Can a <median household save 1 year of expenses every year?

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Glockenspiel
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Can a <median household save 1 year of expenses every year?

Post by Glockenspiel » Mon May 14, 2018 3:58 pm

Is there anyone here, in this forum, that lives in a household making less than $59,000 gross income per year that saves as much money as they spend, every year?

soccerrules
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Re: Can a <median household save 1 year of expenses every year?

Post by soccerrules » Mon May 14, 2018 4:05 pm

interesting question. I assume you would get more YES's on MM than on BH, I could be wrong.

The lower the income below $59K the harder to accomplish the 50/50 split.

One option might be an individual (young grad) that lives with parents and is able to sock away at least 50% of Income. Technically "a household", right ?
Don't let your outflow exceed your income or your upkeep will be your downfall.

chillyuber
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Re: Can a <median household save 1 year of expenses every year?

Post by chillyuber » Mon May 14, 2018 4:12 pm

What does it matter how much you save relative to your current expenses? Expenses are dynamic and change over time. They may start off low, then increase with children, before going back down again into retirement. Additionally, how do you define "saving"? If i took a 5 year loan on a house and tied all my money up for 5 years making the payment, would you consider that saving or spending? I would say saving since at the end of 5 years I would own the house free and clear and not have a rent payment.

If you want to get rich, the way to do that is to increase your net worth. A high income provides greater potential for net worth growth. Therefore if you want to get rich you should focus not only on saving but also on getting a higher income.

Glockenspiel
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Re: Can a <median household save 1 year of expenses every year?

Post by Glockenspiel » Mon May 14, 2018 4:17 pm

viewtopic.php?p=3927245#p3927245

The reason for the question is related to a statement made in this thread.


Glockenspiel wrote: ↑Mon May 14, 2018 3:41 pm
chillyuber wrote: ↑Mon May 14, 2018 2:40 pm
KlangFool wrote: ↑Sat May 12, 2018 10:08 am

+1. Every time I see this I think this is a person completely removed from the universe that real people live in. For ANYONE making less than the median household income, this is impossible.


Glockenspiel,

You should start a topic and ask. We have quite a few of those people in this forum.

KlangFool

marcopolo
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Re: Can a <median household save 1 year of expenses every year?

Post by marcopolo » Mon May 14, 2018 4:48 pm

Glockenspiel wrote:
Mon May 14, 2018 3:58 pm
Is there anyone here, in this forum, that lives in a household making less than $59,000 gross income per year that saves as much money as they spend, every year?
I guess there are some people who are able to do this. After all, there are families that survive on $30k/yr income, so it is possible.
It also probably depends on what stage in life you are, kids? house paid off, etc.

Remember you are getting that rule from someone making $150k/yr. Not sure if he was doing that if/when earning $60k/yr.

I agree with the other comments that it is A LOT easier to do when income is higher. At least for me, it also helped to have started out at a modest income level, established a certain lifestyle, then as income grew, did not really ratchet up spending. This allowed a number years where savings was 3-4x spending levels.
Once in a while you get shown the light, in the strangest of places if you look at it right.

chevca
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Re: Can a <median household save 1 year of expenses every year?

Post by chevca » Mon May 14, 2018 5:00 pm

A better question is, would anyone making that feel comfortable commenting on this thread in Bogleheads?

I would guess that might be pretty intimidating and I'd be surprised if they chimed in. I mean when you see folks posting about making hundreds of thousands a year and saving well over the median income just because they can....

DW and I are a good bit over the median income line and probably come close to saving what we spend each year. I would imagine though when talking below the median income level... especially in a mid to HCOL area. Just covering basic expenses might not leave much for saving in some or most areas at the median income level and below.

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Smorgasbord
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Re: Can a <median household save 1 year of expenses every year?

Post by Smorgasbord » Mon May 14, 2018 5:14 pm

In grad school I was making about $19,000 a year and was investing $8400 a year ($700 a month). Assuming I spent everything else, that would mean I was saving a year's worth of expenses every 15 months, so I was close to the hypothetical situation. Had I not bought a $4000 TV, or taken up aviation as a hobby, I probably could have made it down to the 12 month mark. :oops:

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Re: Can a <median household save 1 year of expenses every year?

Post by enclee » Mon May 14, 2018 6:29 pm

As someone commenting in that linked thread, I did save half of my income in 2017, but I was on deployment. I see it as a struggle for an individual with mid-range income levels, and especially so if they have to cover their own health insurance. I think a lot of people here take for granted, their employer covering their health benefits.

