$32k puts you in the Top 50% of Earners

[Jersey_Steve]

http://articles.moneycentral.msn.com/Taxes/CutYourTaxes/make-32k-youre-in-the-richer-50percent.aspx

That's a little crazy. Half the people in the country make less then $32k a year.

However, what I find even more insane is that the top 50% is paying 97% of the taxes. I guess it's kind of crazy to ask them to pay more when they are already carrying the load. Even more amazing is the top 1%, who are paying 40% of the burden. I mean, yeah, they have a lot of money, but I'm sure they worked just as hard for it. I've seen management at my job working 12 or 14 hour days all the time.

I'm sure a lot of the people in the bottom half are kids who are working part-time jobs and therefore getting a complete refund.

Still... I don't feel like I'm in the top 50% of earners in the country.

[wordsmith]

$32K is decent in my hometown. And the zillions of other towns of similar size and demographic across the country, I'd imagine.

Growing up with that as reality has made me feel pretty great about making a wage a lot of other people would probably look down their noses at. It works for me, and it's also had the added bonus that I've never felt pressured to abandon a career I enjoy due to the paycheck.

[PenforPrez]

With $32k I could do some damage, especially considering I have almost no debt now. :) I make nowhere near that now.

Paul

[vinsanity]

This hints at the reason why our tax code is all fucked, and probably why we can't get rid of the stupid AMT. Every time someone talks about repealing it, some other politician with an interest in the revenue it provides whines and cries about how it would only benefit the top 10% of earners in the country, or something like that.

According to that chart in the link, the top 10% income equates to a middle-class lifestyle for about a family of 4 in southern CA.

[Jersey_Steve]

I guess because I grew up and still live in the shadow of NYC... $32k really doesn't go far here. You would have to be closer to the top 25% to really live comfortably around here. I make a little more than $32k, and I would be struggling if I didn't live at home. I mean, I could probably make it, but I wouldn't be living like I live at home.

Then I talk to my friend in Indiana who works at a factory making nowhere near what I make, and she owns a home.

[vinsanity]

I guess because I grew up and still live in the shadow of NYC... $32k really doesn't go far here. You would have to be closer to the top 25% to really live comfortably around here. I make a little more than $32k, and I would be struggling if I didn't live at home. I mean, I could probably make it, but I wouldn't be living like I live at home.

Then I talk to my friend in Indiana who works at a factory making nowhere near what I make, and she owns a home.

by any chance, would the top 25% income be enough to live on your own in a place like Park Slope or Prospect Heights?

[wordsmith]

I guess because I grew up and still live in the shadow of NYC... $32k really doesn't go far here. You would have to be closer to the top 25% to really live comfortably around here. I make a little more than $32k, and I would be struggling if I didn't live at home. I mean, I could probably make it, but I wouldn't be living like I live at home.

Then I talk to my friend in Indiana who works at a factory making nowhere near what I make, and she owns a home.

It's SIMPLE to own a home where I'm from in middle America, if you have an income or the midtwenties or higher. Seriously. I have lifelong friends who have settled in the hometown. They were married in their early twenties, had a child by their midtwenties, the guy worked and the girl was a stay at home mom and commuter student, and they had absolutely no problem buying a home on one (starter) income.

I think it's easy to forget just how much of the country is simply not metro NYC, LA, Chicago, etc., and that skews perception.

[wordsmith]

With $32k I could do some damage, especially considering I have almost no debt now. :) I make nowhere near that now.

Paul

I don't either, but I'm in a two-income household. However, I COULD live alone on what I make, I just couldn't live where I live now, most likely.

[spiritedaway]

My first job out of college paid 30K with bonus potential of 2.5k. It seemed like a lot, but it's all relative when you consider that rents easily run from $1200-1800/month. Needless to say, I lived at home during that time to save and pay off car debt. I was on a very strict budget and living paycheck to paycheck. I was grateful for the job since I graduated during the recession and my field was where it was hardest hit (computer science/IT). I was not in any position to be picky, and had to switch industry so I won't be unemployed for longer than I already had.

Things have changed quite a bit since, and I make substantially more, though I'm not rich by any means. I always believed (and still do) that higher income folks should pay more taxes, but sometimes I think that putting a higher tax burden simply because one makes more (when one works just as long and hard) does not seemed quite right either. I have to admit that sometimes I think even if I'm laid off and couldn't find a higher paying job, it wouldn't be that big of a deal or difference. I could just work fewer hours and still be able to save if I'm in a lower tax bracket. Having been on both ends of the stick (from my first minimum wage paying job in high school to a higher salary bracket), I get a sense of why middle class says that they're getting screwed. They really are. They don't make enough to not have to worry about finances, and they don't make low enough to pay less taxes or qualify for low-income resources, etc.

This hints at the reason why our tax code is all fucked, and probably why we can't get rid of the stupid AMT. Every time someone talks about repealing it, some other politician with an interest in the revenue it provides whines and cries about how it would only benefit the top 10% of earners in the country, or something like that.

According to that chart in the link, the top 10% income equates to a middle-class lifestyle for about a family of 4 in southern CA.

[NewMrs.]

$32K is decent in my hometown. And the zillions of other towns of similar size and demographic across the country, I'd imagine.



In the small city in PA where I used to live a few years ago, the average household income was in the mid-30's. I worked as a proofreader for a few weeks for this company in that town that employed dozens of college graduates for salaries of about $15K a year. They were mostly in their 20's and worked there because there really wasn't much else in town.


A nearby college professor wrote a business plan about how the downtown area would be revitalized somewhat if they could convince Target to build a store there, and they tried to lure the corporate office of Target to send somebody to their town so that community officials could make a sales pitch and try to convince Target to put a store there. Target refused. Corporate Target said that they wouldn't even consider coming to an area unless it had a minimum household income of $50K.

[AsianGeek]

I thought the national median income is 45k a year. In any case, this statistic is really depressing considering how much cost of living is gone up with food, gas, and housing(yes I'm aware of the drop but still it's so high compared to 10-20 years ago). Then again, if this is all based on adjusted income then I'd believe it. Since my adjusted income is around 30k a year.

[Jersey_Steve]

by any chance, would the top 25% income be enough to live on your own in a place like Park Slope or Prospect Heights?

Probably. I don't know what that comes to a week, but rent in those areas is about $2k/month for a studio. It balances out since you don't have to worry about owning a car and the fees that come with it (like gas and insurance).

I think it's easy to forget just how much of the country is simply not metro NYC, LA, Chicago, etc., and that skews perception.

That's so true. Even more screwy is how people act. They're all nice and stuff... which makes me feel like a jerk because we don't act like that where I'm from. Like I visited my friend out in Indiana and people were so much more friendly, it actually seemed strange to me. Not really sure what that say about me as a person.

[wordsmith]

A nearby college professor wrote a business plan about how the downtown area would be revitalized somewhat if they could convince Target to build a store there, and they tried to lure the corporate office of Target to send somebody to their town so that community officials could make a sales pitch and try to convince Target to put a store there. Target refused. Corporate Target said that they wouldn't even consider coming to an area unless it had a minimum household income of $50K.

This is a pretty interesting line for Target to take, because the neighboring, slightly larger town to where I grew up has had a Target for the past several years, and this is their census information: "The median income for a household in the city was $37,060, and the median income for a family was $48,180. Males had a median income of $39,722 versus $21,961 for females. The per capita income for the city was $20,658. About 4.8% of families and 7.5% of the population were below the poverty line, including 12.8% of those under age 18 and 4.7% of those age 65 or over."

Another thing in my hometown is that housing is so inexpensive in the area that there is virtually nothing to rent. Nearly everyone, regardless of income, buys. The few rental units that there are and the few vintage homes that are retrofitted as apartments are incredibly cheap, too. In tha majority of the years I lived there as an adult, I paid $300 for a two-bedroom. I never paid more than $350 anywhere, there.

That's so true. Even more screwy is how people act. They're all nice and stuff... which makes me feel like a jerk because we don't act like that where I'm from. Like I visited my friend out in Indiana and people were so much more friendly, it actually seemed strange to me. Not really sure what that say about me as a person.

This is true, but it's also incrediby true of urban areas in the Midwest. I live in Kansas City, now, have lived in Chicago, and spent my college years just outside Minneapolis/St. Paul. It's not like it's just something confined to small towns, it's an overall attitude that's different. People are neighborly, they help one another out and hospitality and warmth are priorities. It's a big part of why I absolutely love the Midwest.

Midwestern attitudes overall tend toward no BS, down to earth plainspokenness and genuine politeness, though that's of course a generalization and there are always many exceptions. There is unquestionably a different mentality regarding how to treat neighbors, etc. in middle America. More than anything, your reaction to experiencing that just speaks to the mentalities and attitudes to which you're accustomed.

[winneythepooh7]

I have had several jobs that paid $32K or LESS in NYC and while it was hard, it was manageable. You really need to stick to a budget, cut out a lot of "wants" and also find an apartment situation that may be less than ideal.

I don't live in NYC anymore, but in the suburbs of NYC where it still is very expensive (major difference is we have a whole HOUSE now for what we would probably pay for a one or 2-bedroom in rent in some parts of NYC). Having 2 incomes definitely helps. I also make a lot more than $32K now, and along with my husband's income, this is really the only way we are able to afford our mortgage, as well as be able to sock away a significant amount of my pay checks.

[NotPersephone]

How bizarre... I make that much, and I feel poor. I guess I'm luckier than I think. Good to have some perspective.

[vinsanity]

It's SIMPLE to own a home where I'm from in middle America, if you have an income or the midtwenties or higher. Seriously. I have lifelong friends who have settled in the hometown. They were married in their early twenties, had a child by their midtwenties, the guy worked and the girl was a stay at home mom and commuter student, and they had absolutely no problem buying a home on one (starter) income.

