I was reading an article from Australia about a woman's budget she has for her 100K yearly earnings - which is a bit above average for a salary there. However, what was most interesting were some of the comments from others,
“So you’re earning $100k but only have 400 bucks to yourself a month?”
“That budget is not realistic. You haven’t included any money for general spending like gifts, hair cuts, medicine, dentist, new tires and clothes”
I don't watch TikTok videos, but supposedly people were upset at her setting aside so little for "fun" activities - the 400 a month - which is probably why so many people are struggling and don't have enough to invest. You know the old adage
"Save 10% of your salary"
Remember, this is 100K is pretax and once that and superannuation (retirement) is automatically taken out, as well as a small amount for her student loan, she is left with 5,300 a month, so that means that the 400 is 7.5% of her monthly disposable income. Is that too little for entertainment? Obviously for some, but what was also interesting is that after all of the oher payments like rent, food, electricity etc, she had a $300 emergency fund and $400 put aside for a holiday fund.
Notice anything?
Yeah... no investments. Other than her superannuation, it seems that she is not keen on putting anything into a generative asset, but is willing to save the 300 for emergencies. Saving is good, but it is a depreciating value against inflation, however as I have written about before, there are differences in this regard between men and women. Women are on average, better savers than men and have more held in savings but, they also have less held in investments. This means that while saving well can increase the savings account for a rainy day, investing well can powerup the value, beat inflation and increase that rainy day fund - but there is s a risk involved that it actually goes down. Risk aversion is real - this woman spends $500 a month on insurance.
It is a crazy world when we are spending more on insurance than investments, isn't it?
I think this is a good indicator of how we are conditioned not to look after ourselves financially and are instead encouraged to proxy our financial security to others - in this case, financial institutions. What this does is convinces us that renting is better than owning, so we spend our available resources on everything, except what we own and control.
The greatest trick the devil ever pulled...
It wasn't convincing the people he didn't exist, it was convincing people to sign their assets and potential over to him under the provision that he will use it with our best interests in mind. The only interest he cares about is, the one he collects from us after we fall into a debt trap, because we do not own anything.
But all in all, at least this person has a plan for her finances, as most people have none and live their economic life at the whimsy of their moods and desires. In this regard it is like the advice of, "don't shop hungry", because you will end up spending more on foods that offer less. the average person holds a consumer mindset, making decisions based on their desires of the moment, not their long-term goals. This means that those "down the track" goals can't be reached, because the energy that could be turned toward it, is continuously commandeered and redirected by the wants of the moment.
I am definitely not as structured as I should be with my finances and there is a lot of leakage on the unnecessary, but I find that what people consider necessary has shifted over the last decade, often at the expense of investments and savings. We are constantly buying more and owning less, but as the economic landscape changes, we are increasingly finding ourselves worrying, struggling, suffering. But, if we followed the paper trail, it would indicate that our decision-making processes on how we use our resources, has led us directly to this point.
Owning nothing and owing more than nothing.
What is an "unrealistic budget" for the long term, is one that favors entertainment over investment, because eventually, the budget runs dry and there is no position to fall back on, except deeper into the folds of the devil's debt.
Taraz
[ Gen1: Hive ]
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It is the greatest trick convincing people that he doesn’t exist, 100k over here is a lot, are you sure super isn’t in addition to the 100k as we don’t usually quote salary including super.
I have a friend who is putting nothing into retirement with the exception of her 401K. She has a pretty decent savings account that she earns a laughable amount of interest on. I keep trying to get her to put some of that money into investments so it can work for her. She likes seeing it in her savings account though and she needs to be ready to take that step. I can't force her. I really love that a lot of my secondary investments get taken out pre-tax. That means I never even see it on my bottom line when I get my check. Once you get in the habit of it not being there, you don't even miss it.
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Inflation in the US in February: 7.9%
Hope she is getting more than that in interest!
This means that if she has 100K, she will effectively have 92K of today's buying power next year. What a deal! I know you know this, but just in case someone reading doesn't ;)
This is the trick for most I think - out of sight, out of mind.
Yeah, no problem. Thanks for the tip. I am going to be spending some time with her and her husband in the next week, so maybe we can have a conversation about it again and I can point this out to her.