It’s my goal for the future to project out my expenses and save at least that much.

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Re: Can a <median household save 1 year of expenses every year?

Post by stoptothink » Mon May 14, 2018 6:31 pm

Glockenspiel wrote:
Mon May 14, 2018 3:58 pm
Is there anyone here, in this forum, that lives in a household making less than $59,000 gross income per year that saves as much money as they spend, every year?
Currently we save over twice annual expenses as a household, but our income is obviously well above median. While in grad school (7yrs earning MSc and PhD, with a 5yr break in between when I married and supported a now ex-wife through dental school), as a single individual, I was able to do this probably every year. In fact, my final year earning my PhD (2012), I believe my total working compensation was like $57k and I saved more than twice my total expenditures that year. Then again, I am quite the minimalist and willing to live a lifestyle and forgo some expenditures that the huge majority of people (even on this board) would simply not be willing to.

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Re: Can a <median household save 1 year of expenses every year?

Post by triceratop » Mon May 14, 2018 6:48 pm

chevca wrote:
Mon May 14, 2018 5:00 pm
A better question is, would anyone making that feel comfortable commenting on this thread in Bogleheads?

I would guess that might be pretty intimidating and I'd be surprised if they chimed in. I mean when you see folks posting about making hundreds of thousands a year and saving well over the median income just because they can....

DW and I are a good bit over the median income line and probably come close to saving what we spend each year. I would imagine though when talking below the median income level... especially in a mid to HCOL area. Just covering basic expenses might not leave much for saving in some or most areas at the median income level and below.
I made significantly less than that, mid-$30s, last year and saved more than my annual expense last year.

I have no problem saying that because I’m not shallow enough to equate net worth or income with quality or value of work, intelligence, or human worth. Those who do, it says more about them than those who they judge.
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."

enclee
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Re: Can a <median household save 1 year of expenses every year?

Post by enclee » Mon May 14, 2018 6:59 pm

How were you able to keep your expenses so low?

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triceratop
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Re: Can a <median household save 1 year of expenses every year?

Post by triceratop » Mon May 14, 2018 7:07 pm

enclee wrote:
Mon May 14, 2018 6:59 pm
How were you able to keep your expenses so low?
I have a roommate, and do not have expensive hobbies. I also have no desire to consume or purchase items as others apparently do; my car has hundreds of thousands of miles on it but runs smoothly and gets me from point A to B — yet many others would have purchased a new car. I live simply but happily with my focus being on my work.
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."

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Re: Can a <median household save 1 year of expenses every year?

Post by dbr » Mon May 14, 2018 7:08 pm

I know a few people who make only half that who could presumably therefore save expenses every year if somehow their income increased, with a bit of a break for taxes. Whether those people would do that I have no idea, but they obviously could. None of those people are posters here, however.

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Re: Can a <median household save 1 year of expenses every year?

Post by JBTX » Mon May 14, 2018 7:20 pm

If you made $50 then live off of $25k? For a family, you are getting close to a poverty level of expenses. Perhaps if your house was already paid for, and you live frugally in a LCOL area.

I imagine some MMM types could do it. But they have a fairly extraordinarily frugal lifestyle.

Perhaps some farmers do it.

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Re: Can a <median household save 1 year of expenses every year?

Post by chevca » Mon May 14, 2018 7:24 pm

To those talking about grad school days and to Triceratop... could you pull that off with a family and all involved there? That's what I think of when the median household is talked about. Not single folks with little responsibilities and minimal bills.

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triceratop
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Re: Can a <median household save 1 year of expenses every year?

Post by triceratop » Mon May 14, 2018 7:26 pm

chevca wrote:
Mon May 14, 2018 7:24 pm
To those talking about grad school days and to Triceratop... could you pull that off with a family and all involved there? That's what I think of when the median household is talked about. Not single folks with little responsibilities and minimal bills.
Oh yeah, well I'm in grad school so count me out for having expenses comparable to a household. I certainly could not pull it off with those major sources of expenses.

But, isn't an unmarried person without children the very definition of a <median household? :wink:
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."

chevca
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Re: Can a <median household save 1 year of expenses every year?

Post by chevca » Mon May 14, 2018 7:29 pm

triceratop wrote:
Mon May 14, 2018 7:26 pm
chevca wrote:
Mon May 14, 2018 7:24 pm
To those talking about grad school days and to Triceratop... could you pull that off with a family and all involved there? That's what I think of when the median household is talked about. Not single folks with little responsibilities and minimal bills.
Oh yeah, well I'm in grad school so count me out for having expenses comparable to a household. I certainly could not pull it off with those major sources of expenses.

