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My wife and I make a bit more than the $175k in you post, however, $55k of it goes to taxes. Now add our mortgage, living expenses, insurance, retirement, etc. and there isn't as much left over as you think.
Someone with a higher salary will have living expenses proportionate to their salary so it isn't as cut and dry as you're making it sound. 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 not advocating living beyond your means but I do believe in enjoying what you've worked for.
I agree. Some people believe they should live the lifestyle as you even though they don't have the skills to make the same money. They want you to pay for it.
When I was younger I was also stupid with my money. Thank god I grew up, used the snowball plan, paid off debt, then it seemed like I had a lot of money (compared to before). But instead of putting myself back in debt, I invested it. It's amazing how different and better life is since I grew up. Thank god I wasn't a naysayer or didn't give up before starting like some people in this thread did.
I've seen people in this situation wasting money on cigs and booze, spending money on ridiculous things. Then go crying to mom and dad that they don't have money expecting them to pull out their wallet on their fixed income to give to them.
I've seen where someone daughter couldn't afford a car so fixed income mom co-signed the loan, bad decision. Then when the daughter didn't pay the car loan the bank came after 75 year old fixed income mom. Nice huh?
Yes, those people are living beyond their means. Buying cigs and booze are not needs. They can be given up to free that money to pay for other things.
If she cant afford a car, then she needs to ride a bus, walk, car pool, etc until taxes or an income increase..then buy USED.
Yes, those people are living beyond their means. Buying cigs and booze are not needs. They can be given up to free that money to pay for other things.
If she cant afford a car, then she needs to ride a bus, walk, car pool, etc until taxes or an income increase..then buy USED.
Oh I agree. The problem is people easily buy into sob stories and people know how to sob to get sympathy and money. The person who try to help put themselves on the line trying to help, then they get screwed. Do you think the daughter or the others I mentioned were anywhere to be found when the the people who helped them needed help? Nope, of course not.
Yes, those people are living beyond their means. Buying cigs and booze are not needs. They can be given up to free that money to pay for other things.
If she cant afford a car, then she needs to ride a bus, walk, car pool, etc until taxes or an income increase..then buy USED.
Before my mom became ill she tried to help my cousin, giving him a free place to live and paid for things he needed for 4+ years. When she became ill he still lived there. He used to say, your mom helped me now I will help her. These people are great at the game. How did he repay her. He became verbally abusive and was always drunk telling her "you need me". Fortunately we caught on and kicked him out.
Before he left I thought she seemed very timid, I thought it was her sickness, after I will never forget, she asked "is he gone for good" and I answered yes. Her personality changed big, she smiled again, she was funny and she seemed to be interested in trying. They call it a abused women syndrome I think.
These people are not interested in helping themselves, they are interested in taking from the next sucker.
A budget isn't about tracking expenses, it's about estimating them in the future(per the underlined parts of the definitions). You would track your expenses so you can see how close you are to staying on budget, but the tracking itself isn't the budget.
It's comparable to how Mint will track your spending, but has a separate section for setting up your budget. The two aren't the same.
This.
I don't understand why jotucker would be admonishing someone for using electronic transactions as an advantageous way to track spending, saying you track it before you spend it. A budget is a plan, spending is the execution. Nobody has a budget with a subitem "Burger King meal - $7" they'll have a more general category of "fast food" or "dining out" or even "discretionary spending" where that meal gets attributed.
Also = there are so many aspects to financial responsibility I find it absurd to label someone financially irresponsible because they don't adhere to all of them. The person in my example was purposely constructed to make this point, in my opinion someone living on half their income with no debt and significant savings is already way ahead of most of the herd and has clearly overcome one of the biggest challenges of living under their means. It leads to accumulation of wealth, flexibility in life choices, and a far safer position facing life/financial challenges going forward. I call them financial responsible even if they can't tell me what they spent on food last month.
is growing up, becoming an adult, forming a written budget, sticking to said budget, and having the discipline to not be ruled by EMOTION all of the time.
