is it true ,the more money you make the more debt you have?...

[Dancing Fire]

i know couple of friends their annual salary is well into 6 figures, yet up to their nose indebt

always need to borrow money

i guess for some people the more they make the more they spend. though they''re professionals, it sure looks good from teh outside but,what a mess inside.

 

[jadeleaves]

I think the more money you make, the more inclined you would be to take on more debts - eg, buy a bigger house, your dream car etc etc?

Sadly, some only spend and not use their increased income to create more personal wealth.

 

[strmrdr]

A lot of times yes.

 

[lost on 5th]

i think it is true in part. the more you make the more debt you might have. but i guess the question is how reasonable is the debt? there is nothing wrong with using good credit to your advantage, tho at times it can easily get out of control. i know many people with big houses, fancy cars, big rocks, etc... that are in debt up to their eyeballs in the quest of outwardly perceived wealth.

the most wealthy people i know....are typically the most modest. a few nice things, but nothing over the top.

 

[MrsFrk]

For many people, that is the case. Americans spend 105% of their income per year, regardless of whether they make $5 an hour of $400,000 a year.

I live in the Silicon Valley, a lot of my friends made a lot of moolah during the dot com boom, they spent it all and then some. My husband and I make relatively modest living for our area, but we have always lived a bit more within our means than some of our friends.

 

[valeria101]

Sure. At least on the average it is so... both for private and corporate accounts. And it''s not just US fashion either.

 

[cflutist]

It all depends on how you want to manage your finances.

When I was a starving student, working to put myself through college, I had no debt. Didn''t own a car, and took public transit to get around. If I didn''t have the cash to buy something, I didn''t buy it, period.

Websailor and I are in a tax bracket where we get hit by AMT, but we spend beneath our means. We pay cash for our cars and use our credit cards for convenience only, paying off the entire balance each month. My only liability (the mortgage on my house) is only 7% of our assets. So for us, we have hardly any debt. Heck, I didn''t get a cellphone until last year.

 

[windy1365]

Yes, I think it''s true. The more money you make, the more expensive your tastes become. Your debt gets higher because the things you want become more expensive. Someone in your crowd has a huge flat screen t.v., so now you want one.

You think you''re too good to get your hair done at the local salon... now have to drive an hour and a half to the big city to have it highlighted by the best of the best. All of those things start to add up. Starbucks twice a day sometimes (at least once). New car w/ $400 car payment.

I made a very nice salary right out of college, but I racked up so much debt in six months that I couldn''t even live in an apartment... I had to continue to live at home. Now, four years out of college, I still wouldn''t be able to live on my own... my fiancee makes all the bill payments. I really learned my lesson, though. He has put us on a strick budget! I am really bad about wanting things... then when I get them, I lose interest in it really fast.

I don''t even know what most of my debt payments are paying for either!! It''s a hard lesson.

 

[bobswench]

style="WIDTH: 98.57%; HEIGHT: 115px">Date: 3/18/2005 9:17:43 PM
Author: cflutist

It all depends on how you want to manage your finances.

Well said, cflutist. Bob and I....OK, mostly Bob, has been working towards eliminating debt and we''ve done a pretty good job of it. Cars are paid off, we pay cash for everything except my highway tolls to and from work (anybody wanna buy a 2 year old Mustang coupe with 74,000 miles?

). Of course we have a killer mortgage, but what''s a wench to do?

Credit card BAD. Save and pay cash GOOD.

 

[Momoftwo]

Total, yes, as a percentage, no. Our house payment is larger with a new house. With two kids in college we went from no credit card debt to some. Only car loan is our son's. But, can and do make well beyond minimum payments on everything.

Funny thing is when we were in college, we were taught credit is good because it gives you more spending power which is true if you dont' overextend yourself. It's all choices.

 

[sjz]

I think it really just depends on the individual. I have known some pretty wealthy people in my time that don''t act at all like they''ve got lots of money. They drive modest cars, and live in modest homes, don''t wear flashy clothes or jewelry. On the other hand, I''ve known people who barely have two nickels to rub together that drive pricey sports cars, wear designer clothes, and are dripping with jewels. I am always amazed by that!