But, isn't an unmarried person without children the very definition of a <median household? :wink:
Well, no. :wink:

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Re: Can a <median household save 1 year of expenses every year?

Post by sketchy9 » Mon May 14, 2018 7:43 pm

JBTX wrote:
Mon May 14, 2018 7:20 pm
If you made $50 then live off of $25k? For a family, you are getting close to a poverty level of expenses. Perhaps if your house was already paid for, and you live frugally in a LCOL area.

I imagine some MMM types could do it. But they have a fairly extraordinarily frugal lifestyle.

Perhaps some farmers do it.
You'd have to live on less to account for payroll taxes that you would never see in your pocket. Depending on your household situation, you may or may not pay any income tax, but you'll lose at least 8.65% to Medicare/SS tax.

workingovertime
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Re: Can a <median household save 1 year of expenses every year?

Post by workingovertime » Mon May 14, 2018 8:35 pm

My spouse and I make around $67,000/yr combined. Our annual expense is about $23,000. So after tax, we saved around $30,000/yr.

We do this by sacrificing a bit (or should I say,A LOT!) of our privacy living with my spouses's mother and our share of rent is only $375/mo. Not having privacy sucks a lot and we can definitely afford to live on our own but we think of this as a building block for our future. We're both 28 yrs old so not really all that young to be living with parents still - esp after marriage!

I know the figures I wrote can't be kept up in the long run because we obviously don't plan on living with her forever and plan on having a kid some day. I'm currently working on getting my CPA in the next few years so hopefully we can increase our income too.

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celia
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Re: Can a <median household save 1 year of expenses every year?

Post by celia » Mon May 14, 2018 9:19 pm

I know some college grads still living with their parents and they save multiples of their living expenses each year. Once they move out, the living expenses will go up and the savings will go down. I even know a vet who wasn't working, but saved the disability checks while going back to school.

Do these count?

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Re: Can a <median household save 1 year of expenses every year?

Post by golfCaddy » Mon May 14, 2018 9:45 pm

The federal government guidelines show $25k as poverty for a family of four. The family only earning $25k/year will qualify for more government benefits(ex. Section 8) than the family earning $60k/year, but choosing to save half their income. Adjusting for that, raising a family and saving half your $60k/year income means you are living in poverty by US standards.

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Re: Can a <median household save 1 year of expenses every year?

Post by venkman » Mon May 14, 2018 9:46 pm

An interesting question would be whether or not to count Social Security taxes as "saving."

It's not something you have a choice in, but it IS money you're putting away now that you will (theoretically) get back in retirement. That's the same general idea as an IRA, 401k, etc.

And 6.2% (plus employer match, for most) would represent a significant amount of gross income for people making below the median.

chevca
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Re: Can a <median household save 1 year of expenses every year?

Post by chevca » Mon May 14, 2018 9:50 pm

celia wrote:
Mon May 14, 2018 9:19 pm
I know some college grads still living with their parents and they save multiples of their living expenses each year. Once they move out, the living expenses will go up and the savings will go down. I even know a vet who wasn't working, but saved the disability checks while going back to school.

Do these count?
No. The college grad and their parents make up that household, IMO. So, maybe if all of them combined make the median income or less....

These college grad, living in the parents basement, spending only on Cheetos, and saving boatloads stories can probably be left out of this one. :happy

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Re: Can a <median household save 1 year of expenses every year?

Post by Algernon » Mon May 14, 2018 10:05 pm

My after-tax income is just under $51,000. I live alone, and own my own home. Last year my saving/spending ratio was 33.6/66.4, and this year I'm on track to hit 38/62.

I wouldn't say I'm particularly frugal. I have a long-term savings goal that I'm currently ahead of where I should be to meet. There is room in my budget to save more at the expense of entertainment/hobbies/nice-to-haves, but if I sacrificed just those my best estimate still puts me short around 5% from hitting 50/50.

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Re: Can a <median household save 1 year of expenses every year?

Post by Glockenspiel » Mon May 14, 2018 10:07 pm

I think the point is that after income tax, propertytaxes, payroll taxes, I find it exceptionally difficult to do this unless you are a single person renting an apartment with a roommate, but then, if your roommate also works, you probably make more than the median income combined. Almost everyone that can claim they do this has special circumstances.

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Re: Can a <median household save 1 year of expenses every year?

Post by Glockenspiel » Mon May 14, 2018 10:11 pm

workingovertime wrote:
Mon May 14, 2018 8:35 pm
My spouse and I make around $67,000/yr combined. Our annual expense is about $23,000. So after tax, we saved around $30,000/yr.

