Anyone Else Feel Broke Trying to Maintain a High Savings Rate?

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Topic Author
bigtex
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Anyone Else Feel Broke Trying to Maintain a High Savings Rate?

Post by bigtex »

I feel like I am constantly low on funds each month because I am trying to maintain a 30% saving rate on a 65k gross income. Does anyone else feel like this or struggle with high savings rates on less than $100k incomes? My mortgage payment is 1350 per month so maybe that is also why I feel constrained? Bought too much house for my aggressive savings goals? I would love any help the bogleheads can provide.
jerrysmith
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Re: Anyone Else Feel Broke Trying to Maintain a High Savings Rate?

Post by jerrysmith »

I'm seriously averse to paying too much for a home. Recently we refi'd into a 10yr that put our mortgage after escrow at 1350. Our gross is in the 135k range so I'd definitely feel tight if I were paying it on 65k.
Topic Author
bigtex
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Re: Anyone Else Feel Broke Trying to Maintain a High Savings Rate?

Post by bigtex »

jerrysmith wrote: Mon Nov 02, 2020 4:39 pm I'm seriously averse to paying too much for a home. Recently we refi'd into a 10yr that put our mortgage after escrow at 1350. Our gross is in the 135k range so I'd definitely feel tight if I were paying it on 65k.
Thanks Jerry.
Normchad
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Re: Anyone Else Feel Broke Trying to Maintain a High Savings Rate?

Post by Normchad »

bigtex wrote: Mon Nov 02, 2020 4:31 pm I feel like I am constantly low on funds each month because I am trying to maintain a 30% saving rate on a 65k gross income. Does anyone else feel like this or struggle with high savings rates on less than $100k incomes? My mortgage payment is 1350 per month so maybe that is also why I feel constrained? Bought too much house for my aggressive savings goals? I would love any help the bogleheads can provide.
The humble-braggers will be along shortly to tell you to save even more....

But, I think if you can manage to save 30%, on a 65K gross salary, that is really impressive. You should be proud that you have the self control to do that. If somewhere along the line, you decide to indulge, and fall a bit below 30%, I think that is okay too.

Seriously, this will pay big dividends for you down the road. But if you can't keep it up all the time, don't feel bad. Virtually no real people could come close to what you're doing.....
RadAudit
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Re: Anyone Else Feel Broke Trying to Maintain a High Savings Rate?

Post by RadAudit »

bigtex wrote: Mon Nov 02, 2020 4:31 pm I feel like I am constantly low on funds each month because I am trying to maintain a 30% saving rate on ...
I can imagine that you are. What are you saving for? What's the number that's your target? When do you plan to get there?

I can remember pulling $50. out on Friday afternoon for the week and have $10. left on Monday morning to split between the two of us for lunches for the week. Of course that was 50 years ago and we were saving 8% of our salary for retirement. We thought we had it made.

I'd suggest rerunning your numbers. Life is too short not to enjoy some of it as you go along.
FI is the best revenge. LBYM. Invest the rest. Stay the course. Die anyway. - PS: The cavalry isn't coming, kids. You are on your own.
Wings5
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Re: Anyone Else Feel Broke Trying to Maintain a High Savings Rate?

Post by Wings5 »

If it’s stressing you out maybe you should adjust. Is there something dogmatic about 30% for you? Would 25% help you sleep better?
“Ronald James Read was an American philanthropist, investor, janitor, and gas station attendant.”
Olemiss540
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Re: Anyone Else Feel Broke Trying to Maintain a High Savings Rate?

Post by Olemiss540 »

bigtex wrote: Mon Nov 02, 2020 4:31 pm I feel like I am constantly low on funds each month because I am trying to maintain a 30% saving rate on a 65k gross income. Does anyone else feel like this or struggle with high savings rates on less than $100k incomes? My mortgage payment is 1350 per month so maybe that is also why I feel constrained? Bought too much house for my aggressive savings goals? I would love any help the bogleheads can provide.
Of course you are low on funds with that house payment while trying to save 30% of GROSS.

What's your nest egg and when's your hopeful retirement date? How old are you and is there any project ability with increases in your hopeful income?
I hold index funds because I do not overestimate my ability to pick stocks OR stock pickers.
runner3081
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Re: Anyone Else Feel Broke Trying to Maintain a High Savings Rate?

