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[winjet81]

I can't recommend enough budgeting software like YNAB to help people get a real and transparent view of their income coming in and their spending habits going out.

A year ago, my wife and I were were over-spending by $200-300 monthly and got further and further into debt (usually CC related). Today I can say that because of YNAB, we are a year with zero CC debt and are saving/investing $500-600 month.

Living with CC debt is an absolute absurdity, yet it's became normalized by consumer addictions that CC companies shamefully exploit.

 

[Vicetrailia]

I anyways wondered why online banking doesn't have features that help customers generate breakdown reports on their spending.

 

[Skellig Gra]

I anyways wondered why online banking doesn't have features that help customers generate breakdown reports on their spending.

A lot of credit card websites provide this feature. It is very handy.

 

[Vicetrailia]

A lot of credit card websites provide this feature. It is very handy.

Does it include having some sort of categorical breakdown?

 

[Skellig Gra]

Does it include having some sort of categorical breakdown?

Yeah, for capital one they do all kinds of breakdowns with pie charts and bar graphs. These are the categories I see:

Dining
Gas/Automotive
Merchandise
Entertainment
Travel
Monthly Bills
Services
Utilities
Health Care
Insurance
Other

 

[thechristoph]

I don't feel like I'm irresponsible with money. I don't eat out a lot. I don't buy a lot of crap... I spend probably less than $100 a month on frivolities like games or collectibles. Yet I am in that average range of credit card debt. I'm a scooch and a half above the median earning level, and it just builds on itself. All my extra money goes to feeding the beast.

Some of it comes from things like emergency home and car repairs, some of it comes from needing to buy a lot of clothes at once for a new job (which can be written off come tax time, and a lot comes from pre-deductable and high percentage medical co-pay (again can be written off).

 

[CornBurrito]

Wage stagnation is partly to blame for this. Not to mention capitalism's unwavering dependence on rabid consumerism.

But wage stagnation is only because this generation is the laziest. Wages would skyrocket if we were as hard working as the boomers.

 

[crazygambit]

As sad as it sounds, high schoolers really need to have a class set aside to learn budgeting, investing for the future, and simple daily financial management (balancing a checkbook, how to pay down debt smartly, etc.) Living within your means should be a major building block of our school system.

I can definitely cover $400 but I've been blessed in my life. If I hadn't learned some hard lessons about discretionary spending I might be much worse off.

I've said this many time before. Like why the fuck are we spending 4 years learning chemistry? When was the last time you used anything you learned in that class in your life? (Unless you're actually a chemist I guess, in which case it should be an optional class for those who want to pursue that line of work).

Yet absolutely EVERYONE has to deal with money. But no, let's not teach that. What would be the point?

 

[RoadHazard]

I feel like I do a decent job with my finances even though I really could stand to do a more formal budget. I max out two retirement accounts and have automatic cash savings every month for emergencies. My credit card debt is a below the $5,700 in the quoted part of the article, but is currently higher than I generally like, but that's mainly because I'm in "just bought a house now I need furniture" mode - and don't want to pull cash from my emergency funds to pay for those so despite the interest on the CC I'd rather use it to amortize those costs out a bit. I'm lucky though in that I'll have it paid off in three months or so now that the furniture buying has slowed.

Having no car payment at the moment helps as well.

Still, I need to start making use of that YNAB I've had sitting in my Steam Library for a while.

That's not very smart though, is it...? You're using money you don't have instead of money you do have, and paying interest on it. Why not buy the stuff with that money and keep the CC for possible emergencies? You'd be down the same amount of money, except with no interest unless there actually is an emergency. And your emergency funds would have been refilled in three months. Seems to me like you're wasting money (interest) for no real reason except principles here. And while the principle of not touching emergency funds for non-emergency purchases is of course a good one, what you have done here isn't really any better. What you're really saying, since you won't touch the emergency funds for stuff like this, is that you couldn't actually afford the stuff you just bought.

