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Am I as poor as I feel?

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    Am I as poor as I feel?

    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!

    #2
    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.

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      #3
      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!!

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        #4
        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.
        Steve

        * Despite the high cost of living, it remains very popular.
        * Why should I pay for my daughter's education when she already knows everything?
        * There are no shortcuts to anywhere worth going.

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          #5
          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.

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            #6
            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.

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              #7
              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.

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                #8
                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"

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                  #9
                  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"

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                    #10
                    Originally posted by Donaldo View Post
                    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.

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                      #11
                      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

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                        #12
                        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.

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                          #13
                          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.
                          retired in 2009 at the age of 39 with less than 300K total net worth

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                            #14
                            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.
                            Brian

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                              #15
                              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!

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