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Middle class folks, how did you play it? (Retirement/housing/fun money)

Discussion in 'Bad Dog Cafe' started by naveed211, Apr 7, 2021.

  1. Guitarteach

    Guitarteach Doctor of Teleocity

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    Deliberately bought a modest house that needed a lot of cosmetic work (in killer location). saved £100,000. Always bought cars second hand or bought my company lease cars at end to avoid the depreciation hit, saved at least £50k over the years with that and paid off mortgage just before I was 50. Never used an overdraft or debt beyond the mortgage. Used company pension scheme options, took bonuses in shares not cash and got the IPO/sale windfall.

    We did most of our wedding ourselves and I played in 3 of the bands performing, we camped on our honeymoon. That saved us £15-20,000 that others throw away in a day these days. My cousins spent £30,000 on theirs... that is 3 years of retirement!

    Live your own life, don’t conform to expectations, don’t try and beat the neighbours. Give yourself rules that make you win... e.g music gear must be earned with gigs.

    “fun money” is the bad idea... find stuff for free or cheap that is fun or makes something for more fun. Picnic in the woods, by a river on a beach.. with a dog.. life does not get better!

    I have paid for Canadian canoes and climbing gear and got many years of use from them, but throwing money away on one off ‘entertainment’, Ifind hard to justify - so pub nights drinking cash away, meals out, etc. are very rare.. but we will do a city break and live in museums and galleries and enrich our minds occasionally.

    i got educated and got work that got me lots of global travel.. i collected the airmiles dillgently and family tagged along on business trips. We holidayed the lot of us in Hawaii and travelled most US national parks for nothing.
     
    Last edited: Apr 8, 2021
  2. gimmeatele

    gimmeatele Tele-Afflicted

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    I joined the police in the UK at 30, it was a good pension and I paid extra in with the knowledge I would retire at 55 years of age with a full and good pension.
    Sadly ten years into my career I was injured on duty with life changing injuries, I was forced to retire at 41 and even though I still recieved a good pension, it was not what I would have had at 55, but you cut your cloth accordingly and so I get by.
    I am basically unemployable due to my medical record, but it didnt stop me doing alot of volunteer charity work over the last few years, before retiring here to Spain.
    I guess what I am saying is that you can fully prepare for what life will hand you, but where you can add a little thought to what may happen and how you will cope if it doesnt go to plan.
     
  3. filtersweep

    filtersweep Tele-Meister

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    I disagree. A home is a place to live. You cannot live off the value of your house while you live there, unless you use an idiotic reverse mortgage. The profit of your current dream home is at max a million-- and that is likely pushing it, as you still need a place to live. If you relocate somewhere 'cheaper' your social network dissolves. Maybe you get a few hundred thousand- which is more reality. The profit will be taxed as a capital gain. You cannot just roll it all over into an annuity.

    But if you lived more cheaply early on, and invested the difference in an index fund, I am confident most people would be further ahead financially. That is not to say home ownership is bad. I merely state that your home is not a proper investment. Never mind the tax, municipal charges, maintenance, and other costs, that over a lifetime of ownership are not insignificant. If you do not remodel, your house will be decades out of style by the time you want to sell.
     
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  4. loudboy

    loudboy Tele-Meister

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    No kids.

    Built our own hose, and lived in it for 31 years.

    No loans or credit card debt, ever.

    Maxed out 401K contributions.

    Buy quality, pay in cash.

    Used is the way to go, for almost all purchases.

    Learn the difference between want and need.

    No appetizers, or drinks when dining out. Easily save 40% on your bill, as that's where they get you.

    You can have great vacations without spending an excessive amount. As we feel travel is very important, we always managed to get away at least a few times a year, sometimes more.

    We were right in the OP's income range, and by doing the above things, we were able to retire early (me at 61, wife at 58) to a fully paid-off house in a beautiful place. We have never felt deprived - ate out a lot, vacationed, I've had an embarrassing amount of guitar, PA and recording gear over the years, etc.
     
  5. loudboy

    loudboy Tele-Meister

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    I agree, in today's market bubble, I would not advise to buy a home. Things will come down in a few years - save up, invest the money and buy after the correction. That's what we did in 2009, and saved 46% over what the previous owner had paid in 2006.
     
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  6. Guitarteach

    Guitarteach Doctor of Teleocity

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    Yep. The ‘house as investment’ was one of the biggest lies sold. Trapped millions.

    You buy a shelter you can see yourself living your days out in... don’t see it as more. Location beats decor.

