The value of LBYM

[atmsmshr]

But I'm sure he "deserves" the $60k vehicle. After all, he had to sell his dream home. I shake my head at friends nearly daily as they pull up to my house in their ultra-expensive rides.

I know I'm strange, but I love it when people chuckle at me for driving an electric scooter to work. I think to myself, "keep laughing funny boy. I'll see you in early retirement before you know it."

When faced with the prospect of a major purpose, I ask myself, "Do you want this widget more than you want to retire early?" The answer is most often "NO".

A good friend of mine recently purchased a new Toyota 4Runner. I LOVE 4Runners! He even let me take is for a spin around the block. Man, I would love to have one, but not to the tune of $650 per month in payments, or depleting $42k from my savings.

My friend actually said this to me, "You make good money. You should get one. My payments are ONLY $650 a month". I nearly fell out of my chair upon hearing this statement. I wanted to pull out my online investment calculator and show him what $650 a month would look like after 20 years at historical returns. Instead, I just said, "That seems like a lot for a car payment." He responded, "It's a lot less than my previous loan". SMH.

Holy crap batman! After DW's serious car accident in February, I insisted on buying her tank - CPO 2017 GLE 350 Mercedes SUV. Reliable and Safety features outta the gazo. $650/month. I can't imagine spending that on a Toyota. We are old enough that it is coming out of the kids inheritance. Meanwhile I drive old faithful, a 12 year old S550 with 105,000 miles (finally broke in the car). Just changed the belt and tensioner myself today.

Gotta admit though, with all of the curves life throws at us, it can be devastating when a health, financial or employment issue pops up. Semper Gumby.

 

[Amethyst]

Layaway isn't a long-term loan; there isn't an interest charge, or at least there didn't use to be. You threw money at the item once a month until it was paid for; you could redeem the item early by paying the balance.

Stores I went to, stopped offering layaway in the 1980's. They needed the room that was taken up by items waiting to be redeemed.

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.

 

[Walt34]

Stores I went to, stopped offering layaway in the 1980's. They needed the room that was taken up by items waiting to be redeemed.

Layaway is available in at least some places. Here in WV land is cheaper than many other states and cities, where I would imagine that would make the cost of storage an issue. But at least some of the local Walmart stores have it available, there are stories in the local paper at Christmas time when some "Secret Santa" pays off somebody's layaway item at Walmart.

 

[gwraigty]

Layaway isn't a long-term loan; there isn't an interest charge, or at least there didn't use to be. You threw money at the item once a month until it was paid for; you could redeem the item early by paying the balance.

Stores I went to, stopped offering layaway in the 1980's. They needed the room that was taken up by items waiting to be redeemed.

I didn't say it was a loan of any kind. brett mentioned the cash economy. Layway was a component of that. That's all. I think the biggest risk with it was if people couldn't make their payments, they lost what they'd already paid, plus didn't get the items.

 

[atmsmshr]

Layaway is available in at least some places. Here in WV land is cheaper than many other states and cities, where I would imagine that would make the cost of storage an issue. But at least some of the local Walmart stores have it available, there are stories in the local paper at Christmas time when some "Secret Santa" pays off somebody's layaway item at Walmart.

Just before last Christmas, DW played secret Santa to our hair stylist and one other unknown family with layaway gifts for children. We are both grateful to be able to do small acts of kindness.

 

[RxMan]

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.

Actually I specifically excluded the poor from my comment above and also referenced people who should not be lumped into any irresponsible category based on bad luck and/or extreme circumstances. And I never mentioned anything about anyone being lazy either.

I’m referring to people who spend more than whatever they do make which by the way can be quite large salaries like drunken sailors (and actually that figure of speech isn’t fair to drunken sailors). For every complex problem there are solutions that will work. But hey, feel free to misrepresent my comments in the future if that’s what you enjoy doing.

 

[NW-Bound]

I’m referring to people who spend more than whatever they do make which by the way can be quite large salaries like drunken sailors (and actually that figure of speech isn’t fair to drunken sailors)...

