http://www.reddit.com/r/financialindependence

Basically the only reason most people struggle financially in the US is due to their own financial illiteracy and living above their means. If you manage not to fall victim to either of those then you can save a substantial portion of your income towards a very early retirement should you choose to do so.

Kids are pricey though, so this approach is most viable for those who've eschewed the traditional family.

That is really only true for households above the median income.

So "most" is not a factual statement. About half of the country can save [at most] a few thousand dollars a year unless they want to ruin their health and take other risks that are essentially gambling.

That is part of what pisses me off about /r/financialindependence. Alot of the "suggestions" those people make are essentially gambling. [e.g. going without proper insurance coverage, high risk investments if you cannot save much due to income, eat unhealthy to save money which will cost you later] Or they assume you are making $60k a year so you can save $20k/year. You can't save $20k/year if you are making $30k.

My anecdotal experience working alongside lower class workers is that most of them run into trouble through trying to live a middle class lifestyle without the income to support it. They buy new cars, they eat out often, they refuse to work more than 40 hrs/wk, and they live in pricier apartments without roommates. All of these mistakes tie into the financial illiteracy that plagues people who were never exposed to those with good money habits.

Poor people will never stop having sex, or wanting kids, or desiring a drink at the end of the day, because it just so happens that you don't lose basic human desires when you're poor. A lot of talk about financial literacy is really just moralizing about behaviors the lecturer would never dream of giving up himself.

It's a dead-end conversation, because, again, humans are always going to do the stuff that humans do.

But this entire thread is doomed because it stems from a claim that most people who struggle do so because they're living above their means. It seems to me that most people who struggle do so because they don't have as much money as the people who don't struggle.

EDIT: Dear HN, can we make > start a quote, already? Look at how many people in this thread alone have used it in that way! I do it all the time and usually edit it back out.

Of course the alternative view is to blame these folks and tacitly assume that the right to a comfortable lifestyle with a couple kids is a luxury only for the rich.

We can also work to change those circumstances for future generations.

The living wage project from MIT is designed to be the minimum viable estimate with no savings and living paycheck to paycheck.

http://livingwage.mit.edu/counties/06037

$23,640/year

http://livingwage.mit.edu/places/1308904000

$21,007/year

http://www.census.gov/hhes/www/cpstables/032011/perinc/new01...

http://livingwage.mit.edu/places/1324504204

> $17,640

Btw, Augusta, Georgia is literally one of the 10 cheapest cities [and if you read the Household Income as a "well they can do it!", remember the living wage is a single adult, two adults is double and they can't again]:

http://www.kiplinger.com/slideshow/real-estate/T006-S001-10-...

~36% of the population is below the living wage number in major metro areas.

52.16% make less than $30,000.00

> My anecdotal experience working alongside lower class workers is that most of them run into trouble through trying to live a middle class lifestyle without the income to support it. They buy new cars, they eat out often, they refuse to work more than 40 hrs/wk, and they live in pricier apartments without roommates. All of these mistakes tie into the financial illiteracy that plagues people who were never exposed to those with good money habits.

> The basic framework of early retirement is pretty simple: cut way down on your spending, then invest your savings. High savings rates can lead to surprisingly fast retirements. For example, if you save half your income, you'll be ready to retire in around 17 years.

http://www.vox.com/2015/5/1/8518455/extreme-early-retirement

The majority of the population can't save half of their income like Mr Money Mustache and other FI people suggest.

It isn't even mathematically possible for most of the country.

Your moralizing is proof you are ignorant and don't have a real argument.

The figures given by the living wage calculator are assuming a middle class lifestyle which is obviously ignorant when discussing lower class economics. Plugging in my own city of Ann Arbor, Michigan gives wildly inflated figures that fall in line exactly with my claims up above. The rent figure given is for having your own one bedroom apartment with no roommates, the food figure is hilariously overstated ($242/month), transportation assumes a pretty new car or very long commutes ($306/month). These figures simply are not realistic for a lower class individual.

