Am I as poor as I feel?

[Donaldo]

I live in California, and work around people who are very well-off. I'm at the very bottom of the totem pole, earning $16/hr.

I have no formal education and my situation is my own darn fault for not going to college. I live in a bad neighborhood where my house is worth $280K (in a city where million-dollar houses are not uncommon). It's depressing living in a crappy neighborhood with gang members and graffiti...

I only just started saving money in my 401K a few years ago and have maybe $5K in there. At age 46.

On the plus side, my house is paid for, I have about $140K saved in the bank, and have never in my life been a nickel in debt. I've never borrowed money. I have 2 TVs, both 10 years old, the largest being 13". I have the cheapest cable available at less than $20/mo. and have $8.95 dial-up internet access. I'm content with less.

However, I worry about the future. Social security, my savings, etc. I want to get out of this bad neighborhood but it will cost me.

Just wondering...where do I stand? Am I OK enough to take that leap of buying a house elsewhere (cheaper than where I live, but in an area I will be making much less $)? I'm an extremely cautious person - which is both bad and good. Bad, because that's why I never made anything of myself, and good, because I am not wasteful.

Can I get some ideas on how screwed up I am/will be (scared about retirement) or am I doing all right at this point?

Thank you kindly for any advice you can give me!

[KTP]

Single? No credit card debt?

You have a net worth of over 400K, so I think you are actually better off than many people at age 46. Invested wisely, you should reach 1 million easy by age 62 if you continue to earn $10 to $16 an hour and keep expenses low.

Try to arrange things such that you can fund a Roth IRA and also contribute as much as possible to your 401K. If you are wary of the markets, I would buy TIPS and bond index funds in your IRA and 401K and perhaps I-bonds in your taxable. Of course if it were me, I would be about 50% stocks 50% bonds.

[Donaldo]

Correct - single, no kids, no credit card debt, always pay full balance.

I'm new to this site as of today, so I look forward to learning what those terms mean. I'm completely ignorant when it comes to investing. My money is in CDs because I'm too leary of anything else, but the rates are dismal. Oh, I do have an annuity which is under $13K, earning maybe 3.3%.

I appreciate your reply so much. When I see people with money worrying, it makes me wonder how much more should I be worrying!!! But, I guess I can look at it this way: I may be lowly-paid, but if I lost my job tomorrow, I know how to get by and still be happy. I'm not sure a lot of the 6-figure-salaried people can say the same.

Thanks again!!

[disneysteve]

Welcome to the site. I think you are doing far better than you realize. $16/hour is about $33,000/year (assuming a 40-hour work week). Yet somehow you have $280,000 in home equity and $140,000 in other savings - and zero debt. That's phenomenal! Your net worth is nearly 13 times your gross annual income. I am also 46 and earn nearly 4 times as much as you. We are debt-free except our mortgage ($76,000) and have a net worth of about $675,000, only about 5.5 times our income, and I think we're doing pretty well. On a percentage basis, your numbers blow us out of the water. We would have to have $1.6 million to match you percentage wise.

I think you have very little reason to worry about money. You are in great shape. Keep doing what you're doing and retirement won't be a problem at all.

[krantcents]

You are right you do not earn much, however you managed to do pretty well despite of it. Is there a way to get training to increase your earnings? This the area where you could use growth.

[maat55]

Move to Oklahoma or Texas. You can find work, you can live in a much nicer house and neighborhood with 150k or less. This would up your current savings to 270k.

[cschin4]

Wow! Your stats are phenomenal! How did you do so well on your income? But, i am curious why you want to buy another house? I can see getting out of a bad neighborhood, but i would recommend renting in a better location.

[jtr8178]

Yea, I would just relocate. I live in SC and a $240,000 house here would be VERY nice. Plus earning $16 per hour is pretty easy, cost of living is less, etc... You could buy a house for $120k that is 2,000 sq/ft and in a nice subdivision.

Those people with money are probably up to their eyes in debt & backwards on their houses. I wouldn't worry to much about the "Jones's"

[jtr8178]

Yea, I would just relocate. I live in SC and a $240,000 house here would be VERY nice. Plus earning $16 per hour is pretty easy, cost of living is less, etc... You could buy a house for $120k that is 2,000 sq/ft and in a nice subdivision.

Those people with money are probably up to their eyes in debt & backwards on their houses. I wouldn't worry to much about the "Jones's"

[humandraydel]

Originally Posted by Donaldo

Am I OK enough to take that leap of buying a house elsewhere (cheaper than where I live, but in an area I will be making much less $)?

In my experience, you will always earn LESS (on a relative basis) when you live in a high cost of living area. For example, you might earn $12 an hour in the midwest (33% less), but the cost of living is at least 50% less, so in the end you will come out ahead.

Twice in my career I have gotten a job in a high cost of living area and turned it down because I would be taking a pay "cut" to take the job.

[dawnwes]

We moved from Los Angeles to North Carolina about 6 years ago.

In hindsight we should have chosen a much less expensive home. But we were like kids in a candy store with how "cheap" things were here. So, we may have made more $$ than you did, but we were far more foolish with what we had.

One thing to consider if you are looking to move within CA is that you will not only pay more for a different house, but you pay taxes based on the purchase price, so you need to take that into consideration.

I don't know what kind of work you do, but would it be easy to get a job elsewhere? Is there anywhere else you have considered moving/living?

Dawn

[dawnwes]

Oh, and in answer to your question.....no, you are not poor. YOu are far ahead of the game.

We feel more poor now that we are saving and have no debt, but in reality, we are much wealthier.....we just don't have as many toys and we are very careful with spending.....which we didn't used to be.