    = win
     
  7. CharlieO

    CharlieO Friend of Leo's Ad Free Member

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    While I have a lot of money invested in stocks, I agree that a house can be a good part of a retirement plan. When I was younger I thought that it was a good idea to buy a much less expensive home than we could afford. Now I realize that we could have enjoyed a nicer home for the past 30 years and would have more equity to be used to supplement our retirement income.
     
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  8. imwjl

    imwjl Poster Extraordinaire

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    Before we ever thought we'd have kids there were some years I saved a lot and the investments grew. Even being ahead of means and medians for our efforts to save or have assets still seems scary being in my 60s and late age parent. In the crazy market right now we could sell our house and have a big gain but then it would be "Where do we move?".
    There's where in the Midwest to consider. Houses like ours in same circle or block and a block away are selling for $550,000 - $600,000 but similar homes in same state are 50% or 60% that. Wages are not that high across the board. People in my county are starting to feel a version of news you get from the coasts and other places.

    Closer to topic, it helped that I saved more and invested before we had kids. My wife and I have tried to stay ahead of medians and means in a bunch of ways through life. That can still be scary. We see contemporaries who don't have much at all and some who are seriously wealthy.

    At the moment we have our mothers nearing age 90 one with stage 4 cancer and one moving to a senior apartment. Doing that stuff with quality is seriously expensive. It has made us feel like keeping ahead of medians and means might not be enough.

    In my 60s I'm really glad I have skills that are in demand. That's not exactly about savings but looking at my cohort I see a crazy big spread of some without any reasonable amounts of income same time some are high earners. That's kept me thinking that keeping up on skills is really important for retirement and well being.
     
  9. Cpb2020

    Cpb2020 Tele-Meister Silver Supporter

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    I think this depends. If you put the delta between the monthly cost of the two houses in investments, then you probably come out on top with the more modest house. Whereas if you spend the delta and the mortgage would have helped you put more away, then the more expensive house makes sense.

    Where I live, the nicer houses come with extra baggage of a significant increase in property / school / town taxes.
     
  10. Mr powers

    Mr powers TDPRI Member

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    Not quite true but true enough because of how Defined Benefit Pensions are being fazed out.

    Edit: This doesn't take into account the cost of health.
    That's a whole nother pile of ******** for many of our members.
     
    Last edited: Apr 8, 2021
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  11. Charlie Bernstein

    Charlie Bernstein Poster Extraordinaire

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    That's working class. Middle class people (professionals, middle management, and successful small business owners) generally make a lot more.

    Personally, I never thought hard about retirement until I got married, in my mid-fifties.

    My wife and I were lucky enough to have had jobs that provided IRAs and withheld for Social Security. And we've also been lucky enough to have had good health. So we're both retired now and live very comfortably. We chose early retirement. It beats job hunting!

    Financially, I'd lived close to (and over) the edge for all my adult life, and was tired of it. So when I had the chance to buy a house twenty years ago (just before the Recession hit), I opted for a much smaller mortgage and cheaper house than I qualified for. Thanks to the state's first-time-buyer program for people below a certain income level, I only needed $1,000 down. Mortgage payments ended up being about what I'd been paying for rent.

    Then I got married. We paid off the thirty-year mortgage in ten years. That saved us a bundle. (Another piece of luck is that houses are real, real cheap in Augusta. No one wants to live here. Perfect for me!)

    Since retiring about seven years ago, my ironclad gear rule has been: one in = one out.

    Conclusion: It's all luck. Do what you want to do. Everything works out, one way or the other. It's called life.
     
    Last edited: Apr 8, 2021
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  12. buster poser

    buster poser Friend of Leo's Platinum Supporter

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    Framing a home (ha!) as an "investment" is a faulty tack. For us, early home ownership was simply a wise financial decision. The mortgage has never been more than comparable rent in the area, and the liquidity of equity helped lighten the burden *considerably* on each of our two cross-country moves; since I didn't make $500k either time, no capital gains hit.

    Additionally, turning the bulk of that equity into down payments on two occasions kept our mortgages lower, and put that equity back into our current home (currently 25-30% of value), while we continue to fund our retirement. I hope folks understand it's not either/or, you can do both.

    Small additional item: The biggest line item in our current list of expenses will be $0/month in retirement. GL with that (ever-increasing) rent payment at 70.
     
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  13. burntfrijoles

    burntfrijoles Poster Extraordinaire

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    I made more than the range you cited but I had to start over when I was in my early 40s due to divorce. I fully funded my daughters bachelors and masters education.
    I put the max I could into my 401k/403b.
    I bought a modest house and paid it off before I retired.
    In addition to my 403b, I paid myself first each month by an auto-savings plan and transferred what I could budget into savings each month.


