Last week, I shared a few e-mails from readers who are just "like Mike."
That is, they're like the reader named Mike who wrote a couple of months ago to say he and his wife make decent money and live a moderate lifestyle, but those around them seem to live much more extravagantly.
His question, as I stated last week, is, "What is 'normal,' and why does everyone around me seem to be able to eat out, travel and recreate, and splurge more often than we do?"
I shared some of your responses last week, and I'll pass along another one today. In a future column, we'll see if we can come to some kind of consensus on Mike's question.
Jesse sent me an e-mail to say that he thinks Mike's dilemma is "extremely common."
"Although I feel comfortable financially, I, too, am sometimes just baffled at the spending habits of my neighborhood friends," he wrote. "How do they do it? I would love to see how much they spend on certain things. But none of them seem to be going bankrupt."
Jesse wrote that he and his wife are in their mid-30s, college-educated, and live in a neighborhood with houses in the $250,000 to $350,000 range. They have four young children, two decent cars and a modestly furnished home.
Jesse describes himself as "somewhat obsessive" about tracking his money, so he was able to provide specifics about his financial situation. His primary annual expense categories are:
• Car: $3,000.
• Food: $5,000.
• Bills (utilities, electricity, phone, Internet, etc.): $3,000.
• Household (miscellaneous supplies, furniture, home improvements): $5,000.
• Leisure: $3,000.
• Vacation: $3,000.
• Noninsured health-care items: $1,000.
• Child care (education, toys, diapers, etc.): $2,000.
• Miscellaneous (including clothing): $1,000.
"These are nonfixed, discretionary expenditures," Jesse wrote. "Our primary day-to-day focus is on keeping these costs under control. We allow this budget to increase 10 percent per year for inflation and our growing family. It feels like things get a little bit easier each year."
Jesse said his fixed expenditures include:
• Taxes (income, Social Security, etc.): $14,000.
• House payments: $14,000 (about $1,200 per month).
• Charitable donations: $9,000.
"We also occasionally have one-time expenses that I don't categorize; for example, this year we will pay $2,000 in hospital expenses for our new baby," he wrote. "We don't have a college account for our children. Although I will be willing (and, I think, able) to help out as necessary, we expect our kids to fund the bulk of their own education, since that's what we did. ...
"We are able to put $10,000 per year into our Roth accounts ... and still have enough left over to add significantly to our taxable brokerage account each year. This has allowed us to get ahead of the curve, earn interest, pay cash for our cars, etc."
He said he credits his wife for their financial success. She keeps food costs low by cooking at home, he wrote, and gets clothes by shopping at garage sales and trading hand-me-downs with friends and relatives.
"Like Mike, we do without cable TV and fast food for the most part," he wrote. "But we still have what I consider a generous leisure and vacation budget. It really doesn't feel like we are making sacrifices; we enjoy skiing, attend sporting events and went to Disneyland last year.
"I think that the two biggest things that get people in trouble are a big mortgage payment and not keeping a close eye on their monthly bills. You have to watch those automatic payments, like cell phone and TV and Internet, very, very closely, because they're like interest: They never sleep.
"By the way, I am not alone. I have a sister with nine kids and a similar income, but they have a decent home, a 15-year mortgage and plenty of fun. The American dream is alive and well. (OK, not too many people dream of having nine kids.)"
You're right on that last point, Jesse. But I also appreciate hearing from someone who is doing well without going into massive credit-card or other debt.
So what do you think, readers? Can you relate to Mike or Jesse or the others I've mentioned?
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