The value of LBYM

[Perryinva]

Better to get a wake up call in your 30's than in your 50's .

You would think so, wouldn’t you. I have 3 sets of relatives that had wake up calls in their 30’s (& 40’s) and now it their 50’s they continue with denial and stupid decisions. Some people never learn. One set I know is waiting for the kids to graduate (if ever) to divorce, yet both are to blame and neither does anything to improve the situation even when told plain facts. How does one live where every bill is 2-3 months late.

One drained every retirement account and bit of savings (when he made, as he called it, “more money than I could ever spend”) to build a “dream” house that he estimated would cost him $400k and be worth $800k. And he decided that AFTER he was laid off, with the logic that once built, they’d be living for “free” and the appreciation on that house would be a higher ROR than any investment for their retirement. Now broke, with a 3/4s built house (with about $600k in to it) after over 3 years and laid off again. His retirement plan is a hoped for inheritance (of less than $100k) and SS for both.

One set has decided to retire with one disability and the other working when he finds something “that’s a good fit”, otherwise he flips on eBay. Their retirement plan is also a hoped for inheritance. I absolutely get no joy from their stupidity and in fact it actually angers me when I hear about their lives.

My own step son is a financial disaster despite seeing both of us work our whole lives often 80 hours a week, plus putting in a lot of sweat equity in houses, never a new vehicle, etc, etc. His take away from watching us LBYM and now FIRE? “Way too much work, and not enough living. I’m not going to work my life away like you two did”. He’s on his own and paycheck to paycheck and his “living” consists of video games and pot. Some people can’t be taught.

My parents were financially ignorant till the day they died. They never had a retirement savings plan besides their homes. Both sides of grand parents were savers and frugal to the max. I think the offspring rebelled against that. Never had a single Consumer class in any school. Self taught, like most here, but I think it helps a lot to have a solid base in common sense (and math).

 

[Cut-Throat]

That’s becoming more and more common in the United States. Those that live responsibly are punished to make up for those that don’t.........................

Of course it is becoming more common in the United States! - With the decline of real wages for the working poor over the last 30 years and the elimination of Pensions and Unions, it will only get worse.


The working poor with a couple of minimum wage jobs have more 'Personal Responsibility' than you could possibly imagine. - I have known these people and they are far from lazy.


Lots of poor people were also common in the 1930s - I believe that those people were not lacking in personal responsibility or lazy either. And guess what? Social Security was not available until 1935 and Medicaid was not on the radar. There was no safety net for the thousands in soup lines (That were provided by Al Capone in a lot of cases).


For every complex problem, there is a simple solution that won't work. This pretty much sums up your suggestion.

 

[Perryinva]

That's ........

When I retired my "retirement present" was a special-ordered brand new 2003 GMC 4WD pickup that I still have, with just over 101k miles on it. If I ever do get another pickup I'll almost certainly buy a used one since at age 69 now, I probably wouldn't get my nickel's worth out of another new one.

I bought my ‘99 Dakota from a 70yo man in 2006 with 91k on it for $4k. He said the same thing but bought a new Toyota PU with the logic “My last new vehicle ever probably, so why not?” I still use it today with 175k on it. Lowest cost per year and repair wise of any vehicle I ever owned. Insurance and taxes are very low. (But I do almost all my own work. It did need the blown out rusted rear brake line runs replaced. Nasty work, so I paid the $340 to get it done. )

 

[karen1972]

+1

In high school, I learned Physics, Chemistry, Euclidean Geometry, Analytic Geometry, History, Geography, Literature, Biology, Foreign Languages, Calculus, etc...



My parents did not explicitly teach me anything about finance. I simply observed that when people ran out of money, they were in deep doo doo. And I did not want to be deep in doo doo. As simple as that.

I wish my parents were knowledgeable about investing despite being thrifty, in order to give me some tips. It was not their fault, given their background.

My economics teacher took 2 weeks out to teach us how to write a check, balance the checkbook, some budgeting and he taught us how to read the stock symbols in the newspaper. There was no real course material, he just walked us through things so those notes got tossed with the notebooks at the end of the year. It wasn't much but at least it was something.

