What exactly makes life so expensive? AKA Why do we need six figure incomes, again?

[ExcuseMyIgnorance]

Here's the jist of what's been on my mind lately... I'm young and trying to plan out much of my life. I want to carry the proper insurance in case something happens, save enough money for retirement, decide where I want to live forever, when to buy a house, etc. Hence why I've been so chatty on these forums.

What I'm noticing is life really isn't that expensive (I don't think I'll have kids). But 90% of my elders whine about never being able to retire. Have they just made that many mistakes or is there something I'm forgetting to calculate?

P.S. I've read blogs like MMM, ERE, and Root of Good. Those guys seem to have things figured out.

P.S. P.S. Is there some magical expense I'm missing? Health expenses becoming INSANE for some reason, maybe?

[tiffany85]

Life isn't expensive. It's a myth to keep Americans working 40 hours a week. I'm only a tiny bit kidding

[Tabs]

There are plenty of ways to answer this, I'm sure.

For example, I've read articles and even heard it on here about that magical $70,000 per year earning mark being the point of diminishing returns, in terms of happiness vs earned income. If so, it's clearly below the six figure mark.

I personally don't follow any arbitrary figures though. Everybody's financial situation is a bit different, and we all live in different areas with differences in cost of living, and so on and so forth. I say just earn as much as you can handle. It's better to have too much than too little IMO.

Most seniors that are unable to retire... I personally believe it. I think the simple fact is... well, personal finances is seen by many as boring. Why save for the future when you can spend the money to do something fun and exciting today? Carpe Diem, right?

It's a shame though, that some people realize the folly of not planning for their future only too late. By then, all you can do is to keep chugging along, doing what you can to stay afloat, and complain on the internet about how now you'll never get that retirement you are somehow entitled to but never prepared for.

No, OP. You're doing the right thing by planning ahead like this. We all should.

Edit: I am totally digging the animal avatars by the way. I don't know why, but I find it amusing. Maybe I am easily amused.

[Jluke]

Life is as expensive as you make it. Or inexpensive if you choose. Self control and strategic planning are key.

If something can be bought where someone has to pay on a monthly basis, a lot of people will jump on that. Whether it is a 0% loan, a subscription service, etc.

People also fall into the I want it. I need it. Now. If you do not have the savings to cover the expense you don't buy it. Except for a house of course. And eventually a car should fall in this category if you save appropriately.

Perhaps the seniors you are referring to were expecting social security and Medicare to pay the way. Where I live a lot of seniors complain about property taxes; specifically school taxes.

You are on the right path. Especially with the websites you mentioned. Live on half your net salary and save like crazy early on.

Have 20% down for a house. Pick one that is in good shape where you won't have to dump money into it to fix it up. Try to get a 15- or 20-year mortgage. Download an amortization schedule in excel to play with mortgage numbers.

Look closely at your monthly bills and see if there is any excess. Treat savings as an expense too so you always make that "payment" to yourself.

Establish a 401k and Roth. Invest in the market using dollar cost averaging.

Seems so simple but remember life will happen and it will try to derail you from your goals. Stay focused.

[avil_saver36]

Here's the jist of what's been on my mind lately... I'm young and trying to plan out much of my life. I want to carry the proper insurance in case something happens, save enough money for retirement, decide where I want to live forever, when to buy a house, etc. Hence why I've been so chatty on these forums.

What I'm noticing is life really isn't that expensive (I don't think I'll have kids). But 90% of my elders whine about never being able to retire. Have they just made that many mistakes or is there something I'm forgetting to calculate?

P.S. I've read blogs like MMM, ERE, and Root of Good. Those guys seem to have things figured out.

P.S. P.S. Is there some magical expense I'm missing? Health expenses becoming INSANE for some reason, maybe?

THAT makes life expensive.

- No need to buy a house in a great school district - this can easily save you more than $50K in the purchase price of the house where I live.

- No need to feed, clothe and educate another human being (or more) for 18 years.

- No need to accumulate money to send the kids to college.

- No need to buy them cars, other expensive toys. No need to buy them health insurance.

- No need to spend time with the kids - you can easily use all of your excess time to have a second career or even learn plenty of skills that make you additional money or even save money.

You can keep counting. If you don't have kids, if you have a professional's salary and if you are frugal, you will be rich. It is inevitable.

