I want to live in a house!
October 20, 2005 10:09 AM   Subscribe

How does anyone afford growing up?

I'm in my 20's, mostly living paycheck-to-paycheck, though I'm saving a little. My credit is okay--not perfect, but not hideous. It's improving, albeit slowly. My finances are under control, but I can't imagine ever being able to afford a house, kids, vacations ... I can't even imagine affording a washing machine at this point, much less a house to put it in! My salary is low compared to some of my friends (~$28K), but lots of my coworkers make that and have homes and kids. I think I'm fairly "normal" for a 20-something city dweller, but I'm wondering how people manage to make the transition to surburban-dwelling, baby-supporting grown-ups. How do you afford to take the next steps? Must I marry landed gentry?
posted by hamster to Work & Money (53 answers total) 6 users marked this as a favorite
All I can say, is that I'm 30 and until I was 28 I felt like I was in the same boat as you. Then one day, I turned around and I had disposable income! A lot! Where did it come from? I really couldn't say. I guess over time, my salary had increased just enough, my college loans were paid off and I didn't have any credit card debt. caveat: The only expensive tastes I have are eating out, video games and reading too many books.

Then I got married and together we bought a house, and now we both have plenty of money do with what we wish. It'll be harder when we have children, I imagine, but together it's definately doable.

My advice? Analyze your spending habits over the course of a month, then budget accordingly. ~28K a year is a lot to work with for a single person.
posted by lyam at 10:17 AM on October 20, 2005

I think it depends where you live and where your money goes. And a lot of people who seem to have everything (house, nice car, kids) have to borrow a lot of money and live forever in debt in order to keep those things. Most people can't afford a house - they save for years for a downpayment and take out a mortgage.

I'm 25 and my fiance and I make decent salaries, but I don't think we'll be able to buy a house at least in the next 3 years or so. I have no idea how people younger than me can afford a house and a brand new car (I drive a used car), but I assume they must not have had student loans or other expenses that I have.
posted by catfood at 10:17 AM on October 20, 2005

If you ever want to have money you have to save 50% of what you earn. Don't buy stuff on credit. Live within your means.
posted by banished at 10:18 AM on October 20, 2005

if you were to marry someone who earns 28k, too, then you'd have 56k ... that's how your coworkers are doing it ... it gets more difficult with kids, of course

some hints - you don't need new furniture ... used will do ... in fact you can find decent stuff outside of apartment dumpsters for nothing

same goes with clothing ... i don't know why anyone would spend 80-100 bucks for nikes when one can get a decent pair of sneakers for 20-30 bucks at target ... i get some of my clothes at goodwill .. cheap

do you need a new car? ... or just a 5-10 year old one that's reliable?

grocery shopping ... do you shop at big chain stores or the ones like save a lot or aldis? ... do you buy what's on special and plan meals around that? ... how often do you eat out? ... and yes, it's true that two can eat almost as cheap as one

i've no idea where you stand on any of this but my point is, there's a lot of things you may be in the habit of buying a certain way that you just don't need to ... even though you may think you do ... there are many ways to save money by questioning your assumptions as to what one really needs to buy
posted by pyramid termite at 10:26 AM on October 20, 2005

Perhaps think about a career change? There are many jobs out there that pay someone in their 20's much more than $28k/yr.
posted by gyc at 10:28 AM on October 20, 2005

Save half of $28,000? You must be nuts, banished. After taxes and health insurance, $28,000 is going to be around $20,000 (or less) in take-home pay. Depending on whether you want to save half of gross pay or half of net pay, you're going to be living on $10,000 or $6,000 per year.

That's not realistic advice for someone who has to pay for transportation, food, clothing and lodging -- let alone pay off student or car loans. In most of the US, it would be impossible without public assistance. And because of that gross salary of $28,000, public assistance isn't going to be available.

Saving 10 or 20 percent, though, thats probably a good idea.
posted by croutonsupafreak at 10:29 AM on October 20, 2005

Some of your co-workers may have been receiving support from their parents. Tuition, a place to live during college, spending money, a downpayment, a first car...even just one of these elements can help people pull ahead. Some people live at home for years.

Do what you can now to get out of debt, save for a downpayment, and improve your credit rating. If you can, buy your next car with cash. Create an account for vacations. In time, your salary will rise, too, and this will help. Designate any raises to go to your investments, keeping maybe 10% to splurge.

Your co-workers may also be married or living with someone, so they have twice as much income. If you can stand it, get a roommate. Keep in mind that your co-workers may be mortgaged to the hilt, unable to withstand a layoff, interest rate rise, or other issues. Their marriages may even be rocky, if finances are an issue.

Also, do you have to do the suburban house thing? My husband and I are very happy raising our kids in the city. This means one car (rarely driven - $20/mo for gas). My husband comes home for lunch, saving a fortune. And we have a close relationship. We also don't have to spend precious time mowing a lawn, cleaning gutters, etc. Far fewer maintenance issues, too.
posted by acoutu at 10:31 AM on October 20, 2005

Marrying landed gentry would help.

