Money/Assets Benchmarks

[missy]

I am thankful we are where we are in life right now but we had planned to be further along but for the recession that affected us greatly. We have always lived well below our means but after the recession hit less so since my dh switched careers where he is now earning 1/3 of what he had been earning. But, because we had always lived below our means, we were fine- though it was a bit scary (to me) for a while. We have one home paid in full and took a mortgage on our second home that is about 30% of the cost of that home so we can live with that.

In a weird way I am thankful that the recession hit as it caused us to make a major life change that we might not have necessarily made because we were too comfortable to make that change. My dh had been unfulfilled in his career for a few years (he had been there over 16 years) as the challenge was no longer there for him as the economy had been slowing for a few years before the official recession so he had been feeling it. The recession caused us to reevaluate our future and we decided to purchase a forever home where we would retire in x number of years. We sold our first beach home (which was always just a second home and never could be our forever home) and bought one more suitable for our lifestyle. The major concession being that when we retire we leave our beautiful home in NYC. I am a city girl so that was a decision I thought long and hard about and one of the reasons we chose our new home is that it is 30 min by ferry from the city. All in all we are very pleased with the way things have worked out for us.

I am not sure when or if we will ever truly be able to retire as the economy is still quite unstable and IMO showing little improvement. I always hope for the best but expect the worst and try to be ready when trouble hits. I think that has served us well over the last decade or so. The only certain thing in life is change so one must be adaptable and figure out how to thrive when that change (for the better or worse) ultimately occurs.

Life can be hard and we work hard and do the best we can and try to enjoy each day but always have an eye towards the future. I do not want to live so below our means that we cannot enjoy all our hard work but instead live enough below that we can retire one day and that we are OK should financial hardship strike again. To that end we manage to save about 25% (total rough estimate) of income after taxes that we invest for the future. We also keep at least 18 months of living expenses liquid for just in case purposes. The last recession taught us that.

I am thankful for all that we do have and though we both work very hard I by no means think our success is due only to that but also to our fortunate circumstance of growing up with the families we did. This gave us a big advantage over those who were not as fortunate. We both come from supportive and loving families who put a huge emphasis on the importance of a good education. We grew up knowing that education is invaluable and no matter what happens no one can take that away from you.

Having said that I do believe you can overcome your circumstances with motivation, determination, and hard work but it is by no means easy but no one ever said life is fair. You just have to do the best with what you have.

And nothing is more important than good health and healthy relationships with our loved ones. Money truly cannot buy happiness.
(but it can buy pretty jewelry )

 

[Haven]

Median homes in my city are $650k. Pricey!

I hear you Haven but still think you are fortunate to have accomplished what you have, and clearly things aligned to allow it. Have you read Outliers? It is a simplified argument, but I think that the root premise is true: We give too much credit to the individual when they achieve success and do not give enough credit to their circumstances and environment.

And I am not trying to pick a fight either, Haven, but this issue just hits a nerve with me. I think it is too sweeping a statement by far to suggest that *anyone anywhere* can choose to live on one income. It feels a little to me like the old "Anyone can succeed in the good old US of A if they try hard enough" line that has been used for so long to explain away poverty by blaming lack of effort. My family is not poverty stricken -- now -- but I still think these types of finanical beliefs follow a similar vein.

And I had written a long rant but decided to delete it because, well, it is neither here nor there.

650K--That is expensive. I have no idea how much the median home costs in my city. A google search brought up everything from 450K to 720K.

This issue hits a nerve with me, as well. And while I think we're standing on opposite sides of it, I completely understand what you're saying. I really do.

In my case, I see a lot of people who are stuck in modes of thinking where they function as if their choices don't have any affect on the quality of their lives. We have so many friends who are extremely privileged and earn far more than we earn, yet they create lives for themselves that essentially box them into debts and thus, take away their freedoms, big and small. Then, these people see us and the way DH and I live our lives and essential say "Must be nice " which of course is code for "You lucky bastards, your lifestyle fell right into your lap." I suppose what I experience is the opposite of Gladwell's argument--that people give zero credit to their (or my) efforts/abilities, and 100% credit to circumstances. They see themselves as helpless victims of their middle class lifestyles, and it is just so darn frustrating. (I just picked up a copy of OUTLIERS yesterday, oddly enough.)

I'm not saying DH and I are not privileged, because we are. SO privileged. The difference, as I see it, is that we take advantage of those privileges to carve a really wonderful life out for ourselves. it could have easily gone the other way--we could have bought a much more expensive home, cars that we could only afford on a loan, and a whole host of other things that would have saddled us with debt to the point that we would need two incomes to live. But we didn't. We made the choice.