I am living a lower class lifestyle right now as I type this. I live in a shared home with 2 other people. I drive an older but reliable car I purchased for $2.2k cash (a luxury expense, I could have kept taking the bus/biking to work). I rarely eat out, and I avoid expensive items at the grocery store barring a few healthy choices like nuts. I split a $45/month 50 mbit internet connection with both my roommates. No cable. $30/month cell phone bill (another luxury). I have health and auto insurance.

Overall, I have a pretty comfortable life for less than <$10k/yr. Nothing is stopping genuinely poor people from doing the same except extraordinary misfortunes (birth defects, severe disabilities). There is no moralizing here, just the cold hard numbers and experience from someone actually living this life and interacting daily with others at the bottom of the workforce.

EDIT:

After seeing your comment above I want to point out that at no point did I assert you could retire by 30 years old on this kind of income. If you're trying to argue that point then it's a strawman. I will also add that if you're still making ~20k/yr all of your life then you've made some financial mistakes in regards to your actual career choices, even janitorial staff end up around 35k/yr after a while.

Even paying a bit more on rent a roommate scenario with split utilities is never going to add up to $675 a month if you're at all savvy and modest in the residence you choose.

If your job requires a car and phone but doesn't pay an amount that allows you to afford those things then you should get a different job. $40/month will get you unlimited everything phone wise, or if like me you rarely call then you can do T-Mobiles $30 a month 5gb 4g plan w/ 100 calling minutes.

I'm in no way trying to thump my chest here, I'm trying to provide a detailed look at this lifestyle within the overall context of FI's ideas regarding saving and well planned finances. I also apologize if I somehow led you to believe I was saying anyone regardless of circumstance and income could retire at 30.

I'm genuinely a little puzzled as to why you're going at me so aggressively, would you mind going into your own lifestyle and why you feel I must be lying to you?

EDIT: As far as being mad I wasn't more specific, pay some mind to the demographic that visits this site. I would be surprised if even 1 in 10,000 visitors to this site will never in their life have a job paying more than ~20k/yr (assuming they live in the 1st world). My message was obviously directed at this sites prevailing demographic.

Consider: When I was single I lived a very very very comfortable life on $22,000 a year (cash, not income). I put that much in my checking account and everything else in savings and investment. This was after I spent several years putting the majority of my pay on loans to become debt free and paid off the $60,000 in student loans and a very small car loan.

If someone makes a salary of $30,000 a year than they probably take home around $22,000 after taxes and insurance. It would be much less comfortable for them to have a lot of savings. True, not impossible, but much much harder than me since their takehome pay is equal to my "frugal" pay. They would have to give up much more than I do. Obviously you can't max out your 401(k) and IRA on that salary, maxing those out would be more than your take home pay! Basically - not possible until you get past median income (which is around $50k)

As an aside I don't think children have to be that expensive... Granted I don't have them but I see all my friends spending a massive amount of money on very silly things for their kids. Nobody needs the majority of crap that is bought for kids. Household size has, IIR, doubled in the last 60 years. It isn't like kids' needs have changed to take up double space since my grandparents were raising them - it is parents just give them more.

Yes, but the amount they'd save is "a few thousand a year". I doubt they'd save more than $3,000/year after the big expenses and random things happening [e.g. dental, medical]

You'd need around $1,000,000 to produce $30,000 a year [3% "safe return"] indefinitely.

http://www.bloomberg.com/personal-finance/calculators/401k/

You'd need to save for 35 years to retire before 60 [using the defaults, no employer match since you need access before you could access a IRA/401k, etc] which is what /r/financialindependence is about.

Mr Money Mustache and all of their idols retire early [by 40] and that is what they emphasize. That simply isn't possible on $30k/year in the US.

EDIT:

> Which was exactly my point. :)

Ah okay. I thought you were like the guy I was replying to who is completely 100% convinced that they can retire in their 30s like /r/FI aims for if they'd just "save more money".

You'd have to basically be homeless to save enough to be able to retire very early on a modest income such as $30,000.

The real costs of kids are the necessities. Child care, clothing, food, medical & dental expenses.

