Memories of Poor Friends In My Distant Past

Coal

When I was a young kid, I remember being at my neighbor’s house and experiencing a lifestyle that was very different from where I lived. I didn’t realize that they were poor at the time though. I’m going to describe the setting and lifestyle of this charming couple from my memories.

One of the most vivid things that I remember wad that their heating system was a coal furnace in the basement (which had a dirt floor). It was kind of hard to breath in the house, it has a distinct smell that I will never quite forget. One time, I remember riding in a pickup truck to pick up some coal. The coal was literally poured into the back of the truck through a metallic chute of some sort, or so I believe.

Next my neighbor drove the coal home and we feed the coal through another chute that open down to his basement. He had a pile of coal in his basement in some kind of large bin. I helped shovel for a little bit, but I was so young that I didn’t last long… so I went home.

Another thing I remember is Jesus paintings and pictures and bible quotes throughout the house. This family was minimalist before the term became popular… although not by choice. I remember a couple of mini-statues of Jesus throughout the house too, along with other religious symbols.

The other things that I remember in the house was a very small TV, a second hand small couch and a non-matching chair, a beat up dinette set (used of course), and a bed that was small and appeared lumpy. In their 2 bedroom house, they had a small lumpy bed in the guest/storage/sewing all-in-one room. The other bedroom was the one that they slept in. I never went into that room. The total size of their house was less than 1/2 the size of my current house.

So what did they do for entertainment?

Mostly free stuff, they had a garden where they grew their own food and they also socialized with family and friends. I remember that church was a very important function in their life. The wife went two or three times a week, mostly riding with other women since I don’t believe she had a car. The husband mainly watched TV while chewing tobacco. Most (if not all) of their cloths were either made by the wife or bought second-hand.

You might think that they were miserable, but actually they seems fairly happy, especially the wife. I only live in that neighborhood for a few years, so I’m not sure how they did as they aged. I think not having money in your later years would mean it would be hard to get decent health care. So their retirement might have been rough.

At the time I didn’t realize how hard they had it financially, but as an adult, I now realize that they were quite poor. The husband had injured his back and was on some form of disability, while the wife didn’t work. They had a frugal lifestyle so they were able to get by though.

They weren’t rich or even middle class, but they were charming in their own way.

Being wealthy doesn’t make you a better person, but it does make life easier.

Billionaires Should Spend Their Money!

by Money Reasons

I noticed an article on yahoo today called 7 Spending Tips From Frugal Billionaires in which the article goes on to talk about how many Billionaires are frugal too. The article was a good one with a good message, which basically states that if billionaires are frugal shouldn’t we non-billionaires be frugal too?

I’m not disputing the message of the article, but I think Billionaires should spend their money instead of being frugal and hoarding their cash like a Scrooge!

When Billionaires act frugal and keep their money tight, that keeps the money from the hands of the middle-class people! This means the money supply is constricted, and then not as many people purchase goods which in turn slows down the economy.

Now you might think that when Billionaires spend money, they buy expensive things like yachts, personal jets, and other such luxuries. And this is true, but even when Billionaires spend money on luxury goods, that money pays workers that build or create those luxury goods. Then those workers spend money on ordinary goods, and once again money flows freely again.

So, while I believe in being frugal, I don’t think it’s such a great idea for a billionaire (or high-end millionaires) to do so. These extremely rich folks should enjoy life a bit more instead of being so frugal.

Recently, Warren Buffett and Bill Gates went around and convinced over 40 Billionaires (and near Billionaires) to give over half of their money to charity. While that’s an admirable goal, I think some of the money would have been better served to help the economy by them spending some of it. Don’t get me wrong, I think it’s great that these billionaires are giving their money away to charity!!! But, I know that during the recession, I actually spend more of my money, and I’m not a millionaire…, yet. Of course, I didn’t go into debt when I was spending more money during the recession.

An outstanding example of a frugal billionaire hurting their local economy would be the richest man in the world, Carlos Slim. Carlos Slim is a Mexican, and very frugal. But if he were to buy more things from Mexican business, wouldn’t that help the Mexican economy? I know that Mexico has complex and not easily solved business issues, but every little bit counts…

What do you think of frugal Billionaires hoarding their money?

A Frugal Middle Class Assessment

by Money Reasons

Once twitter I noticed that SeeJaneGetRich tweeted a link to a U.S. News article on yahoo called “How to gauge your middle class status”. Since I love feedback and statistics, I thought I’d check it out.

It was an interesting read so I decided I’d write about how I was doing.

Income: We are very close to the middle-middle income level for a 2 parent, 4 person household. We are a bit above that $81,000 dollar number, but still less than $100,000.