My parents never owned an investment beyond their house until I was well into adulthood. I listened to talk radio, I learned most of it there. Bruce Williams taught me the basics of IRA, basic credit management, etc. Bob Brinker taught me what the govt reports meant and what to watch for. I learned how to buy a house by paying for a class thru the local district. I also learned how to swim by paying for adult classes...

I throw that last one in because it was me, seeking out info, I never expected my parents or school to teach me everything I needed to know. I think you have to be ready and willing to learn before anything sticks.

 

[Dtail]

My parents didn't teach me specifics, but I observed their mostly frugal lifestyle. I did practice LBYM in that was saving monies every year, but not to the extent of some posters here.

 

[johnhkc]

Amethyst for President, 2020

"Your parents didn't teach you enough about handling money, and the school system certainly can't be expected to, so...your vasectomy is scheduled for Monday at 11 a.m.!" Lol

I love it! Amethyst for President, 2020!!!

 

[gwraigty]

Many people are more concerned with whether they can afford the monthly payments than what something actually costs them in total. I was reminded of this again yesterday when buying a new car. When we sat through the obligatory extended protections sales pitch, they emphasize how little this, that, and the other thing might raise the monthly payment. We had no intention of buying any of this, but I said straight out I wanted the total cost. When given that figure, it's mind-boggling for what you're getting, plus you're not really getting anything unless something goes wrong. Same scenario when we bought a new car in late 2017.

Disclaimer in the spirit of lessons in LBYM: Rplaced a 13 year old rusty van in 2017. Reason for buying another new car so soon yesterday - our son got his driver's license on Thurs. Yesterday's new car is the replacement for the 2012 we're giving him tomorrow. Financed both cars at favorable interest rates below current investment income yields. Can pay both off at any time, if yields become unfavorable.

 

[BoodaGazelle]

One thing I have learned in my 63 years is that peoples’ lifestyle appearances are often a sham. So when I see an acquaintance with an $800/month BMW lease, I now realize that his net worth may the inverse of what it appears.

 

[W2R]

Learning about personal finance as a kid

We didn't have any classes in consumer finance in school, although my algebra teacher devoted one day of class time (plus one homework assignment) on how to balance a checkbook. Then I took Civics when I was a senior, and in that class the teacher mentioned the stock market, the Fed, and that sort of thing but she wasn't a very good teacher. My (silent) reaction was, "Oh pul-eeze!" I just wanted the school day to end so I could go surf.

My childhood and younger teen years were the days of "children should be seen and not heard", and I spent a lot of time having to sit and listen to adults without speaking, bored out of my everlovin mind. Much of what they were discussing was investing so I couldn't help but pick up a smattering of concepts like diversification and risk. We kids also had to help our parents clip bond coupons at the kitchen table although I never did quite understand what the point of that was (still don't since I have never had any individual bonds, just bond funds).

Also my parents established a savings account for me when I was seven years old. I think it only had about $5 in it but low balances like that were allowed back then. They encouraged me to save my $0.10/week allowance and deposit it. That didn't go very far with me when it was that or a comic book, but I guess I deposited a little bit anyway.

 

[Kwirk]

Some people are endowed to think of the future as if it were today and they make decisions with the future clearly in mind. For others the distant future is largely irrelevant to current thinking while they are more focused on immediate pleasure and social standing, or simply on survival. Many are somewhere in between and can be influenced one way or another. Unfortunately, I suspect that biology plays a large role in this orientation.

So, congratulations if you are lucky enough to be naturally forward thinking. Congratulations if you are 'persuadable' and were exposed to folks who could educate you. Enjoy your luck but avoid arrogance.

 

[Souschef]

For those who have worked and saved judiciously: congratulations! Your reward will be higher taxes in retirement as your retirement savings (401 K) and SS will all be taxed as your elected representatives have determined that you have more than enough when compared to those who choose to spend now without any thought to their future.

I agree. It really gripes me that I have to withdraw 5% of my IRA and pay taxes on it. This not only puts me in a higher bracket, but also makes 85% of my SS taxable.

 

[brett]

I do not think that you need any parental advice or public schooling to grasp the concept that you should live within your means and spend what you earn, or less.

This is not rocket sense, more like basic common sense to me. What's with all the necessary training?

It is difficult to compare past generations. They depended more on a cash economy. Credit cards, minimum monthly payments, and don't pay a dime until 2029 were not as common. About the only choice was the dept. store credit card like Sears. They encouraged you to buy a bedroom suite or a television on credit...for $10 a month for the rest of your natural life. In the end, their respective credit card operations turned out to be the most valuable component of their businesses.

