Careers vanish after subprime freefall

[FIREd]

Right now we spend about $5,000 to $5,500 a month including everything except savings (we are also DINK living in a low COL area). I simply totaled our 2007 annual expenses in Quicken and divided by 12. But if we both lost our jobs tomorrow, we could (and would) cut back to about $3,000 a month initially with the possibility to go bare bone after a few months ($2,500 a month) if we see that we might be facing a prolonged job search. Our non-retirement savings would support us for 5 to 6 years at that spending level which should be enough to weather most crises. Of course I can't wait to reach FI so that any job loss would be of no consequence. We should be able to indefinitely support a $2,500 a month lifestyle in about 5 years and that's going to be a big relief.

 

[lucija]

We go through roughly 8 to 10k a month with two adults and two small children. Most of our numbers are not that far from yours, although RE taxes are a good bit higher (pushing $600/month), water/sewer is higher (~$100/month), and transportation costs are higher (my long commute). We do not live extravagantly. Its just that we are in a high cost area and that is the way it is.

Yes, living in a high cost area is taking its toll on us as well... we tent to burn through $6-7K/month - two adults + 2 kids; we have no mortgage/loans and retirement savings are treated as a separate item. The figure does include college savings and a couple of "slush" funds for vacations and minor repairs/home improvements.

edit: if one of us lost a job, we could cut back to $3500/mo without too much trouble.

 

[W2R]

Of course we don't need it either. My wife wanted a big kitchen, and as it turns out, the only houses with big kitchens happen to be big houses.

Ironically, I'm the one that ends up doing most of the cooking!

You know, I have been musing about this and it seems to me that much of your high expenses follow directly from the fact that your house is so big. Utilities, taxes, and maintenance all come to mind. That big kitchen has really ended up costing more than I might have imagined.

 

[A854321]

Want2retire- I think that is so true about these McMansions. Big house, big tax bill, bil utilities bill, big upkeep ( landscaping/pool/gardner).
Then you have the cost of furnishing these places. Have you ever seen how much wood blinds cost? For a 4000 sq foot house it is easily $10K.

Traveling to other countries, I have observed how much less house one actually needs.

I have always bought a modest house in a modest neighborhood whose mortgage was far under 30% of my take-home, and I am sure glad I did.

 

[kombat]

it seems to me that much of your high expenses follow directly from the fact that your house is so big. Utilities, taxes, and maintenance all come to mind.

Sure, but would we really save that much by downsizing? I'm sure we'd save a few hundred, but in a budget of $94,000/year, is it worth lowering our living standards to save a few hundred when we're already doing fine (debt-free, saving $2k/month)?

Besides, our house is a "normal" size for a family with kids (we just happen to not have/want any), and thus our budget is (I would bet) actually quite conservative and frugal. My point was simply to illustrate that it's not actually very hard to spend $8k/month on just the basics of living. It's not like $8k/month gets you a Corvette, boat, private plane, country club membership, etc., as others seemed to assume. It gets you a house, a '05 Mazda 3, and a bus pass.

 

[tuixiu]

Besides, our house is a "normal" size for a family with kids (we just happen to not have/want any), and thus our budget is (I would bet) actually quite conservative and frugal.

I don't get this. You have more house than you need but since you're paying the proper amount for someone who would need it your budget is frugal?

I'm not judging your budgeting etc. just having trouble wrapping my brain around the above logic.

 

[Razor]

. It's not like $8k/month gets you a Corvette, boat, private plane, country club membership, etc., as others seemed to assume. It gets you a house, a '05 Mazda 3, and a bus pass.

Actually $3000 a month got me a house, a Corvette, boat, country club membership, but no private plane.

 

[kombat]

I don't get this. You have more house than you need but since you're paying the proper amount for someone who would need it your budget is frugal?

I'm not judging your budgeting etc. just having trouble wrapping my brain around the above logic.

No problem, no offense taken.

I was responding to this comment, from A854321:

How can you possibly rack up $10K a month expenses?

My point was that for a normal family, $10K is not an extravagant amount for a monthly budget. I demonstrated that even for my wife and I, with no kids, and pretty conservative tastes (rarely buy new clothes, drive practical cars, no fancy club memberships), we're already at $8K/month.

