How much do you save?

[AmberGretchen]

I think we save around 15-20% of our total take-home, overall. But I''m still in grad school, and we live in one of the country''s highest COL areas (SF Bay Area). Next year, when I''m out of school and working, and we''re living in a much lower COL area, I think we''ll be able to save A LOT more.

 

[Haven]

Date: 3/30/2009 2:51:41 PM
Author: fleur-de-lis

Heh, Lovegem, I can't even focus on answering your opening Q because I'm still in awe of your transportation costs being only 3% of your takehome pay. A few years ago, I helped a friend with setting up a basic budget and recall his car payment (~500/mo), insurance (~200/mo), gas (~200/mo), and incidentals (oil changes, wiper blades, car washes, etc.) and was blown away by 'even basic car=$1000/mo' for some people. To have 3% transportation costs, that would mean a post-tax income of about $30,000 a month, or post-tax of $360,000 a year, or an pre-tax income of around $700,000 a year!

Of course, it's less if you don't have a car payment or if you live in a public transportation friendly area (and partake of it). But to spend 3%.... wow, I hope you appreciate just how uncommonly lucky you are!

$500/mo car payment??!! Holy cow, that is INSANE.

We don't spend much more than 3% on transportation (if any more, at all) and we each drive our own cars. We don't carry car payments, though, because we didn't buy cars that we couldn't afford.

For me alone, I spend about $1200/year on gas, and $630/year on car insurance. I get my oil changed only about twice a year at $30 a pop, so let's make it an even $200 on incidentals. SO, my total yearly car costs would be $2,030. If I earned only $68,000 a year, the costs would be only 3% of my income. I earn a bit more than that on my measly little teacher's salary plus coaching stipends, so not bad! DH earns way more than I do, so he spends an even smaller percentage on transportation.

Are there really people out there who earn as little as me and carry $500/mo car payments? Scary. I wouldn't be able to save nearly as much as I do with such a huge car payment.

 

[Tuckins1]

We spend about 1/3 of our income... We save a lot because our house is paid off and our car payments are very low!

 

[Elmorton]

Hmmm...I think this is why I really dislike this type of post. The point is to find out how people spend/save, not critique.

But - Haven, there are people out there with $500 a month in car payments - but I'm not really sure it's insane. When I bought my car in grad school, I had a trade-in (a 10 year old vehicle that needed a new engine among other major issues) plus a little bit more than 25% down. The model I bought was the cheapest thing on the market (the only exception being the Chevy Aveo) without any frills - so what I'm saying is that I didn't buy a car that isn't affordable - in fact, I think I did a really good job in terms of finding something that was reliable and getting the most for my money. And, having a car is absolutely necessary, since I have to travel for my job and public transportation is lousy (would take over an hour to get from one college to the other). So, I have a $250 car payment. My DH was in a similar situation right as he was graduating college, got a used car, and decided he wanted to pay it off in a shorter time frame than the norm. Together, we pay more than $500 a month in car payments.

So - there are more than a few reasons a person could spend $500 a month in a car payment that, in my book, are pretty sensible. A $500 dollar payment doesn't mean a person is driving an Escalade - the equivalent might be a 2006 Corolla with low miles over the course of 2 years.

And I absolutely agree with Fleur that some of the stats shared here are really impressive. If a single, new teacher (starting wage around here is I think around 26-28, but let's say 30k a year just because that's an easy number) lives where I live, a reasonable rent for a decent neighborhood (a good rental is hard to find because housing is relatively affordable, so most people own) is going to be $600 a month. Utilities - $200. Phone and internet - $100. Groceries - $150. A pretty manageable car payment would be $250 a month (and let's say it's a 3-year payment), and gas costs a lot less up here - let's say about $700 a year, $500 a year on car insurance.

So - I'm really lousy at math, but I think I may have this right, and using really skinny estimates -

42% - Fixed living costs
14% - Transportation

If my numbers are right, then for my imaginary average starting teacher in my area, saving 40-60% of an income is right next to impossible.

 

[Haven]

El--You''re right, I''m sorry. I should not have posted my reaction like that, and now that I reread my post I can see how critical it sounds. I wrote it in the spirit of curiosity, and not to be critical, but it does sound critical, I can see that now. Consider it an issue of tone. I was exaggerating, and trying to show shock. It reads like criticism, and I totally accept it. (If I could edit it out, I would, but that option is no longer available.)

I was really, truly shocked to by fleur''s math on the subject, and my post came from that place. I suppose you cold say that I was looking at that figure from my own point of view, and from my relatively small teacher''s salary.

