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Old 02-14-2016, 08:51 PM
 
Location: Nashville, TN
1,894 posts, read 1,082,357 times
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Quote:
Originally Posted by GeoffD View Post
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.
You said it! Not sure if you've heard this phrase before, but it's helped me stop kicking myself so much:

"The best time to plant a tree was 20 years ago. The next best time is now."
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Old 02-14-2016, 08:55 PM
 
Location: Nashville, TN
1,894 posts, read 1,082,357 times
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Quote:
Originally Posted by montgomery212 View Post
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.
Right -- it'd probably be an interesting topic for a new thread: "how do you calculate your savings rate?"

There's no right answer. You pick net, I pick gross, other people might include anything that contributes to their net worth (like additional principal payments), etc.
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Old 02-14-2016, 08:57 PM
 
33,046 posts, read 20,766,780 times
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Quote:
Originally Posted by montgomery212 View Post
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.


The people spending 98% of their pay generally are not what I call subsidy Kids. Subsidy Kids don't carry their own weight because they are enjoying cost advantages and thus are not paying market prices.

The 30-something living in mommy's basement isn't paying market rent, for example.

Being disciplined and/or frugal won't help much when you're poor and spending more to rent a studio apartment than your next door neighbor pays to own a 3BR house.
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Old 02-14-2016, 09:08 PM
 
Location: Nashville, TN
1,894 posts, read 1,082,357 times
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Originally Posted by freemkt View Post
The people spending 98% of their pay generally are not what I call subsidy Kids. Subsidy Kids don't carry their own weight because they are enjoying cost advantages and thus are not paying market prices.

The 30-something living in mommy's basement isn't paying market rent, for example.

Being disciplined and/or frugal won't help much when you're poor and spending more to rent a studio apartment than your next door neighbor pays to own a 3BR house.
I prefer to not compare someone else's highlight reel to my behind-the-scenes.

Who knows if that 30-something has a disability, or is helping take care of their parent(s) with disabilities. Maybe they're going through a divorce or bankruptcy due to medical bills/lawsuits/etc.

The neighbor that *seems* to have it better might not, and the information either way doesn't pay my bills. So who cares? Just holding that resentment is like drinking poison and hoping the other person dies.
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Old 02-14-2016, 09:57 PM
 
136 posts, read 104,062 times
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As a general rule I don't make it my problem to worry about whether someone's mommy and daddy are paying their rent or providing their down payment or if they're living in an apartment due to a bitter divorce or if they're earning below market wages due to a disability or whatever. Not my problem. I'm just saying that all things equal, there ARE people -- who are in fine health and are in high earning professions and have the chance to be economically solid -- who are spending 98% of their pay and still viewing themselves as living below their means. Why they choose to live this way rather than choosing to save 10% or 50% or whatever isn't really my problem, nor does it require my judgment.
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Old 02-14-2016, 10:47 PM
 
33,046 posts, read 20,766,780 times
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Quote:
Originally Posted by numberfive View Post
Right -- it'd probably be an interesting topic for a new thread: "how do you calculate your savings rate?"

There's no right answer. You pick net, I pick gross, other people might include anything that contributes to their net worth (like additional principal payments), etc.

Let's call the whole thing off.
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Old 02-14-2016, 10:49 PM
 
33,046 posts, read 20,766,780 times
Reputation: 8928
Quote:
Originally Posted by numberfive View Post
I prefer to not compare someone else's highlight reel to my behind-the-scenes.

Who knows if that 30-something has a disability, or is helping take care of their parent(s) with disabilities. Maybe they're going through a divorce or bankruptcy due to medical bills/lawsuits/etc.

The neighbor that *seems* to have it better might not, and the information either way doesn't pay my bills. So who cares? Just holding that resentment is like drinking poison and hoping the other person dies.

What I'd suggest is trying to monetize that information.
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Old 02-15-2016, 01:52 PM
 
11,419 posts, read 5,894,629 times
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Quote:
Originally Posted by numberfive View Post
You said it! Not sure if you've heard this phrase before, but it's helped me stop kicking myself so much:

"The best time to plant a tree was 20 years ago. The next best time is now."
Yep. I sat down at age 51, ran the numbers, and quickly did my planting. I'm almost half way through a 15 year plan to be able to retire at age 65 1/2 and not be eating dog food and sleeping in a cardboard box. Not quite but I made a plan, keep refining it, and I'm busily executing it. It's not exactly "frugal living" but I'm very focused on building wealth so I don't take a big lifestyle hit when I retire. It's a very different way of looking at my personal finances than the first ~30 years of my work life.
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Old 02-15-2016, 02:19 PM
 
4,348 posts, read 4,441,394 times
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Quote:
Originally Posted by GeoffD View Post
Yep. I sat down at age 51, ran the numbers, and quickly did my planting. I'm almost half way through a 15 year plan to be able to retire at age 65 1/2 and not be eating dog food and sleeping in a cardboard box. Not quite but I made a plan, keep refining it, and I'm busily executing it. It's not exactly "frugal living" but I'm very focused on building wealth so I don't take a big lifestyle hit when I retire. It's a very different way of looking at my personal finances than the first ~30 years of my work life.
I think grad school helped me with this. Living for 4 years on about $14-15k/yr allowed me to really differentiate wants vs. needs.
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Old 02-15-2016, 02:20 PM
 
Location: Living on the Coast in Oxnard CA
15,372 posts, read 25,625,313 times
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Quote:
Originally Posted by canadian citizen View Post
I am still waiting for the first person on one of those TV "home finder " programs who walks in to a 2800 sq ft house and says ..............Its too dam big.


It amazes me when I see a couple ( married but no kids ) who say they " need " a four bedroom, three bathroom house. Are they going to run a bed and breakfast business ?


JiM B.
Shouldn't people that can afford what they want be able to get what they want? I don't think that the size of a home offers any kind of glimpse into if they are living within their means. I know a couple on the beach in a 5,000 square foot 3 story home. They don't need that size of home. It is only them as their kids are grown with kids of their own. Still, they love this home. I have no idea what they paid for that home. I do know that homes along the beach can cost in the 7 figures. I am betting that they paid over $2mill for it. The home fits their lifestyle. They can entertain, they can have their kids and grand kids visit. They have told us we could use the home as a place to park when we went to the beach or shower after leaving the beach, as it has an outdoor shower area, something that is common to many homes in the area.

Another friend purchased a 10,000 square foot place in a high end community. It sits on a couple acres and I know that they paid $2,465,000 and change for that home. They do have young kids at home, 2 small children that have not started school yet. The home is way below there means as the company they own is valued at over $100 million. The size of the home has little bearing in these cases on if they are living above, within, or below their means.

As far as our own situation. My wife and I put money into our retirement account. We do this with pretax dollars. Our employer also adds to that. We also save other money in an account at the bank. We are also unloading debt at a faster rate than in years past. The goal is to unload a car loan, and three small loans this year. The total amount is about $18,000 in debt, mostly with the car. We also want to unload my student loan debt and lastly our mortgage debt. Even with the debt load we are saving money so feel that we are living within our means. The goal though is to be debt free and living within our means. We never want to see a bill book or a notice that we owe money in our life time. Next car will be a cash deal. Making the payments now on the car we will have later.
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