Income Versus Expenses
Posted by Gail | Filed under Money Management
One of the comments I get most often about the show comes from the people who are making do on less. They look at couples that make $80,000, $100,000, $130,000 and they can’t understand how those people could possibly be in debt. Raising a family on $40,000 or less, they think it is obscene that these “idiots” and “morons” are being rewarded with $5,000 to get their act together.
First, let me say that if these people didn’t step forward to share their stories, we wouldn’t have a TV show. I think they are remarkably brave and strong to participate, take what-for from me, and turn their circumstances around. For the most part they are lovely people who suffer from the same trials as most people: no financial lessons, flying by the seats of their pants, never really stopping to think about their money. I just try to help.
But there’s a larger issue here. Expenses are like air, expanding to fill our Income Container no matter how big it gets. In an article in USAToday earlier this year, it was clear that those people considered high earners are in just a big a pickle as the folks who make considerably less.
“Eighteen percent of employees earning $100,000 could continue their lifestyle for one month or less if they lost their income, according to a new survey by Discover Financial Services. And 12% of these high earners say they have no money left over after paying debts.”
We’ve seen figures like this reported in Canada too. People are living from one pay to the next with barely any wiggle room. The first unexpected expense that comes along forces them to use credit. Never mind all the enticements to spend. And since the prevalent thought when it comes to credit is, “As long as you make your minimum payment, you’re fine” (courtesy of the credit scoring system), people are only concerned about working the smallest of payments into their cash flows. The debt keeps growing. And they get closer and closer to insolvent.
You’d think someone smart enough to pull in a six-figure income would also be smart enough not to be ensnared by credit card (or line of credit) debt. Not so. Since a high income comes with high expectations – a nice house, a new car, myriad social events – people making more money often default to using credit to keep up with what they think they should be able to afford.
Ah, there’s the rub: what they think they should be able to afford. Since peers are living off credit to achieve higher standards of living – no one seems content to spend only as much as they can actually afford – the pressure to keep up means turning to credit to satisfy lifestyle inflation. Eventually even the best paid will hit the wall.
You know the old saying, “It’s not how much you make, it’s how much you keep.” That could be the mantra for the people I work with. Income is only the issue when people make so little that they can’t keep body and soul together; then they must make more money. But for most – those who work with me on TV and those at home watching – it’s a matter of not spending more money than you make. Income is, after all, only part of the equation. Inflated expenses can go through a big income faster than green grass through a goose.
November 8, 2010 at 7:56 am
I’ve been there – with a well-paying job and lots of debt. I’m now out of debt (good and bad debt too) and am furiously saving to catch up for lost time. Thanks to the tools Gail has provided along with watching the show, I have what’s needed to stay out of debt and I thank her for that (and for my will to succeed).
I watch Gail’s show and generally feel sympathetic to the people because I’ve been there. I didn’t get those life skills until much later in life, I was impulsive, and I liked stuff. I’m older now and wiser I hope. So I don’t think most of the people on Gail’s show are idiots – just people like me who didn’t have the life skills, and who, as their income went up, used it to finance a bigger lifestyle.
The people I have are harder time being sympathetic to are those on Gail’s new show, Princess. There have been very few of the people on that show so far that I have been able to find a connection with to make me sympathetic. I think it’s because a good portion of the show’s participants are simply selfish and manipulative to those around them. I may have been stupid with my money, but I don’t think I was selfish and manipulative.
November 8, 2010 at 8:32 am
My sister and I have a large difference in our family incomes – around $80,000 a year difference. Yet she has all the material things I have, even more tv’s and computers. I used to wonder how she did it.
But here’s the thing. She cannot afford to buy a house (no mortgage repayments), she can not afford private health insurance (no health insurance payments), and she is not able to put money away for retirement or unplanned emergencies (no savings out of her income).
After all these are taken out of my income our disposable incomes are very similar. But I am fortunate to have the luxury of assets and safety nets, which she is unlikely to ever have.
November 8, 2010 at 8:42 am
I remember as a kid asking my mom how people who made so much money could be in such a pickle. She told me that your lifestyle always increases with your pay and you’re always living paycheque to paycheque.
I was determined not to live that way so starting saving money with my first paycheque. As for the Princesses, when I told my mom about the show she said it seems to be a generation thing, even though some of them are much older. A 2 generations thing.
