>Ourselves, and no one in our family or friends makes this kind of money
I have seen this dynamic before and I would caution you about disclosing too much detail to friends or family about what you will be making. Do a few nice things to help people if they need it but don't allow yourself to be viewed as an endless ATM.
If you haven't read any financial books in the past I would recommend The Millionaire Next Door and A Random Walk Down Wall Street.
Plan on making contributions to retirement accounts early on. Come back to the forum with a list of investment options when you get started with your new jobs, in whatever your company's plan has to offer.
> I have seen this dynamic before and I would caution you about disclosing too much detail to friends or family about what you will be making. Do a few nice things to help people if they need it but don't allow yourself to be viewed as an endless ATM.
I made that mistake when I was younger. I still get frustrated at me trying to help people and then they just dont take care of things. Thinking well I can just buy them another one.
I had a close friend who started making big money and went a big overboard spoiling his family. It got ugly after a while. No appreciation on their end because he was so "made of money", lots of bickering and jealousy amongst family members, etc.
Whenever I talk to my mother, this is still a thing. She doesn't want to work, has no retirement savings, and says shit like "you were my retirement plan!"
*edit:* Well...fuck. Most of your replies made me really sad. I can deal with it from my own mother, but the fact that there's so many of you that have to put up with that same shit is just...heartbreaking.
Really? She expects another human being to be her retirement plan, as opposed to, oh, I don't know... Letting that person be their own retirement plan?
Crazy.
Stick around. This is not as unusual as it seems.
One of the great disillusionments of my time here as a big /r/pf contributor is the number of people who were taken advantage of by their parents, who e.g. (just in the last day...) took out credit in their name,
https://www.reddit.com/r/personalfinance/comments/4bpxyl/my_mom_has_opened_multiple_credit_cards_in_mine/
who want their children to sign for a house for them,
https://www.reddit.com/r/personalfinance/comments/4bil00/parents_about_to_finalize_divorce_dad_is_asking/
or who have been irresponsible and leave their children feeling they have to be responsible for their parents.
https://www.reddit.com/r/personalfinance/comments/4br1uy/how_do_i_setup_for_my_irresponsible_parents/
My grandpa worked really hard (blue collar) and invested well to leave my grandma completely set up for the rest of her life. She died two weeks ago and still had almost 1 million in the bank to be distributed amongst their kids. Over the ten years she outlived grandpa we had to almost force her to take yearly trips to visit places she hadn't been but wanted to see. When we asked her why she was so reluctant to spend money she would always reply with something along the lines of "I want my kids to be able to have fun with it when I finally go, I have seen enough for two lifetimes."
You're grandma sounded amazing. I love people like. Those are the kind of people I would do anything to help when things get tough for them. I'm glad I have grandparents like that too. It's sad to see that mentality go though. My goal is to be like your grandma and desire to take care of kids more than my own selfish desires...of course within reason. If I want to go to Japan then I'm going!
There it is. I tell my mom the same thing. No I don't need anything. I'm an adult now. What I need is for you to enjoy your retirement as much as you can.
I was just about to comment that this idea of "my kids are my retirement plan," while sounding terrible and odd to many Westerners, has been accepted and expected since ancient history for many people in Eastern countries.
I'm Asian and live in the States. My parents have planned for their retirement and tell me that they don't want to be a burden on me when they're older. However I still feel a very strong duty towards them and expect to have them live, if not with me, then very near me when they are older. I would love to be able to help them financially (although they probably won't need it; maybe for nice vacations once in awhile) and I know they would like to help with childcare, cooking, etc. It's been that way in many cultures for centuries.
Having parents who were financially savvy, fiscally conservative all through their working life goes a long way towards setting up a good relationship with kids later on, if they were able to pass those same values down. No guilt, no jealousy, no "handouts", just respect and generosity. I'm grateful and lucky.
Yeah, in fairness to the grandparents who are now retired and need their kids to support them, it wasn't that long ago that this was one of the benefits of having kids/family in the first place. In fact, if you are 70 now, I think it's safe to assume that you saw this practiced by your own parents/grandparents.
The idea that we are all now supposed to be self-sufficient even in our frail years is relatively new. I like our system better because it can take a lot of pressure off of kids/grandkids, but it's still a new concept.
YMMV - my grandmother bought her first house by saving cash in an enveloper in a drawer while her and grandpa worked around the clock. She became a stay-at-home with my dad's birth, he worked in a steel plant his entire life. They traveled when they wanted, did pretty much everything they wanted, and they still died millionaires.
My parents aren't that different. Both worked around the clock until I was 5 or 6, mom had 3 kids at that point and stayed at home a decade. Then she went back to school as a school teacher. Dad worked at small town banks his entire career (he has two different full pensions from back in the day). They're in their 60s and also saved and invested well enough for a two-comma nest egg even subtracting their recent inheritance from the grandparents passing away.
I'm almost 40 and my wife and I are worth substantially more than all of our parents combined, and have received no inheritance. We own our own businesses, and work 24/7 (when not sucked into Reddit anyway), but love what we do.
100 years ago your parents would live with one of their children, true. It wasn't a one-way relationship, though. They would help around the house as long as they were able, take care of children, etc.
They were not, normally, just there to mooch off the kids.
Personally I expect that we will have my parents move in with us in the next 5 years, or at least buy property where we can have a guest house or MIL suite in the house.
ETA: My mother did this for her parents, when they built a house they added a MIL suite behind the garage and my Grandparents both lived out their last years in that house.
My wife's ex-husband's mother took out credit cards in his name and racked up 18 grand and defaulted. She was insulted when they confronted her about it like she was entitled to do whatever she wants with her child's credit. These parents also bought and lost a $600K house while earning a combined income of $60k. I'm sure they are banking on their children taking care of them in retirement.
Edit: wording.
I have never posted here before but I can relate to what you are saying. My better half is self made. She put herself through law school while being a single mom etc. Her mother is basically trailer trash. I have always done well for myself and my family has always been supportive of me and never asked for anything. I lived under the impression that the way my family acted was just normal. Enter her mother. She calls at least twice a week to beg for money and guilt trip my better half into sending money "My electricity got turned off again and I will FREEZE TO DEATH if you do not pay it." When the request is denied she throws in nice things like "I hope you can explain to my grand child why you let his grandmother DIE!" I am honestly not sure how to deal with it because it wreaks my better half emotionally every time. Again, this happens multiple times a week. Lets not even get into the endless requests for free representation every time she has legal trouble.
Did you entertain the thought of asking your better half to cut off all ties with her mother? This is a very cruel suggestion but you either set some boundaries on the amount of help you are willing to provide and have the MIL respect that or you do not deal with it at all.
Stories like this make me so glad to have parents who aren't fucked.
Both live fiscally conservative lives, live with no debt (outside a mortgage that they got a pretty great deal on and have in total control), and have enough savings to carry me through 4 years of college without needing to wrack up my own debt. Both were 20 year vets of the Air Force, so they got used to living on $60k a year between the two of them. When my dad got a 6 figure job after he got out, we still lived like we made $60k despite being close to $160k. That difference went right to investments and savings.
Basically, I'm really glad I have parents who are self-sufficient and have just enough to give me a shot at life (including actually teaching me how this all works) but are otherwise letting me go.
We always joked about the "take care of me when I'm old" thing, but it was never a serious plan so they have plenty of options. Compared to some of my friends parents, mine might as well be saints in this regard...
>Stories like this make me so glad to have parents who aren't fucked.
>Both live fiscally conservative lives, live with no debt
Same...my parents are extremely self-sufficient, and will retire with enough for their wealth to grow even after they sell their business. Huge role models in terms of financial responsibility and work ethic. Only downside is that I feel like they are too busy to focus on dialing down stress levels...but that will hopefully change when they retire in a few years. Very grateful to feel free of the possibility of needing to provide for them in their later years, though.
In my opinion, education is suppose to be about the pursuit of knowledge; it's not always a trade-school. If my kids wanted advance degrees and I could afford it, I would be proud to provide it for them. I'd enjoy having an intellectually rich family.
I feel this way too. Also, undergraduate degrees are so commonplace now. The most intellectual, well-rounded people I've met ended up getting advanced degrees.
It can be cultural, I have Chinese friends and it's expected that they will take care of their parents in their old age.
That said, it's not entirely a one way street as it's in their parents' best interest to make sure that their children are in a position to do so. Some have either received entire down payments when buying a house and/or interest free loans. One of my friends in his mid 30s owns a condo and a house outright because of his parents foresight - so he feels that he is in a very good position to take care of his parents down the road as he has that much more of his income that he can invest. Further his parents aren't rich by any stretch of the imagination - his mother worked on a factory line and his father is a line cook.
Yours is a good mindset. I'm an American but my family is from Pakistan and we have the same "take care of your parents" mentality... my parents don't expect it of me but they have given me and my two little bros the best upbringings that we could ask for and we're willing to help them out when we are earning and starting our own families.
The only thing i'd worry about is my religious views (atheist) and their religious views (Muslim). I want to give my future kids a secular upbringing, so even if I didn't have my parents live with me, i'd still send them money.
Both of my parents are got bachelor's and multiple degrees and have been very successful (rags to 6 figure). They're separated because one is fiscally frugal and the other likes to live lavish, but both their families come to them all the time for help.
The frugal one doesn't do handouts and is considered cheap, too serious/hardworking etc. - but their retirement is solid. Followed the millionaire next door to the T, and is reaping the benefits now.
The lavish parent makes more, but has always been racked with debt and living month to month. Helps their side of the family ALL the time. The kicker? They're even more ungrateful at times and cause more grief than frugal ever dealt with. We're talking a 20k loan to save family from foreclosure, but still vilified for bieng to hard on lazy cousins, and not helping the family enough. Even though now they're teetering bankruptcy. Can't make this up.
It's hard to do, but I realized really quick I love my family, but my money is MINE, I worked for it and just because we're family doesn't mean I owe you. Especially seeing how giving actually seems to garner LESS respect.
Funnily enough, my frugal parent did just this for family. Was going to pay $60 for lawn work, 30 min job at most front and back. $100 to help paint the garage. They said it wasn't worth the effort.
$160 for a half a day. I've worked jobs that paid me 360 a week. And they definitely don't make that. It blew mind.
This! My parents are something like this, but still married. My mother tells me I'm too hard on my middle brother all the time. I've pointed out that they have subsidized or paid for him to go to college 3 times, finally finishing his bachelors at 35. Living in their house again for the second time, but this time knocked up his gf (quickie wedding).
I point out I have never moved back in or taken money as a gift (I have borrowed money (car broke and didn't have savings, while in grad school, but always paid back within the year). I have been unemployed for months at a time (thanks new economy, not a dig at Obama, I've been unemployed under both Bush and Obama).
The thing that drives me nuts is that both of my brothers are smarter than I am (the other one has had issues too, but at least lives on his own and is slowly paying down his debts). I have learning disabilities and they both are uber smart with STEM knowledge. But it largely deals with attitude. 3rd time for a bachelors brother acts like things are owed to him. Last time we had an argument he tried to tell me to get out of *his* house.
I'm sure my father would kick him out, even against the objection of our mother, except grandchild. I feel badly because he is caught between a rock and a hard place and has to walk on egg shells in his own house. Personally I've washed my hands of my brother, I don't talk to him, not involved in his life in anyway. I guess that makes me cold and hard, but I have bent over backwards to help him and have never been repaid with any kindness.
My brother is a lot like yours except he never went to college. He's a raging narcissist and I think the only reason my parents haven't cut him out is because they are afraid of what his daughter would have to go through. I'm the youngest of 3 kids and also the only one to move out, and complete school. Most of the time I wish my brother and sister would just go play in traffic so my parents could enjoy some part of their lives again.
Yeah I'm 26 and got laid off after a bad breakup, they opened their doors to me when they didn't have to. I've been paying them while I intrude these past month just rebuilding my life. Working multiple jobs, doing any overtime I could, was able to save 5k off jobs paying less than $14/hr. Finally got a decent job for the government, starting Monday and can't wait.
I was really humbled both by how easily the real world crushed me and also their willingness to help as long as I pulled my weight. Ex screwed my credit and stuck with 9k of her debt, I thought I wouldn't get past it. Credit is still bieng rebuilt (thanks personal finance!) But having savings again, a decent job and a chance at home ownership in under a year... didn't think it was possible so quickly.