Post by runner3081 »

Adjust savings to meet your lifestyle now and goals later. Seems like it might be too restrictive at the moment. We save a ton, but it is not restrictive (for what is a "happy" lifestyle for us). If it became that way, we would spend slightly more and alter long-term plans for the money.
adamthesmythe
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Re: Anyone Else Feel Broke Trying to Maintain a High Savings Rate?

Post by adamthesmythe »

I never saved anywhere near that much but then I was not trying to retire at 40 either. While projections into the future are very uncertain it seems to me that this may be an unnecessary savings rate.

Also it's not clear whether there is any employer match in the picture.
rich126
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Re: Anyone Else Feel Broke Trying to Maintain a High Savings Rate?

Post by rich126 »

I never came close to maxing out retirement savings in much of my life. House payments and trying to enjoy life w/o being crazy. I was also single which helps in some ways but hurts in others. I always made sure to max out any matching contributions but after that I preferred the house over more retirement savings. And, while morbid, I never anticipated getting to retirement. Considering the current state of the world, I'm glad I used the money when I could. By the time things improve I could be having health issues that would prevent doing those things (travel, ski trips, etc.)
000
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Re: Anyone Else Feel Broke Trying to Maintain a High Savings Rate?

Post by 000 »

Are you using tax deferred vehicles, or Roth? Does it make a difference in your situation?
matti
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Re: Anyone Else Feel Broke Trying to Maintain a High Savings Rate?

Post by matti »

bigtex wrote: Mon Nov 02, 2020 4:31 pm I feel like I am constantly low on funds each month because I am trying to maintain a 30% saving rate on a 65k gross income. Does anyone else feel like this or struggle with high savings rates on less than $100k incomes? My mortgage payment is 1350 per month so maybe that is also why I feel constrained? Bought too much house for my aggressive savings goals? I would love any help the bogleheads can provide.
Are you married and do you have kids? I make $70k (gross) and put about 30% into retirement, but I don't have any kids. I don't feel like I'm broke and I live comfortably. I don't desire to have a lot of "stuff" (e.g., new electronics/phones, new clothes, fancy car, etc.) and I think this helps as well. You're doing great at 30%, for sure.
getthatmarshmallow
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Re: Anyone Else Feel Broke Trying to Maintain a High Savings Rate?

Post by getthatmarshmallow »

bigtex wrote: Mon Nov 02, 2020 4:31 pm I feel like I am constantly low on funds each month because I am trying to maintain a 30% saving rate on a 65k gross income. Does anyone else feel like this or struggle with high savings rates on less than $100k incomes? My mortgage payment is 1350 per month so maybe that is also why I feel constrained? Bought too much house for my aggressive savings goals? I would love any help the bogleheads can provide.
30% is a tall order on $65K in most parts of the country, and a decent chunk on top of that goes to the mortgage. That's an impressive savings rate, and it might be too high if you're miserable. What do you mean by feeling broke? What is it that you're missing out on? How much would you need to have to not feel broke?
relax
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Re: Anyone Else Feel Broke Trying to Maintain a High Savings Rate?

Post by relax »

I don't recall the numbers, but many years ago I was trying to save every last penny for retirement. Then a friend died at the age of 40. That changed my thinking quite a bit and I looked for balance for having a nice life then and in retirement.
Lee_WSP
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Re: Anyone Else Feel Broke Trying to Maintain a High Savings Rate?

Post by Lee_WSP »

As others have stated 30% on 65k with a 1350 mortgage is a pretty substantial financial undertaking.

If we go off of a 50% needs budget, you're aiming for 30% savings & 20% wants.

You're already spending about 33% on mortgage alone, which doesn't take into account HOA fees, maintenance or other homeownership costs. So, let's say you've got 15% left for other necessities. I think your needs budget probably blows past the 50% of salary "rule" and that's why you feel broke all the time.

Saving 50% of your income is a lot easier once you earn enough that the needs portion can realistically be met with 30-40% of your income.
MarkRoulo
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Re: Anyone Else Feel Broke Trying to Maintain a High Savings Rate?

Post by MarkRoulo »

bigtex wrote: Mon Nov 02, 2020 4:31 pm I feel like I am constantly low on funds each month because I am trying to maintain a 30% saving rate on a 65k gross income. Does anyone else feel like this or struggle with high savings rates on less than $100k incomes? My mortgage payment is 1350 per month so maybe that is also why I feel constrained? Bought too much house for my aggressive savings goals? I would love any help the bogleheads can provide.
Also, you have accumulated around $330K and are 30 years old.