I think it's easy to forget just how much of the country is simply not metro NYC, LA, Chicago, etc., and that skews perception.

heck, out in the desert just in the fringes of LA, there's a community where my lowly underpaid junior analyst salary would still be able to buy a beautiful new 3-br house with a pool. If you don't mind the occasional tumbleweed blowing past your house, it's the materialization of the American dream. Only two things stand in the way of it:

credit crisis
finding a job (junior analyst who?)

a third thing is that I'd be bored out of my mind on Friday/Saturday night, but that's almost how it is in the expensive area where I live; at least here you can find something to do if you look hard enough.

[nikorock28]

I would like to add some things to the discussion. First, 50% of people have zero tax liability, meaning they don't pay one penny in federal income taxes.

This makes sense when you look at the numbers: take the typical 4 person hosuehold: husbdand, wife, 2 kids and they earn $50K per year. After all deductions, exemptions and credits, this family will only pay about $1K in taxes. On the other hand, a single person with no children who makes $50K a year pays $6,600 a yr in taxes. 560% more than the family!

Personally, I would like to see MORE tax cuts for struggling single people... it bugs me that the emphasis is always on struggling families. The truth is the single person has to fend for him or herself while a married couple can rely on two incomes if need be.

[Jersey_Steve]

I would like to add some things to the discussion. First, 50% of people have zero tax liability, meaning they don't pay one penny in federal income taxes.

This makes sense when you look at the numbers: take the typical 4 person hosuehold: husbdand, wife, 2 kids and they earn $50K per year. After all deductions, exemptions and credits, this family will only pay about $1K in taxes. On the other hand, a single person with no children who makes $50K a year pays $6,600 a yr in taxes. 560% more than the family!

Personally, I would like to see MORE tax cuts for struggling single people... it bugs me that the emphasis is always on struggling families. The truth is the single person has to fend for him or herself while a married couple can rely on two incomes if need be.

However, the government WANTS you to be married and to have kids. Having kids means you're raising little taxpayers, and the government wants to make sure the population is growing.

Plus, there are a lot more expenses to a family with kids than a single person. Not to say that single people aren't struggling, but there is always going to be that focus on the family as the backbone of country.

[vinsanity]

also, it's a bit harder for 4 people to live off the salary of 1 person.

I'm going to have to go back a few years to look at my old tax returns, but that $6600 figure seems a bit high.

[PenforPrez]

I don't either, but I'm in a two-income household. However, I COULD live alone on what I make, I just couldn't live where I live now, most likely.

On $32k, I probably couldn't afford to buy a house, even here in St. Louis, where homes are cheap across the board. Unless I bought a tax-delinquent property from the city (STL city owns thousands of tax-delinquent homes and sells them for as little as $100 each, with huge regulations attached) and fixed it up, and that's a whole other issue. Of course, I'm not the least bit interested in buying a house right now. I'm having trouble keeping my small room clean. :p

I'm going to make slightly less than $20k this year (a substantial sum considering what I was making before), and I'm almost shocked at how much I can save with a little bit of effort. :)

A nearby college professor wrote a business plan about how the downtown area would be revitalized somewhat if they could convince Target to build a store there, and they tried to lure the corporate office of Target to send somebody to their town so that community officials could make a sales pitch and try to convince Target to put a store there. Target refused. Corporate Target said that they wouldn't even consider coming to an area unless it had a minimum household income of $50K.

This is a pretty interesting line for Target to take, because the neighboring, slightly larger town to where I grew up has had a Target for the past several years, and this is their census information: "The median income for a household in the city was $37,060, and the median income for a family was $48,180. Males had a median income of $39,722 versus $21,961 for females. The per capita income for the city was $20,658. About 4.8% of families and 7.5% of the population were below the poverty line, including 12.8% of those under age 18 and 4.7% of those age 65 or over."

I find that curious too. Target has one or two stores here in the city of St. Louis, and St. Louis is the poorest major city in the country (I think per capita income here in the city is only $17k). Of course, they didn't put a Target in any poor neighborhoods. The Target I go to here in the city is on the edge of one of the best neighborhoods on the South Side (mostly white middle class neighborhoods).

As far as taxes, I actually want to pay taxes, at least to St. Louis city. Is that weird? :redface:

Paul

[spiritedaway]

True, I'll agree that it's harder for a family of four to live on the salary of one (or two), but should the single person be punished because s/he happened to be single (may be result of working long hours or what not?) but makes a higher income? That person can't claim exemptions/child credit, etc.

It's sort of to analogous an article I read the the other day. A single person who is booking say, a hotel, is charged a higher price when the same room (same type, same everything) will be charged a slightly lower price if booked for two people. It's a common practice, but how exactly is that fair? It doesn't affect me since I usually travel with others, but I don't imagined I would be too pleased if I were to travel more (solo) and get charged more only because I'm traveling by myself.


also, it's a bit harder for 4 people to live off the salary of 1 person.

I'm going to have to go back a few years to look at my old tax returns, but that $6600 figure seems a bit high.

[wordsmith]

Why is paying taxes a punishment? I'm a fan of quite a few tax-funded programs, and glad to have my money going toward them.

[PenforPrez]

Why is paying taxes a punishment? I'm a fan of quite a few tax-funded programs, and glad to have my money going toward them.

That's the way I feel about it. :)

[Bocheezu]

Why is paying taxes a punishment? I'm a fan of quite a few tax-funded programs, and glad to have my money going toward them.

It's a punishment if you don't want to pay them.

[winneythepooh7]

I am about to have my first child, and my husband and I certainly make a heck of a lot more than $32K per year combined, but there is also no way in hell I'd be able to be a SAHM in this area without really struggling.

Fortunately, his business is doing quite well right now so he can swing the mortgage, but he relies on me to pay for our utilities, groceries and I am also the main person socking away our savings money. We also have another interesting situation.........he can't afford healthcare for us being self-employed, so that's another reason for me going back to work after the baby.

We also give a lot in terms of taxes in general, not counting "what is taken out of our paycheck". Try adding property taxes into the equation.........it's a lot more than the figure quoted up thread for a single person..........it's ON TOP of what is already taken out.........

[spiritedaway]

I wish that my argument wasn't taken out of context, but I think you're missing my point. In general, I'm a proponent of paying taxes (in fact, that question will come up for my state in the upcoming election and my hope is that we don't abolish state taxes) since it helps to fund a lot of state and local programs.

Having said that, my argument is that a single higher income earner (non business owner) is getting screwed with taxes since there are no tax credits to lower some of the tax payments. It's one thing if you're not paying a lot of taxes, but if you're trying to save and paying thousands in taxes, it's a big difference.

Case in point, if I'm single and working full time (totally making up numbers here) and in the 30% tax bracket, and you're working part time because you have kids and as a result, you're in the 15% tax bracket since (all things equal except for salary), that would be $30 out of every $100 that I make vs $15 that you make (+ whatever tax credit you get for your kids) when you and I are both trying to save. In that sense, I'm indirectly punished only because I happened to work full time (and make more) and because I'm single. That difference is quite substantial over time.

And that was my point - and not whether taxes in itself is a punishment.

(As an aside, the amount quoted by nikorock earlier thread is in the ballpark, if not much higher, if you combine other taxes as well (state + sales tax, excise tax and property taxes)

Why is paying taxes a punishment? I'm a fan of quite a few tax-funded programs, and glad to have my money going toward them.

[nikorock28]

It IS $6600 for $50K for a single person who is taking the standard deduction.
Taxable income = $50,000 - $5,450 (stanndard deduction) - $3,500 (personal exemption) = $41,050

TAXES on $41,050:
0-8,025: 10% = 802.50
8,025-32,550: 15% = 3,678.75
32,550-41,050: 25% = 2,125
TOTAL = $6,606.25

Of course, the wise financial strategy is to sock away $8,500 in your 401k for the yr to avoid the 25% bracket entirely.

If this single earner happened to live in CA (NY is similar but 1.35% less), his/her income earned in excess of $44,400 would be taxed at greater than 40% (federal 25%, state 8%, SS+ Medicare 7.65%). I personally find that to be absolutely crazy.

[nikorock28]

We also give a lot in terms of taxes in general, not counting "what is taken out of our paycheck". Try adding property taxes into the equation.........it's a lot more than the figure quoted up thread for a single person..........it's ON TOP of what is already taken out.........

As far as I know, a single person who owns a home also pays property taxes ;): And I am sure you guys pay way more than $1K in federal taxes =)

[roulettefanatic]

this tidbit is very interesting....where i'm from 32k is barely enough to rent a small one bedroom apartment (and it would have to be with a roommate or SO) and you couldn't possibly have a luxury car or go out drinking every weekend or go on extravagant vacations without going into debt (not that these are priorities for everyone but the point i'm trying to make is that you would lead a very basic life, paying for rent, food, car insurance and a few extras once in a while)....the 32k would literally keep you in that apartment and that's about it.....never mind owning property or buying a house (you would have to save for a good 10 years before that's possible).....i always find it interesting to compare how far a certain salary goes in different areas of the country and i honestly think it's a shame that a decent salary (in my opinion 32k is hardly bad, it's ok) can't get you a basic home in some places.....

[nikorock28]

Having said that, my argument is that a single higher income earner (non business owner) is getting screwed with taxes since there are no tax credits to lower some of the tax payments. It's one thing if you're not paying a lot of taxes, but if you're trying to save and paying thousands in taxes, it's a big difference.


