Well this has been a fun week. It's not typical for me to have posts that generate over 100 comments on them, nor have my email box filled with hate mail about something I wrote. Lest I be accused of being a “Defender of the Rich” I decided to write a quick post about low income earners. You see, like many physicians, I have been both a high earner and a low earner. In fact, I never earned more than $15,000 a year in any of the first 28 years of my life, and was into my thirties before I ever had a six figure income. I've had the joy of learning to live on $5K, $20K, $40K. $100K, $200K, and higher. It's all the same game, but the rules do change a bit as you go along. At any rate, let's talk about….drumroll please….
Why It Sucks To be Poor…AKA Have A Low Income
1) You Can't Buy Expensive Stuff
Expensive stuff, like vacations and consumer items, can be a lot of fun. If you don't have the money to buy it, however, it isn't nearly as fun. Either you're smart and don't buy it, or you buy it on credit and never get out of debt. High earners don't have to worry about this because they can actually afford to buy expensive stuff and still meet reasonable financial goals.
2) You Pay a Higher Interest Rate On Your Mortgage
Sure, you may get the standard deduction even if you don't have enough deductions to really deserve it, but all that mortgage interest and property taxes you pay may not really be deductible. Only the amount higher than the standard deduction really benefits you. Thus, you're in effect paying higher rates to borrow money for a home. You might not qualify to buy the home and have a harder time coming up with a 20% down payment too. You are far more likely to have to pay PMI and there certainly aren't any doctor mortgage loans out there for you.
3) You Can't Max Out All Available Tax-protected Accounts
High earners don't have to worry about which accounts they should use. They just fill them all up and most likely can even save a little in a taxable account. However, the Roth IRA vs 401(k) vs 529 decision can be tough when you can't really do them all.
4) Your Kids Are Going To Have To Borrow To Go To College, Just Like You
It's not uncommon for low earners to still have student loans when their kids are taking out their own student loans. Sure, they may qualify for Pell grants and other need based aid, but actually saving up to pay a significant chunk of the cost of their education isn't even an option. You're doing well just to save enough for your retirement needs. My parents made slightly more than the average American household, but their total contribution to my education consisted of plane tickets home twice a year and 8 months of rent. My wife's parents and grandparents contributed more to her education, but she still worked every semester in college and grad school to pay her way. And an expensive liberal arts school or Ivy Leaguer? Forgettaboutit.
5) Social Security Tax Doesn't Go Away
Unlike a high earner, you pay 6.2% (12.4% if self-employed) on ALL your income. The effect of the payroll tax is a flattening of the tax curve. I experienced this while moonlighting in the military on a taxable income well under $100K. My moonlighting dollars were taxed at 25% federal + 6% state + 15.3% payroll for a total of a 46.3% marginal tax rate (technically slightly lower as half that payroll tax was deductible.) You don't have to have a six figure income to be paying nearly half of your marginal dollar in taxes.
6) The Stigma of Public Programs
Sure, a low earner gets the benefits of Social Security disability, unemployment, food stamps, Medicaid and even PPACA subsidies. But they also get the at times esteem-crushing knowledge of knowing they aren't completely self-sufficient. They have a constant battle of knowing they qualify for government programs even if they could figure out a way to get by without them.
7) Hard to Get Unbiased Financial Advice
Most good asset managers list a minimum amount of assets you must have before they will manage your money. $500K-$1M is typical. A low earner may retire with less than that and thus never benefit from good advice. The best they can find is often a commission-based salesman.
8) Biking In The Rain Sucks
There were 13 years between the time I left home and the time I started earning a six figure income. I owned a ($3-7K) car for just 8 of those years, but my wife had it most of the time. My primary mode of transportation was the trusty mountain bike I recently replaced. Even after I had a six figure income, I continued to commute from time to time on it. In case you are not aware, biking to school or work in the rain sucks, even if the bicycle is a money-printing fountain of youth. Standing on the corner waiting for your bus while people zip by in brand-new BMWs spraying water on you sucks too. Driving crappy cars because you have to choose between getting a newish economy car and funding your 401(k) gets old as well.