We do this by sacrificing a bit (or should I say,A LOT!) of our privacy living with my spouses's mother and our share of rent is only $375/mo. Not having privacy sucks a lot and we can definitely afford to live on our own but we think of this as a building block for our future. We're both 28 yrs old so not really all that young to be living with parents still - esp after marriage!

I know the figures I wrote can't be kept up in the long run because we obviously don't plan on living with her forever and plan on having a kid some day. I'm currently working on getting my CPA in the next few years so hopefully we can increase our income too.
You make $8k more than median US household income AND live with your spouse’s mother, so I don’t think you qualify under this scenario. You are doing wonderful, don’t get me wrong, but I’m just trying to prove a point here.

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Re: Can a <median household save 1 year of expenses every year?

Post by Whit » Mon May 14, 2018 11:54 pm

venkman wrote:
Mon May 14, 2018 9:46 pm
An interesting question would be whether or not to count Social Security taxes as "saving."

It's not something you have a choice in, but it IS money you're putting away now that you will (theoretically) get back in retirement. That's the same general idea as an IRA, 401k, etc.

And 6.2% (plus employer match, for most) would represent a significant amount of gross income for people making below the median.
I would not count SS tax as savings, but if we do for arguement sake and we also count employer retirement matching funds my family would get close to the "save half of gross income" mark.

6.2 % - Employee SS tax contribution
6.2% - Employer SS tax contributions
7.4% Employee retirement plan contributions
7.4% Employer retirement plan contributions
21.5% IRA/Roth IRA contributions

Total - 48.7%

This is also questionable math since we are counting an employer match and employer SS tax contributions as part of savings and not as part of gross income

It would be extremely difficult to get anywhere near 50% not counting these things if you have kids to support. We have 3.

-Whit

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Re: Can a <median household save 1 year of expenses every year?

Post by basspond » Tue May 15, 2018 6:51 am

If the stars are aligned, it is possible. House paid off and no other debt, contribute max to 401k, generous company health care and life insurance subsidy, Children involved with inexpensive activities, don’t eat out, don’t drink or smoke, volunteer so you are not spending money for entertainment, keep phone/internet/cable to under 1% of income, only buy household items/ groceries when on sale, avoid toll roads, and vacations less then 1% of income.

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Re: Can a <median household save 1 year of expenses every year?

Post by KlangFool » Tue May 15, 2018 7:36 am

Whit wrote:
Mon May 14, 2018 11:54 pm
venkman wrote:
Mon May 14, 2018 9:46 pm
An interesting question would be whether or not to count Social Security taxes as "saving."

It's not something you have a choice in, but it IS money you're putting away now that you will (theoretically) get back in retirement. That's the same general idea as an IRA, 401k, etc.

And 6.2% (plus employer match, for most) would represent a significant amount of gross income for people making below the median.
I would not count SS tax as savings, but if we do for arguement sake and we also count employer retirement matching funds my family would get close to the "save half of gross income" mark.

6.2 % - Employee SS tax contribution
6.2% - Employer SS tax contributions
7.4% Employee retirement plan contributions
7.4% Employer retirement plan contributions
21.5% IRA/Roth IRA contributions

Total - 48.7%

This is also questionable math since we are counting an employer match and employer SS tax contributions as part of savings and not as part of gross income

It would be extremely difficult to get anywhere near 50% not counting these things if you have kids to support. We have 3.

-Whit
Whit,

The topic is about saving rate as per the annual expense.

<<6.2 % - Employee SS tax contribution
6.2% - Employer SS tax contributions
7.4% Employee retirement plan contributions
7.4% Employer retirement plan contributions
21.5% IRA/Roth IRA contributions

Total - 48.7%>>

In your case, let's assume that your total federal and state income tax is 10%.

Your total tax on your gross income is

6.2 % - Employee SS tax contribution
1.45% - Employee Medicare contribution
10% - Federal and State income tax

17.65% = (taxes)

The employee's saving from the paycheck.

7.4% Employee retirement plan contributions
21.5% IRA/Roth IRA contributions

28.9% - Employee saving.

Your annual expense = 100% - 28.9% - 17.65% = 53.45% of your gross income

Your annual savings = 28.9% (Employee Saving) + 7.4% Employer retirement plan contributions = 36.3% of your gross income

Your annual savings as per annual expense = 36.3% /53.45% = 67.91% of your annual expense.

KlangFool

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teen persuasion
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Re: Can a <median household save 1 year of expenses every year?