I'm with you. Oh, and I also forgot about the stimulus package from earlier this year. Take the $50K family and they are actually paying ZERO taxes and getting a check from the government for $800 for the year. It just doesn't seem fair to me, but such is life. Perhaps tax policy will sway my decision to one day have children :P

[vinsanity]

I wished that my argument wasn't taken out of context, but I think you're missing my point. In general, I'm a proponent of paying taxes (in fact, that question will come up for my state in the upcoming election and my hope is that we don't abolish state taxes) since it helps to fund a lot of state and local programs.

Having said that, my argument is that a single higher income earner (non business owner) is getting screwed with taxes since there are no tax credits to lower some of the tax payments. It's one thing if you're not paying a lot of taxes, but if you're trying to save and paying thousands in taxes, it's a big difference.

Case in point, if I'm single and working full time (totally making up numbers here) and in the 30% tax bracket, and you're working part time because you have kids and as a result, you're in the 15% tax credit since (all things equal except for salary), that would be $30 out of every $100 that I make vs $15 that you make (+ whatever tax credit you get for your kids) when you and I both trying to save. In that sense, I would be indirectly be punished only because I happened to work full time (and make more) and because I'm single. That difference is quite substantial over time.

And that was my point - and not whether taxes in itself is a punishment.

(As an aside, the quoted amount quoted by nikrock earlier thread is in the ballpark, if not much higher, if you combine other taxes as well (state + sales tax, excise tax and property taxes)

To be honest, if I all of a sudden had to support 3 other people on my current salary, damn right I'd be happy to take the tax breaks.

nikorock: thanks for the quick calculation.

[spiritedaway]

Heh heh, I suppose that's an "added" incentive. :)

I actually didn't see the stimulus check quite as a "stimulus check". Maybe it was the wrong approach, but I thought of it as getting back a very small slice of what I paid for taxes already (not so much "extra" money I could spend). Most of it went back into bills...not really sure it helped to "stimulate" the economy. :D (Though it's quite clear the economy needs more help than the stimulus plan).

On the whole, I also think it's absurd when one could be paying up to 40% of their income on taxes. I thought the sales tax in California is quite high, 8.25% in some parts of SoCal.

Since you seemed to have a lot of knowledge there, do you actually know anyone who invest that much into their 401K to avoid the 25% bracket altogether? Personally, I don't know anyone who can afford to do that since I'd imagined it would be very difficult for the average 20-something, but is it more common than I may have realized?

I'm with you. Oh, and I also forgot about the stimulus package from earlier this year. Take the $50K family and they are actually paying ZERO taxes and getting a check from the government for $800 for the year. It just doesn't seem fair to me, but such is life. Perhaps tax policy will sway my decision to one day have children :P

[vinsanity]

Why is paying taxes a punishment? I'm a fan of quite a few tax-funded programs, and glad to have my money going toward them.

That's the way I feel about it. :)

HA! Call me when you guys reach that 40% bracket niko mentioned :evil:

[spiritedaway]

That's what I mean. It's not so bad if you're not paying a lot of taxes or if you can benefit a bit from the tax breaks, but the average single higher income earner is getting screwed with taxes.

ditto - thanks nikorock for the calculation.

To be honest, if I all of a sudden had to support 3 other people on my current salary, damn right I'd be happy to take the tax breaks.

nikorock: thanks for the quick calculation.

[vinsanity]

On the whole, I also think it's absurd when one could be payment up to 40% of their income on taxes. I thought the sales tax in California is quite high, 8.25 in some parts of SoCal.

yup, that's why I'm still living the ghetto fabulous lifestyle. Can you believe that CA is still in a budget defecit?



Since you seemed to have a lot of knowledge there, do you actually know anyone who invest that much into their 401K to avoid the 25% bracket altogether? Personally, I can't (have quite a few bills to pay) and I don't know anyone who can afford to do that since I'd imagined it would be very difficult for the average 20-something, but is it more common than I may have realized?

It's hard to avoid, since the 25% federal bracket kicks in so low, but anything that will get taxable income to 32,550 or lower (according to niko's chart). So, anything above and beyond $41,500 (plus any student loan interest) for the year would have to be put away into a tax-exempt vehicle in order to avoid the 25% bracket.

(32550 + 5450 std. deduction + 3500 exemption = $41,500)

[nikorock28]

Heh heh, I suppose that's an "added" incentive. :)

On the whole, I also think it's absurd when one could be paying up to 40% of their income on taxes. I thought the sales tax in California is quite high, 8.25% in some parts of SoCal.

Since you seemed to have a lot of knowledge there, do you actually know anyone who invest that much into their 401K to avoid the 25% bracket altogether? Personally, I don't know anyone who can afford to do that since I'd imagined it would be very difficult for the average 20-something, but is it more common than I may have realized?

I don't think it is that common as I think the typical 401k contribution is probably 6-10%. And I think that goes for all ages, life situations, etc. As for me, I put just enough into my 401k to get me under the dreaded 25% tax bracket and into the more reasonable 15% one. I do not have to invest that much this yr though because I am now a home owner which enables me to itemize my deductions above and beyond the standard deduction. I grew up in southern CA but after college I quickly realized that I would never be able to get ahead in life if I continued to live there on a non 6 figure income. I now reside in AZ where property is actually affordable. The main point is that I absolutely refuse to pay 25% federal income tax and I will adjust things every year so that I never will =) Then, when I pull that money out in retirement it will be in a lower income tax bracket as I expect my expenses will be much lower (paid off home, no school loans, etc) and I will be able to get by on a lower income. There you go, that's my tax strategies =)

I think it is important to understand the tax system and, like anything else, think about it in a logical way so you are able to make wise financial decisions.

[nikorock28]

Yeah, seriously, the 25% bracket kicks in way too low. Paying more taxes as you make more money is kind of a disincentive to work your way up the ladder, isn't it? I mean, once you get into higher 5 figures, in states like CA, you are literally paying over 50% on taxes (not including any property tax, sales tax, etc.) for income earned in the highest bracket. My advice for this person would be to save up enough investment income to be able to, one day, work part-time and pay lower taxes :P And, you will still get much of your social security benefit this way as it is tailored to lower income earners.

[nikorock28]

yup, that's why I'm still living the ghetto fabulous lifestyle. Can you believe that CA is still in a budget defecit?


It's probably because of all those liberal social welfare programs. Another thing I noticed is that unemployment benefits in AZ are nothing compared to CA.

[spiritedaway]

Yeah, I read an article just the other the other day on California (tightening of credit). I think quite a few states are struggling.

http://www.telegraph.co.uk/news/newstopics/celebritynews/3130508/Arnold-Schwarzenegger-California-needs-7-billion-loan-to-fend-off-credit-crisis.html

I've been to SoCal 3 times in the past year and went up to San Fran for the first time earlier this year. The scenery and the views of the Pacific are absolutely breathtaking. I'm not so sure I want to live there (no snow :D) or if I could even "afford" to live there (depending on where you're looking at in SoCal, rents for a studio (!) can be $1200+. Unless the income is significantly higher there (I didn't think the difference is that much compared to the Northeast), so I honestly don't know how the average 20-something can reasonably afford to live there and/or purchase.

What part of SoCal are you near? The last several times that I visited, I've primarily been near the Redondo/Hermosa Beach area.

yup, that's why I'm still living the ghetto fabulous lifestyle. Can you believe that CA is still in a budget defecit?

[vinsanity]

Yeah, seriously, the 25% bracket kicks in way too low. Paying more taxes as you make more money is kind of a disincentive to work your way up the ladder, isn't it?

Ha. Wait til you reach the $250k mark under Obama's presidency. If he wins, I'm seriously going to consider a career switch to estate planning. A lot of wealthy people are going to pay good money to protect their income.

I mean, once you get into higher 5 figures, in states like CA, you are literally paying over 50% on taxes (not including any property tax, sales tax, etc.) for income earned in the highest bracket. My advice for this person would be to save up enough investment income to be able to, one day, work part-time and pay lower taxes :P And, you will still get much of your social security benefit this way as it is tailored to lower income earners.

At my age, I can expect to receive exactly one year of SS benefits before the fund is depleted. Hooray for government spending :rolleyes:

[vinsanity]

Yeah, I read an article just the other the other day on California (tightening of credit). I think quite a few states are struggling.

http://www.telegraph.co.uk/news/newstopics/celebritynews/3130508/Arnold-Schwarzenegger-California-needs-7-billion-loan-to-fend-off-credit-crisis.html

I've been to SoCal 3 times in the past year and went up to San Fran for the first time earlier this year. The scenery and the views of the Pacific are absolutely breathtaking. I'm not so sure I want to live there (no snow :D) or if I could even "afford" to live there (depending on where you're looking at in SoCal, rents for a studio (!) can be $1200+. Unless the income is significantly higher there (I didn't think the difference is that much compared to the Northeast), so I honestly don't know how the average 20-something can reasonably afford to live there and/or purchase.

What part of SoCal are you near? The last several times that I visited, I've primarily been near the Redondo/Hermosa Beach area.

I live in Anaheim (where Disneyland is), and the rents aren't quite as bad here ($1700 for a pseudo-lux 2br apartment). But where I work in the Irvine/Newport Beach area, $1200 studios are the norm.

[spiritedaway]

Thanks for sharing your tax strategies - quite impressive, indeed! My financial strategies are similar, though I have suspended my 401k contribution at the moment due to a job change (and I have not set up a new account). From a financial standpoint, I should still contribute, but I may wait just a little bit since my 401k performance really tanked this year.

I think the first time I remembered thinking that the tax system was messed up was when I first graduated (during the last recession). My good friend and I both finally landed a job, and her salary put her in the 15% bracket. I made just a bit more but it was enough to tip me into the next bracket. I remembered that we figured out our "after-tax" income would just be around the same (if I remembered correctly, I actually ended up with less) which I thought was strangely ironic, though we both had a good laugh over it. Unfortunately, I was quite broke as a newly minted graduate and didn't know much about 401k at that time. I considered it to be one of those live-and learn lessons.