Now as for our house, I guess I rationalize it by telling myself we forego other "luxuries" to live in a home that I would consider pretty gratuitous for a childless couple. 4 bedrooms, 2.5 baths, hardwood floors throughout the entire main floor, 9' ceilings in the basement, corner lot (read: bigger backyard), granite countertops, the whole she-bang. I love our house.

But to be comfortable with our budget, we skip other things. Like I said, I take the bus instead of driving a BMW. I wear a Timex instead of a Rolex. Bluenotes jeans instead of Mavis (or whatever a fancy brand of jeans are). I bag my lunch every day instead of eating out. We don't go on fancy vacations every year (just the family cottage in PEI for a week of relaxing). And the big one: we've chosen not to have kids.

I'm willing to make those sacrifices for a comfortable savings level (I'd always like to be saving more, but we can reach our goals at our current savings rate) and a house that is relaxing and ample for everything we want to do. We can take in family or friends if they want to visit, we have an exercise room, a woodworking shop, my wife has a winemaking room, tons of storage in the basement, a plenty-wide garage for changing my own oil (see? frugal!), a big backyard for playing frisbee in the summer... I simply value all those things more than I'd value looking rich by wearing rich clothes or driving a rich car.

However, (and getting back to my original point), families with kids (and who thus probably live in a house like mine, but with a better reason than me) and who do think they need to drive a BMW and wear Versace and eat lunch at fancy restaurants all the time, surely you can see how they could easily be spending $10K/month without even thinking they're overspending?

 

[W2R]

What's the square footage? Or if I'm being too nosy, please ignore! Just curious since it sounds gigantic! Sounds lovely, too.

 

[WanderALot]

Here's our back-of-the envelope budget:

Mortgage 1600
Property Tax 300
Assoc 100
Car Ins 100
Home Insurance 50
Utilities 250
Phone+DSL 100
Groceries 500
Eating out 300
Savings (Invest) 2000
Misc 500

Total = 5800

I don't think your budget is extravagant. Actually, the above isn't actually our budget but just want we spend. We are pretty frugal in general and since we save about 40% of our gross, I haven't been pushing maintaining a budget too hard. DW hates to budget, but she's coming around, especially since we had a baby recently and DW is going to slow down her work hours. We live in SoCal so its pretty expensive, but our property taxes are pretty low since we bought about 9 years ago. Our utilities are pretty low too since it rarely gets too hot or too cold here.

Two big expenses that aren't here are car payments. We buy cheaper, dependable cars rarely and tend to pay cash; our last purchase was end of last year and we paid $23k for a Toyota OTD. We also travel quite a bit, especially overseas, I would say we probably spend about $12k a year on travel. So both these expenses will have to be amortized into our future expenses. Other stuff like home maintenance is also not included. I guess we are able to get away with this kind of sloppy accounting/budget since we have a decent buffer and save quite a bit.

Like others, I wouldn't consider savings as an expense.

 

[TickTock]

kombat,

I say that anyone who saves 25% of their net income is definately LBYM.

And I agree that it can be easy to spend $8k/mo. Just that it isn't what I'd consider middle class.

 

[TickTock]

Sure, but would we really save that much by downsizing? I'm sure we'd save a few hundred, but in a budget of $94,000/year, is it worth lowering our living standards to save a few hundred when we're already doing fine (debt-free, saving $2k/month)?

I think you'd save far more than that.

Sell the $400,00 house, move into a $200,000 house - cuts the mortage in half, at least... property taxes by half... utilities (though probably not by half)... another $2,000/yr on home maintenance (using the 1% rule of thumb).

Whether you judge that the lowered standard of living is worth it is a completely different matter that only you and your DW can decide properly.

 

[tuixiu]

I say that anyone who saves 25% of their net income is definately LBYM.

Yep. It's an unfathomable goal for most.

 

[packrat44]

Indeed. That's probably why you will never be in their position.

Regarding WB, the same Fortune column notes that he has a poor credit rating(!)

The magazine suggests that this may be a case of mistaken identity.

