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Several years ago I posed a similar question to an independent CFP we hired to help us tweak our investment strategy, and he let us in on the secret: the Jones's are broke. What is it Warren Buffett says? You see who's swimming naked when the tide goes out. According to our CFP, there are a lot of people out there in their birthday suits.
My spouse and I managed to accumulate a pretty impressive nest egg and a paid-off house by forty, and we did it by living under our means. For most of that 18 years between college and today, we made not much more than you, and we had two kids to boot. Over the past few years, our annual income has risen dramatically, and this year we'll have earned an amount we never even dreamed possible. I'm still a bit flabbergasted to tell you the truth. A hefty portion of it came in the form of investment income of one sort or another. We wouldn't have been able to do it if we'd gotten swept away comparing ourselves to the Jones's.
BTW, people who tell you that $70k isn't an impressive salary for a 25-year-old are full of crap. Don't fritter the money away on meaningless things and soon you'll leave your peers in the dust. Keep your eye on the goal!
Funny thing is most people my age I hang out with don't have any concept of retirement! I usually do put way some 3% into 401K to get company match. I do have plans use my cash to put into Roth IRA eventually.
Anyhow, I seriously do think I already stick out for being cheap with my money. Potentially people asking whether I bought house yet, played role in me actually buying one. However, that didn't managed to get rid my "cheap" label. A lot people I know haven't gotten hit personally from the recession and are back spending money. Two of them even bought new houses recently.
That's ok. I get called 'cheap' by morons who make a tenth of my salary because I won't buy a new cell phone (mine works just fine) or go out to eat every five seconds...meanwhile, they don't say anything when I buy them treats or presents...people want to justify their poor financial decisions by making you feel bad for not making the same decisions.
Keep doing the right thing. Budget. Max out your 401k. Put a bit aside in investments/savings every month. Don't worry what other people are doing - they will not bail you out when you run out of money.
The smart phone/cell phone thing is a little different - I see no point in owning an 11 year old cell phone because you can get a new one for next to nothing by signing up for a new service plan, even at your existing carrier. The same goes for most smartphones, but those require a data plan that can cost 30 a month or so.
But in the end, I think the short answer to your question is that a) your income isn't all that high for someone your age who's been to college - it's above average but not extraordinary; and b) a lot of your friends are overspending.
Agree, no need to be a Luddite, but also know how to save.
I am a 25 year old single guy who earns about 70K a year. Looking at household income in that US, looks like put me at top 30% or so household income in the US. Yet it seems like everyone I come across is outspending me. It sometimes does make feel a bit poor since I don't the money to buy all these things.
For example, at malls I visit people seem to buys tons of items while I usually window shop or get 1-2 items. At Wal-mart, people checkout with carts full of goods, and spend like $25 usually. Not mention, I know a lot of people my age working at retail store yet they can buy latest smart phones, LCD TV, brand name clothes, and not mention nice loaded cars.
I don't consider myself very frugal, I spend most of my take home income due to various expenses. Most of my expenses goes to things like car, housing, basic utilities, and paying off debt. And yes, I sometimes even have negative budget (spend more than income) in a month. Now I don't have any credit card debt, and always spend money if I have cash to pay for it. Wonder if that is the difference? I really do wonder where people managed to find so much of money to spend? Or maybe I am just around people who have more money than me?
Been there....15 years ago. Some people live paycheck to paycheck and have mountains of debt. My advice. Spend even less until you are out of debt except if you own a home. Buy used or inexpensive cars....later in life you will be ahead of the game so enjoy. Also, you should be putting a TON into your 401k now for the best tax benefit...you can ease off when you have more deductions like family etc. then.
I'll chime in as I don't understand why people will compare themselves to every other tom, jane and harry on the street. I have never understood it as one poster said... there may be 2500 people at the mall spending like mad but there are just as many people at home saving their money.
I personally won't spend anything and then I go on my little shopping sprees and will spend hundreds at a time. I can do this as I SAVE up and know what I need and don't spend frivoulously..
Big purchases are made and paid off asap before another big purchase... (This next year i'll get a new TV (I still have the old huge thing), blue ray, BOSE sound system... and a whole new living room set - in leather...)... I will be able to do this because I have saved up for this.. .
So.. just because it seems someone is "outspending" = it could be they are currently in a position to blow some money
It's because, as my Grandmother would say... some people live like there is no tomorrow... they spend all they have and mortgage their future to boot.
Each person has to make their own way... I worked with a number of 20 somethings a few years ago... they were intoxicated on easy credit... many were buying new homes, investment property, maxing HELOC to pay for lavish vacations and new cars... 50K SUV... monster trucks even a 90k Land Rover... every one and I mean every one has walked away from their homes... either moved in with Mom and Dad or rents a modest apartment...
The receptionist owned 3 homes and drove a new BMW and vacationed in Tahiti... she now only has memories and lives with her folks...
It is easy to go into debt... maturity and common sense will help with prioritizing.
Young, Dual Income Couples can really spend... they have two incomes and often no children... My brother sees young couples all the time that have nothing behind them... they cannot qualify for a home and yet drive expensive foreign cars... expensive clothes and spend money lavishly going out...
Life is full of trade offs.
The CEO of the company pulled my aside one day and said I know you can afford a better car... I was still driving the $800 Plymouth Valiant I bought in High School... the car never let me down and I never had to worry if something happened to it. Never go into debt for something that depreciates in value...
I do think my housing costs are bit too much. As mentioned, I bough a bigger house since my parents are living with me. Also, I stopped eating out since my parents cooking / buying groceries. Hence, why my wal-mart trips are usually $25.
In recent months I have been spending a lot of money on unplanned expenses. For example, car service bill hit over $200. Then my dentist wanted to do a $400 "deep cleaning" procedure. Now recently, my HoA is upset about weeds / grass on my lawn and I may need to spend $500-$2000 to fix this all up...
I recently read in some article a remark by a woman who does estate sales that in every house of a deceased person she has to organize a sale for there is a huge pile of "stuff" that no one wants or knows what to do with. The point was not to waste money buying things that have no meaning or use.
It isn't the partner, you've just upgraded your standard of living and are attributing it to having a partner instead of said upgrade.
One two bedroom place is cheaper than two comparable single bedroom places, it is also cheaper to heat and cool than two. Throw in one subscription for internet/cable instead of two, cheaper food costs when cooking for two, cheaper car insurance, etc.
In my experience two people can live on between about 1.5x the cost of a single person, given same standard of living.
Statistically speaking, I read that 2 can live as cheaplly as 1.8. But that's just an average, so it obviously varies. I think if both work at it, you could get it down to 1.5, as you say.
I agree, I make a good salary too, and everyone seems to have more money than me. Oh well, I just continue to save 15% of my income for my retirement, that will make me more happy in the long run, than a new purse.
I think part of this phenomena of everyone seeming to have more than is us that our brains are wired to notice people who have more than us than people who have less. We almost automatically compare "up" instead of "down". I think that's why religion exhorts us to think of those less fortunate than us....because it's not something that comes naturally to most of us.
Anyhow, I seriously do think I already stick out for being cheap with my money. Potentially people asking whether I bought house yet, played role in me actually buying one. However, that didn't managed to get rid my "cheap" label. A lot people I know haven't gotten hit personally from the recession and are back spending money. Two of them even bought new houses recently.
If you're waiting for people to stop calling you "cheap" you'll be waiting the rest of your life in America's spendthrift culture.
The best thing you can say to these people (if you must say anything) is "Yes, that's right. I'm cheap". Say it proudly and firmly.
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Agree, no need to be a Luddite, but also know how to save.
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