You don't understand money!!!

[LivingAlmostLarge]

A friend today told me I don't get money. I am not interested in money very much and I don't understand how important it is. She said that DH and I not very ambitious about making money. I understand that she is frustrated because I asked her to really reconsider taking on a new job. Background...this is her 3rd job since October 2010.

Mommy had a baby in Feb 2010. In October 2010 she started a new job that was "contract to hire" but got "laid off/fired" in 12-31-10. Then got another position in January 2011, and now is interviewing for another position yesterday. She hates her current position, felt they lied to her about the amount she had to drive, work in the office etc. They promised work from home but instead she has to commute 1 hour each way at least 3 days a week. They pay her $80k. She feels it's unfair, people lie, cheat, etc. She works a ton of overtime (unpaid) due to the nature of the job.

She grosses $80k right? $15/hr for a nanny so she is paying $31.5k/year net (cash under the table) for a nanny. $48.5k before taxes. Assuming 4.2% SS, 32% Federal and state tax, 1.5% Medicare = 37% taxes = $29.6k/year taxes. She is going to net $18.6k/year. That is before commuting costs, car costs, extra to nanny if they are running late (happens all the time), eating out, etc. Assume easily an extra $500/month = $6k/year = $12k/year net after taxes and nanny and extras. She is killing herself commuting 1 hour each way, working 50-60 hours a week for $12k/year or making $5.68/hour.

I said she should really reconsider working and figure out what she really wants to do, job and career wise. She said that I'm crazy, I don't understand working or money. I told she should slow down because job hopping looks bad and she should at least work on finding a job she likes and is happy doing. She said it doesn't work that way. She said she was taking the job back in October to save money to pay down their house so they would get out from underwater to move.

So I asked her, has she saved every penny from her job? Her answer? No. They need her salary to live, now because they have a lot of expenses, their lifestyle. They can't live on her husband's salary. She justified the non-savings by saying I've only been working a couple of months, how could I save anything? There hasn't been enough time. I don't have a clue about their bills and expenses. True, but let me say this.

She told me in the past her husband makes $120k/year, but she feels he needs to make $200k to afford their lifestyle. Okay possibly true.

But here's a clue as to differences in our lifestyles. $20k engagement ring versus $1k ring. $40k cars versus $20k cars. $300 haircut vs $40 haircut (me).

I'm not saying I'm right, but I am saying that she should consider what it means to work and what she's giving up. She should really think about what job she wants and then go after it. Don't just job hop and assume that it's worth the money. I think it's a good time after having a kid to reconsider if you love your career and find it worth spending hours doing it. I say this because she complains about not seeing her kid much

This is why I rarely say anything about money. Because people who are dumb with money never listen. I hate when people say to me "you are so lucky to stay at home with your kid. You have no idea what I would give to do that. Or I need the money, I can't just quit. Or how can you save money when you make so little? How do you ever afford to stay at home? You can't be saving money it's not possible on that income."

Truth - it doesn't matter what you make, what matters is what you spend. When we made $40k/year we still saved. We tripled that and still saved. It didn't matter what we made we always saved. And people don't get that.

And further more when you don't work there is no daycare as a side note.

[LuckyRobin]

I tend to get hit with the "You're so lucky you can afford to stay home with your kids," comments. It's not luck. It's a lot of hard work and sacrifice which we are willing to make and others are not. Plain and simple.

[disneysteve]

We used to have a friend who once told us, "I have to work to afford daycare." She was totally serious when she said it. Apparently, it simply didn't cross her mind that if she didn't work, she wouldn't need daycare.

Some people just don't get it. They like to make themselves the victims and blame everything and everyone for their problems. I have very little patience for people like that.

[frugalgirl]

IMO this is not simply about money. She is more likely trying to tell you that you don't understand her life as a full-time working mother. She probably does want more time with her child but not full-time responsibility. Being a SAHM is not for everyone. If she quits working now, she may be afraid that she will not be able to find a full-time position when the child is older. She probably likes the feeling of a job well-done that her work life gives her even if this particular job has many negatives AND even if it only nets her $12,000/year.

As someone who quit a very high paying job to be a SAHM, I have lived both sides of this. My advice to all women is to complain only to other women who have made the same career/family choice. SAHMs do not want to hear full-time working moms complain about their jobs and how much they miss their kids because that is the choice they made. Likewise, full-time working moms do not want to hear about how hard it is to stay home or how strict the budget is for a SAHM because the SAHM made the choice.

[moneybags]

Originally Posted by LivingAlmostLarge

Truth - it doesn't matter what you make, what matters is what you spend. When we made $40k/year we still saved. We tripled that and still saved. It didn't matter what we made we always saved. And people don't get that.

