Would You Change Your Spending Habits If You Made More?

[disneysteve]

I didn't say "beyond their means". I said "corresponding to their income levels."

I think most people, not just doctors, tend to elevate their spending to match their income. That's what gets so many people in trouble. That's why 60-70% of Americans live paycheck to paycheck according to studies. Make more, spend more, make more, spend more.

Ultimately, the people that do the best aren't necessarily the ones who make the most but rather the ones who keep their spending well below their income.

[AngelineRose]

I would start saving towards a house to own, that is the only thing lacking and limited by my income in a high cost of living area. I chose retirement over a house with what I have at the moment. To be honest, I would likely buy a newer car with better gas mileage as well as help my son with his college payments when he gets older. So basically I would spend more on things that I can't afford at the moment.

[Singuy]

I bet many of you experienced this kind of windfall in some shape or another.

There was a time when you were at MCD making $7/hour, living with 3 other roommates and eating a lot of ramens (or cereal) (I'm assuming you guys are not the "I'm going to spend every dime of my student loans" type).

After college, you suddenly make 3-10x that amount(depending on your education). Did you adjust your spending accordingly? I bet most have (instead of driving a 500 dollar beater highschool car, you now have a 10000 dollar used car..instead of living with 3 other roommates, you now have a house and etc).

[phantom]

There was a time when you were at MCD making $7/hour, living with 3 other roommates and eating a lot of ramens (or cereal) (I'm assuming you guys are not the "I'm going to spend every dime of my student loans" type).

After college, you suddenly make 3-10x that amount(depending on your education). Did you adjust your spending accordingly? I bet most have (instead of driving a 500 dollar beater highschool car, you now have a 10000 dollar used car..instead of living with 3 other roommates, you now have a house and etc).

I would argue that the raise one sees at the start of one's career is very different than an unexpected mid-career raise.

Sure, my yearly salary went up 6X between working summers in college and my first full year in my chosen career field, but my hourly rate only went up about 30%. So, it didn't feel like I was making much more money.

I lived in the dorms in college, and I lived with my parents after college. I don't remember exactly how much of my tuition was room and board, but it was more than 0, which is more than I had to pay my parents (nothing). The amount I spent on food also went down since I was forced to buy a meal plan in order to live on campus, and my parents paid for all the meals I ate at home with them after college.

My entertainment costs were about the same during and after college. I spent about the same amount doing stuff with friends, and the amount I spent shopping stayed about the same.

I did buy a car within a year of graduating college. But, I didn't buy it because I was making more money; I bought it because I suddenly needed a car. I paid (mostly borrowed) $17,000 for it. But, I see that as a one time expense. I didn't keep buying cars every year. In fact, I'm still using that car over a decade later.

If you compare the four years I was in college, to the four years immediately after college, and count money I borrowed for college as spending that I did while in college, my post-college spending was actually lower.

Now, the year after that, I finally moved out and bought a house, and my spending shot way up. But, that had no relation to my income. In fact, my income actually went down that year.

In order for a raise in income to cause me to spend more, I think it would have to start making more money than I currently expect to be able to make.

[disneysteve]

I bet many of you experienced this kind of windfall in some shape or another.

There was a time when you were at MCD making $7/hour, living with 3 other roommates and eating a lot of ramens (or cereal) (I'm assuming you guys are not the "I'm going to spend every dime of my student loans" type).

After college, you suddenly make 3-10x that amount(depending on your education). Did you adjust your spending accordingly? I bet most have (instead of driving a 500 dollar beater highschool car, you now have a 10000 dollar used car..instead of living with 3 other roommates, you now have a house and etc).

Ok, that's very different than how I think most of us read this post. Sure, when I was a teen, I was a camp counselor. I made a couple hundred dollars for the whole summer. Now I earn 6-figures. Do I spend more today than I did back then? Of course I do. But that's not really the point.

I think the point is to ask if, with your current lifestyle, would you spend more if your income suddenly spiked up? That's the question I was answering.

[LivingAlmostLarge]

Spending when in college or before you get into a career is way different from having a large career income increase I think. Before you really get into paying adult stuff even on a small income.

I think by nature people do grow to their income even if it means "saving" that large increase. They probably never expected to be able to save so much.

[MonkeyMama]

To add to the last 2 comments, sure if I got a $400k raise when I Was 22 I may have lived up to that income. I might not have had any frame of reference to do otherwise.

For us, I think it was a switch that flipped around age 30. We've never particularly dreamed of increasing our means (buying up house, etc.) since that point in time.

