A bit of personal perspective: I'm a 30 year old, I earn well into six figures/yr, but I still live relatively far below my means. Concretely, this has required making some very tangible lifestyle choices that haven't always been pleasant, including living with roommates in a somewhat bad neighborhood, not buying high-end clothes, etc.
The reason I do this, and it's something which somewhat annoys my long-term girlfriend, is that I absolutely refuse to live paycheck-to-paycheck. I've done that for a while after a failed startup, and it's terrible. It takes a huge psychological toll and the idea that you have to stay at a crappy job, and be afraid every day of being fired, is something I'm working very, very hard to avoid.
I think that's definitely a mindset of someone who has enough financial cushion to be able to do that in the first place. No one living paycheck to paycheck is going to do that unless they are immature or reckless to begin with.
The responses I got were along the lines of "if you aren't saving %#% of your income per month, you're living beyond your means". I've lived paycheck to paycheck my entire existence and I'm almost 50 years old. I've had every job imaginable; built custom cabinets for private jets, managed a laundromat, managed a liquor store, cleaned houses, firefighter, managed a furniture store (sold a million dollars worth of furniture in 2 years, in a town of 16,000 people) and my IT career has spanned 20 years. I’ve worked all types of IT from state governments to one of the largest tech companies in the world.
On the flipside, someone who makes very little also knows how to live with very little. I make $30k and have $5k in the bank - I am not terribly worried about quitting my job in the near future. I already make garbage salary, living off my own savings won't be very different.
I think that there is a balance between blowing all of your money that you earn such that any decrease in salary would be catastrophic and driving a decrepit car, living in a cramped room with an hour+ commute, and not spending a dime more than you have to.
Surely you can still "experience life" in your 20s and 30s while saving something for a rainy day/when you can no longer work.
I disagree. Living paycheck to paycheck is not necessarily exclusive to lower earners or those short on time. Personally, when I did live paycheck to paycheck I had nothing but time. For most Americans, more money means bigger bills. Got a raise worth $300/mo? Let's go get a new car that's going to cost us $400/mo!
I understand that some people work multiple jobs, take care of kids, etc. Those people barely have time to breathe, let alone manage finances. Even so, managing finances is a fact of life.
Time, more money or whatever else you can think of will not break the cycle of living paycheck to paycheck. It requires a change in attitude and habits. The first simple fact is you have to spend less than you earn. It's a basic concept that so many people fail to grasp. If it's payday and you have leftover money from the last check you have savings. Don't go out and spend it like it's found money. Set it aside. Do this over and over again and you have an "emergency fund". Guess what? Now you are not living paycheck to paycheck. The second is that you have to take on an active role in managing finances in order to accomplish this. That means planning, budgeting, tracking and adjusting. The most difficult part is making the decision to start and then taking the first step.
There a hundred excuses one could come up with for living paycheck to paycheck, having debt or some other financial mess. Predatory banks, too little money (when still earning more than a reasonable amount), not enough time. None of it changes the fact that you are still living paycheck to paycheck. The only thing that changes that is planning your own finances instead of letting these other things plan for you.
It's surprisingly easy for this to be the case. I'm not particularly great with my salary, entirely because I don't have any pressures. I'm in my early 20s, near the 6-figure threshold and it's easy to fuckup. You think, well I should be living in a nice place, I make enough money right? So you lease a penthouse. So you've got this nice condo, you need new furniture, right? Then your car you've had since college starts acting funky, so why not just buy a new one? Been there, done that. I mostly broke even on my expenditures and maintained my savings, less a downpayment on a new Civic, but you could see how things could go wrong when you get into that mentality. Now consider the similar case but with folks with little earning power. Worst case, I could break my lease and live somewhere cheaper. Worst case, they're on the streets.
When you're out of college, you're used to living on a shoestring budget. You can get by without quite little because you haven't really raised your standards of living around a big salary.
When you've worked for a few years, you've likely saved up a decent amount of cash (unless you live a life filled with consumption). You may have to cut back on all the perks but you can still get by.
Most of the people I know who want to start a company don't want to risk their current cash flow. Yet all of them have been working long enough where they've likely saved up enough money to go a long time without making money and be ok. I think the only thing is that people raise their standards of living (more expensive rent, big car payments, high rent/mortgage) such that they feel they must continue to make their current salary in order to "survive."
This is an extremely black and white way of looking at it, I would suggest you find some grey areas in your thinking.
For what its worth, a high percentage of people are living paycheck to paycheck, no matter how big that paycheck is. Many people will adjust their lifestyle to or above their means, so they have to live paycheck to paycheck to support that lifestyle.
Two of my friends surprisingly told me they live paycheck to paycheck on salaries well into the six digit range. When I asked why, they both said "that's just how they've always lived." So having the discipline to save a little is clearly a challenge for them, despite having a very good income.