If you are constantly low on funds each month and feeling constrained, when do you plan on relaxing and enjoying life a bit more (honest question, not rhetorical or snark)? You have to enjoy the NOW as well as plan for the future. Too much NOW makes the future much less fun if/when it arrives. Too little NOW means you miss out on enjoying a large chunk of your life (and the healthy, more carefree part, too).

So ... when do you plan on not feeling this way?
Topic Author
bigtex
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Re: Anyone Else Feel Broke Trying to Maintain a High Savings Rate?

Post by bigtex »

matti wrote: Mon Nov 02, 2020 5:41 pm
bigtex wrote: Mon Nov 02, 2020 4:31 pm I feel like I am constantly low on funds each month because I am trying to maintain a 30% saving rate on a 65k gross income. Does anyone else feel like this or struggle with high savings rates on less than $100k incomes? My mortgage payment is 1350 per month so maybe that is also why I feel constrained? Bought too much house for my aggressive savings goals? I would love any help the bogleheads can provide.
Are you married and do you have kids? I make $70k (gross) and put about 30% into retirement, but I don't have any kids. I don't feel like I'm broke and I live comfortably. I don't desire to have a lot of "stuff" (e.g., new electronics/phones, new clothes, fancy car, etc.) and I think this helps as well. You're doing great at 30%, for sure.
Ya three kids all under 4.
KlangFool
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Re: Anyone Else Feel Broke Trying to Maintain a High Savings Rate?

Post by KlangFool »

bigtex wrote: Mon Nov 02, 2020 4:31 pm I feel like I am constantly low on funds each month because I am trying to maintain a 30% saving rate on a 65k gross income. Does anyone else feel like this or struggle with high savings rates on less than $100k incomes? My mortgage payment is 1350 per month so maybe that is also why I feel constrained? Bought too much house for my aggressive savings goals? I would love any help the bogleheads can provide.

bigtex,


Yes. If you overspend on the big purchase aka the house, it is too late to fix the problem.


KlangFool
KlangFool
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Re: Anyone Else Feel Broke Trying to Maintain a High Savings Rate?

Post by KlangFool »

bigtex wrote: Mon Nov 02, 2020 6:02 pm
matti wrote: Mon Nov 02, 2020 5:41 pm
bigtex wrote: Mon Nov 02, 2020 4:31 pm I feel like I am constantly low on funds each month because I am trying to maintain a 30% saving rate on a 65k gross income. Does anyone else feel like this or struggle with high savings rates on less than $100k incomes? My mortgage payment is 1350 per month so maybe that is also why I feel constrained? Bought too much house for my aggressive savings goals? I would love any help the bogleheads can provide.
Are you married and do you have kids? I make $70k (gross) and put about 30% into retirement, but I don't have any kids. I don't feel like I'm broke and I live comfortably. I don't desire to have a lot of "stuff" (e.g., new electronics/phones, new clothes, fancy car, etc.) and I think this helps as well. You're doing great at 30%, for sure.
Ya three kids all under 4.
bigtex,

Do you plan to pay for their college education?

KlangFool
Topic Author
bigtex
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Re: Anyone Else Feel Broke Trying to Maintain a High Savings Rate?

Post by bigtex »

KlangFool wrote: Mon Nov 02, 2020 6:07 pm
bigtex wrote: Mon Nov 02, 2020 6:02 pm
matti wrote: Mon Nov 02, 2020 5:41 pm
bigtex wrote: Mon Nov 02, 2020 4:31 pm I feel like I am constantly low on funds each month because I am trying to maintain a 30% saving rate on a 65k gross income. Does anyone else feel like this or struggle with high savings rates on less than $100k incomes? My mortgage payment is 1350 per month so maybe that is also why I feel constrained? Bought too much house for my aggressive savings goals? I would love any help the bogleheads can provide.
Are you married and do you have kids? I make $70k (gross) and put about 30% into retirement, but I don't have any kids. I don't feel like I'm broke and I live comfortably. I don't desire to have a lot of "stuff" (e.g., new electronics/phones, new clothes, fancy car, etc.) and I think this helps as well. You're doing great at 30%, for sure.
Ya three kids all under 4.
bigtex,

Do you plan to pay for their college education?

KlangFool
Yes I do.
KlangFool
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Re: Anyone Else Feel Broke Trying to Maintain a High Savings Rate?