I''d have to say we are somewhere in the middle. We aren''t rich by any means, but we live very comfortably. My husband''s salary is such that I haven''t had to have a "paying" job for over 10 years. We always buy my cars with cash, and finance hubby''s which he usually pays off in about 18 months or so. We do use credit cards liberally, but we pay off the balance every month unless we''ve had to purchase a big ticket item like an appliance or something. In that circumstance we would probably take 2-3 months to pay it off. We don''t spend a lot of money on clothes...hubby wears scrubs to work, kids wear uniforms at school, and I''m a hippie so I pretty much just wear raggedy jeans and go barefoot all the time.

It''s funny, there are some things we are really stingy about. I hardly ever buy anything if it isn''t on sale. But we each have a couple of things that we go nutty overboard and spend too much money on. Mine would be music (our family room is full of my keyboard, guitar, various and sundry saxophones, stacks of music and stereo equipment). His would be electronic gadgets (basement is full of computer stuff, cameras, recording devices, and other things that I have no idea what they are or how to use). But at least our overindulgence does bring some quality to our lives. Or at least that''s what I keep telling myself!

 

[Richard Sherwood]

I''ve been on both sides of the fence. I used to live big, with plenty of debt to go along with it. Now I live small, with no debt. House paid for, cars paid for, business paid for.

Between the two lifestyles there''s no comparison. I now operate at about 1/10th the stress level I used to when I was carrying all that debt.

 

[Dancing Fire]

Date: 3/19/2005 12:38:56 AM
Author: Richard Sherwood
I''ve been on both sides of the fence. I used to live big, with plenty of debt to go along with it. Now I live small, with no debt. House paid for, cars paid for, business paid for.

Between the two lifestyles there''s no comparison. I now operate at about 1/10th the stress level I used to when I was carrying all that debt.

Rich
WOW!!! that''s great,i''m sure alot of people would love to be in your shoes plus you get to play with diamonds everyday

what a life

 

[MissAva]

I think it depends on how you feel about money.i Have always been taught (age six on) that for everythign you spend money on it is costing you something else. You want a can of soda from the machine that is six of them out of a 24 pack is it worth it to you? Do you make a list and stick to it, bring a calc to the store and extimate sales tax before leaving (grocery store only for me)? I have a single credit card which I keep having to write to in order to keep my monthly spending limit down the more credit you have immediately avaible to you the harder it is to get loans and though I have no loans I have no way of prediciting if I would ever need one. I pay all of my bills online ahead of time Wachovia has a great automatic one stop bill pay center. And I look over everything and even keep my fast food receipts. Perhaps I over do it but I am in college and I see girls who are paying off purses over a matter of months (does anyone in college need a 2,300$ purse or hell 500$ purse?) and it scares me. I dont want to bring debt to my marriage so I am careful. My parents are debt free and have made their children aware of what happens when people go into debt and taught us how to track our spending and see where and how we spend. It takes time but in the end I am usally with in 2% or so of what I predicted. Okay I am babbling I am done.

 

[ForteKitty]

Yes, it really depends on how you manage your money. I find that the more money I make, the more stingy I become.

My mom always told me, "if you don''t need it, don''t get it. If you can''t afford to pay cash, don''t get it. But if you need it, and can afford it, then charge it because we get cash back!"

I charge every little thing on my credit card, even if it''s a dollar, and pay it off in full each month. Last year, I earned about $500 dollars cash back.

 

[Mara]

Depends on the individiuals...some people learn from mistakes and others don't...

When I was in college I was the typical college student drunk with the power of being able to get credit cards and not think about the consequences. I racked up alot of debt for a college student, not much in the grand scheme of things, but for a college student--esp since I was working 2 jobs to put myself through school...the debt lasted for years after college was over, and I never could even remember what I bought.