I know this is off topic. I'm sorry. I typed out an even longer post and deleted it. I see what you're saying, Dreamer, and I understand it.

To be slightly back on topic, I'm 30 now and happy with where we are. Our goals moving forward are to:
Pay off the house completely by the time I'm 40
Continue taking overseas vacations every year
Continue living a debt-free lifestyle
Continue pursuing experiences that make us happy

ETA:

I'm not blaming anyone's poverty on a lack of effort. Rather, I'm blaming *some people's* middle class unhappiness on poor choices. I'm sorry if none of this makes any sense.

 

[Dancing Fire]

I'd like us to retire with around $20 million in assets. That's my personal goal. It would require both of us to stay on a pretty ambitious track throughout our careers, but it's also possible if we do. I recognize bumps in the professional road might put that totally out of our grasp, but that's my idea of "success."

at my age all i need is $7 million. IMO...once you get old money is useless.

 

[AGSHF]

This is an interesting discussion. Going back to the OP's initial question about benchmarks, it reminded me of an article, which I can't locate, printed in the NYTimes a couple of years ago. In it, the author discussed how to evaluate whether one is an Under, Average or Prodigious Accumulator of Wealth. Apparently, the calculator was based on the book, "The Millionaire Next Door."

This suggests, of course, that benchmarks will differ for each of us (obviously) and how well each of us is doing is based first on our income level and, then, is calculated based on our present age.

The idea is that someone aged 50 who is earning $500,000 should have a significantly larger net worth than someone aged 50 who is earning $50,000. If the person earning $500,000 has a net worth of $2,000,000 at age 50, his net worth might not provide him with the financial security at his purported lifestyle as the person earning $50,000 who has a net worth of $400,000 at age 50.

Ok, upon further googling, I've found this link to the NYTimes article.

http://www.nytimes.com/books/first/s/stanley-millionaire.html?scp=1&sq=prodigious%20accumulator&st=cse

The pertinent section:

HOW TO DETERMINE IF YOU'RE WEALTHY

Whatever your age, whatever your income, how much should you be worth right now? From years of surveying various high-income/high-net worth people, we have developed several multivariate-based wealth equations. A simple rule of thumb, however, is more than adequate in computing one's expected net worth.

Multiply your age times your realized pretax annual household income from all sources except inheritances. Divide by ten. This, less any inherited wealth, is what your net worth should be.


So, my hypothetical 50-year-old earning $500,000/year should be worth $2,500,000. So he falls somewhat short.

The hypothetical 50-year-old earning $50,000/year should be worth $250,000. And, he is ahead.

It's an interesting concept, and I've used this rough benchmark when checking our net worth.

 

[Phoenix]

[Yeah, I live in London. It's very hard to live on one income here, and still pay a mortgage.

. House prices have skyrocketed: we can't afford to live in the houses our parents lived in anymore. A decrepit 1500 sq foot Victorian terraced house in our area sold last month for £850,000. Thats about $1.3 million. It was nothing special, and rather cramped, and needed a complete overhaul. But actually, we couldn't get a mortgage for that amount anymore despite our combined salaries. Ok, we are looking at good areas of London: there are plenty of places where you can buy a cheaper house but they tend to be where the crackheads hang out and no decent schools nearby..

I hope you don't mind my asking this and pls feel free not to answer it. Which area you guys live in (generally only, not asking for specifics)? I ask because I'm just about to exchange contracts on my 500 sq ft flat in Limehouse for a "grand" (not) total of 244,000 pounds. And it's in decent condition. I've had it upgraded from time to time and maintained it regularly - which costs I've not even taken into consideration yet in calculating the dismal profit from the purchase made 11 yrs ago. I'm also getting rid of it incidentally cos I'm sick of having to deal with all the BS issues stemming from being an overseas landlord.

Sorry Phoenix, I don't wish to be more specific: its in a very small area

Properties in east London haven't realised the prices that were predicted so I see why your Limehouse flat hasn't made you a huge profit.

There are expensive pockets in London that are just getting more and more expensive: those are the areas to buy in as they grow steadily in price. Ok, you don't get a major profit, but you are less likely to lose in real terms.

No pob, Rosetta. I was just wondering if I'm getting ripped off by the buyer (?). I mean I haven't lived in London since 1995 and sure I visit regularly and my family lives there, but there's no substitute for first hand knowledge.

Appreciate your responding.

 

[rosetta]

[Yeah, I live in London. It's very hard to live on one income here, and still pay a mortgage.

. House prices have skyrocketed: we can't afford to live in the houses our parents lived in anymore. A decrepit 1500 sq foot Victorian terraced house in our area sold last month for £850,000. Thats about $1.3 million. It was nothing special, and rather cramped, and needed a complete overhaul. But actually, we couldn't get a mortgage for that amount anymore despite our combined salaries. Ok, we are looking at good areas of London: there are plenty of places where you can buy a cheaper house but they tend to be where the crackheads hang out and no decent schools nearby..

