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Comment by omginternets | Hacker News Reader

I have often remarked that it is common for Americans to live beyond their means at all SES levels. Years ago, an acquaintance of mine got a promotion that brought his annual salary from $22k to $35k. I remember those numbers like it was yesterday. He celebrated by buying a mustang.

Years later, a collegue's wife got a huge promotion, such that their household income was in the neighborhood of $500k per year. They celebrated by buying a new house in a swanky neighborhood, and a boat. When I asked him about this, he replied that the house was (unsurprisingly) mortgaged and the boat was financed over a number of years. A couple of years later, he confessed that he was up to his ears in debt and that his home life was a disaster as a result.

It was then and there that I decided that being rich wasn't so much about having a lot of money as not having to worry about money.

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> It was then and there that I decided that being rich wasn't so much about having a lot of money as not having to worry about money.

I don't know if anyone would call me rich. I wear clothes from a cheap chain store, I have a 25 year old house I'm constantly working on and I drive a boring car..

But money worries aren't ever on my mind. I never have to worry about paying the bills. If I changed jobs tomorrow and made significantly less.. my lifestyle would not change.

This is basically the theme behind The Millionaire Next Door which argues that the people building wealth are often not the people flaunting it; they setup a fancy reception for people with a net worth of million+, expecting doctors and lawyers and other "high class" people and were surprised to get a bunch of construction workers and plumbers asking where the bud light was.

I have a simple definition. "Rich" == doesn’t have to work for money. "Poor" == must work for money. Having said that, congratulations on your worry-free life! I’m not there yet but I’m focused on that goal, hopefully will reach it before I’m too old :)

>But money worries aren't ever on my mind. I never have to worry about paying the bills. If I changed jobs tomorrow and made significantly less.. my lifestyle would not change.

Yep, that's me and my 22-year-old Subaru. I can even go to the restaurant without doing any mental arithmetic. It wasn't always like this, but now that it is, I have no desire to go back.

Reminds me of this wonderful little exchange between an interviewer and Jeff Bezos: https://www.youtube.com/watch?v=Yv8MrBBuRqI&t=5m08s

At the time I got my first job in tech, I was working 2 jobs to clear $29K/year. My salary as a junior dev was $76K/year. My next role was $105K/year, then $120K/year, then $135K/year, then $150K/year.

At each level, my lifestyle adjusted to my income, and it did so completely subconsciously. It felt invisible; I can't think back to a particular time where I was like "I am going to spend more money because I can". It just happened.

I've always felt guilty about it, because I know that I'd be in a much more secure position if I had been more conscientious about how I managed my finances.

I suppose it’s somewhat natural for this to happen at the lower end of the pay-scale, because one stops actively restricting one’s expenses. But I’m curious, what form did the creep take from 135-150? Are you still living paycheck to paycheck?

I didn't adjust my lifestyle very much, though the extra income allowed me the opportunity to make some larger purchases that I wouldn't have otherwise made. An iPad Pro, a nice standing desk, a herman miller chair, etc. After around the $120 mark, I don't think I was living paycheck to paycheck. But I was not nearly as frugal as I should have been.

Leaving the house mortgaged is a reasonable and prudent decision, particularly at the rock-bottom interest rates of the past N years. The size of the house may be excessive, on the other hand -- most of the returns on a large home are not investment returns, but rather a form of consumption -- and the purchase of a boat, financed or otherwise, was probably the real five-or-six-figure mistake.

I made $500k last year (selling 1.5 years' of equity compensation near the top of the market) and I'm celebrating with a brand new mortgage and a car, but my monthly payment on both will be lower than what I was paying in rent, inflation is eroding the value of my mortgage debt. A conforming loan of $647,200 at 4% is an inflation hedge with a rate of return around $2000/mo, or ~60% of the mortgage payment.

The car is going to be used (real interest rate around -4% to 0%, details TBD). Boat? Maybe a kayak or canoe. :)

What I consider to be imprudent is not the use of debt itself, but the use of debt as a tool for living beyond one's means.

The problem is generally those that believe debt is an investment. It's like believing professional gambler is a long term profession. People don't get rich taking out debt, banks do. You can beat the house once in a while, but you aren't winning over a lifetime of buying things with debt. 2-3 targeted purchases, you can win, a lifetime of car payments and you lost a ton.

How many years later was that? That's a pretty big spread between one partner making $35k and the other $465k

Different people ;)

different colleagues, and probably decades

> It was then and there that I decided that being rich wasn't so much about having a lot of money as not having to worry about money.

This is really a crucial insight. My wife recently got a promotion which moved us to a higher COL area. I'm a programmer (but at a non-tech company), and since we were in a low COL area I never cared much about salary before. We didn't worry about money and it just didn't matter.

Now, we are making more money, but we have a massive mortgage weighing over us. I keep thinking that I need to find a job at market rates to pay off this debt. It's a constant source of stress and a huge hit on QOL.

So from personal experience, I can tell you, if you are in a position where you are never worried about money... don't rock the boat.

Funny, Dutch people are raised the opposite. I say that, yet I'm still surprised how many Dutch people have student debt, which is around 1.6 million people with an average of around 15000 euro's [1]. So maybe it's just how I was raised?

[1] "2021 hadden 1,6 miljoen" and "15,2 duizend euro in 2020", see (CTRL + F): https://www.cbs.nl/nl-nl/nieuws/2021/47/meer-personen-met-st....

It's something that's "said" about Dutch people but from my own experience, Dutch people are pretty capable at living paycheck to paycheck, too. Often under the assumption that all our taxes, insurances and safety nets will save us from any kind of fall. We even have a term for what GP describes, "wooncarrière".

And in a twist of irony, that attitude has come back to bite us as we failed to apply it to the wealthy.

I find it weird you mention taking on debt and financing these purchases that way. It’s typically the best way to purchase anything as long as the rates are good.

In fact - most people who are financially literate would say it’s completely moronic to buy things with cash or majority cash. It’s usually in your best interest to use debt as much as reasonably possible. (Obviously you want to be able to afford the payments and what not but debt is very good as long as the rates are optimal)

The issue isn't so much the debt as it is using debt to buy things you can't really afford.

SES = SocioEconomic Status

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