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Old 08-26-2010, 09:36 AM   #21
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What in the world? It's "human nature" to spend every penny you have, just because you have it? How does he figure? Is this the average philosophy of personal finance?
It's human nature for some people. But fortunately not for everyone. The folks on this board don't have that problem.

For some folks, automatic deductions into savings from their paycheck can help "hide" the extra money so they don't "see" it. But some folks don't even need that level of discipline.

I think your colleague is just justifying his spending habits.

Oh - and there was no need for that conversation to continue anyway. Don't waste your breath.

Audrey
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Old 08-26-2010, 09:37 AM   #22
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Originally Posted by Andre1969 View Post
Usually that's the point where they'll then switch to the argument of "Well, what if you get sick and run up some medical bills, or get laid off for a long period of time, or get disabled and can't work, or lose your money in a bad investment, the country goes to war, loses, and the enemy seizes your bank account, blah-blah-blah".

Some people just want to live in their it-can't-be-done gloom and doom, and don't want anybody's optimism to hint that something better is possible.
Yep, I always used to hear my sister say "what if I die...", so when she recently mentioned that she would start saving for retirement, I was so dumbfounded that I didn't know what to say to that
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Old 08-26-2010, 10:24 AM   #23
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I guess this may be a list of what not to do.

I'll preface this by saying while we still live below our means, contract our spending when we needed to and save, we have been very, very, very guilty of letting expenses increase with income, so are not in as strong of a position as some of the inspirational savers here. Here are some of the main weak human excuses/choices/confessions:

* Substitution of $ for time - this has been the main one I have been guilty of. While I still mow my own lawns, I very frequently make the choice of spending $ to make my life more enjoyable... eating out, buying expensive baked goods, not chasing the refund/rebate, hiring contractor, not working full-time.
* Very much more expensive cost of living associated with moving to area related to the increase in income
* Spending more than necessary on kids again and again and again (now a bit of a issue I have to "undo" as I try to get them to budget in preparation for Living below their much more meager means)
* Addition of expensive hobby - DH gets a lot of enjoyment
* General weakness and relaxation of values: I used to think ziplock bags were a huge waste (now I just reuse); that seeing first run movies was totally unnecessary - now we do it w friends or family; we survived with activities for 2 adults, 3 kids and 1 car for 5 years, but now have more cars than drivers; it was OK to have 1 living area and 2 boys sleeping in it (while we extended), but now have a pool table in that room and 2 big screen TVs in the other - that sounds v.bad (teens video games).

In summary, I am very aware of lots of these choices, I'm a bit guilty, I hope we won't regret them... In general I don't think we do so far.
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Old 08-26-2010, 10:38 AM   #24
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The fact that you had not done what you were proposing to that point lent credence to his arguement in that it is much like losing weight....
Ouch! Touche. You have me on that one, I fear. I can't stand a bunch of people sitting around talking about what they're "gonna" do, when they've never done anything like it in the past, despite having that exact same conversation many times over many, many years. That's partly why I offered it as a hypothetical, "This is what's ideally possible..." comment, not necessarily as something I was promising would happen. I didn't have much ground to stand on, though, since I couldn't demonstrate any results.

Still, I'll warrant that the majority of big savers and early retirees did not all have a solid financial vision in mind from the instant they earned their first dollars. Some did, but that's not everyone.

We all have to start somewhere. Repeating that to myself is the only thing that keeps me going at the moment, when I look at the hash I've made of various opportunities I've received in my lifetime. I think about where I could be, if only I had been more focused or had more experience "back then," and it makes me sick with despair. I feel like I've failed myself and my family by not having the strength and knowledge to do what I should have done.

I probably knew what the right thing to do was years ago, but I couldn't articulate it, so I let myself get pushed by other people down paths that have lead my current situation. I don't know if I even deserve the opportunity to turn things around now. I really don't know.

But I think that, for whatever reason, the opportunity has come my way. Here and now. It's like waking from a daze! All I can do is try to get moving and hope I can establish some momentum that will keep the fog from descending again.

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Old 08-26-2010, 10:41 AM   #25
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I think it is human nature to want to drag others down so that you don't look bad in comparison. Like crabs in a boiling pot pulling down the ones that reach the top of the kettle.

After high school I worked for a while in a blue collar job. I got a lot of resentment from coworkers when I announced that I was going back to college. I'm sure most of them are still there, living within their own predicted limitations.
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Old 08-26-2010, 11:04 AM   #26
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I think a couple of factors may be where you are in your life and where your income level is.

Many years ago when I first got of school I was single and lived in an apartment. It would be insane to think that I could for the rest of my working life spend the same thing as I was making then even if I stayed single. Inflation obviously is an issue. But it isn't just that. I got married. We have 3 children. Even if I had in my husband's income when he first got out of school, the combined incomes wouldn't allow us to raise children 20 or 30 years later without living at a very low standard of living.