I hope you don't mind my asking this and pls feel free not to answer it. Which area you guys live in (generally only, not asking for specifics)? I ask because I'm just about to exchange contracts on my 500 sq ft flat in Limehouse for a "grand" (not) total of 244,000 pounds. And it's in decent condition. I've had it upgraded from time to time and maintained it regularly - which costs I've not even taken into consideration yet in calculating the dismal profit from the purchase made 11 yrs ago. I'm also getting rid of it incidentally cos I'm sick of having to deal with all the BS issues stemming from being an overseas landlord.

Sorry Phoenix, I don't wish to be more specific: its in a very small area

Properties in east London haven't realised the prices that were predicted so I see why your Limehouse flat hasn't made you a huge profit.

There are expensive pockets in London that are just getting more and more expensive: those are the areas to buy in as they grow steadily in price. Ok, you don't get a major profit, but you are less likely to lose in real terms.

No pob, Rosetta. I was just wondering if I'm getting ripped off by the buyer (?). I mean I haven't lived in London since 1995 and sure I visit regularly and my family lives there, but there's no substitute for first hand knowledge.

Appreciate your responding.

No problem. I think you're probably getting a fair price in today's climate. Difficult to say for sure without seeing the place. There are too many new build flats in the docklands area and so prices are low. I would sell and get out of that area now. My top tip is to buy in south west London. I like Richmond and wimbledon. But being an overseas landlord is a real pain, unless you hand things over to management company. Am in the throes of house hunting and location really is key to maintaining a return on your investment, house prices in less desirable places have bombed now that the bubble has burst.

 

[chemgirl]

This is an interesting discussion. Going back to the OP's initial question about benchmarks, it reminded me of an article, which I can't locate, printed in the NYTimes a couple of years ago. In it, the author discussed how to evaluate whether one is an Under, Average or Prodigious Accumulator of Wealth. Apparently, the calculator was based on the book, "The Millionaire Next Door."

This suggests, of course, that benchmarks will differ for each of us (obviously) and how well each of us is doing is based first on our income level and, then, is calculated based on our present age.

The idea is that someone aged 50 who is earning $500,000 should have a significantly larger net worth than someone aged 50 who is earning $50,000. If the person earning $500,000 has a net worth of $2,000,000 at age 50, his net worth might not provide him with the financial security at his purported lifestyle as the person earning $50,000 who has a net worth of $400,000 at age 50.

Ok, upon further googling, I've found this link to the NYTimes article.

http://www.nytimes.com/books/first/s/stanley-millionaire.html?scp=1&sq=prodigious%20accumulator&st=cse

The pertinent section:

HOW TO DETERMINE IF YOU'RE WEALTHY

Whatever your age, whatever your income, how much should you be worth right now? From years of surveying various high-income/high-net worth people, we have developed several multivariate-based wealth equations. A simple rule of thumb, however, is more than adequate in computing one's expected net worth.

Multiply your age times your realized pretax annual household income from all sources except inheritances. Divide by ten. This, less any inherited wealth, is what your net worth should be.


So, my hypothetical 50-year-old earning $500,000/year should be worth $2,500,000. So he falls somewhat short.

The hypothetical 50-year-old earning $50,000/year should be worth $250,000. And, he is ahead.

It's an interesting concept, and I've used this rough benchmark when checking our net worth.

Surely this only works for people over a certain age with a fairly stable income? I tried it for DH and I and got a bit paniked before I realized there was no way we could possibly have accumulated $500 000 ish at this point in our lives (we're in our 20's).

 

[partgypsy]

This is an interesting discussion. Going back to the OP's initial question about benchmarks, it reminded me of an article, which I can't locate, printed in the NYTimes a couple of years ago. In it, the author discussed how to evaluate whether one is an Under, Average or Prodigious Accumulator of Wealth. Apparently, the calculator was based on the book, "The Millionaire Next Door."

This suggests, of course, that benchmarks will differ for each of us (obviously) and how well each of us is doing is based first on our income level and, then, is calculated based on our present age.

The idea is that someone aged 50 who is earning $500,000 should have a significantly larger net worth than someone aged 50 who is earning $50,000. If the person earning $500,000 has a net worth of $2,000,000 at age 50, his net worth might not provide him with the financial security at his purported lifestyle as the person earning $50,000 who has a net worth of $400,000 at age 50.

