You know it won't happen that way

[Katsmeow]

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.

 

[Joshua]

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.

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

 

[CCdaCE]

<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.

-CC

 

[rescueme]

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"

 

[walkinwood]

We'd feel so very ordinary if it wasn't for all those "mule muffins" (love it!) who can't bank their earnings!

 

[SunsetSail]

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.

 

[ESRwannabe]

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.

 

[SecondCor521]

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>.

2Cor521

 

[SunsetSail]

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

decartes would say 'I save, therefore I am not.'

 

[deserat]

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.

 

[militaryman]

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.

 

[Andre1969]

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")

 

[MichaelB]

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.

 

[HFWR]

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"...

 

[militaryman]

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.

 

[samclem]

In practice, we banked a significant portion, but not all, of each true pay raise. All through automatic deductions (never saw the money). It made a huge difference in building our retirement nest egg, and also provided a gradual increase in our standard of living, which was nice. You can't live with cinderblock-and-board shelves forever, and it does cost money to raise a child.

By limiting spending and banking an ever increasing amount, you accomplish a secondary objective in addition to building your savings: you get accustomed to living at the modest level that you can carry into retirement and thereby reduce the amount needed in the nest egg.

Regarding the workplace discussions on FI (and certainly RE), as the OP has learned, they typically don't end well. It's best to keep these heretical thoughts of saving and the options/freedom that come with it to yourself. Many of your co-workers are making the choice to remain chained to the desk for an extra decade or more to sustain their lifestyle, and their spending will enrich you through the earnings of companies and the dividends they pay to you. Your coworkers may need to keep working after FRA, and their payments into SS will help keep the system afloat.

 

[MichaelB]

In practice, we banked a significant portion, but not all, of each true pay raise. All through automatic deductions (never saw the money). It made a huge difference in building our retirement nest egg, and also provided a gradual increase in our standard of living, which was nice. You can't live with cinderblock-and-board shelves forever, and it does cost money to raise a child.

By limiting spending and banking an ever increasing amount, you accomplish a secondary objective in addition to building your savings: you get accustomed to living at the modest level that you can carry into retirement and thereby reduce the amount needed in the nest egg.

Regarding the workplace discussions on FI (and certainly RE), as the OP has learned, they typically don't end well. It's best to keep these heretical thoughts of saving and the options/freedom that come with it to yourself. Many of your co-workers are making the choice to remain chained to the desk for an extra decade or more to sustain their lifestyle, and their spending will enrich you through the earnings of companies and the dividends they pay to you. Your coworkers may need to keep working after FRA, and their payments into SS will help keep the system afloat.

Automatic deductions is an excellent point - probably a critical success factor for most.

 

[Rambler]

I'm finding that since the kids have gone away to college, our costs have gone down even though we are paying for tuition, books and housing (they are on the hook for their own food and play money...this being part of the education process in my book). DD has been home for 3 months, and I have been in shock at how our expense have gone back up in that time, and how much junk is in the fridge (I want my fridge space back!!!). She goes back to school next week. We'll miss her, but will enjoy getting back to our own life, our own way of spending, and saving more.

Just a few items that have gone away since DD went to college: 500/mo piano lessons (english piano instruction in Tokyo is expensive), 100-150/mo train fares, at least 300 or more in snack type, instant, or pre-prepared food of the less-than-healthy type, 100/mo in miscellaneous contributions to her school, probably 100/mo in school lunches in the cafeteria (even though she packed a lunch from home 2/3 of the time...remember, Tokyo). Not quite as much went away when DS went to school, as he was much happier with home cooking and less junk food than DD, and didn't go out to play as often as DD.

Overall, we now cook simpler meals that we like, don't go out as often, and these two things alone save us hundreds.

So yeah, the costs of kids and how much we let their choices rule our budgets is or can be a big determining factor in whether our cost of living go up, remain relatively stable, or go down.

R

 

[Nords]

As SamClem says, your coworkers can offer plenty of reasons why that'll never work. Best public answer seems to be to let everyone know you'll be taking a few months off to see what comes up. Eventually you'll find the one or two (out of several hundred) who really "get it" and are ready to talk about what you'll do all day without feeling bored or unfulfilled.

We always banked our pay raises and spent very little on lifestyle. (Hey, c'mon, we're submariners, who needs to buy a lifestyle?) I frequently got teased about driving decade-old cars instead of spending our nuke bonus pay, but the teasing usually stopped when I'd point out that our values were reflected by our investment portfolio... not by our depreciating assets.

So yeah, the costs of kids and how much we let their choices rule our budgets is or can be a big determining factor in whether our cost of living go up, remain relatively stable, or go down.