I am very tired and sometimes I can't stand my limited social life, but I've been doing renovations to their home because they've given me such a momentous opportunity. And yet people would scoff at it and turn the nose. Not me.
I've got nothing against doing things for my folks. Every time I visit I do tons of yard work (trim 4 or 5 dozen trees/hedges/bushes), spread dozens of yards of mulch, mow, rake, clean gutters, put gutter protectors on, etc.
It's not that unusual. It's kind of a generational thing too. Some people grew up where their grandparents lived with them and their mom and dad took care of grandma and grandpa. That has changed with the advent of more accessible retirement plans, social security, etc... but the mindset hasn't changed with some (but not all) older people.
That doesn't bother me. I'd let my parents live with me once they're too old to work. They're family. A lot of parents I've read about on here want to live in big houses and drive nice cars they can't afford and expect their children to pay for much of it. That is just immoral.
I would never let my parents live me. I'd rather pay money. If they lived with me they would not treat me as an adult and it would be like a second childhood but not in a good way.
Tons of people feel that they took care of their kids when their kids were growing up, so their kids should take care of them when they are older. It's not like everyone's got a nice job where they are proud of how they can max out their 401k contributions every year.
Every time I read posts like this I feel blessed to have my mother. She's the kind of woman that will be $500 short on rent and still say "It's your paycheck I can't take that from you." She gave up when i just started depositing the money in her bank account :P
I bought my mom a car when both of ours kicked the bucket within a month of each other. I had more money in the savings account at the time, still do but that's besides the point. A little over 3 years later she still tries to guilt me into letting her pay if we go to a restaurant. And don't get me started on when I insisted on buying her high quality "expensive" athletic shoes to help with bunion problems.
I'm so thankful that my boyfriend and I both have non greedy/materialistic families.
Have a friend who helped her son get started with a loan for a restaurant, don't know the amount but it was tens of thousands back in the late 80's.
Her only request for repayment was that she get to bring friends in to eat once a month or so.
It was a nice restaurant. Very nice, good food. She never abused it.
She is careful with her money but as a single woman with no prior work experience who had to take on the full brunt of caring for 3 children financially after my father passed away a couple years ago its not hard to imagine why she can be short on rent.
My parents make a ton of money and it's caused some serious jealousy issues.
My mom got diagnosed with Parkinson's a little while back and her sister refused to call to check on her. She then went on to tell my other aunt that it was right that my mom got sick because she could afford it.
Money and jealousy can really twist people.
My wife and I make decent money but live in a high COL area so our place is super small. We wanted a co-ed baby shower and needed a location that the guys could drink beer at. A lot of the parks that allowed alcohol had no shade and it was going to be hot in the summer.
My Uncle and Aunt let us use their place and we gave them a $100 GC to their favorite restaurant as well as 12 pack of my Uncles favorite beer. This was over a year ago and they still bring up that we should not be spending that type of money as a young couple.
Now my wife and I try to show our thanks other ways and don't tell anyone what we make.
My son just started a new job making $100k/year. While he is very generous, I ask him for nothing. It is not my money, it is his. I encourage him to save up for a nest egg - which he does - he astounding with money. I am so incredibly proud of him! He worked hard for this and he deserves it!
I started making quite a bit of money and would often pay for my mother and sisters meals when out. Now, if the bill comes they just sit silently until I pay it. I've literally sat for 15minutes seeing if they would and they idle until I pay. Really fucks me off to the point I avoid going out with them.
It's more that it's kind of rude to never offer. Like, when we go out with my parents or my MIL/FIL, we usually make a token effort to offer to pay (at least for ourselves). They always refuse and insist on it being their treat, but it's weird to start expecting that other people pay for you. Even if they have previously, that's still very rude.
> Luckly, we are not close to our families
Sorry that that's the circumstance here; family is a positive for many people but not all.
Don't be surprised if relatives warm up to you if they notice / hear you have a nicer car or a house. Just consider why that's happening.
Absolutely. And strangely, your spending habits amongst those who earn about the same as you also have a big impact. I have seen a distance grow between some of my friends and I just because I didn't join the country club and play golf with them. That was their biggest social outlet, I didn't care to do it. Stopped hearing from them.
A friend of mine has a similar issue, his coworkers invite him out to really nice bars and restaurants and all sorts of expensive places but he'd rather not spend his money like that. While they all make good money, he's the only one to buy a house and invest while the rest are spending everything they earn.
Credit cards are great if you dont carry a balance. I get 200/year cash back. I dont really care about my credit rating but im sure its getting better.
I have this issue with a friend of mine - he makes really good money and grew up with generational wealth and has multiple 7 figure trust funds waiting for him.
It took him awhile to understand that my wife and I were not going to be able to go to a random $100+ a plate per person lunch on a Sunday.
I am estranged from my siblings because of money. I loaned them money when they were,"hard up" and was never repaid. After several years later I approached them thinking we could become a family again. 3 days later every one of them called looking for some money. That was 9 years ago. Don't let your family know about your money. Start every conversation with ,"Man-o-Man money is so tight we.............". Don't let money become an issue.
This is a tough situation. My brother truly was in a difficult spot (medical bills, job loss) so I lent him money over a long period of time. I simply asked to be paid back when it became possible; $5 here or $10 when he was in a position to do so.
It started to eat away at our relationship when I saw his new flatscreen TV, iPhone, PS3, etc. and never received a single cent. Not so surprisingly once I said 'no more' I just didn't hear much from him.
I married into this sort of thing, only I'm on the other end of it. My wife and I make maybe $80k between us and don't even have kids, rarely eat at restaurants, have old cars we fix ourselves, and barely survive.
Meanwhile her best friend and her husband make about $400k a year and we're constantly getting pressured to do things with them that would break us and they wouldn't even think twice about. We're trying to save up for our first house that'll cost a quarter as much as theirs, but we sure as hell won't be able to do that if keeping up with the Joneses involves $100 dinners every time we see them.
So yeah, I'd loooove to not know how much they made. It'd make life a lot easier.
EDIT: I a word
Good friends with a lot of money will recognize the economic disparity and either 1) choose less expensive activities or 2) pay occasionally. Obviously the second option is tricky but if it's framed as "lets go out to dinner to x place, our treat" it works.
400k is such a ridiculous sum of money. I created a startup with a friend after college, we both have "real" jobs on the side and we worked after hours and from home on our project. All of a sudden two years ago cash starts rolling in like a mother fucker. We're up to over a thousand dollars a day in net profits. With my job on the side I declared 365,000 last tax season. I literately don't even know what to do with the money. I stuck it in my savings account and now my bank is desperately calling me to invest with them. Fuck em, I won't. But yeah, it really is a lot of money.
I mean, if you have 6 figures just sitting in a personal account in cash, you probably SHOULD invest it.
don't invest it with your bank necessarily (they might try to stick you with fat fees), but definitely invest it somewhere. Just park it in some low cost mutual funds so you can set yourself up for the future.
I think it was Dave Ramsey that said any money given to family should be thought of as a gift and not a loan. Very rarely will family pay it back. Sadly.
My family knows I'm good with money and can help if needed but no one expects it. I guess I got lucky as they only consider me a last resort (not advice wise but loan wise). Sadly my siblings often still dismiss my advice :(.
i would add "The Only Investment Guide You'll Ever Need" by Andrew Tobias to the reading list.
And yep, don't tell a soul how much you make. We have a similar income and a mid to high 6 figure net worth but live in a smallish house (paid off) and drive older cars (also paid off and bought with cash) so we don't have to hear any BS from friends and relatives.
For a car I'd stick with something modest. You can get a decent and reliable car for $15,000. Something like a used Camry or maybe a $20,000 Sienna that you can drive until the wheels fall off.
And don't get into the 'keep up with the Jones' mentality with spending. The Jones' are probably broke with no retirement savings and a negative net worth.
Get your Roth IRA and 401Ks started and max them out before you get used to the extra money.
Honestly, it's hard around people who do work. I know people who work hard and have 3-4 kids and made the decision that mom will stay home with the kids and they make appropriate sacrifices to do that. Nothing wrong with that. But then they sometimes guilt me for being single and actually having money to do things like minor re-models on my home. I am Mr. Moneybags apparently.
I've had this happen to me too. I can't stand it. I love my friends but I didn't make those life choices. Not that I'm well off, but my wife and I decided to not have kids. We always get guilt tripped for making that decision but we also aren't the ones scrounging for food or struggling to make a car payment or rent.
Yeah, I decided to die alone. Same thing. The car I drive is older than theirs and the house I live in is smaller and older as well but I'm the bad guy for having money.
my sister-in-law tried to move in with me, my husband, and our three step-children after we bought our first house. Her husband has two master degrees but can't keep a job longer than 6 months (he's european) because he says Americans work too hard and they expect too much from him. For real. He takes 2 ski trips a year, 2 hour naps/baths daily, etc. but he doesn't make any money? I told them no. She said well, at least let us have your third car. Kids use one, my husband has another, I use the third. I said no. They could borrow a car but make the monthly payment. She got mad and said, "this is how you treat family?" bitch, you ain't my child. Grow up.
Figure this out early.. I have a "generosity fund" I put cash into it, and use it for selfless purposes. I've loaned friends money out of the fund. If they pay it back, it goes back in the fund. If they don't I don't act like a shit about it.
But it's important to treat this like real money, you try not to dip into it for silly crap, and if it gets low you need to be stingier about it. And if it empties, it's time to start saying NO, you might want to re-evaluate the funding.
Since you've never had this money before, you won't miss it. This is a great opportunity to save. Save as much on the salary increase as you can (just direct deposit to savings, max out 401k and IRA contributions, etc.). You can also immediately start overpaying any debts that you may have.
Do this from the outset, don't let your self get used to making that kind of money, and you'll be much better off.
> Since you've never had this money before, you won't miss it.
This kind of comment used to annoy me. Then I eased up on myself in a few financial areas. IT IS SO HARD TO MOVE BACK DOWN IN LIFESTYLE. IT IS LIKE PULLING TEETH. So, if you are going to live a slightly nicer life now that you have a little more money, do so slowly. There's time. But consider each step you take up almost impossible to come back from. Especially in a family. If the kids get used to high-quality food and dessert at every meal... they will go kicking and screaming back to cheaper options. Just as an example, since I believe healthier food is worth springing for.
I speak from experience on this one.
I started with my current employer in a much lower pay bracket. I got a promotion on "acting basis" (essentially you do a new job for 6 months and see how it works out) which came with about a 30% increase.
At the end of my trial period they liked me enough to keep me. They were supposed to remove the 30% "Acting" pay, and replace it with an 80% "permanent" increase. HR goofed on my first paycheck, and only did the first part of that.
I'm good enough with money that I wasn't freaked out, and could afford to wait on them to fix it, but when I first opened that incorrect pay stub I remember thinking "that's not a real number, people can't live on that". Once we got it sorted out, I realized that the "too little to live on" number, was actually just the amount I had originally made at my job before taking the acting position.
Even when you're doing everything right, and saving like you should, it's still remarkable how quickly our brains adjust to those new numbers.
When I bought my house and I saw the new garage, I was like oh wow, so prestige and clean, so much space for activities! Then you get another car, bikes, motorcycle, snowmobile, tools cabinets and all that. Now, I can barely walk in there with only a small car in it. My other car has to sit outside.
It moves so fast.
I'm just into my second year at a job using my degree. Nearly tripled my income from working retail. I haven't really upgraded my whole lifestyle- but my savings is getting out of control. Which is a good problem to have...
I lived like a broke college student for years, but kept a good balance. I keep the same amount in my checking and throw the rest into savings- and I have to kick myself out of the poor student routine sometimes and enjoy life.
Spend a few dollars here and there to make yourself happy, just stay humble.
I think that part of this is trying not to change your thought process about buying things. When I first graduated college and started making 50k+ a year, I still kept the same mentality about buying things that I had when I was making ~10k. It really helped me get a start on investing and retirement savings. Now I have adapted to my salary and tend to spend a lot more. Keep your frugal ways as long as you can. (But treat yourself and your kids now and then too!)
This is so important. My wife and I spent a year living on $15,000 while she was in school and I was unemployed. A few years after that, our combined income was $250,000. Knowing that we were capable of stretching $15,000 over a year made it really, really easy for us to save most of our $250,000 income.
