Living paycheck to paycheck on $350k/year

[jp1]

Thankfully this isn’t my ‘problem’ and hopefully/probably? not that of any of us on this board. But I recently read this letter to marketwatch from someone who does have this problem and was fascinated by their obvious financial incompetence (blind spots? Keeping up with the joneses?). Curious about this I spent a few minutes with the googles and found stats along the lines of 20% of Americans who make incomes over $250k consider themselves to be living paycheck to paycheck. The letter writer doesn’t mention how much is going to 401k and other savings so we don’t know if it’s just small amounts or actual serious savings but I wouldn’t consider anyone who has $170k in car loans and is still able to save much to be living paycheck to paycheck.

https://www.marketwatch.com/picks/im-paycheck-to-paycheck-i-make-350k-a-year-but-have-88k-in-student-loans-170k-in-car-loans-and-a-mortgage-i-pay-4-500-a-month-on-do-i-need-professional-help-01664544530

We live in a similarly expensive part of the country and have a similar household income but thankfully the similarities end there. Our mortgage for a nice home in a nice suburb is half theirs and we have only one, much smaller, car payment and no student loan debt. I broke free of the Parkinson’s law problem (spending will rise to meet increased income) well over a decade ago thanks to YMOYL and have helped SO to do the same since then. This letter writer should be on easy street. Hopefully he takes the answer to his letter to heart and finds competent advice to help him get off the financial roller coaster he’s currently on. As the sole bread winner in his household he’s just one medical disaster or job loss or divorce away from a lifetime of financial struggle despite having a great income.

[Tybee]

The car loans are insane. Maybe start there.

[ApatheticNoMore]

The electric vehicles have to be high end new Teslas or even more $. They aren't Chevy Bolts or Nissan Leafs, those don't cost anywhere near that. I can't really imagine a mortgage half that as I don't tend to see much of anything less than 3k a month.

[bae]

The car loans are insane. Maybe start there.

I believe in paying cash for automobiles.

[frugal-one]

I believe in paying cash for automobiles.

And, paying credit cards in full each month.

[happystuff]

I believe in paying cash for automobiles.


And, paying credit cards in full each month.

Ditto to both of these. We have also been using the snowball method to add to our savings. A small source of income started a couple months ago, as well as a cancellation of a monthly bill - both of those are going directly into savings. I imagine we will have to start thinking about what to do with the money when savings gets to be a more significant amount. However, I read a bit ago that Suzie Orman now recommends enough money to cover 12 months' worth of expenses in an emergency fund, up from her previous eight months' recommendation.

[ApatheticNoMore]

However, I read a bit ago that Suzie Orman now recommends enough money to cover 12 months' worth of expenses in an emergency fund, up from her previous eight months' recommendation.

I tend to think 2 years, because i'm pessimistic.

But to be realistic that long long stretch of unemployment I had only lasted 11 months, so 12 months would have sufficed. But it wasn't in a recession, in a severe recession who knows. I try to not end up unemployed too, but I've come to see it as not only something that sometimes happens regardless of what one does if a company is doing layoffs, but also a risk one takes on if one takes a new job and never knows what they are getting into (last time a horrible bully that bullied me out of a job). And sometimes it may make sense to take a new job anyway. I ended up doing more interesting work in the end since the job I left was the boringest dead-end job imaginable, but whether it was worth all that ordeal to get somewhere somewhat better eventually I have my doubts.

[mschrisgo2]

I can’t imagine having that much car debt - and his car insurance must be crazy high too- and I can’t imagine having ANY car debt before the student loan is paid off. Pure crazy, in my book.

[jp1]

The whole car debt thing is crazy. The fact that he mentioned ‘two electric cars’ makes it seem like he needs to signal to everyone how virtuous they are. They could have done that by getting cheaper model 3’s instead of model S’s.

As someone dealing with upgrading electric for a bathroom remodel and considering spending the extra to be prepped for an EV I’m fascinated by their priorities.

[ApatheticNoMore]

The fact that he mentioned ‘two electric cars’ makes it seem like he needs to signal to everyone how virtuous they are.

Only suppose you want to buy an electric car and be virtuous (and my next car may be, only I don't need a new car now). Okay, but Chevy Bolt and Nissan Leaf are on the market. Now there is some advantage to paying a bit more for an electric car for longer battery life (Leaf has at least two models I believe, so it probably is highly desirable to get the fancier one if you can swing it, as it has more battery life). But there is no reason buying electric cars to be virtuous needs to cost 170k. My partner considered an electric car quite seriously for awhile but it was the used Nissan Leaf market (which has disadvantages batteries lose some power over time), but well under 20k.