 

[DKHustlin]

this may be anecdotal but i also feel that people get into this trap because saving money isnt sexy or attractive (ie it seems boring)

like sure not eating out or going out or buying nice things will save you money, but its not exactly this super interesting lifestyle. any thought?

 

[Skellig Gra]

this may be anecdotal but i also feel that people get into this trap because saving money isnt sexy or attractive (ie it seems boring)

like sure not eating out or going out or buying nice things will save you money, but its not exactly this super interesting lifestyle. any thought?

There is definitely some truth to that. What people don't realize or choose to turn a blind eye to is they need money later in life. It's fairly evident with Baby Boomers not retiring because they have no money to do it. You can't blow your load in your early life, you need to spread it out.

 

[diffusionx]

this may be anecdotal but i also feel that people get into this trap because saving money isnt sexy or attractive (ie it seems boring)

like sure not eating out or going out or buying nice things will save you money, but its not exactly this super interesting lifestyle. any thought?

Well this is exactly why.

I feel like social media is a big driver in this with the kids these days.

 

[entremet]

Thing is, renting sucks in a lot of ways too. For one, every time a lease renewal comes up, you could end up having to move, which is stressful and expensive.

At least in a home, if you pay your mortgage, you've got it for life.

I do agree, but it seems are buying homes when they are not ready.

 

[f0nz0]

In my situation, our childcare costs are crippling, we basically live check to check on a six figure income

 

[witchedwiz]

it's not even an american only issue
My home town, in southern Italy, is called Trani..
There, you will see plenty of people buying the new iphone, buying expensive fur coat or designer cloth... but at the end of the day, most will have less than 10k euros for emergency, heck I'd go as far as saying that almost half of the population in my hometown is balancing their red//green in accounts paycheck by paycheck..

and nonetheless, people will just say "but but.."..
The issue is not with the "consumerism" itself, but with the people..
In te past if you hadn't enough money you would buy a cheaper tv, or a cheaper phone..
Nowdays signing for a loan when buying a tv is easy..
Loan that were a concept once only related to buying the house or buying the car (borderline) are now applied even to the small stuff..
you want a new cell? monthly payment!
new tv? monthly payment!
a car? monthly payment!
a grand honeymoon?? monthly payment!
a ps4??? monthly payment!

Which I frankly don't understand... If I can't afford to pay for something I don't buy it..
If I'm overstepping my financial allowing, I'll just save the money until I can afford what I want.. Is that so hard?

 

[RoadHazard]

Yep, but even then, for an average salaried adult you should do what you can to get 30k into savings (liquid) to support yourself should you lose your job or face a series of unfortunate events (medical cost, funeral cost, job search cost, car blows up, insurance claim issues). After that point, for an average saleries adult (we'll say 60k/year) you should be investing it or find ways to insure that money actually grows on its own and doesnt just sit in a 0.0000008% savings account doing nothing for eternity while the rest of the world passes it by.

My wife and I had about 25k saved up, but over the new year we got hit with a 10k emergency vet bill because of our dog, than 2 weeks later one of our water heaters ruptured (that was another 3k) than our dog had a relaps (that was another 1k) than medical bills suddenly hit (that was a big chunk out of the HSA) and now suddenly our 3 year old car has developed an electrical issue that cant be fixed and we are fighting with the dealership on how to handle its payoff as they are deaming it unsafe to drive. All this has happened in the last 4 months. Suddenly that 25k savings feel back down to 10k, thats how quickly disaster can strike. We are weathering it, but its depressing seeing it fall. We of course have our 401k's and would never touch them, but we wanted to hit that private investment point, and now are 20k off again.

30K in liquid savings, doing nothing for you, is way too much unless you have insane expenses. Are you really gonna need that much faster than you can sell off some funds or shares?

 

[teiresias]

That's not very smart though, is it...? You're using money you don't have instead of money you do have, and paying interest on it. Why not buy the stuff with that money and keep the CC for possible emergencies? You'd be down the same amount of money, except with no interest unless there actually is an emergency. And your emergency funds would have been refilled in three months. Seems to me like you're wasting money (interest) for no real reason except principles here. And while the principle of not touching emergency funds for non-emergency purchases is of course a good one, what you have done here isn't really any better. What you're really saying, since you won't touch the emergency funds for stuff like this, is that you couldn't actually afford the stuff you just bought.