I live in the midwest and send/sent my children to a daycare that is extremely price conscious even for this area. It cost me over $7000 per year per child. So when I had 3 kids in day care at the same time; I was paying $21,000 a year just for daycare. For some people that is not sustainable; it is as much or more than they earn.

The vast majority of my clothes were hand-me-downs or thrift store or sometimes sales rack stuff. My mom and her sisters and brothers passed around garbage bags full of their kids' old clothes for the smaller kids and clothes were passed on to coworkers and friends. Several kids all wore clothes until they fell apart. I was allowed to have one pair of shoes (only from Payless) and I wore them either until they didn't fit or until the next schoolyear came. My parents didn't spend hardly anything at all on clothes.

Medical costs obviously are high (unless you are in the military)

I never even felt deprived or anything either. Not being able to pick out my clothes wasn't even a big issue for me.

People talking about saving money by not spending money on clothes and toys really don't know what they're talking about. Brand new clothes and toys today are super cheap compared to what they were when I was a kid. For example, I just bought some brand new baby shoes and shirts on sale for $2 at the grocery store. If I was poor it would cost me more in bus fare to get to the used clothing store than I would have saved had I just bought stuff new at the grocery store. The biggest cost for me _by_far_ is childcare and summer camps.

These places were pretty friggin boring though, just a bunch of sitting around doing not much of anything except playing with yarn with minimal supervision.

The "free camp" (as we called it) was especially boring.

We always chuckle when our friends talk about how expensive their kids are, right before mentioning their three cross-country trips. Financial literacy can apply to child-rearing too!

But keep in mind, in SF, a 3br house or apartment south of 280 (a bit blighted in spots, but far safer than its reputation) starts at 800K, and really, unless you're at the outskirts and buying a property in need of considerable work, you're probably going to shell out over a mil. Child care is easily over $2k a month, so 50K a year.

So at least in SF, you're probably looking at about 90k+ on housing and child care. Health care is another huge cost, but it's hidden.

What percentage of that is really spent on creature comforts like expensive travel or christmas gifts? New clothes? You're a parent, you've seen what things cost at lower cost spots like Old Navy or payless shoes. It's not a big expense. I do a lot of hand-me-downs (I have 2 kids myself), but in the end, I'd estimate very generously that clothing costs about 0.5% of the yearly budget.

Now, one could certainly reasonably say that living in SF is a financially illiterate thing to do (though if this is the case, then many of the employers claiming a shortage of software developers are actually claiming that there is a shortage of financially illiterate developers, since these companies are generally located in SF or Silicon Valley).

But is Boston, New York, Washington DC, Seattle, or LA really that much better? I think it just goes from impossible to difficult.

The reason I mention this is that I believe the middle and working classes in the US are eroding, and while some of this can be self-indulgence (look at the way some people treated houses as piggy banks, for example), I wouldn't write off middle class struggles as financial illiteracy or excessive self-indulgence.

This is an aside, but when silicon valley companies say there is a desperate shortage of software engineers, Obama[1] nods gravely in agreement. Why doesn't he at least ask why they don't let people work from places like Fairfax? I understand that there are benefits to being in the valley, but if the shortage is that desperate, wouldn't they at least try?

As for the original point, even if things get easier outside SF, I'd still say that you'd need to be taking some pretty serious shopping trips for kids clothes to approach the chunk of the budget that goes to health care, housing, and child care/education, even in a less brutal housing market like Fairfax. As for good public schools, well of course that's a relief once they get out of day care age, but you still shell out - I have two kids in public school, and just paying for the local YMCA run after care (so my wife or I can pick them up after work) is $6k per kid per year (so $12k total for me). We cancelled cable, which saved us about $1k a year.

[1] not to pick on Obama, this is common reaction from politicians.