Keep those college stories comin', I'm taking notes...

 

[TomG]

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?

He is exactly right that it is human nature to increase spending as income increases. Just as it is human nature that people want to get married and have children. Which is why there is no person in the world who is single and/or childless

 

[Livin Large in MT]

I learned very early on to keep mum about money and spending especially around the office. People are all too willing to rain on your parade and they brag about how they can't seem to save anything. We built our own house and never had a mortgage more than $20,000 or so. We saved as we went and maxed out our retirement accounts. I spent a couple years as a financial advisor so could learn the ropes of financial investing. When I left the firm, I moved everything to Vanguard and handle our finances and those of my (semi) grown children. Along the way I never talked about money to anyone but family.
I repeat: don't talk money to anybody in the office. It can create the impression that you have it made and you never know who hears about it when layoff time comes or even when promotion time comes. Employers like to think that you are desperate for money and so would never leave and it can color their ideas about you as an employee. Better that they never know what you are doing...besides, it is none of their business, is it?

 

[Joshua]

I repeat: don't talk money to anybody in the office. It can create the impression that you have it made and you never know who hears about it when layoff time comes or even when promotion time comes.

Or make you a good target when people have blown all their cash on booze over the weekend and want to hit you up for gas money.

I get what you're saying, and it makes sense. There are some things that it is hard to find the right audience for. I was just trying to test the reaction to some things with people who I do not normally have to be around. You never know. Wisdom is sometimes found in unlikely places. Still, on the whole, yeah... everyone already knows enough about every one else's business as it is. There's no need to make it easier for them.

Josh

 

[rescueme]

I have to adjust my 401k contribution slightly downward...

Why?

 

[Andre1969]

Why?

Sorry, I probably phrased that wrong. I have to adjust the contribution % slightly downward, not the overall contribution. Otherwise, I hit the federal limit too soon in the year, and lose out on part of my company match. My company does a 4% of income match, but if I hit the federal limit, say, in the 23rd paycheck, then I stop contributing in paychecks 24-26, and my company stops matching.

One thing I liked about my old company was that they'd just give me a flat-out 4% of income, regardless of what I contributed. In 2008 I managed to hit the federal limit in the first paycheck of October. So suddenly my paychecks got a lot bigger as I wasn't contributing anymore, but the 4% match continued on.

With my current company though, I have to tweak my percentage every once in awhile, to make sure I don't hit the federal limit too soon. It's a shame that companies won't let you just do a flat-out dollar contribution, rather than a percentage. Just let you take the federal limit, divide by 52, 26, 24, or however many pay periods you have, and let that be it.

 

[Nords]

I learned very early on to keep mum about money and spending especially around the office. People are all too willing to rain on your parade and they brag about how they can't seem to save anything.
Along the way I never talked about money to anyone but family.
I repeat: don't talk money to anybody in the office. It can create the impression that you have it made and you never know who hears about it when layoff time comes or even when promotion time comes. Employers like to think that you are desperate for money and so would never leave and it can color their ideas about you as an employee. Better that they never know what you are doing...besides, it is none of their business, is it?

You phrase this as an absolute, perhaps based on your FA experience, but I think there are very few absolutes among the topics discussed on this board.

We've had posters who have kept their ER plans confidential until the minimum required two-week's notice. But we've had others who have quietly let their bosses know that they wouldn't mind being laid off, and who have benefited from being able to promptly take opportunities that were either unavailable to the rest or were quickly oversubscribed.

Money is frequently discussed in the military "office". Everyone's pay is posted on a website for the whole world to review, and yet the military salary/compensation system is so arcanely obtuse that everyone benefits from sharing the info. It also doesn't take a lot of talk to discern who knows what they're talking about (and who doesn't). Subjects that come up once in front of the whole group can later be quietly taken off-line with the few who "get it".

In my case, I've regretted talking about money with family. Spouse & kid, sure, no problem. Sibling, parents, in-laws, cousins, um, not so good. Some of our worst money experiences have been at the hands of my parents-in-law, and now our household vocabulary is full of the [-]horrible advice[/-] quaint phrases uttered by my FIL while we think to ourselves "There but for the grace of God"...

Rather than envying me for "having it made", most of my relatives, friends, & acquaintances seem to pity me for either not having what it takes to survive in MegaCorp, or for not wanting to take charge of my own business, or for being "forced" to live a low-key beach-bum lifestyle.

Sure, there's a lot of money negativity out there. But exclusively focusing on avoiding the 99 bad money co-workers out of every 100 will surely overlook an opportunity to encounter the good one.