I used to have a free subscription to Money Magazine. I still recall reading about a doctor and his wife who ran into debt while making $200K/year. They were in their 50s, not a newly minted doctor. And this income level was 20 years ago. And there were many stories like that.

 

[RAE]

What impresses me is the view of health and retirement by most people in this forum. “Retirement in a conventional sense” is what we are working to achieve and yet the vast majority of Americans are content to rely on SS and Medicaid and become a burden on the government and successive generations.

Taking responsibility for your own retirement is something we should all strive for, I agree. And most of us in this forum have been able to do that to a large degree, I'm sure. But I think you have to keep in mind that a large share of those "vast majority of Americans" you refer to are working-class folks, not making a lot of money, and many of those folks have not seen a wage increase (in real terms) since the early 1980s. In a situation like that, it's not that easy to sock away $$ in your 401k for retirement (to say the least). So I can understand why many of these folks have to rely on SS and Medicaid in their later years, and I personally do not have a problem with that, or see it as a "burden" on the rest of us.

I'm not talking here about people like those in the OP's post, who earn enough money to fund their retirement, but are financially inept - that's a completely different story.

 

[HI Bill]

I remember one day the President of the company telling me as we walked between buildings that he loved seeing those pricey cars in the parking lot because he knew the employees would be working hard.

In the late 1990s, I was working at a job I wasn't sure I'd last in. I was on Maui, and there weren't a lot of technical jobs there. My car was paid off, but I was renting a condo. I thought long and hard about buying the condo, as I considered the condo and loan a "ball and chain" that would keep me from leaving the job when I wanted. But the cash flow would have been positive if I had left and had to rent, so I went ahead and rented. Over the next 4.5 years, most of my prior rent cost went to the principal, and I made my first $100K in real estate through appreciation!

Most people buy too large/expensive of a house, and don't realize that they're working to support the house. Looking at what a purchase will cost you in the long term can get you to LBYM.

 

[redduck]

I generally use gross exaggeration and dark humor to drive home a point, which is generally misinterpreted.

You've got the gross exaggeration part down pretty well

 

[gwraigty]

Taking responsibility for your own retirement is something we should all strive for, I agree. And most of us in this forum have been able to do that to a large degree, I'm sure. But I think you have to keep in mind that a large share of those "vast majority of Americans" you refer to are working-class folks, not making a lot of money, and many of those folks have not seen a wage increase (in real terms) since the early 1980s. In a situation like that, it's not that easy to sock away $$ in your 401k for retirement (to say the least). So I can understand why many of these folks have to rely on SS and Medicaid in their later years, and I personally do not have a problem with that, or see it as a "burden" on the rest of us.

I'm not talking here about people like those in the OP's post, who earn enough money to fund their retirement, but are financially inept - that's a completely different story.

+1

 

[brett]

I get tired of this business of blaming others for one's ills and misfortunes.

To often people seem to lack the fibre to take responsibility for their own challenges AND move forward with a long term solution. Living beyond one's means is just another example. Easy to blame it on everything from easy credit to high credit card interest rates.

The bottom line is that more often than not those who have a challenge made the decision to buy something. It starts with that decision. So why blame the car dealer, the furniture store, the travel agent.

 

[Teacher Terry]

Rae, I totally agree with you.

 

[blueskyk]

I see a common thread with couples that flirt around the edges of, or fall into, a financial abyss that hasn’t been mentioned yet. I did Crown Financial coaching for a while and the number one issue I saw is that couples could not work together on their finances. As noted elsewhere on this board, money represents a lot of different things to different people and it can get complicated when tangled up with a marriage.

A universal indicator of financial resurrection for a couple was whether or not they 1) worked out an actual budget and then 2) hooked their huskies up to the same sled and headed in the same direction to live by it. These were the people who made it out of nightmare financial situations, no matter their income level.

But, I saw only about 2 in 10 couples will buckle up and do this.

 

[audreyh1]

I remember learning double entry bookkeeping in junior high, and for some reason I never could get my books to balance, LOL!

Good thing Quicken does it for me.

