Okay people really do spend everything they make. You think they don't. Or at least I thought they didn't. Turns out people really do spend everything they make and then more.
I've now seen people making incredible salaries, still working, and drawing from a 401k. Paying 30% tax on their 401k withdrawal based on their income and somehow not saving. Being in their 60s and still have a mortgage with interest. I am floored.
It explains a lot about people talking about how will they retire? I mean I work in a tax office where one of the other tax people has admitted to it being too hard to save. So she gets a $8k tax refund to help them through the year make ends meet. She said it was too hard to save for college so they meant to but they never got around to it. Her kids have $8k saved at 16 and 14 and most of it was from her dad's initial contribution into a 529 of $2500. She said everything else just seemed more important.
Or another one said there's no way we'll retire before 65. My husband was hoping 60 but we have so many expenses. Apparently they have a couple of rentals that aren't really breaking even. I wanted to point out that perhaps they should cash in and buy rentals that actually produce income. But they see it as a long term investment of price appreciation. I'm not RE savvy enough but I can't help but wonder if this is a losing proposition? Sure you can write off depreciation and other stuff on rentals, but if you can't cover the mortgage with rent, I wonder if you shouldn't buy a different property?
These are supposedly financially savvy people and the clients who come in are in the top 2-3% of earners in the US. But they have very little savings. They spend it as soon as they make it.
I know we chose to live without income. But I have to wonder don't these people worry? Do they even have 3 months saved in an EF? From what I can the answer is no.
Spend everything you make
January 19th, 2017 at 04:59 pm
January 19th, 2017 at 05:13 pm 1484845986
January 19th, 2017 at 08:47 pm 1484858855
January 19th, 2017 at 10:45 pm 1484865948
Several of my friends who will be 60 soon-ish still have mortgages. It's hard to resist the pull of advertising and lots of people have expenses with elderly parents, expensive childcare, and medical issues too. I agree we could all plan better. That's why a site like this is so important--to cheer each other on.
January 19th, 2017 at 10:54 pm 1484866496
January 20th, 2017 at 01:02 am 1484874148
http://www.frugalwoods.com/2016/10/28/striving-for-compassion-in-a-world-of-judgement/
January 20th, 2017 at 07:04 am 1484895872
And nope the poor woman who didn't save for college, my suggestion? Apply for colleges that might provide aid. I also suggested community college, but it's not good enough for her son.
And the rentals? Well I'm not savvy enough investor but I think losing money on any investment a bad idea. Stocks or rentals. It doesn't sound like a good retirement plan.
January 20th, 2017 at 12:30 pm 1484915456
I'm just suggesting you focus more on your blessings (which includes good sense about finance) rather than spend so much energy on judging others. They will learn, or not.
January 20th, 2017 at 02:22 pm 1484922155
January 20th, 2017 at 07:42 pm 1484941350
Living--it must be hard to see people's "bad" decisions. I wonder if a chart showing how early 401k deductions are actually dinged would help. Sometimes people hear the 30% thing and can't even figure the math.
CB is one of my heroes for her excellent quality of life and care for others!
January 20th, 2017 at 09:22 pm 1484947326
CB I honestly feel we are doing people a huge disservice. It's not like I want to say stop spending. BUT just the simple tax implications of someone still working and making $200k and drawing from a 401k is insane. This could save them $6k off the top and they could have that much more for spending. But instead they are paying the government unnecessary taxes.
MyEnglish, I can't critisize spending because I don't know what they are spending on. But I do find it hard to bite my tongue on super simple tax savings. I don't want to say "hey contribute to your 401k." But seriously losing money on a rental seemed common sense and not paying taxes on your 401k that you've been deferring to pay the maximum tax break is crazy.
The coworker who can't afford college, I didn't judge but I did suggest community college as a possibility. It's just not for them.