    Mistakes I made:
    I spent too much on cars.
    I spent too much on guitars/gear.
    The above was offset by my decision to stay in my modest house.

    Regarding cars and guitars, I could afford it but I also advise that you only buy what your budget allows. It's all about priorities and "needs" versus "wants". Save up for your "wants' but take care of your "needs" first and foremost.

    I made a few bad investment decisions. (Unless you really know stocks and understand investing, buy index funds.)
     
  14. deytookerjaabs

    deytookerjaabs Friend of Leo's

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    I've been looking at cities all over. Basically, Rockford Illinois, lol, and a few others are still dumpy enough to be very affordable.

    The rest? I'm shocked. Feels like 15 years ago it was just a Bay Area and New York thing. Now all the cities are getting there and the ones with rough areas anywhere outside that area is back to crazy. Geez, Seattle, Portland, California, Salt Lake City, Denver, Boulder, Austin, New Orleans, Nashville, Chicago all up to the east coast. 350K for a 900sqft shack in developed cities is becoming the new normal.

    The even more odd part is those less desirable areas which were always your lower/mid priced stuff. Now, new builds in those areas are still silly money and any dough you might save on the dump in the rough area is so much smaller than it used to be to the point where it just looks like a bad idea.

    Time to start my own town!
     
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  15. Charlie Bernstein

    Charlie Bernstein Poster Extraordinaire

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    To Tube Toaster it's a house. To you it's a home. Big difference!

    As for letting go of money, I follow a simple rule: Never lend, bet, or invest more than you want to lose. Gambling is fun. If Tube wants to bet his house, there's nothing wrong with that. I wouldn't, but I'm not an investor. For me, it's a home.

    About reverse mortgages: Sometimes they're a bad deal. But getting one was the smartest money move my mother ever made. She unloaded an unsellable white elephant and got out from under a mortgage she couldn't afford. It was a dream come true.
     
  16. BigDaddyLH

    BigDaddyLH Tele Axpert Ad Free Member

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    Americans, especially, conflate money and social class. If you took away Prince Charles' wealth and stuck him in the middle of Trailer Park Boys, his social class would not change, just his circumstance. To me, middle class is a social construct, independent of money, but anyway...

    And if you write "middle income", what does that mean? It's better to use an actual range or write something like, "If it's going to be a challenge to save for retirement, requiring foresight and a plan..."
     
  17. BigDaddyLH

    BigDaddyLH Tele Axpert Ad Free Member

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    Hah, just as there is no french toast in France, there are no canadian canoes in Canada! Do you mean one of there?

    [​IMG]

    (kayak)
     
  18. jondanger

    jondanger Poster Extraordinaire Silver Supporter

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    I grew up around DC and EVERYONE in my family worked for state/federal government or the military. Basically the last game in town for a decent pension plan.

    I’m 8 months away from being vested as a state employee. It takes 10 years now. They changed it from 5 years about 6 months before I got hired. Hopefully MD can keep its pension fund solvent for the next 50 years - planning to make it to 90.
     
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  19. trapdoor2

    trapdoor2 Friend of Leo's Gold Supporter

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    Ok, I just deleted a lengthy post detailing how it happened for us. Pffft. Boiled down: Luck favors the prepared.

    Miz Diane has been the biggest financial boost ever (among other things). Although she was financially upside-down when we got married, once I got her right-side up, she took over as CFO. We instituted short-term and long-term financial plans...and stuck to them (mostly). Our goals were always, "debt free over time". We never thought, "profit from every transaction."

    Not having kids is a huge financial benefit. Of course, we did not use that as a financial basis, we just didn't want any.

    We both were "lucky" with jobs. We both believed in working hard, whatever we did. Now we don't have to.

    Toy box: My mother kept a "Xmas club account" and advised me to do the same. I did that for many years, having a small amount shifted from each paycheck, etc. Patience is a virtue...and I financed many toys that way. I still have a reserve account but since I no longer get a paycheck, it doesn't grow.
     
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  20. Charlie Bernstein

    Charlie Bernstein Poster Extraordinaire

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    Middle income means at or near median income.

    Some economists call middle income people working class. Some call them lower middle class.

    I like working class — that is, most Americans. Since hourly wage earners, gig economy workers, and most salaried workers usually don't have a whole lot of control over the businesses they work for, I consider them working class — unlike the third who are professionals, middle managers, and successful small business owners, who have a lot more control over their day-to-day activities.

    But yes, you're right, there are other ways to define it.

    Privilege defines Charle's class. If you took away his privilege, he'd be just another working class bloke, no matter how Etonic his bearing. That would be a hoot.
     
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