Post by teen persuasion » Tue May 15, 2018 7:53 am

Our combined gross income just exceeded $60k for the first time last year. DH was contributing 50% of his $40.4k to his 401k, plus nearly maxed his HSA (~$6400). I have no access to a 401k, but we contributed the max to Roth IRAs as well, $6500 DH + $5500 for me. So a total of $38.6k out of $60.5k gross wages.

Note, though, that the high contribution rate to HSA + 401k result in significant refundable tax credits, that I earmark towards our Roth IRA contributions, probably in the $7-8k range last year.

I always have a problem defining our "gross" income - do I add our refunds, or not?

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Re: Can a <median household save 1 year of expenses every year?

Post by BlueRidgeHorizon » Tue May 15, 2018 8:01 am

I work with someone who fits that profile. He lives with his parents, his mom has a physical disability.

He is extraordinarily frugal and saves alot more than he spends, carpools to work, drives a budget vehicle which he paid cash for and owes no student loans. It seems like a pretty lucrative life strategy but as with anything it comes with sacrifices.

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Re: Can a <median household save 1 year of expenses every year?

Post by campy2010 » Tue May 15, 2018 8:20 am

When I was first out of grad school about 8 -10 years ago, I was earning that much, saved 10% in retirement funds, and was putting about $25k/year toward student loans. My one luxury was living by myself in a medium to high COL area ($1500/month rent+utilities), but otherwise I didn't spend much money on any "luxuries". At the time, I didn't keep close a budget but my monthly non-housing expenses were around $500/month, including cell phone, food, healthcare, entertainment, clothes, gas, car insurance, and an annual trip home to visit family. I'm glad those days are over - it is a lifestyle I don't really recommend.

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Re: Can a <median household save 1 year of expenses every year?

Post by David Jay » Tue May 15, 2018 8:29 am

Glockenspiel wrote:
Mon May 14, 2018 4:17 pm
Every time I see this I think this is a person completely removed from the universe that real people live in. For ANYONE making less than the median household income, this is impossible.
I guess you have your answer. It is not impossible, just very rare.
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Re: Can a <median household save 1 year of expenses every year?

Post by 8foot7 » Tue May 15, 2018 8:30 am

With all due respect, I don't think seeing the results of single people still in university or two adults living with roomates or parents really gives a meaningful answer to the original question, which is surely meant to figure out if a family with two adults and perhaps a kid or two that makes less than $60k can actually stash $30k away.

I will comment that when I was making $60k with a live-in girlfriend we did not save 50% of our expenses.
Last edited by 8foot7 on Tue May 15, 2018 8:32 am, edited 1 time in total.

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Re: Can a <median household save 1 year of expenses every year?

Post by teen persuasion » Tue May 15, 2018 8:31 am

The "every year" part of the question is the harder part. When we were younger, in even lower paying jobs, I was a SAHM, and we had student loans + an ugly 9.75% mortgage, and 5 kids at home - no we were not saving 50% of income.

I've been gradually getting to our current situation. It took a while for me to figure out how to manage the refundable credits to our advantage proactively, rather than just see how they shake out when computing our taxes after year end. They have also been changing along the way as our family grew. As the size of the credits grew, I began utilizing them to pay down our high rate mortgage aggressively. The guaranteed return was better than the gamble of investments, and freeing up that cash flow rapidly for future investments was my goal. Are prepayments on your mortgage a form of savings?

Ironically, it was DH's employer dropping the 401k match that got me incrementally increasing his 401k contributions. He'd only been contributing 5% to capture the match; when they dropped the match, he wanted to stop contributing altogether. I wanted to replace the match, so I tweaked his withholdings to double his contributions but leave the take home essentially the same. When that succeeded, I was emboldened to keep tweaking withholdings and find some savings and double it again. Student loans disappeared, doubled it again. When our youngest hit school age and oldest began college, I was offered a very part-time job, the mortgage was just about gone, so we opened Roth IRAs with our refunds. When the mortgage was finally gone, we pushed DH's 401k contributions to 55% to try to max it for the first time. My income has gradually grown, as the kids have aged out of CTC and fallen off our taxes our refunds have been shrinking, and we've been pushing more of DH's income to increasing 401k limits and HSA accounts. Most of his income goes to benefits and tax advantaged accounts, most of mine now covers living expenses.

Everything is always shifting, nothing is ever the same "every year".

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Re: Can a <median household save 1 year of expenses every year?