Bottom line: I don''t really care what people spend on their cars, but I do find it interesting. And I really do enjoy threads like these, so I hope I didn''t ruin the tone of the whole thing.

 

[fleur-de-lis]

Date: 3/30/2009 6:06:44 PM
Author: Haven

Date: 3/30/2009 2:51:41 PM

Author: fleur-de-lis


Heh, Lovegem, I can't even focus on answering your opening Q because I'm still in awe of your transportation costs being only 3% of your takehome pay. A few years ago, I helped a friend with setting up a basic budget and recall his car payment (~500/mo), insurance (~200/mo), gas (~200/mo), and incidentals (oil changes, wiper blades, car washes, etc.) and was blown away by 'even basic car=$1000/mo' for some people. To have 3% transportation costs, that would mean a post-tax income of about $30,000 a month, or post-tax of $360,000 a year, or an pre-tax income of around $700,000 a year!


Of course, it's less if you don't have a car payment or if you live in a public transportation friendly area (and partake of it). But to spend 3%.... wow, I hope you appreciate just how uncommonly lucky you are!

$500/mo car payment??!! Holy cow, that is INSANE.


We don't spend much more than 3% on transportation (if any more, at all) and we each drive our own cars. We don't carry car payments, though, because we didn't buy cars that we couldn't afford.


For me alone, I spend about $1200/year on gas, and $630/year on car insurance. I get my oil changed only about twice a year at $30 a pop, so let's make it an even $200 on incidentals. SO, my total yearly car costs would be $2,030. If I earned only $68,000 a year, the costs would be only 3% of my income. I earn a bit more than that on my measly little teacher's salary plus coaching stipends, so not bad! DH earns way more than I do, so he spends an even smaller percentage on transportation.


Are there really people out there who earn as little as me and carry $500/mo car payments? Scary. I wouldn't be able to save nearly as much as I do with such a huge car payment.

Oh, I totally agree with you Haven. The shock at the 3% figure was that it was based on 3% of take home pay, which was the metric of the OP. So to extrapolate it out, the $2030 yearly cost correlates to a $68,000 take home. I'm not sure of the tax rate at that level, but I'm guessing Federal 28%, State 8%, SS/FICO 8%. Thus, to have $2030 a year equal 3 percent of your take home pay, your gross annual salary would need to be a little over $121,000 to get to a take-home pay of 68K-- presuming you're not one of those types to contribute to your 401(k).

If the hypothetical gross salary were 68K, and still presuming 28+8+8%, the take-home pay would be a touch over $38,000 a year, and the % of gross spent on transportation costs of $2030 a year-- without car financing payments, but only the gas/insurance costs you laid out-- is 5.3%.

Automobile ownership takes a surprising percentage of the pay of the middle class.

 

[Haven]

fleur--I hope I didn''t offend you, as well. That certainly wasn''t my point.

You''re right about the pre-tax/post-tax calculations, I didn''t even consider that. (I suppose that''s why I teach literature instead of math, huh?)

 

[fleur-de-lis]

Date: 3/30/2009 7:39:29 PM
Author: Haven
El--You''re right, I''m sorry. I should not have posted my reaction like that, and now that I reread my post I can see how critical it sounds. I wrote it in the spirit of curiosity, and not to be critical, but it does sound critical, I can see that now. Consider it an issue of tone. I was exaggerating, and trying to show shock. It reads like criticism, and I totally accept it. (If I could edit it out, I would, but that option is no longer available.)


I was really, truly shocked to by fleur''s math on the subject, and my post came from that place. I suppose you cold say that I was looking at that figure from my own point of view, and from my relatively small teacher''s salary.


Bottom line: I don''t really care what people spend on their cars, but I do find it interesting. And I really do enjoy threads like these, so I hope I didn''t ruin the tone of the whole thing.

Hey, no worry, I wasn''t offended-- after all, the $500/mo payment referred to my friend whom I had helped. (I am blessed to own my cars outright.) That, and I totally dig the intellectual curiosity thing whenever I see it.

And I share your shock at the figure, Haven. When I helped my friend, I was floored that a modest Honda or Toyota could take such a HUGE chunk out of a man''s salary. For a person who grosses 80K (and nets about 45K), 12k/year takes up a whopping 27% of a person''s take-home pay.

 

[Elmorton]

Okay Fleur, I''m officially lost with the numbers now, but I think I see the point!

Haven, no worries and no offense taken at all! This thread does remind me a lot of one a few months ago - it was something like "What are your fixed expenses per month?" When I read it, I was floored - that''s when realized then that PS is a really interesting sliver of the pie because of the different ages, incomes, locations, etc. It was also a very realistic eye-opener as to how hard it is for a younger person or person from a lower socio-economic background to start out versus maintain a comfortable lifestyle. I just don''t think many middle class-born people my age see those number comparisons very often, and we have expectations that a "healthy budget" affords X, Y, and Z, when these things can be pretty relative.