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It is weird to talk about money with friends - but I am getting used to it :)
I am pretty open with people I am comfortable with and I feel like I have some good wisdom to share. I have been deep in debt and brought myself out of it to the favorable position I am in now. If I can help someone avoid my mistakes all the better.
I’m glad that the woman has something saved at least! We know too many people with zero savings or retirement accounts. A good friend of mine, or at least was, had no retirement funds but would keep a good amount of cash in his house instead. I tried to get him into crypto and he mocked me saying it was dumb even though he’s pretty decent at tech stuff. I wonder if I should text him and ask him how his financial life is going after me telling him to get into bitcoin was something he ignored lol.
There’s definitely more people that are into the “spend it” mindset and I think it’s terrible. Good for the people who convince the fools to piss their finances away but bad for the poor saps who don’t realize they need to get their shit together before it’s too late.
We just had some family that passed away without a penny to their name. Quite sad, and it wasn’t hidden money or anything. They had nothing saved.
Common for tech people - they look at the technology of it and say "there is already better (centralized) solutions". But they don't understand the finance side. Finance people say, there is already better financial tools, but don't understand the technical side.
Distribute wealth evenly and a few years later, the same people who are rich now, will be rich again.
It must be a hard life to live always scrounging, forever.
Folks have forgotten how to save money. We feel we need things that honestly we can live without. Many years ago, when I was living from hand to mouth, I started collecting nickel cans for the deposit. Over a year's time, I saved $600.00. That taught me that I could save and got me back on track to putting money away.
But I would never trust a bank for my savings. The laws in America have changed. And if a financial institution goes under today, the depositors are left paying the bill. In 2008 it was a governmental bail out of banks. If it were done today, it would be the bail in and the depositors would be screwed.
The bail in is a scary proposition, isn't it? I am not sure of the laws in Finland on this, but I suspect it is heading the same way, if not already.
Your can story reminded me of about 15 years ago when my ex and I were saving for a trip to Australia. We already had tickets, but for spending money, we decided to only use cash for six months and all change, went into a jar. It ended up being over 1000€ worth. Not bad!
Having a plan is better than no plan for sure. Am also very risk averse, but crypto is gradually making me feel like I could get my hands a little more dirty. I'll say she's on track, and if she's lucky to come across crypto in the short term, it'll be a good fit for her long term thinking...if she's willing to taka a little risk
Sometimes I wonder if I am far too risk taking in this - but I don't feel like I am (most of the time)
Start small, build up a tolerance :)
It is good to plan for things in future, but it is according to our capabilities. I agree with you. You should not listen to desires too much. You should arrange things in a timely manner and pay attention to the requirements at the present time.
I wonder how many people have very different capabilities to invest or save, even though they are in the same financial and life situation?
It depends on what you invest your savings in. I think the best to protect savings againts inflation is to divide them into different assests, even dividing among cryptocurrencies.
that isn't saving though - it is investing - it is a spend :)
Why? If deposit in a bank, you get capital + profit in return.
As I read this I am left wondering if spending money on getting a bunker built is a good investment since we are close to things spiraling into hell breaking loose in Europe.
Yes, 10% is something we all dream about. Since I have had a pause in my beer consumption I am finding more pennies or cents in my pocket.
I think I should stop myself from accessing information online. Too much of a good thing is bad sometimes LOL.
There is a constant tug that is happening between being sensible and just going hell bent of blowing every bit of cash since today could be your last..
That's the best title I have seen all day.
Maybe it's because the phrase "protective detail" still rings in my head after seeing the 7 seasons of "blacklist"..
It's sad to see that the system encourages outsourcing our financial security to institutions.
But with the rise of financial education around the globe, I believe things are changing...
The good wife did something interesting a few months ago. She took the monthly disposable income out of the bank. She started allocatting it to different envelopes. So we had entertainment envelope, fuel envelope, Food Shopping Envelope, etc etc. Whenever we needed anything, we took it out of the appropriate envelope. We were always going over budget.Tapping the card had become too easy. At first I was shock and horrified but I started liking it and it was a good exercise.