At 23 we actually chose to save 80% of our income (or 100% of post-college wage increase) until we got into a home and then saved 50% of our income (entire second income) until we had kids and my spouse stopped working. That left us with our means about where we had started immediately after college, which we are still content with today. BUT, I did want to say, even with that kind of financial planning it was absolutely nothing we viewed as more than temporary in our 20s. I expect we would have bought much more house or lived more lavishly if we had some huge salary in our 20s. After that switch flips though, you just don't see the point.

[Singuy]

Ok, that's very different than how I think most of us read this post. Sure, when I was a teen, I was a camp counselor. I made a couple hundred dollars for the whole summer. Now I earn 6-figures. Do I spend more today than I did back then? Of course I do. But that's not really the point.

I think the point is to ask if, with your current lifestyle, would you spend more if your income suddenly spiked up? That's the question I was answering.

I think and most of you guys have proven to spend more once you get that increase in pay as proven by the transition between college->today. I see you guys see it as something different but what if say we have college students on the forum...eating ramens and cereal everyday...and after making say 6 figures, they will continue to eat ramens/cereal/rent with buddies?

Who to say that buying a house is a must(even after marriage)?
My initial post said "bigger house, Aston Martins, lavish vacations/meals"
Your "bigger house" is this college student's "house". Your "Aston Martin" is this college student's "used but newer Honda civic."

Do you guys know anyone who make 6 figures but still choose to live like a poor college student?

[phantom]

what if say we have college students on the forum...eating ramens and cereal everyday...and after making say 6 figures, they will continue to eat ramens/cereal/rent with buddies?

How common is it that people have to maintain such a low standard of living in college? I never had to eat inexpensive food or rent a place with friends. I grew up living a middle class lifestyle and my parents (and to some extent my student loans) continued to support that lifestyle until I could afford to do it myself. I'm not saying I haven't had a life of privilege or that I'm not lucky relative to most of the world. But, most people I knew in college had similar experiences both before and during college. I've heard the ramen cliche a million times, but none of my peers ever lived it.

Sure, my spending considerably higher than my spending was in college, but that's because I gradually took over paying for all the things my parents used to pay for on my behalf. Taking over payment for things that someone else used to pay for is different than lifestyle inflation.

[disneysteve]

what if say we have college students on the forum...eating ramens and cereal everyday...and after making say 6 figures, they will continue to eat ramens/cereal/rent with buddies?

I certainly hope that college grad making 6 figures will have the good sense to get himself on a healthier diet than ramen and cereal. Will that cost more? Sure, but it will pay off in living a longer healthier life.

Are you suggesting that everyone should live a bare bones existence regardless of how much they earn? If so, what would be the point of bettering oneself, getting an education, etc. if there won't be any material benefit to doing so? I work hard for my 6-figure income. I wouldn't keep doing it if I was forced to eat ramen and cereal all day. I could do that working at WalMart.

[Singuy]

I certainly hope that college grad making 6 figures will have the good sense to get himself on a healthier diet than ramen and cereal. Will that cost more? Sure, but it will pay off in living a longer healthier life.

Are you suggesting that everyone should live a bare bones existence regardless of how much they earn? If so, what would be the point of bettering oneself, getting an education, etc. if there won't be any material benefit to doing so? I work hard for my 6-figure income. I wouldn't keep doing it if I was forced to eat ramen and cereal all day. I could do that working at WalMart.

No I never suggested that everyone should live a bare bone life with a 6 figure salary. I was wondering if anyone have heard of such a thing(peers, etc etc.).

Also the "ramen" diet is not really ramens. It's just peeps eating cheap fast food, or prepare in a extremely cheap fashion (rice and beans per Dave Ramsey).

I know my parents (just like those people on extreme cheapskates) live a pretty bare bone life with a 7 figure net worth.

Examples of things they do
1. Never threw away socks no matter how big the holes are, and they want hand me downs from myself
2. Put water in dish washing fluid
3. Turn off hot water heater until 10 mins before shower
4. Takes showers at the club house because it's free
5. Never turn on the A/C
6. Never turning on the lights
7. Never had a meal in their lives that cost more than 25 bucks
8. Yell at me for buying anything they wouldn't buy(which is pretty much everything).