Anyhow, now that I am older, and hopefully more wise, I am much more responsible with my finances, Greg is definitely savvy and a saver and helps balance my spending side out...we will be entirely debt free this year except for our house (big debt but worthwhile!), and our cars are paid off. We can't wait!

We have friends who make the typical high-tech MBA Silicon Valley six figure salary and still have a ton of debt that they are still trying to pay down. Complain about being poor, but then they are out buying expensive items or paying a huge car payment.

The average American has something like $10k worth of debt...we attended a financial seminar recently and the financial planner was saying that he had a client who made $30k a year and had something like $40k of debt! He will have a nightmare of a time paying that down, not to mention off!

The most rude awakening you can have regarding credit and debt and interest rates is to do one of those calculator things online where it shows you how long it will take to pay off a credit card at the minimum rate..aka $4k at minimum rate takes something like 10 years. Seeing those hard numbers sure gets your butt in gear!

It's all about priorities...for us it's our priority to be entirely debt free this year after a year of many financial happenings....and feel good about it...as opposed to being a statistic who lives beyond their means. It is easy to get sucked up into that and/or wanting what the Joneses have, but I like to think with age comes some wisdom...and the ability to learn from past mistakes!

Edited to add...here's an article as well!
http://moneycentral.msn.com/content/Savinganddebt/Managedebt/P95340.asp

 

[pearcrazy]

Well, it may be true for some but not for me. We actually have a greater comfort zone the more money we make. Our purchases may be more expensive, but we make more and save more. I''d always put away about 20% of my and DH''s earnings. I still do except 20% accounts for a lot more now. We spend more on our credit cards but are still able to pay in full and carry no debt other than mortgage and car payment. One just has to keep expenses proportional to earnings as earnings go up.

 

[sjz]

Date: 3/19/2005 4

9:42 AM
Author Mara

The most rude awakening you can have regarding credit and debt and interest rates is to do one of those calculator things online where it shows you how long it will take to pay off a credit card at the minimum rate..aka $4k at minimum rate takes something like 10 years. Seeing those hard numbers sure gets your butt in gear!

It''s very scary to figure out how long and how much you will end up paying in interest for anything you buy on credit! The worst is a mortgage for your home. Most people go with a 20 or 30 year term, and when they tell you how long it''s going to be before you make even a dent in the principle, and how much interest you are going to pay over the years, it blows your mind! But the upside is, that hopefully someday when you pay down the mortgage, you will own an asset that will have increased greatly in value over the years.

That''s not so with most other things we buy on credit, like cars and consumable goods. Cars depreciate the minute you drive them off the lot. Other big ticket items wear out or become obsolete after so many years. Jewelry, antiques (and musical instruments

hehe) usually hold their value, and often increase if you take good care of them.

We use our credit pretty liberally I must admit. But we always try to limit what we purchase to things that are within our means to pay off when the bill comes. We put a limited amount of money in the checking account each month for expenses, after we set aside what we need to pay bills, add to our savings and investments, and the kids'' college funds. I pretty much use a debit card when shopping for everything other than our monthly bills. I go on line pretty frequently to check the balance. When I see we are getting near the limit of the funds available...I simply quit spending the money, unless it''s somthing vital that needs to be purchased. This system works pretty well for us. The only two debts we have hanging over our heads are the mortgage, and my husband''s car payment which will hopefully be eliminated within the year.

 

[tanuki]

I am amazed at the amount of debt people are willing to take on nowadays.

It''s frightening to imagine the consequences if the economy goes down even a little.

I highly recommend using Quicken or one of the other financial management programs.

It''s easy to look at your cash flow and balance the making more vs spending more when you have the information you need.

So much of my finances were sort of a black box where money went in and money went out but I really didn''t know what I could afford before I started having a realistic budget.

