Your wife needs to find different friends.
The problem that I've found is that most people live way beyond their means when they are selecting housing. This means that if you want to live with people like yourself, you have to too. If you spend what you should on housing, you end up "in a bad neighborhood".
So I feel like your wife has fallen victim to this problem. To live with the people she wants to associate with, she has to spend a lot more of your money.
You are in the top 10% of wage earners in the US.
It's a nice place to be. I make about the same and my wife treats me like royalty (and works herself and makes about 2/3 that).
If her vision of a "middle class lifestyle" is buying lots of shiny things, you're screwed.
Here are some links to make your wife feel better:
http://politicalcalculations.blogspot.com/2010/12/whats-your... http://en.wikipedia.org/wiki/Household_income_in_the_United_...
What has she achieved, besides you? The answer doesn't matter.
What matters is that marriage is an investment and you've both made a bad one. You both deserve better and will have to separate to get it, the sooner the better.
It won't get better.
It is very easy to criticize, if she is still believes you are an underachiever(you are not) Do what Fraajad says, let her find out how easy(or difficult) it is to succeed.
According to:
http://www.reuters.com/article/2010/09/14/us-usa-taxes-middl...
"Some academics divide the middle class into an upper bracket that includes professionals and middle managers who hold postgraduate degrees and often earn more than $100,000 and a less affluent lower middle class that typically has some college education with household incomes around the national median. Median household income in the United States was $52,175 in 2008, according to the U.S. Census Bureau."
It's also been shown that while happiness increases drastically up to 60k a year in annual income (in the U.S.A.), happiness does not increase further after that point. I.E. People making 100k are on average no happier than people making 60k, and people making 200k are no happier than those making 100k.
If you're already living on toasted rats in a cardboard box, that's different, but if you've got unnecessary expenditures, you should really cut those out and get an emergency fund. To do otherwise is reckless. And you're cheating yourself of sleep and peace of mind.
When raising our kids we often talked about money and "kinds" of money. When you're young you can go for long stretches with "no" money, as you get older you get introduced to the notion of a "cash flow" and a steady stream of expenses that need to be paid.
The single biggest point we try to impress on them was that if you were not able to 'save' (put aside) some money every month (could be $10 but it had to be net positive) such that under 'normal' circumstances you've put money aside in more months than not in a year, then you are, by definition "living beyond your means."
If you found yourself in that space you needed to scale back your life if you could, or upgrade your means.
Being able to come up with $2,000, "if you had to", is pretty important. And while its perfectly ok to say you have to liquidate your savings or sell an asset.
Acquiring it through a credit instrument didn't pass the test, since you just moved the obligation forward in time, and if you couldn't come up with it now then why do you think you can come up with even more later?
It used to bother me a bit when peers whom I knew were making about the same amount of money as I was were living much more "exciting" lifestyles, and it really wasn't until the 90-91 recession hit that it was clear that they were living on credit. One person called me in desperation for a ride to work because their car had been 'stolen.' It turned out it had actually been re-possesed. Thats a hard place to be.
What about stocks? I need three days for a sale of stocks to settle and take the money out. If I have an emergency I can use my credit card. (and pay it back at the end of the month).
This is the byproduct of double digit unemployment as much as anything. As much as we talk about consumption, most of it is at the middle class level. Now, I've seen poor people make very bad decisions, but many are on purchases you and I would make without a second thought.
It is far too easy to forget how good we have it.
Sometimes I wonder about this. How many poor folks are wasting their limited budget on frivolous crap?
One reality show I really would like to see would be about a sensible financial advice type who parachutes into the lives of low-income, deeply-in-debt people and shows them how to budget properly.
You might be underestimating the middle-class-ness of the problem. My first job out of college was pre-screening people's credit reports (in 2004, so in quite good economic times), and it was shocking how many middle-class and lower-rich-class people were living way beyond their means, while applying for expensive short-term debt to cover it up.
The worst I saw was the owner of a local chain of stores whose wife or girlfriend was clearly cleaning him out, and he was applying for short-term unsecured debt.
At least on the news we see this a lot. The folks who are "screwed" by the banks because they raised their credit card rate and are going broke. When they cover those stories you often get to see how much credit card debt these folks have and it is always > $10,000 and often > $20,000.