So, what I''ve been rambling to say - my point was not at all to call you out (because I know from previous threads about your teaching experience/life outlook that you are very aware of these inequalities), but to try to add perspective to the overall thread that, from the part of the country where I live, the numbers here are quite amazing.

 

[MichelleCarmen]

Date: 3/30/2009 3:46:02 PM
Author: lovegem

Actually this is the first year DH and I start to really save. That''s why I want to know how much other people are saving. It is really never a thread meant to make people uncomfortable.

fleur-de-lis, I wish we earned as much as your calculation based on our transportation.

Oh, I hope I didn''t sound overly critical or suspicious! lol We''re moving in a couple weeks and so suddenly budgeting is back on the forefront of my mind. I just earlier made a list of all the companies I have to remember to change our address with and am reminded of all the ways our money flies right out the door.

 

[MichelleCarmen]

Date: 3/30/2009 6:06:44 PM
Author: Haven

Date: 3/30/2009 2:51:41 PM
Author: fleur-de-lis

Heh, Lovegem, I can''t even focus on answering your opening Q because I''m still in awe of your transportation costs being only 3% of your takehome pay. A few years ago, I helped a friend with setting up a basic budget and recall his car payment (~500/mo), insurance (~200/mo), gas (~200/mo), and incidentals (oil changes, wiper blades, car washes, etc.) and was blown away by ''even basic car=$1000/mo'' for some people. To have 3% transportation costs, that would mean a post-tax income of about $30,000 a month, or post-tax of $360,000 a year, or an pre-tax income of around $700,000 a year!

Of course, it''s less if you don''t have a car payment or if you live in a public transportation friendly area (and partake of it). But to spend 3%.... wow, I hope you appreciate just how uncommonly lucky you are!

$500/mo car payment??!! Holy cow, that is INSANE.

A relative of mine has a car payment even higher than $500. She filed for bankruptcy a few years back and even with a high paying job ($80K+), she still couldn''t qualify for an interest rate under 20%. I''m not sure how much she put down and all that. . .the $500 payment that was mentioned may have much to do with a poor credit score.

 

[fleur-de-lis]

Good luck on the move, MC! (Bigger or smaller place? What do you like most about the new place?)

I think you don''t even have to have some sort of disastrous credit to have that payment. Doing a little quick internet research, it appears that the 2009 Toyota Camry-- a modest yet reliable car if ever there were one-- has an MSRP range of 19-28K. Splitting the difference, assume a 25,000 car hits about 27,000 after taxes, fees, etc. On a 60 month term at (a better-than-national-average) 7.00%, the bankrate.com calculator shows the monthly car payment would be... $534.63. Owning a *Camry* can get someone to the $1000/month pretty quickly. So it''s actually pretty easy to hit that figure if you''re financing a car.

But hey, we''re a diamond forum. The only reason we should be talking about this is that the next time your FI or husband makes a snarky comment about how you''re wearing "a car" on your ring finger, you can show how poor a car is on the budget whereas a ring is *done* once it''s on your finger because it doesn''t need an extra $3-5K/year in carrying costs.

(Oh, and Lovegem, sorry for this threadjack! LOL)

 

[Hudson_Hawk]

Date: 3/30/2009 11:34:54 PM
Author: MC

Date: 3/30/2009 6:06:44 PM

Author: Haven

Date: 3/30/2009 2:51:41 PM

Author: fleur-de-lis


Heh, Lovegem, I can't even focus on answering your opening Q because I'm still in awe of your transportation costs being only 3% of your takehome pay. A few years ago, I helped a friend with setting up a basic budget and recall his car payment (~500/mo), insurance (~200/mo), gas (~200/mo), and incidentals (oil changes, wiper blades, car washes, etc.) and was blown away by 'even basic car=$1000/mo' for some people. To have 3% transportation costs, that would mean a post-tax income of about $30,000 a month, or post-tax of $360,000 a year, or an pre-tax income of around $700,000 a year!


Of course, it's less if you don't have a car payment or if you live in a public transportation friendly area (and partake of it). But to spend 3%.... wow, I hope you appreciate just how uncommonly lucky you are!

$500/mo car payment??!! Holy cow, that is INSANE.

A relative of mine has a car payment even higher than $500. She filed for bankruptcy a few years back and even with a high paying job ($80K+), she still couldn't qualify for an interest rate under 20%. I'm not sure how much she put down and all that. . .the $500 payment that was mentioned may have much to do with a poor credit score.

