Sunday, September 15, 2019

Paycheck to Paycheck on $350,000 a Year

The problem with budgets is that they always show every dollar spent.

A lot of financial advisers say you should establish a budget for your spending.   It may be helpful, but budgets are only general guidelines, and as governments everywhere illustrate, they often end up being wildly out-of-wack with reality.

The other problem with budgets is that they can be manipulated to show that we need more money - there isn't enough money in the budget to pay for everything!   There is no money "left over" after all the budget items are paid!

Relax.  There is never any money "left over" in anyone's life.   Whether we put it into a retirement plan, pay down the balance on our mortgage, or spend it on food or clothing, all the money gets spent.   That's the nature of it.

Two baiting articles published recently illustrate this problem.  Both had click-bait headlines designed to get you enraged, which the powers-that-be want you to be, all of the time, so all you see is red and you never really think about things.  Both articles are designed to fan the fires of class and generational warfare as well.

The first has an obscene title claiming that a family of four is "barely getting by" on $350,000 a year and their budget "proves" it.  Of course, they are more than "barely getting by" but in fact are socking away 10% of their income into a 401(k) plan, paying down a mortgage on what must be a half-million dollar home.  Oh, and they spend $24,000 a year sending their kid to preschool.  That's more than the average American can hope to spend sending a kid to college each year, in case you weren't paying attention.  Barely getting by, indeed.

The rest of the article is hilarious, if it weren't so sad.  They spend $600 a month on clothing (!!) with the notation "Old Navy not Gucci!" (the latter of which they surely are entitled to and would have, if not for Trump!).   Old Navy is, in my opinion, rather overpriced.   I have a few pieces, of course, that I bought at a thrift shop.  But then again, I'm not proud.

The other item is the car payment on a Toyota Highlander, which has the notation "Not the Range Rover!" (the latter of which they are so clearly entitled to, but Trump or Obama took away from them).   No mention on why day care - excuse me, preschool - costs more per year than I live on.  But hey, how's the kid going to get into Harvard (which again, they deserve) if he goes to the wrong preschool?  You think I am crazy, some people in New York actually think this way.  No, really.  Seriously.  I know, it's stupid, but they think it.

What is really sad is that this family is headed for woe.   Assuming they have been married for five years and they have been contributing 10% of their income a year to the 401(k), at best they can hope to have $1M to $2M in savings by retirement.  This equates to maybe $50,000 to $100,000 in income, in the year 2050.   How in hell are they going to go from $350,000 a year to $50K  a year, if their spending habits are like this?

But again, this is a BAITING article, designed to get people riled up, and here I am, getting riled up, over nothing.  These folks are comfortably wealthy, and well-off.  Well off enough to spend countless hours at Old Navy every month buying hundreds of dollars of clothes and paying as much as most people do for a car, every year, for pre-school.  I'm not worried about them "barely getting by" at all.  I would save my worry for the poor black teen working an after-school job at McDonald's, trying to help his Mama by bringing home some extra bucks, staying out of trouble, and trying to avoid being recruited into a gang.

That's a real hero.  I wonder what the budget for preschool for his children will be?

The second article is a similar attempt at BAITING and class-division.   The article states that "old people" (which I guess means me and Joe Biden) are "blaming" young people for their own malfeasance in signing onerous student loan documents.   Apparently, it wasn't their fault - someone forged their name on the loans!  Oh, wait, that wasn't the case.

The poster boy this time around is a guy who has $200,000 in student loan debt and no job and no way to pay it off, ever, ever, ever!   Oh, wait, that isn't true.  He actually is making well over $100,000 a year as a fashion designer.   He can pay this off - over time.  His complaint? That his parents or grandparents had it easier as they have a nice home with an ocean view, which he is so obviously entitled to, at age 28.   He has to struggle with a "starter home" with plumbing issues.  Why can't you start at the top?   Why can't you have all the things your parents strived for over 50 years, just right out of college?

Of course, what our young friend fails to see is that Grandpa had it "so easy" in the 1930's when unemployment was as high as 30%, and then he went off to fight the Nazzis and saw his best friend's head blown off at Anzio.   And maybe Dad had to serve in Vietnam - but even if he didn't, he saw 10% unemployment, 10% inflation, and 14% mortgage rates - and even-and-odd gas days - in the late 1970's.

Yea, those earlier generations had it so easy.  Fuck them!

But the other half of the equation, regarding housing, is that over time, the population increases, and the cost of housing goes up.   When I was a kid, there was undeveloped land along the lake my parents lived on.  My parents had to sell the lake house, as the taxes were too high.  Today, that house is worth millions (my parent sold it for $300,000 - a king's ransom in 1985!) and I could not afford to live in it.   I bought a less expensive house on a less expensive lake - guess what?   I could not afford the property taxes, either.

I learned a hard lesson - I am not entitled to everything my parents had.  Then again, they never owned a color television until 1975.  They drove shitty cars (a Vega, a Volare) and scrimped on many things, so they could have that fancy house.   They certainly didn't spend $600 a month or even the inflation-adjusted equivalent, on clothing.   And no, not anything on preschool.

Comparing my life to theirs, however, is silly.  As I noted before, it is impossible to compare the relative worth of things between generations.  Maybe the cost of a can of Green Giant green beans can be compared between 1945 and today, as that product (or one nearly identical to it) exists in both worlds.   But comparing things like telephones or televisions, or even things that didn't exist - such as internet service - is pointless.

