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problem with high earners is that most of their debt, they can "work" to compensate for it. they don't mind spending $10-20k+ on a vacation/fun car because it's a few extra work days a month for a few months and they make it back.
Debt changes meaning once you can just earn your way out of the hole, so why worry about the hole if it isn't a "large" leak?
For most people, they don't see Starbucks as a large leak, so they buy their coffee. A smartphone plan with "extras" like unlimited X, small leak, they pay for an unlimited plan. People buy food but let it spoil, again small leak but they don't mind their money "spoiling" away.
Bring this back to high earners, a small leak can be thousands of dollars.
Wow, do you have that wrong, at least with people who are trying to build wealth so one day they can be financially independent and be able to continue "paying their way" in their elderly years.
The problem is, you're convinced and would rather hate and you have no intention of opening your mind to learn from other people so I won't bother.
Of course, I would have more left each month if I lived like we only made $50k per year but what is the point of working so hard for our higher income if we're going to live like we did when we only made $50k?
I'm with you, LBTRS, COULD i save more and live like I only made 50K…uh, yeah I COULD. But the whole point of making MORE than that (for me) is so you don't' HAVE TO live like that's all you make. Now, I'm not going to live like I make 150K if I only make 100, just to buy or have things. But I'm sure as hell not going to live like I only make 50K either. I am very much a live for today AND save for tomorrow kind of person. I'm not going to deny myself certain things that bring me pleasure. But I'm not going to let enjoying things put me in the poor house or debtor's prison either.
Could many people save more. Sure the likely could. BUT, just like at a certain point people say making more doesn't ADD to your life's enjoyment…..the flip side of that for me would be…..saving more WOULD, lead to me NOT enjoying life as much. SO….. I save an amount "that doesn't' hurt." And that's good enough for me. I'm not going to save more if it means cutting out something I enjoy, just to save MORE. Some people, like the Money Mustache people, or the Dave Ramsey beans and rice people -- that works for. And good for them. It's just not MY philopshy of living or saving. Of course its also easier not to spending on things, if those aren't things your interested in anyway. It's not denying yourself -- if it's something you didn't want in the first place.
I'm with you, LBTRS, COULD i save more and live like I only made 50K…uh, yeah I COULD. But the whole point of making MORE than that (for me) is so you don't' HAVE TO live like that's all you make. Now, I'm not going to live like I make 150K if I only make 100, just to buy or have things. But I'm sure as hell not going to live like I only make 50K either. I am very much a live for today AND save for tomorrow kind of person. I'm not going to deny myself certain things that bring me pleasure. But I'm not going to let enjoying things put me in the poor house or debtor's prison either.
I don't believe that I could save more. BUT, just like at a certain point people say making more doesn't ADD to your life's enjoyment…..the flip side of that for me would be…..saving more WOULD, lead to me NOT enjoying life as much. SO I save an amount "that doesn't' hurt." And that's good enough for me. I'm not going to save more if it mean curating out something I enjoy, just to save MORE. Some people, like the Money Mustache people, or the Dave Ramsey beans and rice people -- that works for. And good for them. It's just not MY philopshy of living or saving. Of course its also easier not to spending on things, if those aren't things your interested in anyway. It's not denying yourself -- if it's something you didn't want in the first place.
I took a different attitude. I'm with you, I want to enjoy my life too but I had two driving forces. I understood that the good times never last forever so I saved and invested for the bad times first. After starting my company and when it became successful, I understood that the good times will never last forever (yes, a repeat) so instead of spending I set up a foundation, emergency fund, max 401k, post tax investing, debt free, although I still do well, I have a good foundation and can relax more. My main driving force was never, EVER, have to punch a time clock at the hospital again.
My uncle on the other hand did well too, that is if you think it's ok to put sheets between rooms so he doesn't have to heat rooms he's not in. Oh and I'd never eat anything out of his fridge. He was raise by parents who went through the depression so I guess that's where that mindset comes from.
I don't follow Ramsey's advice to the letter, either. For instance, I do have a credit card that I pay off every month. But I also save more than 15% for retirement (more than he recommends). I do have 3-6 month emergency fund as he recommends.