The other side of the coin is to truly understand and appreciate just how expensive kids are in developed countries. A family of size 4 earning $50K household income is poor - not middle class. A couple earning $50K without kids are on the other hand middle class and can retire comfortably.

P.S. As an addendum, the *timing* of when you have kids can be crucial. If you can accumulate plenty of wealth before having your first child, you can still come out ahead. Plenty of people dedicate their 20s and 30s to work their butts off and rise the corporate ladder. They are already at the VP level when they have their first child as they are on the wrong side of 40. If you have kids too early, you simply do not get to put 80 hours a week at your work and your career is never going to skyrocket. It's a real possibility.

However, just understand and realize the possibility that situations change and people change. People's fundamental core beliefs can change within a decade. In your 30s, it is very likely that you will feel that money is not everything, and it is not out of the realms of possibility that you may actually want kids. Just be open to the possibility. The best thing you can do is use your youth wisely. If you really put serious effort in your 20s (assuming you are in your 20s) and aspire to accumulate wealth rapidly, you can afford the possibility of having kids and still retire rich.

[dawnwes]

Here's the jist of what's been on my mind lately... I'm young and trying to plan out much of my life. I want to carry the proper insurance in case something happens, save enough money for retirement, decide where I want to live forever, when to buy a house, etc. Hence why I've been so chatty on these forums.

What I'm noticing is life really isn't that expensive (I don't think I'll have kids). But 90% of my elders whine about never being able to retire. Have they just made that many mistakes or is there something I'm forgetting to calculate?

P.S. I've read blogs like MMM, ERE, and Root of Good. Those guys seem to have things figured out.

P.S. P.S. Is there some magical expense I'm missing? Health expenses becoming INSANE for some reason, maybe?

What elders are in your life? All of my relatives over the age of 75 are retired. The only one who had to retire later than he wanted (mom's brother) is because their daughter passed away and they had to raise their grandchildren. They chose not to retire until their grandchildren had reached 18 and were doing ok.

However, as for live being expensive, you just never know what will happen. One woman is on disability due to an injury from work. Another man lost his job and couldn't find another one for almost 10 years. You can plan for everything. You just can't.

[scfr]

There are negative things that could happen as you get older. Higher medical expenses and wage stagnation when you hit 50-ish (or having to switch to a lower paying job) are both very likely. But those can be planned for if you think about your future with steely-eyed realism.

As far as the people who complain that they will never be able to retire, it is likely that they are in that situation for a variety of reasons. Some have experienced truly catastrophic events, have always lived a bare minimum existence, and truly aren't able to save. But there are MANY (I would guess most) who choose not to plan and save adequately.

[scfr]

Edit: I am totally digging the animal avatars by the way. I don't know why, but I find it amusing. Maybe I am easily amused.

Me too. That poor little mouse doesn't have a chance against that dog & fox!

[ua_guy]

Life isn't expensive. It's a myth to keep Americans working 40 hours a week. I'm only a tiny bit kidding

^ This person gets it. There's nothing mystical or visionary, philosophical about it. Savings = Income - Expenses. The better you can balance that equation and plan for retirement and to not buy expensive things you can't afford, the better.

[ExcuseMyIgnorance]

There are plenty of ways to answer this, I'm sure.

For example, I've read articles and even heard it on here about that magical $70,000 per year earning mark being the point of diminishing returns, in terms of happiness vs earned income. If so, it's clearly below the six figure mark.

I personally don't follow any arbitrary figures though. Everybody's financial situation is a bit different, and we all live in different areas with differences in cost of living, and so on and so forth. I say just earn as much as you can handle. It's better to have too much than too little IMO.

Most seniors that are unable to retire... I personally believe it. I think the simple fact is... well, personal finances is seen by many as boring. Why save for the future when you can spend the money to do something fun and exciting today? Carpe Diem, right?

It's a shame though, that some people realize the folly of not planning for their future only too late. By then, all you can do is to keep chugging along, doing what you can to stay afloat, and complain on the internet about how now you'll never get that retirement you are somehow entitled to but never prepared for.

No, OP. You're doing the right thing by planning ahead like this. We all should.

Edit: I am totally digging the animal avatars by the way. I don't know why, but I find it amusing. Maybe I am easily amused.

HA! Looks like we're on an animal forum.

If you don't have kids, if you have a professional's salary and if you are frugal, you will be rich. It is inevitable.