 

[Momoftwo]

We were totally out of debt until our second son started college. Since I was home with them when they were young which we felt was much more important than more money, we lived very frugally and had to charge car repairs, and emergency stuff then as well as occasional clothing charges and had nothing left to save for college. I still to this day do not regret raising my own children. Then when I went back to work part time when they were in middle school, we had plenty since we always live on my DH''s salary. We built our dream home, also on his salary and were paying for our oldest son''s college in cash. Now with two, one in state and one in private college, it''s impossible to pay it all. My gross salary would cover it, but my net does not, so we use equity which gives us a tax writeoff and will be paid off in less time than student loans would. All I can say, is never say never. It''s definitely easier to be debt free without children. They have this way of growing out of clothes and shoes every couple of months and need all kinds of school supplies, etc. Even those who plan on staying debt free cannot always do it. We currently drive cars with 110k miles on them (less than 10 years old) so we can pay down the college stuff faster. Using credit does not make people bad. Using it badly makes them at risk. Good credit can do a lot for you. Having excellent credit means never being turned down for a loan which is great if your car dies and you need a new one right away. Our cc debt has never exceeded 10% of our annual income. There are people as someone mentioned above who have cc debt of more than they make.

I do know a college age girl who thinks she has to have $200 purses and can barely make her car and insurance payments. I''m not sure what she needs a purse like that for. I could easily write a check for a purse like that, but I wouldnt'' since it''s a waste of money to have a "designer" anything. That''s a marketing ploy, kind of like the 2 month salary rule for engagement rings. It''s all to make money for the co. producing it and the designer. I know a lot of people want to be like some celebrity, but I hate to tell them, the celebrities are given or loaned these designer items in order to entice others to buy. Celebrities actually buy very little.

 

[BBLOND]

THERE WILL BE ALOT OF PEOPLE IN THE FUTURE WORKING AT AN OLDER AGE. ITS SAD. MOST PEOPLE DONT SAVE MUCH AND WON''T BE

ABLE TO RETIRE.

 

[fire&ice]

Simply put, No.

I find the older I get the less stuff I need. In fact, we went through the house & sold some stuff this year.

No car payments (thought we did take out a loan at free money - made a whole more sense - we made money on the opportunity cost). We could easily pay off both mortagages. In our case, makes sense not to. Money can not stay this cheap in the long run. A few years back we were making significantly more interest in a CD than our mortage interest rate.

 

[Jennifer5973]

We have been good at conquering debt as we made more money/became successful. The only interest-bearing debt we have now is our mortgage. Our new problem is finding tax shelters.

 

[aljdewey]

Thankfully, my husband and I have NO debt - except the house.

Money is a tough thing. My parents tried to teach me the value of saving, but those lessons evaporated with my first job in high school. When you get your first job and you don''t have any bills to pay, ALL of that money can go to discretional spending. Nice, huh? Ah, but then you enter the real world, and you''re not used to having to allot any of your income to "responsibility" spending - the bills.

As Mara mention, that then gets compounded by the powerful feeling of getting a few credit cards. Problem solved---if you don''t have enough income for the "play money" spending after paying bills, you can just use the c/c! But then you find out - OH, they want to be paid back!? Then reality hits.

I lived without a budget, check to check, for a number of years.....and I remember then that $1000 seemed like it would solve every problem I ever had. At 30, I lost my job - with no savings at all, no checking buffer and NO idea where the next dime was coming from. For me, that was my version of "rock bottom".

That experience for me was life-altering. It''s like I became "born-again" about saving money. When I got the next job, I made it a priority to SAVE, SAVE, SAVE. A funny thing happened......I became obsessed by it! The more money I saved, the more I wanted to amass. In days of old, I used to think $1,000 was a LOT of money. Now, I break out into hives if I drop below $10K in savings.

For years, I have not had to worry about how a given bill is going to get paid....there is always money to pay them. The improvement in quality of life from not stressing out about bills is simply indescribable.

One of the BIG factors in our favor when I met my husband is that he is like-minded.....he also had a few panic moments as a young man, and he too took serious lessons from it. We are primarily savers now. We both have the same philosophy on major purchases.....we''d rather spend a bit more and get something that we''ll like for a long time and that will last, and we''re willing to wait until we have saved the money to get it---but having that savings buffer comes first.