Also if you are a widow with 3 children making $35000 a year and get an extra $1000 in income it may be much harder to save all that $1000 in income than if you are 45 years old, single with no kids, and your income increases from $250,000 to $275,000.

So, if you are at a point in your life when you aren't going to be making major lifestyle changes -- you already have whatever children you are going to have or you are committed to having no children, for example -- then you might be able to bank all salary increases. Also if your existing salary already outpaces your current spending then you could perhaps do it. Even then, inflation will take a toll over the years. You will need to either increase spending to account for inflation or will have to decrease your standard of living.

That said, I don't know that having a goal of saving every penny of any salary increases is necessarily required. The important thing would be to save a goodly amount, even most, of such increases.
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Old 08-26-2010, 11:40 AM   #27
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I think a couple of factors may be where you are in your life and where your income level is.
Sure. If you make major life adjustments (more children, different relationships, job/housing changes, etc.), then that obviously requires adjustments to whatever financial plan you have.

In our case, we are happy with the family size we have, so that's not an issue.

As for inflation - there are annual cost of living adjusted raises for my field. It all evens out, I think - if someone at an entry level gets a x.x% raise, and someone a few levels above that gets the same x.x% raise, then I could - at that higher level - allow myself to spend that extra x.x% without guilt because I would know that it was given to me partly to help compensate for that inflationary cost of living. It wouldn't be maintaining strictly the same dollar cost of living, but it would be aimed at keeping roughly the same standard.

After all, it's not that people just decide to purchase the exact same things at a higher cost - they're trying to buy more or better stuff to increase that standard of living. It sounds reasonable, until you step back and realize that even an entry level position in a developed country puts you far ahead of many people in the world!

Right now, I have a decent car to drive, good clothes, good food, and a solid roof over my head. As soon as I kick the stupidity debt from old credit cards and whatnot, I'll even have some cash to play with on a regular basis. My job is reasonably secure. My kids go to a decent school. How many people would kill to have all of that? How much hubris would I have to have to think that I have to do better than this?

Or, looked at another way - how greedy and short sighted would I have to be to think that doing better than this is in the here and now is more important than setting up a quality standard of living for the rest of my life? Eh! There's a thought.


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That said, I don't know that having a goal of saving every penny of any salary increases is necessarily required. The important thing would be to save a goodly amount, even most, of such increases.
There you go! It is the effort that counts. Nothing will ever be perfect, but that shouldn't stop people from trying.

I think I have a new saying when it comes to saving:

If you shoot for the moon, you may not make it, but if you shoot yourself in the foot, you'll hit it every time!

Josh
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Old 08-26-2010, 01:41 PM   #28
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<snip>

After all, it's not that people just decide to purchase the exact same things at a higher cost - they're trying to buy more or better stuff to increase that standard of living. It sounds reasonable, until you step back and realize that even an entry level position in a developed country puts you far ahead of many people in the world!

Right now, I have a decent car to drive, good clothes, good food, and a solid roof over my head. As soon as I kick the stupidity debt from old credit cards and whatnot, I'll even have some cash to play with on a regular basis. My job is reasonably secure. My kids go to a decent school. How many people would kill to have all of that? How much hubris would I have to have to think that I have to do better than this?

Or, looked at another way - how greedy and short sighted would I have to be to think that doing better than this is in the here and now is more important than setting up a quality standard of living for the rest of my life? Eh! There's a thought.

<snip>

Pure poetry, sir. My hat is off.

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Old 08-26-2010, 02:24 PM   #29
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Yep, I always used to hear my sister say "what if I die..."
I would have responded with "I would rather die with money than live without it"
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Old 08-26-2010, 02:50 PM   #30
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We'd feel so very ordinary if it wasn't for all those "mule muffins" (love it!) who can't bank their earnings!
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Old 08-26-2010, 03:21 PM   #31
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I am not surprised by the OP's conversation at all. I agree that this type of response is dead wrong. However, in my experience it is more toward the norm than anything else. Unless of course you are having a conversation with a member of this forum.

aida2003 - several years ago I got the same response in a conversation with someone that just graduated from college. I said "yes, but what if you live!" I just got a deer in the headlights stare. The person has turned out to be a pretty good saver now. I hope I influenced them positively.
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Old 08-26-2010, 03:50 PM   #32
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That's what someone said to me the other day. "You know it won't happen..."

Josh

It is probably true for 90% of people.

The participants on this forum represent the exception, not the rule.
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Old 08-26-2010, 04:47 PM   #33
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Real life counterexample:

February 2007 expenses: $5,538.07
July 2010 expenses: $5,307.50
February 2007 income: $x
July 2010 income: 170.73% of $x

I include income taxes as an expense in the first two lines above. My income taxes increased by $754.75 between those two time periods, so my after-tax spending actually dropped by ($5,538.07-$5,307.50)+$754.75 = $985.32.