I'm "grown up" and I can hardly afford it on an income three times that much. Save. Invest. Make smart investments - save enough to buy a decent first home, then save more to trade up. Pay off debt.

Budget. Watch where you spend - even rich people overspend their incomes.

Read. Get some books on personal finances and they can help you figure things out. I liked "The Millionaire Next Door", which isn't about finance, but helps you understand that most rich people are really cheap and most "wealthy" people also live paycheque to paycheque.

Also, get a raise. 28K is an OK income for someone in their early 20's, but depending where you live you may need more. A lot more. But you'll be surprised how easy it is to find "extra" money by budgeting, regardless of how much you earn.
posted by GuyZero at 10:31 AM on October 20, 2005

Go read Get Rich Slowly, in which I summarize what I learned from reading a bunch of financial self-help books. I post this self-link in every AskMe financial thread, but I do it for a reason: there's lots of good advice there (and even more in the comments).

Also: go buy Your Money or Your Life. Read it. Live it.
posted by jdroth at 10:35 AM on October 20, 2005

Saving half your income is a pipedream unless you still live at home and have no debt.

The best advice I can offer is to stay away from credit cards. It might be okay to have one for emergencies but I try to think of credit cards as leeches. They leech money from you all the time. If you carry a balance then they are always taking money from you.

Buying a house is hard to do but its not impossible. Especially if you're handy enough to get a fixer-upper and make yourself some money via sweat equity.

We had to move a town away from where we used to live to afford a house but its worked out really well since where we moved is asploding right now real estate wise and our investment has paid off quite handsomely. But we still have money issues and they're going to get more difficult next year as we're going to have a second child!
posted by fenriq at 10:35 AM on October 20, 2005

As an aside, jdroth, thanks for your post on Getting Things Done! It has really helped me to get myself more organized and moving forward through all of my tasks and paperwork.

Now I'm off to read this latest link to Folded Space.
posted by fenriq at 10:36 AM on October 20, 2005

It all depends on what your priorities are. Prior to this job, I made less than industry standard. But my priority right now is to live in metropolitan area and enjoy life rather than worrying too much about future and investment. Obviously, it goes w/out saying that my savings account is pathetic (at least i've got one is my excuse), and the whole purpose of the account is for emergency and to travel.
If your priority is future investment and securing your financial stability, then watch out where the money is going to. Change your life style to better meet your goal as soon as possible. Try transfering your credit card debt to someone who offers less APR (and CUT UP YOUR CARDS). Move to suburb and make lunch instead of going out to lunch. Look out for buy one get one free rather than buying those expensive 6 rolls of toilet paper. Saving money starts with small things but if you do it day by day with anything, then you accumulate significantly. It is a sacrifice, but if you do it in a focused way, you have to put up with it for lesser period of time and sooner you reach your goal.
Nice thing about investment is once you have a house and live in it for a few years, you get extra $$ to move onto nicer house.
posted by grafholic at 10:42 AM on October 20, 2005

croutonsupafreak, saving 50% of course is predicated on getting a higher paying job, but I thought that was obvious.

If you are living paycheck to paycheck to begin with, saving money isn't going to help your situation much. In fact, saving money won't even be an option.
posted by banished at 10:45 AM on October 20, 2005

Take your bank statement and go through it. Highlight your necessary expenses (as in, bills that have to be paid, not, "I have to have a latte") in one color and unnecessary things in another. Figure out how to eliminate the things you're spending on that you don't need. (That said, sure, you can get a pair of sneakers at Target, but if you save $10.00 a week for eight weeks, you can then buy a nice pair of shoes that will outlast your Target sneakers. If you're going to make a higher-dollar purchase, think about its long-term usability.)

Pay yourself first. Even if you only save $50.00 per paycheck, that's $50.00 you didn't have before. Pay off your debts, and when you're in a position to do so, investigate fixing what's wrong with your credit.

You will be able to afford growing up; I did not that long ago. Just pay attention to what you're doing, be mindful, and remember what you really want, which is to be able to handle it if the crap hits the fan. And, of course, to live in a house one day.
posted by Medieval Maven at 10:52 AM on October 20, 2005

Your city might just be too expensive. Some cities (New York, I'm looking at you) just won't support a middle class lifestyle.
posted by footnote at 10:54 AM on October 20, 2005

Gotcha, banished. I don't think hamster should change jobs if s/he's happy in his or her field and if his/her salary is competitive within that geographic region.

I'm roughly the same age and making roughly the same amount of money, and I wouldn't change jobs in a million years. There's a lot to be said for liking what you do.

lyam makes a good point. Paying off debt, getting yearly pay increases, and keeping your lifestyle constant as your salary grows, should probably do the trick. I sure hope so, at least.
posted by croutonsupafreak at 10:55 AM on October 20, 2005

We're busy right now trying to move from being renters on to having a house. I feel like I mention this book all the time, online and IRL; I just did this morning, in fact, in another finances thread - but it changed my outlook and my strategies so much: The Complete Tightwad Gazette. Many good ideas for how to save, and how to develop a "saving" mindset; I find it inspirational.
posted by Melinika at 10:57 AM on October 20, 2005

Something to think about...