[97guns]

with a net worth of 400K thats enough to retire on. i retired with 300K in cash, bought 4 houses in the central valley(merced county) and now have my money working for me. i gross 4K a month and net around $3200, more than enough for me to live on.

[bjl584]

Your financial situation sounds solid to me. I think that your problem lies with your desire to move out of your neighborhood. I don't know how far you want to move, but if you are willing to move across the country to where I live, then you could probably buy a house for cash using the proceeds from the sale of your current home and then get a job making around what you are making now. But, Pittsburgh weather is nothing like sunny California.

[BMEPhDinCO]

You are doing better than you think, as mentioned. If your house is fully paid for, and you have no adversion to moving - then consider the comments above. Selling it for around $280k would net you quite a bit to invest AND pay in full for another house in another part of the country (our 3/4 bedroom, 1.5 bathroom cost $125k in Colorado, for example).

But if you like living in CA, and in the general area, consider checking out rents around you and doing a job search. Also, consider going to a community college (or real one) or doing online classes to improve your education and thus job possibilities - even learning a trade like plumping, a/c, etc would probably help.

Also, with that much in "cash", I would immediately move $5k to a RothIRA at Vanguard or similar to help with retirement. You can always take it back again if you really need it but it will be much better for you. Pick a Target fund (like 2030 or 2035) and leave it alone.

Good luck!

[Frugal]

It sounds like you are doing very well, if you have saved up that much at your age.

[feh]

If you're not tied to your current area, I also suggest moving to a lower cost-of-living area.

[Donaldo]

I am so very pleased so many people took the time to answer my post. What a welcoming forum this is! I am looking forward to pilfering as much of your knowledge as I can.

DisneySteve:

Your post made me feel quite good. Thank you! Unfortunately, I haven’t been able to save for some time now, so I’m kind of stuck. I’m a bit of a hypochondriac, I stress myself out, and therefore get random aches, pains, and other stuff, so I spend a good amount on supplements, chiropractic & acupuncture, trying to eat mostly organic, etc. Then again, I see this as an investment in my health, though it’s not doing much for my finances!

Krantcents:

I really should get some training to better myself but, to be honest, there is nothing I’d like to do that pays better…everything that sounds good to me actually pays less than what I get now! So, I’m sort of afraid of taking the time (and expense) of going back to school to better myself for something I already would rather not be doing. Then again, I’m not accomplishing anything doin’ nuttin’! (I would like to get out of the office environment.)

schin4

I actually inherited the house (only child), and about ½ of my savings were inherited. Perhaps part of my worries are due to the fact that my parents spent a mint in health care costs (my mom was a heavy smoker, which didn’t help), and they were better off than I – pension, fairly-well-paying job (father), social security which was then decent, etc.

As for renting in a better location instead - here, rent is about $1800+ in the poor neighborhood I’m trying to get out of. I net $1840 a month.

Maat55, jtr8178, humandraydel, dawnwes, feh

If it weren’t for the tornadoes, I would LOVE to move to the South or Midwest! The people seem phenomenal! I’m already a worrier, though, and I’d probably spend half my time looking out the window, awaiting “the big one,” or shivering in fear in the basement! Especially after seeing all the horrors on the news this year. Earthquakes (here in CA) – no problem!! If anyone knows of a cheap area in the South/Midwest that is relatively safe from tornadoes, and not too snowy, I’m all ears!

97guns

I have seen how cheap the houses are in Merced, Stockton, etc.! I wasn’t sure if it was worth it, though, to purchase a cheap house, have low-income people with their 10 kids (and 8 cars parked on the lawn) rent it out, then trash it. A friend of mine owns a 10-unit apartment complex and the people that rent it out are pigs. If you could tell me just a tad little more (via PM if you like), I’d so appreciate it!

bj584

I’ve seen pictures of PA that make me melt. Unfortunately, I’m concerned about shoveling snow… I believe snow-shoveling is the #1 cause of heart attacks, if I’m not mistaken! (I did mention I am a borderline hypochondriac! )

BMEPhDinCO

Thank you for your advice! I will have to look into that. I don’t even know what a Roth IRA is (though I’ve heard of it). If Vanguard is online only, that would really make me nervous, especially as the online crooks get sneakier and sneakier, and I have no brick-and-mortar place to march into! But, I guess $5K isn’t that huge of an investment and worth a try? Again, thank you!

Frugal

Thank you. Again, I feel much better after coming here!

Thank you all SO very much for your time in replying!! I feel more hopeful, and I will look into the possibility of relocating further away or purchasing a rental home, if cheap enough. I feel pressured to do something. I do want to make my money work for me, not the other way around!

[riverwed070707]

If you're really open to the idea of relocating, start by doing some research. Most of your assumptions about the ciites mentioned above are based on stereotypes...not ever midwestern/southern city is full of large redneck families. There are a lot of great places that come to mind.

Check out this article for some ideas Kiplinger.com. Another great starting place would be by just looking around for jobs and seeing what's out there. You haven't mentioned what you do, but if it's industry specific, look for other companies in your field and check out where they are headquartered. Even if you aren't looking to do an office job forever, it's certainly a great way to get you moved and settled before looking for something else.

[disneysteve]

Originally Posted by Donaldo

I actually inherited the house (only child), and about ½ of my savings were inherited.

This obviously changes the story, though still you've saved about 70K, more than double your annual income. I think the percentage of Americans who have 2 years worth of income in savings is probably pretty low. There was just a recent survey that showed that 50% of Americans couldn't come up with $2,000 within 30 days for an unexpected expense without selling personal belongings. So even without the inheritance money, you are at least in the top half of the population.

What would be helpful at this point is to see your income and expenses to make sure that you are using the money you do earn wisely. The inheritance has obviously put you in great shape but you don't want to take your eye off the ball just because you have a paid for home and a big bank balance.