His FICO score may be correct at 718. If you always pay cash, don't use credit, you don't build a good credit history. If I were him I wouldn't care less if my FICO were 300 (and I am sure those selling to him don't care about his FICO score).

 

[kombat]

What's the square footage?

2620 sq. ft. on a 7900 sq. ft. (pie shaped) corner lot.

 

[W2R]

2620 sq. ft. on a 7900 sq. ft. (pie shaped) corner lot.

Oh, OK!! That's not TOO huge. I was thinking that you were in 6000-8000 square feet, maybe. (whew!)

 

[Moemg]

2620 sq. ft. on a 7900 sq. ft. (pie shaped) corner lot.

That's a resonable size house in a lot of places it would have cost way more than $400,000 . Sometimes I think some of this board is in La La land about house prices in other areas .

 

[saluki9]

Is it really so difficult to imagine? My wife and my monthly expenses are $8K/month.

Granted, the couple in the article are utterly oblivious to their own idiocy. They've made their bed and will lie in it.

But for middle-class DINKs, $8K-$10K/month isn't that hard.

Kombat, I hear you. One of the problems here (and all forums) is that you get people from geographic areas who don't know what you can buy housing wise in other areas.

My wife and I also have a similar budget to yours. We have a $2300 mortgage payment and $725/mo in property taxes. We have a nice place, but now what some people here would expect. There simply are no $200,000 houses in our area, and even at $400,00 they aren't places you would really want to live.

It doesn't take much (or leave you anything to show) to go through $8-10K a month.

 

[W2R]

That's a resonable size house in a lot of places it would have cost way more than $400,000 . Sometimes I think some of this board is in La La land about house prices in other areas .

True - - my former house in San Diego is only 996 square feet, and sold for about that much a while back, so you are very perceptive to point out that housing costs do differ from place to place.

Still, that 996 square foot house didn't have 4 bedrooms, 2.5 baths, an tons of storage in the basement, an extra large kitchen, a wood working shop, a wine tasting room, and so on. Sometimes extra rooms like that are more frequently found in McMansions (and I don't consider a 2600 square foot house to be a McMansion, personally).

 

[REWahoo]

Sometimes I think some of this board is in La La land about house prices in other areas .

It's my understanding that prices in La La land are some of the highest in the country....

 

[W2R]

It's my understanding that prices in La La land are some of the highest in the country....

La La land is definitely not on my list of tempting ER locations!

 

[Moemg]

True - - my former house in San Diego is only 996 square feet, and sold for about that much a while back, so you are very perceptive to point out that housing costs do differ from place to place.

.

Wow you lived in a $400,000 house and I thought you were the queen of LBYM !! I'm shocked . What's next fessing up to buying hundreds of dollars of clothes or taking Frank on a around the world cruise ?

 

[Gumby]

..

 

[W2R]

Wow you lived in a $400,000 house and I thought you were the queen of LBYM !! I'm shocked . What's next fessing up to buying hundreds of dollars of clothes or taking Frank on a around the world cruise ?

I really think the undisputed kings of LBYM are Khan and UncleMick (in his former cheapbastardhood life, that is), and a few others around here who probably know they fit that description. I don't even come close. I do try! Or at least I did, before my recent extravagances.

It's a $400K house NOW... We sold it in 1984. My ex borrowed money from his mommy to buy it.

I know, I know - - my life is just EVER so fascinating. (yawn)

 

[Meadbh]

Sure, but would we really save that much by downsizing? I'm sure we'd save a few hundred, but in a budget of $94,000/year, is it worth lowering our living standards to save a few hundred when we're already doing fine (debt-free, saving $2k/month)?

Besides, our house is a "normal" size for a family with kids (we just happen to not have/want any), and thus our budget is (I would bet) actually quite conservative and frugal. My point was simply to illustrate that it's not actually very hard to spend $8k/month on just the basics of living. It's not like $8k/month gets you a Corvette, boat, private plane, country club membership, etc., as others seemed to assume. It gets you a house, a '05 Mazda 3, and a bus pass.

You are heating several empty rooms in the coldest capital city in the world. Some people might call that waste.

But you could always fill the rooms with the patter of little feet, I suppose......