To the comment above, at that point you had an emergency a long time ago. If you can't pay off your credit cards at the end of the month you have an emergency.
The lady who cleans our office is poor by any definition. She works 14 hours a day, every day. She has two kids, no TV, and has cash saved up to buy Christmas presents and school uniforms.
The guy in the next office makes $110k/year leases a BMW 5 series, owns a new condo, and goes out of the country on vacation 3 times a year.
Who's irresponsible?
Most people aren't programmers, and are at the mercy of the job market, which sucks right now.
There are many cases of irresponsible behavior, but I know of far too many responsible people that tried everything they could to right the ship and kept hanging on, hoping that things would change...with no luck.
It would be one thing if gas prices were going down, utilities were getting cheaper, and food prices were getting back to normal, but they aren't.
Most of us are fortunate enough to turn to freelancing when money runs out, but much of America is screwed.
What if someone has a $5k debt on a credit card, and only $1k in savings? Should they prioritize getting more cash into a low-interest savings account, while racking up interest on the CC?
(1) pay your bills (2) get a small emergency fund together (enough to pay for a small emergency, car breakdown, 1 month's living expenses, etc) (3) pay down high interest debt (credit cards, etc) (4) get a large emergency fund together (enough to support you for a few months if you lose your job, major emergency, etc) (5) invest and pay down low interest debt (mortgages, student loans, etc).
creating a smaller emergency fund to start sets the best precedent because it creates a safety buffer. what happens if you throw tons of cash at paying down your CC bill every month and save nothing, but then you lose your job and have 0 income? you're going to end up missing payments, get penalized, and your debt will snowball again quickly. you need to have something to fall back on when bad things happen, just in case.
As long as your bank is not evil and keeps dropping your credit limit as your balance decreases you can always borrow again against that line of credit if needed.
The article says they don't count, though:
"29.5% said they would have to resort to credit cards, a home equity line of credit, reverse mortgage or unsecured loan. "
This. The "sacrifices" you make are not a loss, but a gain.
Edit: Assuming you are not yet "down to basics" -- which more and more people are, these days.
Technically, it would have been much wiser to put any excess money towards 15% APR credit card debt than in 5% saving accounts (5% savings accounts did exist for a few years prior to the 2008 collapse), but actually having money to pay for unexpected expenses rather than building the debt I was trying to pay off, felt better.
---
Freakonomics did a podcast a few months ago, using either this study or a similar study as part of the podcast. The podcast was about lottery-linked savings accounts. The other half of the equation was that the same 50% of Americans who could not come up with $2,000, were also the ones most likely to play low-odds lottery games. Lottery-linked Savings accounts take the relatively minuscule interest gains on each account, and throws them into a lottery pool, where one or several winners will win the "prize".
This style of savings account worked very well in one country (I believe it was South Africa). The incentive to save, with minimal interest gains, was low. However, the idea of a big payday, which technically was free (you only surrender your interest), led many more people to put money away.
These bank accounts are largely illegal in the United States. Partially because of their image, and partially because states don't want to sacrifice their own state-owned lottery cash cows. I believe a credit union in Michigan was able to work around some laws and find a legal way to offer a lottery-backed savings account.
Keeping cash on hand instead of paying off cheap debt can prevent you from having to incur expensive debt, which functions as a non-obvious term in deciding how much cash to keep around.
Why early in your adult life? People should begin saving as children.
My parents were sensible. I got my first bank account at the age of five, I think. They paid me some small amount of pocket money (two dollars a week?), and encouraged me to save it up to buy things I wanted, and to worship the magic of compound interest (it helps that interest rates were actually decent in those days). I enjoyed watching the amount in my bank account go up much more than I enjoyed actually buying things with it, so I got into good saving habits.
I can't fathom the idea of an adult (or at least, an adult with a job) not having a mere two grand in their savings account, and certainly not of having negative net wealth (ie credit card debt).
Parents! Teach your children about money early!
At the age of 10 I was acutely aware of the value of things and more concerned with keeping the balance on my imaginary account high than with having every toy or computer game I could see. To this day I don't like buying "stuff". It was an awesome parenting move.