[Rogar]

I'm in the cash only for cars also, plus the only credit card I own is a debit card. I understand regional differences in living costs, but as a humble opinion, people in that income category who have money problems need a serious reality check that involves more than just a couple of changes.

[ToomuchStuff]

I have never bought a new car, always been used. My current one should last me a long time yet.

As I know too many professional athletes, I have heard a few stories over the years. There was one who used a local PO box place that used to be our neighbor, I was offered a car wheel he had made for a hot rod project, based on some motorcycle wheel he liked, and payed $10K for, because he was almost a year in arrears for the PO box. When he passed, the one boss, convinced the other to buy out the estate at the end. Some stuff they were able to sell on, some stuff eventually went in charity auctions, some was given to one of his many kids, one item (the most expensive one), they never could sell (tried Ebay, but people thought the original was one of the posters) and in the last year, two of us convinced the owner to hang it on the wall, after three people almost stepped through the painting.

What did sell, quite well, was all the bad checks he wrote.

While another player, told the story about a player who signed a huge contract, and then bought a residence for the total of his contract. Took nothing into account of living expenses of any kind (food, utility bills, maintenance, etc.)
Lost the house a year later.

Then my friend who his agent, long ago taught him to take these paying charity gigs, and put that (and parts of his income) aside. When he retired from sports, he went into broadcasting, which he recently cut back on to spend more time with the grandkids.

Not everyone is good with money, and some find a good teacher, which they listen to, others ignore them.

[pinkytoe]

I silently cringed when I heard SIL just bought a new car - and an expensive one at that. He loves his toys. He and DD make good money but my guess is they are living close to the edge financially. I hope I'm wrong but when we were her age, the mid 80s recession happened and we were both laid off and lost our house - it can happen again.

[iris lilies]

I silently cringed when I heard SIL just bought a new car - and an expensive one at that. He loves his toys. He and DD make good money but my guess is they are living close to the edge financially. I hope I'm wrong but when we were her age, the mid 80s recession happened and we were both laid off and lost our house - it can happen again.

Good for you, mom for keeping quiet!

Your daughter undoubtedly knows the story of you losing your house and it serves as a cautionary tale should she wish to co sider it. But it is a different time, they are different people, and don’t they have some inlaw financial backup if needed?

I would be a little worried and a little unhappy about big spending of my kids, but it is what it is.

[littlebittybobby]

Okay--I source my cars from the wreckin' yard, but the wreckin' yard has gone waaay up in price, lately. Good thing I am not looking to buy. But guess what? The wreckin' yard has gotten in some pretty clean, straight Toyota Priuses, lately. They set them out back, for parts, not for sale. I'd bet the problem is with the battery pack, and it's not affordable. So, the people "trade"(get screwed), for a nice, clean NEW one, instead. Or preowned. Alsoi, on GOVdeelz, the auction prices for ragged-out 10-20 year old pickups are ridiculous. So, don't look for a bargain there. Nope. Anyway, I've got my 87 Suburban 4x4 project going, and will have 'er roadworthy with the next year. But yeah---traffic is murdfer, and driving is highway robbery. Yup.

[Tybee]

I silently cringed when I heard SIL just bought a new car - and an expensive one at that. He loves his toys. He and DD make good money but my guess is they are living close to the edge financially. I hope I'm wrong but when we were her age, the mid 80s recession happened and we were both laid off and lost our house - it can happen again.

I know what you mean--it feels a little similar to that time, for some reason, and I could see things getting rough for a while.

[iris lilies]

I know what you mean--it feels a little similar to that time, for some reason, and I could see things getting rough for a while.

Funny that my mom would sometimes say to me “ let go of some of that money! Live a little!” She was not a spendthrift, but she thought I was just a leeetle too tight.

I remember going shopping with her a few times and ending up with household stuff I just did not like. Never liked the coffee table. Never liked the bedspread. Never liked the spice rack.

now I take eons to look for the right thing.

[pinkytoe]

My mother was no doubt a tightwad due to her Depression era youth. That scarcity mindset rubbed off on me and now I have given it to DH. Some days it feels like we overly deny ourselves little pleasures because "they cost too much." The most recent "discussion" was about the price of a jar of orange marmalade. On the other hand, when visiting DD and seeing how much she freely spends on groceries without a thought, I am shocked.