Ok, upon further googling, I've found this link to the NYTimes article.

http://www.nytimes.com/books/first/s/stanley-millionaire.html?scp=1&sq=prodigious%20accumulator&st=cse

The pertinent section:

HOW TO DETERMINE IF YOU'RE WEALTHY

Whatever your age, whatever your income, how much should you be worth right now? From years of surveying various high-income/high-net worth people, we have developed several multivariate-based wealth equations. A simple rule of thumb, however, is more than adequate in computing one's expected net worth.

Multiply your age times your realized pretax annual household income from all sources except inheritances. Divide by ten. This, less any inherited wealth, is what your net worth should be.


So, my hypothetical 50-year-old earning $500,000/year should be worth $2,500,000. So he falls somewhat short.

The hypothetical 50-year-old earning $50,000/year should be worth $250,000. And, he is ahead.

It's an interesting concept, and I've used this rough benchmark when checking our net worth.

Surely this only works for people over a certain age with a fairly stable income? I tried it for DH and I and got a bit paniked before I realized there was no way we could possibly have accumulated $500 000 ish at this point in our lives (we're in our 20's).

I wanted to quote this link as well: where you stand depends on how much you make and how old you are.
This particular formula seems flawed to me, because it is based only this years income and not historical data.
For myself if I enter myself and my husbands income, we fall short. This is despite the entire time I have worked I have saved between 7 to 10% of my gross salary, with additional matches of either 5 or 7% (so actual contributions between 12 to 15% of gross salary per year). While we don't make individual contributions of my husband's income, his time/money gets funneled into home improvement projects which improve our bottom line and more importantly quality of life.

I used to be more obsessed with the topic, but unless my life dramatically changes my focus is more on what I do rather than how much I make. I will never be rich or close to it, but feel I can fulfill my goal of being self-sufficient over my entire lifetime.

 

[rubybeth]

I've done the "Millionaire Next Door" formula back when I read the book. It doesn't really work for us, either, as we spent so many years in school, but now our income is like triple what we made before.

We are able to live on just my income/benefits, so DH's goes toward debt and fun stuff. We live fairly simply, though, in a small apartment near both of our jobs, and we both drive paid-for cars (neither of us has ever had a car payment). We live in Minnesota, so cost of living is a bit higher than other areas of the midwest, but we're where we want to be.

For me, a benchmark of success will be once we are on Dave Ramsey's baby step 4 (save 15% for retirement). Right now we are on step 2 (debt snowball) and, if all goes well (God willing), we will be debt free in the spring of 2013. We plan to splurge and take a celebratory vacation, then save up to put 20% down toward a house.

 

[Tanzigrrl]

This thread continues to be very interesting. I appreciate all the responses. I guess that I feel that no matter how much I talk to financial planners at work, at the bank, etc. and to trusted friends and family members, I just cannot gauge where I and my DH are in the grand scale and if we're headed the right way. I realize that everyone is different and that there is more than one way to live comfortably/retire comfortable. It's just so hard to tell where we should be.

For example, my DH started his career at age 40 (academic route) and has been working very hard to carve out a nice career for himself. I, on the other hand, have about 11 years in with my career. So, obviously, our retirement plans have very different amounts in them. In terms of debt, we have no credit card debt. He does have some student loans left over, mine are paid off. Together we own a house with a mortgage payment that is 1/5 of our current monthly income. Since the mortgage payment is so low (we bought the house on my salary before he found permanent work and decided not to "upgrade" our house once we had two incomes), we overpay every month making it as though we pay 14-15 mortgage payments in the 12 month calendar year. One vehicle is paid off, the other has a payment, but it is 0% APR so it's not so grisly. We each have Roth IRAs that we've started to supplement our employers' retirement plans. We budget for everything from home improvements/repairs and jewelry purchases (of course!). We have some money in timed deposits like CDs, and we have some invested. We're 10 years apart in age.


Everyone is different. It's just interesting to hear how others are planning and managing their finances.

When I'm 50 I'd like to have the house paid in full, no debt, and a healthy stash in different places (bank, retirement accounts)!

 

[smitcompton]

H,

Tanzi girl-- you seem well on your way to having a good financial future. You have thought out the fundamentals of how you will get there, and if you follow that plan, it really sounds good.

Chem girl-- I think you missed a decimal point in your calculations, I suspect it should be 50,000 not 500.000.

I enjoyed the discussion about how much each of us is(or not) responsible for our financial futures. Of course you are both right, with just a little context. I have found that people really don't want to give others credit for their success. Usually, they just say that they have a higher income than we do, or the family gave them their start-up money or some such thing.

On the other hand, I am surprised when a person wants all the credit for their success, without understanding that while it may be going their way for now, it may not always turn out that way. One of the most difficult and perhaps impossible things to do, imo, is to plan your life out without expecting rough patches along the way. I do believe the saying , "there but for the grace of God , go I".
I am not at all religious, but the sentiment is something I believe in to keep me humble at times.