 

[RobbieB]

Yup. Here's what I posted in the other thread;

Back when I was a teenager Pops told me all I needed to know about finance. It wasn't real hard stuff.

1) Son you can make a million a year but if you spend a million a year you ain't never gonna have feces, so save some dough.

2) Save enough so you don't have to take out loans for appliances or cars.

3) Save some more for a down payment on a house. The mortgage should be your only debt.

4) After your savings recovers from the down payment start buying stocks. Stocks are where you really make some dough.

I followed his advice and it worked -

 

[Taxman59]

I tried to buy a new car many years ago. I went to the Ford dealership and told the salesman I wanted a Taurus. I listed the must haves, and the definitely don't wants and told him to give me his absolute best cash offer. He went to his computer, punched in a few things, looked at the screen, went to the manager, then came back to me with $239! I confirmed that that was his best price, he said yes, and I told him I would be back in 20 minutes with the $239 in cash and could he have the car out front for me to drive away. He was shocked, he said I needed to go through the credit manager to make sure I qualified for the loan! I said what loan, I asked for the best cash price and you quoted $239. He got the manager over, I explained the situation, and the manager said that $239 was the best price. When I again said that I would return with cash, he said he needed certain information to process the loan. I again asked "what loan". The response was it is obvious that the $239 is the monthly payment. I reiterated that I wanted their best cash price and twice the response was $239. When they replied that the sticker price was $20k, I said thank you and would return if theirs was the lowest price. That was when the manager said that I had no idea how to buy a car!!

I understand that in this day and age that one haggles over the price, but to twice assume that all I cared about was the monthly payment, then respond with the sticker price when pushed, shows that the salesman and manager are catering to the "it's not the cost, but the monthly payment that matters" crowd.

I ended up buying a used Taurus for cash (equity line was an intro 0.9% so I drew from that and paid it off over the 12 month intro period). Way below the $20k for the new one.

 

[pjigar]

When I grow up, I want to be Robbie.

Everyone does.

 

[Teacher Terry]

When we were in our late 30’s I met my then husband at a car dealer after work. He was a tool and dye maker so had jeans, t-shirt and a flannel shirt on. He also had a master’s degree in math so had listed the options we wanted, etc and wanted exact prices. We were paying cash. The guy wouldn’t give us exact figures but estimates. We went to a different dealer, got what we needed and bought. The first dealer assumed by his dress that we couldn’t afford it.

 

[gwraigty]

It is difficult to compare past generations. They depended more on a cash economy. Credit cards, minimum monthly payments, and don't pay a dime until 2029 were not as common. About the only choice was the dept. store credit card like Sears. They encouraged you to buy a bedroom suite or a television on credit...for $10 a month for the rest of your natural life. In the end, their respective credit card operations turned out to be the most valuable component of their businesses.

We had a few discount stores (Spartan Atlantic, Grants, Woolworth) within walking distance in my childhood. I remember layaway quite well. People were highly motivated to make their payments. You couldn't take stuff home until you'd paid it off, plus I think there was some kind of forfeit if you stopped making payments.

 

[Nemo2]

The first dealer assumed by his dress that we couldn’t afford it.

Might have told this story before: It goes back ~ 60 years to Perth, Australia.

Friend's younger brother attained a job in a new car dealership....shortly after he started this scruffy old guy came in the showroom, and all the other salesmen disappeared.

Brother shows the old guy around.....he finally says he'll have "One of those trucks, and that car for my wife".

Call to bank manager....who said "Give him whatever he wants, he's one richest farmers in the area".

 

[gwraigty]

The response was it is obvious that the $239 is the monthly payment. I reiterated that I wanted their best cash price and twice the response was $239. When they replied that the sticker price was $20k, I said thank you and would return if theirs was the lowest price. That was when the manager said that I had no idea how to buy a car!!

I understand that in this day and age that one haggles over the price, but to twice assume that all I cared about was the monthly payment, then respond with the sticker price when pushed, shows that the salesman and manager are catering to the "it's not the cost, but the monthly payment that matters" crowd.

Yesterday our salesman told us they'd had a customer who admitted declaring bankruptcy the week previous. The guy thought he'd be able to get a car loan. He didn't.