That is hugely exciting to me! I have a professional's salary + I'm frugal and don't ever see myself changing + I will probably either have no kids or 1 kid. I'm gonna be rich, I tell ya!

However, it sucks because people tell me a lot that a life without kids is unfulfilling and/or selfish. Ugh. I guess it's not important to care what other people think.

[ua_guy]

However, it sucks because people tell me a lot that a life without kids is unfulfilling and/or selfish. Ugh. I guess it's not important to care what other people think.

Because they've never lived it any other way. People find very fulfilling purposes in life beyond having children. Who's life is it, anyway?

[avil_saver36]

HA! Looks like we're on an animal forum.



That is hugely exciting to me! I have a professional's salary + I'm frugal and don't ever see myself changing + I will probably either have no kids or 1 kid. I'm gonna be rich, I tell ya!

However, it sucks because people tell me a lot that a life without kids is unfulfilling and/or selfish. Ugh. I guess it's not important to care what other people think.

There is no doubt of this outcome the way things are currently stacked in the US.

However, just as a precaution, it will be prudent to keep tabs on the political situation in the US. Historically, single people without kids have bore the brunt of the taxes in the US. It makes sense for these people to divert more and more of their income to 401K/IRAs to reduce tax liability, but putting too much money in retirement can leave you at mercy to future US governments, who will be cash strapped and looking for new ways to tax excess wealth.

Finding out the right balancing act is the key. No matter though - free of all childcare expenses, you should be a millionaire within a couple of decades at worst on a professional's salary. Good luck!

[Fishindude77]

If you're going to be working anyway, why not leverage your talents and resources to make as absolutely much as possible with the time you put into it? Have seen many intelligent people that I grew up around spend their careers doing "average paying" jobs. Seems wasteful to me, but I suspect it's just that they are afraid to take a chance or to get out of their personal comfort zone.

Make a boat load of money while you are younger and energetic, and slam it away to enjoy when you will have less energy later in life. And, you are correct .... life can be pretty cheap, depending upon how you choose to live.

[avil_saver36]

If you're going to be working anyway, why not leverage your talents and resources to make as absolutely much as possible with the time you put into it? Have seen many intelligent people that I grew up around spend their careers doing "average paying" jobs. Seems wasteful to me, but I suspect it's just that they are afraid to take a chance or to get out of their personal comfort zone.

Make a boat load of money while you are younger and energetic, and slam it away to enjoy when you will have less energy later in life. And, you are correct .... life can be pretty cheap, depending upon how you choose to live.

From my own personal experience, always being in a "learning mode" and "getting outside of comfort zone" can be quite "discomforting". I literally wasted my 20s in doing a job that didn't require much innovative skills beyond a point. My domain knowledge was solid, and I enjoyed being relied upon by people as an expert, but ultimately, not learning new skills was going to make me rot. I should have been constantly learning and going up - I only started doing it in my early 30s. Even after losing my precious years, I was able to double my salary in 5 years and my career is still trending up.

The best thing one can do is literally utilize every day in learning and honing skills from the age of 22 until the age of 35. Forget marriage. Forget kids. Even put serious dating on back burner. Nothing is more important than you having tremendous in demand skills that you can leverage to get any position you want. Success will easily follow after that. If you missed dating during this time, almost any man/woman in your dreams will follow your success once you achieve it. Unfortunately, most young people have it the other way around - they are wasting too much time in buying gizmos and finding perfect dates when they are far from perfect themselves.

[elessar78]

We bring home a combined six figures and what makes life expensive for us is 2 car payments, 2 student loan bills, and day care for 2 kids. And by no means am I saying we're living our financial lives correctly. In fact, I think we are living very incorrectly in that regard I just can't convince my wife otherwise.

The above represents 26% of our take home.Mortgage is another 18%.

Here's another one, we're choosing to eat healthier stuff and it's seems to cost a lot of money. $800/month or 13% of our budget. Fruits and veggies seem to cost a lot. We barely eat out anymore.

The other aspect are social obligations: birthdays, xmas, weddings, etc. I perfectly fine not giving gifts and expecting nothing in return. To me, it's silly, it's just a circular act. We give you a gift, and you give us a gift because you feel obligated. Why don't we just all keep our money and keep being friends and enjoy each other's company?

Then the rest just goes to, as mentioned, buying gifts, maintaining the house or maintaining the cars or the occasional doctor and dental bills, and other unexpected things.