I think it is important to understand the tax system and, like anything else, think about it in a logical way so you are able to make wise financial decisions.

[Bocheezu]

From a financial standpoint, I should still contribute, but I may wait just a little bit since my 401k performance really tanked this year.

The performance now doesn't matter, it's the performance 30 years from now that matters. Buy low, sell high, etc.

[redav]

I'm a bit late to the discussion, but a few things:

It's pretty common for people/studies to quote average income, average household income, median income, & median household income. While most people don't distinguish between them, there's a big difference. Since not everyone is an income earner, so many tax filings are joint returns, and people share living expenses (as families, roommates, etc), I can't say which is most appropriate to glean for social trends and insight. While $32k doesn't sound like a lot, it is compared to pretty much anywhere else. When I was in grad school (my first 'job' after graduating), I was making $22 (there were tax advantages since it was from the university, but I also had to pay tuition/books/fees/etc). It was so much more than I was used to as an undergrad that I lived quite comfortably on it and was even able to save quite a bit. When I went into the workforce, that let me max out my savings without missing any of it. I pretty much maxed out my 401(k), which in turn really lowered my taxes, and I only actually got into the 25% bracket in 2006 (but a couple of those years my house it what caused that).

I believe a broad tax system, combining a (essentially) flat income tax, property tax, & sales tax is the most fair method of taxation. There are some popular deductions that should be reduced/eliminated, but not entirely since using those incentives is a proven method to motivate people to do things. People who make more should pay more into the system. Sales taxes are simpler and catch those who try to avoid income taxes. Property taxes are necessary because there's only so much to go around, and these taxes cause people to 'use' it with more discretion.

If taxes are collected, then everyone who benefits from society should pay some skin into the pot, even if it is only a little; otherwise, they have no vested interest other than what they can get out of the system.

I would hate to see the breaks given to families, specifically for having children, reduced, even if it means I have to pay more right now before I have a family. Raising kids is expensive, and as far as the future goes, more raising them right is more important than anything else you do, so it makes sense to put some money back in parents' hands. However, like the addition of using SSNs on the 1040, there needs to be ways to keep people from abusing it.

[winneythepooh7]

I would hate to see the breaks given to families, specifically for having children, reduced, even if it means I have to pay more right now before I have a family. Raising kids is expensive, and as far as the future goes, more raising them right is more important than anything else you do, so it makes sense to put some money back in parents' hands. However, like the addition of using SSNs on the 1040, there needs to be ways to keep people from abusing it.

I am a social worker and I completely agree with you. I work for a system that is horribly broken right now. About 12 years ago, when the program first came into existence, it threw money at the clients for basically anything they wanted. Now there have been huge tax cuts and the $$$ just doesn't exist anymore. However, many clients have been "spoiled" and consider so many things that are NOT in fact entitlements, to be "entitlements". Believe it or not, the biggest thorns in my side are families who actually HAVE the financial resources to not bleed off this system too. We currently work with one family who live in a mansion in a ritzy upscale neighborhood on the North shore of Long Island, told us they pay $30K a year in property taxes at their first meeting, yet, are still trying to bully the program into paying for their relative's housing subsidy. They turn down every apartment that is shown to him saying "it's too small" or "not in a decent neighborhood" and say that we should just "tell the state" to give him the $$$$$ to get his own place in their neighborhood. They could really just go out and BUY him his own condo if they wanted to. If they were really smart, they would do that, charge him market rent and then get a subsidy that way ;). (Not that I can advocate that because that is still technically milking the system).

Families do this with other things as well, when they really do not need the $$$$ at all.

I have found that the people I work with who were raised with really no pot to piss in are truly the most grateful for whatever resources we are able to link them up with.

[gemma-dahl]

Why is paying taxes a punishment? I'm a fan of quite a few tax-funded programs, and glad to have my money going toward them.

Don't most income taxes go towards paying down interest on the Federal Reserve? I don't know. My understanding is that business taxes are actually what supports the social programs. And since businesses get so many damn loopholes anyway, I say, "Let them pay."

But I don't love paying taxes, either. Thankfully, I live someplace with a super-low COL (and a super-varied job market to match, ha ha). Most of the Midwest and Plains states, plus post-industrial wasteland places like Ohio, Michigan, rural Pa., W.Va., etc. are really good deals.

It seems like in a lot of places, the rents will double or triple and the salaries don't match. New York is an obvious example. I look for jobs there all of the time, and I can't tell you the number of times I see crap like, "Editorial assistant. 11 dollars an hour. Must own car." :rolleyes:

[wordsmith]

I guess I just look at it as the cost of living in a society with amenities.

[Jersey_Steve]

I guess I just look at it as the cost of living in a society with amenities.

I guess my problem with taxes is that I put money in, but I don't really get as many services as the people who don't (i.e. the bottom 50%). It's not like we don't need the services as well. But no, we collect a paycheck, so we have to pay for those who don't.

Like my school district is now offering full-day preschool to low income families, completely free of charge to them. When I was a kid, my parents paid for my preschool and kindergarten out of their own pockets.

Or one of my personal favorites, back when I was in high school. All the "low-income" kids got a free lunch and came in wearing expensive clothes and jewelery. You have enough for $80 jeans and your mom to have a Benz, you have enough for a $3 lunch.

I mean, I can go on and on. From refunds to subsidies on almost everything and what seems like free everything, it really bothers me sometimes. I almost wish I was poor, then the government would give me everything.

I'm gonna stop now before I say something to get myself modded. But I wish I got those amenities for all the money my family pays for.

[PenforPrez]

But I wish I got those amenities for all the money my family pays for.

You actually do, they're just not as visible or obvious. Roads, state and national parks (I am a heavy user of the former), libraries, police, public health (which does benefit us all by tracking medical trends), food and drug inspectors.

That last one is very important. Before the Pure Food and Drug Act was passed in 1906, a manufacturer could put ANYTHING on the shelf and claim it to have any sort of curative powers with or without scientific evidence, and it was perfectly legal.

I remember reading about a man from Chillicothe, Ohio from that time who had a cold and bought some sort of alleged cold remedy and took it. What he wound up taking was almost pure arsenic, and he died within 20 minutes. Food and drug inspection--very important. :)


I mean, I can go on and on. From refunds to subsidies on almost everything and what seems like free everything, it really bothers me sometimes. I almost wish I was poor, then the government would give me everything.

I've dealt with this personally. About three years ago, I started a long search to find affordable mental health counseling. I went to the local mental health clinic, only to find out that all outpatient mental health aid had been cut by the state. All of it. Governor Blunt (the man who views contraception as a form of abortion) had decided that mental health was an unnecessary state expense. He later tried to close a state-run mental hospital here in St. Louis and basically kick the inpatients out in the street. That didn't get very far, thank God.

Having informed me of this, said mental health clinic wanted to charge me $90 cash for 15 minutes a week. I was depressed and I had an out of control anger problem, but I couldn't afford it, and 15 minutes a week is simply not enough time in outpatient therapy. I wound up floating for almost a year before I found my current therapist, who did a sliding scale fee (which I am still on).

I was lucky in finding that. Most people in my position (below-average income and uninsured) don't have that and can't find it. A lot of private insurance does not cover mental health; Wal-Mart insurance does not (as I found out the hard way!). So they either need the state to help or do without. The latter is the worst thing you can possibly do.

A year or two ago in Kansas City, the institution housing the largest number of mentally ill people was the Jackson County jail. Followed by the city jail. That may have changed; I really hope so. But that makes the problem obvious.

Long story short, all of society suffers when people cannot get the help they need. If somebody told me that with a tax increase, we would guarantee all necessary help to the mentally ill, I'd support it in a heartbeat, as long as the proposal was common sense. I've done without help. I couldn't do it again.

Paul

[winneythepooh7]

I guess my problem with taxes is that I put money in, but I don't really get as many services as the people who don't (i.e. the bottom 50%). It's not like we don't need the services as well. But no, we collect a paycheck, so we have to pay for those who don't.

Like my school district is now offering full-day preschool to low income families, completely free of charge to them. When I was a kid, my parents paid for my preschool and kindergarten out of their own pockets.

Or one of my personal favorites, back when I was in high school. All the "low-income" kids got a free lunch and came in wearing expensive clothes and jewelery. You have enough for $80 jeans and your mom to have a Benz, you have enough for a $3 lunch.

I mean, I can go on and on. From refunds to subsidies on almost everything and what seems like free everything, it really bothers me sometimes. I almost wish I was poor, then the government would give me everything.


I'm gonna stop now before I say something to get myself modded. But I wish I got those amenities for all the money my family pays for.


How do you know they weren't living on credit or getting the $$$$$$ for the benz by sketchy, illegal means?

I've noticed from my work as well that it's pretty common for people who are "poor" to focus on brand names and such because it gives them a sense of status and importance. I also know from my work that credit card companies target the poor and in the end, it's a problem because many of them can't handle the access to credit and become even more in debt which creates more problems for society overall.

[wordsmith]

Or one of my personal favorites, back when I was in high school. All the "low-income" kids got a free lunch and came in wearing expensive clothes and jewelery. You have enough for $80 jeans and your mom to have a Benz, you have enough for a $3 lunch.

Eh, you don't know anybody's backstory, really. When I was in grade school, I was eligible for reduced lunches. My parents owned a mom and pop business and we didn't have much. They were also proud, and because of that, I didn't actually TAKE the reduced or free lunches, but I was eligible. My dad, a school board member who tried to change the process, wasn't keen on how the program was administered, because they'd give low-income kids a different colored lunch ticket and make us stand in a different line, which he thought was classist bullshit (he eventually got it changed). In any case, I'm sure I looked completely presentable at all times. I had an older cousin who frequently gave me hand-me-down designer label clothes. My grandmother also often bought my school clothes to help take some of the pressure off my parents. It's kind of ridiculous that somebody would think they could look at my sweatshirt or sneakers and pretend to know my family's income. My clothes could have come out of a charity box (and, in a sense, did), for all anybody knew. Don't pretend to know jack squat about anybody's financial situation, based on your powers of observation as a high school student, seriously.