November 8, 2010 at 9:01 am
I can completely relate to this post. I make approximately half of my mother’s income. I sat down with her over Thanksgiving and we put together a budget.
She is hoping to retire at 65 (in 10 years) and doesn’t have much as far as RRSPs go for someone her age – it’s about $150,000 and has only knocked $50,000 off of her $200,000 mortgage. I explained that while I am okay saving 10% for retirement because I have 30 or so years to go, she should be aggressively saving.
With categories like ‘condo redecoration’ in her budget she just couldn’t see saving more than $500/month. With a gross income of $6,000/month it just baffled me!
I think that having a lower income and needing to make each paycheque stretch out to cover off all areas will prove a benefit when raise time does come.
November 8, 2010 at 9:35 am
Although there haven’t been enough Princess episodes to confirm the pattern, I wonder if Gail will have an easier time with the younger princesses than the older ones. It seems to me like a case of people having no expectations of these women, but at least the younger ones often are eager to prove themselves, while the older ones have lived too many years with others doing for them. I’m a firm believer in being responsible for yourself as an adult, but it’s hard to do when you have family and partners and friends that have treated you as though you can’t fend for yourself. I VERY STRONGLY DO NOT think it’s a generational thing… there have always been, and will always be, ‘princessess’ – both male and female, but i think the difference is that women are more often treated like they’re helpless and taught that they have to rely on manipulation of others rather than on their own abilities. that same attitude is what i think also contributes to many people’s inability to manage their own incomes… no one ever helped you or took the time that Gail takes with people to explain.
I spent a big chunk of this weekend explaining credit cards and health insurance to my sister. It made me remember – things like money management are not intuitive. TDDUP and Princess are great examples of why Gail is so important – too many people do not take the time to sit down with their loved ones and share their knowledge, and then turn around surprised when people can’t manage, no matter how much they earn.
November 8, 2010 at 9:38 am
We could spend “within our means”, but that would mean that we ratchet up our spending like crazy. We’ve seen friends do this. Best advice we ever received was to spend “below your means” and budget like you were budgeting in a previous stage of your life (i.e. if working, budget like a student; if promotion, budget like you didn’t get promoted; if two incomes, budget like you only had one). You can also look at your trash output – we have a family of 5 and we put out one trash container every 2 weeks. If you are putting out more, that means you’re spending too much on things that have packaging… (i.e processed food, electronics, etc).
4 years 5 months.
November 8, 2010 at 9:40 am
With regards to the show Princess, those young women are products of their parents.
If you don’t grow up with your parents always bailing you out, giving you everything and teaching you that your responsibility is nothing more than showing up and smiling, you don’t become a Princess.
I don’t feel sorry for them, but the onus seems to be on their parents.
November 8, 2010 at 9:46 am
My mantra has always been ‘you can control what you spend, but not what you earn’. Gail’s proven the second part wrong, but I’m lazy and would rather scrimp a bit than try to earn more.
November 8, 2010 at 9:47 am
I’m ordering a copy of the book Driven today, written by one of the Dragon’s Den guys. I was reading an interview with him yesterday and picked up some things that are exactly what Gail’s saying. He was quite clear that we need to know where our money’s going. And that’s from someone who’s got more money in cars than I have in my house.
November 8, 2010 at 9:56 am
I was lucky.
My father has never been one for spending even though he had a good job, and didn’t think it was important to seem like you have any money. What was important was saving, and being able to leave money for the next generation.
So my lessons were to spend as little as possible. Get your money worth out of everything. Don’t bother with appearances. Don’t spend money if you can do something for less/free. Maintain things as best as you can so that you can get your money’s worth out of them. (So homes are kept well, clothes patched, cars get proper maintenance, healthy food is consumed.)
I learned the lessons so well, my family (even my dad) urges me to spend more money. However, I am happy that I can win the “anything you can do, I can do cheaper” game with my father, and that I will be able to leave something for my nephews when I die.
November 8, 2010 at 9:58 am
At all income levels there are people who spend only what they can afford and those who spend money they don’t have and end up with huge debts. Whether five or six figure earners, these people who over spend have the same problem. They are trying to be something they aren’t and want to project an image that is different from reality. When people are truly confident with who they are and understand what things are really important in life they do not worry about displaying a certain lifestyle. It is usually more pleasant to interact and socialize with those who have less and live within their means than those who make more, spend more and are busy living the high life and putting on a show.
