Are You a Spender or Saver ?

[Helena]

Just say NO to consumerism
and GET OUT OF DEBT !!


High income, low net worth could doom retirement

Have you ever thought that if you were making $100,000 or more it would be easy to save money?
Apparently it isn't, even for people making upward of $250,000. There's no shortage of high-income earners
who have relatively little net worth.



Entire article and chart at link below

High income, low net worth could doom retirement (Page 1 of 2)

[Grizz]

Good topic. I have seen my yearly family income increase about 300% in the last 10 years, and we do save some of it. The strange thing is, our standard of living is increasing at a faster rate than our savings.

I don't feel a need to keep up with the Jones', but somehow over time you find a way to justify a car that is newer, or a new electronic gizmo. Next thing you know, there you have it, a new improved lifestyle that you've become accustomed to. It's insidious, and although I have had some success battling some of the spending urges, I'm certain that it is a human natural instinct that we're all up against.

[Milton]

Quote:

Originally Posted by Grizz I have seen my yearly family income increase about 300% in the last 10 years, and we do save some of it. The strange thing is, our standard of living is increasing at a faster rate than our savings.

Wow.

Quote:

Originally Posted by Grizz I don't feel a need to keep up with the Jones', but somehow over time you find a way to justify a car that is newer, or a new electronic gizmo. Next thing you know, there you have it, a new improved lifestyle that you've become accustomed to. It's insidious, and although I have had some success battling some of the spending urges, I'm certain that it is a human natural instinct that we're all up against.

No, not everyone.

[W2R]

I am spending the same now as I did when my income was lower. I just continue to let my income rise, but don't increase my spending.

Since I am single, this works pretty well. I don't feel especially deprived, because I have every bit as much to spend as I did last year (and the year before, and the year before, and so on). I am frugal but I also buy some things for fun.

I will be getting a cash award sometime soon. I have no idea how much it will be, but the last one was $1200. I am not thinking of "what treat will I buy for myself". Instead am thinking of how great it will be to be able to contribute the max to my Roth in January instead of later. So, I guess I'm a saver!

[FIREdreamer]

Quote:

Originally Posted by Want2retire I am spending the same now as I did when my income was lower. I just continue to let my income rise, but don't increase my spending.

Same here!

But really I am a spender at heart. I love to buy things. I love waiting with anticipation for the purchase, I love browsing for, researching and comparing products on the internet, looking for deals, and then finally the day has arrived... I wake up in the morning energized and in a good mood. I am gonna spend that money and feel good about it. Excitement is building, my heart is beating a bit faster, I am ready to enjoy myself. So I log on to my Vanguard account and buy a few more share of my favorite mutual fund... Aaaahhhhhh!

[W2R]

Quote:

Originally Posted by FIREdreamer Same here! But really I am a spender at heart. I love to buy things. I love waiting with anticipation for the purchase, I love browsing for, researching and comparing products on the internet, looking for deals, and then finally the day has arrived... I wake up in the morning energized and in a good mood. I am gonna spend that money and feel good about it. Excitement is building, my heart is beating a bit faster, I am ready to enjoy myself. So I log on to my Vanguard account and buy a few more share of my favorite mutual fund... Aaaahhhhhh!

I guess I am a spender at heart too, then! I really get a charge out of putting my money into a mutual fund. Just got $5K of Vanguard 500 on November 2nd. So far I've lost $64 out of that $5000, but it was still fun.

[Meadbh]

Quote:

Originally Posted by Want2retire I am spending the same now as I did when my income was lower. I just continue to let my income rise, but don't increase my spending. Since I am single, this works pretty well. I don't feel especially deprived, because I have every bit as much to spend as I did last year (and the year before, and the year before, and so on). I am frugal but I also buy some things for fun.

W2R, you and I are two of a kind!

I'm wondering two things.
(a) how much does a person's cultural background influence saving vs. spending?
(b) why is there an ad for $4m properties on this page?

[bots2019]

Quote:

Originally Posted by Meadbh (b) why is there an ad for $4m properties on this page?

Yeah, I thought that was pretty funny. Rule #1 of marketing - know your audience!

btw - that's starting at 4M, I'm sure you could also find nicer ones.

[Helena]

Quote:

Originally Posted by Meadbh why is there an ad for $4m properties on this page?

I wouldn't live on an island if it cost 4 dollars...
being surrounded by all that ocean would keep
me constantly nervous... I don't even want to
live on the coast... that's the result of being
born and raised in the desert.

[W2R]

Quote:

Originally Posted by Meadbh W2R, you and I are two of a kind! I'm wondering two things. (a) how much does a person's cultural background influence saving vs. spending? (b) why is there an ad for $4m properties on this page?

(a) I'll bite. I would imagine that a lot of Americans (and a lot of those on this board) have a cultural/ethnic background like mine, and that it is really not all that unique. Despite the gorgeous German model depicted in my avatar, actually my ethnic background is Scottish-American and my paternal ancestors came over in a boat in the early 1730's. My maternal ancestors followed not too long afterwards. I have a big dose of American pioneer in my background, moving West, working hard and making do with what they had. Massive, massive doses of Puritan ethic have been passed down to me through the generations, and this has plagued me unmercifully and I try (often unsuccessfully) to put it in perspective. Some Calvinist background/attitudes as well.

(b) I found myself laughing at the ad! Being able to afford a property like that for ER is a nice fantasy, but realistically, even if I could afford it I doubt I would be interested. See (a), above.

[TickTock]

Quote:

Originally Posted by Want2retire I am spending the same now as I did when my income was lower. I just continue to let my income rise, but don't increase my spending. Since I am single, this works pretty well. I don't feel especially deprived, because I have every bit as much to spend as I did last year (and the year before, and the year before, and so on). I am frugal but I also buy some things for fun.