Post by KlangFool »

bigtex wrote: Mon Nov 02, 2020 6:15 pm
KlangFool wrote: Mon Nov 02, 2020 6:07 pm
bigtex wrote: Mon Nov 02, 2020 6:02 pm
matti wrote: Mon Nov 02, 2020 5:41 pm
bigtex wrote: Mon Nov 02, 2020 4:31 pm I feel like I am constantly low on funds each month because I am trying to maintain a 30% saving rate on a 65k gross income. Does anyone else feel like this or struggle with high savings rates on less than $100k incomes? My mortgage payment is 1350 per month so maybe that is also why I feel constrained? Bought too much house for my aggressive savings goals? I would love any help the bogleheads can provide.
Are you married and do you have kids? I make $70k (gross) and put about 30% into retirement, but I don't have any kids. I don't feel like I'm broke and I live comfortably. I don't desire to have a lot of "stuff" (e.g., new electronics/phones, new clothes, fancy car, etc.) and I think this helps as well. You're doing great at 30%, for sure.
Ya three kids all under 4.
bigtex,

Do you plan to pay for their college education?

KlangFool
Yes I do.
bigtex,

A) How do you plan to find the money?

B) Please do not tell me that you choose not to max up your Trad 401K and do an after-tax contribution to the 529.

C) Do you qualify for Saver's Credit?

https://www.bogleheads.org/wiki/Saver%27s_credit

D) Do you qualify for EITC?

https://www.irs.gov/credits-deductions/ ... tax-credit

E) Is it a 30 years or 15 years mortgage?

KlangFool
tashnewbie
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Re: Anyone Else Feel Broke Trying to Maintain a High Savings Rate?

Post by tashnewbie »

What's total household income and mortgage amount and rate?

Sounds like you may have stretched on the mortgage. No judgment. Some people prefer to put most of their money into a house versus other things like vacations, saving for other things. There are tradeoffs, however.

How did you reach your desired 30% savings rate? What was the reason you set it there? I agree with someone else above who said you shouldn't dogmatically and arbitrarily hold onto a set savings rate. Determine your goals and adjust accordingly, if needed.
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Brianmcg321
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Re: Anyone Else Feel Broke Trying to Maintain a High Savings Rate?

Post by Brianmcg321 »

For the goals you have, you simply have too much house. You really need to get that mortgage payment lower.

Your basically living like your broke.
Rules to investing: | 1. Don't lose money. | 2. Don't forget rule number 1.
absolute zero
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Re: Anyone Else Feel Broke Trying to Maintain a High Savings Rate?

Post by absolute zero »

bigtex wrote: Mon Nov 02, 2020 6:02 pm
matti wrote: Mon Nov 02, 2020 5:41 pm
bigtex wrote: Mon Nov 02, 2020 4:31 pm I feel like I am constantly low on funds each month because I am trying to maintain a 30% saving rate on a 65k gross income. Does anyone else feel like this or struggle with high savings rates on less than $100k incomes? My mortgage payment is 1350 per month so maybe that is also why I feel constrained? Bought too much house for my aggressive savings goals? I would love any help the bogleheads can provide.
Are you married and do you have kids? I make $70k (gross) and put about 30% into retirement, but I don't have any kids. I don't feel like I'm broke and I live comfortably. I don't desire to have a lot of "stuff" (e.g., new electronics/phones, new clothes, fancy car, etc.) and I think this helps as well. You're doing great at 30%, for sure.
Ya three kids all under 4.
You say you feel low on funds. Does this mean literally cash strapped? If so, perhaps consider increasing your checking account balance. For example, if you typically keep $1000 in checking, stop saving for a couple months (or however long) until you get your checking account balance up to, let’s say, $5k. Then proceed with your 30% savings rate, and try to maintain a steady $5k in your checking account. Having a little extra cash on hand could possibly make a world of a difference, if that’s the issue.
Mike Scott
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Re: Anyone Else Feel Broke Trying to Maintain a High Savings Rate?

Post by Mike Scott »

The mortgage is probably the squeeze.
Can you get the mortgage payment down with a refi and or longer term?
Is selling/downsizing the house possible given all the other considerations?
Are you OK with 20% savings instead of 30%?
What is it that makes you "feel" broke?
Do you need a cash cushion or more emergency fund?
Do you want to spend some fun money each month?
Are there other people who should be part of this discussion?
MathIsMyWayr
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Re: Anyone Else Feel Broke Trying to Maintain a High Savings Rate?