November 8, 2010 at 10:10 am
I love both shows and I would love Gail to go knock some sence into my younger sister some days.
I remember taking a career and personal planning class in high school that was supposed to teach you about life. We covered carreer planning, goal setting and post secondary research. Budgets and Personal Finance were not on the list though. Well they should be!!
Thank goodness for Gail for doing the work that she does, she has become to voice in the back of my head. I am cleaning up my debt mistakes, saving for retirement, emergencies, my daughters education and recently started a vacation savings too. I was never a Princess, expecting others to bail me out of situations but I knew little about savings, debt and interest before Gail. I knew that you shouldn’t spend more that you made but if you had a credit card than that was Ok to supplemtent your income with. The interest can’t be that bad right? Thank goodness I was only on that track for about 4 years before getting my reality check.
November 8, 2010 at 10:42 am
I try and live well below my means. It feels really good to be able to take what crap gets tossed my way.
It can really vary on where you live too….. how much below your means you can live. not only credit, but houses. (been figuring out the buying a house thing myself. something on my mind) borrowing the max, and struggling to keep up with the repairs. I know plenty of people who after paying the mortgage, taxes, hydro, are watching their houses rot around them. They can’t afford to fix that dripping pipe, repair the hole in the siding, or tend to the falling deck. The GTA can be bloody expensive. (and where I currently live too, BC. Seems even worse.) It just sucks up too much of their income.
It seems as though to me the large sums banks allowed people to borrow allowed them to play “ebay” while house shopping. The bidding wars just to secure the place. The more you make, the more you can borrow. I know some people who’s life pie is so distorted from housing it’s nuts. And, depending on your location, that may be a $300- $450 plus house. (not talking about anything “luxurious” either.) I’ll assume if you live in a part of the country where $100 000 buys a fabulous house, $400,000 plus on a mortgage seems insane! It’s really expensive to live in some of the parts of GTA, where these shows are filmed. (paying rent or owning.)
I’m saving for a more sizable down payment now, and looking in the lower range of properties I can afford I am so appalled. (this isn’t the lowest end) Most were owned by people who couldn’t afford a house. (or, simply didn’t care about the upkeep). almost every place I’ve seen, has issues with water damage and mold. (mega bucks to fix). a few were tear-downs. How horrible some of these places are, finally made sense to me when I started reading my copy of debt free forever. People don’t think about the full costs to home ownership. and choose to defer to maintain their asset…. and watch it rot, because they “can’t afford” the 3-5% it costs to maintain. Sad.
November 8, 2010 at 11:22 am
Gail’s point about people having the same issues no matter the income level is part of what is missing when most people look at big ticket purchases. So many people seem to buy stuff on the belief that they will make more money later and that justifies borrowing now.
Ann this is the issue with a lot of the housing you are seeing, When I bought in TO a couple of years ago a lot of the houses had the same issue, people bought at their max and expected to be able to magically make more money to afford repairs/renos later.
November 8, 2010 at 11:41 am
I have to admit, that when I was married and we had two large incomes coming in, we lived on our credit line. I also indulged a depressed husband, hoping the next purchase would take him into a happier place. But with so much money coming in every month, there was never an incentive to pay off the debt. Our earning power was excellent. Now that I’m on my own with the kids, I live very frugally, no debt (other than mortgage), and I have an emergency fund and more savings. I understand how the people on the show can feel an entitlement. They have worked hard. You know what? People who work at McDonald’s work just as hard on a shift, and have just as much stress as people who work in management.
The princesses are definitely a product of their environment. They have been created. It is not generational, I would agree there have always been people that want to “take care” of their children, to their children’s detriment. Some personalities will thrive in that environment (the princesses), and some personalities will go forth and make their own way. That’s why you don’t have the same result with all of the children in the family. But the parents/spouses/boyfriends/friends did create the monster. What they don’t think about is that it is actually really cruel to make someone that dependent on you. They have no sense of accomplishment or self worth.
November 8, 2010 at 12:12 pm
Also consider housing cost. Starter homes an hour outside of Vancouver cost $800,000. I’m jelous of people in small towns that get to live in a beutiful house for less than our down payment.
