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I am making just under $24k a year. At this income level, just keeping afloat is a challenge. I can barely pay basic bills, let alone invest anything. I need a lot more income to simply pay off some debt. If I were able to break into the $40k-$50k range like where I was last year, I could start investing again and paying off debt. I can't even imagine the mess I'd be in with kids.
Yes, lifestyles increase as income goes up, but it doesn't go up linearly. I might buy a lot more at Whole Foods if I was back in the $40k range, but my eating habits wouldn't change greatly from $40k to $80k. That extra income on the top side left over after subsistence is the investment money.
I make more than 40K and I still never go to Whole Foods.
24K is pretty low....but even at that level, I bet you spend money on stuff that aren't true needs. Almost everyone does.
Last edited by mysticaltyger; 12-27-2013 at 01:15 AM..
To anyone who once had nothing and is now worth 7 or 8 figures:
1. Yes, if I worked hard and did not spend as much money as I earned - as well as investing as much of my money as possible back into my business and avoided business loans and credit as much as possible. Another critical part of the equation was not having kids and getting a vasectomy. I have saved at least tens of thousands alone with that: lawyers, child support, etc.
2. I'm not exactly bouncing off the walls since I had to work very hard for it and most of my friends have way more money than I do and it came far easier, including getting a lot of help from parents: trust fund distributions.
3. It should have taken about a few years - but a few things interfered along the way: like skydiving, traveling, strippers and high maintenance flight attendant girlfriends.
4. Think outside of the box, never give up and no matter how many times you fall down - get back up.
To anyone who once had nothing and is now worth 7 or 8 figures:
3. It should have taken about a few years - but a few things interfered along the way: like skydiving, traveling, strippers and high maintenance flight attendant girlfriends.
I am making just under $24k a year. At this income level, just keeping afloat is a challenge. I can barely pay basic bills, let alone invest anything. I need a lot more income to simply pay off some debt. If I were able to break into the $40k-$50k range like where I was last year, I could start investing again and paying off debt. I can't even imagine the mess I'd be in with kids.
Yes, lifestyles increase as income goes up, but it doesn't go up linearly. I might buy a lot more at Whole Foods if I was back in the $40k range, but my eating habits wouldn't change greatly from $40k to $80k. That extra income on the top side left over after subsistence is the investment money.
Debt? Therein lies the problem. Don't borrow money!
I'm a big believer in living on much less than you make. You just can't out earn stupid financial spending decisions. The thought that you have to have large incomes to achieve this is just not so. You do need to manage your financial house by not wasting cash on stupid things and continue to fund your retirement goals by investing in diversified mutual funds. It takes discipline and time, but is quite possible for most families. You just can't try to live like the neighbors next door.
i have always attacked things from the opposite side. once i started earning a decent living i was never a very frugal person. i managed to save but worrying about pinching pennies or not driving new cars was not what i wanted to do.
so i learned to invest what i did manage to save better and more effectively and that gave me the growth and allowed more spending.
most folks go the opposite, they pinch pennies and then don't do much with the money so it grows little. a penny saved is a penny earned but it still stays a penny.
Last edited by mathjak107; 01-01-2014 at 09:30 AM..
I have six figures, which I inherited, and I put it where it is difficult to access, and I haven't touched it, I still live on my Social Security. So it hasn't had any effect at all on my lifestyle, except the peace of mind of knowing it is there. If I had 7 figures, I don't know if I would be a little more liberal with my spending. The family car cost $1,000, last summer, to replace the $800 one that lasted two years. We own the Michigan house, and rent in Texas.
I used to be in great place financially before 9-11 ---10 yrs in a sweet job, cruising the Bahamas and crash- not only 9-11 but many other bad things happened, deaths, hurricanes etc- picking up the pieces now- but you know things just happen,,, bouncing back is not always "quick"- thankful all is well- but yet to get back what I lost financially
i have always attacked things from the opposite side. once i started earning a decent living i was never a very frugal person. i managed to save but worrying about pinching pennies or not driving new cars was not what i wanted to do.
so i learned to invest what i did manage to save better and more effectively and that gave me the growth and allowed more spending.
most folks go the opposite, they pinch pennies and then don't do much with the money so it grows little. a penny saved is a penny earned but it still stays a penny.
I agree with you. I'm maybe somewhere in the middle though on the "frugal" discussion : I don't pinch pennies when it comes to vacations and going out with friends etc. but we still drive reliable used cars as opposed to new ones for example - we're somewhat thrifty, just not on the penny-pincher, frugal level. We pick and choose our "nice" stuff.
However, we invest heavily and we are planning to dip our toes in the rental property realm this year maybe. I agree 100% that it is very important to actually make the money work for you when people do save it. Too many people "save" money and are very frugal but then just stuff that money in their mattress essentially.
Some people make $10 a month and are very frugal and only spend $3 and put $7 in a savings account. They then might look at someone like me who spends $5 of my $10 and thinks I spend too much. But the key is that I invest the other $5 in the market and funding side-stream incomes. Over time the person investing and funding other ventures should snowball a LOT more money than the person who pinches pennies and sits on it. So far it has worked out very well for me.
Debt? Therein lies the problem. Don't borrow money!
unless you can leverage the debt to make more money. IE: in some cases it makes sense to buy a car cash. Other times if you are getting a really low interest rate, it makes more sense to take the loan and invest the money. Say you had $20,000 to buy a car. Instead of paying cash, sometimes it's better to take that 0.9% loan and then invest the $20,000 and pay the cheap loan for a few years. During that time, you could probably crush the 0.9%. and come out farther ahead than paying cash. Paying cash you spent $20,000. If you take the 0.9% loan, sure you may pay $20,300 for the $20,000 car but at 7% a year in the market you would have also made $8000, so you actually came out $7,700 ahead . Even if you put it in a 2% CD you could earn $2200 and come out $1900 ahead of paying the cash.
The debt problem is when people take out lots of loans for stuff they can't actually afford. In some cases, when you already can afford stuff, it makes sense to leverage cheap money.
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. Even if you put it in a 2% CD you could earn $2200 and come out $1900 ahead of paying the cash.