 

[gwraigty]

When we were in our late 30’s I met my then husband at a car dealer after work. He was a tool and dye maker so had jeans, t-shirt and a flannel shirt on. He also had a master’s degree in math so had listed the options we wanted, etc and wanted exact prices. We were paying cash. The guy wouldn’t give us exact figures but estimates. We went to a different dealer, got what we needed and bought. The first dealer assumed by his dress that we couldn’t afford it.

Face value judgments, right? Even on a small scale. For a few years, I sold books on eBay, as a business. At garage sales/estate sales, etc., there would sometimes be women browsing dressed in nice, neat, office wear, high heels, looking quite professional. Sometimes they'd try to talk the homeowner down on things, usually without success. Me, with my sweats/T-shirts, casual shoes, must have looked poor in comparison. Even when buying full boxes of books, I'd get offered reduced prices without asking for any deals.

 

[Taxman59]

Grandfather (GF) was selling trucks and buses in St Louis in the post WWI era. A bag lady came in the shop carrying 2 shopping bags with her possessions in themand told how the local parish school needed a bus and she wanted to buy them one. My GF and his buddy passed the lady off to the new salesman while the two of them went into the back for a drink. After the lady picked out all of the amenities she thought the parish school could use, the salesman asked how she wanted to pay for it. At that point, she dumped out the shopping bags she was carrying and asked if that was enough cash to cover the 2 buses! My GF had to watch as the new guy added up the retail price of two fully loaded buses, counted the cash out (and put the rest back into the shopping bags!). As the lady left, the salesman counted out his share of the commission and laughed all the way to the bank!

 

[mh]

I agree. It really gripes me that I have to withdraw 5% of my IRA and pay taxes on it. This not only puts me in a higher bracket, but also makes 85% of my SS taxable.

That was the deal when you put it in, no ?

 

[Nemo2]

At that point, she dumped out the shopping bags she was carrying and asked if that was enough cash to cover the 2 buses!

There's a Toronto legend about Rompin' Ronnie Hawkins:

https://en.wikipedia.org/wiki/Ronnie_Hawkins

Story goes that, back in the late 1960s, IIRC, Hawkins felt slighted by a Rolls Royce salesman....came back with two bouncers from the club he played at, (a guy I was in telco sales with sometime later claimed to be one of them), and a couple of Honest Ed's (a well known cheapie store at the time) shopping bags....full of cash.

Dumped the full payment on the sales manager's desk, pointed to the salesman and said "And he doesn't get a commission!"

 

[The Cosmic Avenger]

When they replied that the sticker price was $20k, I said thank you and would return if theirs was the lowest price. That was when the manager said that I had no idea how to buy a car!!

From their perspective, we're doing it all wrong, as we're actually getting the best deal, not the lowest monthly payment!


Your method sounds a lot like mine back before the "no haggle" dealers that show your their invoice and markup became common. I called and emailed a bunch of dealerships (I think this was the late 1990s, so they were not all using email or posting price/inventory online) saying I wanted this make, this model, this trimline, with these options required, so that the quotes should all be for pretty much the same thing. I wanted to know their best and final price, and told them that I'd go with the lowest price at the end of next week. I swear, some of the dealerships called five times a day leaving messages that they wanted me to come in so they could tell me the price, despite my terms being pretty clear. I got a few prices, enough that I was pretty sure I got a good one.

 

[redduck]

Like most in this situation they are fully aware of their predicament...However, that lovely little Defense Mechanism called "Denial" always plays a large part in these sort of peoples lives and finances.

There's a contradiction here: they cannot be fully aware of their predicament if they are in denial because denial hangs out in the unconscious. Denial: An unconscious defense mechanism characterized by refusal to acknowledge painful realities, thoughts, or feelings. (Free Dictionary).

So, they post pictures of "how well we are doing" for all to see..

How do you know what the motivation is for this couple to post photos? Some people just enjoy sharing their lives with friends.

Anyhow, I have a lot of empathy for these people. They seemed to be doing okay until the husband lost his job. They adopted a child (nice thing); sold their small house to build a bigger one (people do that) and bought a car (people do that as well) and don't land in financial trouble. From what we've been told regarding the couple[-] we [/-] I don't have enough information not be sympathetic.