And I think his advice about stock market returns from "good growth stock mutual funds" being 12%, while possible, is overly optimistic to say the least. Top performing growth mutual funds have not returned that over the last 20 years, and with the stock market fully valued, I don't think they'll return anywhere near that over the next 20, either. His advice that you can take out 8% from your retirement savings once you retire is wildly optimistic as well. It should be 5% at most, and that is a stretch.
12% nominal stock market returns over a 20 year period are fairly unusual. In the 68 20 year periods starting with 1/1/28-12/31/47, and ending with the 20 year period from 1/1/95 to 12/31/94, 28 of those had nominal S&P 500 returns (including dividends) of 12% or higher. If we extend that out to 30 year periods, then it's 19 out of 58.
If we're talking real returns, then obviously it's much less. Any discussion of saving $X in the future needs to take into account that, say, "a million dollars" (or anything) 30 years from now will likely be about half as valuable as today (rule of 72s, money doubles in 30 years at about 2.4%. As good a guess as any going forward).
That said, ANY amount of money saved 30 years from now is better than zero, and DR is about getting people heading towards "savings". If he works for some people, great. Doesn't impact my life any. If a DR "acolyte" wants to fight with me about debt or whatever and claim that anything I'm doing is "wrong", then so be it (I've had a few such encounters during my years on the intertubes. )
Whatever works to make people's lives better. We all make "suboptimal" choices to some degree, and we're all dealing with limited facts, limited time, and limited resources.
Wow, do you have that wrong, at least with people who are trying to build wealth so one day they can be financially independent and be able to continue "paying their way" in their elderly years.
The problem is, you're convinced and would rather hate and you have no intention of opening your mind to learn from other people so I won't bother.
I think you're making assumptions about the poster you're replying to.
There ARE, in fact, people who earn high incomes who spend more money than they should. (There are also people who are high earners who save scads of money, just as there are many on both sides at moderate and low levels of income). My read of the post you're replying to is that high earners WHO ALSO TEND TO OVERSPEND will look at debt as something they can "earn their way out of", rather than addressing the underlying spending. I have seen this mindset in action. "I can always make more money". Yes, but anyone who really wants to can also spend whatever they make.
The low earner who "overspends" will eat out at McDonald's or buy Starbucks rather than make food at home, and will buy a new Kia or Hyundai rather than a used car. The high earner who overspends will buy a Mercedes rather than a Honda Accord (or whatever), or fly first class instead of coach, or stay at the 5 star hotel when they travel abroad instead of the 3 star. A low earner's "leaks" will usually be tens of dollars, and may occasionally be a thousand for that rare "big ticket" purchase. A high earner's "leaks" can often be much larger.
I get that you are assuming that poster is hating on all high earners. I didn't read it that way.
I don't get it
people that follow the dave ramsey program in it's entirety usually end up needing credit at some point. and since they don't have a credit profile there up a creek without a paddle. DR ignores common sense situations in favor of his theory wich he sells
Dave Ramsey doesn't sell his theory, it's free on the radio, by podcast ect unless you want to take a class, which you would pay for. I stopped borrowing money in 2010 except for a home mortgage that I took out in 2012 on a home we put 20% down payment. You don't need a credit score to borrow for a home. Most lenders can do manual underwriting and people get mortgage loans everyday that way.
Borrowing money to buy clothes, furniture, cars to "build your credit score" costs thousands of dollars in interest that could otherwise be saved. Borrowing is so easy, it's no wonder that people ruin their credit score by borrowing more than they can pay when they get laid off, sick, have a baby and so on. It's common sense to NOT borrow for things you WANT and only for things you NEED, get it?
You may WANT a new car when all you NEED is a car to get you to work and home. A paid for car is always cheaper to repair than a car payment.
I think you're making assumptions about the poster you're replying to.
There ARE, in fact, people who earn high incomes who spend more money than they should. (There are also people who are high earners who save scads of money, just as there are many on both sides at moderate and low levels of income). My read of the post you're replying to is that high earners WHO ALSO TEND TO OVERSPEND will look at debt as something they can "earn their way out of", rather than addressing the underlying spending. I have seen this mindset in action. "I can always make more money". Yes, but anyone who really wants to can also spend whatever they make.