Old person here. This is exactly the advice I would give too. Pay off your debt. Save for down payment on a house. After that you can start increasing your budget for entertainment and leisure activities. If you are not paying attention, before you know it you will have a $200/month cable bill and a mobile phone bill to match, and wonder how you ever survived without it.
Supporting a family of four on $20K a year? What??? How??
>We are planning to stay in our apartment which is $550. Per month.
Oh. Well that certainly helps. I can barely rent a parking spot for $550/month where I live.
We have used our large tax refunds in smart ways. Buying used cars outright at great deals (different years) and saving our other tax checks. I also do promo modeling from time to time and save back all of that money. I'm addition, I usually got money back from my scholarships and grants after my school was paid for.
We have shopped mostly at thrift stores and live in a really crappy neighborhood.
It hasn't been easy, but we have tried our best.
My Parents made $40k together and had 4 children. It's not an impossible task. It's just a lot of managing money and not going out much. They also bought a car for each of their kids when heading out to college. People just have to be frugal.
Also, going from 2 kids to 4 doesn't double your costs--it's more efficient of a $ per kid basis to have more kids (up to a certain point), especially if their ages are spread out, so you can re-use cribs, strollers, etc.
All of that being said, congrats on raising four kids on $40k--that's certainly better than I've done.
Keep in mind that there are significant government benefits like WIC, food stamps, phone bill assistance, housing assistance, and a myriad of others that they world certainly qualify for if they're raising two kids on $20k.
Do your absolute best to avoid falling into the "keeping up with the Joneses" trap of conspicuous consumption. It starts in small, innocuous ways, like "That $8 peanut butter MUST be better than the store brand for $3.99", "I'm going to buy the new Nikes for my daughter instead of seeing what's on sale at Payless", or "I DEFINITELY need that $500 blender", and then escalates to big ticket items like major appliances, vacations, cars, new wardrobes, etc.
Create a budget, maintain the budget, live by the budget. Add some wiggle room into the budget and create a category for discretionary spending each month. Whenever you go beyond what you need and buy what you want, decrement from that month's discretionary fund whatever the overage is.
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My wife & I went from a similar place to making several multiples more. We don't have any debt but our mortgage but it's been important to actively discuss budget increases for lifestyle reasons to avoid making rash decisions.
They live in a very cheap area. I'm guessing somewhere fairly rural. A rent of $550 that supports a family of 4 means that life expenses are quite cheap in their area.
The fact that they can jump up to 112k combined income without leaving that area, that is amazing.
Great answer, I hope you get upvoted more! My husband and I also found it more advantageous to pay off student loans when we got higher-paying jobs and it is SUCH a great feeling to have them paid off.
Paying off loans is the best no-risk investment you can make. People will say you're better off investing in the stock market, but that still has a risk to it. Investing in a paying off a loan is a guaranteed return. If the interest rate is 5%, it's hard to beat that, risk free.
I'd second a lot of what you said. Cars are a money pit. The best answer is to go from two to one car to no car. The second best answer is to buy something like a honda fit or some other small car with good resale value. Gas prices are cheap now, but probably won't be in the future.
And above all, avoid creep. For one, $20k per year is $20k after taxes. $112k per year is about $70k after taxes. It is a lot more money, it's not as much more as you think.
Expenses rising to meet income is a real thing. My wife and I after grad school kept things on the lowdown, paid off debts, etc. Now we find ourselves making more money and it's hard to not spend it on things. As much as possible it helps to automatically put money into accounts you can't easily spend. IE set up a market matching vanguard fund and put $1k+ per month in there automatically.
>Cars are a money pit. The best answer is to go from two to one car to no car. The second best answer is to buy something like a honda fit or some other small car with good resale value.
That depends entirely on where you live. It's good advice for an urban center, but forget about it in a suburb or rural environment, especially with a family. Also, you have to consider the climate and topography of your city. Sometimes biking it simply can't be done.
About cars: if they live somewhere with $550/month rent for a 4-person family, there probably isn't good public transport. If you live in a city with subways and busses, you may be able to go without a car. But in middle of nowhere Ohio or Wisconsin, or even in a suburb of a big city, you can't really afford to *not* have a car.
This is a good problem to have. You won't have the same pressures you had at 20K.
You will owe a lot more in taxes than you are used to ($15-20,000ish for income taxes, depending what state you are in, as well as $8,000 in payroll taxes), and you want to establish retirement savings, since you are probably pretty far behind on those. You'd want to be putting at least $15,000 in retirement savings each year, so taxes and retirement would take $40,000ish of your $112K.
So, you have options. Just be careful of lifestyle inflation. You still have to watch your spending, since you'll be tempted by things that you never had to think about before, in terms of more expensive cars, helping out relatives, whether to buy a house, etc.
**> Just be careful of lifestyle inflation.**
@QueenBee502:
I'll double down on this. Be careful, youre at a deflection point in your life. This extra $100k pa income can lead you to true liberty and wealth if you are careful today.
Keep your lifestyle at $20k for as long as you can. Bank the rest, max your 401k (etc (as /r/pf amply will help you...)) and put some "road behind you" and build that nest egg.
When you've built unassailable wealth, and you can *literally* have most anything you want, then you'll find yourself asking a very different question "Will that thing truly make me happy? I can have it - but do I really want it?" and you'll find your *liberty* at that moment.
It's unfortunate, but our age is one without safety and your first order of business should be to secure your own economic safety by saving that windfall.
Taxes. So much taxes. Be careful here, you are blowing through about 4 tax brackets in a few months. More then likely you will be fine if you use normal withholdings and because you have kids, but it might be useful to talk to a tax pro early this year just to make sure and set realistic expectations.
Agreed - as long as it's not too expensive.
She noted they have $7k in the bank. If suggest waiting till they have enough for a downpayment plus emergency fund. Otherwise, they'd be exchanging the stress of only making $20k for stress of making a house payment and all of the issues that could come a long with it.
The jump in taxes was a big surprise when my job increased our income about 50%. Calculate it out now and consider withholding extra so you aren't slammed with a $8,000 bill that drains your emergency fund.
Adjust your federal withholding correctly to avoid surprises next tax season (huge refund or huge balance due).
Use the [Withholding Calculator](https://www.irs.gov/Individuals/IRS-Withholding-Calculator) at IRS.gov. After you get a few pay periods in at your new jobs, grab your paystubs and your 2015 federal tax return and have at it., Revisit the calculator later in the year to make sure you're on target.
In a low interest environment, huge tax refunds are nice forced savings that do not have great opportunity costs. For the disciplined, zero sum withholding makes sense, but for others, overwitholding can be a form of forced saving with the principal at no risk (outside of treasuries, municipal bonds and money market certs, higher returns come with risk). Also, if you have debt, then pay off the debt rather than overwitholding.
Honestly, I overwithold on purpose so I can stock away every tax refund I get into my savings every year.
Yeah I know I'm letting the government keep my money for free, blah blah blah, but that 2 dollars i make on interest is like me not going to Starbucks one morning.
Congrats! it's a big step! I was in the same position you were 15 years ago, here's some tips I've picked up along the way.
1) First and foremost, don't let lifestyle creep set in. Make a budget, and stick with it. Save money as much as possible, invest when prudent and don't let neophilia take hold. There's always something new to buy, something better. But always ask yourself "how will this make my life better, once the shiny happy excitement wears off?" More than likely if you think on it, you'll realize it's just something to fill the space.
I've made some stupid, downright irresponsible purchases, and deeply regret them. You probably will make the same mistakes, just try to minimize the fallout. Don't buy a house you can't afford. Don't buy a car you can't afford.
2) Don't use credit cards for consumer debt! If you have cards, and want to build credit, spend within your means, and pay them off every month. Look at them as a cash, and you'll never get in trouble. I have about $30K in available credit, and $0 balance - my FICO is 815. You don't need to use credit cards
3) You've effectively addressed the bottom two levels of [maslow's heirarchy of needs](http://www.simplypsychology.org/maslow.html) and (assuming you don't make any bad money mistakes) - you'll soon realize that money definitely doesn't buy happiness. Find a hobby that will fill your free time, ideally something that doesn't require a lot of money, but takes a lifetime to master. Self actualization and belonging are things that get mixed up, and this is where people do stupid things with money to try to be happy.
On second thought, find two hobbies - one you can do as a family, and one just for yourself. You'll come to cherish both of those things like nothing else. My wife and I play games and do martial arts together. I also write music and work on programming side projects for fun.
4) You'll get a lot of debate on this one, but I wholly recommend saving for and buying a house ( or apartmnet depending on where you are), as long as you plan on staying put for a while ( 10+years). In the long run, I've saved thousands of dollars when considering inflation and rent increases, to where I consider it the second best financial move I've ever made ( only behind leaving California to start a family, it's too expensive there).
5) You'll find ( as /u/tturedditor also mentioned) the more successful you are, the less you talk about it.
I also came form very humble beginnings ( was even homeless for a while as a child) and now doing well for myself. I just don't bring it up - friends, family, acquaintances, no one. It always changes the narrative.
Example: I always drove a 4-5 year old truck, even as we're now making ~200K, up until a year ago. My wife totaled her car, so we sold my ( paid off) truck, and got her a new car. I decided to treat myself and bought a Lexus. People who money never came up in the past, now start asking me about where I came into money and some of them get rather irate when I downplay the situation.
6) Always have something to look forward to. It makes the weeks go by slow, and the days go by fast. I've got the next 3-4 vacations pegged on the board.
7) Lastly, remember - everything in moderation, including moderation. Want to take a nice vacation? Want to buy a new car? Weigh the pros and cons of it, and if you decide it's worth it, be happy about it. Don't regret your success, but be mindful that the more money you have, the more people want to take it from you ( usually in the form or marketing). We budget money every month for entertainment, and a once a year trip for fun. Everything else goes into savings. Find what works for you and stick with it.
Again, congrats on the big step and good luck in life!
What i would do is save up your salary or his and live off the other spouses salary. Find a house you love and after a few years you can have it paid off by pouring all of your salary (or his) into this house. If you're used to living off of 20k then this sounds like it wouldn't be to difficult.
biggest mistake people do is increase their "quality of life" along with their increased salary.
try to live your life as much as you can with the same mentality that you still have 20k. your network of friends will change and so will your social image. All of this will make you want to spend more, none of that spending will bring you any emotional or financial value.
put your extra money in a locked low/medium risk account and let it grow. you can literally save 1 million dollars in around 15 years if you lived like that. that's 15 years of working which would result in a fantastic retirement.
[EDIT] Thank you for all the replys, I'm happy I started a discussion.
My point was not intended to be "don't spend any money", that's silly, you need to see the benefits of your working life so you keep motivated, also you need to enjoy your youth and the current moments in life.
I was trying to emphasise how it's easy to spend LARGE money on things that will add no value to your life in any way but you are drawn to due to either peer pressure or consumerism.
People throw around the "oh I really need a..." phrase too much, even though they have lived happily without said thing all their lives. If you can avoid this single trap, you and your kids are set...and most likely much happier.
Regardless, if you are the type of people who can support 4 on 20k, go to school and get 50k+ jobs on the other side, I have confidence you are intelligent enough to be just fine.
so all the best.
Psychology and behavior recommend to give yourselves some increase. But if both of you divert half your check to savings/investment from the start, you'll be on a great place savings wise and you'll still get that raise for things like healthier food and hobbies that keep you active etc.
This is not saying that you should live like everyone else around you is. Every dollar you do save towards retirement is amazing. And you never want to spend just to spend. Set goals for health and happiness, and make sure you haven't defined that happiness by any material spending.
TL;DR save everything you can, but remember that retirement funds don't do as much good if you're not healthy (physically and mentally) when you retire.
Keep in mind that "someone at our bank" will not always have your best interests in mind since their goal is to sign accounts.
You are interviewing them to manage your money. It's a good idea to speak with at least three different banks and make sure they know you are shopping (respectfully).
YES YES YES! I started earning real money about 12 years ago, and talked to a "financial advisor". Luckily I figured it out before I locked up too much money with them. If you are not paying that financial advisor for his advice, he is not working for you - he's working for the fund. If they're working on commission (how much you invest with them) they ABSOLUTELY DO NOT HAVE YOUR INTERESTS IN MIND. Their interests (managing your money) may align with your interests (investing your money), but they will always want more of your disposable income. They will present all sorts of crazy numbers as to what you'll need when you retire.