Of course circumstances play a role in good fortune. But the friends who comment as if they are envious really don't want to live the way you do, otherwise they would.

You know the one thing I noticed is that most of you don't have children. This makes planning a lot easier as well.

I think you are all doing good.

Annette

 

[swingirl]

Swingirl, I bought my house right after I turned 20. Yes I understand that you pay it back. What I didn't understand is how expensive upkeep would be. I thought I did the right thing by basing my mortgage on 30 percent of my income. One year later that 30 percent turned into 60 percent due to job cuts. Now I can see where I messed up but I couldn't then.

That's what we were advised to do as well just a couple of months ago, and that was the "conservative" figure - that such irresponsible advice is being given to people looking to buy their first house is horrifying.

I remember the 30% as being, "this is the maximum we'll base a mortgage on" but I don't remember anyone telling me I should borrow to the max. We got our mortgage based on what WE felt comfortable paying and took into consideration either one of us could lose our job, get sick, or suffer some other tragedy that would change our income situation. I guess new home owners don't want to admit that their income could go down rather than up.

 

[chemgirl]

H,

Tanzi girl-- you seem well on your way to having a good financial future. You have thought out the fundamentals of how you will get there, and if you follow that plan, it really sounds good.

Chem girl-- I think you missed a decimal point in your calculations, I suspect it should be 50,000 not 500.000.

I enjoyed the discussion about how much each of us is(or not) responsible for our financial futures. Of course you are both right, with just a little context. I have found that people really don't want to give others credit for their success. Usually, they just say that they have a higher income than we do, or the family gave them their start-up money or some such thing.

On the other hand, I am surprised when a person wants all the credit for their success, without understanding that while it may be going their way for now, it may not always turn out that way. One of the most difficult and perhaps impossible things to do, imo, is to plan your life out without expecting rough patches along the way. I do believe the saying , "there but for the grace of God , go I".
I am not at all religious, but the sentiment is something I believe in to keep me humble at times.

Of course circumstances play a role in good fortune. But the friends who comment as if they are envious really don't want to live the way you do, otherwise they would.

You know the one thing I noticed is that most of you don't have children. This makes planning a lot easier as well.

I think you are all doing good.

Annette

Just checked it again and used your example of a 50 year old making 500k being worth 2 500 000 to make sure I was doing it right. According to my calculation, my 28 year old self should have close to 500k in assets right now. I'm including DH's income as well as my own since you said household income (he's also 2. I've been working for less than 4 years and DH has been working for about 5 so not a lot of time to accumulate that type of wealth. I also make almost double what I made 4 years ago.

That said, we're definitely not where I want to be financially. We have no credit card debt and we are saving a significant amount, but I always feel like we could be doing more. I think its partially a lifestyle thing. We like to spend our vacation travelling so that eats in to what we save every year. On the other hand, I know I'm not going to have regrets about missing out on travel (something I love doing). I see how our friends are struggling and I'm happy that we didn't make some of their mistakes, like getting in to a house we couldn't afford, or spending our bonuses on fancy cars that cost a fortune to maintain. We own a condo and drive a Golf instead.

And you're right, it is so much easier planning without kids! We live off of one income for the most part right now, but I have a feeling that's going out the window when kid come along.

 

[rosetta]

Yeah, kids. I tell my husband that once we have them, we will never be rich again

Just sending one kid to our preferred school: £30,000 per year.

No decent state schools in our area, so we have to go private.

I calculate we have to earn over £10,000 per month net (approx $15,000) to maintain our current lifestyle, once we have kids and a mortgage. Those of you predicting millions in assets when you retire: you guys must earn an awful lot. I'm sure we aren't going to have millions in assets when we retire, even at projected incomes (and assuming we don't get sick, lose our jobs etc)

Honestly? I don't want to become one of those crazy savers who can't enjoy life. I'm going to continue buying my lattes and lunches, eating out in nice restaurants, travelling etc. I see too many people who have had their lives cut short: they always regret not spending more and enjoying more of their lives. I would deeply regret leaving behind a huge pile of cash when I die. Just need to ensure there is enough for retirement (I have an NHS pension which is still a good one) and enough to support loved ones if you die early (life insurance etc) and I'm happy. I get no joy in having my bank balance pile up.

I should add that some of my patients are very rich: we spend some time talking about life and wealth and what really matters. It has altered my perception of life in a way I'm sure would not have happened if I didn't do the job I do. It's definitely made me enjoy and appreciate life more and I'm grateful for that. It's always surprising to some of my patients how little their vast wealth matters when they are dying. There just aren't the cures available, no matter how much money you throw at it. Anyway, I'm rambling so I'll stop now!