Despite having fairly good health insurance, my heart disease bankrupted me at the age of 45. That's one bypass, two heart attacks, six stents, EECP, numerous appointments, prescriptions, unpaid sick days, blah blah blah.

I burned through 10% of my Lifetime Maximum insurance coverage in 2 years.

Now, even with disability insurance payments, I'm living in a fleabag apartment, scraping up child support, begging my doctor for drug samples.

Further, my disability insurance is Any Occupation. That means that after my initial 18 months of payments, my case is reviewed as to whether I can work any job fulltime. Even if that means taking a pay cut.

That's why I moved to Vegas. Tons and tons of management positions around here. ;-P
posted by mischief at 10:58 AM on October 20, 2005

Listen to the advice about tracking your spending and doing some significant saving, both for your retirement (401k plans with employer matches are still one of the best deals in town) and for a house. Once you learn to set aside money from every paycheck, it's only a matter of time before you suddenly realize you've accumulated a good chunk of change.

Also bear in mind that you can look for a "starter house" rather than a McMansion and still enjoy the same tax benefits and equity-building.

Many of the people you see around you living the high life are very likely doing so on credit, particularly if they're fashionistas. Dare to be different!
posted by clever sheep at 11:11 AM on October 20, 2005

Some cities (New York, I'm looking at you) just won't support a middle class lifestyle.

Bingo. Unless you've got a high-paying job or wealthy parents, most large urban centers (NYC, Boston, SF, LA, Chicago) are terrible places to live and save. Here's the equation: if more than half of your income is going to rent, you need to move. Naturally, some people have different priorities, and "living where stuff is happening" is more important than "saving for the future."

I can tell you right now, planning a future with a salary in the high-$20's is only going to work if you're living in the boondocks. You could upgrade location by sacrificing locale, however. The midwest is relatively cheap and has some decently-sized cities. As a bonus, the housing bubble isn't nearly as exaggerated. You can get a two-story 3-bedroom home in Lincoln, NE for a hundred grand (for example). But then, you'd be living in Lincoln.
posted by Civil_Disobedient at 11:13 AM on October 20, 2005

I was salaried at 22 and from 23-27 I paid off every singe debt, school, car, etc. Now I just blow it on drugs and the stock market.

It'll happen sometime, but getting a good job is part of it.
posted by The Jesse Helms at 11:15 AM on October 20, 2005

hamster, I'm just about to turn 27, live in the SF Bay Area, and I make about half of the income required to buy a condo here. This is despite the fact that I don't make that much less than the median income of the state. (Side note: I have been given pretty regular raises and promotions by my employer, so I am making about $10K more now than I did when I started here 5 years ago.) There's no way I can afford a house here, not right now anyway. And frankly I don't want to buy a house here because the bidding process is CRAZY. So that dream is put off for now, and my boyfriend and I are looking into moving somewhere that we could buy a cheaper house (in 5 years or so).

Save everything you can, when you can. Even $25-50 a paycheck will get you somewhere. Check out bankrate.com for some Money Market Savings accounts that offer higher interest than regular checking or savings accounts. I've found that something as simple as having the money in another, hard to access account helps prevent me from using that money to just pad my checking. Ing Direct requires you to have your customer number, some random numerical piece of personal info, and a 4-digit PIN to log in to their site-- each time I try and log in to my account, I have to dig out these numbers. Sometimes I don't even bother, so the money just sits there, earning interest, which is what it's supposed to do.
posted by sarahnade at 11:20 AM on October 20, 2005

Houses in many parts of the US are simply unaffordable for the average worker. The good news is that historically houses have not remained unaffordable for long.

That said, if you make less than the median household income in your area, you may still have trouble affording a house.
posted by malp at 11:21 AM on October 20, 2005

What I've found is that in large, expensive cities, the emphasis is not so much on housing but on lifestyle. You may say "duh", but think about this: Hong Kong, for example, is based around restaurants and dining. Apartments are not regularly used for entertaining, at least not any old guest. They are not large, because they can easily be $1k-3k/sq. ft., but it doesn't matter, since you live in HK and should be spending your time Doing Stuff that you are afforded by this fact.

I only state the obvious here because it seems a lot of Americans turn up their noses at people who choose this way of life. A small apartment in a big city can be a lot more fun than a McMansion in the exurbs with nothing to do but mow your lawn, again.