I realize that inflation may well have eaten into that 13% hugely but as a pre/early-teen that didn't factor into my view.
Here's a paper that's probably one of the original sources for the Freakonomics piece.
I would love to see Prize-linked savings in the US. It'd be fun to have some money sitting in an account that has powerball-esque payouts, but without the powerball-esque destruction of the original bet.
http://www.freakonomics.com/2010/11/18/freakonomics-radio-co...
Not sure what I would do but I think I could sell enough non-essentials to make up the money if it was a really bad situation.
I was under the impression that the rule was around 6 months.. then again, I'm talking about monthly expenses,as opposed to salary(which hopefully a person isn't spending 3 month's worth of salary in 3 months under normal circumstances). It probably goes up somewhat proportionally with age, if you factor in a home / dependents. I'm in the process of looking for a home now, so my decision on "how much home" I buy will be influenced by the notion of wanting to keep around a year's worth of monthly expenses should I find myself unemployed suddenly.
The only point at which it's okay to stop saving is when you say "Phew, I've got more than enough money to last me for the rest of my life regardless of random emergencies, I think I'll retire!"
I have trouble seeing 2K as a lot: I don't think it could cover real emergencies (losing a job, emergency in my family overseas...)
But frankly I'd probably do exactly what you have done personally so take that advice with a grain of salt.
I have a side project going that I'd love to launch in the next month or so, but I'm also polishing up the resume to begin sending out June 1.
Time for me to start pulling myself out of this rut now that I've got things in my life stabilized again.
I actually feel a little embarrassed posting this here, but what the hell. This will act as motivation for me. I seem to have forgotten along the way that I'm a good developer and worth more than the small salary I have right now. (I took on some consulting work that sort of turned full time. The salary was not/is not great but I kind of ended up 'trapped' there. Stockholm syndrome for the employed?)
Desperation can be a tremendous motivator, and a great way to set priorities. Think of yourself as a newly-arrived immigrant. Now make your way in your new world.
Whatever you do, don't let depression set in. Depression = failure. Even if you struggle to pay the bills for the rest of your life, if you stay positive, you'll keep the people you love in your life.
It might help to imagine yourself getting that big break, and making enough money to never worry about money again. If that happens, how will you remember the tough times? Will you be proud of yourself, or ashamed? Will you regret that you treated others (and yourself) poorly? The history of the world is chock-full of successful people who were haunted by their past.
I'm on a roll here, so let me finish with this existential note: life is a bloody, sweaty mess, and there is no natural justice. From the day you're born to the day you die, you're flailing about on a tightrope over infinite emptiness. There's plenty to fear, and the easiest thing in the world is to fall.
But don't you really want to be the guy dancing on that tightrope and laughing at the void?
> Depression = failure
Why are you reading HN instead of doing this? Close your browser, finish your resume, and apply for ten jobs online before you go to bed tonight. Apply for ten more tomorrow. Repeat until you're employed.
Good things come to those who hustle.
Many people are cash-poor, yes, but I am surprised that over half the population has no cash equivalents, hard assets, or access to credit (even from a relative or friend).
N.B. This is not meant to be financial advice, but just to point out that people usually have many more options than they think they do.
I'm also extremely thankful for a couple folks that approached me to write some web apps (php/rails) for them. Without them those last few medical payments would have crushed us.
My crappy situation came from double job troubles (gf and I) + dying car + hospital visits.
We've stabilized finally and now it's time to get out of this hole and get my life back together.
Don't beggar yourself to pay medical bills in the amount they originally ask on the timescales they originally ask.
House: It would take you 6 months to sell a house (good luck with all those foreclosures out there), 3 months to get a loan against your house (hard to get a loan these days).
401k: It would take you 1 month to withdraw from your 401k (if your 401k plan allows it).
Car/TV: There's an abundance of car/TV inventory out there, and it might take 2-3 months to move those.
Relatives: if half of Americans don't have $2000 for rainy day funds, chances are you're not gonna have much luck asking your relatives.
So realistically, if you needed $2000 tomorrow to bail out your family member (or $40k for that surgery tomorrow), it wold be very hard.