 

[missy]

Yeah, kids. I tell my husband that once we have them, we will never be rich again

Just sending one kid to our preferred school: £30,000 per year.

No decent state schools in our area, so we have to go private.

I calculate we have to earn over £10,000 per month net (approx $15,000) to maintain our current lifestyle, once we have kids and a mortgage. Those of you predicting millions in assets when you retire: you guys must earn an awful lot. I'm sure we aren't going to have millions in assets when we retire, even at projected incomes (and assuming we don't get sick, lose our jobs etc)

Honestly? I don't want to become one of those crazy savers who can't enjoy life. I'm going to continue buying my lattes and lunches, eating out in nice restaurants, travelling etc. I see too many people who have had their lives cut short: they always regret not spending more and enjoying more of their lives. I would deeply regret leaving behind a huge pile of cash when I die. Just need to ensure there is enough for retirement (I have an NHS pension which is still a good one) and enough to support loved ones if you die early (life insurance etc) and I'm happy. I get no joy in having my bank balance pile up.

I should add that some of my patients are very rich: we spend some time talking about life and wealth and what really matters. It has altered my perception of life in a way I'm sure would not have happened if I didn't do the job I do. It's definitely made me enjoy and appreciate life more and I'm grateful for that. It's always surprising to some of my patients how little their vast wealth matters when they are dying. There just aren't the cures available, no matter how much money you throw at it. Anyway, I'm rambling so I'll stop now!

Rosetta, I agree 100% with what you have written. Money affords you (pun intended) the ability to enjoy/live in comfort but cannot buy happiness. Happiness most definitely comes from within and no amount of money can purchase that. Personally my dh and I are on the same page and want to enjoy our money but make sure to save enough for peace of mind (ability to retire, ability to withstand financial hardships etc). For different people money means different things and I totally respect those who want to live way below their means in order to have that peace of mind. It really does come down to personal comfort level.

(I would be interested in seeing how it all changes when children come into the picture for those who posted who do not have kids now).

 

[ksinger]

Swingirl, I bought my house right after I turned 20. Yes I understand that you pay it back. What I didn't understand is how expensive upkeep would be. I thought I did the right thing by basing my mortgage on 30 percent of my income. One year later that 30 percent turned into 60 percent due to job cuts. Now I can see where I messed up but I couldn't then.

That's what we were advised to do as well just a couple of months ago, and that was the "conservative" figure - that such irresponsible advice is being given to people looking to buy their first house is horrifying.

I remember the 30% as being, "this is the maximum we'll base a mortgage on" but I don't remember anyone telling me I should borrow to the max. We got our mortgage based on what WE felt comfortable paying and took into consideration either one of us could lose our job, get sick, or suffer some other tragedy that would change our income situation. I guess new home owners don't want to admit that their income could go down rather than up.

Well I think she WAS saying that she realized she made a mistake. I don't think being in denial about tragedy or hard times striking is a trait unique to new homeowners. Older people do it all the time, how much more so then, might a 20-year old, who is still in the glow of "immortality"? Of course it's a good argument that 20-year olds as a group, probably aren't the best pool of home-owners. At that age you lack experience with managing finances from sheer lack of time on the planet and are not so good at parsing the BS coming from anyone trying to advise you on how much is "conservative", and you still haven't accumulated all the "stuff' of a life, and not only do you then have a house to maintain, you still have to buy a drill and scissors more furniture, etc ad nauseum. Buying a home later generally means you aren't trying to pay for a house AND all the extra stuff at the same time.

When I bought my house I think the rule was 25% - not entirely sure: it's been a long time. But I too picked a lower percentage because, well, I'm a big 'ol scaredy-cat. I set it up so I could weather a downturn, and as it turned out I did that very thing. I was out of work for 10 months at one point and barely felt it. But if I'd not done what I did, I'd have been in a world of hurt.

We seem to be on track, for now. I fully expect a layoff of one or the other of us in the next 2 years, so we are planning for the worst right now. Maybe we'll get lucky. I hope so.

 

[NewEnglandLady]

Yeah, kids. I tell my husband that once we have them, we will never be rich again

Just sending one kid to our preferred school: £30,000 per year.

No decent state schools in our area, so we have to go private.