ETA: Fleur I didn't see your response. That's basically me in your analogy...

Re the credit score/interest payment.

Not really. I have a decent score and a reasonable interest rate (not sure what it is off the top of my head), and I have a $500 car payment on a 3 year loan for a 2009 Toyota Camry. I had a trade in that I still owed on, but it was a lemon and I was putting in more $$$ in repairs than it was worth. Even with that amount rolled into the new loan, I still came in under the MSRP for the Camry (of which I purchased the base model). The problem is that cars today are INSANELY overpriced. I can remember when you could buy a new Honda Civic and have a payment of $100/month. Now-a-days that would be closer to $350-$450 or even $500 depending on the financing and options.

 

[elrohwen]

We save somewhere between 15% and 20% I believe; this money is currently for our wedding, and will turn into a house fund after we''re married. We also put away 10% each to our 401(k)s. It''s hard to judge right now because I often put wedding things on my credit card so I''m not putting money into our savings account each month. Once wedding stuff is paid for it''ll be easier to see how much each of us is really contributing.

 

[elrohwen]

I wanted to add another way that someone could easily have a $500 car payment. When FI and I graduated college, he needed to buy a car for himself. He ended up with a used Accord that was less than $20k (though I don''t remember the exact amount). It''s really hard to find a new car for less than that and he got a great deal, I think. Sure, he could''ve bought a bargain basement car for $15k, but I think the extra few thousand were worth it to get a Honda. His car payment is around $500 a month because he didn''t have much to put down on the car when he bought it since he was just graduating school. Now we''re planning to get me a new car in 2-3 years and we''d love to pay for it in cash or at least put 60%+ down on it. We''re only able to do that because we''ve been working for a few years now and are able to plan this stuff years in advance.

It''s quite tough to get started when you don''t have lots of money in the bank to put down on cars and things.

 

[MichelleCarmen]

Date: 3/31/2009 1:54:41 AM
Author: fleur-de-lis
Good luck on the move, MC! (Bigger or smaller place? What do you like most about the new place?)

Thanks for the good luck

As to not "highjack the thread," (lol) I''ll post about the situation after we move because it''s a bit of an odd one (moving from a place we own to a rental.) A bit unconventional, but this is our only option with the market being so sluggish and our current condo not working out. My kids need a yard.

 

[Haven]

I understand that if you want a new or lightly used car and have little or nothing to put down for it, then you might end up with a $500 car payment.

My first car as an adult was a nine year old Blazer, which I bought from a church deacon for $1000 cash. Did I want to drive that car? Not at first, no. But in my mind, I had no choice because I was not about to take on a car payment when I was only earning 30K a year.

The OP's question seems to come down to how far below your means you choose to live, and that's why I think this thread is so interesting. I grew up with parents who were terrible spenders, and even worse money managers, so throughout my childhood our daily lives were plagued with screaming fights about money, bills, hidden credit cards, late fees, etc. I also sat out of a lot of sports and activities and such because we just couldn't afford it, even though my mother was making decent money. (If my parents were to answer the OP's question, their answer would be along the lines of "Save? What do you mean, save?") I made a promise to myself that that would never be me, and I started working multiple jobs as soon as I could get someone to hire me, and I've been a sort of miser with my money ever since. I still work two to three part-time jobs in addition to my full-time teaching job and coaching gigs, and it's been really difficult for me to back off of all the working because I have a sort of fear that I won't be able to put away a lot of cash *just in case.* Maybe that bit of background can give some insight as to why I insist that DH and I live far below our means, and why a $500 car payment would scare the heck out of me.

I didn't mean to be critical. I'm just looking at this thread with my own personal history and baggage, as we all do.

ETA:

HH--You're right, cars are ridiculously overpriced. My cousins own car dealerships and you wouldn't believe how much is added to the price on top of cost. It's really disgusting.

MC--Congrats on the move! Can't wait to hear more about it.

 

[MichelleCarmen]

Date: 3/31/2009 1:41:39 PM
Author: Haven
The OP''s question seems to come down to how far below your means you choose to live, and that''s why I think this thread is so interesting. I grew up with parents who were terrible spenders, and even worse money managers, so throughout my childhood our daily lives were plagued with screaming fights about money, bills, hidden credit cards, late fees, etc. I also sat out of a lot of sports and activities and such because we just couldn''t afford it, even though my mother was making decent money. (If my parents were to answer the OP''s question, their answer would be along the lines of ''Save? What do you mean, save?'') I made a promise to myself that that would never be me, and I started working multiple jobs as soon as I could get someone to hire me, and I''ve been a sort of miser with my money ever since. I still work two to three part-time jobs in addition to my full-time teaching job and coaching gigs, and it''s been really difficult for me to back off of all the working because I have a sort of fear that I won''t be able to put away a lot of cash *just in case.* Maybe that bit of background can give some insight as to why I insist that DH and I live far below our means, and why a $500 car payment would scare the heck out of me.

