9 ms·

Anyone can live paycheck to paycheck if they let lifestyle creep get past their income. Looking at the difference in my income now vs 10 years ago and the diff

by jghn 4y ago

Anyone can live paycheck to paycheck if they let lifestyle creep get past their income. Looking at the difference in my income now vs 10 years ago and the difference in my savings rate, the savings is less than it should be in comparison. Inflation is part of it, sure. But it's a lot more that my lifestyle has changed. I choose to have a nicer place vs back then while living in a HCOL area, a nicer car. There are purchases I make without a second thought that would have been a big deal back then. And I make a conscious effort to monitor lifestyle creep. Plenty of people don't think about it at all and go all in.

onlyrealcuzzo 4y ago
The second my mom gets a dollar - she has the most insatiable desire in the world to spend ten. There are spenders and savers. No amount of money changes that.
- dr_dshiv 4y ago
  Part of the point of making more money is to not think about cost. And then you learn how endless our desires are.
- Someone1234 4y ago
  > There are spenders and savers. This seems a little reductive, like nobody has any agency nor are there any shades of gray, you're either black or white, true or false, spend or save. I'd argue people prioritize different things and a lot of the reasons they prioritize those things has to do with their upbringing or personal history. I'm sure, in general, people should save more. Just feels like everyone is quick to jump on others for making different choices without understanding the context of those choices. It is the whole "Should people on food stamps buy a birthday cake?" question again, and every time that comes up all hell breaks loose.
  - f38zf5vdt 4y ago
    Many people have poor impulse control around certain decisions and are unable to control themselves despite wishing otherwise. The percentage of overweight and obese individuals in the world is a good indication of this. Unless you feel obesity is their priority.
    - scottLobster 4y ago
      Not just poor impulse control, typically obese people and compulsive spenders are compensating for some psychological trauma. For some reason they lack a positive emotional stake in their future
      - onlyrealcuzzo 4y ago
        Some people just really like French Fries...
      - s1artibartfast 4y ago
        Seems like you are describing Why they have poor impulse control.
shmatt 4y ago
How many of them would not be making $250k if they moved away from the HCOL area? Rents in NYC have been through the roof. Even with wages up due to the great resignation, it hasn't kept up with housing. Spending 50%+ of your post tax high pay check on housing has become the norm. You could live far away from the city and spend 3-4 hours commuting every time you wanted to enjoy the city life or your employer asked you to come in. Or you could move away and risk getting fired or "salary adjusted" The article kind of ignores the fact the high salary is directly tied to office location. You can save more by moving away from HCOL areas, but you most likely won't be part of the $250k article anymore
- Someone1234 4y ago
  HCOL has an interesting parallel to when women entered the workforce in large numbers, you'd think that households going from single-income to dual-income would make them better off, but much of that new income went into property prices leaving a lot of households little better off in the long term, and leaving single-income households much worse off. To be clear, NOBODY is suggesting women in the workforce is a bad thing, I am merely saying that HCOL's housing cost just suck almost all the regional income gain back out of the market leaving households little better off overall. The best thing we could do as a society is more full-remote jobs, to break up HCOLs and revitalize more rural areas.
  - TimPC 4y ago
    Georgists have studied the mechanism by which land captures the value of labour quite extensively and many of them even predicted this trend. The solution to land capturing excess amounts of labour is to reduce total labour capture by taxing land instead of labour.
    - newaccount74 4y ago
      Would that not just lead to increased rent? Is there a way to do it so that rents become lower?
MomoXenosaga 4y ago
Reminds me of those stories about broke athletes. Some of them are quite tragic- they're preyed on by their entire family and birth village.
jseliger 4y ago
A large part of this is about housing and taxes: https://www.aeaweb.org/articles?id=10.1257/mac.20170388 https://www.aeaweb.org/articles?id=10.1257/mac.20170388 HCOL areas are also usually the most productive.
- paulmd 4y ago
  In fact it's not a coincidence - economically productive areas are desirable to live. Everyone likes living in a thriving economy, and salaries are higher. HCOL isn't a bad thing in the abstract, there is no abstract "right" set point for cost-of-living, and you could equally view LCOL areas as generally being rural/underdeveloped areas that are underpriced relative to the broader economy.
  - ouid 4y ago
    HCOL is the law of rents catching up. If your right to exist in a place can be captured, then it will eventually cost you your entire productive output.
roflyear 4y ago
The best way to deal with this is to add savings-creep too. There is no reason why you can't enjoy things if you make more money, but increase your savings and investing rate by an equal or greater % as your salary goes up. If you do not have a savings or investing rate, the next time your salary goes up, if you think it will, take 50% of that and put it into savings and investments. Treat your salary increase as a 50% increase.
- jghn 4y ago
  This is more or less what I do. Measured objectively against typical Americans I do save a ton. But back 10 years ago I figured I had everything I cared to have, so anything over and above would be gravy. Not so as it turns out. So instead I have a target savings rate, and while I don't live on a strict budget I keep my eye on it that I'm close enough over time.
