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Please Don’t Make Me Download Another App | Our phones are being overrun
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this post was submitted on 03 Oct 2024
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I think age / location / profession have a lot to do with what socioeconomic circles people run in.
Not to mention luck of the draw.
For sure, but like...I'm a middle-aged software engineer in a low cost-of-living area. My parents always had enough on one income, but we're struggling on two.
I'm similar, but probably a bit younger. I make a good salary now (I'm in a leadership position), but the people on my team are a bit more "average." Software engineering will have a higher than average salary, but I'm talking $80-120k for the people who work for me in an area where the median income is $70-80k ($80-120k), and most are single or single-income.
There's a pretty stark difference between those who are financially stable and those who... aren't. I don't have everyone's salary, but here's what I see:
Notice I didn't say anything about income. Some of the financially unstable people have a much higher income (probably double the range above), and some of the financially stable people have a much lower income (e.g. one of my employees is single and just bought a house in a pricier area, while being at the bottom of the income range).
I obviously don't know your income or situation, but I think most people can do much better than they are without changing their income. And the more financially stable you can be, the more "quiet" confidence you get (i.e. you're not distracted by when payday is), and the more likely you are to get that promotion or better paying job. Success tends to breed success.
Check out The Millionaire Next Door, which gives lots of examples about how wealthy people tend to be frugal and careful with money. There's not really any secret sauce here, just delayed gratification and discipline. Obviously a $100k salary will go a bit further than a $50k salary, but even a median income can rocket you to an upper-middle class/lower-upper class retirement if you manage it carefully. I'm happy to walk through a scenario if you like, but that's a bit off-topic for this community and is probably better for one of the PF communities.
Honestly, what you see isn't familiar to me at all. The people I know are very good at being frugal and wringing the last out of every dime, not being extravagant or frivolous, etc. We have no car payment on our ten-year-old minivan, own our home, and haven't been clothes shopping in years except to replace things that wear out, that sort of thing.
The problem isn't budgeting; we have a budget, and we stick to it pretty well. There are very few things we could cut, and doing so might save us a hundred or so dollars per month. The problem is that inflation has eaten up every dollar from my paycheck we used to have in surplus. The problem is that my salary hasn't kept up with inflation and nobody else around here is hiring.
Yes, you can budget yourself from the top of one financial class into the bottom of another one; and you can manage money poorly enough to drop from anywhere to the bottom of the heap. But that doesn't change the fact that there is a significant financial crunch happening for most people in the world right now.
Seems like everyone has their own preferred explanation as to why that's happening (corporate greed vs. government overreach), but the fact that it's happening seems pretty clear.
Yes, that certainly is a problem. Salary increases tend to lag inflation a bit, so you'd either need to switch jobs or wait to get caught up.
That said, wage growth has exceeded inflation for the last year and a half or so, so hopefully you'll get a yearly salary bump to help out. Our salary bump was higher than usual last year (about 5%), but still below inflation (8-9%), and I hope our salary bump this year will fix that (4% would be enough to catch back up).
But the fact that you've been able to stay financially stable despite high inflation means you're probably closer to "The Millionaire Next Door" than the average Joe drowning in credit card debt. If you can stay out of debt and put money away for retirement every month, you'll be doing fine in your 60s when you're looking at retirement.
Sure, if you follow the average advice (save 10%), then yeah, one bump-up is essentially expected. But if you're more aggressive, jumping up more than one level should be feasible.
This video talks about economic classes, and the portion I linked shows how you can go from $65k/year salary (middle middle class) to lower upper class by age 50 by just investing 10% of your income. So this is essentially middle middle-class to lower-upper class. If you do 40 years instead of stopping at 50, you'd have $3M by retirement age. If we account for 2% inflation, you'd have about $1.7M in today's dollars, which is almost to upper upper class. If you bump to 15% of your income, you end up with $2.6M after taking inflation into account, which is in that upper upper class range. So with just a median household salary, you can have an upper upper class retirement.