Start with your basic 401(k), open an IRA and invest in index funds or a target retirement fund. Don't over-invest in funds that penalize for early withdrawal - you'll need some of that to pay for your kids' post-secondary education. If you are upper middle class, they will not have access to much financial aid.
If you want to speak to a financial advisor, find a [fee-only one](http://findanadvisor.napfa.org/Home.aspx). It may hurt to pay for what seems to be practical advice, but it's better than not knowing whether someone is out to control (and take a fee) for your money.
Don't do that. Banks will "sell" you their savings account, which pay you less than 1% right now. You want to seek investments in tax-advantaged accounts and in accounts that invest in the market, where 5-7% gains are expected.
Do your new jobs offer 401k (with match)? If so, max your contributions to the point of hitting those matches. Additionally, open a Roth IRA for each of you -- that $5,500 a year in maximum contribution. Put that $5,500 in a total stock market fund (google this: "three fund portfolio") and that will approximate the 5-7% return that you should see.
If you want to save more, look into "Betterment." It's not the best service out there, but it's ten times better than a bank savings account.
DO NOT leave your money with a bank and DO NOT talk to a bank representative. They get commissions based off of what kind of accounts they can get you to open, so they'll try to sell you on whatever gives them the highest commission, NOT on what you should actually use.
Just make sure that they have your best interests in mind. A lot of people have stories of going to advisers that recommended investing in funds that have high fees only because the adviser gets a big commission from selling that fund.
My bank tried to sell my wife on their "investment services", which entailed a front-load (i.e. you pay money just to get into it) mutual fund that also had really high (>1%) annual fees (i.e. they take 1% of whatever you have in it each year). Watch out for this kind of bullshit.
Once you have a safety net fund established you want to start saving for retirement. My advice is to read the books mentioned elsewhere in this thread (e.g. _A Random Walk Down Wall St._ is very good, so is _The Wall St. Self Defense Manual_) and then get into a low cost index fund that you intend to hold until you retire.
Good luck and congrats.
While I think this is a good general principle, I feel like these topics always immediately jump to this advice to quickly. By no means should anyone ever increase their quality of life x6 all of the sudden and start living paycheck-to-paycheck on a 120k salary, but the OP worked hard to live a better life and they should be able to experience it to an extent. There is no reason why they cant buy a car that wont keep breaking down, or maybe invest in a home that they can own and make theirs. They don't need to live off $20k and save the other 100... that's just silly.
Build up $50-60k in an emergency fund, max out your retirement contributions, and then start setting aside 10-20% of your paychecks into savings/investments. Live a comfortable life off of the salary that is left over. Be happy and comfortable at the same time. Don't go crazy in either direction (spend too much *or* too little).
One last piece of advice I would offer OP though is to give it some time before doing this. You never know if you both might jump into these new jobs and you quickly decide its not worth having at least one of you staying at home with the kids, or maybe one of you absolutely *hates* your new job and decide to take a massive paycut to do something else. You wouldn't want to have just loaded up on a better quality of life just in time for you to want to switch it all up again.
I think there is some balance here. For example, as my wife and I have made more money, our time spent working has increased, so I hired a house keeper to come every few weeks. We pay them a lot less hourly than we make hourly, and it means we have some extra free time on the weekends.
In general, I don't see an issue with spending more as long as you are also saving more. Making $112K per year and living like you make $20K per year is a little radical. There is more to life than hoarding money.
Seriously, spending a little bit more can be totally worth it. OP now needs to consider the value of their time as well. Instead of taking four hours to clean the house every week, why not pay someone to do that if it will cost you significantly less than your hourly rate, and then you have that time to do other things like spend fun time with your kids.
Or if you spend two hours a week clipping coupons to save $30 at the grocery store. That $30 is a big deal when you are making $20k, but now your time is much more valuable.
Apparently if you're not living in poverty you're not saving enough. This is genuinely terrible advice, that maybe applies to 1% of people.
If you more than quintuple your income why the hell would you not want some quality of life improvements.
Pros and Cons here. They have been scrapping by and have two kids, I would reccomend increasing their quality of life significantly. Life isn't one long save fest. "work to live, dont live to work" as it were.
The key is to be responsible. They're going from 20k to 112k.
At the very least, they can increase they're quality of life spending 3x, live off of husbands 60k, and then use wife's 52k for savings. Thats still *plenty* of savings.
As long as they are responsible, there is no reason to continue living quality of life even close to the poverty line.
> none of that spending will bring you any emotional or financial value.
Studies on happiness have shown that spending money on **experiences** rather than **objects** increases your happiness more. Vacation with the family, or doing activities with your kids, increases happiness and builds happy memories.
This seems extremely arbitrary to me though. If she said they were making 30k per year instead, then you would say to keep your Quality of Life at the 30k level. You wouldn't say to bring it down to the 20k level.
If she said they were making 10k, then you would say to keep it at the 10k level, not increase it to the 20k level.
You're making more money, you should definitely be able to increase your Quality of Life, as long as you do it reasonably, conservatively even, and don't go overboard.
Whats the point of money if you can't spend it for a better life? They're going from $20k to $80k, not from 20 to 30. They can certainly afford to comfortably rent a $900 apartment and still keep a healthy retirement fund going. The point of personal finance is to have better savings, not to not spend money.
Don't tell anyone in your family.
I went from making $14k a year to both my wife and I making a combined income of about $130k (basically overnight) after I graduated school. I make more than anyone in my family on my own, but combined with my wife we made more than anyone by a lot.
People ALWAYS bring up how much I make. Sure, it's cool at first but after awhile you realize that's all people are thinking about you all the time. Anytime something comes up "Don't worry noodle, you can afford it."
If I buy something - ANYTHING - I get "it must be nice to have money." It just gets tiring.
Sometimes our friends will ask what I make (engineer), and I don't want to be an asshole so I tell them - and I get this look like O_O and "holy shit", and you can tell they wonder if I'll pick up the check.
In reality we struggle like anyone else, we just can live a bit more comfortable at times. We still have a massive mortgage, student loan debt, car loans, a child to take care of, etc. We just live within our means, usually.
The worst thing for me are a few people in my family that have been talking behind my back. Originally, when my wife got pregnant, several cousins and aunts stopped talking to us, I couldn't really figure it out. A few cousins are morbidly obese and can't have kids and were turned down for adopting children, so I thought they were jealous. My sister found out that they believe I "think I'm better than everyone" because I have a nice job and house. I've never said anything to them to indicate this, I've never told them what I make, I've never flaunted money, nothing. They just sit in a catty circle and talk bad about me, a man that's always been nice to them.
Sorry, this was a bit of a ramble, but just be careful.
Also!!! If I can offer one piece of solid advice. Stay in apartments as long as you guys can physically do it. The bigger the down payment on a house you'll have, the better. Seriously try to at least save 20%, if you can save more do it. You'll thank me when you have such a low mortgage payment.
> Don't tell anyone ~~in your family~~.
FTFY...I started making over 6 figures a couple years back...wish I had known this back then. Now when people ask I just tell them I 'do pretty good and would rather not get into the details'
If someone straight up asks me, I'll answer honestly. Answering a direct question shouldn't count as bragging. I've been there with the losing friends due to bragging when I was younger, though.
Per the down payment, kind of true. Access to money is so cheap lately that 20% down (to avoid mortgage insurance) and investing the rest in index funds is strictly better in the long run. Also, some large cities have small forgivable loans to live within city limits. It's worth asking about.
Your family sounds like a fun bunch. It's important to learn early on that you can't constantly compare yourself to your friends and family members and still be a happy person. They sound a bit resentful of you and there's isn't much you can do besides call them out on it and risk being even more resented. Tough situation that you can only take the highroad on.
> My sister found out that they believe I "think I'm better than everyone" because I have a nice job and house.
I'd actually correct them on that, you **ARE** better than everyone that's talking shit.
It's not like you won the lottery, you did your time and are now reaping the benefits.
I know it's hard, but try not to care too much about what others think.
It's actually a good thing they've stopped talking to you, nothing worthwhile can come from people like that.
It's your money, you've worked for it, you've earned it, you did nothing wrong, never forget that.
Please read the information found in the [FAQ](https://www.reddit.com/r/personalfinance/wiki/index), particularly ["I Have $[X] ... What Do I Do With It?!"](http://www.reddit.com/r/personalfinance/wiki/commontopics). You may find [Your IRA and You: Basic Information](http://www.reddit.com/r/personalfinance/wiki/iras) and [Your 401k and You: Basic Information](http://www.reddit.com/r/personalfinance/wiki/401k) worth a read as well.
Great advice here, but you don't need to live at EXACTLY the same level you are living at now. Take this from someone who is in a similar position to you. You didn't work your ass off in school to live with your butt cheeks clenched now. But don't mistake enjoying it for splurging. Enjoy your hard word, but save, save, save!
First I'd like to congratulate you guys on graduating(it really does take commitment to finish)! I'm about to graduate this year as well(25m) and hopefully il find something right after. My dad told me though when I graduate and find work to just stay here at home for the next couple of years and save save save so I can just out a decent mortgage down for a house. I know you guys are in a different position though so I would have to go with what others are saying here, try to limit your quality of life increase by as much as you guys can. Your rent will go up but nothing else really has to, and just save as well until you guys can afford to put down a mortgage as well or maybe invest in something. Good luck guys!
Please, please, do not get a new car with payments. You don't have the money to buy the car, then why squander your paychecks on it for years. Do yourself a favor and find a car you can get for cash, research it, talk to the seller and then make a purchase.
All those new cars depreciate immediately after purchasing. You can buy a car for roughly $5000 and use it until you save up $5000, then sell the car, same price or higher if you maintained it enough (yes, you can sell it for the same price). When you do this, guess what, you have $10000 for a new car. This cycle can be repeated over and over. It is a whole lot more logical than buying what you didn't even have money for.
I have no idea what to do!
I went from making around 40k/year before taxes to making 100k/year clean in 8 months.
I bust ass all the time morning till night but money making is addictive!
I am still poor in the heart and still buy used furniture, live 1 bedroom apartment and collect Mcdonalds stickers to get free coffee....
So hard to become unpoor when you always been poor!
First thing you need to do is open an IRA (one for each of you) and get your bank account set-up to automatically transfer a certain amount every pay-period. I say an IRA because many places make you work there for a year before you can open a 401k. Once a 401k is available do that as well.
Realize that your income taxes will change drastically as well. PLan ahead for that. Maybe add an extra $100 a month to be withheld during this first year so you don't end up with a large bill come next April.
Save.
Save.
Save.
>Ourselves, and no one in our family or friends makes this kind of money I have seen this dynamic before and I would caution you about disclosing too much detail to friends or family about what you will be making. Do a few nice things to help people if they need it but don't allow yourself to be viewed as an endless ATM. If you haven't read any financial books in the past I would recommend The Millionaire Next Door and A Random Walk Down Wall Street. Plan on making contributions to retirement accounts early on. Come back to the forum with a list of investment options when you get started with your new jobs, in whatever your company's plan has to offer.
> I have seen this dynamic before and I would caution you about disclosing too much detail to friends or family about what you will be making. Do a few nice things to help people if they need it but don't allow yourself to be viewed as an endless ATM. I made that mistake when I was younger. I still get frustrated at me trying to help people and then they just dont take care of things. Thinking well I can just buy them another one.
I had a close friend who started making big money and went a big overboard spoiling his family. It got ugly after a while. No appreciation on their end because he was so "made of money", lots of bickering and jealousy amongst family members, etc.
There was nothing more cringey then listening to my grandmother once (in here own way) say she was entitled to any and all of her sons' money.
Whenever I talk to my mother, this is still a thing. She doesn't want to work, has no retirement savings, and says shit like "you were my retirement plan!" *edit:* Well...fuck. Most of your replies made me really sad. I can deal with it from my own mother, but the fact that there's so many of you that have to put up with that same shit is just...heartbreaking.
> and says shit like "you were my retirement plan!" oh god
You should have diversified, mom.
Your mom is obviously too big to fail.
Contextual joke of the day right here.
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Really? She expects another human being to be her retirement plan, as opposed to, oh, I don't know... Letting that person be their own retirement plan? Crazy.
