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If I have monthly income of 3000 and spend it all, how am I to save 1000 monthly without lowering my costs? This sounds impossible, unless maybe you’re not cou

If I have monthly income of 3000 and spend it all, how am I to save 1000 monthly without lowering my costs? This sounds impossible, unless maybe you’re not counting all spending as “ordinary costs”?

kd0amg 5y ago
It's not counting all spending as costs of living.
jandrewrogers 5y ago
This is a term of art. An "ordinary expense" are categories of expenses required to live a decent average life, as evidenced by the fact that most people actually spend money on them. This includes housing, transportation, clothes, food, healthcare, utilities, taxes, etc. It makes no judgement on how the money is spent in ordinary categories e.g. buying a BMW is an ordinary expense because it is transportation. It isn't prescriptive and it includes pretty much everything you would expect. Ordinary expenses include a lot of luxury and non-essential spending. If you look at all the categories that are "non-ordinary" because most people spend no money on them, they are pretty obviously lifestyle flexes. For example, if you blow your entire paycheck on a bar tab, that is not classified as an ordinary expense because most people don't do that. Subtract the median ordinary expense from the median income, you are left with more than $12,000 per year as a surplus. This is called "discretionary income", money you can spend on fun, hobbies, or -- relevant to this thread -- savings. If we restricted it even further to ordinary and essential spending, the income level that no longer generates any surplus is in the region of 15th percentile IIRC. That is still 20 million households in the US with no ability to save but that isn't the experience of the vast majority of households. The Bureau of Labor Statistics and the Federal Reserve publishes surprisingly detailed statics of what people spend money on and how income surpluses are used.

kd0amg 5y ago

It's not counting all spending as costs of living.

jandrewrogers 5y ago

This is a term of art. An "ordinary expense" are categories of expenses required to live a decent average life, as evidenced by the fact that most people actually spend money on them. This includes housing, transportation, clothes, food, healthcare, utilities, taxes, etc. It makes no judgement on how the money is spent in ordinary categories e.g. buying a BMW is an ordinary expense because it is transportation. It isn't prescriptive and it includes pretty much everything you would expect. Ordinary expenses include a lot of luxury and non-essential spending. If you look at all the categories that are "non-ordinary" because most people spend no money on them, they are pretty obviously lifestyle flexes. For example, if you blow your entire paycheck on a bar tab, that is not classified as an ordinary expense because most people don't do that. Subtract the median ordinary expense from the median income, you are left with more than $12,000 per year as a surplus. This is called "discretionary income", money you can spend on fun, hobbies, or -- relevant to this thread -- savings. If we restricted it even further to ordinary and essential spending, the income level that no longer generates any surplus is in the region of 15th percentile IIRC. That is still 20 million households in the US with no ability to save but that isn't the experience of the vast majority of households. The Bureau of Labor Statistics and the Federal Reserve publishes surprisingly detailed statics of what people spend money on and how income surpluses are used.