Well of course I couldn't afford it all at once, but the total of the purchases versus my income actually doesn't put me in the red in aggregate, just in the short term (ie. it fits in my funds for spending over a couple of months rather than what I have in one month). I basically decided to pay interest on the CC as a "fee" to have a furnished home quickly rather than feel like I'm living as a squatter in an empty house. Frankly that was worth it to me. It's purely psychological I realize but seeing as this isn't my normal behavior towards my CC it doesn't bother me too much (i generally pay it off immediately) since the CC and my mortgage are my only debt right now (no student loans or car loan).

 

[Lombax]

In my situation, our childcare costs are crippling, we basically live check to check on a six figure income

I feel you, and very sorry to hear that you are going through that. We noticed a dramatic drop in daycare / pre-k / kindergarden costs once we moved to a suburban area.
When we lived in the city it was $1500.00 a month, it is absurd.

Our daughter is heading into 1st grade this fall, and we are very much looking forward to putting that money that we would have spent into savings!

 

[Vincent Grayson]

I do agree, but it seems are buying homes when they are not ready.

Yeah. My wife and I were definitely in that category. But our parents thought it was a grand idea. We just recently finally sold our house and are currently renting (albeit from my in-laws, so no increases to worry about). Getting rid of that house was the best thing we've done.

 

[n0razi]

Everywhere I look I see people with no problem dropping $400 for a new iphone, ps4, cable package, video card, vegas trip (just take a peek at the NeoGAF Pickup Thread for examples)... but cant find $400 for an emergency?

 

[Roland_Gunner]

this may be anecdotal but i also feel that people get into this trap because saving money isnt sexy or attractive (ie it seems boring)

like sure not eating out or going out or buying nice things will save you money, but its not exactly this super interesting lifestyle. any thought?

These pressures come up on people in a variety of ways. A couple of my friends have recently bought houses, that IMO, they can barely afford. They're doing this because the belief is that housing will always go up so it becomes their savings. Problem is this leaves them very little cushion in case something goes wrong with their jobs or they have unexpected expenses. They see this as being responsible but its a risky way to go.

 

[Vincent Grayson]

Everyone I talk has no problem dropping $400 for a new iphone, ps4, cable package, trip vegas... but cant find $400 for an emergency?

I remember this story from a while back, and IIRC, there was something about not considering "I'd use credit" to be a valid means of "having the money" (in their hypothetical situation), when those same people probably put all of those purchases on their credit cards.

 

[Lombax]

Everyone I talk has no problem dropping $400 for a new iphone, ps4, cable package, trip vegas... but cant find $400 for an emergency?

I think many consider a credit card as their "Oh shit!" button.

 

[RoadHazard]

These pressures come up on people in a variety of ways. A couple of my friends have recently bought houses, that IMO, they can barely afford. They're doing this because the belief is that housing will always go up so it becomes their savings. Problem is this leaves them very little cushion in case something goes wrong with their jobs or they have unexpected expenses. They see this as being responsible but its a risky way to go.

Buying a house or apartment shouldn't really be viewed as an investment (unless it's something you're gonna rent out), it should be viewed as consumption. Sure, it might increase in value, but so will other houses. So you won't really be able to get anything better than you could originally, unless maybe if you bought in an unattractive area that then became attractive. So what are you gonna do, sell the house and move to a rental? You could, but that's not what most people who buy their own place see in their future.

 

[Celegus]

As sad as it sounds, high schoolers really need to have a class set aside to learn budgeting, investing for the future, and simple daily financial management (balancing a checkbook, how to pay down debt smartly, etc.) Living within your means should be a major building block of our school system.

I can definitely cover $400 but I've been blessed in my life. If I hadn't learned some hard lessons about discretionary spending I might be much worse off.