I get this and live by it . I have always said that is about lifestyle choices and living within your means.

[MonkeyMama]

I get the "you are so lucky" and the "you are so stupid." Just depends on the person.

Anyway, we are very happy with our situation, and I get a LOT of unwarranted opinions and input. If only women would keep their opinions to themselves, but that seems way too much to ask.

Anyway, both opinions are extremely misguided.

I understood that our choice was to have my husband work FULL TIME to maybe take home $5k per year, 2 years post college, in a job he hated and was laid off from anyway. OR, have him stay home with our kids. How hard is it to come up with $5k per year from side endeavors? People always have assumed I make far more money than I do and that my spouse didn't make much. My spouse made $50k per year, which was a pretty substantial wage. So did I, when we first had kids. I still have friends today marvel how we gave up that wage. To me, we gave up $5k per year. I know several people who make 50% more than us, these days, but take home the same at the end of the day (after day care, work expenses, taxes, etc.). The taxes and the daycare were just insane - add working expenses, and we are talking $45k per year in expenses on that second wage.

This is OUR situation. I know many people older and more established in their career who have harder choices to make. Would I give up a decade investment in a solid career? No - I didn't want to give up a 2-year investment in my career! Likewise, having graduated college with many 30-somethings, I see a whole career ahead for my husband - will probably resume at 35. He will start all over, but that's where he was anyway. No biggie. He is still young (after being home 9 years). People act like he is 50 or something. Like it's too late. Give me a break!

Likewise, we have over a decade practice of living on one income. Any future second income is just gravy. I think we can easily make up for lost time. We lived on one income only, ever since we married, so the transition was easy for us to begin with.

Oh, and do you think I would make the income I do today, if I didn't have a stay-at-home spouse? No way!! I have far more to give to my job.

Are we lucky? No, we planned long and hard for this situation. We could live on very little if push came to shove. We initially only planned for my spouse to stay home a few years. Things just went better than expected. If I had a dollar for every woman who told me I Was LUCKY to afford a maternity leave on no income while their spouses were working. Whatever. They do realize that my spouse was not working??? That I Was not paid when I took leave? My job wasn't even legally required to be held for me, during leave. But we did the best we could. Luck is not the word that comes to mind.

Finally, I know many people who chose more money over more time for their family/kids. These are the types who call us stupid. Fortunately, I have learned there is more to life than money. I can't argue that some of these people have far more financial security. We are the types who could have easily made that decision. But, personally, it's just not the right decision for us. I think having kids gave us permission to slow down and enjoy life a little more. I understand what they are trying to say, but our life goals and values have just changed drastically having children. We want to be able to take care of ourselves and have ample retirement, but I don't see the point of aiming much higher than that. We need more balance and enjoyment in the present day. BTW, I could NEVER imagine telling these people that they are living their lives all wrong. I merely see it as a difference in opinion. I do get tired of hearing SOME of these people complain about their lot endlessly and you see they have lost any sense of balance. It's all about more $$$$$ - where does it end? But for others, they don't complain and it seems to work for them. I respect that everyone is just different. As long as they don't gripe on endlessly... The gripers will get a few opinions from me.

[jpg7n16]

I think your friend thinks money is to be spent today, and you think it is to be saved for tomorrow.

To the person who feels that money is only good for today, saving makes no sense.

In her mind, it seems that you're supposed to have everything you want today, and then you just need more income in order to make that happen. (as you indicated she felt she needed a $200k income to afford her lifestyle, rather than reducing her expenses to match her income)


I wouldn't take any financial advice from her

[Hector]

Originally Posted by LivingAlmostLarge

She grosses $80k right? $15/hr for a nanny so she is paying $31.5k/year net (cash under the table) for a nanny. $48.5k before taxes. Assuming 4.2% SS, 32% Federal and state tax, 1.5% Medicare = 37% taxes = $29.6k/year taxes. She is going to net $18.6k/year. That is before commuting costs, car costs, extra to nanny if they are running late (happens all the time), eating out, etc. Assume easily an extra $500/month = $6k/year = $12k/year net after taxes and nanny and extras. She is killing herself commuting 1 hour each way, working 50-60 hours a week for $12k/year or making $5.68/hour.

Fancy Math. I person making 80k falling in 32% tax bracket doesn't mean he/she pays 0.32*80k in tax. its tax bracket not total tax.

[LivingAlmostLarge]

Gotta to go bed, hubby makes $120k = 25% bracket. 28% bracket with $80k plus state income tax. Plus no child tax credit. I know she cashed out her retirement savings last year, when she left her last job. She's not saving $16.5k to lower her taxable income.

