Doh!
- Make enough money to support your desired lifestyle
I'm not an extravagant big spender with super-luxurious tastes. There are a lot of things I do without. But like anyone else, I have certain minimum standards about how I want to live, and they don't seem to vary much. Here's an illustration:
This is not drawn with accurate figures, but represents a rough sketch of my financial history. The early years were tough, as I was not making much money while trying to live on my own for the first time. I didn't get into huge amounts of debt, but there were a couple of years where I must have barely broken even, if that. Then there were years when I saved a little, but not much. It's only more recently that my income has grown to a point where I could save a lot, but only because my spending hasn't ballooned to match.Unfortunately, it's not like you can just select the amount of money you want to make on a checklist when you are hired for a job! (I can fantasize about the HR paperwork: "Let's see, I think I'd like dental plan B, and I'll put $50 a month in a FSA, and hmmm, well, I'd like to be able to afford two homes, a yacht and an all-Prada wardrobe so I think I'll take the $400,000 to $449,999 salary range...check!")
But there are times when you have a choice in the matter. If you happen to have a passion for collecting Rolexes, a career as a social worker might not be the right choice for you! (From what I hear about social work salaries, even having a passion for 3 meals a day might be a problem...)
I may not be able to choose to make as much as I want, but I can choose to approach my career in a certain way and devote a certain amount of energy to it so I can move up the ladder and make more money. I can choose to pursue a job at a company or industry based on its average pay scale. Sometimes I choose not to follow the money, because other things are more important. Yes, grasshopper, as usual, it all comes down to balance.
12 comments:
haha, so being an anthropology major in college was probably a bad choice? :P
MY Open Wallet:
I like your graph.
The gap should widen as you advance in your career, and you should keep your expenses well below the income (after tax).
That way you can save and eventually be free from having to work in a place that you may or may not like.
lpkitten:
Anthropology is not a bad idea!!
My sister-in-law is a good anthropology major example. She:
1. Started looking for a job in January 2005 (just after graduation).
2. Got a $24,000 job in February. (small amount of cash) (Boston Area).
3. In August 2005 got a promotion and raise to $38,000, with the promise that if she takes a specified training she will be promoted again (and increased in salary).
She is not making as much money as other people on these blogs. But what impresses me is the fast pace at which she is advancing. How? By exceeding expectations on the positions she has held.
Right now she has chosen to live with roommates to save. However, she is capable of paying her own studio if she wanted. She puts 10% of her income in a Fidelity Simple IRA, 10% of her income in a money market for a property she wants to buy some day, and 10% of her income on a savings account for paying for travel and big fun expenses (car?, computer?, travel? etc).
She holds no credit card debt. Right now she is traveling 3 weeks in Peru, Bolivia, and Colombia.
Small income, but very well managed finances. I see that girl growing to be a millionaire.
If lpkitten had brown hair (instead of red) she would look almost the same. Funny that lp are her initials... and I love cats.
Money and Investing
I love the graph.
I love graphs! Hey, the lines are diverging. With the pink one on top. Looks like a good trendline to me!
You know I love your stuff-always thoughtful and insightful! But I was a little distressed by your IT person and the new layout, where your post starts way down here. So, I went to your ads and hit them repeatedly trying to fix your site :-)
What happens when you're a grad student making $20,000/yr before taxes, and that barely covers basic living expenses like rent, water, and electric? :)
A great site, as these questions are on everyone's mind.
Started work same year as you and have seen my salary escalate upwards in about same trajectory. Only problem is that spending has more than kept up as well.
If one has to rely on a 401k and savings for retirement to try and not run out of money, or be a burden on children, I agree this all makes sense. But what about if you have a defined benefit pension to look forward to.
I am fortunate in that I now part of a defined benefit pension, which I can start on in 18 years (god willing I live that long!) as I switched jobs to one that offered such a plan almost 3 years ago.
So my thought is that if there will be a guaranteed income stream in 18 years, of about 60% of the highest 5 years salaries, might it make sense to overspend a bit now (travel, vehicles, daily living) then back off later as age creeps in. Fortunately I live in Canada where we have universal health care so don't really have to worry about getting broke from getting sick (Hope to God that never changes!).
At any rate, it seems to me that any employers who choose to offer a defined pension should be the employer of choice, all things being equal. Most companies are walking away from this as they don't want the risk, but those that do should be the target of jobhunters in their 30's to 40's (when it really is time to start thinking about finish line if have neglected in the 20's - which most have).
Long winded post - but there just not seem to be any advice on the web at looking at the overall amount of money one will earn in life (projection of course) and consider the rate at which it should be spent to optimize one's life, if you will. All the sites say spend less than you make, and I wonder about, spend more than you make when you can enjoy it, then use the higher earning years to pay a lot off when you are not so interested in these perks (been there, done that, got the t-shirt).
It is just that I have seen lot of people postpone any and all joy until retirement, then die soonafter, or even worse, be afraid to spend any money on fun things because they have never allowed themselves too.
ps. same poster as above, have same net worth as you, bizarre, are you 41 too? LOL
At any rate, just noticed your links - do any of them consider the issue of I have raised of "lifestyle optimization" as I have proposed as a potential life pathway in the above post?
Will do some searching on my own.
Would make a hell of a book title "How to spend more than you make!" with an asterisk of course stating that this is for "part of your life"
good content make money without investment
More and more people are earning extra to poay for the car payment, mortgage, vacation etc. with a home based business.
Two I recommend are:
1. For pet owners: http://people-planet-pets.biz. Learn how to get your pet food for free to start off with!
2. FOr personal development:
http://personal-development-university.com. 14 day trial to check it out.
Ken
A big part of "making enough" is making smart choices about where you live. Is living in a big, East coast or West coast city important to you? It may be, in which case you'll need more money. But if you'd be happy in a smaller city, or even outside a city entirely, you may need to make only 50% as much to live just as well.
The idea of "spending more than you make (temporarily)" is called Consumption Smoothing. You create a model of your earnings, savings, children, future plans, etc. The computer tells you whether it makes sense to spend down savings. (It did for me!)
I bought a software package called ESPlanner which does this kind of analysis. They have a free online version at www.esplanner.com
My only connection with them is as a customer.
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