I'm not sure I would call valuable life skills "sad". It absolutely should be taught. I've thankfully never fallen into the cycle of credit card debt, it just felt like common sense that if I don't have money, I shouldn't spend money.

 

[Sulik2]

YNAB a garbage, it doesn't auto import any of your transactions. I like mint.com much better. Everything shows up automatically, way easy to track.

Staying single and not having children is the best financial decision anyone can make in this economy. Of course its terrible for the economy and country long term if everyone stops dating and having kids though.

 

[Skiptastic]

I'm not sure I would call valuable life skills "sad". It absolutely should be taught. I've thankfully never fallen into the cycle of credit card debt, it just felt like common sense that if I don't have money, I shouldn't spend money.

It's just more sad that they aren't getting taught this at home. It's not sad that they should learn useful stuff in school.

 

[entremet]

YNAB a garbage, it doesn't auto import any of your transactions. I like mint.com much better. Everything shows up automatically, way easy to track.

Staying single and not having children is the best financial decision anyone can make in this economy. Of course its terrible for the economy and country long term if everyone stops dating and having kids though.

I love the YNAB philosophy, but the app sucks.

 

[DKHustlin]

YNAB a garbage, it doesn't auto import any of your transactions. I like mint.com much better. Everything shows up automatically, way easy to track.

Staying single and not having children is the best financial decision anyone can make in this economy. Of course its terrible for the economy and country long term if everyone stops dating and having kids though.

Amen to this. Much cheaper when I was single. I'm married now and I spend on stuff I never would have in the past cause it makes my wife happy. it's hard for her to see things she wants as a "waste" :')

 

[Afrodium]

Finances are important. I was raised by an unskilled, single mother: working-class as you can get, we went hungry sometimes, went cold in the winter, and missed birthdays. I moved out when I turned 18, and I've been living independently since. I don't get any help from family, and have to work alongside studies.

I still manage to keep a couple of grand in a savings account at any one time. People seem to love living in excess. I shop at cheap supermarkets, forgo the £3 daily coffee for a flask I make in the morning alongside a packed lunch. I try to keep my going out to a minimum, and wait for sales before I splurge on luxury items.

I don't intend to have children until I'm at least 30, and financially secure. That's not to say I'm tight-fisted; growing up with money for me meant that, whilst I appreciate its necessity, I don't need it to feel content. I don't really care about designer clothes, or new models of phone, or better cars. I save, keep some as insurance, and spend the excess on travelling.

I'm on a student budget now, supplemented by a paltry minimum-wage income on the side. I imagine that when I graduate and go into a well-paid job, I'll be quite comfortable. Don't understand how you can earn $50,000 a year and still struggle; that's more than 3 times the income I was raised on -- live within your means.

You sound a lot like me. I got a job out of school that paid over twice what my brother and I were raised on. I live a lifestyle slightly better than what I'm used to and feel like I'm flush with cash.

A coworker of mine started at the same time as me in the same position and is from an extremely wealthy family. He lives at home so doesn't pay rent or buy groceries. His parents also paid off his 200K in student loans. Shortly after we started he told me he couldn't make his checks last until the next one.

 

[diffusionx]

I haven't had significant credit card debt since college. I think people get into a trap where they don't look at how much something costs, just how much the monthly payment will be. A handbag isn't $500, it's $15 a month or whatever.

 

[Brandson]

In my situation, our childcare costs are crippling, we basically live check to check on a six figure income

We paid about $30k in childcare last year, all at non-profit institutions. I don't know why the US and Canada don't view childcare as something worth funding for the benefit of society, like they do elementary and high school. As it is, it's like paying for private school, and it's not optional.

 

[Weetrick]

Is it typical that in America most people have credit cards and non-mortgage/student loan debt?

Most of my peers in the UK don't even own a credit card, or paid it off after university
*

*granted, our cost of going to university is tiny compared to yours.

Everyone here has credit cards. When used properly, they are great. I pay for everything with my credit card, which gives me cash back (1 - 3%) on all purchases. I pay it off fully every month, so it is literally free money for me.