As my final word, just remember that you may need to spend money to earn the experiences that allow you to move to a better position in the future - meeting people at bars, living in a certain part of town, etc. Spend money to make money, all that.
posted by kcm at 11:29 AM on October 20, 2005

If you die owing a million bucks, it's like you always had it.
posted by adamfunman at 11:35 AM on October 20, 2005

I agree with the tracking advice. You know how much your income is, now you need to know where it's going. Once you actually add things up, you may be amazed at where your money is going. It's the little crap that kills you if you don't watch it. Say if you spend $2.00 on coffee and $12.00 on parking and $7.00 on lunches each day and work 250 days a year, that's (2 + 12 + 7) * 250 or $5250 a year. Brew your own, take the buss and brown bag it and you could save ~10% of your salary. That's just an example but the point is, if your trying to survive on a tight salary, you need to keep track of every dime.
posted by octothorpe at 11:35 AM on October 20, 2005

Oh, and a little bit more on investing, I suppose. Make sure you are taking advantage of all your pre-tax opporitunities: Roth IRAs, employer-sponsored plans (403b, etc.). You really maximize your money this way, while putting it away in an untouchable manner for when you're Old (59.5). Max-out your Roth each and every year.

I also just remembered the other misconception people have about large cities: everything is expensive. It's not. Generally, housing will be through the roof, but everything else will be as cheap or cheaper: no car, groceries at a local produce store are cheaper than Whole (Paycheck) Foods - and better, etc.

Here in Pittsburgh is a good example: every "big city" entity is represented on a small scale: the upscale grocery store, i.e. However, because it's such a novelty, it actually costs MORE than usual, whereas in a real city, this kind of thing just *exists* and is priced at a normal rate. But, the housing is cheap here. It always balances. :)
posted by kcm at 11:37 AM on October 20, 2005

But, brown-bagging it at your desk robs you of the social interaction and networking that you gain by eating out with your co-workers or associates. You could brown bag it "out", but then you come off as cheap and that hurts in a business sense, for some careers. I'm not advocating a two martini lunch Monday through Friday for everyone, just presenting the other side of the coin to think about. :) Please do brew your own and take the bus, though.. $700 in Rancilio kit is worth its weight in gold.
posted by kcm at 11:39 AM on October 20, 2005

If you die owing a million bucks, it's like you always had it.

Well...that is unless you have kids or a wife that you care about. Other than that, yeah.
posted by spicynuts at 11:49 AM on October 20, 2005

Owning a house is overrated if you're single. It can be a lot of work, and there's nobody to help with it.
posted by kindall at 12:08 PM on October 20, 2005

I'm so sick of all those books that say, Watch where your money is going, cut back, blah blah blah. What about when you've already done that? I spend nothing on nothing, but I'm still not going to be able to buy a house anytime soon. And I save 10%- I tried to save 20%, but it nearly killed me.

Sorry, I guess this is just a rant.
posted by ThePinkSuperhero at 12:08 PM on October 20, 2005 [2 favorites]

When I was in my early twenties, I was living in Manhattan on $26K per year. And yeah, it was pretty much paycheck-to-paycheck. I remember hearing about people who'd had their wallets stolen, and that they'd lost, say $200, and thinking two things: (1) "wow! $200! who has that kind of cash?" and (2) "Yikes! If I lost $200, that would mess up my finances for the next six months!"

But time passes, hopefully you move up the food chain a bit in your chosen line of work, and hopefully your lifestyle doesn't expand to match the increase in your disposable income. That's really the key: living within your means, is, over time, one of the most liberating things you can do for yourself. I'm married now, and we both make good incomes, but we've set up our lifestyle to live on the smaller income (almost) and save most of the other. If one of us were to lose our job, we'd have to forego the sushi dinners and the scuba trips, but we wouldn't have to worry about housing or food. Yeah, we both drive used Japanese cars, and we could afford to get a bigger place (or a new car) but we prefer the freedom that comes from a smaller lifestyle.

A lot of those people you see buying houses and driving new cars are leveraged up to their eyeballs. Don't do that, and you'll be fine.

I also second the suggestion upthread to read "Your Money or Your Life".
posted by ambrosia at 12:18 PM on October 20, 2005

If you die owing a million bucks, it's like you always had it.

It's this kind of thinking that spawned the dreaded Bankruptcy Bill. Now when someone who pays off all their debts and never overextends their credit finds themselves bankrupt due to a medical emergency they will be forced into indentured servitude for the rest of their life.
posted by any major dude at 12:38 PM on October 20, 2005

Best answer: hamster--It does seem impossible, doesn't it? It did for me when I left undergrad in '88 to work in HR for the hotel industry, taking home $1400/mnth and paying $800/mnth in rent/insurance/utilities in Chicago.

I've only switched jobs 4 times in my career but each move really raised my salary quite a bit. So that might happen eventually. Otherwise, I only had one credit card, managed my debt, saved a little cash here and there (mostly in my 401k), refinished furniture that I bought at Goodwill for my apartment, brought my lunch some days, ate out for others, and just scraped along. The friends and I had a lot of potluck dinners during the lean years :) One year, I had a Christmas tree with paper decorations that we made. But there are plenty of dollar beer nights and cheap things to do for fun if you can think creatively.