Also, most Brokers will allow you to borrow against the value of your IRA, or your 401k with very short notice. If you have a house and a mortgage you probably also qualify for an unsecured line of credit and could get a cash advance immediately.
The surgery example is a non sequitur because hospitals have very liberal payment terms and are willing to negotiate costs down significantly for people with financial hardships.
I did wonder if it might be sensible to keep a chunk of cash somewhere safe for unpredictable times - having plenty of cash on tap won't help much if it is tied up in a bank that has just stopped working.
I bet at least some of the people who can't come up with $2000 today is because they've already eaten into their emergency funds due to lost jobs, economy, etc...
> Meanwhile, Lusardi, Schneider and Tufano also looked at how different countries compare. They consulted with local partners to set the number used in local currency at a comparable level. “Perceived capacity to cope with an emergency is lowest in the U.S., U.K. and Germany, all countries in which 50% of households or more would probably or certainly be unable to come up with the emergency funds,” the authors wrote. “France and Portugal occupy an intermediate position; 46% of respondents in Portugal would certainly or probably be unable to come up with the funds as would 37% of those in France. The highest levels of coping capacity are found in Canada (28% certainly or probably unable), Netherlands (27.9%), and Italy (20%).”
My impression is that it's just far less dangerous (and so a lot more compelling?) to go without an emergency budget here in Germany, so I wonder if this comparison misses to include the risks involved?
Sure, if you have family and a good deal of property/a mortgage to pay, you've got a lot of incentives to stay in business. But if you're renting? Already living in the lower middle class? No kids?
Worst case scenario: You lose your job (2-4 weeks notice) and are bankrupt at the end of the month. You can apply for help from the state (unless you find something else). You'll get a (60%? No idea, but something like that) percentage of your last salary for a while, afterwards you end up on a different and quite a lot lower benefit level, but you'll most certainly keep a TV, keep a (reasonable) flat, get good healthcare. If you do have kids you get (a bit) more money, education is mostly free for them.
I don't want to claim that it's all roses, but this is the worst that you actually need to worry about in my very humble opinion. What would happen in the UK or US if you run out of cash completely?
Last I heard, homelessness is on the rise in the US and has been for some time.
I hit the 9 month mark, then had major health issues that are wiping a lot of it out.
At first, I was fairly devastated. Then someone told me, "Isn't this exactly the kind of thing that savings is for?"
And you know what, it is. Sure, I wanted to quit my job in the near future. Sure, I wanted to be the rare married family guy who still had the flexibility to do startup work.
But how blessed and thankful I am that I am "only" going to have 3 months stored away after this is all done.
It is always good to keep things in perspective.
Knowing exactly what I can spend on what is a really comforting thought. When I'm in a shop and I see something I want, before I would have to quickly count up the big expenses of the coming months, see what I have left, and decide if it's worth it. Now I know exactly in what category the item is, and how much money I have left. If I don't have enough and I feel like I really need it, I can take a look at my budget and adjust it slightly.
On a sidenote, I'd love to start a business one day, but as long as it's not completely necessary (and safe) I would never want investments. I'd much rather bootstrap my product instead: the risk is much lower, and the relaxed feeling much higher.
Once the account balance gets to a level you're comfortable with, you can divert that excess monthly savings into CDs and other safe (less-liquid) investments, that you can periodically cash-out to build up your emergency fund for bigger, longer emergencies. The added security will help you sleep better. At least it did for me.
My strategy to allow myself to own a decent car, a computer, etc revolves around a credit card I secured with a very high credit limit. I have $2k I can "borrow" against my future, and then I have a 30-day grace period in which I can sell possessions to come up with the money. In other words, I use my credit card and its 30-day grace period to increase the liquidity of my possessions.
This has two caveats: 1) Keep that credit card paid off to allow use of the grace period 2) I suffer a net loss when I resell something, but that's a small gamble I decided to take.
one of the ways that other people's thinking strikes me as insane (and not in a hyperbole sense, but literally insane) is not considering the alternative uses of any given chunk of money when making buying decisions. I watch time and again the people around me purchase something they want less for more money, simply because their thinking is compartmentalized i.e. the two items don't get thought of at the same time.