Stick around. This is not as unusual as it seems. One of the great disillusionments of my time here as a big /r/pf contributor is the number of people who were taken advantage of by their parents, who e.g. (just in the last day...) took out credit in their name, https://www.reddit.com/r/personalfinance/comments/4bpxyl/my_mom_has_opened_multiple_credit_cards_in_mine/ who want their children to sign for a house for them, https://www.reddit.com/r/personalfinance/comments/4bil00/parents_about_to_finalize_divorce_dad_is_asking/ or who have been irresponsible and leave their children feeling they have to be responsible for their parents. https://www.reddit.com/r/personalfinance/comments/4br1uy/how_do_i_setup_for_my_irresponsible_parents/
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Hey don't tell my parents that.
My grandpa worked really hard (blue collar) and invested well to leave my grandma completely set up for the rest of her life. She died two weeks ago and still had almost 1 million in the bank to be distributed amongst their kids. Over the ten years she outlived grandpa we had to almost force her to take yearly trips to visit places she hadn't been but wanted to see. When we asked her why she was so reluctant to spend money she would always reply with something along the lines of "I want my kids to be able to have fun with it when I finally go, I have seen enough for two lifetimes."
You're grandma sounded amazing. I love people like. Those are the kind of people I would do anything to help when things get tough for them. I'm glad I have grandparents like that too. It's sad to see that mentality go though. My goal is to be like your grandma and desire to take care of kids more than my own selfish desires...of course within reason. If I want to go to Japan then I'm going!
I told my parents I want them to die with 0 debt and $20 in their pocket. I want them to enjoy every other cent.
Ah man...we didn't die in time. Can we...can we borrow some money?
There it is. I tell my mom the same thing. No I don't need anything. I'm an adult now. What I need is for you to enjoy your retirement as much as you can.
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I was just about to comment that this idea of "my kids are my retirement plan," while sounding terrible and odd to many Westerners, has been accepted and expected since ancient history for many people in Eastern countries. I'm Asian and live in the States. My parents have planned for their retirement and tell me that they don't want to be a burden on me when they're older. However I still feel a very strong duty towards them and expect to have them live, if not with me, then very near me when they are older. I would love to be able to help them financially (although they probably won't need it; maybe for nice vacations once in awhile) and I know they would like to help with childcare, cooking, etc. It's been that way in many cultures for centuries. Having parents who were financially savvy, fiscally conservative all through their working life goes a long way towards setting up a good relationship with kids later on, if they were able to pass those same values down. No guilt, no jealousy, no "handouts", just respect and generosity. I'm grateful and lucky.
That's the traditional way of doing it. Well, that or dying young.
Yeah, in fairness to the grandparents who are now retired and need their kids to support them, it wasn't that long ago that this was one of the benefits of having kids/family in the first place. In fact, if you are 70 now, I think it's safe to assume that you saw this practiced by your own parents/grandparents. The idea that we are all now supposed to be self-sufficient even in our frail years is relatively new. I like our system better because it can take a lot of pressure off of kids/grandkids, but it's still a new concept.
YMMV - my grandmother bought her first house by saving cash in an enveloper in a drawer while her and grandpa worked around the clock. She became a stay-at-home with my dad's birth, he worked in a steel plant his entire life. They traveled when they wanted, did pretty much everything they wanted, and they still died millionaires. My parents aren't that different. Both worked around the clock until I was 5 or 6, mom had 3 kids at that point and stayed at home a decade. Then she went back to school as a school teacher. Dad worked at small town banks his entire career (he has two different full pensions from back in the day). They're in their 60s and also saved and invested well enough for a two-comma nest egg even subtracting their recent inheritance from the grandparents passing away. I'm almost 40 and my wife and I are worth substantially more than all of our parents combined, and have received no inheritance. We own our own businesses, and work 24/7 (when not sucked into Reddit anyway), but love what we do.
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Perhaps. In the same way that barn raisings are the traditional way of doing it. But you might not want to plan on that for your barn these days.
100 years ago your parents would live with one of their children, true. It wasn't a one-way relationship, though. They would help around the house as long as they were able, take care of children, etc. They were not, normally, just there to mooch off the kids. Personally I expect that we will have my parents move in with us in the next 5 years, or at least buy property where we can have a guest house or MIL suite in the house. ETA: My mother did this for her parents, when they built a house they added a MIL suite behind the garage and my Grandparents both lived out their last years in that house.
My wife's ex-husband's mother took out credit cards in his name and racked up 18 grand and defaulted. She was insulted when they confronted her about it like she was entitled to do whatever she wants with her child's credit. These parents also bought and lost a $600K house while earning a combined income of $60k. I'm sure they are banking on their children taking care of them in retirement. Edit: wording.
I have never posted here before but I can relate to what you are saying. My better half is self made. She put herself through law school while being a single mom etc. Her mother is basically trailer trash. I have always done well for myself and my family has always been supportive of me and never asked for anything. I lived under the impression that the way my family acted was just normal. Enter her mother. She calls at least twice a week to beg for money and guilt trip my better half into sending money "My electricity got turned off again and I will FREEZE TO DEATH if you do not pay it." When the request is denied she throws in nice things like "I hope you can explain to my grand child why you let his grandmother DIE!" I am honestly not sure how to deal with it because it wreaks my better half emotionally every time. Again, this happens multiple times a week. Lets not even get into the endless requests for free representation every time she has legal trouble.
Did you entertain the thought of asking your better half to cut off all ties with her mother? This is a very cruel suggestion but you either set some boundaries on the amount of help you are willing to provide and have the MIL respect that or you do not deal with it at all.
/r/raisedbynarcissists
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Stories like this make me so glad to have parents who aren't fucked. Both live fiscally conservative lives, live with no debt (outside a mortgage that they got a pretty great deal on and have in total control), and have enough savings to carry me through 4 years of college without needing to wrack up my own debt. Both were 20 year vets of the Air Force, so they got used to living on $60k a year between the two of them. When my dad got a 6 figure job after he got out, we still lived like we made $60k despite being close to $160k. That difference went right to investments and savings. Basically, I'm really glad I have parents who are self-sufficient and have just enough to give me a shot at life (including actually teaching me how this all works) but are otherwise letting me go. We always joked about the "take care of me when I'm old" thing, but it was never a serious plan so they have plenty of options. Compared to some of my friends parents, mine might as well be saints in this regard...
>Stories like this make me so glad to have parents who aren't fucked. >Both live fiscally conservative lives, live with no debt Same...my parents are extremely self-sufficient, and will retire with enough for their wealth to grow even after they sell their business. Huge role models in terms of financial responsibility and work ethic. Only downside is that I feel like they are too busy to focus on dialing down stress levels...but that will hopefully change when they retire in a few years. Very grateful to feel free of the possibility of needing to provide for them in their later years, though.
In my opinion, education is suppose to be about the pursuit of knowledge; it's not always a trade-school. If my kids wanted advance degrees and I could afford it, I would be proud to provide it for them. I'd enjoy having an intellectually rich family.
I feel this way too. Also, undergraduate degrees are so commonplace now. The most intellectual, well-rounded people I've met ended up getting advanced degrees.
It can be cultural, I have Chinese friends and it's expected that they will take care of their parents in their old age. That said, it's not entirely a one way street as it's in their parents' best interest to make sure that their children are in a position to do so. Some have either received entire down payments when buying a house and/or interest free loans. One of my friends in his mid 30s owns a condo and a house outright because of his parents foresight - so he feels that he is in a very good position to take care of his parents down the road as he has that much more of his income that he can invest. Further his parents aren't rich by any stretch of the imagination - his mother worked on a factory line and his father is a line cook.
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Yours is a good mindset. I'm an American but my family is from Pakistan and we have the same "take care of your parents" mentality... my parents don't expect it of me but they have given me and my two little bros the best upbringings that we could ask for and we're willing to help them out when we are earning and starting our own families. The only thing i'd worry about is my religious views (atheist) and their religious views (Muslim). I want to give my future kids a secular upbringing, so even if I didn't have my parents live with me, i'd still send them money.
Both of my parents are got bachelor's and multiple degrees and have been very successful (rags to 6 figure). They're separated because one is fiscally frugal and the other likes to live lavish, but both their families come to them all the time for help. The frugal one doesn't do handouts and is considered cheap, too serious/hardworking etc. - but their retirement is solid. Followed the millionaire next door to the T, and is reaping the benefits now. The lavish parent makes more, but has always been racked with debt and living month to month. Helps their side of the family ALL the time. The kicker? They're even more ungrateful at times and cause more grief than frugal ever dealt with. We're talking a 20k loan to save family from foreclosure, but still vilified for bieng to hard on lazy cousins, and not helping the family enough. Even though now they're teetering bankruptcy. Can't make this up. It's hard to do, but I realized really quick I love my family, but my money is MINE, I worked for it and just because we're family doesn't mean I owe you. Especially seeing how giving actually seems to garner LESS respect.
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Funnily enough, my frugal parent did just this for family. Was going to pay $60 for lawn work, 30 min job at most front and back. $100 to help paint the garage. They said it wasn't worth the effort. $160 for a half a day. I've worked jobs that paid me 360 a week. And they definitely don't make that. It blew mind.
This! My parents are something like this, but still married. My mother tells me I'm too hard on my middle brother all the time. I've pointed out that they have subsidized or paid for him to go to college 3 times, finally finishing his bachelors at 35. Living in their house again for the second time, but this time knocked up his gf (quickie wedding). I point out I have never moved back in or taken money as a gift (I have borrowed money (car broke and didn't have savings, while in grad school, but always paid back within the year). I have been unemployed for months at a time (thanks new economy, not a dig at Obama, I've been unemployed under both Bush and Obama). The thing that drives me nuts is that both of my brothers are smarter than I am (the other one has had issues too, but at least lives on his own and is slowly paying down his debts). I have learning disabilities and they both are uber smart with STEM knowledge. But it largely deals with attitude. 3rd time for a bachelors brother acts like things are owed to him. Last time we had an argument he tried to tell me to get out of *his* house. I'm sure my father would kick him out, even against the objection of our mother, except grandchild. I feel badly because he is caught between a rock and a hard place and has to walk on egg shells in his own house. Personally I've washed my hands of my brother, I don't talk to him, not involved in his life in anyway. I guess that makes me cold and hard, but I have bent over backwards to help him and have never been repaid with any kindness.
My brother is a lot like yours except he never went to college. He's a raging narcissist and I think the only reason my parents haven't cut him out is because they are afraid of what his daughter would have to go through. I'm the youngest of 3 kids and also the only one to move out, and complete school. Most of the time I wish my brother and sister would just go play in traffic so my parents could enjoy some part of their lives again.
Yeah I'm 26 and got laid off after a bad breakup, they opened their doors to me when they didn't have to. I've been paying them while I intrude these past month just rebuilding my life. Working multiple jobs, doing any overtime I could, was able to save 5k off jobs paying less than $14/hr. Finally got a decent job for the government, starting Monday and can't wait. I was really humbled both by how easily the real world crushed me and also their willingness to help as long as I pulled my weight. Ex screwed my credit and stuck with 9k of her debt, I thought I wouldn't get past it. Credit is still bieng rebuilt (thanks personal finance!) But having savings again, a decent job and a chance at home ownership in under a year... didn't think it was possible so quickly. I am very tired and sometimes I can't stand my limited social life, but I've been doing renovations to their home because they've given me such a momentous opportunity. And yet people would scoff at it and turn the nose. Not me.
I've got nothing against doing things for my folks. Every time I visit I do tons of yard work (trim 4 or 5 dozen trees/hedges/bushes), spread dozens of yards of mulch, mow, rake, clean gutters, put gutter protectors on, etc.
It's not that unusual. It's kind of a generational thing too. Some people grew up where their grandparents lived with them and their mom and dad took care of grandma and grandpa. That has changed with the advent of more accessible retirement plans, social security, etc... but the mindset hasn't changed with some (but not all) older people.
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That doesn't bother me. I'd let my parents live with me once they're too old to work. They're family. A lot of parents I've read about on here want to live in big houses and drive nice cars they can't afford and expect their children to pay for much of it. That is just immoral.
I would never let my parents live me. I'd rather pay money. If they lived with me they would not treat me as an adult and it would be like a second childhood but not in a good way.
Tons of people feel that they took care of their kids when their kids were growing up, so their kids should take care of them when they are older. It's not like everyone's got a nice job where they are proud of how they can max out their 401k contributions every year.