I started putting 2% of my savings into my 401k when I was only 23 and raised the percentage eventually when I could. I bought my first condo when I was 32, my first house when I was 37. When I was 34, I had a Masters Degree (that I had earned part-time while working) and a 6-figure consulting job. I chucked that career because the schedule was so nuts and scaled back again. I didn't have huge debts hanging over me and so I knew that I could. I was married at 35 and we'll have our first child in January.

It can be done more easily if, at SOME point, your monthly salary begins to grow beyond your monthly fixed expenses (e.g., rent, utilities, insurance, etc.) So set that as a goal. Saving in your 401k and eventually buying a house helps your tax position as well. Just don't compare yourself to other people! You don't what that lavish lifestyle is hiding...including family members who bail them out of debt. I have friends and family who have not budgeted, have overspent and who have ended up with massive amounts of debt, heartache and pain. My sister and her family (mid-thirties) just had to sell their house which they loved and move in with the in-laws to pay off enormous credit card debt. And they don't live in a metro area (as I do) and they have two paychecks. They never deprived themselves of anything--ever--and their spending spiraled out of control. Don't let that happen to you, if you can avoid it.

And...who says you have to own a house? Who says you have to own a car? Or at what age you HAVE to HAVE something? Advertising and entertainment makes us think that we need more than we really do...
posted by jeanmari at 1:46 PM on October 20, 2005 [1 favorite]

I'm 25 and making $50k right now. For the longest time I found myself paycheck to paycheck, stressing about money, etc. Then one day I woke up and just realized, all I need is a reason to save and a little budget analysis. Honestly, you probably don't need to track your expenses for a month; just give it 30 minutes' thought and you'll see where your money is going. I made two discoveries. One, I eat out way the fuck too much. Two, I buy way too many toys and gadgets. So first off, I stopped doing those two things - now I eat a cup of yoghurt and some oatmeal for breakfast, and I have a $3 lunch in the cafeteria at work every day. I cook more for myself when I'm home. Yes it takes some time, but you can think of easy things to make that taste good too. Spaghetti, burgers, microwave burritos (I like the organic kind - less greasy). When I think to myself, "Hmm I really should get a 300G hard drive, they're only $80," I slap myself and say, "You do nothing but surf the web and IM people, you don't need 300G of storage!" Things like that. I only buy myself a new toy when I've done something to deserve it (graduated college, got a raise/bonus at work, etc).

I decided awhile back that I wanted to move to San Francisco, and I wasn't going to be able to get a job until AFTER. Thus I was going to NEED to save a bunch of cash beforehand; can't pay rent with a credit card! I figured 3 months of no income was a good amount to plan for. I worked out my expenses and concluded that $5k ought to be enough. Next question: How soon can I have $5k in the bank?

First, how much do I take in per month? Something on the order of $2700 after taxes. Next, what are my expenses right now? $900 for rent, $200 for bills, $150 for food, $125 car payment, $125 car insurance, $125 gas, $110 minimum student loan payment, and throw in $150 for other stuff like going out with friends for beers or to a rock show. That's $1885 all told. That means at a minimum I should be able to save $815 a month, barring any unforeseen expenses. More than that if I can trim some money out of food, gas, and entertainment. I set a target of $1k per month savings. That meant I could move in 5 months, which put me at December 1. Perfect - I'd get to move before the first snow in Boston.

Once you have a goal and an amount per month to save in mind, things become easier. You have a reason NOT to buy the 300G hard drive, the large Coke, "one more beer," etc. You don't have to live like a pauper, just take a minute to think before pulling out the wallet. To make it easier on myself, I set up an ING savings account. The damn thing gets 3.20% interest now! It's linked to my checking account; I have direct deposit of my biweekly paycheck on Thursday night; the next day an automated transfer snags $250 of that into savings, which is UNTOUCHED except in case of emergency. That means at a minimum, without even thinking about it, I'm saving $500 a month. On the last day of every month I have a reminder in my calendar: "Transfer to ING?" I look at my checking account, any outstanding checks or bills, and transfer as much as I can into the ING account, shooting for $1k. Sometimes I'm under, sometimes I'm over.

Here it is almost the end of October. How much money do I have saved? $4200. Luckily for me, I nailed a job in San Francisco that starts November 7. I found a roommate to take over my lease, and - windfall! $900 security deposit paid to me! I'm over my budget AND, through some lucky networking, I won't even need most of that money. Instead, I can move and start looking for an apartment immediately, instead of having to couch surf for 6+ weeks like I originally planned.

You get the idea, sorry for being so long-winded. I thought you might appreciate a specific personal example to go along with some of the other more general advice.
posted by autojack at 2:21 PM on October 20, 2005

You could earn extra income by becoming an Amazon Associate and linking to personal money management books in AskMe threads. ;-)
posted by DakotaPaul at 4:18 PM on October 20, 2005

You could earn extra income by...