9) Suffering Through Inconvenience
I missed a flight last week. So I bought a new one. No big deal. I can afford to pay for convenience. However, when I had a low income, that would have required a dip into the emergency fund. Even worse, I would have had to choose a much worse itinerary just to save $80. Instead, I bought the direct flight. Money gives you the ability to avoid many unpleasant things (like working on your own car or having to bring a cold brown bag lunch to the ski resort. Heck, many ski areas don't even let you eat inside unless you buy food.) Low earners just have to do unpleasant things a lot more than high earners. Cleaning your own house. Mowing your own lawn. Combining trips. Sharing a car. Having to bargain shop. Using coupons. Darning socks. Need I go on?
10) No Stealth IRA
Low earners can use an HSA just as well as high earners. However, they don't have money on the side somewhere to spend on their health care. They actually have to use the HSA money, which obviously can't then compound into a Stealth IRA down the road. Want to know what really stinks? Spending a quarter of your net income on health insurance premiums and then another quarter on co-insurance and deductibles.
11) Basic Living Expenses Eat Up A Higher Percentage of Income
High earners have a choice to live high on the hog, or to live like the middle class and retire early. Low earners don't have that choice. They have to live like the middle class and still have to work into their 60s. I suppose they could live like they're poor and retire early (and many Mustachians do) but that's not exactly the same thing. Everyone has to eat food, and you can only cheap out so much on it before it starts to affect your health. Yes, you can buy a smaller house in a less expensive part of town, but they only get so cheap. Low earners are simply going to spend a higher percentage of their net income on needs (versus wants) than high earners are.
12) Unsavory Financial Professionals Target You Too
Sure, you don't have the target on your back that “financial advisors” see on the backs of doctors, but don't kid yourself–many financial firms target low earners also. Payday loans and pawn shops anyone? They're not putting those businesses up in the high end neighborhoods. I'm also amazed at just how many people who can't afford adequate term life insurance have somehow been sold a whole life policy. And what about all those “get out of debt” schemes?
13) Having to Say “I Can't Afford That.”
Sometimes high earners feel obligated to treat lower-earning friends and families. However, there's something worse. Having to say, “No, I can't go out to eat” or “No, we can't drive three hours to go camping this weekend” or “No Junior, you can't play basketball this season” because you can't afford it. When all your friends and family are going to go do something fun you can't afford, it sucks to miss out. High earners rarely have that experience.
14) Poor Investing Choices
Being willing and able to put more money into an investment can often save you money/earn you more money. A $20,000 CD or savings account often pays a higher rate than a $1,000 one. Vanguard's Admiral shares require a $10,000 investment. If you only have $3,000, you can only invest in the more expensive investor shares. You may be forced to buy ETFs if you can't even scrape up $1-3,000. Ever tried to rebalance a four asset class, four figure portfolio? It's a pain. And investments that require you to be an accredited investor? Not even an option. You're also much more likely to be stuck with a crappy 401(k) loaded with higher expense ratio, loaded, actively managed mutual funds kicking money back to everyone but you.
15) Tax Deductions Aren't Nearly As Valuable
If you're in the 33% bracket, donating $10K to charity saves you $3,300. If you're in the 15% bracket, donating $1K to charity only save you $150, and that's assuming you somehow found enough other deductions to get above the standard deduction.
16) PSLF Results in Much Less Forgiveness
Yes, doctors and lawyers have to take out much bigger debts to go to school. But if they're willing to work for a 501(c)3 or government entity, they can also get those loans forgiven after just 10 years. Doctors can get even more forgiven if they spend 3-6 years in residency and fellowship. They might have hundreds of thousands forgiven by PSLF. How much might you get forgiven? Maybe a measly $10-20K. Sure, it's better than a kick in the teeth, but not exactly the same.