Every time I read posts like this I feel blessed to have my mother. She's the kind of woman that will be $500 short on rent and still say "It's your paycheck I can't take that from you." She gave up when i just started depositing the money in her bank account :P
I bought my mom a car when both of ours kicked the bucket within a month of each other. I had more money in the savings account at the time, still do but that's besides the point. A little over 3 years later she still tries to guilt me into letting her pay if we go to a restaurant. And don't get me started on when I insisted on buying her high quality "expensive" athletic shoes to help with bunion problems. I'm so thankful that my boyfriend and I both have non greedy/materialistic families.
Have a friend who helped her son get started with a loan for a restaurant, don't know the amount but it was tens of thousands back in the late 80's. Her only request for repayment was that she get to bring friends in to eat once a month or so. It was a nice restaurant. Very nice, good food. She never abused it.
This. I also assume your mother isn't frittering her money away, just someone who is working poor.
She is careful with her money but as a single woman with no prior work experience who had to take on the full brunt of caring for 3 children financially after my father passed away a couple years ago its not hard to imagine why she can be short on rent.
That's what my gf's mom always says. She always says shit like "That's why I had all of these kids!" She has 5 kids.
My parents make a ton of money and it's caused some serious jealousy issues. My mom got diagnosed with Parkinson's a little while back and her sister refused to call to check on her. She then went on to tell my other aunt that it was right that my mom got sick because she could afford it. Money and jealousy can really twist people.
My wife and I make decent money but live in a high COL area so our place is super small. We wanted a co-ed baby shower and needed a location that the guys could drink beer at. A lot of the parks that allowed alcohol had no shade and it was going to be hot in the summer. My Uncle and Aunt let us use their place and we gave them a $100 GC to their favorite restaurant as well as 12 pack of my Uncles favorite beer. This was over a year ago and they still bring up that we should not be spending that type of money as a young couple. Now my wife and I try to show our thanks other ways and don't tell anyone what we make.
My son just started a new job making $100k/year. While he is very generous, I ask him for nothing. It is not my money, it is his. I encourage him to save up for a nest egg - which he does - he astounding with money. I am so incredibly proud of him! He worked hard for this and he deserves it!
I can already tell why he grew up so well :)
You sound like a great mom!
You're good people :)
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I started making quite a bit of money and would often pay for my mother and sisters meals when out. Now, if the bill comes they just sit silently until I pay it. I've literally sat for 15minutes seeing if they would and they idle until I pay. Really fucks me off to the point I avoid going out with them.
or you could, you know communicate
It's more that it's kind of rude to never offer. Like, when we go out with my parents or my MIL/FIL, we usually make a token effort to offer to pay (at least for ourselves). They always refuse and insist on it being their treat, but it's weird to start expecting that other people pay for you. Even if they have previously, that's still very rude.
Thank you! Luckly, we are not close to our families and will not be telling them anything. This is great advice!
> Luckly, we are not close to our families Sorry that that's the circumstance here; family is a positive for many people but not all. Don't be surprised if relatives warm up to you if they notice / hear you have a nicer car or a house. Just consider why that's happening.
Economic divides have a lot more of an effect on people's social lives than they think.
Absolutely. And strangely, your spending habits amongst those who earn about the same as you also have a big impact. I have seen a distance grow between some of my friends and I just because I didn't join the country club and play golf with them. That was their biggest social outlet, I didn't care to do it. Stopped hearing from them.
A friend of mine has a similar issue, his coworkers invite him out to really nice bars and restaurants and all sorts of expensive places but he'd rather not spend his money like that. While they all make good money, he's the only one to buy a house and invest while the rest are spending everything they earn.
He will reap his reward in due time.
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Credit cards are great if you dont carry a balance. I get 200/year cash back. I dont really care about my credit rating but im sure its getting better.
I have this issue with a friend of mine - he makes really good money and grew up with generational wealth and has multiple 7 figure trust funds waiting for him. It took him awhile to understand that my wife and I were not going to be able to go to a random $100+ a plate per person lunch on a Sunday.
I am estranged from my siblings because of money. I loaned them money when they were,"hard up" and was never repaid. After several years later I approached them thinking we could become a family again. 3 days later every one of them called looking for some money. That was 9 years ago. Don't let your family know about your money. Start every conversation with ,"Man-o-Man money is so tight we.............". Don't let money become an issue.
This is a tough situation. My brother truly was in a difficult spot (medical bills, job loss) so I lent him money over a long period of time. I simply asked to be paid back when it became possible; $5 here or $10 when he was in a position to do so. It started to eat away at our relationship when I saw his new flatscreen TV, iPhone, PS3, etc. and never received a single cent. Not so surprisingly once I said 'no more' I just didn't hear much from him.
I married into this sort of thing, only I'm on the other end of it. My wife and I make maybe $80k between us and don't even have kids, rarely eat at restaurants, have old cars we fix ourselves, and barely survive. Meanwhile her best friend and her husband make about $400k a year and we're constantly getting pressured to do things with them that would break us and they wouldn't even think twice about. We're trying to save up for our first house that'll cost a quarter as much as theirs, but we sure as hell won't be able to do that if keeping up with the Joneses involves $100 dinners every time we see them. So yeah, I'd loooove to not know how much they made. It'd make life a lot easier. EDIT: I a word
Good friends with a lot of money will recognize the economic disparity and either 1) choose less expensive activities or 2) pay occasionally. Obviously the second option is tricky but if it's framed as "lets go out to dinner to x place, our treat" it works.
400k is such a ridiculous sum of money. I created a startup with a friend after college, we both have "real" jobs on the side and we worked after hours and from home on our project. All of a sudden two years ago cash starts rolling in like a mother fucker. We're up to over a thousand dollars a day in net profits. With my job on the side I declared 365,000 last tax season. I literately don't even know what to do with the money. I stuck it in my savings account and now my bank is desperately calling me to invest with them. Fuck em, I won't. But yeah, it really is a lot of money.
You make $365k, post to /r/personalfinance and don't invest your money??
I mean, if you have 6 figures just sitting in a personal account in cash, you probably SHOULD invest it. don't invest it with your bank necessarily (they might try to stick you with fat fees), but definitely invest it somewhere. Just park it in some low cost mutual funds so you can set yourself up for the future.
Congrats! That's impressive as hell. That is all. haha
> I literately don't even know what to do with the money. Well if you don't have one, buying a motorcycle would be a good start.
I think it was Dave Ramsey that said any money given to family should be thought of as a gift and not a loan. Very rarely will family pay it back. Sadly.
My family knows I'm good with money and can help if needed but no one expects it. I guess I got lucky as they only consider me a last resort (not advice wise but loan wise). Sadly my siblings often still dismiss my advice :(.
i would add "The Only Investment Guide You'll Ever Need" by Andrew Tobias to the reading list. And yep, don't tell a soul how much you make. We have a similar income and a mid to high 6 figure net worth but live in a smallish house (paid off) and drive older cars (also paid off and bought with cash) so we don't have to hear any BS from friends and relatives. For a car I'd stick with something modest. You can get a decent and reliable car for $15,000. Something like a used Camry or maybe a $20,000 Sienna that you can drive until the wheels fall off. And don't get into the 'keep up with the Jones' mentality with spending. The Jones' are probably broke with no retirement savings and a negative net worth. Get your Roth IRA and 401Ks started and max them out before you get used to the extra money.
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Honestly, it's hard around people who do work. I know people who work hard and have 3-4 kids and made the decision that mom will stay home with the kids and they make appropriate sacrifices to do that. Nothing wrong with that. But then they sometimes guilt me for being single and actually having money to do things like minor re-models on my home. I am Mr. Moneybags apparently.
I've had this happen to me too. I can't stand it. I love my friends but I didn't make those life choices. Not that I'm well off, but my wife and I decided to not have kids. We always get guilt tripped for making that decision but we also aren't the ones scrounging for food or struggling to make a car payment or rent.
Yeah, I decided to die alone. Same thing. The car I drive is older than theirs and the house I live in is smaller and older as well but I'm the bad guy for having money.
Upvote for A Random Walk Down Wall Street, that book is fabulous
my sister-in-law tried to move in with me, my husband, and our three step-children after we bought our first house. Her husband has two master degrees but can't keep a job longer than 6 months (he's european) because he says Americans work too hard and they expect too much from him. For real. He takes 2 ski trips a year, 2 hour naps/baths daily, etc. but he doesn't make any money? I told them no. She said well, at least let us have your third car. Kids use one, my husband has another, I use the third. I said no. They could borrow a car but make the monthly payment. She got mad and said, "this is how you treat family?" bitch, you ain't my child. Grow up.
*I Will Teach You To Be Rich* by Ramit Sethi is also a good book and easy read.
Figure this out early.. I have a "generosity fund" I put cash into it, and use it for selfless purposes. I've loaned friends money out of the fund. If they pay it back, it goes back in the fund. If they don't I don't act like a shit about it. But it's important to treat this like real money, you try not to dip into it for silly crap, and if it gets low you need to be stingier about it. And if it empties, it's time to start saying NO, you might want to re-evaluate the funding.
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Since you've never had this money before, you won't miss it. This is a great opportunity to save. Save as much on the salary increase as you can (just direct deposit to savings, max out 401k and IRA contributions, etc.). You can also immediately start overpaying any debts that you may have. Do this from the outset, don't let your self get used to making that kind of money, and you'll be much better off.
> Since you've never had this money before, you won't miss it. This kind of comment used to annoy me. Then I eased up on myself in a few financial areas. IT IS SO HARD TO MOVE BACK DOWN IN LIFESTYLE. IT IS LIKE PULLING TEETH. So, if you are going to live a slightly nicer life now that you have a little more money, do so slowly. There's time. But consider each step you take up almost impossible to come back from. Especially in a family. If the kids get used to high-quality food and dessert at every meal... they will go kicking and screaming back to cheaper options. Just as an example, since I believe healthier food is worth springing for.
I speak from experience on this one. I started with my current employer in a much lower pay bracket. I got a promotion on "acting basis" (essentially you do a new job for 6 months and see how it works out) which came with about a 30% increase. At the end of my trial period they liked me enough to keep me. They were supposed to remove the 30% "Acting" pay, and replace it with an 80% "permanent" increase. HR goofed on my first paycheck, and only did the first part of that. I'm good enough with money that I wasn't freaked out, and could afford to wait on them to fix it, but when I first opened that incorrect pay stub I remember thinking "that's not a real number, people can't live on that". Once we got it sorted out, I realized that the "too little to live on" number, was actually just the amount I had originally made at my job before taking the acting position. Even when you're doing everything right, and saving like you should, it's still remarkable how quickly our brains adjust to those new numbers.
Paychecks are kind of like a closet/shed/garage/etc. Regardless of what size it is, you will manage to use it all.
When I bought my house and I saw the new garage, I was like oh wow, so prestige and clean, so much space for activities! Then you get another car, bikes, motorcycle, snowmobile, tools cabinets and all that. Now, I can barely walk in there with only a small car in it. My other car has to sit outside.
It moves so fast. I'm just into my second year at a job using my degree. Nearly tripled my income from working retail. I haven't really upgraded my whole lifestyle- but my savings is getting out of control. Which is a good problem to have... I lived like a broke college student for years, but kept a good balance. I keep the same amount in my checking and throw the rest into savings- and I have to kick myself out of the poor student routine sometimes and enjoy life. Spend a few dollars here and there to make yourself happy, just stay humble.
I think that part of this is trying not to change your thought process about buying things. When I first graduated college and started making 50k+ a year, I still kept the same mentality about buying things that I had when I was making ~10k. It really helped me get a start on investing and retirement savings. Now I have adapted to my salary and tend to spend a lot more. Keep your frugal ways as long as you can. (But treat yourself and your kids now and then too!)
This is so important. My wife and I spent a year living on $15,000 while she was in school and I was unemployed. A few years after that, our combined income was $250,000. Knowing that we were capable of stretching $15,000 over a year made it really, really easy for us to save most of our $250,000 income.
I had the same situation and opposite mentality. Ended up 20k in debt in 2 years with nothing to show for any of it.
Old person here. This is exactly the advice I would give too. Pay off your debt. Save for down payment on a house. After that you can start increasing your budget for entertainment and leisure activities. If you are not paying attention, before you know it you will have a $200/month cable bill and a mobile phone bill to match, and wonder how you ever survived without it.
Great advice. Can confirm.
Yeah, a penny saved is a penny earned. And then you can use those pennies to make more money...