Post by MathIsMyWayr »

Wings5 wrote: Mon Nov 02, 2020 5:00 pm If it’s stressing you out maybe you should adjust. Is there something dogmatic about 30% for you? Would 25% help you sleep better?
30%*$65,000=$19,500 - does it look familiar?
hookemhorns
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Re: Anyone Else Feel Broke Trying to Maintain a High Savings Rate?

Post by hookemhorns »

Assuming your mortgage payment includes tax and insurance it's quite reasonable. If it doesn't, then the equation gets tighter depending upon just how high your tax and property insurance are.

Either way, a 30% savings rate on 65k income would be very difficult in most parts of the country. Certain costs of living are largely fixed (i.e. utilities, insurance, healthcare, basic groceries) and these will eat into a meaningful part of a 65k income. I think I could achieve it, barely, in my MCOL city if I were single. Definitely not if married and/or kids.
mx711yam
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Re: Anyone Else Feel Broke Trying to Maintain a High Savings Rate?

Post by mx711yam »

I feel the same way often.

Your savings rate is incredible, but like another poster mentioned, make sure youre enjoying life. I saved too much when i was younger before kids, should have taken more vacations.
Bama12
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Re: Anyone Else Feel Broke Trying to Maintain a High Savings Rate?

Post by Bama12 »

Is your house 15 years or 30 years? What is your insert rate?

Saving 30% is great but not if you and your family never have a life. You and your family need to have some fun. Kids need toys, wife needs to go out, family needs yearly vacation even if its just a beach trip.

I would first look at my house first maybe downsize, get a better rate, move to 30 years.

I would also think hard about saving 15% instead of 30%.
260chrisb
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Re: Anyone Else Feel Broke Trying to Maintain a High Savings Rate?

Post by 260chrisb »

bigtex wrote: Mon Nov 02, 2020 4:31 pm I feel like I am constantly low on funds each month because I am trying to maintain a 30% saving rate on a 65k gross income. Does anyone else feel like this or struggle with high savings rates on less than $100k incomes? My mortgage payment is 1350 per month so maybe that is also why I feel constrained? Bought too much house for my aggressive savings goals? I would love any help the bogleheads can provide.
You feel that way because you ARE constantly low on funds based on your income and mortgage. Congrats on having the discipline to save at that rate. If you bought too much house; so what? Enjoy it. I bought way more house than I need but am happy for where the money is going. I'm guessing you're going to keep the discipline so maybe scale back to 20-25% which is still a very high saving rate and see how that makes you feel.
Normchad
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Re: Anyone Else Feel Broke Trying to Maintain a High Savings Rate?

Post by Normchad »

BigTex, you have 4 kids, a house, you make 65K, and you save 30%. In my eyes, you are amazing! You’re not doing anything wrong at all.

As others have mentioned, if you’re miserable, loosen up the purse strings once in a while.

I’m super impressed though. Hats off to you!
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arcticpineapplecorp.
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Re: Anyone Else Feel Broke Trying to Maintain a High Savings Rate?

Post by arcticpineapplecorp. »

MathIsMyWayr wrote: Mon Nov 02, 2020 6:55 pm
Wings5 wrote: Mon Nov 02, 2020 5:00 pm If it’s stressing you out maybe you should adjust. Is there something dogmatic about 30% for you? Would 25% help you sleep better?
30%*$65,000=$19,500 - does it look familiar?
in this case the OP is maxing out 401k but not utilizing Roth IRA (or spousal Roth if spouse is not employed).

if MFJ and making $65,000 then the $19,500 is only saving them 12% in taxes on that ($2340 taxes saved).

While the OP wants the extra money obviously, I think paying 12% tax to put $19,500 in Roth (if Roth 401k allowed, or even if not, $12,000 in Roth IRAs between OP and spouse) is better bang for buck. That's me though.
It's "Stay" the course, not Stray the Course. Buy and Hold works. You should really try it sometime. Get a plan: www.bogleheads.org/wiki/Investment_policy_statement
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bigtex
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Re: Anyone Else Feel Broke Trying to Maintain a High Savings Rate?

Post by bigtex »

arcticpineapplecorp. wrote: Mon Nov 02, 2020 7:42 pm
MathIsMyWayr wrote: Mon Nov 02, 2020 6:55 pm
Wings5 wrote: Mon Nov 02, 2020 5:00 pm If it’s stressing you out maybe you should adjust. Is there something dogmatic about 30% for you? Would 25% help you sleep better?
30%*$65,000=$19,500 - does it look familiar?
in this case the OP is maxing out 401k but not utilizing Roth IRA (or spousal Roth if spouse is not employed).

if MFJ and making $65,000 then the $19,500 is only saving them 12% in taxes on that ($2340 taxes saved).