Well, I've had a low income and a high income. A low net worth and a high one. My sisters will tell you I whined just as much in both situations, but not nearly as much as when someone blocks my road while playing Settlers of Catan. I'm not going to lie, I definitely prefer the high income/net worth. I hope this website will help you to obtain a high income and manage it well so it will someday be a high net worth. But for those who criticize me for writing about the money issues faced by high-income professionals, trivial as they might be, you might want to read the banner at the top of the blog before reading the content. It's a financial blog for high-income professionals like doctors and their trainees.
What do you think? What sucks about having a low income? Did I miss anything? Comment below!
I’m glad you put up this post. Nice counter arguments to be past post. Maybe the ideal earner is one who has an average income! Next post will be on that I hope! (Of course I’m kidding)
Nice post….Been there done that too! Lived in a cockroach infested garage appt one year where I could reach the kitchen sink while sitting on the only toilet in the roughly 250 sq ft apt….I have a feeling this post won’t get 150 replies 😉
GREAT FOLLOW ON POST!!! I don’t fall into either category…but probably relate more to this one than the high income post. I make good living and save A LOT. I don’t focus so much on the income aspect but the outflow of that income and building net worth! So based on this post I wouldn’t be considered low income since my focus always goes back to net worth in any argument.
I love reading your info and insights!!!
One good thing about a medium income and a high net worth is you’re not considered one of the 1%ers. You’re not a target for higher taxes. I’ll take that any day over the ridicule the 1$ers get.
Too bad the hate mail senders will probably not see this post or if they do think you are patronizing. I bet your high income post will generate lots of traffic/comments to your site for a long while!
Been there done that. I used to live in the projects when younger. The fact remains that there is no reason other than disabled any one needs to be poor. There are plenty of job opportunities with just a little education without a huge debt burden to make $50K+ per year.
There are two classes of poor in the US.
1) The poor that want to get out and do everything they could to do so.
2) The so called moocher class that does everything possible to live on the government.
In medicine we get to see both classes and I have a huge respect for the working poor but absolutely no respect for the moochers and am not interested in paying taxes to support that lifestyle.
The support we give to the non disabled needs to be progressive as well allowing for plenty of incentive to go and get a job. Why work if you have free housing, free food, free medical care, free iPhone with Bluetooth headset, and a free car?
17, Sometimes safety is jeopardized. You might need to live in a shady neighborhood (where there is armed robbery in your apartment complex, you commonly hear gunfire, your car is stolen from the parking lot {and also the stuff you stored in the trunk because your apartment doesn’t have a closet}) because you are making far less than the hourly minimum wage–that was the situation of a certain PHYSICIAN during his intern year.
This is a financial blog for doctors, I think it’s appropriate to complain about how folks are penalized for high income. When someone says they are a physician I automatically know that they spent 4 years in college where it is hard to make a good income while making good grades and doing the extracurricular activities to ensure med school admission, 4 years of med school when you realistically only have one summer to work, at least 3 years of residency where you are making good money but not when you factor in the hourly rate. So, yeah, I think most physicians are fairly paid for what we do and most of us also know why “it sucks to have a low income.”
WCI – don’t let the hate mail get to you. Some people may not realize how much we have sacrificed to earn the income we do now. We didn’t start off making 250k+ straight out of college and most of us are not trust fund kids.
WCI – You know you have made it big when you have critics. As painful as it may be, it will likely fuel the publicity of your site and improve your business.
I was going to say something sarcastic…but then you actually touched upon it: #12. That is sad that even the low incomes get bit with whole life plans.
Actually with huge endowments, the IvyLeague is probably a better option that most any other school for kids of low-income earners. At Harvard they will get free tuition (0-10% tuition if income less than $150k) and it will go up on a sliding scale. My kids would pay full price. You can argue about access to better elementary and high schools to qualify for the Ivyleague but if a smart kid can work hard and swing it, what a life altering opportunity!