Post by LiterallyIronic » Tue May 15, 2018 8:36 am

We're relatively close to saving one year of retirement expenses (i.e., not including the mortgage) every year. Household income is $63,500 for a family of three. Monthly expenses, including the mortgage and a mortgage principal prepayment of $250/month are in the vicinity of $2,500. Take out the $700 portion of the $808 PITI that is principal and interest, and the $250 extra principal prepayment, and our monthly expenses are $1,550. Meanwhile, the amount that we send to retirement every year is $15,888 (25% of gross), or $1,324 per month.

So we're fairly close, if you don't count the mortgage and give us a little slack for being just above the $59,000 cutoff from OP. We were saving a lot more, relative to our income, before we bought the house and were paying $400/month for rent. But it was a cold, dark basement with no kitchen - not a good place to raise a baby and we knew we wanted a paid off house in retirement, so it seemed like a good time to get started on that.

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Re: Can a <median household save 1 year of expenses every year?

Post by DetroitRick » Tue May 15, 2018 8:41 am

I never did, never wanted to, and am glad I didn't. Even though savings was always a big priority for me (just not THAT big). Looking back at my earnings, both above and below your $59k threshold (considering inflation), I'm pretty sure I never reached that level of savings. Not at half those earnings, not at 3 times those earnings. But I still retired at 50.

You have to seek your own balance. Ignore what others say and do, except for general ideas that you can adapt to your situation. Even when people truthfully do reach such goals, you have to know the underlying circumstances before you can pull any meaning from a "savings rate." Married/single, high or low education goals, children, independent/living at home - and thousands of other determinants. Without knowing all of this for each case, stated savings levels are meaningless. Plus, of course, not everyone on the internet is truthful :oops: . So the biggest question is not whether it is possible to save at these levels (sure, it is), it's whether you want to.

Texanbybirth
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Re: Can a <median household save 1 year of expenses every year?

Post by Texanbybirth » Tue May 15, 2018 9:16 am

OP, I think you have your answer.

I've often wondered if there are any bloggers out there in the low income brackets. A blog with the title "The Minimum Wage Family" or "Minimum Wage Finance Buff" has a nice ring to it. ("Nice ring to it" from my cushy office job with a warm cup of coffee, I mean.) I know a lot of PF blogs like to write about their frugal lifestyles, but their family history, education, drive, and skills secretly provide them a nice fall-back if the whole blogging thing doesn't work out. It's kind of like the old "my house is just too big" or "we just have too much stuff" first world problems that PF bloggers also write about to get clicks and advertising revenue. I'd be much more interested in reading about the struggles of those about whom you're asking, although I meet them all the time in the "real world" too.

As an aside, I read an article this weekend with an interesting twist about "safe savings rates". The conclusions might help those in this income bracket bring a realistic approach to their savings.

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JamesSFO
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Re: Can a <median household save 1 year of expenses every year?

Post by JamesSFO » Tue May 15, 2018 9:19 am

This is an interesting thread I know it is only in the last few years (~20 years into my adult working life now) that I've been able to consistently save 1x my expenses/year. I have generally had jobs above the median income and no kids; however, live in a VHCOL area and had a mortgage for 15 of the 20 years (now paid off).

Glockenspiel
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Re: Can a <median household save 1 year of expenses every year?

Post by Glockenspiel » Tue May 15, 2018 9:27 am

teen persuasion wrote:
Tue May 15, 2018 7:53 am
Our combined gross income just exceeded $60k for the first time last year. DH was contributing 50% of his $40.4k to his 401k, plus nearly maxed his HSA (~$6400). I have no access to a 401k, but we contributed the max to Roth IRAs as well, $6500 DH + $5500 for me. So a total of $38.6k out of $60.5k gross wages.

Note, though, that the high contribution rate to HSA + 401k result in significant refundable tax credits, that I earmark towards our Roth IRA contributions, probably in the $7-8k range last year.

I always have a problem defining our "gross" income - do I add our refunds, or not?
This is fantastic. How do you manage to save such a large percentage of your income? Are your housing expenses unusually low for your area? As far as your gross income goes, I would leave the refunds out. It's not earned money. You could consider it a refund on other taxes that you pay (sales, property, fees, etc).

winterfan
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Re: Can a <median household save 1 year of expenses every year?

Post by winterfan » Tue May 15, 2018 9:33 am

We did this for a year when I left my job to stay home with my toddler. My husband was making $55K and we maxed out his 401K, maxed out our Roths and added money to our child's 529 plan. The only reason we were able to do it is because our house and cars are paid off. We also didn’t take any vacations and I really didn’t leave the house that much except to go to the park, run errands or visit family. We make quite a bit more now, but we also have added (by choice) expenses like private school, more charitable giving, vacations, etc. We still save approximately the same amount, but my husband's income has gone up by quite a bit since then.