I calculate we have to earn over £10,000 per month net (approx $15,000) to maintain our current lifestyle, once we have kids and a mortgage. Those of you predicting millions in assets when you retire: you guys must earn an awful lot. I'm sure we aren't going to have millions in assets when we retire, even at projected incomes (and assuming we don't get sick, lose our jobs etc)

Honestly? I don't want to become one of those crazy savers who can't enjoy life. I'm going to continue buying my lattes and lunches, eating out in nice restaurants, travelling etc. I see too many people who have had their lives cut short: they always regret not spending more and enjoying more of their lives. I would deeply regret leaving behind a huge pile of cash when I die. Just need to ensure there is enough for retirement (I have an NHS pension which is still a good one) and enough to support loved ones if you die early (life insurance etc) and I'm happy. I get no joy in having my bank balance pile up.

I should add that some of my patients are very rich: we spend some time talking about life and wealth and what really matters. It has altered my perception of life in a way I'm sure would not have happened if I didn't do the job I do. It's definitely made me enjoy and appreciate life more and I'm grateful for that. It's always surprising to some of my patients how little their vast wealth matters when they are dying. There just aren't the cures available, no matter how much money you throw at it. Anyway, I'm rambling so I'll stop now!

I think for the vast majority of people, accumulating wealth over a lifetime has very little to do with caring about one's net worth. It's nearly always an effort made on behalf of the couple's children. I think every parent would love to leave their children with more than they had.

And I agree about finding a balance between living beneath one's means, but still being able to enjoy life. For me, security = happiness, so when we spend money (and we do, most notably on travelling), there is definitely some opportunity cost there.

 

[iheartscience]

Yeah, kids. I tell my husband that once we have them, we will never be rich again

Just sending one kid to our preferred school: £30,000 per year.

No decent state schools in our area, so we have to go private.

I calculate we have to earn over £10,000 per month net (approx $15,000) to maintain our current lifestyle, once we have kids and a mortgage. Those of you predicting millions in assets when you retire: you guys must earn an awful lot. I'm sure we aren't going to have millions in assets when we retire, even at projected incomes (and assuming we don't get sick, lose our jobs etc)

Honestly? I don't want to become one of those crazy savers who can't enjoy life. I'm going to continue buying my lattes and lunches, eating out in nice restaurants, travelling etc. I see too many people who have had their lives cut short: they always regret not spending more and enjoying more of their lives. I would deeply regret leaving behind a huge pile of cash when I die. Just need to ensure there is enough for retirement (I have an NHS pension which is still a good one) and enough to support loved ones if you die early (life insurance etc) and I'm happy. I get no joy in having my bank balance pile up.

I should add that some of my patients are very rich: we spend some time talking about life and wealth and what really matters. It has altered my perception of life in a way I'm sure would not have happened if I didn't do the job I do. It's definitely made me enjoy and appreciate life more and I'm grateful for that. It's always surprising to some of my patients how little their vast wealth matters when they are dying. There just aren't the cures available, no matter how much money you throw at it. Anyway, I'm rambling so I'll stop now!

Rosetta, I agree 100% with what you have written. Money affords you (pun intended) the ability to enjoy/live in comfort but cannot buy happiness. Happiness most definitely comes from within and no amount of money can purchase that. Personally my dh and I are on the same page and want to enjoy our money but make sure to save enough for peace of mind (ability to retire, ability to withstand financial hardships etc). For different people money means different things and I totally respect those who want to live way below their means in order to have that peace of mind. It really does come down to personal comfort level.

(I would be interested in seeing how it all changes when children come into the picture for those who posted who do not have kids now).

Ditto both of you! My husband and I save and invest a decent amount of money, but I'm not going to skip doing things that make my life easier and happier. My parents have the same philosophy, although my dad is more of a saver than I am, most likely because he grew up very poor. But despite his background, he always says he hopes his last check bounces, and I hope that too!

I like to tease my mom and dad about all their trips and tell them that they're spending my inheritance, but I really don't want a cent from them. (The antique Italian desk, however, I do want! ) I want them to spend every cent they've earned on themselves. I have my whole life ahead of me to earn money and then I plan to do the same thing they've done when I retire.

 

[rosetta]

I plan to give my kids a top notch education, and some fine jewellery. That's it.

I'm expecting nothing from my parents: it's their money, not mine.

I hope they spend it all on sin, sand and sangria.

The rest they can just just squander

 

[Dancing Fire]

[quote="missy|quote]

Rosetta, I agree 100% with what you have written. Money affords you (pun intended) the ability to enjoy/live in comfort but cannot buy happiness. Happiness most definitely comes from within and no amount of money can purchase that. Personally my dh and I are on the same page and want to enjoy our money but make sure to save enough for peace of mind (ability to retire, ability to withstand financial hardships etc). For different people money means different things and I totally respect those who want to live way below their means in order to have that peace of mind. It really does come down to personal comfort level.

(I would be interested in seeing how it all changes when children come into the picture for those who posted who do not have kids now).[/quote]

but i rather be "rich and sad" than "poor and sad"...