Ivy League colleges are great (my dad went to one and I could have), but have you checked their acceptance rate lately? We need to do a lot more to educate the great middle group that can do college work, but are not in the top 1% intellectually. Not to mention good technical training, to fill those complex jobs that are proliferating. I taught in mid-range colleges for a quarter century. Most of my students worked part-time, some even fulltime. States have been reducing their support of higher education. Sorry, you well-off docs need to help by paying reasonable taxes. Hahvahd doesn’t need your money for their massive endowment, but your local state university probably does (and your contribution is even tax deductible).
I see this type of comment frequently about taxes on those with a high income. Please share your definition of what constitutes paying “reasonable” tax rates (total effective rate, please). Just curious what people mean when they say that.
thanks for the follow-up post WCI.
don’t let any of the haters get to you. you created a blog to help docs, dentists, etc get a fair shake and educate themselves on financial matters.
just like we need to educate ourselves about investing, insurance products and the like, taxes are another important financial topic. knowing and understanding the tax code can save or cost you tens of thousands of dollars.
i feel blessed that i earn enough that i can decide to work less and still maximize my savings goals. its much easier to say no to that extra call shift when you understand what you are really getting paid to take it.
i think it was dr. mom who stated recently – you most valuable possession is your time… sure helps guide most of my decisions
Here’s another reason it sucks to have a low income (compared to family size).
My dad, a UPS driver, would work ridiculously hard during the week (he had the tough route). While being a UPS driver is a great job, it can be very stressful, and it only provides so much for a family of 7 on one income. On the weekends and sometimes right when he arrived home, he would do maintenance on our cars and house. I worked with him as he closed in the garage for my sister’s bedroom, remodeled 3 bathrooms, and worked on cars endlessly. He also did an amazing job tiling his house with the stone-style tiles by himself.
Having to be your own handyman/mechanic/remodeler/tile layer is like a second job.
I definitely learned what real hard work is by watching him. I knew I could do the 80 hour weeks of residency if he could do his crazy hours and raise five kids.
I have always been middle class, though I did live in a basement as a grad student, and worked in college to bridge the difference between my parents’ means and an expensive private university education (worth every penny). But your list doesn’t seem to touch the REALLY poor, who can never quite catch up on their rent, have trouble keeping food on their kids’ plates, and may even have to resort to begging. Minimum wage is OK for teenagers, but utterly inadequate if you have a family. Health care is expensive, so you resort to the emergency room (as you know) if you need attention. If a job is available, you may have no way to get there. And so on. I would be a lot less critical of the wealthy if we could rearrange our society to assure everyone a minimum, decent standard of living, which we don’t do in America. The tax burden here is low, compared to most developed countries, so it burns me to see how the wealthy and even upper middle class get to use various tax loopholes, while those at the bottom are suffering. The cost of that flashy boat you just bought could support a family for several months, just like the taxes you will never pay on your “back door” Roth.
The poor in the US are some of the wealthiest poor in the world. In how many other countries do poor people have new cell phones, get to drive cars, have cable television, and free healthcare (Subsidized Obama Care.)
Now if you are disabled, you have no way to improve your standard of living, but what keeps the person working at McDonald’s from getting licensed as an electrician, plumber or mechanic. They can get a degree as a nurse and be guaranteed work for the rest of their life. Why do I have to pay for the poor life choices of others? America is really the land of opportunity, and if someone is willing to work hard then they can achieve great wealth in this country. This is proven by many physicians on this forum who started off one of these poor. Myself being one of them.
The nerve of people like you thinking that someone who makes more than you must give their hard earned cash away. Each and every physician busted their butt to get to where they are, they gave up the best young years of their life to get that education and maybe are now able to buy themselves a nice house or a boat. Both of which they truly deserve. It is so easy for someone to force others to pay more in taxes when it does not affect them. These are the weaseliest people off all because they offer very little but expect others to do everything.
Physicians over the coarse of their careers will each pay millions in taxes. How much more must we pay?