But that aside, I think she's unhappy taking jobs that appear. Rather than consciously taking jobs that are 'good'. Even if she didn't have a kid, i'd tell her to consider not job hopping but seriously search for a position she could stay in for longer than a couple of month. Instead of jumping from job to job. 3 jobs in less than 6 months? If we were both single I'd still ask her if it is the right move to switch jobs, chasing a paycheck for "more" money.

Rather than asking is it the right job for me and will i stick with it? I don't know but is there a point where job hopping looks bad?

[jerrycates]

Just make what you think is best that would work for you. Not all people have the same needs and wants and of course, spending and earnings. Best to make the most of what you have, that is sensible at least. What you have is of your own doings, do not blame it on others or the economy for that matter.

[bjl584]

Originally Posted by LivingAlmostLarge

A friend today told me I don't get money. I am not interested in money very much and I don't understand how important it is. She said that DH and I not very ambitious about making money. I understand that she is frustrated because I asked her to really reconsider taking on a new job. Background...this is her 3rd job since October 2010.

Mommy had a baby in Feb 2010. In October 2010 she started a new job that was "contract to hire" but got "laid off/fired" in 12-31-10. Then got another position in January 2011, and now is interviewing for another position yesterday. She hates her current position, felt they lied to her about the amount she had to drive, work in the office etc. They promised work from home but instead she has to commute 1 hour each way at least 3 days a week. They pay her $80k. She feels it's unfair, people lie, cheat, etc. She works a ton of overtime (unpaid) due to the nature of the job.

She grosses $80k right? $15/hr for a nanny so she is paying $31.5k/year net (cash under the table) for a nanny. $48.5k before taxes. Assuming 4.2% SS, 32% Federal and state tax, 1.5% Medicare = 37% taxes = $29.6k/year taxes. She is going to net $18.6k/year. That is before commuting costs, car costs, extra to nanny if they are running late (happens all the time), eating out, etc. Assume easily an extra $500/month = $6k/year = $12k/year net after taxes and nanny and extras. She is killing herself commuting 1 hour each way, working 50-60 hours a week for $12k/year or making $5.68/hour.

I said she should really reconsider working and figure out what she really wants to do, job and career wise. She said that I'm crazy, I don't understand working or money. I told she should slow down because job hopping looks bad and she should at least work on finding a job she likes and is happy doing. She said it doesn't work that way. She said she was taking the job back in October to save money to pay down their house so they would get out from underwater to move.

So I asked her, has she saved every penny from her job? Her answer? No. They need her salary to live, now because they have a lot of expenses, their lifestyle. They can't live on her husband's salary. She justified the non-savings by saying I've only been working a couple of months, how could I save anything? There hasn't been enough time. I don't have a clue about their bills and expenses. True, but let me say this.

She told me in the past her husband makes $120k/year, but she feels he needs to make $200k to afford their lifestyle. Okay possibly true.

But here's a clue as to differences in our lifestyles. $20k engagement ring versus $1k ring. $40k cars versus $20k cars. $300 haircut vs $40 haircut (me).

I'm not saying I'm right, but I am saying that she should consider what it means to work and what she's giving up. She should really think about what job she wants and then go after it. Don't just job hop and assume that it's worth the money. I think it's a good time after having a kid to reconsider if you love your career and find it worth spending hours doing it. I say this because she complains about not seeing her kid much

This is why I rarely say anything about money. Because people who are dumb with money never listen. I hate when people say to me "you are so lucky to stay at home with your kid. You have no idea what I would give to do that. Or I need the money, I can't just quit. Or how can you save money when you make so little? How do you ever afford to stay at home? You can't be saving money it's not possible on that income."

Truth - it doesn't matter what you make, what matters is what you spend. When we made $40k/year we still saved. We tripled that and still saved. It didn't matter what we made we always saved. And people don't get that.

And further more when you don't work there is no daycare as a side note.

Some people just don't get it, and probably never will. Your friend seems to be one of these people. A lot of people never get or focus on the spending side of the equation. They are completely obsessed with the income side of things.

[MonkeyMama]

Originally Posted by Hector

Fancy Math. I person making 80k falling in 32% tax bracket doesn't mean he/she pays 0.32*80k in tax. its tax bracket not total tax.

It's not fancy math when you are talking about a second income - as I think LAL was trying to say.

I think most two-income earners would be shocked if they truly understood how much of their second income was taxed. Depending on the income bracket, of course.

[KTP]

Originally Posted by MonkeyMama

It's not fancy math when you are talking about a second income - as I think LAL was trying to say.

I think most two-income earners would be shocked if they truly understood how much of their second income was taxed. Depending on the income bracket, of course.

LAL is totally correct. My wife makes about 200K and any income I make on top of hers is taxed at about 35%. Add in SS, medicare, commuting and clothing expenses and probably looking at over 60% of a second income going down the crapper, in addition to not being able to take time off with her 5 weeks a year vacation.