So, to the question "is it true, the more money you make, the more debt you have", I''d say no, it''s not true as a statement by itself. It really depends depends on how important money is to you. Both of us make more money at our jobs now than we ever have previously - by a lot - and yet we have no debt. Right before we became engaged, he bought his car - put down half in cash and paid the balance off in a year. I own mine (9 years old and still running great) outright.

I think it IS true for the most part that people tend to spend to the level of what they make (not the debt-laden, but the everyday Joe.)

 

[websailor]

Quicken is very useful and great if you plan your financial world. It also handles the big numbers easily and helps out a lot at tax time....

We too find that as we have gotten older, we have bought fewer "things".... We have lived a relatively simple life in regards to material things. Still just get basic cable, don''t own a wide screen TV, drive our cars till they are over 10yrs old and have at least 100k mileage....

Cflutist could buy all the trinkets Mara posted on the WOW Factor thread from her "ready spending" account and still have money left over....but we just don''t do things like that....we tend to concentrate our spending and evaluate significant purchases for where it does the most good for us (or sometimes the agencies we donate to).

It takes a lot of hard work and discipline to achieve this. Plus maybe some wisdom. My hat is tipped to those PSers who have learned, either from their own character, or their parents, or from the school of hard knocks.

It''s okay in our world to reward ourselves occasionally for this hard work...hence the nice diamonds and cruises you''ve seen.....

 

[nicoly]

I agree that for some of us, we have to learn our lessons earlier in life, and hopefully, we can be wiser as we grow over the years. When I was in college, I accumulated so much debt, just buying this and that, and traveling and buying this and that while traveling. In those days, it was more carefree, especially since I still lived at home, and didn''t have any financial responsibilities of budgeting for food bills, electric bills, etc.....

15 years later, after paying off my debt, I am now at a point in my life that I am debt-free and feel like I took a load of stress out of my life. I make a point to pay off all my credit card bills.

 

[Logan Sapphire]

It''s true in our case. We both have large graduate school loans, but getting our grad degrees also allowed us to enter the government at a much higher pay rate, thereby giving us a large salary with large student loan debt. It''s not bad debt, but it''s still debt all the same.

 

[Momoftwo]

I need to clarify one thing. While we weren''t able to save for college for our kids we have saved for retirement through diversified funds with our financial planner, as well as us both having good work retirement plans. Between my federal retirement and TSP, his 401K''s and co annuities (he''s a contractor to the fed govt) and his military reserve retirement pay (he''ll draw that at age 60) our retirement should be very comfortable. While we may have some debt due to our children''s college now, that will be all paid off within 5 years. Amount of debt is relative. As I said earlier, ratio of debt to income tells more than dollar total. Each person has his own story. It''s hard to generalize about this subject. We started out with no college debt even though we each paid our own way. Good federal summer jobs and living at home made that possible. You know you''re in trouble when you can''t make even minimum payments and have to shuffle money around. A good credit rating is something you can never take for granted. Because we have good credit due to paying everything on time and never having been too deep in debt, we were able to buy our new house noncontingent before we sold our last home so that when we closed on the same day on both houses, there was no issue. Mortgage co qualified us at 46% debt ratio because we had no other debt at the time in order for this to happen. We actually closed on the new one several hours before the old one and paid off the second mort. with the proceeds from the first house a month later. Worse case would have been renting out the old house at a profit if the closing had not occurred, so not really risky. It''s about making smart money decisions and not emotional and impulsive ones.

 

[Dancing Fire]

Date: 3/19/2005 9:48

3 AM
Author: Jennifer5973
We have been good at conquering debt as we made more money/became successful. The only interest-bearing debt we have now is our mortgage. Our new problem is finding tax shelters.

Jenn
i got an easy solution to your problem,either you or hubby should retire.oh..don't forget all your jewelry purchases are tax deductible.