The Valley companies in general don't like remote workers, despite all that is said about the shortage. The executives/managers want the convenience of being able to bother an engineer on whim. Amusingly, remote work is in practice more common in the DC area (and for more than just software engineering), in part because the federal government has driven telework as a huge perk.

http://www.dcurbanmom.com/

sounds like 2k a month isn't unusual, but you can get this down if you look around and find a more neighborhood based one. These exist in SF too, they are licensed but tend to be run out of someone's house.

I'd say that for two kids, you'd probably be at over 3k a month easily in fairfax. Mortage on a 500k house with a 10% down would probably be about another 20k a year, so you're looking at a conservative estimate of $56,000 a year for childcare and mortgage costs (I know there's a deduction, but there are also property taxes and other housing related costs that in my experience offset this and then some). Keep in mind that if you're a 2 income professional family, your income is too high to qualify for a tax deduction for child care (I always wonder why people haven't identified this as one of the things that deters women from re-entering the workforce).

This is perfectly manageable on a good tech salary with a second spouse working - in SF, those numbers would probably be closer to 100k. So what is perhaps impossible in SF is absolutely workable in fairfax, though of course this really just scratches the surface, I don't know much about life in DC.

I'd still maintain that housing, health care, education/child care costs in both places probably still vastly eclipses the savings you can get from cutting back on things like cable, cars, or travel, unless you're extremely self indulgent or are in an unusual situation (such as a sick family member living at some distance from home).

For some reason I thought houses up there had gotten crazy expensive. Not too far from Reston and Tyson's and some of the best schools in the country. Can't beat that.

- Child care (necessary if both parents work or there's just one parent)

- Larger apartment/house, in an area with good schools

My wife and I live in a large midwestern city. Prior to having kids, we had more than enough space in a 2-bedroom apartment. We had in the past (as students) lived comfortably on less than $20k each a year.

Putting an infant in a day care costs between $1200 and $1600 here. It drops a few hundred when the baby moves into the toddler room, and a few hundred more when the toddler moves into the older kids' room. With two kids in day care (an infant and an older kid), that still costs in the ballpark of $2000-2500 per month.

The 2-bedroom apartment is too small for 2 adults plus 2 children, plus visiting family members who help with kids, and moving to a bigger place in an area with good schools also increases monthly costs substantially.

Even if you're not spending money frivolously, having kids is expensive compared to not having them.

I have two kids, and it's fairly easy (at least before starting school / sports)

1 - Second hands clothes, toys, etc are super cheap 1.1 - Hand me down across the extended family and your family (seriously, they grow out of it in minutes, try not to buy it new) 2 - Your kids don't need a lot of toys and crayons and paper are cheap 3 - GO TO THE LIBRARY 4 - Parks are really fun, and really cheap, as in free

Where it adds up, at least for me, is I now have a 2 & 4 year old in school and that's $1K a month (drops to zero once they hit public schools), but for a few years that's hefty. However, that's also a choice

1 - I chose private school for preschool, so that's costlier 2 - I moved to a specific area for the 10/10 public schools to save money

You pay either way. Picking the nicer location is probably cheaper, but I wouldn't bet on that always being the case. It's difficult to quantify the costs of location to compare the two.

My ONLY point being, my family wanted a house sooner, but we waited, and waited, and waited it out to find one that met our financial needs in the area we wanted.

IF you do that (knowing it the stars may not line up) it's incredibly helpful.

You do realize that those are luxuries you are not taking because they're going to other priorities i.e. your family? It has nothing to do with not having kids and being financially irresponsible. Kids are very expensive and have incredible amount of all kinds of risk attached to them.

However, when the going rate for daycare in NYC is $3K/month per child, you need to make an extra $50K/year (pre-tax) to just cover that (if you were to maintain your pre-kids lifestyle). Then there are other expenses. Point it, kids aren't free.

That's where you need to start making choices (less eating out, etc.)

For child care, either a parent stays home (cost = what that parent would be making, including retirement and benefits) or you pay (around here) ~$600-$1200/month per kid for day care, depending on the quality/reputation of the place.

Tax credits help a bit, but not much.

We've also chosen, collectively and as a society, to make a lot of high-productivity places artificially expensive: http://www.amazon.com/Rent-Too-Damn-High-Matters-ebook/dp/B0...