[winneythepooh7]

Eh, you don't know anybody's backstory, really. When I was in grade school, I was eligible for reduced lunches. My parents owned a mom and pop business and we didn't have much. They were also proud, and because of that, I didn't actually TAKE the reduced or free lunches, but I was eligible. My dad, a school board member who tried to change the process, wasn't keen on how the program was administered, because they'd give low-income kids a different colored lunch ticket and make us stand in a different line, which he thought was classist bullshit (he eventually got it changed). In any case, I'm sure I looked completely presentable at all times. I had an older cousin who frequently gave me hand-me-down designer label clothes. My grandmother also often bought my school clothes to help take some of the pressure off my parents. It's kind of ridiculous that somebody would think they could look at my sweatshirt or sneakers and pretend to know my family's income. My clothes could have come out of a charity box (and, in a sense, did), for all anybody knew. Don't pretend to know jack squat about anybody's financial situation, based on your powers of observation as a high school student, seriously.

Really good points, thanks for bringing this up. Again, as someone who is immersed in our "systems" on a daily basis, it's really not as easy as one may think to gain access to many services----especially where there is even the hint of financial subsidies and "gain" being involved.

I am again not saying it has always been this way----but it has changed from what I have seen in the 4 years alone that I have been working for the program that I do.

And I still stand by my observation that it tends to be people who don't have much who maintain their pride and often turn down services they are eligible for, for fear of "taking from someone else truly in need".

I will also say that from my work, I hope that I never need the services that I work with each day, because it is such a horribly broken system that can really take YEARS to gain even a little tiny bit of assistance from.

[wordsmith]

Seriously, spend as little as six months as a legal advocate for disabled and poor people who are getting denied Medicaid and/or food stamps, and it becomes abundantly clear how inept a descriptor the word "handout" even is. Most people don't know, unless they've been on them, but public benefits are hardly "handed out" indiscriminately. Loads of people who should be, and indeed ARE, eligible for aid of all kinds get completely shut out due to the way programs are administered.

[winneythepooh7]

Seriously, spend as little as six months as a legal advocate for disabled and poor people who are getting denied Medicaid and/or food stamps, and it becomes abundantly clear how inept a descriptor the word "handout" even is. Most people don't know, unless they've been on them, but public benefits are hardly "handed out" indiscriminately. Loads of people who should be, and indeed ARE, eligible for aid of all kinds get completely shut out due to the way programs are administered.

I think the average turn-down rate is about 3x and spans out a year or two. Often people have to get an attorney involved to get benefits. Then, once you are on, it can be a challenge to keep them going. I have clients whose benefits get shut down all the time and I am given 6 different reasons why..............and that's another thing.........NO ONE in the Medicaid offices communicate with one another so good luck trying to get answers on this stuff. 9 times out of 10 it has been Medicaid's mistake and they just shut the person down for no apparent reason.

It's frustrating for me as a professional dealing with these systems...........I can't imagine how hard it must be for someone who is down on their luck/facing a major disability and the stress related to all that/serious cognitive impairments/lack of family support/etc. etc. etc. to deal with these "people".

You are correct too................most people really just don't know what it's like out there if they have not needed to rely on public resources as their only means of "support". I've also been doing this kind of work for over 10 years now, and in that time span have literally worked with hundreds of clients so I can't totally be pulling these stats out of my ass ;).

[wordsmith]

I think the average turn-down rate is about 3x and spans out a year or two. Often people have to get an attorney involved to get benefits. Then, once you are on, it can be a challenge to keep them going. I have clients whose benefits get shut down all the time and I am given 6 different reasons why..............and that's another thing.........NO ONE in the Medicaid offices communicate with one another so good luck trying to get answers on this stuff. 9 times out of 10 it has been Medicaid's mistake and they just shut the person down for no apparent reason.

The most common reason, at least in this state's public benefits administration, are disabled people being "not considered permanently and totally disabled," which 9/10 of the time is due to state error. We had cases of amputees where the state "had no record of their having been disabled," which means the caseworker did an insufficient job of completing their medical files. The caseworker turnover is huge, people are underpaid, and incompetence abounds. The other most common reason is paperwork error on the part of the state office. These things are easy enough to fix at a hearing, but in the meantime, you have sick and/or elderly people who have their only income frozen and can't get food or medicine. Not good. Also, many low and fixed income people on public benefits are not aware that they can get legal assistance free of charge, and are not aware that they can represent themselves at hearings if they want to dispute the action taken by the state on their benefits (although it's not a good idea, they'll likely get railroad without advocacy). So they just figure they have no options, because they can't afford an attorney they'd have to pay for every time they get a letter about their Medicaid or food stamps.

[gemma-dahl]

I guess I just look at it as the cost of living in a society with amenities.

Oh, don't get me wrong, so do I. But almost half my income is from self-employment. So filing every year is terrible. I filed online for 2007 and it wasn't so bad. But, you also have to keep on top of quarterly set-asides. I wish I knew an accountant.

I guess my problem with taxes is that I put money in, but I don't really get as many services as the people who don't (i.e. the bottom 50%). It's not like we don't need the services as well. But no, we collect a paycheck, so we have to pay for those who don't.

Or one of my personal favorites, back when I was in high school. All the "low-income" kids got a free lunch and came in wearing expensive clothes and jewelery. You have enough for $80 jeans and your mom to have a Benz, you have enough for a $3 lunch.

I mean, I can go on and on. From refunds to subsidies on almost everything and what seems like free everything, it really bothers me sometimes. I almost wish I was poor, then the government would give me everything.

I'm gonna stop now before I say something to get myself modded. But I wish I got those amenities for all the money my family pays for.


That's why I'm so pro-national healthcare. I really do think every tax payer deserves basic care. But the poor really don't have a fun, free ride. They're getting the basics. Nothing more, no frills.

Besides, you can't tell with clothes. I have a bunch of designer dresses and I bought them all at consignment stores for 5 dollars or less, because I can't justify expensive clothes on my income. Basically, I wear hand-me-downs for grownups. I bet a lot of lower-income people do the same.

[wordsmith]

Oh, don't get me wrong, so do I. But almost half my income is from self-employment. So filing every year is terrible. I filed online for 2007 and it wasn't so bad. But, you also have to keep on top of quarterly set-asides. I wish I knew an accountant.

Trust me, I grew up in a family of six that was supported wholly my entire childhood by one self-employed person's income. It's definitely not a cakewalk to be self-employed (and I'd never do it myself, now, thanks to that experience), let alone having that be the sole means of support for a large family.




That's why I'm so pro-national healthcare. I really do think every tax payer deserves basic care. But the poor really don't have a fun, free ride. They're getting the basics. Nothing more, no frills.

And often, not even the basics. So very many people are left sitting in the cracks when they really shouldn't be; they're actually eligible for care.

Besides, you can't tell with clothes. I have a bunch of designer dresses and I bought them all at consignment stores for 5 dollars or less, because I can't justify expensive clothes on my income. Basically, I wear hand-me-downs for grownups. I bet a lot of lower-income people do the same.

Pretty much. I wear very little that's any type of label, and if I do, it's secondhand, consignment, or discount.

[vinsanity]

That's why I'm so pro-national healthcare. I really do think every tax payer deserves basic care. But the poor really don't have a fun, free ride. They're getting the basics. Nothing more, no frills.

With a national socialized health care system, get ready for the government taking an interest in how you take care of yourself (diet, alcohol, smoking). It won't be pretty what with our reputation for obesity :rolleyes:

[and1grad]

With a national socialized health care system, get ready for the government taking an interest in how you take care of yourself (diet, alcohol, smoking). It won't be pretty what with our reputation for obesity :rolleyes:
It might be best to avoid a national health care discussion here unless we want the thread to completely change course.

[yankeeyosh]

That number probably includes part time workers, who make up about 18% of the workforce. http://en.wikipedia.org/wiki/Household_income_in_the_United_States shows that the full time worker in this country makes about $40,000 as a median (average of men and women). It still seems like there is some discrepency, because even though the part time population is non-trivial, I don't think it is big enough to effectively reduce the overall median salary by $8,000 from the full time salary. Perhaps students and teens are also in the mix. The average household income is now about $50k, so the fact that there are a lot of singles out there and even one-income families, $40k for a median for full timers makes more sense.

That said, even $32k could be enough to live on, depending on your situation and where you live. As a grad student, I was able to live on $17-18k for two years, but I was in northern Fla., one of the cheapest areas of the country. I could never make it on that amount here, and unless I didn't own a car, $32k would be nearly impossible either in this town, even as a single person. A car will essentially eat $5-10k of pretax earnings, so you have to take that into consideration.

I think a lot of these numbers don't take into consideration income from second jobs, which despite labor statistics showing only 5% of workers have one, seem to be a lot more abundant in recent years.

[redav]

A car will essentially eat $5-10k of pretax earnings, so you have to take that into consideration.
How do you come to those figures? Is it related to expenses from your locale?

The reason I ask is that my car doesn't cost anywhere near that. When I was still making payments, sure, but if you take care of a car, you can get many years of use without payments which brings the overall cost of ownership down, not to mention used cars that also bring cost of purchase down.

That being said, it seems most people buy more car than they need, do not take care of it (so it wears out too soon), and get rid of it when they should continue to hold on to it.