[Tybee]

My mom was definitely in the Depression era camp and could not spend money, even for things she liked. When I cleaned out her house, she still had the towels I took to college, for example, back in 1972. My mil, on the other hand, was more like IL's mom, probably in defiance of her Depression era mom. She was a spendthrift. Funnily enough, I was just talking yesterday with one of my son's about our grocery bills and discussing how much everything had gone up and who had the best prices, Walmart of Meijers. So he seems to have inherited the frugal gene.

I have to remind myself I can take a middle road. But my default is always Depression era, like my mom.

[frugal-one]

I think the thing that most surprises me is people who just pick up something and buy it without looking at the price!!! Many times I have seen (especially with meat) 2 packages of the same item with different costs per pound. They forgot to change the scanner (or whatever it is called?). Or, I ask a person about the price they paid and they have no idea. huh?

Like those above... I hesitate to buy something that I think it too much even though I can easily afford it. I have to remind myself to spend the dough!!!

Like IL... it has to be just right... or I don't purchase it.

[sweetana3]

I was just scouring Amazon for my hot chocolate mix at the "right" price. Finally found it at half the price of the sponsored listings. Just did not want to try and find it at the grocery and only one store has it anyway.

Just had the 2 price thing happen with blueberries. $1.99 and $4.99. The higher price was not organic and was in the same bin. Took awhile for customer service to figure out since her computer gave her a different price than the cashier's machine on the checkout line. ???

[Teacher Terry]

My mom was a child during the depression. She was good with money but didn’t deprive herself once she could afford not to. My in laws on the other hand saved everything. One of my kids is good with money and the other one makes me cringe.

[pinkytoe]

My older brother and his wife are wealthy by most standards. I still recall a conversation with his wife about groceries. She did not mean it in a superlative way but mentioned that she just gets what she wants at the grocery and never checks prices as if that is what most people do.

[flowerseverywhere]

A woman said this morning at a group I was in. " We are selling our house and getting an apartment With the appreciation because we can't afford it anymore.". In the next breath she told a story of how she took her three kids and one grandchild out to eat last week and it cost $450.

Imagine the dinner you could make for a fraction of that, with the highest quality freshest veggies, meat, fruit and so on. Plus a wonderful desert. I bet most people could have a lavish dinner plus have three weeks groceries out of that.

No wonder why they have trouble affording a house.

[iris lilies]

We amassed a great net worth based on our frugality in the early decades of our marriage. I have friends who are single who made an astonishing amount of money, considering how much they actually HAVE of it now, not much. I just learned how much one friend is making who’s living paycheck to paycheck, yet another one of our friends to reach retirement age with many years remaining on their mortgage. All of them continued to use their house as their bank account and pull out equity over the decades when they could hsve paid it off.

As for pinkytoe’s remark about groceries, yes. That’s the first place we learn a frugal lesson— when you go to the grocery store there are choices you make. It is a choice to buy red raspberries. It is a choice to buy expensive cuts of beef. Those are things I did not buy for 20 years. I remember distinctly the first time I bought red raspberries in the past decade. We’ve had red raspberries in our garden, but it wasn’t a reliable crop and often DH got just enough for one raspberry pie and that was it for the season.

One of my friends who’s in her 70s and still has a big mortgage talked about grocery buying as though that was a fixed cost. I never attempted to convince her of anything else because she would not havevheard it.

Now that I’m spending my assets, I buy red raspberries whenever I choose. It is a huge luxury. I recognize it as a luxury.

I just… Can’t understand the whole business of crying poor, buying the Democratic party line of rich people need to step step up, when the salaries of these people are just amazing. Granted, their salaries are nowhere near that $350,000 of the folks highlighted in the article but it’s the same mindset, And we are in flyover country where I can buy a functional cute house in Hermann for $79,000 and a condo for $65,000.