  - hanifc 4y ago
    > But back 10 years ago I figured I had everything I cared to have, so anything over and above would be gravy. Not so as it turns out. Would you mind sharing what changed? This is actually something I've been thinking about lately. I'm trying to plan out the type of lifestyle that I'd ideally like to have while also estimating how much it would cost me. This way, I don't get needlessly tempted by chasing ever higher and higher salaries.
    - jghn 4y ago
      Sure. It's nothing profound. More a matter of having simpler tastes back then. The first example that comes to mind would be there are restaurants I enjoyed that were a once in a year treat kind of place at the time. Now I go to those sorts of places multiple times a month. At some point I realized I could afford to do so, and I enjoy those places more, so why not? And then at some point they shifted to being among the default options when we think to go out for dinner.
rayiner 4y ago
There's also a lot of social pressure toward lifestyle creep. My parents hassle my wife and I regularly about our lifestyle choices. In their view, as two corporate attorneys, we should be living in a $2 million house in a posh DC suburb, driving a BMW and fighting with other people to get our kids into one of the "top" DC private schools. My wife and I couldn't bring ourselves to take on that kind of mortgage payment, and opted to buy a house that was less than one-quarter that price. We're not any further from D.C. than the expensive suburb where I grew up, but many of our neighbors have non-professional jobs or lack a college degree, which drives my parents nuts. Luckily my wife comes from a modest background and thinks our 10-year old paid-off Toyota 4Runner is a great car and would never let me buy a BMW (even though I really want one lol). It's the best financial decision we ever made. Earlier this year when my wife decided she wanted to quit her job and bootstrap a business, we didn't have to spend months planning and downsizing. We just pulled the trigger.
- nunez 4y ago
  why won't she let you buy a BMW if you can afford it without compromising savings goals?
  - emodendroket 4y ago
    Yeah that seems like it's getting into pathological territory.
  - ac29 4y ago
    > my wife decided she wanted to quit her job and bootstrap a business Because, by saving the money, they had this opportunity.
  - rayiner 4y ago
    Apart from not needing it, it would be rather conspicuous in our neighborhood, and given our small lot we’d have to park it at the community lot a quarter mile away. Lifestyle creep is easier to avoid if buying stuff is inconvenient…
    - 4y ago
screye 4y ago
Yeah, assuming a household of 2+2 in NYC/SF/Seattle: * Renting a 3 bed near work (financial district) will cost around $70k/yr * a nice car (a BMW M3-ish) + a cheap van (costs around $20k/yr * Ordering in everyday costs $40k/yr * Nice vacations and trips will easily cost $30k/yr total = $160k/yr wage = (250k x 0.7(taxes)) - 30k (401k, HSA) = $145k/yr __________ Yep, I can totally see how allowing common types of 'tech-people life creep' will quickly lead to a paycheck-paycheck situation. I only outlined the macro-costs, and those still add up. Of course, this also clearly outlines the main savings a person can make: * Save on rent. always. 33% of your wage is a recommendation for poor-americans. Don't rent at 33% if you're making $250k (70k -> $35k) * Cook if you can or pickup from your local street vendor, not doordash.($40k -> $15k) * Buy a cheap car, or none at at all. _________ It also outlines why a subsection of HN has been shouting about urban infrastructure reform in the US. Higher density, more middle housing and better public transports allows for more housing supply, more walkable amenities and car-free lifestyles. * Car free = save 15k/year (assume 5k for ubers, car rentals when needed, public transport) * More walkable density = cheap food downstairs (NYC is an excellent example of this) * More housing = cheaper rent (the biggest culprit) __________ The numbers are staggering. I haven't added any of the extra costs that come with emergency medical care or children (except food and living). $250k is the top 5 percentile of households the US. Unless America makes its infrastructure efficient and sustainable, the current framework will bankrupt literally 95% of irresponsible spenders in HCOL regions in the US. Worst of all, the cities are ugly, the concrete landscape is hellish and the hedonistic treadmill quickly catches up, as the new luxuries start feeling no different than a Motel or a Corolla.
- sieabahlpark 4y ago
  Wow if only not owning a car worked outside of a city. Except it doesn't, even in the city, if you have family outside of the city how do you visit them? Would you rent a car or have someone make the trip to get you?
  - jghn 4y ago
    I interpreted the GP as suggesting instead of BMWs, Teslas, and nice SUVs there are cheaper alternatives. This includes more bottom of the barrel cars. On your other question, I was a carless city dweller for many years. And yes I would fill in the blanks with rental cars on occasion.
nunez 4y ago
100%. I'm in the same boat as you. I could save more...but I like nice things and going out. I track all of my spend and my lifestyle creep year-over-year aggressively, so I know how much I'm letting it get to me, but I'm also putting money into my 401(k) and HSA and have back-out plans in case things go _really_ south.
emodendroket 4y ago
Yeah, the article kicks in with an inflation angle but I don't buy it. Last year I moved to Orange County, their example of a paradigmatically expensive area, and the real estate certainly is pricey, but not out of reach for anyone with a quarter-mil in yearly income. But I've never seen so many Teslas, Lamborghinis, and Porsches on the road in my life. Not a mystery where the money is going.