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Re: Can a <median household save 1 year of expenses every year?

Post by stoptothink » Tue May 15, 2018 9:33 am

chevca wrote:
Mon May 14, 2018 7:24 pm
To those talking about grad school days and to Triceratop... could you pull that off with a family and all involved there? That's what I think of when the median household is talked about. Not single folks with little responsibilities and minimal bills.
If my wife was willing to stay home and not continue with her education: absolutely. For a single data point, last year our total household expenditures for a household of 4 was <$45k. This included paying $1500/month in childcare, cash flowing wife's full-time college education, and a 15yr mortgage. Without childcare, tuition and associated costs, and possibly refinancing to a 30yr mortgage we could easily get household expenses <$25k/yr. Cut out a few activities for my kids and I think we could do <$20k. We're not going to do it, but we absolutely could. That's the freedom not buying more home than we needed and designing our life around not being dependent on cars has afforded us.

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Re: Can a <median household save 1 year of expenses every year?

Post by Glockenspiel » Tue May 15, 2018 9:34 am

Texanbybirth wrote:
Tue May 15, 2018 9:16 am
OP, I think you have your answer.

I've often wondered if there are any bloggers out there in the low income brackets. A blog with the title "The Minimum Wage Family" or "Minimum Wage Finance Buff" has a nice ring to it. ("Nice ring to it" from my cushy office job with a warm cup of coffee, I mean.)
I'd also love to read something like this. In my head, I'm thinking that people working minimum wage, or close to minimum wage jobs don't have the free time or wherewithal to start a blog.

chevca
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Re: Can a <median household save 1 year of expenses every year?

Post by chevca » Tue May 15, 2018 9:41 am

stoptothink wrote:
Tue May 15, 2018 9:33 am
chevca wrote:
Mon May 14, 2018 7:24 pm
To those talking about grad school days and to Triceratop... could you pull that off with a family and all involved there? That's what I think of when the median household is talked about. Not single folks with little responsibilities and minimal bills.
If my wife was willing to stay home and not continue with her education: absolutely. For a single data point, last year our total household expenditures for a household of 4 was <$45k. This included paying $1500/month in childcare, cash flowing wife's full-time college education, and a 15yr mortgage. Without childcare, tuition and associated costs, and possibly refinancing to a 30yr mortgage we could easily get household expenses <$25k/yr. Cut out a few activities for my kids and I think we could do <$20k. We're not going to do it, but we absolutely could. That's the freedom not buying more home than we needed and designing our life around not being dependent on cars has afforded us.
Okay, that's great. But, you didn't mention if you are in grad school, didn't list your income, and only laid out ways to cut expenses. I'm not sure what you feel you answered there?

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teen persuasion
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Re: Can a <median household save 1 year of expenses every year?

Post by teen persuasion » Tue May 15, 2018 9:46 am

Glockenspiel wrote:
Tue May 15, 2018 9:27 am
teen persuasion wrote:
Tue May 15, 2018 7:53 am
Our combined gross income just exceeded $60k for the first time last year. DH was contributing 50% of his $40.4k to his 401k, plus nearly maxed his HSA (~$6400). I have no access to a 401k, but we contributed the max to Roth IRAs as well, $6500 DH + $5500 for me. So a total of $38.6k out of $60.5k gross wages.

Note, though, that the high contribution rate to HSA + 401k result in significant refundable tax credits, that I earmark towards our Roth IRA contributions, probably in the $7-8k range last year.

I always have a problem defining our "gross" income - do I add our refunds, or not?
This is fantastic. How do you manage to save such a large percentage of your income? Are your housing expenses unusually low for your area? As far as your gross income goes, I would leave the refunds out. It's not earned money. You could consider it a refund on other taxes that you pay (sales, property, fees, etc).
Mortgage is paid off, we are in a relatively LCOL area (but high state property and income taxes). We started off low income, had a large family, learned to live frugally, just kept expenses about the same. As income has finally begun creeping up, we save all increases.

I recognized the tax advantages of our low income / large family situation, and dug into the details to utilize it to the best of our ability. Keeping our EFC as low as possible for the college kids over the years also plays in. Along the way I discovered MMM and Bogleheads, further refining the process.

It's also about where we are in the journey. Mortgage paid off, student loans paid off, no childcare expenses, buy used cars for cash. We've made most of our big, starting out purchases, and now we are content to coast. Stuff is less enticing than the freedom of FIRE.