While the OP wants the extra money obviously, I think paying 12% tax to put $19,500 in Roth (if Roth 401k allowed, or even if not, $12,000 in Roth IRAs between OP and spouse) is better bang for buck. That's me though.
By doing 401k instead of Roth, I get over $2k in earned income tax credit each year. Considering that I should stay with 401k over Roth right?
rockstar
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Re: Anyone Else Feel Broke Trying to Maintain a High Savings Rate?

Post by rockstar »

When I made your salary, I saved 15% in my 401k, and I had $650 monthly rent. Now, rent is double that by me. I'd probably save half as much.
Carguy85
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Re: Anyone Else Feel Broke Trying to Maintain a High Savings Rate?

Post by Carguy85 »

Car payments or other payments? Ballparking taxes your house is 30-35% of take home..assuming this includes insurance and property taxes? 25% is a good ballpark ...doesn’t necessarily sound like you are super over extended depending on other bills. Kudos for being very deliberate about saving.
pseudoiterative
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Re: Anyone Else Feel Broke Trying to Maintain a High Savings Rate?

Post by pseudoiterative »

Do you have unexplored options for increasing income? Like many things, this can be a lot easier said than done. Early in my career I made the mistake of working for too little money for too many years instead of finding a better paying job & negotiating a better deal.
Da5id
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Re: Anyone Else Feel Broke Trying to Maintain a High Savings Rate?

Post by Da5id »

Welp, to quote Dumbledore, "It does not do to dwell on dreams and forget to live".

I think if you are feeling like a 30% savings rate isn't letting you enjoy life, maybe a lesser savings rate would bet a better compromise. You need not keep up with the Jones who are somehow living large while saving 87% on a 10K/year salary in bogleheads. On the other hand, perhaps if you spent your money on different things you'd be more content with the 30%. Having a hard look at where your money is actually going might sort things out. Also, easing up a bit on your savings rate but committing a larger chunk of your raises to savings could be a compromise.
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arcticpineapplecorp.
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Re: Anyone Else Feel Broke Trying to Maintain a High Savings Rate?

Post by arcticpineapplecorp. »

bigtex wrote: Mon Nov 02, 2020 8:06 pm
arcticpineapplecorp. wrote: Mon Nov 02, 2020 7:42 pm
MathIsMyWayr wrote: Mon Nov 02, 2020 6:55 pm
Wings5 wrote: Mon Nov 02, 2020 5:00 pm If it’s stressing you out maybe you should adjust. Is there something dogmatic about 30% for you? Would 25% help you sleep better?
30%*$65,000=$19,500 - does it look familiar?
in this case the OP is maxing out 401k but not utilizing Roth IRA (or spousal Roth if spouse is not employed).

if MFJ and making $65,000 then the $19,500 is only saving them 12% in taxes on that ($2340 taxes saved).

While the OP wants the extra money obviously, I think paying 12% tax to put $19,500 in Roth (if Roth 401k allowed, or even if not, $12,000 in Roth IRAs between OP and spouse) is better bang for buck. That's me though.
By doing 401k instead of Roth, I get over $2k in earned income tax credit each year. Considering that I should stay with 401k over Roth right?
yes good point.

as was asked...do you look into the saver's credit? if not, look into that:
https://www.irs.gov/retirement-plans/pl ... ers-credit
It's "Stay" the course, not Stray the Course. Buy and Hold works. You should really try it sometime. Get a plan: www.bogleheads.org/wiki/Investment_policy_statement
Misslenna
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Re: Anyone Else Feel Broke Trying to Maintain a High Savings Rate?

Post by Misslenna »

I am a single mother of two children ( 16 and 3), 36yrs old, fixed income of $70,000 per year with a mortgage of $1458 ( including taxes and insurance) and I save 50% of my income. I don't feel broke and I do not feel like I am missing out but I did just start my saving for retirement. I only have $44,000 saved so far between my ROTH IRA and my taxable account but it's a start. I love budgeting and seeing exactly where my money is going. I think you are doing great! I am in the process of getting a government job so I do plan on getting my savings up to about 60-65% if that job goes through. I still travel and vacation with my boys and that is what my passion is. We don't really eat out anymore but I am a chef so it's not a big deal to cook at home. Keep up the good work and broke is only a state of mind.
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teen persuasion
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Re: Anyone Else Feel Broke Trying to Maintain a High Savings Rate?