Housing: Our house is assessed at $210,000, but it’s only 2,100 square feet. It’s a good size for my family though.

Medical Expenses: First, we are doing an HSA, so it’s kind of like it’s still our money. But we are much lower than the $5,100… We are more like $500…

Cars: We have 2 cars, both were bought new, but only cost about $40,000. That period in time may be the last time we buy new cars. Our expenses around them are less than average because I telecommute a few times a week and carpool with a buddy occasionally.

College Savings: This is one area that I am very average. My savings rate is around $4,000 a year. To date, I have a total of $65,000 saved for my kid’s college expenses in a 529 plan.

Vacations: We’re pretty typical here too! Although we usually only spend about 75% of the $3,000 amount the average middle-class American spends.

Retirement: I save about 15 to 20% of my gross income in this area. I got hit hard during the 2008 recession, but it’s coming back nicely!

Everyday Spending: This is one area we really win at (being frugal and all), but kid’s sports and other needs have had this number slowly rise over the last 5 or so years. We have been going through a bit of a lifestyle creep for our kids. But at least our kids are happy… Our costs are still far less than the average though!

Number of Earners: For the past 9 years, it’s been primarily me, but since my daughter started kindergarten, my wife now works a side job for about 6 to 8 hours per week. So this is one area that has hurt us and my financial plans. I feel a little robbed here compared to my peers.

Hours Worked: With my wife working now, we still work less than 50 hrs a week, but definitely more than 40.

Education: Both my wife and I have college bachelor degrees. I play around with the idea of going back for an MBA, but so far, I’m too busy.

Free Time: My family has plenty of free time, I do not. Again, I’m hurting here compared to the average. But it’s okay, I’m getting used to disappointment from my entire family tree.

Retirement: Over the years I put in what I thought was a lot… At least until my 401k company provided stats for age and income level. I’m in the top 1% for my 401k balance, but only at the top 12% for amount contributed. I must be doing something right though… Probably my balance is high because I was ultra-aggressive with contributions during the 2008 recession.

Household Net Worth: I don’t think this number is for the average 4 member middle class family… When compared to a similar socio-economical family like ours, we are higher than average. Hopefully, in the near future, our spread will continue to expand, since we are totally debt free (no house mortgage).

Debt: I have no debt (credit card, auto or mortgage) at this point in my life. I’m actually surprised that the payments towards debt are only 18% of the disposable income! I was thinking the percentage would at least be over 20%.

Well, there you have it! My assessment for how I’m going verse the average middle class American! Overall, I’m very happy with our progress. In fact, I believe we are going better in every area above, at least in a positive sense (for example, our hours worked isn’t over 70 per week, and I view that as very positive).

Enjoy the weekend!

-MR

How I Have Lost Over Half A Million Dollars Having Kids, So Far!

by Money Reasons

Since my son has been born, We have lost over half a million dollars in income!

How?

My wife stopped working to be a stay-at-home mom, the day my son was born.

In her previous work life (before my son was born), my wife was an accountant. Below is her calculated income based off of the last salary she received before becoming a stay-at-home mom.

	Wages and
Year	Bonuses
2000	40,000
2001	42,000
2002	44,100
2003	46,305
2004	48,620
2005	51,051
2006	53,604
2007	56,284
2008	59,098
2009	62,053
	$503,115.70

I added a 5% standard of living increases for every year after the first year. I really think she would have made more that the amounts that I have here, but this gets my point across.

We never projected out our future income loss, but as you can see it’s quite substancial (Augh). With my wife’s former income steam, we could have be living an “Upper Middle” class lifestyle by now. Vacationing in Paris for Christmas, owning new low-end luxury cars and maybe even a vacation home in the South… we could have been really living it up

So, the question is, would we change anything if we had it to do over again? Hmmm maybe! (initially I was going to say no, but half a million dollars is a lot of money). I think given the choice, I’d at least ask her to continue to work part-time.

Why would I ask that of her?

Half a million dollars is a lot of money!
It would be nice to have a little bit of security, in case I were to get laid off
Half a million dollars is a lot of money!!
The kids would learn that everybody has to go to work to earn a living
Half a million dollars is a lot of money!!!
We would be able to increase our lifestyle, at least alittle bit.
Half a million dollars is a lot of money!!!!
The extra money could be a huge emergency saving fund
Half a million dollars is a lot of money…, really!!!!!!
The extra money could have been used to fully seed the kids College funds. (I’m fighting the savings battle with it right now).

All told though, I really do like the fact that the kids have a mom that is there for them anytime… but, half a million dollars is a lot of money!!!!!

What would you do? Live better and larger (at least a little), or forgo the money and be a stay-at-home mom?