Yeah, I noticed that earlier. I cut-and-paste that link from the entry I referred to. I e-mailed Matt about it, because it seemed like something that ought not be done. Sorry!
posted by jdroth at 4:36 PM on October 20, 2005

The suggestions in this thread are excellent. I recommend you consider reading The Millionaire Next Door. I found the audio series, in particular, to be very approachable. I always thought I was decent at budgeting but I listened to that book five months ago right before I started a new job. I had ~ $5k of debt at that point + student loans. Now, at a $26k a year job, I only have about $1.5k of debt left and will have more than $3k saved next year with only college loans left to pay. My experience is nothing special, but I feel taking the advice in that book was very useful, especially as a way of thinking long-term about how I want my life to be. In particular, the book helps you realize there's no need to live a consumer-oriented lifestyle. In fact, most affluent people don't live such a style, and the doctors/lawyers/executives who do actually have a relatively low net worth.

That reminds me, I need to sign up for a Roth IRA before the end of the month ... Good luck in budgeting!
posted by Happydaz at 5:27 PM on October 20, 2005

The fact that you're saving a little is good. There's a huge difference between having your income run a little ahead of your expenses, and the other way around.

Step two would be to figure out what your goals are. If you don't want to be living paycheck to paycheck, you probably want to build up an emergency fund of two or three months' expenses in your bank account. At your current savings rate, how long will that take?

As a longer-term goal, if you want to save up the down payment for a house, how long will that take?

Step three would be to increase your savings rate, to reduce the amount of time you need to reach your goals. The easiest way to do this would probably be through payroll deduction. Basically, you pay yourself first -- you transfer part of your paycheck (say 5%) into savings, and then you never dip into those savings. If you can get this done automatically by your employer, so much the better.

Step four would be to set up a budget that you can stick to. (That's what I do.) Realistically, how much do you spend each year on housing, transportation, recreation, food, clothing, etc.? And then track how much you're actually spending in each category. According to Andrew Tobias -- who has a hilarious chapter on making a budget in The Only Investment Guide You'll Ever Need -- the trick is to make a budget that you think you can meet or exceed, so that rather than being your albatross, you can think of it as your secret weapon.

Once you have a budget, you'll be able to make decisions on where you think you can cut back (if you want to accelerate your goals further), or assess whether you need to make more radical lifestyle changes (getting a roommate, or a second job, or moving to a place where the cost of living is lower, etc.).

One thing I really like about the Tobias book is that he has lots of advice which is more philosophical or psychological than strictly financial, but which is helpful nevertheless. e.g. he suggests that you try to spend more time thinking about what you have (a 20" Panasonic TV, your health) and less time thinking about what you don't have (a 42" plasma TV, eternal youth).
posted by russilwvong at 5:35 PM on October 20, 2005

Most people live like that or worse, you just might not know them. For lots of people, their living standards decline as they get older (health problems and kids). For lots of people standards of living are declining as companies cut-back, and health insurance gets more expensive. The living standards of older people who are doing ok are often build on a start that came when the economy was much better. 'Grown Up' isn't a timeless concept - it's a post-WWII baby boom one. People our age will probably be the first generation in a while to have worse living standards than our parents. The middle class generally is disappearing.

I'm not saying you should count your blessings, or think of the starving children in Africa before you complain, or that you shouldn't try to get in a more stable position - just that it isn't just you feeling like this, and what you're looking for is on the decline. Pat one-line answers on Mefi certainly aren't going to show you where you've been going wrong!
posted by crabintheocean at 5:56 PM on October 20, 2005

Sorry, earlier I tried to post a link to a graph, but didn't succeed. The graph plots housing affordability in the bay area over the years.

This page contains the graph. Follow the affordability index link. The website design is a little flaky. You may or may not have to register.

Important things to note on the graph:
Houses were very unaffordable in SF in 1990. However by '96, housing affordability had returned to mid-80s levels. They remained at mid-80s levels for the next 4 years. Just because houses are not affordable now does not mean they will stay unaffordable. There was a span of 4 or 5 years where housing affordability was constant. You could have bought anytime within in that time span and done well.

The website has another interesting graph. Follow the House Price Index => Adjusted prices link. Between 1990 and 1996, houses lost almost 25% of their value once you adjust for inflation.
posted by malp at 5:59 PM on October 20, 2005

Saving half your income is a pipedream unless you still live at home and have no debt.

My wife and I live quite comfortably on 40% of my aftertax income and bank the rest, the only income we have other than interest on our savings. It is true that I have no debt, and my choice to live in Korea was partly predicated on the knowledge that although my gross income is about 1/3 of what I was making at my last IT-related job in Australia, my net income is similar, with much lower living expenses. Being debt-free (and also tangible-asset free), having paid off my student loan very quickly after university, was also a deliberate choice.

It's not a pipedream, but you have to be prepared to make sacrifices, and think a bit laterally about what kind of life you are prepared to live.
posted by stavrosthewonderchicken at 6:48 PM on October 20, 2005

Also, I was on a save-travel-blow it all-save-travel-blow it all merry-go-round from the age of 23 to 33, and had a fantastic time. It's only in the last 7 years or so that I've been seriously saving. That has probably had a negative effect on my career prospects, and I'd certainly have been richer in financial terms if I hadn't., but I wouldn't have done anything differently in retrospect.