November 8, 2010 at 12:34 pm
As much as I tried to like the new show, I just can’t. I can’t STAND watching these women, most of whom don’t seem at all interested in changing or living within their means. Sorry, Gail.
I have to admit that I sometimes can’t fathom how someone making 4 times what we make could be in debt. But I do try to remember that a lot of them have kids, a mortgage about 4 times the size of ours, 2 or 3 ‘living room areas’ to furnish instead of one, etc. I do know how easy it is to quickly adapt to living with more disposable income, and I don’t imagine that suddenly stops for no reason. We live in a society that tells us no matter what we have, we can always have MORE which is equated to being HAPPIER.
DH is getting a raise of potentially 12K/yr next month….I want to funnel most of that into retirement savings and savings for the next vehicle–how cool would that be, to pay off the current vehicle, and pay cash for the next one at the same time?? What a rush.
November 8, 2010 at 12:47 pm
There is also the problem that too many students live beyond their means because they supplement their income with loans (I am not syaing it is bad, I am explaining one origin of poor $ awareness). Maybe their earn $5000 (to $10000 if ‘lucky’) during the summer yet live off an extra $10000 with paying very little tax (but paying tuition fees). Once you are no longer a student, taxes take off a lot from your $35000/yr paycheck which means that you cannot live much better than when you were a student because it is payback time. Ensure that your earnings after studying will allow you to pay back that loan.
Being aware of where the net $ comes from is the most important thing. Got a raise? What is it after taxes? If you want to use it for both extra fun and debt repayment, only a percentage of the money can go towards each… not 100% to debt + 100% to fun.
November 8, 2010 at 1:03 pm
it’s ironic, because my SO and I have a combined income of almost 100k (before taxes) and yeah, some months we do struggle to get all the bills paid.
So much of it is psychological. The big thing is, it’s REALLY hard to talk honestly with people about money when you make what appears to be a lot of it. There’s so much guilt and shame that people throw on you when they find out that you make “a lot” of money. (I know, wah wah wah, life is SOOOO hard
)
I am, in short, ashamed to tell people how much money I make, especially when we’re on a pretty tight budget (my SO has student loans and I have tax debt that needs to be paid off) because I feel like people who know how much I make think we’re the world’s biggest cheapskates whenever I say I can’t afford something. I hate the money, it makes me feel sick with guilt, and as a result, I try to get rid of it: I spend a lot of money on my friends, who are mostly struggling grad students, because I feel bad that I have a job and make more money than they do. When we go out, I know that they make $15-20k a year so I’ll buy everyone dinner and drinks. I spend a lot of money on my family for similar reasons. I hate seeing the people around me struggle and it’s VERY hard for me not to say “I got it, don’t worry.”
And the thing is, in our case, it’s all an illusion! It’s not even an epic amount of money! between the ridiculously high cost of living in my city and having the highest income taxes in the US (I don’t even SEE about 40% of my income), we don’t really HAVE much more than average. If we moved back to our home city of Baltimore, we’d make literally half as much money for doing the same jobs. But we can’t make people understand that; they see the numbers, and they see that we live in an apartment that costs $1700 a month (which is tiny, and mediocre at best by this city’s standards–it is sickeningly normal to pay 3 grand a month for a 1br here), and they just don’t understand that we’re not really well-off.
November 8, 2010 at 2:47 pm
My DH and I make $140k gross combined and are in debt. Quite often people who make this amount of money and are in debt are like us: graduated college with student loans (ours were ~$70k when we graduated) and had the student credit cards to get those bad habits ingrained early.
Out of college, it took time to get established in decent jobs because even with degrees and co-op jobs, we were still green and had to prove ourselves before we got to our current salaries. So there we were with 2 kids, $70k in student loans, just scraping by and no money skills (having not found Gail yet). So on came the lines of credit and credit card debt just to make ends meet. No fancy cars, fancy clothes, consumer goods. Just necessities of life and minimum payments.
We ramped up to our current income level (3 years ago or so). The higher your income is, the less you benefit from breaks that seem small but add up, like the child tax benefit, tax breaks, etc. Not only that, when you make this amount of money in this profession, you are often expected to work longer hours to get the job done and that can have a huge impact on your expenses, if you are not very careful, which we were not for awhile.