by jghn 4y ago

onlyrealcuzzo 4y ago

The second my mom gets a dollar - she has the most insatiable desire in the world to spend ten. There are spenders and savers. No amount of money changes that.

dr_dshiv 4y ago
Part of the point of making more money is to not think about cost. And then you learn how endless our desires are.
Someone1234 4y ago
> There are spenders and savers. This seems a little reductive, like nobody has any agency nor are there any shades of gray, you're either black or white, true or false, spend or save. I'd argue people prioritize different things and a lot of the reasons they prioritize those things has to do with their upbringing or personal history. I'm sure, in general, people should save more. Just feels like everyone is quick to jump on others for making different choices without understanding the context of those choices. It is the whole "Should people on food stamps buy a birthday cake?" question again, and every time that comes up all hell breaks loose.
- f38zf5vdt 4y ago
  Many people have poor impulse control around certain decisions and are unable to control themselves despite wishing otherwise. The percentage of overweight and obese individuals in the world is a good indication of this. Unless you feel obesity is their priority.
  - scottLobster 4y ago
    Not just poor impulse control, typically obese people and compulsive spenders are compensating for some psychological trauma. For some reason they lack a positive emotional stake in their future
    - onlyrealcuzzo 4y ago
      Some people just really like French Fries...
    - s1artibartfast 4y ago
      Seems like you are describing Why they have poor impulse control.