I've also been quite lucky, I think.
posted by stavrosthewonderchicken at 6:52 PM on October 20, 2005

I live in Manhattan and I save a ridiculous amount of money. I'm pretty sure I'm saving more than 50% of my after-tax though it may be a little less. And I can do this while having an active social life and enjoying many of the finer things to life.

To answer to your question: you can afford growing up if you make lots and lots of money.

It's not as difficult as you might think.

First, financial investments will probably get you nowhere. Sure, they might pay off in the long term (say 20 years) but by then you'll be old. Plus, the whole economy thing--still pretty shaky. Really, the whole investing and saving game is a sucker's game. The pay off either takes too long or it's too little for the amount of time and effort invested. And I say this as somebody who works in finance.

There are only four types of "investments" that really pay:

(1) Education. The more you know, the more you earn. It's as simple as that, really.

(2) Marriage. The earning power of couples is far, far greater than individuals. When people pool their resources you get network effects that make the whole greater than the sum.

(3) Who you know. If you know the right people in the right way, then money will just rub off on you. This goes back to #2.

(4) Work really hard.

You don't need all four. You can get by with three in my experience. And you don't have to spend all your time obsessing about money and trying to save every dime and buy used furniture. Once you've established a reputation as a smart, sociable, hard-working person money will find you and it'll stop being source of concern.
posted by nixerman at 6:52 PM on October 20, 2005

The other problem with focusing so intently on saving money is that you could easily end up decreasing your long term earning prospects. It takes money to make money. This is a fact of life and there's no way to escape it. For example, I spend money on anything that'll save me time. Even if it's only a few minutes here and there it's worth it to me. The numbers might not add up right now but in the long run I know two things: (1) life is short (2) my time is valuable. Instead of hoarding your dollars consider how to get the best make your money work for you. There are paths you can take that'll increase your debt in the short term but will yield far greater returns over time. Going back to school, quitting your job and living on credit until you find a better one, employing yourself--these are all options if you want the house/minivan/2.5 kids version of the American dream.
posted by nixerman at 7:31 PM on October 20, 2005

Going against the "why own a house" contingent, well, whether owning is better than renting is a personal thing, I guess. I'd hate to go back now that I own my own place. I like the relative privacy, and control over the maintenance etc. It is a lot of work, it would be tough to own a house if I were single.

But from a financial perspective, if you are buying a house that is appropriately valued, in a place you plan to stay several years at lest, anyway, there is just no comparison. Rent is money down a hole, it's gone forever. A mortgage is either tax deductible interest or principle on a material investment. Owning is just a flat out better deal
posted by nanojath at 7:37 PM on October 20, 2005

I've said it before, but jdroth's link to his distillation and aggregation of personal finance books is excellent. It's changed the way I look at and handle money.

Thanks again, jdroth
posted by jikel_morten at 8:32 PM on October 20, 2005

Up until a year ago, I spent more than two years working 80 hours a week.

I have a journalism degree and wanted to write for a living, but being a recent grad meant I only earned about $8 an hour (which after tax was about $1000 a month — not a whole lot to live on) at my newspaper job. So I started bartending too, and was able to pick up shifts left and right when I needed money. The bar I worked at was very successful and in a university area, and it was not uncommon for me to come home with $400 in my pocket after a single night of work. Broke? Got rent or a car payment coming up? Easy, pick p a shift for someone and in one night you've made your carpayment.

I typically worked about 4 nights a week at the bar, from 7 p.m. to 3 or 4 a.m., and a full 40 hours a week at my day job. I was tired ALL THE TIME, but I was able to afford an awesome apartment in Houston's Historic Heights, I had plenty of play money to spend on whatever I wanted, both of my jobs were highly satisfying (and fun) and I was also able to save.

My husband is well off, so after I got married, I quit both my jobs and moved with him overseas, but I really miss bartending and would go back in a heartbeat.

Moral of the story — everybody else's advice is great, but a second job will automatically give you a lot of financial flexibility.
posted by Brittanie at 1:00 AM on October 21, 2005

I post this in almost every personal finance thread, so sorry if you've seen it before. But I made a free finance tracking program; you can grab it at PearBudget.com. (There's an easy del.icio.us link on the page, so if you want to just bookmark it and come back later to read it, you can do that, too.)
posted by Alt F4 at 2:33 AM on October 21, 2005

If you die owing a million bucks, you probably died from the stress of owing a million bucks.
posted by ryanissuper at 6:05 AM on October 21, 2005

If you want what you describe as a "grown up" lifestyle, you need to get on a path to making a LOT more money. People in low-paid careers either forgo that kind of lifestyle, or have someone else to finance it for them.

In the non-profit / education / government / public service sector of the economy, the only way to make a decent salary is to become a terminally-credentialed professional: a lawyer, a professional engineer, a doctor, a PhD-level administrator, researcher, or tenure-track professor.