I have kind of resigned myself to knowing that taking care of the house, doing all the car maintenance, keeping finances heatlhy by seeking the best deals, etc. is actually probably net positive over getting a 45K per year job. (I actually interviewed for a job 30 miles away and was offered it at $39,000...that would be take home of $15,600 for working full time...less than poverty wages)

[snafu]

So many people seem to view their gross income as though it were net and compound that wrong thinking by choosing to gross it up by maximizing credit to the limit. Paying yourself first, living within one's means and adapting lifestyle to income is not admired, it's belittled. When friends get into financial trouble they tell me we're 'lucky.'

NOT! We work hard for our money and seek value. We research products, list pros & cons on spending decisions and have a criteria to differentiate needs from wants. I think it's ridiculous to pay $300. for a haircut...it grows out anyways. I wish the media would reduce focus on Lohan and ask why politicians are making poor decisions. Donald Trump as President would give me nightmares.

[MonkeyMama]

@KTP - at that income level the cost is even more exaggerated.

I felt similarly at a $50k income level. Just to point out that this is not a "high income" thing.

The gap between "too poor to pay any income taxes" and "super rich - taxed by AMT" is very small. I literally paid no income taxes many years when my spouse getting a median-wage job, in addition, would push us in AMT territory. AMT was initially a tax on the UBER wealthy, but hasn't been indexed for inflation.

Taxes aren't as simplistic as tax brackets - that is for sure. There is so much more to it. But we have used my tax knowledge to our advantage.

I think snafu nails it on the head. I have several friends who make low six figures who fixate on the gross. They can't wrap their brains on how on earth we afford our lifestyle with a MUCH smaller income. I understand that our net is about the same. If they think we literally take home $50,000 less per year, than them, than they must think we live on $1k/month or something! Likewise, they feel like they should have a lot more because they do make a good wage. I think they find it easier to justify spending more.

[Frugal]

I agree with FrugalGirl.

There are ways to save money, whether you are making 100k or 10k. If a person has bad spending habits learned from their childhood, etc., they are not going to change their spending habits if they make more. Increasing salary does not always increase savings; as a matter of fact, the reverse is true.

When I had jobs that paid more, I tended to save more, but I know that is not true for a lot of people (in America? Or just around the entire world? Not sure, but we Americans have one of the lowest savings rates in the developed world, well behind Asian economies like China and Japan).

[disneysteve]

Originally Posted by MonkeyMama

I have several friends who make low six figures who fixate on the gross.

I think this is the source of a lot of problems.

Let's say you make 100K.
30K goes to taxes
16K goes to your 401k
5K goes to health insurance

That brings you down to 49K before you even get your check. If you go about your life and spending thinking you make 100K, you're going to get into trouble really quick. You don't make 100K. You make 49K. If you buy a house based on an annual income of 100K, you'll go out and spend 250K-300K on the house and find you are struggling every month and not know why. You need to budget and spend based on your net, not your gross.

[DebbieL]

Your taxes work way differently in the US than our do from what I'm reading. Do you mean that the second person in a working couple doesn't receive any personal excemption? Here in Canada we are all taxed based on our level of income, but we all receive a certain level of personal excemption (eg the first $11K-$25K are tax free - based on dependents, being a student, etc). Married or single it doesn't matter. Taxes are filed separately - however you are linked to your spouses income when certain things are calculated (child tax credits, etc).

If a person in the US earns say $100K, and they are the spouse of someone else who earns $120K, do you mean that the person earning $100K pays 28% (or whatever the rate is) on their ENTIRE $100K? Here in Canada it is always incremental. The first say $36K is taxed at about 15% (federally) plus about 6% (in BC that is the lowest provincial rate), then the next 15K would be taxed at a slightly higher rate, etc, etc. We would never pay the highest rate on our entire income.

[snshijuptr]

In America you file "Married Filing Jointly" usually. You get exemptions of $3650 per person. You then get a $11,600 standard deduction for the couple. You income is added together then you subtract exemptions and deductions and then apply tax brackets. So as long as the first spouse earns more than $18,900 then the next spouses additional income will be taxed at the highest bracket.

(Well unless you move from Married Filing Jointly to Head of Household. The latter has a smaller deduction.)

[LivingAlmostLarge]

It's all one income in the US if you are married. When couples have a disparate income it makes sense sometimes to not work because you net barely less than two people working with kids, etc.

Frugalgirl, I get it as well. I know she's busy, but here's the point I don't get. If a person who stays at home is "working" by doing the daycare providers job then the second parent working is just handing off money. So in either case all four parents are "working".