shmatt 4y ago

How many of them would not be making $250k if they moved away from the HCOL area? Rents in NYC have been through the roof. Even with wages up due to the great resignation, it hasn't kept up with housing. Spending 50%+ of your post tax high pay check on housing has become the norm. You could live far away from the city and spend 3-4 hours commuting every time you wanted to enjoy the city life or your employer asked you to come in. Or you could move away and risk getting fired or "salary adjusted" The article kind of ignores the fact the high salary is directly tied to office location. You can save more by moving away from HCOL areas, but you most likely won't be part of the $250k article anymore

Someone1234 4y ago
HCOL has an interesting parallel to when women entered the workforce in large numbers, you'd think that households going from single-income to dual-income would make them better off, but much of that new income went into property prices leaving a lot of households little better off in the long term, and leaving single-income households much worse off. To be clear, NOBODY is suggesting women in the workforce is a bad thing, I am merely saying that HCOL's housing cost just suck almost all the regional income gain back out of the market leaving households little better off overall. The best thing we could do as a society is more full-remote jobs, to break up HCOLs and revitalize more rural areas.
- TimPC 4y ago
  Georgists have studied the mechanism by which land captures the value of labour quite extensively and many of them even predicted this trend. The solution to land capturing excess amounts of labour is to reduce total labour capture by taxing land instead of labour.
  - newaccount74 4y ago
    Would that not just lead to increased rent? Is there a way to do it so that rents become lower?

MomoXenosaga 4y ago

Reminds me of those stories about broke athletes. Some of them are quite tragic- they're preyed on by their entire family and birth village.

jseliger 4y ago

A large part of this is about housing and taxes: https://www.aeaweb.org/articles?id=10.1257/mac.20170388 https://www.aeaweb.org/articles?id=10.1257/mac.20170388 HCOL areas are also usually the most productive.

paulmd 4y ago
In fact it's not a coincidence - economically productive areas are desirable to live. Everyone likes living in a thriving economy, and salaries are higher. HCOL isn't a bad thing in the abstract, there is no abstract "right" set point for cost-of-living, and you could equally view LCOL areas as generally being rural/underdeveloped areas that are underpriced relative to the broader economy.
- ouid 4y ago
  HCOL is the law of rents catching up. If your right to exist in a place can be captured, then it will eventually cost you your entire productive output.

roflyear 4y ago

The best way to deal with this is to add savings-creep too. There is no reason why you can't enjoy things if you make more money, but increase your savings and investing rate by an equal or greater % as your salary goes up. If you do not have a savings or investing rate, the next time your salary goes up, if you think it will, take 50% of that and put it into savings and investments. Treat your salary increase as a 50% increase.

jghn 4y ago
This is more or less what I do. Measured objectively against typical Americans I do save a ton. But back 10 years ago I figured I had everything I cared to have, so anything over and above would be gravy. Not so as it turns out. So instead I have a target savings rate, and while I don't live on a strict budget I keep my eye on it that I'm close enough over time.
- hanifc 4y ago
  > But back 10 years ago I figured I had everything I cared to have, so anything over and above would be gravy. Not so as it turns out. Would you mind sharing what changed? This is actually something I've been thinking about lately. I'm trying to plan out the type of lifestyle that I'd ideally like to have while also estimating how much it would cost me. This way, I don't get needlessly tempted by chasing ever higher and higher salaries.
  - jghn 4y ago
    Sure. It's nothing profound. More a matter of having simpler tastes back then. The first example that comes to mind would be there are restaurants I enjoyed that were a once in a year treat kind of place at the time. Now I go to those sorts of places multiple times a month. At some point I realized I could afford to do so, and I enjoy those places more, so why not? And then at some point they shifted to being among the default options when we think to go out for dinner.

rayiner 4y ago

There's also a lot of social pressure toward lifestyle creep. My parents hassle my wife and I regularly about our lifestyle choices. In their view, as two corporate attorneys, we should be living in a $2 million house in a posh DC suburb, driving a BMW and fighting with other people to get our kids into one of the "top" DC private schools. My wife and I couldn't bring ourselves to take on that kind of mortgage payment, and opted to buy a house that was less than one-quarter that price. We're not any further from D.C. than the expensive suburb where I grew up, but many of our neighbors have non-professional jobs or lack a college degree, which drives my parents nuts. Luckily my wife comes from a modest background and thinks our 10-year old paid-off Toyota 4Runner is a great car and would never let me buy a BMW (even though I really want one lol). It's the best financial decision we ever made. Earlier this year when my wife decided she wanted to quit her job and bootstrap a business, we didn't have to spend months planning and downsizing. We just pulled the trigger.