Post by teen persuasion »

arcticpineapplecorp. wrote: Mon Nov 02, 2020 8:23 pm
bigtex wrote: Mon Nov 02, 2020 8:06 pm
arcticpineapplecorp. wrote: Mon Nov 02, 2020 7:42 pm
MathIsMyWayr wrote: Mon Nov 02, 2020 6:55 pm
Wings5 wrote: Mon Nov 02, 2020 5:00 pm If it’s stressing you out maybe you should adjust. Is there something dogmatic about 30% for you? Would 25% help you sleep better?
30%*$65,000=$19,500 - does it look familiar?
in this case the OP is maxing out 401k but not utilizing Roth IRA (or spousal Roth if spouse is not employed).

if MFJ and making $65,000 then the $19,500 is only saving them 12% in taxes on that ($2340 taxes saved).

While the OP wants the extra money obviously, I think paying 12% tax to put $19,500 in Roth (if Roth 401k allowed, or even if not, $12,000 in Roth IRAs between OP and spouse) is better bang for buck. That's me though.
By doing 401k instead of Roth, I get over $2k in earned income tax credit each year. Considering that I should stay with 401k over Roth right?
yes good point.

as was asked...do you look into the saver's credit? if not, look into that:
https://www.irs.gov/retirement-plans/pl ... ers-credit
He has 3 young kids. The nonrefundable portion of CTC is $600 each. That should almost cover any federal tax owed. Saver's credit might get him to zero.

Then there's $1400 in refundable CTC for each, $4200. Plus the EITC, fully refundable.

OP, yes we pushed as much as possible into traditional 401k to increase our refundable credits (our state matches EITC at 30%, and CTC for kids over 4 at 33% of the first $1k each). At our peak we got $11k annually, which we used to fund Roth IRAs for both of us; our refunds are smaller now that most of the kids are thru college, and only one under 17.

The EITC creates an artificially high marginal tax rate for you. The phaseout rate with multiple children is 21%. So once you get in EITC AGI range, every additional $100 contributed to traditional 401k increases your refundable credit by $21. Since our state matches 30%, that added another 6.3%, or 27.3%.

You can either bank your refunds to even out your diminished take home pay, or push them into more retirement savings as we did (essentially for free). Actually, when I was initially figuring this out, I was using the large refunds to pay down our mortgage rapidly (instead of funding Roth IRAs) - our mortgage was an ugly 9.75%, so I wanted it gone, STAT. Once I'd knocked it out, then I opened the Roth IRAs. If your mortgage rate is a low one, it probably doesn't make sense to prepay it; saving is more useful.

Ugh, forgot to ask - do you have federal tax withholding turned off? With those credits, you don't need anything withheld; better to get it in your paycheck.
kimura king
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Re: Anyone Else Feel Broke Trying to Maintain a High Savings Rate?

Post by kimura king »

I pretty much feel broke.

I drive a Dave Ramsey/Uncle Buck style beater with a busted muffler.....it is a compact SUV but I do look broke as a joke everywhere I go LOL. A sketchy oil change place smashed my muffler so my car now sounds like a riced out 90's civic. I have wanted to spend 1k on a Toro Timemaster (a big lawnmower) for 3 years, yet I still mow my quarter-acre lawn with a regular cheap Lawnmower I bought used on Craigslist for $140. My wife has a really nice company car, so at least we get a free car. Next year my youngest starts kindergarten, which will be a relief. I've been paying 15k a year for daycare for about 8 years now.
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Re: Anyone Else Feel Broke Trying to Maintain a High Savings Rate?

Post by Wings5 »

MathIsMyWayr wrote: Mon Nov 02, 2020 6:55 pm
Wings5 wrote: Mon Nov 02, 2020 5:00 pm If it’s stressing you out maybe you should adjust. Is there something dogmatic about 30% for you? Would 25% help you sleep better?
30%*$65,000=$19,500 - does it look familiar?
Now that you point it out, yes. But again, if a somewhat random number put forth by the IRS is causing someone to stress, they should adjust if able. It’s not financial dogma.
“Ronald James Read was an American philanthropist, investor, janitor, and gas station attendant.”
Trader Joe
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Re: Anyone Else Feel Broke Trying to Maintain a High Savings Rate?

Post by Trader Joe »

"Anyone Else Feel Broke Trying to Maintain a High Savings Rate?"