Exclude a few other optional behaviors and the numbers shift more positive pretty quickly. Examples: smoking, iphone plans, pets.

Someone doesn't have to go without those things forever but cutting out all the non-necessities for a few years to stabilize and build a little savings is a great thing everyone should be encouraged to do.

It's poor form for a rich person to say "just stop doing [luxury that I consider a social norm]" when a person on median income most probably doesn't do [luxury] to begin with.

You are really saying that poor people are not welcome to those things: cheap entertainment is not for them; the comfort of a pet is not for them; access to communication is not for them. Not having fair access to those things keeps people in poverty.

I would point out that owning a pet, in particular, has major health benefits for the owner - the benefit of owning a pet may easily outweigh the cost.

It's great that you've cut unnecessary things. But I'm not talking about you, I'm talking about the overall trends and data:

According to Mintel[1][2], 57% of those making less than $35k own pets. Further, 34% of people without a high school diploma and 31% of those with only a high school diploma smoke[3]. Odds are those two groups are also low income.

Social norm or not, you have to prioritize and make hard choices.

[1] - http://www.marketingcharts.com/traditional/3-in-5-americans-...

[2] - Updated report: http://store.mintel.com/americas-pet-owners-us-september-201...

[3] - http://www.huffingtonpost.com/stanton-peele/why-do-poor-peop...

For others, that pet may be the only creature on Earth that ever acts happy to see them. It may also be entirely dependent on them for survival. That has an important--and possibly even necessary--psychological benefit.

If you're single, and don't have a pet, I certainly don't begrudge you the expense in acquiring one. It is certainly cheaper than dates or typical group entertainment activities with your friends.

And if I may pat nerd culture on the back for a moment, tabletop board games, role playing games, and certain card games are very often cheaper than bowling, professional sports tickets, dance clubs, movies, concerts, amusement parks, or even pay-per-view television events.

But I'm still not going to fault anyone for attending a pro baseball game for $30 per attendee for nosebleed seats, rather than play a tabletop RPG at $5 for some PDF downloads, paper, and a communal bag of pretzels. In the same way, I don't fault anyone for living in a tiny studio apartment rather than in a van down by the river.

The theoretical possibility that I could survive entirely on dandelions and fresh roadkill does not establish the lower bound for anyone's standard of living. Everyone at that income level has already made more economic substitutions than most people realize. And in a lot of cases, novel substitutions are criminalized or otherwise prohibited by people for whom such substitutions are violations of social norms.

For instance, if you substitute a grass lawn for food-bearing plants in your front yard, some HOA busybody may fine you for it, then convince the cops to force you to destroy it and replant grass seed. And good luck trying to raise rabbits or chickens in your back yard. Or maybe you don't even have a yard in which to make the attempt, and your landlord won't allow windowboxes.

So that "social norm" sword swings both ways. If you find the unaesthetic economic substitutions made by povs to be unacceptable, you cannot reasonably also complain about the expenses incurred in not making those substitutions. I see owning pets as a substitution for more expensive human relationships, and smoking as a substitution for having any sort of hope for a better life in the future or having pride in a lasting accomplishment. If those things were less costly and more widely available, the inferior substitute goods would be less prevalent.

Yes, my point is that you have to prioritize and make hard choices to live at that level of income; not to build savings.

(I edited my parent comment because I didn't feel my personal data was really relevant, sorry for any confusion.)

In my original - and still unedited - comment I said: "cutting out all the non-necessities for a few years to stabilize and build a little savings is a great thing everyone should be encouraged to do."

It's not about "not welcome to..." anything, it's about making hard choices for a while to have better options in the future.

Ditto: I don't drink, and I don't have a car. And I still struggle.

Don't know how some students do it.

But someone studying STEM is already doing those things and it's much easier to continue doing them than to start in the first place. "An object in motion.." and all that.

My mother also went through for a degree in a STEM field. And got caught in a bubble of biochemists. To the point where people with PHDs are applying for research tech work.