 

[phoenixgirl]

I admire the people who knew at age 20 or right out of college that they wanted to save, life off of one income, buy a house (even if it didn't work out ). I feel like I spent my 20s pretty oblivious and care free, and it wasn't until I became a parent, the market tanked, and we become a single income family (by choice) that I realized, oh gee, you should probably plan for contingencies. Partly this naivete was afforded to me by the safety net of a nest egg which I inherited, so the thought that I should save any beyond that (well, to be fair, I was putting 15% of my measly salary into a retirement plan) didn't really occur to me.

So my financial goals, hmmm. I definitely want to have this house paid off within 10 years, or, if we decide to move one more time to our "forever house," then have that house paid off within 15 years. I want to have money saved for my children's education, definitely enough for a private college (if that's what they choose) plus high school if necessary (public schools are iffy here). And I want to have plenty for retirement. So I'm finally realizing that when there's extra money, this shouldn't mean automatic vacation, shopping spree, or bling purchase, but maybe just an extra payment on the mortgage, or a little more into savings.

Dreamer, you are an academic, right? I don't feel like Haven's spend-big friends are an apples to apples comparison, since the road to being a professor involves so many years of expensive schooling, incurring debt, and not earning as much as possible during those years, and probably a lower average salary than other jobs that requires extra schooling, like medicine or the law. I agree that it's not fair to throw out there "all middle class people should be able to live on one salary" without taking into account how expensive in time and costs your career path was.

And $650k is about 4x the median home price here. Yikes! It's hard enough to live on one income in an area like this.

 

[Octavia]

I definitely agree with those of you who want to enjoy life now, but I think my desire to accumulate assets stems from not wanting to be destitute in my old age. I don't want to be a burden on my kids, or worse yet, end up with nobody to care for me and living from Social Security check to Social Security check. (Saying this in the full knowledge that there is no guarantee of kids being willing/able/interested in caring for an elderly parent, and definitely no guarantee I'll ever see a dime from SS.) I'd rather cut back a bit and work hard now than suffer later. But there is definitely a balance -- I still enjoy good food, travel, nice clothes and jewelry, etc. And I'm totally fine with spending the vast majority of what I accumulate, I just don't want it to run out before I die.

 

[Haven]

I agree with everyone who thinks you should enjoy your lives now. The key, here, is figuring out what it is that you really want to do right now, and to not waste money on things that are not really important for your happiness. For me, I'd much rather travel to Europe every summer than buy coffee every morning, so that's what I do. I think it's a big mistake to put off experiencing things until retirement. Those of you who have said similar things would enjoy the book VAGABONDING by Rolf Potts.

As for what I said earlier in response to Dreamer's post, I think I just wasn't very clear. I'm sorry. Phoenixgirl--I understand what you're saying about academics and others who have a long career path, but again, that is a choice. Academics choose to study for years and years and years for a certain career path, so that is obviously their priority. There's nothing wrong with that, but it is certainly a conscious choice. I'll be the first to tell someone to pursue their passion if they have the freedom to do so. We all make choices, that's all I'm trying to say, and as members of the middle class, I think we're lucky to have the choice to live with some financial freedom, should we want that.

Phoenixgirl--I was lucky to work in a (terrible! yet informative) job calculating retirement benefits right after college. I worked with some actuaries who cared very much and taught me all about saving early in order to give myself freedoms later on in life. That, coupled with my parents' terrible financial examples, gave me a lot of determination from a very young age to live as free from financial concerns as possible. I feel lucky for that, because even with my firm goals, it was tempting to live it up in my 20s, and very difficult to hold back when it felt like I was the only one doing so.

 

[iheartscience]

I agree with everyone who thinks you should enjoy your lives now. The key, here, is figuring out what it is that you really want to do right now, and to not waste money on things that are not really important for your happiness. For me, I'd much rather travel to Europe every summer than buy coffee every morning, so that's what I do. I think it's a big mistake to put off experiencing things until retirement. Those of you who have said similar things would enjoy the book VAGABONDING by Rolf Potts.

Oh I still travel-I just also buy lunch out. I've been traveling internationally since I was 17, and I usually go on one big international trip a year, plus a few shorter domestic trips. If it was an either/or situation, I'd skip the lunches out any day. But when I retire I plan to travel even more-no job holding me back! I also make it a priority to have a job with a lot of time off. I'm lucky to have a job that gives me 3 weeks paid time off in my first year, not including sick time or holidays, and the amount of paid time off increases quite a bit the longer I'm here.

 

[Haven]

I'm with you, Thing. 100%. I would never choose a career that tethered me down so much I couldn't travel. Seriously, you should read VAGABONDING. You would LOVE IT. I love my job, but I love my very long vacations even more.