It is like with cars.  Another recent article laments "why cars are so expensive now!" - because we have more money to spend now, and want all the toys.   My parents' cars were largely deathtraps.  Radial tires and disc brakes were only a "thing" by the early 1970's.   Airbags?  Anti-lock brakes?  Seatbelts?   You've got to be kidding me - we didn't have such things back in the day - and if a car came with seatbelts, the first thing Dad did was cut those things off with a razor blade!  Bloody nuisance!

Today, I have a truck that can park itself.  Heated and air-conditioned seats with massage.  Even comparing this to my 1995 Ford, which had the "luxury" of power windows is idiotic.  Comparing it to the 1964 Ford that my Dad shared with a few other Dads, is ludicrous.  It barely was a vehicle!  Today, you can't hardly buy a car that doesn't have air conditioning and power locks - once only something seen on Cadillacs.  We are a much wealthier nation today.   

But no one wants to hear that.  What they want to hear is "we are all victims!" - not just the guy in the ghetto struggling to get by, but the suburbanites and the city dwellers, making well into the six figures.  They are finding out - horror of horrors! - that even making a big salary doesn't make you rich, unless you spend less than you make.

It is something I found out, late in life - almost too late - and the reason why I started this blog.   I thought that once I made 20 grand a year back in the 1980's, I'd be rich.   Maybe 30 grand would do it.  Then I was making 50 - and still not rich!   Eighty, ninety - a hundred - and still not swimming in money!   Of course, I had a house by then, and a car payment, and nagging credit card debt.  But I should be filthy with the stuff!    I kept trying to make more, but it was like running on a treadmill - the faster I ran, the further I got behind.   Jane! Stop this Crazy Thing!

The problem was - and is - the same problem the folks in the articles cited above are having.   They thought - as I did - that now they are making "big money" that they should be instantly wealthy.  So they spend like they have money they don't have - and banks are more than willing to offer them e-z credit terms and merchants are more than happy to take their dough.   They have "stuff" but no wealth!  They are not getting ahead!  They put $1 in their 401(k) plan last week and it didn't turn into a million bucks!   The system is stacked against them!

The secret to wealth is to accumulate money, not spend it.   You can't "invest your way to wealth" through shrewd stock picks or systems.  You have to have money to invest firstAnd that means making sacrifices which no one wants to make these days.   It means putting $100 more into an after-tax savings plan and $100 less into Old Navy.  It means buying a used car and driving it that extra year, instead of buying the fancy car you think you are entitled to because your neighbors and coworkers have them.

The richest guy on your block isn't the guy with the fanciest car, but likely the dude with the battered minivan.    You can't park a shiny 401(k) in your driveway, though, so no one can tell who has more money.

My mistake in life (among many) was to go from $50,000 a year in income to $150,000 a year - but not keeping my lifestyle at the $50,000 level.  It is very, very hard to do, too.   Once you have a few extra bucks in your pocket, the car dealer and the fancy restaurant and the designer clothes start calling.  You feel you've "made it" and are entitled to a reward for "all your hard work" - not realizing that "all your hard work" takes 30 or 40 years to realize.

And that is why I started this blog.   I am not sure how to help that poor kid in the ghetto working at McDonald's - he has real issues and real troubles, and is a real hero if he can overcome them.

The folks profiled as six-figure-salary "victims" in these articles?   Sorry, no sale.   No one felt sorry for me, as a successful young lawyer making big bucks, when I spent it as fast as I made it.   No one feels sorry for these folks, either.  You can't be "broke" and make over a hundred grand a year.  There are people with real problems in this world, and these folks don't count among them.

Oh, and I did pay off my student loans - eventually.   It was "only" about $38,000 of course, but that is equivalent to about $70,000 today.   Was college cheaper back then?  Maybe.  But then again, I also worked several jobs to pay for college - over 14 years of night school. I didn't have to borrow money to pay for my personal living expenses.   I doubt any of these fuckers in these "oh woe is me!" articles ever had to deliver a pizza, or work the 10PM to 4AM shift at UPS, while they were in college.

Oh, right, our generation had it soooooo easy! 

But then again, I am being BAITED, here, aren't I?  The people who write these articles want us to get upset.  They want the young to hate the old, the old to despise the young.  They want the rich to belittle the poor and the poor to envy the rich.  Divide and conquer - the oldest game in the book.   If we don't see we have common interests, it is so much easier to play us against each other.

And we are the same people, too.  If I am "angry" at these young yuppies whining about how hard it is to live on a six-figure salary, it is because I was the same way at that age and made the same stupid mistakes they are making.   And nothing I can say will prevent them from going down the same road I did, learning all the same damn painful lessons I had to learn, often at the expense of thousands, nay tens or hundreds of thousands of lost dollars.

If the old blame the young for their own problems, it is because the old made the same mistakes at the same age, and realize they were mistakes and indeed their own fault.   It takes a half-century to own up to your own malfeasance, it seems.

And yea, that makes me angry.   If there was only some way, this knowledge could be imparted from an old brain to a young one.  If there was only some way to "go back in time" and knowing then what I know now....

Alas, I fear this will never come to be!  The television isn't going to put on a "reality" show about spending less money, unless it mocks the idea, because advertisers wouldn't pay to advertise on a show that promotes thrift and savings.

If only there was some way for someone to write down what they learned over the years, and then communicate that information and those hard-fought and hard-won lessons to a younger generation.  If there was only some way!