Earlier in the thread were some comments on avoiding the 25% bracket. If you look at the curve of actual tax rate (tax liability / income), you'll notice that there is a small blip around where each new bracket starts--and the blip for the 25% bracket is the largest--but it doesn't vary much from the overall curve. So, getting yourself below that magic number really doesn't change things much from being a bit over it.

[vinsanity]

I believe the info is gathered from tax returns, so anyone who filed a return for 2007 is included in the data. Remember also that a number of people can defer portions of their income into future years by means of certain tax provisions.

[vinsanity]

How do you come to those figures? Is it related to expenses from your locale?

Estimated ownership costs for 2003 Civic, 2003 Corolla:

http://www.edmunds.com/used/2003/honda/civic/100178479/cto.html?setzip=92807&vdp=off
http://www.edmunds.com/used/2003/toyota/corolla/100074067/cto.html?setzip=92807&vdp=off

Factor out financing and depreciation, and it still averages out to over $5k per year.

[Bocheezu]

Factor out financing and depreciation, and it still averages out to over $5k per year.

Those numbers are way too high -- the insurance on my 2006 Fusion is half that. Even if I put in my zip code, it's still way too high. And repair/maintenance shouldn't be that high, either, unless you wreck it twice a year or something.

[yankeeyosh]

How do you come to those figures? Is it related to expenses from your locale?

The reason I ask is that my car doesn't cost anywhere near that. When I was still making payments, sure, but if you take care of a car, you can get many years of use without payments which brings the overall cost of ownership down, not to mention used cars that also bring cost of purchase down.

That being said, it seems most people buy more car than they need, do not take care of it (so it wears out too soon), and get rid of it when they should continue to hold on to it.


Earlier in the thread were some comments on avoiding the 25% bracket. If you look at the curve of actual tax rate (tax liability / income), you'll notice that there is a small blip around where each new bracket starts--and the blip for the 25% bracket is the largest--but it doesn't vary much from the overall curve. So, getting yourself below that magic number really doesn't change things much from being a bit over it.

If you drive a normal amount (say, 12-15,000 miles) and you get 25 miles per gallon, you use 500-600 gallons a year. Price it in at $3.00 a gallon (which is much lower than earlier this year), you're talking $1,500 to 1,800. SUV? Much higher.

If you're lucky and you don't have any car issues, maintenance is probably $400 a year. That could easily go well into the thousands if anything goes wrong.

Unless you're out in the sticks, decent insurance is probably $1,000-1,500 a year....easily over $2,000 if you're young, have any infractions, and live in an urbanized area.

Fees, excise taxes (if applicable), safety inspection, and registration is another $100 or so.

Tolls and parking might be another $200.

So on the very low end...we're talking economy car, good driving record, no payments, no car problems, you're talking $3,200 post-tax, or about $5,000 pre-tax per year. This could easily go much, much higher with any car problems or additional driving. And this is if you own the car outright. An economy car will be another $300 posttax a month for payments...or about $5,000 a year pre-tax. Any upgrades can again be much higher. Ten thousand pre-tax may be a low estimate on the "high end".

I remember one year where I spent about half my paycheck on my car alone. It is incredible how much money you spend on it.

[AsianGeek]

Yeah my car last year costed me almost 3k in repairs alone. This year I've spent about 1k. The costs fluctuate so much it's scary.

[AllisonD]

I bought my first car two years ago and it still easily costs me $6,000 a year. My car payment is $250, insurance monthly $100, and gas costs me $160 a month. 40 bucks to fill up once a week. Plus registration fees, getting my oil changed every couple of months and new tires (I had to buy them this year I think it cost me over $400). It very well can cost you a killing if you live somewhere with no public transportation...(south Florida). I do plan on keeping it for a long time especially after experiencing what a waste of money a car is when bought new.

[spiritedaway]

I agree that car maintenance is very expensive. I may consider buying a "used" car if I need to buy again. I bought a brand new car four years ago (have since paid if off), and it's been reliable for the most part. I had to replace my 2 tires (very worn threads) and 1 tire (due to flat) and those were costly. The recommended maintenance checkpoint is costly too. And I may have to replace brake roters/new pads soon that will cost upwards of $300-500 (not counting the insurance cost and gas). It was costing me upwards of $200/month in gas until I switched jobs recently.

The appealing thing about a new car is that I know it's brand new, so presumably, it's got no problems (unless I'm just unlucky). In a way, it's also paying a premium for a piece of mind, so to speak, even though I'm sure I could get a perfectly good/reliable used car. In my case anyway, I wanted a car that's either new or one that's no older than 2 years old, so I found that the cost difference wasn't too significant. I also figure it's a good investment (since I "plan" to use it for 10+ years, if possible), and it's been a good 4 years so far and still looks fairly new!

I bought my first car two years ago and it still easily costs me $6,000 a year. My car payment is $250, insurance monthly $100, and gas costs me $160 a month. 40 bucks to fill up once a week. Plus registration fees, getting my oil changed every couple of months and new tires (I had to buy them this year I think it cost me over $400). It very well can cost you a killing if you live somewhere with no public transportation...(south Florida). I do plan on keeping it for a long time especially after experiencing what a waste of money a car is when bought new.

[yankeeyosh]

I agree that car maintenance is very expensive. I may consider buying a "used" car if I need to buy again. I bought a brand new car four years ago (have since paid if off), and it's been reliable for the most part. I had to replace my 2 tires (very worn threads) and 1 tire (due to flat) and those were costly. The recommended maintenance checkpoint is costly too. And I may have to replace brake roters/new pads soon that will cost upwards of $300-500 (not counting the insurance cost and gas). It was costing me upwards of $200/month in gas until I switched jobs recently.

The appealing thing about a new car is that I know it's brand new, so presumably, it's got no problems (unless I'm just unlucky). In a way, it's also paying a premium for a piece of mind, so to speak, even though I'm sure I could get a perfectly good/reliable used car. In my case anyway, I wanted a car that's either new or one that's no older than 2 years old, so I found that the cost difference wasn't too significant. I also figure it's a good investment (since I "plan" to use it for 10+ years, if possible), and it's been a good 4 years so far and still looks fairly new!

I've had my car for over five years, and I haven't made a payment in nearly that long. I might just drive this car into the ground...zero payments is a LOT cheaper than any car payment.

[wordsmith]

I've never had a car payment - every car I've had, I've purchased outright. It's something I just won't do, if there's any way it's avoidable.

[redav]

"Normal driving amount" is pretty subjective. With the increase in gas prices, many people found they don't actually need to drive as much as they thought, and that's a good thing.

My costs break down:
Car note: $0 (I paid off the loan about 6 yr ago, and I expect my car to last another ~13 yr. The longer you keep a car, the less the capital expenses cost per year. Purchase price / lifespan, I'll say it's $1k/yr.)
Depreciation: Irrelevant. Since I'm not going to sell the car, its value--or loss of value--is no more important than how much my kidneys are worth on the black market.
Gas: $65/mo (I ave a bit over 600 mi/mo, & I get 28+ mpg. EPA est is only 24 mpg, but because of the way I drive, I get nearly hwy efficiency all the time. I also use a card that gives me 5% back on gas purchases.)
Insurance: $950/yr (Harris county is actually an expensive insurance location. Shopping around saved me ~$800/yr)
Title/Inspection: $100/yr
Maintenance: Not sure exactly, a typical year involves a couple oil changes and regularly scheduled maintenance; that's usually around $100. Every few years I have to replace tires (~$600). This last year was pretty big because 60k mi is a big maintenance point (all belts get replaced, etc), and I replaced the brakes + struts, so it was around $1700. The older a car gets, the more this will factor in. Let's just say $500/yr for the fun of it.
Parking: $0
Tolls: $0

Total: $3330/yr. even factoring in income taxes, it's still much less than $5k/yr.

A lot of those expenses are very location dependent. Tolls, parking, insurance, and even total miles driven. But there are lots of ways around them if people are willing to do it, and considering where costs are headed, that is something people WILL have to start doing very soon (if they haven't already).

As far as new v. used, I prefer new, but I do acknowledge that it does cost a bit more. But when you keep a car for its entire lifespan, the savings aren't quite as dramatic, and those first few years are the ones covered by warranty and lowest maintenance. It's a trade-off of lower cap-ex, but higher average op-ex.

[vinsanity]

It's a trade-off of lower cap-ex, but higher average op-ex.

Very true.

All the cars I've purchased outright (read: cheap) have lasted me 2 years max. The worst part is when you shell out some dough to fix a major problem only for another major problem to pop up weeks later.

OTOH, you spend soo much more money buying a brand new car than one that is a couple of years old. Which is what I did, because it's the best of both world for me. I bought a 3-year-old lease return last year and I still have 3 more years and 60k more miles of warranty. In addition, my car cost half as much as it did when it was new.

I'm a big believer in buying lease return cars, because the lease contract basically forces the original lessee to keep the car in perfect condition. My dad very recently bought a 2.5 year old lease return car, also for half its original price. The thing looks brand new. The only way you can tell it's not is by looking at the odometer.

[yankeeyosh]

[QUOTE=redav]

Total: $3330/yr. even factoring in income taxes, it's still much less than $5k/yr.[QUOTE]

That is slightly over $5k when you consider taxes, as you need to factor in income taxes (28% marginal rate if your salary is above $33k) medicare (1.45%) and social security (6.2%); $5,000 x (1-.28-.0145-0.062) = $3,217 If you have state taxes, it is even more.