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Re: Can a <median household save 1 year of expenses every year?

Post by stoptothink » Tue May 15, 2018 9:58 am

chevca wrote:
Tue May 15, 2018 9:41 am
stoptothink wrote:
Tue May 15, 2018 9:33 am
chevca wrote:
Mon May 14, 2018 7:24 pm
To those talking about grad school days and to Triceratop... could you pull that off with a family and all involved there? That's what I think of when the median household is talked about. Not single folks with little responsibilities and minimal bills.
If my wife was willing to stay home and not continue with her education: absolutely. For a single data point, last year our total household expenditures for a household of 4 was <$45k. This included paying $1500/month in childcare, cash flowing wife's full-time college education, and a 15yr mortgage. Without childcare, tuition and associated costs, and possibly refinancing to a 30yr mortgage we could easily get household expenses <$25k/yr. Cut out a few activities for my kids and I think we could do <$20k. We're not going to do it, but we absolutely could. That's the freedom not buying more home than we needed and designing our life around not being dependent on cars has afforded us.
Okay, that's great. But, you didn't mention if you are in grad school, didn't list your income, and only laid out ways to cut expenses. I'm not sure what you feel you answered there?
Huh, I directly answered the question. I have done it myself, in fact more than doubled it for many years (read my previous response), and we could do it right now: easily. We choose not to. My wife is a type-A with major professional aspirations and we simply prefer being a two-income family. What we earn right now is irrelevant to the question because we choose a different lifestyle, and we save well over twice our annual expenses; doesn't change that we "can", which is the very question you originally posed.

FWIW, no I am not in grad school (already have a PhD) and my income is slightly north of 100k, as is my wife's (who is finishing her undergrad while working full-time). If my wife was just a SAHM (we have a 6 and 3yr old), and we changed literally nothing else (ie., still had the 15yr mortgage), our total household expenditures would have been about $24k last year. You do the math.

Toadandfriends
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Re: Can a <median household save 1 year of expenses every year?

Post by Toadandfriends » Tue May 15, 2018 10:17 am

Well, for what it's worth - I do this. And, I could cut my living expenses back even further if properly motivated. My current base salary is almost 60. (I do tend to be able to work extra and add a bit to this - so maybe 65 -70 some years when lucky.) I am able to keep my expenses (after taxes) to $2000 a month. I think the catch is that I live in a town, not a city. So I was able to choose an inexpensive house and keep my monthly mortgage payments under $700. I don't eat out, I drive an older car, spend my weekends cooking, baking, and freezing food, mow my own grass, use library for entertainment, (no shopping!) bike, cobble my own shoes (kidding), etc. I have expensive pets and pay for slow wifi and monthly recycling. Occasionally I even splurge on a $10 data card for my phone. No kids or spendy husband : ) Grab those finances by the throat.
Cheers :sharebeer

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Re: Can a <median household save 1 year of expenses every year?

Post by enclee » Tue May 15, 2018 10:21 am

stoptothink wrote:
Tue May 15, 2018 9:58 am

FWIW, no I am not in grad school (already have a PhD) and my income is slightly north of 100k, as is my wife's (who is finishing her undergrad while working full-time).
You're doing great and I admire both you and your wife's work ethic, and financial responsibility but you missed the topic of the thread.

stoptothink
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Re: Can a <median household save 1 year of expenses every year?

Post by stoptothink » Tue May 15, 2018 10:26 am

enclee wrote:
Tue May 15, 2018 10:21 am
stoptothink wrote:
Tue May 15, 2018 9:58 am

FWIW, no I am not in grad school (already have a PhD) and my income is slightly north of 100k, as is my wife's (who is finishing her undergrad while working full-time).
You're doing great and I admire both you and your wife's work ethic, and financial responsibility but you missed the topic of the thread.
:oops: The title of the thread is "Can a <median household save 1 year of expenses every year?" I very simply defined how my family could easily do it, with one change that we could make tomorrow (my wife becoming a SAHM, and changing literally nothing else). We choose not to. So, please explain how I missed the topic of the thread?

InMyDreams
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Re: Can a <median household save 1 year of expenses every year?

Post by InMyDreams » Tue May 15, 2018 10:26 am

I save, but not 50% of my earned income.

Are you familiar with MrMoneyMustache(.com)? This is a no-brainer for them. MMM wants you to bank 75% of what you make.
Last edited by InMyDreams on Tue May 15, 2018 10:29 am, edited 1 time in total.

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