My best friend who makes 130k/year (out of school) graduated 4 years ago
1. Living with my other best friend, sharing a cheap condo together (I pay more in property taxes/month than his rent/cable/water/electricity/travel gas money/cellphone bills combined)
2. Only eats fast food
3. Never buys anything (has a computer that was a hand me down, used camery, and a bed)
4. So far has almost a liquid of 200k saved up, debt free, maxed 401k. He goes on 1 major vacation/year..usually staying at friend's house or hostiles).
5. No longer has to pay for tuition, so his yearly spending actually went DOWN by 150%.

Now he obviously did not change from college to post college despite of income. Would he change his ways if he made 300k/year? Doubt it.

I am not in any of those camps, but it's pretty crazy to see how simple people are willing to live despite their income/net worth.

[phantom]

5. Never turn on the A/C

This one reminds me of a conversation my husband and I had about his dad and step-mom a few days ago. We are constantly baffled by their financial situation. We know his dad made good money and just retired with a nice government pension, and we know they're generally very careful with their money. But, they're always complaining about how broke they are, and we can't figure out why.

My husband and I both lived in houses with no whole-house A/C when we were little, and our parents put in A/C while we were growing up. In my house, this marked a huge lifestyle change. My parents started keeping the house comfortable in the summer, and I was able to sleep without camping out on the floor in their room (the only room with a window unit) in the summers. In my husband's house, it didn't change anything. His dad refused to turn on the A/C because it was "too expensive to run it." We can't understand spending money on something that is too expensive to actually use. I suppose it helped the resale value of the house, but it's been a decade or two since they installed the A/C, and they show no signs of moving.

[LivingAlmostLarge]

Raising hand here yep my family did the ramen and cheap noodles and my aunts and mom will tell you they suffered from constipation after a month of just eating ramen noodles. Yes they were poor in THIS country and you can be that poor as coming from china and india and other 3rd world countries just depends on where. I have a feeling parts of rural US aren't not much fun and the poor there are very poor.

You wear rice bags sewn together and get clothes from church. You hunt, fish, and grow food. You take baths at communal bath houses or on a kerosene stove or wood baths. Many of my relative lived like that in the US including my mom. My mom happened to have more and her siblings as well after they went to college. But in college they ate a lot of ramen noodles and their health suffered. So they didn't do it afterward. They all want to live to be 100.

Are they frugal? Yes. And I happen to like living a nice life and so does my DH. I'm not going to apologize for eating meals that are more expensive than $25. By the way sometimes you eat junk food because it's comfort food not because it's what you can afford.

One favorite memory was seeing Bill Clinton eating McDonalds with the big soda in the 90s. I saw him speak at my commencement. He's a rock star charisma. But he lives probably pretty lavishly now and can afford it. I think he probably lived frugally in the beginning and still has certain frugal traits. But I bet he doesn't even know it.

[disneysteve]

Examples of things they do

I think what matters is WHY people choose to do these things. If they are doing it out of environmental concerns or just hating waste, I think that's fine. I know people who do the hot water heater thing because they think it is wasteful to run the heater 24/7 when they only need it for 10 minutes/day. It isn't done to save money.

Also, if they are happy and comfortable doing what they do, who am I to complain? If they are not miserable with the AC off, and they aren't putting themselves at risk healthwise, where's the harm? However, I don't think it's okay to force that on others. Just last night, we had dinner at my cousins' house. AC was off. Windows were open. It was a warm, humid night. I was very uncomfortable, sweating the entire time I was there. According to the thermostat, it was 79 degrees in the dining room where we ate. I couldn't wait to get out of there (and get home and shower).

Food is a different issue. Being a physician, I have a big problem with someone living on fast food. It is horrible for you in every possible way. Plus, it's expensive, so I don't really see that even fitting into this discussion. It's far cheaper to cook your own healthy meals at home.

Overall, I think it's pretty smart to stay on the college student budget at least early in your adult life. Get your student debt retired quickly and build up a nice savings cushion. Once you get married and have kids, it's not as easy to stick to that bare bones existence. And once you get older and maybe have some health issues, some creature comforts become more of a necessity. Your back might not tolerate sleeping on the old futon anymore. Your vision may demand brighter lighting around the house. Your blood pressure might spike every time you even drive past McDonald's.

[LivingAlmostLarge]

Since I'm usually cold DS you couldn't live in my house. I wear tons of layers in the winter and in the summer I hate the A/C. My DH and I have constant temperature wars not from being frugal but I am not used to AC and only turn it on for company. I like just wearing shorts and opening windows. A few friends have commented and I respond that I'm usually cold and raised in a warmer climate with humidity. I prefer it that way.