[steph78]

I've never had a car loan either - always purchased used cars that I had saved up enough $$ to buy outright. I've just kind of worked my way up to nicer cars over time by buying used and driving the car for many years. I started out with a 20-year old VW, it was definitely not a luxury car but it got me where I needed to go - then I had a used Honda Accord that was really a great car but I got it when it was 7 years old so it was cheap. I saved enough during grad school and the first few years of my job (by this time I was married) to buy a Nissan Maxima - it was less than a year old when I bought it and had only about 13,000 miles on it, but it was $10,000 cheaper than it would have been if I had bought it new. It was still under warranty and everything. So I've been driving that car for five years now, and we're shopping around for a "family vehicle" this time since we're expecting baby #2 next spring. By never having to pay a car loan we've been able to take that money and save instead, building up enough cash to buy our next vehicle outright again. And each time the car gets a little nicer. This time around we're looking at getting a 2008 model but probably buying it used in January or something and hopefully getting a deal.

I guess we also keep our expenses down by living in a really inexpensive area, our insurance is about $1000/year for TWO vehicles and taxes are very low, gas is also cheap in the southeast, and we actually drive very little, since we live in a small town everything is pretty close by.

[wordsmith]

I've never had a car loan either - always purchased used cars that I had saved up enough $$ to buy outright. I've just kind of worked my way up to nicer cars over time by buying used and driving the car for many years.

Exactly the same thing with me, Steph.

[redav]

That is slightly over $5k when you consider taxes, as you need to factor in income taxes (28% marginal rate if your salary is above $33k) medicare (1.45%) and social security (6.2%); $5,000 x (1-.28-.0145-0.062) = $3,217 If you have state taxes, it is even more.
No, it isn't. Pay is independent of my car, and my overall income tax rate is actually about 10%.

[yankeeyosh]

No, it isn't. Pay is independent of my car, and my overall income tax rate is actually about 10%.

How is pay independent of your car, or any basket of goods for that matter? If you get $50k a year, for argument's sakes, you don't have $50k to spend on products and services. You have maybe $33-35k; less if you have a 401(k). And yes, granted, if you take your average tax rate over your whole income, it is less than 28%, but I am taking the car expenses off the top because for many people, it is a necessary expense.

[NewMrs.]

How is pay independent of your car, or any basket of goods for that matter?

I sold my car to my sister a year or two ago and I have been carpooling with my husband and taking the bus ever since. My salary didn't change when I sold my car.

[yankeeyosh]

I sold my car to my sister a year or two ago and I have been carpooling with my husband and taking the bus ever since. My salary didn't change when I sold my car.

Yes, but wouldn't you agree that your disposable income increased? Not having a car, moving into a cheaper place, etc. are in my opinion equivalent to salary bumps, since the money required to pay for your basic needs decreases, leaving you with more money for other things. When you get a raise, same thing, except that you have more disposable income without reducing basic expenditures.

[redav]

How is pay independent of your car, or any basket of goods for that matter? If you get $50k a year, for argument's sakes, you don't have $50k to spend on products and services. You have maybe $33-35k; less if you have a 401(k). And yes, granted, if you take your average tax rate over your whole income, it is less than 28%, but I am taking the car expenses off the top because for many people, it is a necessary expense.
You mention the top tax bracket. That only applies to the next dollar earned, not what is spent. Therefore, for that to come into play with a car, it would need to be a scenario of "How much MORE would I have to earn to pay for X?" This isn't that case; pay is fixed and all expenses come out of it.

Taking it off the "top" is especially incorrect for a necessary expense--the first dollar earned (lowest bracket) should go to pay for necessary expenses (e.g., a car) while discretionary spending (e.g., a blu-ray player) should come out of the last dollar earned (top tax bracket). However, to do this, you have to list all budget items in order and then check to see which bracket they are in, which makes the analysis subjective due to the rank it is given.

And consider the case for a retiree who has no income and lives off of savings. Would you have to perform gross calcs based on what the income bracket those moneys were taxed at when they were earned? That's too complicated. Using net is simpler and consistent among everyone; otherwise, you'd have the exact same item with the exact same price tag "costing" different amounts to different people because they are in different tax brackets.

[nikorock28]

You mention the top tax bracket. That only applies to the next dollar earned, not what is spent. Therefore, for that to come into play with a car, it would need to be a scenario of "How much MORE would I have to earn to pay for X?" This isn't that case; pay is fixed and all expenses come out of it.

Taking it off the "top" is especially incorrect for a necessary expense--the first dollar earned (lowest bracket) should go to pay for necessary expenses (e.g., a car) while discretionary spending (e.g., a blu-ray player) should come out of the last dollar earned (top tax bracket). However, to do this, you have to list all budget items in order and then check to see which bracket they are in, which makes the analysis subjective due to the rank it is given.


Conversely, if you were to get rid of your vehicle, then that deduction would be coming off the top and it is a question of "How much LESS can I earn now that I don't have to spend X?" So, it really is a top down issue.

[yankeeyosh]

You mention the top tax bracket. That only applies to the next dollar earned, not what is spent. Therefore, for that to come into play with a car, it would need to be a scenario of "How much MORE would I have to earn to pay for X?" This isn't that case; pay is fixed and all expenses come out of it.

Taking it off the "top" is especially incorrect for a necessary expense--the first dollar earned (lowest bracket) should go to pay for necessary expenses (e.g., a car) while discretionary spending (e.g., a blu-ray player) should come out of the last dollar earned (top tax bracket). However, to do this, you have to list all budget items in order and then check to see which bracket they are in, which makes the analysis subjective due to the rank it is given.

And consider the case for a retiree who has no income and lives off of savings. Would you have to perform gross calcs based on what the income bracket those moneys were taxed at when they were earned? That's too complicated. Using net is simpler and consistent among everyone; otherwise, you'd have the exact same item with the exact same price tag "costing" different amounts to different people because they are in different tax brackets.


I see what you're saying. But here is my logic:

Say, for argument's sakes, you make $50,000 and you're single. We're only concerned about federal taxes and not concerned about standard/itemized deductions. The first three tax brackets are as follows:

$0-8,025: 10%
$8,025 to $32,550: 15%
$32,550 to $78,850: 25% (I goofed and for some reason I thought it was 28%).

So, your taxes would be ($8,025 x 10%) + ($32,550-8,025 x 15%) + ($50,000-32,550 x 25%) = $8,843.75

That leaves you with $41,157.25 to spend (in real life, with other taxes and deductions, this would be significantly less).

Say your car costs you (to make it easy) $4,157.25 a year in post tax dollars. That leaves you with $37,000 for everything else. So your "no-car" post tax income is $37,000. Per the tax tables, to obtain that amount post-tax, your pre-tax income can be solved with the following equation:

$8,025 x (1-0.10) + ($32,550-8,025) x (1-0.15) + ($x-32,550) x (1-0.25) = $37,000, where x is the pre-tax income you need. That results in $44,458.

So the difference of $50,000 - $44,458 is $5,542, which is the amount that the car costs you in pre-tax dollars. But $4157.25/$5,542, or the proportion of post tax to pre tax dollars the car costs is 0.75, which means that 25% was deducted due to taxes...which was the highest tax bracket you are in.

Granted, in "real life", this number is probably somewhat lower, especially if you are relatively close to a tax bracket line or if you have a lot of deductions. But it shows that the last dollar you make indeed pays for the car.

[redav]

Granted, in "real life", this number is probably somewhat lower, especially if you are relatively close to a tax bracket line or if you have a lot of deductions. But it shows that the last dollar you make indeed pays for the car.
I still disagree. Using that method would mean that your last dollar also pays for your house, food, entertainment, electricity, etc. But really, that last dollar only pays for one thing. Use this method to figure the "cost" of ALL your expenses (singularly) and you will find they cost you more than you make. This is a fundamental flaw IMO. To get the correct answer, you have to look at each expense using the new, lower value of spendable income each time. But then costs change based on order due to drifting into different brackets, so there is no absolute answer (the costs of your car are dependent on the costs of your housing, food, etc, even though they don't, actually).

It also gets completely mucked up by considering that some unrelated costs are tax deductible which affect taxable income but still get spent on expenses.

To clarify (or simplify), rephrase it as:
- How much savings does it cost?
- How much income does it cost? or rather: How much income is required to replenish the savings that were lost due to the costs of the car?
You can tell these are not the same question. The first is straightforward and consistent no matter what your other expenses are, or no matter who you are (retiree with no income, low-income in low bracket, high-income in high-bracket). The second is not simple and is dependent on not only who you are but also whether you include other items in the analysis and what order they are included. Thus, to answer the second, you really have to have a holistic budgetary analysis, but that would then point to lumping everything together, which would lead to using the overall tax rate rather than the marginal rate. (And actually, for a retiree, the answer may be zero--he has no need to replenish those savings.)

Thus, I don't see a benefit to using income when considering costs, particularly for a single item, since it complicates the problem & makes it less universal.

[redav]

Conversely, if you were to get rid of your vehicle, then that deduction would be coming off the top and it is a question of "How much LESS can I earn now that I don't have to spend X?" So, it really is a top down issue.
True for a discretionary expense, but if it is a necessary one, you can't dump it first, so it wouldn't come off the top.

[yankeeyosh]

I still disagree. Using that method would mean that your last dollar also pays for your house, food, entertainment, electricity, etc. But really, that last dollar only pays for one thing. Use this method to figure the "cost" of ALL your expenses (singly) and you will find they cost you more than you make. This is a fundamental flaw IMO. To get the correct answer, you have to look at each expense using the new, lower value of spendable income each time. But then costs change based on order due to drifting into different brackets, so there is no absolute answer (the costs of your car are dependent on the costs of your housing, food, etc, even though they don't, actually).

OK, you have a point. But even if the car costs are taken out of the lowest bracket (10%), if you consider state taxes (0-5% depending on where you are), Social Security (6.2%) and Medicare (1.45%), not to mention a 401(k) and other deductions (which I consider as "voluntary taxes"), you're still talking about the pre-tax amount paying for your car being about 40-50% more than the post-tax amount.