It’s easy for people with lower incomes to say, “wow, what an idiot” but no, I am not an idiot. So thanks for the post today Gail. I think we are on the right track.
PS:
People may be shaking their heads and wondering, “what were you doing going to school with 2 kids and no savings?”. The answer is:
a) I was living below the poverty line and had no other way out.
b) I didn’t know any better.
But even with our current debt, I would do it again and recommend anyone else to do it also – just avoid those student credit cards!
November 8, 2010 at 3:08 pm
Shorty J, i totally understand. After finishing post secondary training, my income went from 30K to over 100K. But i had over 12 YEARS of student loan/tuition costs and a LOC to pay off asap. Even though my spouse is still a student, People look at us and scoff, oh you HAVE money, what are you crying about? We are both pretty good with money and put everything to paying off our loans. Although we live in a nice house, it’s a rental – which people also dont understand since ‘ you make so much!’….and with our wedding planning, many ‘friends’ would ask why i was fretting over spiralling costs when ‘it doesnt really matter’.
I also have ageing parents i want to save for – who worked minimum wage menial jobs their whole life – not to mention overhead, licensing for professional groups, continued education courses which are NOT cheap in the lease.
it’s easy to dismiss people who ‘make alot’, but to be honest even though i will me able to pay things off relatively soon (few years vs decades), RIGHT NOW, i’m dealing with a bit of odd backlash from people – who were so happy to rub it in my face for years, how they were in the workforce and making money and i was seemingly a ’student-for-life’, those same people have no qualms asking me how much a make in an hour or a month (i would never tell them) and then scoff at ANY concerns i might have re trying to stay on budget – “what do YOU need a budget for!?”….
It’s interesting to see how fast people change.
November 8, 2010 at 5:01 pm
My husband and I make about $140K a year combined before taxes. My siblings make no where near this amount. Combined with their spouses they make around $80-90K a year.
My DH and I have a lot of debt. We dont have a huge house but we still have a mortgage, property taxes, etc,.. We also have a home equity line of credit we’re paying. We have 1 car that we share and it’s a regular car, not an SUV. So there’s a car payment and insurace. We both have student loaks we’re trying to pay off and student lines of credit.
We both pay a lot of income tax, etc.,. I pay more in income tax a year than I made at my first real job and we’re talking GROSS annual salary, not net.
We’ve made some stupid mistakes and are trying to get out of the hole. It’s frustrating becaus my siblings think we’re ‘rich’ and shouldn’t have a problem. We’re not going to get any emotional support from them. Any time I mention money problems I get eye rolls, and “you should have known better looks”, am told I have no right to complain. Everyone makes mistakes and money stress is money stress no matter what income you make. Its frustrating and makes me feel isolated from them.
I worked hard for my education and finished my degree while working at secretarial type jobs. I am now starting to realize the benefits of that hard, hard work… I’m not going to apologize for anything to them.
Finances have been the main reason we’ve put off having kids but it’s to the point now I dont’ understand how anyone could ever afford kids.
We’ve made
November 8, 2010 at 5:06 pm
Sorry I cut off my sentence in the above .. we’ve made mistakes but are trying to fix them. The honest truth is that we’ve got no savings so we are one of those couples who would be in real trouble if we lost a job. Bit by bit we’re trying to get out of the hole.
Good luck to all of you…Gail’s advice gives so much hope!
November 8, 2010 at 6:11 pm
I think I am so lucky…
I have parents who gave me anything I wanted, but it didn’t seem to spoil me.
They are still helping me out now, I am looking to buy somewhere to live and my lease ran out, so rather than sign a lease and possibly pay a mortgage and rent, my parents very generously offered for me to move back in with them until I find a place.
The downside is that I now travel four hours to and from work, but the upside is that I currently pay no rent.
They have worked hard, own their house and are retired, so they like to spend their time travelling. So far this year they have been on three cruises, and they are planning another one in December!!!!
S
November 8, 2010 at 6:26 pm
I too am one that cannot watch the new show “Princesses”. It just makes me mad to watch selfish, arrogant people use those around them.
I believe that we don’t do enough with our children to teach them how to manage money. My son has finished college and is working at his first job. We sat together and used Gail’s tools to build a budget and figure out how he needed to save to move out.