If we keep taxing and cutting the pay for physicians, we will have less and less bright people becoming doctors. There is a limit to how much our salaries can get cut further. For the sake of our healthcare, I hope we never reach that limit.
I will agree that the tax code is way too complex and should be simplified. There should be no loopholes or tax deductions, just a fair tax that affects everybody. To be honest the best tax would be a consumption tax (food, drugs, and shelter should not be taxed. Those that make more will therefor spend more and therefor be taxed more. A consumption tax also promotes saving which in turn promotes investing which helps drive the economy.
” but what keeps the person working at McDonald’s from getting licensed as an electrician, plumber or mechanic. ”
Time and prior decisions mostly. What many on this forum seem to forget is that most of them came from a good home. Many poor do not. If you have 5 brothers and sisters, no Dad, and a mom working two shifts at home, you probably need to work just to help pay the mortgage and buy necessities. It can take poor years to save up enough to get a car. They are almost never offered financial aid because most of schools they can get to on foot don’t offer it. Nor can they afford govt loans which require full time student status since they need to work.
Not everyone lives down the road from a night school.
I agree with you that their is a HUGE population of poor in this country that have no desire to better themselves, but there are also huge chucks of working poor that that do, but can’t do to other prior mistakes or committments.
Both of my medical assistants are single moms of 2-3 kids. Not by choice. Both previously married. Both get minimal child support. Both make about 28K (better that average in this area). When do they get time to get their nursing degree?
Some factors are their fault (bad decisions) and some are not. It’s a complicated subject, no doubt.
If you are an adult and you make minimum wage, you have absolutely zero skills and education. That shouldn’t be my problem. Seriously, if you can show up on time and not drunk to Burger Joint XYZ for 6 months straight, you will be promoted to manager. Heck, someone I know got fired from their job as a bartender after not showing up for all her scheduled shifts over Christmas because she “didn’t feel like it.” Her new job she just found – manager at a Chipotle. This is for someone who flunked out of college after one semester and has minimal real world skills. Opportunities abound, but you have to actually show up and learn something to take advantage of them.
[Ad hominem attack deleted.] Did you deduct your mortgage interest or take exemptions for your kid this year? That potential tax money could have paid for 100s of meals for poor in your community.
WCI does this site as a service for FREE (to us). That’s his valuable time and effort benefiting thousands of readers. What have you done today in your “free time”?
While I appreciate the support, and while both the site and the newsletter are free to readers, I’m certainly not doing this for free. I’m selling your eyeballs to advertisers.
And God bless you for doing so. Every extra dollar you earn means an extra set of eyeballs are attached to someone who is now going to keep their wool, a.k.a. not get fleeced. And these are doctors as well as non-doctors…unless you have some spybot that kicks non-docs off this website!
Such an awesome post. I haven’t missed any posts but I guess I missed why anyone would get pissed off about these posts. And dude, I had no idea you used to commute on a mountain bike, much respect. I can only imagine some radiation oncologist or CEO reading your stuff and being like “Puh, this dude thinks he makes decent money, he’s a pauper!”. It’s all so beautifully relative. Anyway, thanks as always for your posts, the stuff you write is amazingly insightful and helpful.
Having a low income does suck. I had a negative income & net worth for 8 years of school. I was so happy when I started my intership, because I finally had a positive income; going from -30K per year to +40K per year was a 70K raise for me. I do consider myself fortunate to have a high income now, and I know many people’s low income struggles may be life-long. Going from a low to high income has made me appreciate and value what I have, and I think this website helps with this stewardship…it’s certainly better than not valuing what I have and being frivolous.
As for the above post about tax loopholes, specifically backdoor Roths. I was just reading in Forbes (“Obama Budget Would Prohibit Backdoor Roth IRAs”) that this may end. I guess we all knew it would eventually. Curious what the WCI thought about it….
