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Old 02-13-2016, 07:56 PM
 
Location: New Mexico
116 posts, read 71,684 times
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" ... if there is a % based on income that is considered living below your means? "


I don't think it ever matters how much you make. It does matter how much you spend. To me, it basically means living below what I could afford. It's having the philosophy of not having to spend it just because it's there, or keeping up with some arbitrary high-life living standard. That way, a buffer is always had in the event of some unforeseen major expense. Or, simply having the extra money aside for a large purchase, or investment opportunity of some sort.
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Old 02-14-2016, 02:52 AM
 
6,014 posts, read 6,518,511 times
Reputation: 8305
Quote:
I live the entire year on my January income alone.
How much is that January income? And what percentage of your income is that January income?

Quote:
I prefer to spend no more than 10% of my post-tax earnings.
And how much is that post tax earnings?
15K a year or 150K a year?

I crack up when people post comments that are vague, with no details or real context what-so-ever.

Last edited by selhars; 02-14-2016 at 03:04 AM..
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Old 02-14-2016, 02:59 AM
 
Location: Texas
42,203 posts, read 49,753,916 times
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Quote:
Originally Posted by reneeh63 View Post
Yes....and that's the rub, to differentiate "wants" from "needs". I suppose if you're buying truly as an investment property that's a consideration.
No.
If you want your kids in good schools, it's a consideration.
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Old 02-14-2016, 05:35 AM
 
Location: Nashville, TN
1,894 posts, read 1,077,971 times
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Quote:
Originally Posted by selhars View Post
How much is that January income? And what percentage of your income is that January income?

And how much is that post tax earnings?
15K a year or 150K a year?

I crack up when people post comments that are vague, with no details or real context what-so-ever.
Exactly. And you won't be hearing answers to your great questions because it'll highlight how their situations are the exception, not the norm.

That's super if you live with your parents and get your yearly commission/bonus check in January. Let's not pretend that applies to more than a tiny fraction of people.
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Old 02-14-2016, 11:15 AM
 
12,404 posts, read 9,199,643 times
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Quote:
Originally Posted by stan4 View Post
No.
If you want your kids in good schools, it's a consideration.
And will continue to be so until this country does something about educational inequality...
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Old 02-14-2016, 12:32 PM
 
33,046 posts, read 20,714,185 times
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Quote:
Originally Posted by ncole1 View Post
And will continue to be so until this country does something about educational inequality...

I have this weird fantasy where the childless poor cluster with the purpose of voting down unfair property taxes. In the process of course school funding dries up and the middle class regards it as an unconscionable scandal and finally responds with an equitable solution.
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Old 02-14-2016, 06:53 PM
 
136 posts, read 103,746 times
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While "living below your means" technically only means spending less than what comes in, I was always told (by parents, older relatives etc.) that you have to put a % on it. So you have to consciously decide that you will live on 90% of what's coming in net, or 80% or 75% or whatever. That way you know for a fact that you have 10, 20 or 25% percent (respectively) of your net being stashed away monthly. So you have to set your life up that way -- esp. when you are buying things with a fixed cost like a house or a car. Doesn't matter if you could afford more house or a better car, in your mind your net is only 90%, 80% or 75% respectively of what it actually is -- so you shop based on THAT number. So I've always followed that rule of thumb. I think if you just vaguely set the goal of "spending less than you make," (i) it'll be inconsistent -- some months you'll save 15% of your salary and other months 0.1%; and (ii) it gets to easy for expenditure to keep drifting upwards, yet you keep patting yourself on the back bc you have an extra $20 or $50 left over at the end of the month -- when realistically you could have had an extra few hundred.


I've always felt more comfortable doing that too, in part bc I'm in an industry that's hurting so you can lose a job, eat thru your emergency fund, get another job and find that next job offer is actually 80% of what you were making. Of course you take the job, but it's comforting to know that you don't have to totally rearrange your life bc you weren't living to the max on your prior salary anyway.
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Old 02-14-2016, 07:02 PM
 
Location: Nashville, TN
1,894 posts, read 1,077,971 times
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Quote:
Originally Posted by montgomery212 View Post
While "living below your means" technically only means spending less than what comes in, I was always told (by parents, older relatives etc.) that you have to put a % on it. So you have to consciously decide that you will live on 90% of what's coming in net, or 80% or 75% or whatever. That way you know for a fact that you have 10, 20 or 25% percent (respectively) of your net being stashed away monthly. So you have to set your life up that way -- esp. when you are buying things with a fixed cost like a house or a car. Doesn't matter if you could afford more house or a better car, in your mind your net is only 90%, 80% or 75% respectively of what it actually is -- so you shop based on THAT number. So I've always followed that rule of thumb. I think if you just vaguely set the goal of "spending less than you make," (i) it'll be inconsistent -- some months you'll save 15% of your salary and other months 0.1%; and (ii) it gets to easy for expenditure to keep drifting upwards, yet you keep patting yourself on the back bc you have an extra $20 or $50 left over at the end of the month -- when realistically you could have had an extra few hundred.


I've always felt more comfortable doing that too, in part bc I'm in an industry that's hurting so you can lose a job, eat thru your emergency fund, get another job and find that next job offer is actually 80% of what you were making. Of course you take the job, but it's comforting to know that you don't have to totally rearrange your life bc you weren't living to the max on your prior salary anyway.
That's a good way of looking at it. I calculate my savings rate from gross, not net though. 401k savings are still savings IMO. Right now our household saves 30% of our gross, on target to save 50% in the next 2-3 years with the same income.
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Old 02-14-2016, 07:38 PM
 
136 posts, read 103,746 times
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Quote:
Originally Posted by numberfive View Post
That's a good way of looking at it. I calculate my savings rate from gross, not net though. 401k savings are still savings IMO. Right now our household saves 30% of our gross, on target to save 50% in the next 2-3 years with the same income.

Gross is a good way to look at it as well and 30-50% is awesome. I specifically look at net so as not to "count" my 401k savings. Of course it is savings and it's taken off the top, so then I look at -- where do I want to be as a % of my net; do I want to be 10% below my means or 20% etc.


Honestly I think it all works out for most people as long as there is some metric in mind and you are disciplined about it. Where it doesn't work is where people just say they'll live below their means and then are satisfied using up 98% of their pay.
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Old 02-14-2016, 07:45 PM
 
11,315 posts, read 5,839,816 times
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People have already touched on this but to me, "living below your means" is all about your savings rate to accumulate wealth. After backing out income & payroll taxes, I'm saving about 50% of the rest between tax deferred 401(k) and after tax savings. I kind of wish I'd seen the light on this 20 or 30 years ago.
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