that is assisted by cash flow into unjudged personal accounts (miss out on some credit card rewards this way, but that's ok).
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