[flowerseverywhere]

Iris, I cannot agree with you more. The other day someone challenged me when I said I hear no cries for conserving energy in the automobile gas/electric fight. They claimed things are more efficient now than 50 years ago when we were teens.

well guess what? I looked it up from what I could figure out our population has doubled and our energy use is more than 10 times more per capita. Multiple TV’s and computers plus bigger houses full of bigger refrigerators, multiple bathrooms and way more cars per person. Seen a high school or College parking lot lately? Not to mention our highly refined food and packaging in multiple layers of plastic, cardboard and more plastic shipped from China and god knows where. Plus Strawberries in January no longer seem like they are treated as a luxury

[iris lilies]

Iris, I cannot agree with you more. The other day someone challenged me when I said I hear no cries for conserving energy in the automobile gas/electric fight. They claimed things are more efficient now than 50 years ago when we were teens.

well guess what? I looked it up from what I could figure out our population has doubled and our energy use is more than 10 times more per capita. Multiple TV’s and computers plus bigger houses full of bigger refrigerators, multiple bathrooms and way more cars per person. Seen a high school or College parking lot lately? Not to mention our highly refined food and packaging in multiple layers of plastic, cardboard and more plastic shipped from China and god knows where. Plus Strawberries in January no longer seem like they are treated as a luxury

Fortunately, the January strawberries taste like crap so I don’t buy them. But late season red raspberries can be decent.

[catherine]

Iris, I cannot agree with you more. The other day someone challenged me when I said I hear no cries for conserving energy in the automobile gas/electric fight. They claimed things are more efficient now than 50 years ago when we were teens.

well guess what? I looked it up from what I could figure out our population has doubled and our energy use is more than 10 times more per capita. Multiple TV’s and computers plus bigger houses full of bigger refrigerators, multiple bathrooms and way more cars per person. Seen a high school or College parking lot lately? Not to mention our highly refined food and packaging in multiple layers of plastic, cardboard and more plastic shipped from China and god knows where. Plus Strawberries in January no longer seem like they are treated as a luxury

Well, one of my favorite quotes is something that my son told me: "A luxury, once tasted, becomes a necessity." This is one of the reasons doing anything about climate change and the devastation of the planet is that it's almost impossible to walk people back to consuming less. Things that were considered luxuries a few years back: AC, color TV, oranges from Florida if you live in the North, power windows in the car, even electricity itself--these are all "must have's" now. That's why there's energy consumption creep, and that's why people, like your friend, is blind to it.

Yesterday I asked DH, what would happen if the global economy just stopped. What if our country had to depend solely on its own resources? We couldn't get stuff from China or Europe, or even Canada?

His immediate response was "We would die!"

So I dug deeper... Why do you say that? He said, "All the car parts are made overseas!" So I replied, you don't die if you don't have a car. Obviously the answer is more nuanced--some people could die if they couldn't get to work and couldn't buy food or medical products, etc etc. But, strictly speaking, there are SO MANY THINGS we don't "need"--we just want them. Transitioning to a less consumerist society which would, in turn, reduce electricity consumption, would have to somehow overcome this barrier--people would have to be convinced that fresh raspberries in November is not a need to be taken for granted. It's a "nice to have"

[pinkytoe]

We won't change until there are no other options.

[jp1]

A woman said this morning at a group I was in. " We are selling our house and getting an apartment With the appreciation because we can't afford it anymore.". In the next breath she told a story of how she took her three kids and one grandchild out to eat last week and it cost $450.

Imagine the dinner you could make for a fraction of that, with the highest quality freshest veggies, meat, fruit and so on. Plus a wonderful desert. I bet most people could have a lavish dinner plus have three weeks groceries out of that.

No wonder why they have trouble affording a house.

To be fair, maybe she has YMOYL'd the situation and decided that she doesn't particularly enjoy having a big house with all the work and money that goes into maintaining one, but does enjoy taking the family out for dinner from time to time. (It's also possible that her family think she's a lousy cook... :~) )

[bae]

Fortunately, the January strawberries taste like crap so I don’t buy them. But late season red raspberries can be decent.

We have wonderful berries here in the PNW, but the season is somewhat short. I make lots and lots of freezer jam, regular jam, and preserved pie filling during the brief, wonderful season, and thus have berry-stuff the rest of the year.

As an experiment when covid began, I put in a couple of blueberry plants in planters on my deck, and I'm getting a reasonable harvest from them without much fuss, as long as I keep the birds and my dog from savaging them. I'm tempted to increase the number of plants once I think through the setup.

[Tybee]

To be fair, maybe she has YMOYL'd the situation and decided that she doesn't particularly enjoy having a big house with all the work and money that goes into maintaining one, but does enjoy taking the family out for dinner from time to time. (It's also possible that her family think she's a lousy cook... :~) )

I told my husband this story and he said maybe the in-laws steal the silverware, and they've learned not to invite them to the house!

[ApatheticNoMore]

Berries are the healthiest of fruits though. So I have to take my medicine. But if I can only get imported berries I wait until they are back in season. Frozen fruit is an alternative then but it tends to just sit in my freezer, so I don't bother.