The low earner who "overspends" will eat out at McDonald's or buy Starbucks rather than make food at home, and will buy a new Kia or Hyundai rather than a used car. The high earner who overspends will buy a Mercedes rather than a Honda Accord (or whatever), or fly first class instead of coach, or stay at the 5 star hotel when they travel abroad instead of the 3 star. A low earner's "leaks" will usually be tens of dollars, and may occasionally be a thousand for that rare "big ticket" purchase. A high earner's "leaks" can often be much larger.
I get that you are assuming that poster is hating on all high earners. I didn't read it that way.
If that is what they meant then I apologize. I guess since it's not true for me then I forget that other people do. I do agree that people at any income level don't use common sense. For some reason people, no matter what income level don't realize that nothing lasts forever and they spend as if there is no tomorrow.
Electrician,I, myself, don't think it's living beyond a person's means. I said some people could think that -- and it didn't take long to prove my point because the very next post agreed with what I said that some people would think. That -- and that it's stupid to pay interest when you could pay it off before that. Again I'm not saying that others think that.
I also have charged things and paid it off over two or three months -- when I had the money to pay for it. I just didn't want to give up the cash. Others would say it's stupid to pay even 5.00 in interest if you don't have to. Personally I don't care about the interest. I care about what allows me to sleep at night -- not others opinions about what I do. If I charge $600 and pay it off in two 300-dollar payments (the first of which IS before interest is charged.) Yes, stupid me, doesn't see the big deal about paying interest on 3-400.00 for 1-2 months. So yes that 600.00 but the time I added finance charges was what -- 610??? I just can't get that worked up about that. If I'd paid cash for the item at 610.00 would that have been better?
As a real life example… I did charge my entire kitchen remodel on my CCs at 5%. And paid it off over 5 years. It would have taken me 5 years or more to save for the remodel. In the mean time I wouldn't have had my fantastic new kitchen to enjoy……AND…the cost of contracting labor and materials would have gone up also…so a 25K remodel…by the time I saved the cash for it would have cost more anyway -- I'd have had to save even MORE cash. Sooooo I put the kitchen on the CC at 2003 prices and enjoy my kitchen as I pay it off, or save the cash, hate my kitchen -- and have to save enough for 2008 prices. The anti-credit card people might say "you're just rationalizing using credit"……And personally I'm OK with living under the side-eye or their judgement.
Hello! Author of the "very next post" here!
Yep, I consider the examples you provided in that post and this one^ to be examples of "living beyond ones means" (in most cases, there are caveats of course!)
However, I never wrote "it's stupid to pay interest when you could pay it off" and I'm not an anti-credit card person. I use a credit card almost exclusively, and rarely carry much cash.
You don't need to "get worked up" over the $10 in finance charges, or the 5% extra you paid for your new kitchen. You're absolutely free to make those choices, and it sounds like they're the right choices for YOU. I, however, think if I can't save more than $5K a year for a new kitchen that I desperately want, then to go ahead and get one anyway I would be living beyond my means.
But there are times it can be well worth it to "live beyond ones means": I think when people are young and just starting out and savings haven't been accumulated, with cars it often make sense to get a reliable car that will last more than a beater you have to put money into. "Living beyond your means" doesn't have to equal "irresponsible"
I don't consider it a huge character flaw, or moral shortcoming to charge something you can't currently afford. But I do consider that "living beyond your means" Again, it isn't an insult, it's math.
He's an entertainer selling ad-time by dispensing vague generic financial advice to people when he barely knows the veneer of their situations.
Why people take this sort of infotainment - and that's all it is - seriously is beyond me. Equally mystifying is why anyone is entertained by it.
Exactly, he is a radio show host making decisions for people based on 30 sec phone calls. I personally find it entertaining for the most part. I don't understand why people get so mad at him...its just like a News show you don't like...turn it off.
I follow a lot of his principles but I don't preach it. I think since he hates Credit Cards and tells everyone to cut them turns a lot of people off...but at the same time it peaks peoples interest.
Sort of like a Howard Stern type of show where people hated him and said he was disgusting...but they still listened.
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