 

[xDUMPWEEDx]

Fucking mortgage payments. Without my mortgage payment, I would be living very comfortably, and be able to set aside money for savings, retirement, etc.

Unfortunately, my mortgage payment consumes a much larger % of my paycheck than is recommended, because houses are so fucking expensive in California.

 

[Jeronimo Jones]

This is the unfortunate reality for many, but the author made a series of bad decisions that people should try to avoid.

I could cover a $400 emergency since I have savings, access to credit cards, and no credit card debt. A several hundred dollar student loan payment sucks when trying to save to get out of the rent trap, though. At least my degree is in my field and (eventually) provided a good paying career.

 

[Pedrito]

This is the goal of the 1% and has been for some time now. If most of the world is in wage slavery, then there will be little resistance as they slowly take control of everything. Globalization is all about making everyone around the world equally poor. Trade agreements are about funneling money and power to corporations while subverting the power of sovereign national governments. Finance is about accumulating and maintaining unlimited wealth while the rest of the world slowly is forced into debt slavery.

The trajectory of this world is towards a future that looks like Deus Ex or Elysium. We need to break the power of the wealthy over our ostensibly democratic political systems. We need to reject trade agreements like TPP and TPIP. We need to revolt against the enslavement of our next generations with student loans.

We're closer than ever to the dystopian future imagined by every science fiction author ever.

Rich people who already control the world and who make their money by selling all kind of crap to everyone else have a master plan to make everyone poor so they won't be able to buy their crap anymore.

Totally makes sense...

Also, bingo!

 

[Abstrusity]

Rich people who already control the world and who make their money by selling all kind of crap to everyone else have a master plan to make everyone poor so they won't be able to buy their crap anymore.

Totally makes sense...

Also, bingo!

Rich people who control the world and make their money by selling all kind of crap to everyone sacrifice long term sustainability of their business for higher short term profits because, in the short term, this sort of business practice provides higher utility across the board until it doesn't. By the time it doesn't, it's too late to fix, so they scrap and start again.

This is well known.

 

[Shake Appeal]

I like it that you guys are talking about systemic issues and not just the dumb decisions the author makes.

While I myself am in a great position (student loans done, got a house, mostly no debt besides mortgage) I realize one bad medical incident could screw me so even I don't feel fully comfortable even though I do have some savings. I also think it's very difficult to teach "financial responsibility" to 300 million people and this is not a "character" issue that came out of nowhere. It's not like the rest of the world are much better at it than Americans - we are just put in the situation where we have easy access to credit and are freely given 100K for student loans at 18. A large part of it is because we are in a growth minded economy. Spend more now and make more later - but that doesn't always happen.

I think the only way out of it is start redesigning these systems as if Americans were poor (and we are). Stop emphasizing single family home ownership - upzone every single housing plot in cities and suburbs especially to allow for increased density. That doesn't mean massive apartment complexes - we could go from SFHs to 4 unit buildings or create granny apartents in our garages. Change land use policies so we're not utterly dependent on cars - imagine how much money we all could have if we didn't need to spend a good portion of it on vehicles? Improve bus systems. Some cultural stuff is already changing - it's becoming more acceptable to live with your parents, and of course roommates.

Great post.

 

[Condom]

And I thought I was doing bad lately with only keeping 10k in the emergency fund. I couldn't imagine not having that safety net, I'd be a panicking mess every night before sleep. As it is my wife and I both agree we need to get our liquid savings account up to 50k before we feel easy.

10-50k emergency fund to feel at ease, damn son you're lucky you ain't poor

 

[modernlifeisANDY]

YNAB a garbage, it doesn't auto import any of your transactions. I like mint.com much better. Everything shows up automatically, way easy to track.

Staying single and not having children is the best financial decision anyone can make in this economy. Of course its terrible for the economy and country long term if everyone stops dating and having kids though.

YNAB not auto-importing is the absolute best thing about it. Mint makes it too easy to ignore things because it just automatically imports. YNAB forces you to look at each and every transaction, which is what you should be doing if you want to be smart with your money.