After researching all the costs he asked if instead of saving for first and last months rent, could he stay a bit longer and save for a downpayment on a condo (apartment) so he wasn’t throwing his money away. I was so proud of him
When we put the figures on paper it would be cheaper than renting.
We revisit his budget every month to classify his spending and I’m hoping this will get him used to watching his spending.
I agree wholeheartedly that as your income expands so do your expenses. It doesn’t matter how much you make….it always takes planning.
November 8, 2010 at 8:53 pm
Like others, my h and I don’t make a bad income either. However, his income is inconsistent and has been for about 3 years now. Unfortunately, we had to learn some hard lessons about not continuing to live on what was our previously guaranteed income. We are certainly paying for it now on much less money. We have become the poster children for frugal living and still having fun. We had to, or we would never be able to tackle the whopping debt. We’ve got a long way to go, but we’re getting there. I totally sympathize with the people give up their privacy and put themselves out there for the show. It’s easy to criticize from behind closed doors.
November 8, 2010 at 9:40 pm
SkokumMama,
Not sure what you consider a starter home but I live in Greater Vancouver and can confirm
that starter homes are not $800K within 1 hour commute distance.
I think expectations are too high for some people… Starter home doesn’t have to be brand new and 3,000 sq.ft.
Number of around $500K is about right.
November 9, 2010 at 12:18 am
@Big City…Beer Budget — I can agree with you in that one of the benefits of having to live on a low income is that you have to figure out quickly what needs vs wants are and learn how to take good care of your money. I think the challenging times I have gone through financially have taught me a lot. I know a lot more about money and how to manage it than many people, and I believe that this is a strong foundation which will benefit me throughout my life.
November 9, 2010 at 12:29 am
i really like today’s blog gail. i can understand where i’ve gone wrong in my own financial situation, and with your help i’ve been better able to help educate my daughter.
i’ve been on the side where i made a 6-figure salary and worked way too many hours. and spent too much keeping up the image. i’m happier now, making less than 50% of what i was; the only difficulty is (or WAS) learning to give up the spending and credit cards. i am happy to say i have learned my lesson well and each day brings me that much closer to debt-free.
cruising the internet today i saw an article which, in short, said that what used to be considered something to look down on is now all the rage. what is it? shopping at the thrift or goodwill store! ha! i said to myself. how long have i been doing that? yup, that’s me, on the cutting edge all the time! LOL
November 9, 2010 at 1:28 am
I too get very frustrated watching Princess, that’s why I am determined that my 13yr old daughter will NOT become one. We have started giving her two payments a year, $300 each ($600yr) for clothing. Out of that she has to buy all her own cloths, shoes, and coats. If she wants the higher ticket items then she has to earn more money.I have to say I’m quite proud of how well she has budgeted her money.
We will start doing this with my son next year.
P.S. We do it like the jar system, where the cash and reciepts must add up.
November 9, 2010 at 2:08 am
My son, a grad student, gets to watch TDDUP and some of the financial shows on CNBC with me. We discuss the budget, and any major purchases, even though he only has his school stipend at this time. I thought it was important he know how things work, and what decisions need to be made, long before he gets a full-time job. He doesn’t take anything for granted, maybe that’s the antidote to the Princess problem.
November 9, 2010 at 10:47 am
something else I want to add: YAY for the parents in this thread who are teaching their kids financial responsibility! I’m living proof that it pays off–other than my surprise tax debt (which was basically due to a miscalculation on my part, since I was self-employed for the first time and underestimated what I would owe), I am 26 years old and have two degrees and absolutely no debt (no student loans) and about 55 grand in my retirement fund.
My friends all teased me because on Christmas when I was 17 my dad gave me financial planning books instead of a “real” present, but 5 years later they were all asking to borrow them
November 9, 2010 at 1:10 pm
In the context of your post, I think that the following is very interesting:
http://www.theglobeandmail.com/globe-investor/personal-finance/home-cents/money-saving-lessons-from-a-surprising-source/article1783633/
November 9, 2010 at 2:26 pm
I blogged about this before: A high income doesn’t mean financial smarts
It’s a learned skill. LEARNED. Some people take to it easier than others, but no one comes across it without some careful thought and change.
That statistic about people not lasting more than one month scares me, but doesn’t surprise me. I guess when I read those things, I renew my resolve to watch my spending.