If the private sector is an option for you, professional credentials are useful, but not necessary. Find your way into a ground-floor position in an industry where BA-only people regularly advance to high earnings levels. Examples include financial and technology sales (institutional, not consumer), real estate development and management (forget about real estate sales for now), and the entertainment industry.
posted by MattD at 8:46 AM on October 21, 2005

Best answer: Most people my age that I've met have an identical problem, with which I am unable to identify. My primary sources of entertainment come from things that don't cost money to do, or if they do, are negligible such as the draw from an electrical appliance.

Rock bottom easiest ways:

1. Make it a VERY high priority to pay off all debts. IRS first, credit cards second. Pay as close to the full balance as you can afford on the highest card balance without requiring you to eat Ramen for a month. Cut up all your credit cards except one major type like Visa/MC/Disc that you can still use for side items like groceries and incidentals.

2. Only carry with you a set amount of money per week, say $25, and wage whether spending too much of it too soon will hamper efforts later in the week. If you have leftovers at the end, only withdraw enough to bring the wallet back up to $25, not $25 more.

3. Don't leave the house if you can help it. If you leave, you'll spend more money and gas at the same time.

4. Don't have a girlfriend. You may recall the Cosby episode discussing finances with Theo.

5. Get in the mindset of saving up for something, instead of getting it now and gradually paying it off. I wanted to buy a big shed for my backyard, with a goal savings of about $6000 for a metal 2-car exterior garage, installed. My strategy is to save up until I have near double the amount of the item I am saving for, so when I buy it, the savings account isn't devastated. Chances are by the time I have such a high savings, I'm not interested in a shed anymore, having gone without it all this time in the first place. If you're an impulse shopper, carry the item around with you in the store for a few minutes before buying it, giving you ample opportunity to set it back down or talk yourself out of it.

6. Buy all of your entertainment video with a mindset of "how much can I sell this for later." I get most of my video/DVD/games/etc from half.com, but researching to see how well it sold first. I watched the entire DVD sets of the Buffy series, and made a $7 profit. I waited until each season was in my range, watched it and sold it back on half.com for at-cost or slightly higher if I could. When you buy something for $30 this way, you don't lose the $30 you spent, you still have it because the item is actually worth $30 in resale value, not $4 garage sale rate. When you sell it back for $32, you've got your original $30, plus $2 more than you had before, and the memory of having watched an entire season or played thru an entire game. I bought 'Castlevania: Circle of the Moon' for GBA for $12, played thru it until I was utterly tired of it, and sold it back for $14. That's hours and hours of playtime, with profit. Small profits, like small expenses, add up.

7. Visit rummage sales and buy good books en masse for cheap. I visted a church rummage sale that was offering a brown paper bag that you could fill up with anything you wanted there, for $5. I had checked out their book section, and saw a few I figured would sell for at least $5. Turned out one series of them by an author I'd never heard of, Richard Woodman, sells for nearly $7 apiece and there were perhaps 9 books there that I got for a total of $5. I sold one book for $8, making the entire investment, $3 profit, and the entire rest of the bag profit. Half.com is part of eBay, is free to list on (at a price you set) and does not expire until someone buys it. I regularly bring in an extra $50 a month just from buying cheapy $0.25 books at garage sales and casually listing them online. That right there pays the phone and DSL with change left over.

8. Set a goal to not buy anything that isn't gear toward resale for 2 months. Don't buy coffee from a vendor, sodas from a machine, etc, just forgo it because you decide to, because you really don't need it, and tell yourself how much you really don't need it. After 2 months, check your accounts and realize you have a ton of money you never knew you spent so much on.

9. Find a job you can do from anywhere, and move to someplace cheaper. Copywriting and freelance work is exceedingly lucrative than can be done from practically anywhere. Find a job where the most of what you do is entertaining to you, so that when you come home, you're already entertained enough for the day. This way, you won't have to spend to have fun, but are paid to do it. Your entertainment expenses with gasp for air.

10. Figure out a "topped out" number for your checking account. This will be an amount that if you had a unordinarily big month for bills, you could still pay it off with $50-100 to spare. Once your checking gets a certain level over this amount, dump the excess into a savings account. For instance, if $600 is your safety reserve for the month to still pay everything necessary, wait until it gets to $1100 or $1600 and lop the extra 500-1000 into a seperate savings account, and disregard it as available funds unless there is a serious emergency to use it. Work back up to 1100 or 1600 again, repeat.

I'm 27 and figured this out by just thinking about it and witnessing everyone else's poor choices with money and figuring out ways to avoid those. I find it all extremely easy. You make double my wage per year -- I make ~14k.
posted by vanoakenfold at 2:23 AM on October 22, 2005

Best answer: If you want what you describe as a "grown up" lifestyle, you need to get on a path to making a LOT more money.

I disagree strongly. It's not how much you make, it's how much you save. Most people get married and have kids. Median household income in the US in 2002 was roughly $43,000, which means that half the households in the US are getting by on less than that.
posted by russilwvong at 12:46 PM on October 22, 2005

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