No, not at all. Everything in moderation.
Erwin007
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Re: Anyone Else Feel Broke Trying to Maintain a High Savings Rate?

Post by Erwin007 »

You’re crushing it by saving 30% with 3 kids, $65k salary, and a mortgage payment that big. When we first had kids I made around $50-55k and was lucky to save 20%, and we had a mortgage payment that was ~25% less than yours. Kids can be expensive. We didn’t have money to do a lot of things (travel, eat out, buy nice furniture), but we made it work. As others have hinted at, would you feel better about dropping your savings rate to 25% and having a little cushion? May be worth thinking about.
RevFran
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Re: Anyone Else Feel Broke Trying to Maintain a High Savings Rate?

Post by RevFran »

Can you recast your mortgage and thus drop the monthly payment?

I was in a similar situation 15 years ago when I started working— but no kids! I set my 403b to max out— I was earning in the 50s. Since then, I never followed the “when you get a raise, save more” guideline, so my percentage saving dropped, the absolute value stayed the same, and it got easier and easier to do. I also started working a side gig, for splurges; but I know I wouldn’t have had time to do that if I had had children. All this to say, I think the advice to drop your savings rate a little is very reasonable, but I also understand the psychological benefit of maxing out, and I can attest that even with very minimal raises (in those 15 years, I got cola most years, no raise about 3 years, and twice a very small raise above and beyond cola), it got easier.
60B4E24B
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Re: Anyone Else Feel Broke Trying to Maintain a High Savings Rate?

Post by 60B4E24B »

tashnewbie wrote: Mon Nov 02, 2020 6:31 pm Sounds like you may have stretched on the mortgage. No judgment. Some people prefer to put most of their money into a house versus other things like vacations, saving for other things. There are tradeoffs, however.
Except I can choose to take a cheaper vacation if funds are tight. I can't choose to not pay my mortgage.
spm301
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Re: Anyone Else Feel Broke Trying to Maintain a High Savings Rate?

Post by spm301 »

I feel the same way and sometimes it becomes discouraging. It's like a disease.

My salary is divided into thirds:
- 1/3 I live off of (but I put extra into savings whenever I can)
- 1/3 goes to taxes/healthcare
- 1/3 goes into savings/retirement
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LiveSimple
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Re: Anyone Else Feel Broke Trying to Maintain a High Savings Rate?

Post by LiveSimple »

bigtex wrote: Mon Nov 02, 2020 4:31 pm I feel like I am constantly low on funds each month because I am trying to maintain a 30% saving rate on a 65k gross income. Does anyone else feel like this or struggle with high savings rates on less than $100k incomes? My mortgage payment is 1350 per month so maybe that is also why I feel constrained? Bought too much house for my aggressive savings goals? I would love any help the bogleheads can provide.
Just relax some, at $65 K you still have the monthly expenses that you have to pay / expense. I hear you.
Dantes
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Re: Anyone Else Feel Broke Trying to Maintain a High Savings Rate?

Post by Dantes »

I've felt broke while having a low savings rate. That was probably worse. And I wasn't living in a house with a mortgage of 6 times my gross annual salary or have that many young children; is there something unexpected about your financial situation?

Anyway, the issue here appears to be your savings rate, and you have been given good advice on running your numbers; why the high savings rate at this stage of your life? Do you also, on top of the expensive house and the big family and wanting to pay for your kid's college education, want to retire early?
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CyclingDuo
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Re: Anyone Else Feel Broke Trying to Maintain a High Savings Rate?

Post by CyclingDuo »

bigtex wrote: Mon Nov 02, 2020 4:31 pmI feel like I am constantly low on funds each month because I am trying to maintain a 30% saving rate on a 65k gross income. Does anyone else feel like this or struggle with high savings rates on less than $100k incomes? My mortgage payment is 1350 per month so maybe that is also why I feel constrained? Bought too much house for my aggressive savings goals? I would love any help the bogleheads can provide.
You could cut back on your savings a bit so that you are not constantly low on funds. Perhaps cutting back 5%-10% so you are saving 20-25% instead of 30% will do it? Or even cut back to saving in the 15-20% range while only one of you is working.

Become a dual income household to get your mortgage to be a lower percentage of household gross income, and have more money to cover expenses. This may require a slow transition with three little ones at home that begins with part-time, and gradually transitions to full time work as they reach school age. At the very least, look to increase your household income via some extra work for one or both of you.

CyclingDuo
"Save like a pessimist, invest like an optimist." - Morgan Housel
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