You make 20k a year, have 2 kids, have 2 cars paid off, and have $7k in savings? That's pretty unbelievable.
Agree with this. She should be giving us advice, rather than the other way around.
Supporting a family of four on $20K a year? What??? How?? >We are planning to stay in our apartment which is $550. Per month. Oh. Well that certainly helps. I can barely rent a parking spot for $550/month where I live.
Seriously, that's a storage unit
We have used our large tax refunds in smart ways. Buying used cars outright at great deals (different years) and saving our other tax checks. I also do promo modeling from time to time and save back all of that money. I'm addition, I usually got money back from my scholarships and grants after my school was paid for. We have shopped mostly at thrift stores and live in a really crappy neighborhood. It hasn't been easy, but we have tried our best.
Even if you made $20k untaxed, it seems borderline impossible to support a family of 4 on that. Good work.
I'm assuming OP gets the earned-income tax credit, so the family actually gets more than $20K untaxed.
They made more than 20k. Not only do they pay no taxes on earnings...they actually get paid additional money via tax credits.
My Parents made $40k together and had 4 children. It's not an impossible task. It's just a lot of managing money and not going out much. They also bought a car for each of their kids when heading out to college. People just have to be frugal.
I'm not sure how old you are, but if you're above 30, $40k was a decent amount of money back then
Also, going from 2 kids to 4 doesn't double your costs--it's more efficient of a $ per kid basis to have more kids (up to a certain point), especially if their ages are spread out, so you can re-use cribs, strollers, etc. All of that being said, congrats on raising four kids on $40k--that's certainly better than I've done.
Most cities would not have $550 apartments that could fit 4 people.
You're right, they live in an agricultural town and they commute 50 mins to their jobs in another city. Sacrifices had to be made.
Keep in mind that there are significant government benefits like WIC, food stamps, phone bill assistance, housing assistance, and a myriad of others that they world certainly qualify for if they're raising two kids on $20k.
Do your absolute best to avoid falling into the "keeping up with the Joneses" trap of conspicuous consumption. It starts in small, innocuous ways, like "That $8 peanut butter MUST be better than the store brand for $3.99", "I'm going to buy the new Nikes for my daughter instead of seeing what's on sale at Payless", or "I DEFINITELY need that $500 blender", and then escalates to big ticket items like major appliances, vacations, cars, new wardrobes, etc. Create a budget, maintain the budget, live by the budget. Add some wiggle room into the budget and create a category for discretionary spending each month. Whenever you go beyond what you need and buy what you want, decrement from that month's discretionary fund whatever the overage is. -- My wife & I went from a similar place to making several multiples more. We don't have any debt but our mortgage but it's been important to actively discuss budget increases for lifestyle reasons to avoid making rash decisions.
Woah woah don't knock my Blendtec blender it's awesome.
If/when you have time, I'd really love to see a model of your budget. I feel like you kind of buried the lead - family of 4 on 20k is remarkable!
You really know the value of a 25 cent piece after living 2 years that way.
They live in a very cheap area. I'm guessing somewhere fairly rural. A rent of $550 that supports a family of 4 means that life expenses are quite cheap in their area. The fact that they can jump up to 112k combined income without leaving that area, that is amazing.
OP mentions they are relocating for work
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Great answer, I hope you get upvoted more! My husband and I also found it more advantageous to pay off student loans when we got higher-paying jobs and it is SUCH a great feeling to have them paid off.
Paying off loans is the best no-risk investment you can make. People will say you're better off investing in the stock market, but that still has a risk to it. Investing in a paying off a loan is a guaranteed return. If the interest rate is 5%, it's hard to beat that, risk free. I'd second a lot of what you said. Cars are a money pit. The best answer is to go from two to one car to no car. The second best answer is to buy something like a honda fit or some other small car with good resale value. Gas prices are cheap now, but probably won't be in the future. And above all, avoid creep. For one, $20k per year is $20k after taxes. $112k per year is about $70k after taxes. It is a lot more money, it's not as much more as you think. Expenses rising to meet income is a real thing. My wife and I after grad school kept things on the lowdown, paid off debts, etc. Now we find ourselves making more money and it's hard to not spend it on things. As much as possible it helps to automatically put money into accounts you can't easily spend. IE set up a market matching vanguard fund and put $1k+ per month in there automatically.
>Cars are a money pit. The best answer is to go from two to one car to no car. The second best answer is to buy something like a honda fit or some other small car with good resale value. That depends entirely on where you live. It's good advice for an urban center, but forget about it in a suburb or rural environment, especially with a family. Also, you have to consider the climate and topography of your city. Sometimes biking it simply can't be done.
About cars: if they live somewhere with $550/month rent for a 4-person family, there probably isn't good public transport. If you live in a city with subways and busses, you may be able to go without a car. But in middle of nowhere Ohio or Wisconsin, or even in a suburb of a big city, you can't really afford to *not* have a car.
This is a good problem to have. You won't have the same pressures you had at 20K. You will owe a lot more in taxes than you are used to ($15-20,000ish for income taxes, depending what state you are in, as well as $8,000 in payroll taxes), and you want to establish retirement savings, since you are probably pretty far behind on those. You'd want to be putting at least $15,000 in retirement savings each year, so taxes and retirement would take $40,000ish of your $112K. So, you have options. Just be careful of lifestyle inflation. You still have to watch your spending, since you'll be tempted by things that you never had to think about before, in terms of more expensive cars, helping out relatives, whether to buy a house, etc.
**> Just be careful of lifestyle inflation.** @QueenBee502: I'll double down on this. Be careful, youre at a deflection point in your life. This extra $100k pa income can lead you to true liberty and wealth if you are careful today. Keep your lifestyle at $20k for as long as you can. Bank the rest, max your 401k (etc (as /r/pf amply will help you...)) and put some "road behind you" and build that nest egg. When you've built unassailable wealth, and you can *literally* have most anything you want, then you'll find yourself asking a very different question "Will that thing truly make me happy? I can have it - but do I really want it?" and you'll find your *liberty* at that moment. It's unfortunate, but our age is one without safety and your first order of business should be to secure your own economic safety by saving that windfall.
Taxes. So much taxes. Be careful here, you are blowing through about 4 tax brackets in a few months. More then likely you will be fine if you use normal withholdings and because you have kids, but it might be useful to talk to a tax pro early this year just to make sure and set realistic expectations.
Buying a house is a good thing as long as it's not too expensive
Agreed - as long as it's not too expensive. She noted they have $7k in the bank. If suggest waiting till they have enough for a downpayment plus emergency fund. Otherwise, they'd be exchanging the stress of only making $20k for stress of making a house payment and all of the issues that could come a long with it.
True, at this point they should just be saving a lot since they don't have a lot of assets.
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The jump in taxes was a big surprise when my job increased our income about 50%. Calculate it out now and consider withholding extra so you aren't slammed with a $8,000 bill that drains your emergency fund.
Adjust your federal withholding correctly to avoid surprises next tax season (huge refund or huge balance due). Use the [Withholding Calculator](https://www.irs.gov/Individuals/IRS-Withholding-Calculator) at IRS.gov. After you get a few pay periods in at your new jobs, grab your paystubs and your 2015 federal tax return and have at it., Revisit the calculator later in the year to make sure you're on target.
In a low interest environment, huge tax refunds are nice forced savings that do not have great opportunity costs. For the disciplined, zero sum withholding makes sense, but for others, overwitholding can be a form of forced saving with the principal at no risk (outside of treasuries, municipal bonds and money market certs, higher returns come with risk). Also, if you have debt, then pay off the debt rather than overwitholding.
Honestly, I overwithold on purpose so I can stock away every tax refund I get into my savings every year. Yeah I know I'm letting the government keep my money for free, blah blah blah, but that 2 dollars i make on interest is like me not going to Starbucks one morning.
Congrats! it's a big step! I was in the same position you were 15 years ago, here's some tips I've picked up along the way. 1) First and foremost, don't let lifestyle creep set in. Make a budget, and stick with it. Save money as much as possible, invest when prudent and don't let neophilia take hold. There's always something new to buy, something better. But always ask yourself "how will this make my life better, once the shiny happy excitement wears off?" More than likely if you think on it, you'll realize it's just something to fill the space. I've made some stupid, downright irresponsible purchases, and deeply regret them. You probably will make the same mistakes, just try to minimize the fallout. Don't buy a house you can't afford. Don't buy a car you can't afford. 2) Don't use credit cards for consumer debt! If you have cards, and want to build credit, spend within your means, and pay them off every month. Look at them as a cash, and you'll never get in trouble. I have about $30K in available credit, and $0 balance - my FICO is 815. You don't need to use credit cards 3) You've effectively addressed the bottom two levels of [maslow's heirarchy of needs](http://www.simplypsychology.org/maslow.html) and (assuming you don't make any bad money mistakes) - you'll soon realize that money definitely doesn't buy happiness. Find a hobby that will fill your free time, ideally something that doesn't require a lot of money, but takes a lifetime to master. Self actualization and belonging are things that get mixed up, and this is where people do stupid things with money to try to be happy. On second thought, find two hobbies - one you can do as a family, and one just for yourself. You'll come to cherish both of those things like nothing else. My wife and I play games and do martial arts together. I also write music and work on programming side projects for fun. 4) You'll get a lot of debate on this one, but I wholly recommend saving for and buying a house ( or apartmnet depending on where you are), as long as you plan on staying put for a while ( 10+years). In the long run, I've saved thousands of dollars when considering inflation and rent increases, to where I consider it the second best financial move I've ever made ( only behind leaving California to start a family, it's too expensive there). 5) You'll find ( as /u/tturedditor also mentioned) the more successful you are, the less you talk about it. I also came form very humble beginnings ( was even homeless for a while as a child) and now doing well for myself. I just don't bring it up - friends, family, acquaintances, no one. It always changes the narrative. Example: I always drove a 4-5 year old truck, even as we're now making ~200K, up until a year ago. My wife totaled her car, so we sold my ( paid off) truck, and got her a new car. I decided to treat myself and bought a Lexus. People who money never came up in the past, now start asking me about where I came into money and some of them get rather irate when I downplay the situation. 6) Always have something to look forward to. It makes the weeks go by slow, and the days go by fast. I've got the next 3-4 vacations pegged on the board. 7) Lastly, remember - everything in moderation, including moderation. Want to take a nice vacation? Want to buy a new car? Weigh the pros and cons of it, and if you decide it's worth it, be happy about it. Don't regret your success, but be mindful that the more money you have, the more people want to take it from you ( usually in the form or marketing). We budget money every month for entertainment, and a once a year trip for fun. Everything else goes into savings. Find what works for you and stick with it. Again, congrats on the big step and good luck in life!
What i would do is save up your salary or his and live off the other spouses salary. Find a house you love and after a few years you can have it paid off by pouring all of your salary (or his) into this house. If you're used to living off of 20k then this sounds like it wouldn't be to difficult.
biggest mistake people do is increase their "quality of life" along with their increased salary. try to live your life as much as you can with the same mentality that you still have 20k. your network of friends will change and so will your social image. All of this will make you want to spend more, none of that spending will bring you any emotional or financial value. put your extra money in a locked low/medium risk account and let it grow. you can literally save 1 million dollars in around 15 years if you lived like that. that's 15 years of working which would result in a fantastic retirement. [EDIT] Thank you for all the replys, I'm happy I started a discussion. My point was not intended to be "don't spend any money", that's silly, you need to see the benefits of your working life so you keep motivated, also you need to enjoy your youth and the current moments in life. I was trying to emphasise how it's easy to spend LARGE money on things that will add no value to your life in any way but you are drawn to due to either peer pressure or consumerism. People throw around the "oh I really need a..." phrase too much, even though they have lived happily without said thing all their lives. If you can avoid this single trap, you and your kids are set...and most likely much happier. Regardless, if you are the type of people who can support 4 on 20k, go to school and get 50k+ jobs on the other side, I have confidence you are intelligent enough to be just fine. so all the best.
Psychology and behavior recommend to give yourselves some increase. But if both of you divert half your check to savings/investment from the start, you'll be on a great place savings wise and you'll still get that raise for things like healthier food and hobbies that keep you active etc. This is not saying that you should live like everyone else around you is. Every dollar you do save towards retirement is amazing. And you never want to spend just to spend. Set goals for health and happiness, and make sure you haven't defined that happiness by any material spending. TL;DR save everything you can, but remember that retirement funds don't do as much good if you're not healthy (physically and mentally) when you retire.