This is DW and I as well. We LBOM, but don't consider that we deprive ourselves.

Now, on the one hand it's 'easy' for two DINKs with good jobs to preach LBYM, right? OTOH, most folks with our incomes (and higher!) don't save much; expenses tend to increase with income for most humans.

It almost comes down to: do you want to look rich or be rich? It's not impossible to do both, but it takes one heck of a lot of money!

F'r instance, we live in a nice house. But it's less than we could afford - even by traditional measurements, rather than the ones the banks were using until the sub-prime crunch hit - what's the tradtional rule of thumb, 2.5 x annual gross income? We're below it.

We drive what I consider to be nice cars - both bought new (not at the same time!!!), loans paid off, and we intend to keep them for many more years before buying new ones. And I know that buying vehicles new is not the most economical way, but I judge it worth the extra cost to know exactly what the vehicle's history is.

We spend money on things that we judge to give us good value, but we don't go and get a big-screen TV and a vacation home and a boat and a blah blah blah. I'm not knocking any of those items as such, but for us they wouldn't provide good value for money spent.

Quote:

Originally Posted by Want2retire I will be getting a cash award sometime soon. I have no idea how much it will be, but the last one was $1200. I am not thinking of "what treat will I buy for myself". Instead am thinking of how great it will be to be able to contribute the max to my Roth in January instead of later. So, I guess I'm a saver!

That's us, too. When we get a dollar in our hands, the first thought is, "Save it", not "Oooh, now we can afford [insert thing here]".

[RetireeRobert]

Quote:

Originally Posted by Helena Have you ever thought that if you were making $100,000 or more it would be easy to save money? Apparently it isn't, even for people making upward of $250,000. There's no shortage of high-income earners who have relatively little net worth. High income, low net worth could doom retirement (Page 1 of 2)

Thanks for the link---some interesting stats. I found it fascinating the column of the chart that showed for income categories of under $25k (meaning down to $0) all the way to income of up to $250k, the percent of income needed to pay bills was almost a constant around 53%, 55%, 58%---across ALL those income categories.

As to people seeming to be in debt no matter how much they earn, spending it all and then some, I know several like that. Afrined from high school whom I roomed with in college and afterwards for awhile, became a pharmacist and earned big bucks from day one. I (a saver) have been retired seven years, but he is still working and has to work to age 66 or perhaps longer to be able to retire. He was always a big spender and frittered his money away. I remember 24 years ago getting him to open IRA accounts and start saving. Within about five years he had withdrawn his IRA funds (yes, and paid the early withdrawal penalty) to travel to South America or something. Even today he makes $105k salary, but he only really started thinking retirement and started funding it about 12 or 15 years ago. Hence he doesn't see being able to stop working till 66 or as late as 70. He may have his mortgage on his house paid off by then.

I (the saver) have been debt free for some 12 years.

Go savers!

[bots2019]

My favorite stat on the chart - 9% of those earning over 250k don't save because they don't make enough to make ends meet!

I think personal spending habits are often a matter of satisfaction. My grandfather, an uber-saver, seemed to derive perverse pleasure from not spending money, even to the point of deprivation.

This mentality seemed to filter down generations, to my mom, an obsessive second hander, and me, a LBYM type who spends just enough to avoid becoming a card carrying cheap bastard. We're moving in the right direction at least, maybe my son will be able to buy a new car someday, personally I get more satisfaction out of a deal.

[dessert]

Quote:

Originally Posted by bots2019 I think personal spending habits are often a matter of satisfaction. My grandfather, an uber-saver, seemed to derive perverse pleasure from not spending money, even to the point of deprivation.

Bots2019 or anyone else for that matter....
I have seen this term "uber-saver" on several different threads lately. I have never heard of that before and was wondering what it meant.
Google doesn't recognize it either.:confused:

[joesxm]

uber = super

[dessert]

Quote:

Originally Posted by joesxm uber = super

Thanks joesxm....learn something every day on this site.

[Helena]

I live a conservative lifestyle in a less expensive
part of the country and am completely out of debt.
I have never made six figures in my life but have been
able to save with little effort. Yet, many who do make
six figures can't make ends meet? I wonder what
percentage of their income goes to pay interest
on debt ?

[RetireeRobert]

Quote:

Originally Posted by Helena I live a conservative lifestyle in a less expensive part of the country and am completely out of debt. I have never made six figures in my life but have been able to save with little effort. Yet, many who do make six figures can't make ends meet? I wonder what percentage of their income goes to pay interest on debt ?

It is amazing, almost unfathomable, isn't it.

I too never made six figures in my whole career. But I retired early, no debt, am sending three kids to college, getting ready to build a new house for cash, and I never felt the slighest strain geting to this point. But my $105k friend (and way back when, I started out of college at $7k a year--he started at $12k) at age 60 has 6 or 9 years to go to reitre and to just then get his mortgage paid off.

I just can't understand it myself, given my own easy experience, but it happens all the time to lots of people. I just don't get it.

[Puzzley]

I've always known that my wife and I were not very diciplined savers, so the answer for us is to save it before we ever see it... I've maxed out every savings vehicle and retirement opportunity that my Megacorp has offered, and every bonus for the last 12 years has gone entirely into a deferred compensation account. This has forced us into a cheaper lifestyle, and has allowed us to save about 50% of pretax income for a number of years. It'll be a little late, but I should be able to be FIREd next year, at 63...

[Nords]

Quote:

Originally Posted by Helena I wonder what percentage of their income goes to pay interest on debt ?

Sounds like a lifestyle issue to me, and as long as they're willing to keep paying 7.45% of their income to FICA & Medicare... well, who am I to criticize their blatant desire to work for the rest of their lives?