November 9, 2010 at 4:25 pm
Income vs spending is definitley like air! Especially when you are sophicating from debt.
The more we make, the more we spend. BUT other than a few extreme situations we have always lived within our means. I have always been a bit “cautious” about money. I am always sure the bottom will fall out of my income (self employed) so I have always been frugal.
My sister is the financial opposite, she is SURE that her income will always be improving, and she spends her future bonuses and raises as he wants. She is a very gifted manager, and makes an excellent living. And all the trappings too. A BIG house, lovely furnishings, nice clothes all the toys. So far she can pull it off, and the bonuses come. BUT she is a slave to it, she NEEDS the paycheck, every single penny of it. Her expenses are enormous compared to mine, so her disposable income is not better than mine really.
The difference is that I have more disposable TIME than she does.
My household pulls in half of what her’s does, but my expenses are half as well.
And my home is still cozy and nice (and only 7 years left to pay off), the food is homecooked and delicious, the bills are paid and the savings are slowly growing. There is somebody using the house we are working so hard for all day long. I get to drive the kids to field trips, and be there when they are sick too. It’s a luxury in this day and age to be able to work from home and I know it, my income may be sacrificed, but my quality of life is excellent — on a budget!!!
It’s weird, my sister supports another household in a way too, because she has a full-time sitter that depends on my sister’s work schedule to pay her own bills (funny, eh?).
November 9, 2010 at 4:32 pm
Oh, and I love PRINCESS. I enjoy seeing these girls come awake to what they have ben doing. It’s always a cautionary tale for anyone with kids.
November 9, 2010 at 8:02 pm
I think I’ve lived both sides of the coin. We’ve had a very low income during some of our years of marriage (combined under $40 000), and also had a couple of years well into the 6 digits.
Neither income required less thought or planning. I still wanted to justify every dollar spent, and tried to spend wisely.
Having a lower income IS more stressful though. Not knowing how I’d pay for clothing, food (I’d cringe at the grocery store to see if the debit card would go through), and each month going into debt, just to cover essentials with NOTHING extra was hard. But, as a family, we were on the same page.
Having a higher income can be stressful in its own way, but knowing that your basics are covered, it’s not the same kind of stress. More money can divide a family too. Spouses may not agree on how the money should be spent or saved. And, there’s more choices. And with the attitude that’s prevalent, that pricey brand names are a better bang for your buck, it can be hard to decide where to draw that line. When you’re watching every penny, it’s just “how much do we have in the bank?” when something breaks and needs replacing. When replacing something now, it’s harder to decide how much to spend. (Take vacuum cleaners… the sky is the limit!)
So, I do understand debt on both sides… what I have a harder time understanding, are the people with higher incomes that STILL have a hard time clothing or putting food on the table for their families.
November 10, 2010 at 1:21 pm
@tigerlily: Good for you for going back to school to build a better life for you and your kids. Very inspirational, and if you can keep your self on the right financial track over the next few years, it sounds like it will all pay off…
November 10, 2010 at 10:57 pm
I definitely appreciate both this post and some of the comments above. I finished grad school with a significant debt load and combined with being a single parent, every month is a struggle to pay the bills. I make what most would consider a good income but sometimes cost of living in a particular area, combined with daycare and debt repayment means that you have less money than many could imagine.
For instance, I have good friends where the husband works (making about half my salary) and the wife stays at home with the children. By having one parent stay at home with the children, my friends are saving a minimum of $1500 per month. They also do not have student loans. As a single parent, I don’t have the option of staying at home so I need to make that extra 1500/month for daycare plus another $600/month for student loan payments just to be bringing home the same amount. Sometimes you really can’t judge a situation by the dollar signs associated with a salary…
November 26, 2010 at 12:34 pm
[...] I recently read a great post by Gail Vaz-Oxlade on income versus expenses, exploring the question as to how people with major income differences can live the same type of life. Is it really true that those with higher incomes (say six figures and above), are better off when emergency strikes? Not necessarily! Often, a high income comes with big expectations of a new car, a gorgeous house, and several vacations a year. Gail notes that 18% of people who make over $100,000 annually could continue their lifestyle for only a month if they were to lose their income. So, how does your lifestyle measure up? Read more on Gail’s blog. [...]
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