Since according to your friend it is not possible to do so, the only logical conclusion is that I don't exist. QE<poof>. :-)

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Old 08-26-2010, 04:54 PM   #34
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Real life counterexample:

Since according to your friend it is not possible to do so, the only logical conclusion is that I don't exist. QE<poof>. :-)

2Cor521

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Old 08-27-2010, 07:16 AM   #35
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Hmmm - unless you value him and his opinion, it's all hot air. As for his influence over the group, well, if he's that influential, they aren't a very bright group.....Living well in your early-retired young-old age will be the best revenge....keep on keeping-on.
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Old 08-27-2010, 07:49 AM   #36
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It is probably true for 90% of people.

The participants on this forum represent the exception, not the rule.
Sounds about right .... Which is why the individual made the comments he did (not knowing he was dealing with a early retirement forum practicer and believer)

If I had to bet on the results of giving 10 of my co-workers a thousand dollar pay raise I would not bet that much of it would be alotted for retirement savings.
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Old 08-27-2010, 07:49 AM   #37
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I just got my annual review and got a raise. Not a big 'un, just 4.2 percent, but I guess in this job market, I'd better not gripe about it! Anyway, it's also just enough that I have to adjust my 401k contribution slightly downward, so the combined effect should make the paycheck jump by about 5%.

I have no intention, whatsoever, of boosting my lifestyle. I'll probably use the extra to start paying my HELOC down a little quicker. Or, if the economy starts tanking again, I'll use it to do more after-tax investing (buying on "sale")
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Old 08-27-2010, 08:17 AM   #38
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What in the world? It's "human nature" to spend every penny you have, just because you have it? How does he figure? Is this the average philosophy of personal finance?

I admit, I haven't been perfect with my spending lately, but I haven't been trying to stick to a budget recently, either. I used to be much, much more strict about it. I think I've been in something like shock the last couple years just having a job that I'm not afraid will disappear by the end of the week, so it has taken me a while to come down off the high and start planning for the future, but to just flatly state that I will never be able to maintain the same standard of living in the face of a rising income in order to plan for my retirement? I don't know what to make of that. Has anyone else had any experience with this supposedly fundamental part of "human nature"?

Josh
There is no reason you cannot continue with your current standard of living as your income grows. For us, most of our increase in real (non-inflation) expenses were the result of 3 children. We never deprived ourselves or our children, but our standard of living rose at a much slower rate than our income.

This is how people save and provide for their future.
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Old 08-27-2010, 08:21 AM   #39
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Yep, I always used to hear my sister say "what if I die...", so when she recently mentioned that she would start saving for retirement, I was so dumbfounded that I didn't know what to say to that
There's no "if", only "when"...
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Old 08-27-2010, 08:46 AM   #40
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Here's the deal, for me ... It is a much easier issue when you have a static situation like a single person that lives at the same standard throughout their life in order to save a bundle for later. "live like no-one else now, so you can live like no-one else later" cool, I get that ...

However when your situation is dynamic and you have kids or other things (a cause) that you greatly value that will require attention of one kind or another for a limited amount of time then you have hard choices to make.

For my wife, she is very much more on the side of "I have these kids and I am working so hard to have a good income so I can provide a good standard of living for them and provide every reasonable opportunity for them."

For her, to pursue a career and have financial success would be pointless if not to pass this on to the kids by being able to perhaps not buy all their clothes at Wal-Mart or reward a responsible teen by helping to pay for a used car and car insurance, having a nice home that they will want to bring friends over to visit. etc etc

These are all things that when a single person or couple you may choose to forgo (sacrifice) for another goal later in life or for the ability to retire early now but when you bring kids into the picture things change and the whole REASON some try to get raises or even to continue to work is SO THAT they can provide a better standard for their children.

I think pretty much THAT idea or concept IS "human nature" -- to provide good things for our children -- and when given opportunities to make their lives richer (whatever that means to you) then usually the parent will make the choice to do so OVER his or her own comfort.

I often have heard my wife say she regrets not having more $$ to make life better for the kids when they were young. I imagine that regret would be bitterness if we DID have more means and I squirreled away for retirement.

Now, as for me, when you get to a certain income level in a certain geographical region I think both can be done.... The kids can be well taken care of and giving/investing anymore resources into them will not necessarily provide a greater return on the investment (i.e. satisfaction in life, chance of occupational success etc etc) and then upping the $$ for retirement is cool.

So in summary I think there can be a valid mentality that says that any increase in income will probably result in a raise in the standard of living especially when your trying to provide every opportunity you can for your kids.
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