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I know several people who have very decent incomes but live on the edge. In the cases I know, I believe it is due to their inability to determine between a "want" and a "need." In addition many are raising children for whom they provide every thing their friends have and are unable to say "no" for fear of turning the child against them.
I have a neighbor who lives on the edge. He does absolutely nothing to maintain their home, which is only ten years old, shutters faded, landscape unkempt, etc. Two years ago he bought a $18K boat, which cost him $900/month for a slip and used it six times. This year he bought an ATV which he rides around in circles on his front yard. Bought a screened in gazebo which they set up one summer and a hot tub which they used about 10 times. Constantly complains he has no money. Go figure.
While I agree with you wrt larger paychecks vs smaller paychecks, important thing here is from the OP it doesn't sound like they were paid in the FIRST 10 months of the year. There were 2 months without pay in the middle of the year - summer. I'd imagine they were paid January - June, then no pay in July-August, and then September - December. But, I guess, if you look from a standpoint of a school year (and I would assume that most teacher contracts were starting in September) then indeed you are being paid up front.
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You are correct in a general sense. Actually, our first check of the school year was October 1, after starting work in about mid-September, which later shifted to early September. The two months we didn't get a check were August 1 and September 1. So we were not being paid up front.
The exact details are not important to the general principle I was trying to elucidate. I am sorry the specific example I chose led to so much quibbling and bickering. I was actually trying to address people's attitudes toward money management and wondering aloud how it is possible to just have virtually no management going on at all!
Been thinking a lot about this lately. My dad died a few months ago. He had a great life, was a great dad and husband. He never had a big savings, always lived paycheck to paycheck. He never inherited a thing and we were always told not to expect anything, that they were spending it now.
So, now he's gone and his way worked.
I think that statement: "You can choose to live well now, or later" is way too binary. I think it's too often used as an excuse by people who want to live in the present who don't really want to look too deeply at where their money is going and if their spending is really aligned with their values and/or actually bringing them the sense of happiness they think it is.
It also assumes the more you spend the happier you'll be. The research has shown that often isn't true. Yes, spending more helps to a point, but that point levels off at income levels much lower than most people imagine.
It also assumes savings can't be a part of "living well"--that financial security isn't part of living well. I disagree with that very much.
And while it's true that it's harder to save when you're young and your income is low, those benefits of debt paydown/savings/investments begin accruing right away.
I remember reading the story about a guy in Canada who worked 3 jobs to pay off his house by age 30. People were criticizing him for not having a life...but he gave up only 3 years of his life so that he could live well for the rest of his life! Now he's not under pressure to, earn, earn, earn all the time. And he has more time to do other things besides work. (He quit one of his jobs after he paid off the house).
3-5 years of intense saving/debt paydown/investing and then throttling back a bit actually leads to a higher standard of living for most people in the long run (in terms of both time and materially), because they're not paying tons of money in interest on payments and/or their investments are working hard for them, so they can actually afford future splurges and/or don't have to work as hard as those who spend up to the limits (or more) of their incomes.
Last edited by mysticaltyger; 04-25-2017 at 05:46 PM..
I think that statement: "You can choose to live well now, or later" is way too binary. I think it's too often used as an excuse by people who want to live in the present by people who don't really want to look too deeply at where their money is going and if their spending is really aligned with their values and/or actually bringing them the sense of happiness they think it is.
It also assumes the more you spend the happier you'll be. The research has shown that simply isn't true. Yes, spending more helps to a point, but that point levels off at income levels much lower than most people imagine.
It also assumes savings can't be a part of "living well"--that financial security isn't part of living well. I disagree with that very much.
And while it's true that it's harder to save when you're young and your income is low, those benefits of debt paydown/savings/investments begin accruing right away.
I remember reading the story about a guy in Canada who worked 3 jobs to pay off his house by age 30. People were criticizing him for not having a life...but he gave up only 3 years of his life so that he could live well for the rest of his life! Now he's not under pressure to, earn, earn, earn all the time. And he has more time to do other things besides work. (He quit one of his jobs after he paid off the house).
3-5 years of intense saving/debt paydown/investing and then throttling back a bit actually leads to a higher standard of living for most people in the long run (in terms of both time and materially), because they're not paying tons of money in interest on payments and/or their investments are working hard for them, so they can actually afford future splurges and/or don't have to work as hard as those who spend up to the limits (or more) of their incomes.
Bet he had no time for family or dating to try and create a family. Maybe he doesn't want that, if so more power to him. Or maybe he figured he could accomplish it later... but he missed on 3 years of dating/family formation in his 20s. Dating & starting a family only gets harder once you hit your 30s... opportunities get taken off the market, less energy to keep up with the kids, etc... Then again, maybe he had a partner that was on board with the whole strategy.... if so, lucky him.
Still, opportunity cost is a real thing. I learned that the hard way... let people slip out of my life because I was obsessed with working.
Another factor - that guy was lucky that he qualified for the kinds of jobs that made that possible in his 20s. Not everyone does; a day job at Wal-Mart and a night job at IHOP wouldn't accomplish that. Good for him for making it happen, though.
I could potentially do that... take on some kind of night job & pay off my house in maybe 3-4 years. My marriage would never survive those 3 years, though. So I would have to weigh a paid off house vs. the cost of a divorce and the emotional costs involved with that.
Your monthly budget shouldn't shift just because you got 10 monthly paychecks vs 12 of a lower amount. If you could get paid your full 12 months salary in the first 10 months of the years that's the choice people should make. The rationale to take a lower monthly check only makes sense if you have trouble managing your cashflow. Just because most people want something doesn't make it the best financial decision
Most posts were never an attempt to suggest what most people prefer as that's not relevant to what the best financial advice is
What's the benefit to 10 checks? I can budget better than that. On commission income varies wildly but in this case I don't see it. Interest rates on savings accounts are less than 1%. There is no gain to getting your last two checks 'early' and then having none for 2 months. Just a budget hassle for no gain.
You have to take some of the top of each 10 of the checks to save for that two months. Far easier to get 12 checks.
Now, if more money were involved, that would be different. But there isn't.
You can simulate having 12 paychecks if you have 10. All you have to do is have 1/6 of each check go to a separate savings account, then in the first "off" month, transfer half of that amount back to checking on the same day you would "normally" get paid. Then do the same with the other half of the money in the second "off" month. The net effect is that you have the same amount of money coming in to your checking account every month.
Quite true and that is the smart thing to do, the only thing to do really,but as I said above there is nothing desirable about that. Not when the net sum is the same.
What's the benefit to 10 checks? I can budget better than that. On commission income varies wildly but in this case I don't see it. Interest rates on savings accounts are less than 1%. There is no gain to getting your last two checks 'early' and then having none for 2 months. Just a budget hassle for no gain.
You have to take some of the top of each 10 of the checks to save for that two months. Far easier to get 12 checks.
Now, if more money were involved, that would be different. But there isn't.
Having the same amount of money in 10 months is better than 12 months even at low interest rates.
Tell me financially how it's better to opt for 12 payments vs 10 payments totaling the same amount if you can. You can't because it's not better financially
Quite true and that is the smart thing to do, the only thing to do really,but as I said above there is nothing desirable about that.
It allows you to accomplish 12 months' worth of investing in 10 months. While savings accounts aren't yielding much, that's not so true of other investments, and that added time in the market can make a difference.
Having the same amount of money in 10 months is better than 12 months even at low interest rates.
You have not explained why. Interest rates on savings are crap. pennies.
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