nunez 4y ago
why won't she let you buy a BMW if you can afford it without compromising savings goals?
- emodendroket 4y ago
  Yeah that seems like it's getting into pathological territory.
- ac29 4y ago
  > my wife decided she wanted to quit her job and bootstrap a business Because, by saving the money, they had this opportunity.
- rayiner 4y ago
  Apart from not needing it, it would be rather conspicuous in our neighborhood, and given our small lot we’d have to park it at the community lot a quarter mile away. Lifestyle creep is easier to avoid if buying stuff is inconvenient…
  - 4y ago

screye 4y ago

Yeah, assuming a household of 2+2 in NYC/SF/Seattle: * Renting a 3 bed near work (financial district) will cost around $70k/yr * a nice car (a BMW M3-ish) + a cheap van (costs around $20k/yr * Ordering in everyday costs $40k/yr * Nice vacations and trips will easily cost $30k/yr total = $160k/yr wage = (250k x 0.7(taxes)) - 30k (401k, HSA) = $145k/yr __________ Yep, I can totally see how allowing common types of 'tech-people life creep' will quickly lead to a paycheck-paycheck situation. I only outlined the macro-costs, and those still add up. Of course, this also clearly outlines the main savings a person can make: * Save on rent. always. 33% of your wage is a recommendation for poor-americans. Don't rent at 33% if you're making $250k (70k -> $35k) * Cook if you can or pickup from your local street vendor, not doordash.($40k -> $15k) * Buy a cheap car, or none at at all. _________ It also outlines why a subsection of HN has been shouting about urban infrastructure reform in the US. Higher density, more middle housing and better public transports allows for more housing supply, more walkable amenities and car-free lifestyles. * Car free = save 15k/year (assume 5k for ubers, car rentals when needed, public transport) * More walkable density = cheap food downstairs (NYC is an excellent example of this) * More housing = cheaper rent (the biggest culprit) __________ The numbers are staggering. I haven't added any of the extra costs that come with emergency medical care or children (except food and living). $250k is the top 5 percentile of households the US. Unless America makes its infrastructure efficient and sustainable, the current framework will bankrupt literally 95% of irresponsible spenders in HCOL regions in the US. Worst of all, the cities are ugly, the concrete landscape is hellish and the hedonistic treadmill quickly catches up, as the new luxuries start feeling no different than a Motel or a Corolla.

sieabahlpark 4y ago
Wow if only not owning a car worked outside of a city. Except it doesn't, even in the city, if you have family outside of the city how do you visit them? Would you rent a car or have someone make the trip to get you?
- jghn 4y ago
  I interpreted the GP as suggesting instead of BMWs, Teslas, and nice SUVs there are cheaper alternatives. This includes more bottom of the barrel cars. On your other question, I was a carless city dweller for many years. And yes I would fill in the blanks with rental cars on occasion.

nunez 4y ago

100%. I'm in the same boat as you. I could save more...but I like nice things and going out. I track all of my spend and my lifestyle creep year-over-year aggressively, so I know how much I'm letting it get to me, but I'm also putting money into my 401(k) and HSA and have back-out plans in case things go _really_ south.

emodendroket 4y ago

Yeah, the article kicks in with an inflation angle but I don't buy it. Last year I moved to Orange County, their example of a paradigmatically expensive area, and the real estate certainly is pricey, but not out of reach for anyone with a quarter-mil in yearly income. But I've never seen so many Teslas, Lamborghinis, and Porsches on the road in my life. Not a mystery where the money is going.