MC--Congrats on the move! Can''t wait to hear more about it.

Thanks, Haven.

Like you, DH and I are strong believers in living below our means. We''ve learned to do so as a result of many financial mistakes in early life and having nothing to show for years of work. After talking, my DH is taking on a side job to bring in money and over the summer, I''m watching two children in addition to my own. I was suppose to get a "real" job, but that fell through and I''m thankful for that because even though it would have brought in more income, I''d be gone 10-11 hours a day and never see my kids (plus I''d be stuck paying for daycare). The money from the side job and child care will *all* go into savings!

Besides teaching and coaching, what other jobs are you working?

 

[Haven]

MC--I remember your conundrum when you got that job, I'm glad that your decision has led to a better situation with the in-home daycare! I commend you guys for making all these changes, I know it hasn't been easy.

As for my other jobs, they're all teaching-oriented, actually. During the school year, I teach in a gifted program on Saturday mornings at a local university in Evanston; I substitute teach about two Sunday mornings a month at my synagogue; and depending on the time of year, I teach evening undergrad or graduate classes as an adjunct with two other local colleges. (One is the community college where I used to teach before I moved to high school, the other is the university where I earned my second master's, so it's a lot of fun to work with teachers who want to do what I do now as a reading specialist.) In the summers I teach summer school (high school and college) and do a lot of curriculum planning, all of which are paid gigs.

Depending on the time of year, I may be working seven days a week, and most nights, especially during the speech season. I'm the head coach of our school's Speech Team, which is an enormous time commitment. I also sponsor a few clubs, but they only meet for a few hours after school each week so they're not a huge deal.

I'm working on scaling back a bit, because it does get overwhelming at times. I'm going to quit the speech team if I can, but I was bullied into taking the position in the first place, and I'm scared I'll lose my teaching job at the end of next year if I do. Gotta love those public school politics.

The sick thing about it all is that we don't need the extra money. It's like I have this compulsion to work. My mom is the same way, actually. She has more jobs than I do!

 

[MichelleCarmen]

Haven - wow, you're contributing a ton to the educational system and I commend you for that. . .still, you must be *extremely* overwhelmed! Have you thought of taking an enrichment class for yourself as the student? Sort of a spiritually refreshing class where someone else is in charge and you're giving yourself a break and enjoying a whole entirely different genre? Something like a pottery class? I studied pottery for two years and found the potter's wheel an amazing way of grounding myself and having fun as well. It's also very fun to "knead" the clay as you can punch it and other fun stuff to help burn off excess anxiety/stress. lol

I'm sorry about the speech team politics and the stresses resulting from that. During the first conference I had with my son's teacher, she mentioned the entire district revolves around that and she seemed visable distressed by it because she only has a one-year contract. I hope everything works out for you.

Our family changes haven't been easy and the worst decision we made was assuming that we could cut back, in addition to the basics such as eating out and excess theater endulgences, but also on living habitation. Clearly, we made a tremendous mistake thinking raising two children in a townhome condo would work. Financially, it was ideal at the time, but now, luckily, our financial position has improved enough that we found a house to rent that's approximately the same as our condo payment. We won't be falling into the same old habits! (It'll just be odd renting a house!)

 

[Phoenix]

On the subject of cars, they cost an absolute *fortune* in Singapore. We spent years leasing cars then cleverly (not!) decided to purchase a Hyundai for about SD70k (about USD45k using an exchange rate of about 1.5) about two years ago. Now, we're having to sell it since we're leaving the country and by our estimation could only get about SD30-35k for it!

Now, ours is a cheapie, compared to many cars here. A lot of people here (and I mean a lot, you see plenty on the road and parked in front of hotels as well as in front of their driveways) drive Merc, BMW, Lexus, Porche, Ferrari, Lamborghini etc. and I'm sure their monthly repayments are in the thousands (even after a handsome deposit). I don't know the exact prices of these cars (well, except for one Lexus model which we considered - for about 2 seconds; that'd have cost us SD200k or about USD130k), but I do know that all these cars range from SD200k to almost a SD1m. Just imagine the amount of money you'd have to fork out every month to pay for one of these babies?

 

[zoebartlett]

I''m so impressed with how much many of you are able to save.