Anyone can live paycheck to paycheck if they let lifestyle creep get past their income.
Looking at the difference in my income now vs 10 years ago and the difference in my savings rate, the savings is less than it should be in comparison. Inflation is part of it, sure. But it's a lot more that my lifestyle has changed. I choose to have a nicer place vs back then while living in a HCOL area, a nicer car. There are purchases I make without a second thought that would have been a big deal back then. And I make a conscious effort to monitor lifestyle creep. Plenty of people don't think about it at all and go all in.
When I moved out to the bay and was making ~85k a year at a startup I definitely lived like the person I responded to, except I paid for my own meals. Drive to local vacations, excess money went right into student loans and, after those were paid off, stocks.
The difference in opinion is derived, I think, from how I reacted when I got a big tech job. My earnings went way up relative to that first job, but initially my lifestyle didn't change at all. Eventually I started adding things little by little, thoughtfully I think. I took my first international trips, didn't dismiss hobbies outright because of cost - it made me a lot happier because I was experiencing things for the first time. That doesn't mean I stopped backpacking, drinking beer in the park, or going to cheap concerts - it was additive. At the end of the day, though, my lifestyle increased only by a small portion of how my earnings were. All things considered, my savings rate didn't really change by all that much.
There are some people who do really, really well trying to minimize their yearly spend, but there are a lot of people who could give themselves a little bit more slack and be better off mentally and physically for it. It isn't that they're not working hard. For me, it was just growing with working class parents - I never learned to ski, we drove instead of flew to visit family, video games were birthday presents. Relaxing some of the frugality was part of being thoughtful about who I actually was and wanted to be, and I think that's ok.
I think the point is that living paycheck isn't indicative of not being able to afford basic necessities. It is the desire to spend most of your income on more than what are actually basic necessities.
But it's a choice to live that lifestyle. Doing so is implicitly assuming that you will always have that income level - which is rather unwise to assume.
I'm 100% in agreement, and am trying to pursue that on a payscale that's fractions of what's described. I think the problem is the balancing act between "live now" and "save for living later." I think I have a healthy balance, particularly in not denying myself decent food and lifestyle despite the costs. That said, I'm moderate in almost every other way (and I don't have a car, or buy expensive clothing, etc.)
At one extreme I know people who save every penny, even though they make a fortune. One person I know spends maybe 10-20 dollars a week on food by never drinking, receiving farm deliveries of vegetables, etc. and etc. At the other extreme, as per this article, you have Real Housewives-types scoffing at making less than a million, perhaps living extravagant lifestyles.
Maybe this should be called "lifestyle inflation." Through social pressure, greed, trendiness, or perhaps stupidity, people piss all their money away and need more.
There's a balance there, but yes, at the end of the day the goal is to have free time, right?
The problem with that argument is that not everyone is OK with living a bare minimum cost of living life style. Also rewarding yourself for earning more can give you motivation to progress further.
I recommend fixing your spending at a %-age of your post tax income at a maximum. For me it is 50%, but that is on the conservative side for most people. I don't always spend 50%, but that is the max. I feel it is a good compromise between preparing for the future and rewarding yourself in the present
Yeah, I guess. I try to avoid that as much as I can, such that my rent is currently around 10% of net pay, but I constantly feel an urge to upgrade things (and do, eventually). But it certainly is retire early money if you can fight that urge even moderately. I make less than that and am on pace to retire at 35 with a comfortable middle class lifestyle.
I agree with your assertation - specifically with regards to having enough money.
How do you define "enough"? I've adopted the outlook that "less is more." I have a ridiculously low cost of living compared to many of my peers. Some of it is circumstantial and I'm thankful for being in the situation I'm in, but I also think you set yourself up to take advantage of circumstances that arise.
Just an example: my total monthly cost of living without spending on entertainment or extras - ie., food, rent, all my bills, transportation, etc. is 79% of my buddy's rent alone. This affords me the opportunity to find work I like. I can easily go for 2-3 years without any work and it would have no effect on my lifestyle whatsoever. Sure, I don't have an SUV or own a fancy house, but I have time to pursue my own interests and I'm deeply passionate about the work I do (after thinking I had no interest in doing it anymore and trying to "pivot" a couple of years ago).
A bit of personal perspective: I'm a 30 year old, I earn well into six figures/yr, but I still live relatively far below my means. Concretely, this has required making some very tangible lifestyle choices that haven't always been pleasant, including living with roommates in a somewhat bad neighborhood, not buying high-end clothes, etc.
The reason I do this, and it's something which somewhat annoys my long-term girlfriend, is that I absolutely refuse to live paycheck-to-paycheck. I've done that for a while after a failed startup, and it's terrible. It takes a huge psychological toll and the idea that you have to stay at a crappy job, and be afraid every day of being fired, is something I'm working very, very hard to avoid.
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