It is entirely possible to maintain reasonable (or even thrifty) spending patterns without a written budget, and having a written budget certainly isn't a qualifying attribute for being an adult.
I like Ramsey's advice even though there are some things I disagree with.
Most people do not have the discipline to pay off CC every month. Some do, but not most people. If you can't handle that one thing, you're automatically paying more for things than they're worth, simple as that. Interest charges are a complete waste when it's an asset that loses value. A lot of people get into trouble and it's easy to do.
Ramsey is about delaying gratification and instead focusing on putting yourself in as good a financial situation for the future as possible. Racking up debt (aside from a mortgage) is not a good position to be in.
It's not just for middle class folks, it's for anyone.
Now, where I part with Ramsey is the "only take a 15 yr mortgage and don't establish any credit history (aka FICO score)." You can get a 30 year mortgage and choose to accelerate your payments to aim for a 15 year payoff, but if you have a situation like a job loss where you need to pay less for a few months, you can pay the amount of that 30 year mortgage until you're back and able to ramp up those payments again to the accelerated rate.
I also believe that having a CC is important for a couple reasons. If you can't handle credit, then you can get a credit card with a small limit (like $500 for instance) which won't allow you to go over. You can pay for some things using the card and then practice paying off the entire balance each and every month. That will build up your credit and give you a FICO score without all the risk. The goal of course is to never pay interest on any item that won't build up value.
There's no reason to go deep into debt for a car. The car will depreciate over time. I believe strongly in this -- you should endeavor to pay no interest at all, so that means pay cash -or- if offered, take a 0% loan and make your monthly payments automatically so you don't have to remember to make the payment. But whatever you do, don't pay more for a car than you already have to pay, which is plenty expensive enough. That means pay no interest.
Most people do not have the discipline to pay off CC every month.
I'd say it's more like many people don't have the MONEY to pay of their cards every month, because the spend more than they make. (Which could be for a short term reason, or they just live above their means -- temporarily or habitually.)
If you live below your means there's no reason at all that you can't put your spending on your card -- and pay it off even before the statement comes. IF I don't have money on me and don't feel like stopping at the ATM -- I'll put my purchase on a CC, and go right home and pay it (or pay it in the nest couple of days, next time I'm on the computer.)
I do all my "budgeting" in my head now. I've never written up a budget to allocate spending. What I have done in the past is right down the totals of what I spent (already) and how much all the utilities, gar car etc.were …to see how much I've already spent.
Once you know the gas bill is usually this much, the electric is that much, your cell phone and internet plan is this much and a car fill up is 30.00, and groceries give-or take are 75.00. UNLESS your barely making enough to get by and your outgo leaves you not much income left…I don't see the need to proactively budget. (for me at this point in my life)
I'd say it's more like many people don't have the MONEY to pay of their cards every month, because the spend more than they make. (Which could be for a short term reason, or they just live above their means -- temporarily or habitually.)
Either way...not good.
Living within your means necessitates having savings, an emergency fund, and never charging anything you can't immediately pay off.
Is buying anything you can't pay cash for "living beyond your means?
Personally, I don't know anyone who has not --at one point or another -- "temporarily" lived beyond their means.
If a person needs a car repair s/he can't just right a check for, and puts in on a CC and pays it off in two months.
Then technically, I'd guess many would say -- that for those two months -- the person lived beyond their means. (But then again if they could afford the two months of payments…were they living beyond their means?
And no doubt there are those who'd argue that going back in time that same person in their opinion clearly must have been living beyond their means for a longer time -- because they didn't have an emergency fund to handle the car repair that came up.
I just think some people come off as being on a very high horse about….the living below your means topic.
Dave Ramsey recommends a 1K emergency fund and then attacking debt….well, people on his snowball program, who might run into a 1,700 car repair…..(such as happened to me when I hit a pot hole in DC and cracked an engine mount and needed my suspension adjusted)….IF they want to get that car fixed…might have to live beyond their means for a while.
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