I’ve had this question a couple dozen times since the state of the union. Every year there is a proposed budget from the executive branch. But they’re not the ones who make the laws. Last year’s worrisome proposal was limiting PSLF to $57K. This year’s was ending 529s, eliminating the step-up in basis, and closing the Mega Backdoor Roth loophole. I guess a lot of people don’t realize these proposals come out every year and go nowhere. I mean, which Republican controlled House of Congress were you expecting to write legislation that raises taxes?
Been there, done that.
You forgot a few big bad reasons – hunger, homelessness, being victimized by violence, suboptimal health care, premature death
Great points, but some others are not having investments to worry about, not having to worry about keeping up with others, and other things low wealth people don’t have to worry about. I am happy to have been reasonably paid and thrifty so I have time to worry about my investments. Keep up the great work.
Having lived on both ends of the spectrum….two things stand out to me:
1) When you’re poor, you don’t know anyone who knows anything about money, taxes, investing, college, careers, etc.
I think that has changed significantly now with the internet (which you can go to the public library and use) making it possible to self-educate.
2) Any mistake/problem has HUGE consequences. Decisions weigh heavily when your margin is razor thin and everything has to always work perfectly to make your accounts balance out. Even small problems can cause cascading consequences through your life.
An example:
In college I knew a single mom. Really partied it up and then realized she needed to fly straight, got life in order, signed up for night school to finish her associates. Worked with. She bummed rides for about 3 months when her car crapped out on her. Saved up and bought a used sedan for about 4K with low mileage. 2nd day she had it she was sitting in traffic when an uninsured a-hole high on meth slammed into her doing about 40 mph faster than everyone else on the road. Obliterated the car. $3000 at the ER/hospital that she didn’t have (deductible). Now no car. Her insurance valued her car only at about $2.5K. So in one day she went from about 1K in savings to about 3.5K in the hole. Woman just couldn’t catch a break.
A friend just posted on FB that her used car, after $1500 repairs, quit running again and needs another $1500 in repairs. Her posts are often about the onerous costs of owning a car so they can get to work. My nearly new cars- and none used when I got them- rarely need big repairs and I end up replacing them when they start to do so. Not an option for truly low income. THose who say the poor need to work harder- we often think we worked hard to hit a triple and end up on third base, when actually we were born there. If all US poor had decent public transit like was available in my hometown growing up I’d grant more credence to those scorning the ones who don’t get to work regularly etc. And I know plenty fail to do so where there IS still decent transit. But please- very few of us posting here really started out in the lowest 10-20% of income or wealth. THose who did- awesome work. BUt it’s much easier for us true middle class to stay there or to rise than it is for true poor to join white coat investors’ ranks.
Great follow up, but it’s kind of funny/sad that you had to squeeze this one in. I think it’s obvious that most, if not all, would rather deal with first world problems as opposed to third world ones. Or high income problems to low income problems. The point of the article, either of them, isn’t so much that life is tough and we need to be pitied, it was just pointing out things that different groups deal with. I never felt that you were reminiscing about the “good old days” when you used to make 50K as a resident and work 80-100 hrs a week. But, I do have some great memories of from that time and have some great friends from residency I still am close to.
You covered many bases, WCI. It’s a dreary list. I would just add the stress and strain of trying to make things work and getting by week to week. Lots of wear and tear; life can feel like a burden.
Being a high wage earner and a wealthy person are not the same thing. Your web site has helped my wife and I transform our financial lives from one to the other. We simply didn’t know what we didn’t know. Further we seemed to fall into the path of every shyster out there. If you are taking flack for focusing on helping out those of us who are “financially- fortunate”, then let my wife and I be amongst those to say thank you for sharing your knowledge. It has made a huge difference in our lives and our future retirement!
Rob and Liz
^^I second that
Well done! Great follow up.
I hardly think that biking in the rain fits onto the list. It is all a matter attitude. I personally enjoy biking in the rain and snow! I find it exciting and relaxing all at the same time!