The technology of double entry bookkeeping has a fascinating history, harking back to late Middle Ages Venice and is probably why Italian merchants leaped so far ahead of the rest of the western world. (OK, they weren’t busy fighting a 100 years war nor fighting moors either)
https://www.npr.org/sections/money/...n-the-last-supper-and-the-birth-of-accounting

 

[brett]

Yes!

Lots of T accounts.

Credits by the window, debit by the door. And they must balance. Not so good when you change rooms though.

 

[Nature Lover]

The greatest value of living a LBYM lifestyle for me was learning to prioritize/use the value proposition when spending. Since I valued the longer-term security accumulating investments gave me, and because these accumulations were measurable ---my LBYM habit was easier to maintain. Don't get me wrong - I spent plenty, at least by my standards - but I spent far less than my young cohorts because of my desire for that longer-term security.

I also learned that my job wasn't as "necessary" if my living expenses were less. Served me well in both my younger days, allowing me to be a bigger risk taker in my career, and again later, when the opportunity to retire mid-fifties came up on my radar.

 

[pb4uski]

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.

And just how is it that this was a surprise to you? Were you not paying attention? Never heard of RMDs?

 

[pb4uski]

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.

I recall one car that I bought in the last 20 years I told the sales person I was paying cash and he responded that he wasn't sure if I could do that and he had never heard of it

It seemed that is was so unusual that they had to caucus with management as to how to process a cash sale.

 

[Andre1969]

I recall one car that I bought in the last 20 years I told the sales person I was paying cash and he responded that he wasn't sure if I could do that and he had never heard of it

It seemed that is was so unusual that they had to caucus with management as to how to process a cash sale.

When I bought my 2012 Ram, I wanted to pay cash, but they had an extra incentive, something like $500, if I financed through Chrysler Financial...Or Fiat-Chrysler Financial, or whatever they called it by then. So, I did that, got the extra $500 off, made a couple payments, and then paid it in full.

I think my interest rate was around 3.99%. At least, I remember financing around $19400 for 60 months, and the payment was about $358. A few months after I paid it off, they lowered my rate to something like 3.49%, applied it to my previous payments retroactively, and cut me a check for the difference!

 

[pb4uski]

When I bought my 2012 Ram, I wanted to pay cash, but they had an extra incentive, something like $500, if I financed through Chrysler Financial...Or Fiat-Chrysler Financial, or whatever they called it by then. So, I did that, got the extra $500 off, made a couple payments, and then paid it in full. ...

Yes, I've done that... grabbed the incentive and then pay off the loan after a couple monthly payments.... a few times over the years, the most recent in 2016.

 

[JustCurious]

I recall one car that I bought in the last 20 years I told the sales person I was paying cash and he responded that he wasn't sure if I could do that and he had never heard of it

It seemed that is was so unusual that they had to caucus with management as to how to process a cash sale.

I spoke to a new car salesman recently and I asked him based on his experience what percentage of sales are financed versus cash sales, he estimated about 90% were financed.

 

[6miths]

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.

Great story. Would love to have been a fly on the wall.

Cash must be more common around here as it isn't a surprise to anyone when you say you are going that way. Though I did have a salesman say the other day, 'Why would you pay cash, that would be the worst investment you ever made'. So they are adapting.

 

[W2R]

Great story. Would love to have been a fly on the wall.

Cash must be more common around here as it isn't a surprise to anyone when you say you are going that way. Though I did have a salesman say the other day, 'Why would you pay cash, that would be the worst investment you ever made'. So they are adapting.

I have never had any problem with buying in cash, either. Nobody ever seems that surprised about it.

But then, both of my car purchases since my 1998 divorce have been at the same Toyota dealership just around the corner from us. Maybe buying in cash is more typical of people in my suburb, than in some other areas. I have heard of some local immigrants literally taking suitcases of cash to closing in order to completely pay in cash when buying a house.

 

[Souschef]

And just how is it that this was a surprise to you? Were you not paying attention? Never heard of RMDs?

It is certainly not a surprise to me. I have been doing RMD's for almost 10 years. I just said I did not like it.