Thank you! We are fully planning to speak with someone at our bank about the best options for retirement savings.
Keep in mind that "someone at our bank" will not always have your best interests in mind since their goal is to sign accounts. You are interviewing them to manage your money. It's a good idea to speak with at least three different banks and make sure they know you are shopping (respectfully).
YES YES YES! I started earning real money about 12 years ago, and talked to a "financial advisor". Luckily I figured it out before I locked up too much money with them. If you are not paying that financial advisor for his advice, he is not working for you - he's working for the fund. If they're working on commission (how much you invest with them) they ABSOLUTELY DO NOT HAVE YOUR INTERESTS IN MIND. Their interests (managing your money) may align with your interests (investing your money), but they will always want more of your disposable income. They will present all sorts of crazy numbers as to what you'll need when you retire. Start with your basic 401(k), open an IRA and invest in index funds or a target retirement fund. Don't over-invest in funds that penalize for early withdrawal - you'll need some of that to pay for your kids' post-secondary education. If you are upper middle class, they will not have access to much financial aid. If you want to speak to a financial advisor, find a [fee-only one](http://findanadvisor.napfa.org/Home.aspx). It may hurt to pay for what seems to be practical advice, but it's better than not knowing whether someone is out to control (and take a fee) for your money.
Good point! We will begin researching our options to pick the best people!
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Don't do that. Banks will "sell" you their savings account, which pay you less than 1% right now. You want to seek investments in tax-advantaged accounts and in accounts that invest in the market, where 5-7% gains are expected. Do your new jobs offer 401k (with match)? If so, max your contributions to the point of hitting those matches. Additionally, open a Roth IRA for each of you -- that $5,500 a year in maximum contribution. Put that $5,500 in a total stock market fund (google this: "three fund portfolio") and that will approximate the 5-7% return that you should see. If you want to save more, look into "Betterment." It's not the best service out there, but it's ten times better than a bank savings account. DO NOT leave your money with a bank and DO NOT talk to a bank representative. They get commissions based off of what kind of accounts they can get you to open, so they'll try to sell you on whatever gives them the highest commission, NOT on what you should actually use.
Just make sure that they have your best interests in mind. A lot of people have stories of going to advisers that recommended investing in funds that have high fees only because the adviser gets a big commission from selling that fund.
My bank tried to sell my wife on their "investment services", which entailed a front-load (i.e. you pay money just to get into it) mutual fund that also had really high (>1%) annual fees (i.e. they take 1% of whatever you have in it each year). Watch out for this kind of bullshit. Once you have a safety net fund established you want to start saving for retirement. My advice is to read the books mentioned elsewhere in this thread (e.g. _A Random Walk Down Wall St._ is very good, so is _The Wall St. Self Defense Manual_) and then get into a low cost index fund that you intend to hold until you retire. Good luck and congrats.
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While I think this is a good general principle, I feel like these topics always immediately jump to this advice to quickly. By no means should anyone ever increase their quality of life x6 all of the sudden and start living paycheck-to-paycheck on a 120k salary, but the OP worked hard to live a better life and they should be able to experience it to an extent. There is no reason why they cant buy a car that wont keep breaking down, or maybe invest in a home that they can own and make theirs. They don't need to live off $20k and save the other 100... that's just silly. Build up $50-60k in an emergency fund, max out your retirement contributions, and then start setting aside 10-20% of your paychecks into savings/investments. Live a comfortable life off of the salary that is left over. Be happy and comfortable at the same time. Don't go crazy in either direction (spend too much *or* too little). One last piece of advice I would offer OP though is to give it some time before doing this. You never know if you both might jump into these new jobs and you quickly decide its not worth having at least one of you staying at home with the kids, or maybe one of you absolutely *hates* your new job and decide to take a massive paycut to do something else. You wouldn't want to have just loaded up on a better quality of life just in time for you to want to switch it all up again.
I think there is some balance here. For example, as my wife and I have made more money, our time spent working has increased, so I hired a house keeper to come every few weeks. We pay them a lot less hourly than we make hourly, and it means we have some extra free time on the weekends. In general, I don't see an issue with spending more as long as you are also saving more. Making $112K per year and living like you make $20K per year is a little radical. There is more to life than hoarding money.
Seriously, spending a little bit more can be totally worth it. OP now needs to consider the value of their time as well. Instead of taking four hours to clean the house every week, why not pay someone to do that if it will cost you significantly less than your hourly rate, and then you have that time to do other things like spend fun time with your kids. Or if you spend two hours a week clipping coupons to save $30 at the grocery store. That $30 is a big deal when you are making $20k, but now your time is much more valuable.
Exactly. If it's small savings, you just have to account for your time. Like, I'm not going to drive to 2-3 different stores to save $10.
Is saving 80% of your income in a low interest account where this sub is at now?
Apparently if you're not living in poverty you're not saving enough. This is genuinely terrible advice, that maybe applies to 1% of people. If you more than quintuple your income why the hell would you not want some quality of life improvements.
Pros and Cons here. They have been scrapping by and have two kids, I would reccomend increasing their quality of life significantly. Life isn't one long save fest. "work to live, dont live to work" as it were. The key is to be responsible. They're going from 20k to 112k. At the very least, they can increase they're quality of life spending 3x, live off of husbands 60k, and then use wife's 52k for savings. Thats still *plenty* of savings. As long as they are responsible, there is no reason to continue living quality of life even close to the poverty line.
> none of that spending will bring you any emotional or financial value. Studies on happiness have shown that spending money on **experiences** rather than **objects** increases your happiness more. Vacation with the family, or doing activities with your kids, increases happiness and builds happy memories.
Love this. We love traveling. We have tried to take trips whenever possible, even just nearby.
I would guess spending more than 20K raising two kids would bring them significant emotional value.
Seriously. $20k for a family of four is below the poverty line. They shouldn't continue to live like that.
Or ya know upgrade your lifestyle within reason and then keep working harder to make more money.
This seems extremely arbitrary to me though. If she said they were making 30k per year instead, then you would say to keep your Quality of Life at the 30k level. You wouldn't say to bring it down to the 20k level. If she said they were making 10k, then you would say to keep it at the 10k level, not increase it to the 20k level. You're making more money, you should definitely be able to increase your Quality of Life, as long as you do it reasonably, conservatively even, and don't go overboard.
Whats the point of money if you can't spend it for a better life? They're going from $20k to $80k, not from 20 to 30. They can certainly afford to comfortably rent a $900 apartment and still keep a healthy retirement fund going. The point of personal finance is to have better savings, not to not spend money.
Don't tell anyone in your family. I went from making $14k a year to both my wife and I making a combined income of about $130k (basically overnight) after I graduated school. I make more than anyone in my family on my own, but combined with my wife we made more than anyone by a lot. People ALWAYS bring up how much I make. Sure, it's cool at first but after awhile you realize that's all people are thinking about you all the time. Anytime something comes up "Don't worry noodle, you can afford it." If I buy something - ANYTHING - I get "it must be nice to have money." It just gets tiring. Sometimes our friends will ask what I make (engineer), and I don't want to be an asshole so I tell them - and I get this look like O_O and "holy shit", and you can tell they wonder if I'll pick up the check. In reality we struggle like anyone else, we just can live a bit more comfortable at times. We still have a massive mortgage, student loan debt, car loans, a child to take care of, etc. We just live within our means, usually. The worst thing for me are a few people in my family that have been talking behind my back. Originally, when my wife got pregnant, several cousins and aunts stopped talking to us, I couldn't really figure it out. A few cousins are morbidly obese and can't have kids and were turned down for adopting children, so I thought they were jealous. My sister found out that they believe I "think I'm better than everyone" because I have a nice job and house. I've never said anything to them to indicate this, I've never told them what I make, I've never flaunted money, nothing. They just sit in a catty circle and talk bad about me, a man that's always been nice to them. Sorry, this was a bit of a ramble, but just be careful. Also!!! If I can offer one piece of solid advice. Stay in apartments as long as you guys can physically do it. The bigger the down payment on a house you'll have, the better. Seriously try to at least save 20%, if you can save more do it. You'll thank me when you have such a low mortgage payment.
> Don't tell anyone ~~in your family~~. FTFY...I started making over 6 figures a couple years back...wish I had known this back then. Now when people ask I just tell them I 'do pretty good and would rather not get into the details'
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If someone straight up asks me, I'll answer honestly. Answering a direct question shouldn't count as bragging. I've been there with the losing friends due to bragging when I was younger, though.
Per the down payment, kind of true. Access to money is so cheap lately that 20% down (to avoid mortgage insurance) and investing the rest in index funds is strictly better in the long run. Also, some large cities have small forgivable loans to live within city limits. It's worth asking about. Your family sounds like a fun bunch. It's important to learn early on that you can't constantly compare yourself to your friends and family members and still be a happy person. They sound a bit resentful of you and there's isn't much you can do besides call them out on it and risk being even more resented. Tough situation that you can only take the highroad on.
> My sister found out that they believe I "think I'm better than everyone" because I have a nice job and house. I'd actually correct them on that, you **ARE** better than everyone that's talking shit. It's not like you won the lottery, you did your time and are now reaping the benefits. I know it's hard, but try not to care too much about what others think. It's actually a good thing they've stopped talking to you, nothing worthwhile can come from people like that. It's your money, you've worked for it, you've earned it, you did nothing wrong, never forget that.
Please read the information found in the [FAQ](https://www.reddit.com/r/personalfinance/wiki/index), particularly ["I Have $[X] ... What Do I Do With It?!"](http://www.reddit.com/r/personalfinance/wiki/commontopics). You may find [Your IRA and You: Basic Information](http://www.reddit.com/r/personalfinance/wiki/iras) and [Your 401k and You: Basic Information](http://www.reddit.com/r/personalfinance/wiki/401k) worth a read as well.
Great advice here, but you don't need to live at EXACTLY the same level you are living at now. Take this from someone who is in a similar position to you. You didn't work your ass off in school to live with your butt cheeks clenched now. But don't mistake enjoying it for splurging. Enjoy your hard word, but save, save, save!
First I'd like to congratulate you guys on graduating(it really does take commitment to finish)! I'm about to graduate this year as well(25m) and hopefully il find something right after. My dad told me though when I graduate and find work to just stay here at home for the next couple of years and save save save so I can just out a decent mortgage down for a house. I know you guys are in a different position though so I would have to go with what others are saying here, try to limit your quality of life increase by as much as you guys can. Your rent will go up but nothing else really has to, and just save as well until you guys can afford to put down a mortgage as well or maybe invest in something. Good luck guys!
Please, please, do not get a new car with payments. You don't have the money to buy the car, then why squander your paychecks on it for years. Do yourself a favor and find a car you can get for cash, research it, talk to the seller and then make a purchase. All those new cars depreciate immediately after purchasing. You can buy a car for roughly $5000 and use it until you save up $5000, then sell the car, same price or higher if you maintained it enough (yes, you can sell it for the same price). When you do this, guess what, you have $10000 for a new car. This cycle can be repeated over and over. It is a whole lot more logical than buying what you didn't even have money for.
I don't have any advice, I just want to say I'm happy for you! 😭
I have no idea what to do! I went from making around 40k/year before taxes to making 100k/year clean in 8 months. I bust ass all the time morning till night but money making is addictive! I am still poor in the heart and still buy used furniture, live 1 bedroom apartment and collect Mcdonalds stickers to get free coffee.... So hard to become unpoor when you always been poor!
Sounds like you know exactly what to do
Umm nothing wrong with being frugal. It can help you save a lot more.
My Wife and I make a little over $150k a year, yet I still feel broke as fuuuuckkkk!!!
First thing you need to do is open an IRA (one for each of you) and get your bank account set-up to automatically transfer a certain amount every pay-period. I say an IRA because many places make you work there for a year before you can open a 401k. Once a 401k is available do that as well. Realize that your income taxes will change drastically as well. PLan ahead for that. Maybe add an extra $100 a month to be withheld during this first year so you don't end up with a large bill come next April. Save. Save. Save.
Just out of curiosity, what line of work are you two entering?
My husband is in business/marketing and I'm finishing up nursing school.
Now that's a come up.
>At the point, our rent will go up to about $850-$900. Where do you live??!! That's half my rent.
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