Also, even high-earners can probably appreciate an extra $55 per commute! See this post below.
http://www.businesscasualbiker.com/monetary-impact/
It’s not attitude when you show up for a meeting in a suit soaked to the bone, or to the ED in scrubs covered in mud. Sorry. Biking in the rain for pleasure might be fun (although I’m not a huge fan of that either) but not to commute. You have to have another change of clothes when you get to work and preferably a shower. That’s a pain. In fact, that was one reason I ranked OHSU’s (in Portland) residency program lower on my list. The other one was the hill up to the hospital is really steep.
One alternative to this is a full-body rainsuit and booties. That’s how I biked to med school in the wintertime and stayed dry. Still inconvenient (you have to put the wet suit somewhere), but less so for me than having to remember to stock a change of clothes.
I’m officially a wuss.
I advocate for wearing what you are going to wear for work while biking to work. It makes things more simple and lowers the barrier to actually riding. Thus, the name of my blog. I’ve been doing this three years now 100% of the time with minimal issues, including wearing a suit when necessary. I did get caught in the rain on the morning of the 2013 Colorado Flood. I had to replace my pager but fortunately I was wearing scrubs which I could just switch out when I got to work. I admit I have the advantage of living somewhere where it almost never rains in the morning! On the other hand, Portland is the bicycle commuting capital of the US and I understand it rains there a lot.
WCI – Before reading your blog, many people probably thought that DIY investing was a ridiculous idea (especially for a wealthy doctor with lots of spare cash) and that paying 1-3% to a financial advisor is the only “smart” way to invest. I think you have convinced many people otherwise.
The goal of my blog is to convince people, who think that driving is the only way to get to work, that bicycle commuting is a reasonable alternative. What is more, riding to work has endless benefits both in terms of money but more importantly in terms of lifestyle.
As someone in a household with a 6 figure income I hardly consider myself low income and I will ride myself to work even when I have a 7 figure income, in the rain when necessary. I truly believe it is that awesome! You may remember your bike riding being forced upon you by economics but if you look beyond that in your current circumstance you may find all of the benefits that I detail in my blog ( http://wp.me/p5wdgE-g ). I highly recommend it!
I guess you must be a fan of MMM blog. I have been thinking of starting riding bike to work. My goal is eventually to ride bike everywhere other than long distance travel. I guess by then I should not be owning cars at all. Can always get a rental for long distance trips. People don’t realize the true cost of owning a car and driving. Just did a simple calculation using investment calculator: assume average value of a preowned car is 5K (I am sure many people have it much higher); registration and insurance; maintain and repair; and gas cost can easily add to $300 a month; the savings over 10 year is 59K even at modest return rate of 6%; using the same figures but extend the time to 50 years (assume one drives from age 18 to 68) the amount becomes 1.2 millions. Wow! I can’t believe how expensive it is to own a car. Well, better get my bike out and start biking.
That’s all true. However, I’m confident I’m getting at least $59K of happiness every ten years out of owning a car.
I am definitely a MMM reader although my carless commute preceded my discovery of his blog. His thoughts related to purposeful discomfort are very motivating when maybe I would otherwise have a bad attitude (maybe rain, although I’ve always liked the rain).
I advocate for enjoying the car free life style and then count your savings later rather than giving up your car just for the money. I think one is less likely to fail if it is thought of in this manner…
Living in a crummier area with (1) bad schools, (2) more crime, (3) less greenspace and parks, (4) worse grocery and shopping options, (5) less public services, etc.
Reading this post and the one about being rich maybe proves Daniel Defoe right when he wrote in Robinson Crusoe (advice Robinson was getting from his father)
“He told me, I might judge of the Happiness of this State, by the one thing, viz. That this was the State of Life which all other People envied, that Kings have frequently lamented the miserable Consequence of being born to great things, and wish’d they had been placed in the Middle of the two Extremes, between the Mean and the Great; that the wise Man gave his Testimony to this as the just Standard of true Felicity, when he prayed to have neither Poverty or Riches.”
Your ideas about Stealth IRAs in HSAs are very interesting! Must learn more…