[ToomuchStuff]

Well, one of my favorite quotes is something that my son told me: "A luxury, once tasted, becomes a necessity." This is one of the reasons doing anything about climate change and the devastation of the planet is that it's almost impossible to walk people back to consuming less. Things that were considered luxuries a few years back: AC, color TV, oranges from Florida if you live in the North, power windows in the car, even electricity itself--these are all "must have's" now. That's why there's energy consumption creep, and that's why people, like your friend, is blind to it.

Yesterday I asked DH, what would happen if the global economy just stopped. What if our country had to depend solely on its own resources? We couldn't get stuff from China or Europe, or even Canada?

His immediate response was "We would die!"

So I dug deeper... Why do you say that? He said, "All the car parts are made overseas!" So I replied, you don't die if you don't have a car. Obviously the answer is more nuanced--some people could die if they couldn't get to work and couldn't buy food or medical products, etc etc. But, strictly speaking, there are SO MANY THINGS we don't "need"--we just want them. Transitioning to a less consumerist society which would, in turn, reduce electricity consumption, would have to somehow overcome this barrier--people would have to be convinced that fresh raspberries in November is not a need to be taken for granted. It's a "nice to have"

Or would it?

It could also speed up the transition to higher electrical use, with things like 3d printing, etc.
I also expect computers would be used more (probably with open source software to prolong their lifespan), until they died (then go back to books/library, etc), as people figure out how to fix/do things for themselves.
Then you might have a resurgence in smaller stores as the supply chain's run dry on national chains, with people who still have old skills (cobbler, etc).

[flowerseverywhere]

To be fair, maybe she has YMOYL'd the situation and decided that she doesn't particularly enjoy having a big house with all the work and money that goes into maintaining one, but does enjoy taking the family out for dinner from time to time. (It's also possible that her family think she's a lousy cook... :~) )

Well she said the reason she was.moving was unaffordability, and I just question the wisdom of making such a choice. After all, the economic future is very unstable right now and for those close to the edge its time to buckle down

Meals with friends and family can be really simple. It's the company after all.

Every day we all make decisions we have to live with. Everyone can do whatever they want but don't complain about optional decisions that could have a very adverse effect like homelessness. Regardless of who is in power difficult decisions about Medicare and social security will be made. it could spell disaster to many old people.

Personally and as nations the time to fix the roof is when the sun is shining. Lifelong frugality is the only key to surviving the inevitable storms

[jp1]

Well she said the reason she was.moving was unaffordability, and I just question the wisdom of making such a choice. After all, the economic future is very unstable right now and for those close to the edge its time to buckle down

Meals with friends and family can be really simple. It's the company after all.

Every day we all make decisions we have to live with. Everyone can do whatever they want but don't complain about optional decisions that could have a very adverse effect like homelessness. Regardless of who is in power difficult decisions about Medicare and social security will be made. it could spell disaster to many old people.

Personally and as nations the time to fix the roof is when the sun is shining. Lifelong frugality is the only key to surviving the inevitable storms

The flipside of whether she was making a wise decision is that housing costs go on forever. As do the savings of moving to a cheaper home. Decisions about meals out with family can be made one after the other depending on if one can continue affording them. It's a lot easier to stop inviting your family out to dinner than it is to deal with a home that is no longer affordable.

[Teacher Terry]

Spending 450 for a dinner with a few people makes my head hurt. I am making Hungarian goulash for my DIL’s birthday dinner and the meat alone cost 17.

[Tradd]

I will spend money on my diving - like the $10K rebreather with $1600 for training and probably another $750 for travel (to WI from IL) for training, hotels, food, needed incidentals and consumables for the rebreather.

At the same time, I try to take my lunch to work (even if it’s just a can of soup), use instant coffee in the morning so I skip McD’s, and eat at home. Contemplating shorter hot baths (I dislike showers and soaking is a good stress reliever) to save on the gas bill from all the hot water use.

I drive a base model 2018 Ford Escape I’ll have had for 4 years in January. It’s got over 95K miles on it from all the driving I do to dive. Sticker was $25K, but the dealer had it for $18K as they were trying to get rid of it. They gave me another $1K off as I was a repeat customer at that dealership.

I do have some credit card debit, but I’m paying it off. The rebreather and associated costs were paid for in cash.

[Teacher Terry]

Tradd, it seems to me that you are spending according to your values which is important. You are cutting in some areas to afford what’s important to you.