 

[Vicetrailia]

Yeah, for capital one they do all kinds of breakdowns with pie charts and bar graphs. These are the categories I see:

Dining
Gas/Automotive
Merchandise
Entertainment
Travel
Monthly Bills
Services
Utilities
Health Care
Insurance
Other

I like this.

 

[Jeronimo Jones]

YNAB not auto-importing is the absolute best thing about it. Mint makes it too easy to ignore things because it just automatically imports. YNAB forces you to look at each and every transaction, which is what you should be doing if you want to be smart with your money.

I'm not caught up in this side conversation, but I use Mint to do exactly that. I categorize every transaction and the budgets for each category are color-coded based on current spending.

 

[Pagusas]

30K in liquid savings, doing nothing for you, is way too much unless you have insane expenses. Are you really gonna need that much faster than you can sell off some funds or shares?

I just gave you an example of how $15k of it evaportated, 10k within a weeks time. Granted we used our rewards card to pay for that and carry the balance for a few days to minimize the impact, and sure that would be enough time to break out some investments if needed, but:

Its not just about it being liquid, its about it being 100% safe and insured. An investment, other than some bonds, is not a sure things, I've seen too many people lose money they couldn't afford to because they took the mindset of short stocking their liquid savings and instead throwing it in investment.

Right now I get a 1.8% return on my savings, not great, but its not horrible either, and better than risking it on the market.

 

[AlteredBeast]

I made 100k pretax last year and there were definitely months where I struggled. 400 bucks would have been nearly impossible at certain points last year. I had a small split level, two used-car payments, no cable tv, and few extravagant purchases or debts. I don't know what the American Dream is if that is the normal experience for a small family making six figures...

 

[SummitAve]

I just gave you an example of how $15k of it evaportated, 10k within a weeks time. Granted we used our rewards card to pay for that and carry the balance for a few days to minimize the impact, and sure that would be enough time to break out some investments if needed, but:

Its not just about it being liquid, its about it being 100% safe and insured. An investment, other than some bonds, is not a sure things, I've seen too many people lose money they couldn't afford to because they took the mindset of short stocking their liquid savings and instead throwing it in investment.

Right now I get a 1.8% return on my savings, not great, but its not horrible either, and better than risking it on the market.

It is horrible. 1.8% is going to be less than inflation so you should change the name from savings account to slowly losing money account. Check out the How to Save for Retirment thread for some pro tips. Investing in something like index funds is not going to be the risk you are making investing out to be.

 

[sub_o]

Hmm, somehow I'm trained to save at least ~50% per month after everything (tax, pension contribution, rent, etc)

Need to figure out how to start investing those money though.

 

[20cent]

Nah it's more important to have a camaro, a tesla model s, buy every single game released on owned consoles and spend 110% of one's income than having emergency savings, what could go wrong, right?

 

[[KoRp]Jazzman]

Reading articles like this really hits home at how differently a lot of people live. Not sure I could handle the stress of not being able to pay a $400 bill at a moments notice, or living pay cheque to pay cheque.

 

[Abstrusity]

It is horrible. 1.8% is going to be less than inflation so you should change the name from savings account to slowly losing money account. Check out the How to Save for Retirment thread for some pro tips. Investing in something like index funds is not going to be the risk you are making investing out to be.

1.8% is both more than inflation and well above what normal savings accounts normally give. Due to the low interest rates following desperately needed QE policies of the Federal Reserve, the most common ROI for savings is somewhere in the ballpark of .05% - .1%.

 

[Lombax]

Protip right here! Being able to maintain your own house and vehicles can save you a lot of money, and personally taking care of things is very rewarding.

My favorite last summer was something that started small.

The flapper assembly in one of our toilets had a hinge break off (plastic). Easy enough fix

That turned into a crash course on how to disassemble / replace everything / reassemble a toiled!

Oh right and when we first purchased our house I had to re-route our dryer vent that was going into the GARAGE to vent to the outside!

Funny side note, during that project I found the DVD porn stash of the previous owner in the drop ceiling.

But yeah, doing work around the house yourself saves so much money, and it is quite rewarding.