[nikorock28]

OK, you have a point. But even if the car costs are taken out of the lowest bracket (10%), if you consider state taxes (0-5% depending on where you are), Social Security (6.2%) and Medicare (1.45%), not to mention a 401(k) and other deductions (which I consider as "voluntary taxes"), you're still talking about the pre-tax amount paying for your car being about 40-50% more than the post-tax amount.

Keep in mind, yankee, that the lowest tax bracket is effectively 0% for the first $8,950 of earned income (standard deduction plus personal exemption for a single person). Well, check that, if you only earned that much income you would get money from the government based on the earned income tax credit.

[yankeeyosh]

Keep in mind, yankee, that the lowest tax bracket is effectively 0% for the first $8,950 of earned income (standard deduction plus personal exemption for a single person). Well, check that, if you only earned that much income you would get money from the government based on the earned income tax credit.

Yeah, but assuming you make a moderate income, you would hope that all the dollars to pay for your car don't come from that portion of your pay.

[nikorock28]

Yeah, but assuming you make a moderate income, you would hope that all the dollars to pay for your car don't come from that portion of your pay.

The dollars don't really come from any particular portion of your income. I agree with redav that to calculate the true cost of your car, you should apply your overall tax rate. It really doesn't make any sense to do a top-down approach unless you plan on upgrading (more vehicle, more insurance, etc) and have no savings to pay for the increased expenses. In this matter, all of the income generated for the upgrade would be coming from the highest tax bracket.

[yankeeyosh]

The dollars don't really come from any particular portion of your income. I agree with redav that to calculate the true cost of your car, you should apply your overall tax rate. It really doesn't make any sense to do a top-down approach unless you plan on upgrading (more vehicle, more insurance, etc) and have no savings to pay for the increased expenses. In this matter, all of the income generated for the upgrade would be coming from the highest tax bracket.

That's fine, and I agree, but when every deduction you have is taken into consideration, even the "last dollar" of basic expenditures goes into the car, your pre-tax income will still be at least a good 25-30% higher than your post-tax income if you have a moderate income.

[nikorock28]

That's fine, and I agree, but when every deduction you have is taken into consideration, even the "last dollar" of basic expenditures goes into the car, your pre-tax income will still be at least a good 25-30% higher than your post-tax income if you have a moderate income.

Yep, that is true if you consider all taxes.

[winneythepooh7]

This thread has started to lose me.............:p

[vinsanity]

yeah, really.

I don't think of my expenditures in terms of pre-tax dollars; it's just not useful to me. All I do is figure out how to minimize my tax liability every April 15 and budget my remaining income from there.

[yankeeyosh]

Yep, that is true if you consider all taxes.

Precisely. If you live in Fla. or N. H., yeah, your tax burden will be less, and your post-tax to pre-tax ratio will be higher. If you live in Taxachusetts, however, it's a lot different, and you will have to contend with a much lower ratio.

[nikorock28]

Precisely. If you live in Fla. or N. H., yeah, your tax burden will be less, and your post-tax to pre-tax ratio will be higher. If you live in Taxachusetts, however, it's a lot different, and you will have to contend with a much lower ratio.

Right you are. This is another benefit to living in AZ than where I grew up (CA). Your state taxes in CA is 8% on income from roughly $35K-$44K and 9+% on income over $44K. Couple that with federal income taxes (25%) and SS (7.6%) and that is a tax rate over 40% on a modest income (so much for that raise, huh?). At least in AZ, the state tax is more of a flat tax and ranges from roughly 2.5% to 4.5%, regardless of your income. Also, since the cost of living is less here, I am able to contribute to my 401k and avoid the 25% bracket, something I would not be able to do in CA.

[BLK95TA]

the problem with florida, at least south florida from what i saw living down there from the fall of 2003 to summer 2005 is that the companies down there pay you less than a lot of other places and the cost of living is higher so it kind of negates the money you save by not having to pay state income tax

[redav]

Remember that everything gets much, much more complicated with itemizations, kids, and other tax reducing agents like 401(k)s. I can't see 401(k)s as a tax because I keep the money to be used later--it's more like a deferment of income to a later time.

But to tie this back to the main topic, looking at the issue of pre- and post-tax considerations on income distribution would be interesting, meaning, what is the median take-home income? What is the median purchasing power (factors in COL)? Those would probably be more useful stats than just reporting income.

Also, it should be total benefits, since a if a company purchases health coverage, that adds quite a bit to the compensation even though it isn't 'income.'

[ebrillblaiddes]

Just to throw something out there:

It seemed like the statistic in the title of this thread was meant as something like "holy crud, I thought people made a LOT more than that!!!" I think it's accurate to say that most people have inflated perceptions of what other people have.
Given that, how much do you suppose the economic mess, especially people buying houses they know or should know they can't afford, came from keeping up with the Joneses when the Joneses aren't even actually keeping up with the Joneses?

[vinsanity]

Just to throw something out there:

It seemed like the statistic in the title of this thread was meant as something like "holy crud, I thought people made a LOT more than that!!!" I think it's accurate to say that most people have inflated perceptions of what other people have.

I'd have to agree. I suspect my friends (and even coworkers) probably think I make more than I actually do. Regardless of what that might imply, I suppose what they don't know can't hurt them :evil:


Given that, how much do you suppose the economic mess, especially people buying houses they know or should know they can't afford, came from keeping up with the Joneses when the Joneses aren't even actually keeping up with the Joneses?

That definitely played a key role, but the GSE's, with the help of Barney Frank and his minions, enabled the process to set in motion and all the problems that came with it.

[ebrillblaiddes]

That definitely played a key role, but the GSE's, with the help of Barney Frank and his minions, enabled the process to set in motion and all the problems that came with it. Oh true. But on the flip side, the availability wouldn't have created this frackfest if people hadn't used it.

[vinsanity]

Oh true. But on the flip side, the availability wouldn't have created this frackfest if people hadn't used it.

Asking the American consumer to exercise restraint on readily available credit is like putting Amy Winehouse in the DEA's evidence room and asking her not to touch anything: it's a sure-fire recipe for disaster :evil:

[Samwell]

That definitely played a key role, but the GSE's, with the help of Barney Frank and his minions, enabled the process to set in motion and all the problems that came with it.

I just can't let talking-point hogwash (http://www.mcclatchydc.com/homepage/story/53802.html) go unanswered, unless by minions you mean guys like these (http://howdidthishappen.org/2008/10/blame/) and the Bush administration (http://www.washingtonpost.com/wp-dyn/content/article/2008/02/13/AR2008021302783.html).

There's plenty of blame to go around and certainly Fannie, Freddie, and Barney deserve some of it, but to claim that they are the genesis of this crisis is simply wrong (http://mediamatters.org/items/200810100022). They were early adoptors of the sub-prime loans, but it was largely private institutions that cranked out the massive numbers of sub-prime loans from 2002-2006.

[vinsanity]

They were early adoptors of the sub-prime loans, but it was largely private institutions that cranked out the massive numbers of sub-prime loans from 2002-2006.

Wasn't that because the GSE's sought to buy up all the subprime mortgages the private sector could originate? (http://online.wsj.com/article/SB122212948811465427.html)

If Fannie and Freddie wanted subprime or Alt-A loans, the mortgage markets would produce them. By late 2004, Fannie and Freddie very much wanted subprime and Alt-A loans. Their accounting had just been revealed as fraudulent, and they were under pressure from Congress to demonstrate that they deserved their considerable privileges.

Lenders woldn't have made so many risky loans if they weren't so easily derived over to the GSE's as mortgage-backed securities.

[and1grad]

Asking the American consumer to exercise restraint on readily available credit is like putting Amy Winehouse in the DEA's evidence room and asking her not to touch anything
I might have to borrow that. :D

[ebrillblaiddes]

Asking the American consumer to exercise restraint on readily available credit is like putting Amy Winehouse in the DEA's evidence room and asking her not to touch anything: it's a sure-fire recipe for disaster :evil: Agreed. We need a better culture, when it comes to money (and probably lots of other things but let's not go there; the money thing has the advantage over the rest of it of being something that's hard to disagree with in the current screwuppage).

[AsianGeek]

In some ways, I feel no sympathy for the credit card companies as they base their business model off of those who spend more than what they have and then trap them in debt for an indefinite amount of time.

[SAP_GUY]

I have no idea how people can live on $32K in a big city unless they live with their parents or are eating canned food everyday.

I'm 22, make $56K (IT Security) and yet have trouble saving much. I live in a high rise in downtown Chicago, drive a newer car, but really don't splurge on much anything else. My total living expenses (apartment, car, food, gas bills is about $1800) not included unsecured debt. My take home is $3100. With student loans and credit cards, there is about $100 reserve left.

I get by fine this magic idea to save 10% of my income doesn't work out. You have to be making $60-70 to set any money aside in a big city. I thought about buying a place this year but with the credit crunch, it's impossible to get a mortgage unless you give 15-25% down, which I don't have. At this rate, I don't know when I will ever have 30K sitting around to put as a down payment. Lately I've started really analyzing my discretionary spending. I just don't have the confidence to spend $100 to go out on a weekend.

It's pretty depressing when you bust your ass coding all week and then have to think whether you can pay cash to take your girlfriend out for dinner.

[wordsmith]

I have no idea how people can live on $32K in a big city unless they live with their parents or are eating canned food everyday.

Splitting housing costs with a bunch of housemates works pretty well. It's obviously not a generally viable long-term scenario, but then, ostensibly, neither is making a wage that far below the COL for the area.

Honestly, I made far less than that when I lived in Chicago. But cost-sharing made it doable for the short term, and at the time, I wasn't particularly concerned with savings or buying a home.