You would think that people would be cutting back given inflation and such but everywhere I go I see people buy new luxury items and going on extravagant trips. Now I consider myself pretty financially savvy but I can realistically understand how a majority of these people are able to afford such luxuries.

It's easy to focus on one or two things and think people are living beyond their means, but unless you know the full story you can't really draw any real conclusions.

If you see someone with a nice watch he might have been given it by a relative.

If you see someone who goes out to eat all the time they might have extra cash from no longer having a car payment.

If you see someone taking an expensive vacation it might be because they have saved up multiple years because they couldn't travel during the pandemic.

Or they could all be in massive debt and have nothing saved for retirement, who knows?

I think the answer to that question is probably yes, most people are.

But I am actually one of the exceptions. Two cars, both paid for. The "luxury" vehicle (a Porsche Boxster) is actually 7 years old, and I inherited it from my parents. Only debt is my mortgage. All vacations are paid for with regular income. Kiddo will probably get a full (or close to it) scholarship to college.

I look at people around me, though, and wonder the same thing. Especially when I see my son's classmates driving new luxury vehicles (on top of the expensive homes, vacation, luxury fashion items, etc).

Rich people have never been better off than they are right now. Stock market might be down temporarily but thats not really a big deal unless you are retirement age. Salaries are up unless your company sucks, many are still saving money due to flex schedule vs office 5 days a week, not really impacted by increased rent or anything like that since mortgages were locked in at lower levels at record low interest rates. If thats you, why not enjoy life and buy some toys and travel.

The worst part of recessions is people that are doing pretty well in life complain the most in society. OMG your portfolio isn't up 25% this year. You'll survive. No one cares about your minor inconveniences.

If both people work it's not hard at all for 2 professionals to be pulling in $300k plus in Texas's big cities. Locked in mortgage at prepandemic prices? That's a lot of discretionary spending available.

And when debt has been so cheap, why not use it? Obviously need to use it intelligently. My mortgage is 30yr at 2.5% - I'm not paying that down "sooner" to save on effective interest rate of 1.8%. But also put back ~65k/ year in 401k/HSA/other investments and have a decent emergency savings fund in cash.

Leverage away!

I feel that many older people are helping out their 30/40 something children with annual wealth distribution plans. The last 10 years of the stock market have allowed conservative-spending elderly to accumulate way more than they need so they help with a variety of expenses. I'm seeing a ton of beach, mountain, and foreign vacations on FB right now with grandparents seemingly sponsoring the trips.

I'm all for it, I love seeing people include grandparents on trips like that.

South Platte said:

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I feel that many older people are helping out their 30/40 something children with annual wealth distribution plans. The last 10 years of the stock market have allowed conservative-spending elderly to accumulate way more than they need so they help with a variety of expenses. I'm seeing a ton of beach, mountain, and foreign vacations on FB right now with grandparents seemingly sponsoring the trips.

I'm all for it, I love seeing people include grandparents on trips like that.

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Also consider those that hit retirement shortly before the pandemic. Grand plans (and funds) for all kinds of travel and leisure that suddenly got put on hold. I'm very much of the "after 25 I have no interest in any financial assistance/gifts from my family" category, but the last 18 months my parents have been falling over themselves to pay for just about anything. I bought them concert tickets a few times over the last 6 months and it's become telemarketer-esque annoying to get them to stop trying to pay me for them.

There's definitely a lot of people in debt, but there's a lot of people who have a lot of money also. As a wise person on the other thread related to this said - comparison is the thief of joy.

Proposition Joe said:

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As a wise person on the other thread related to this said - comparison is the thief of joy.

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hypeiv said:

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It's easy to focus on one or two things and think people are living beyond their means, but unless you know the full story you can't really draw any real conclusions.

If you see someone with a nice watch he might have been given it by a relative.

If you see someone who goes out to eat all the time they might have extra cash from no longer having a car payment.

If you see someone taking an expensive vacation it might be because they have saved up multiple years because they couldn't travel during the pandemic.

Or they could all be in massive debt and have nothing saved for retirement, who knows?

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If you look at the average numbers around, the majority are not saving for retirement, emergency funds and are likely in debt...

There are plenty of people who can actually afford lots of things, but there are a whole lot more who are living paycheck to paycheck to buy these toys and keep up with the Jones. That includes those people bring home $300k.

The vast majority of Americans couldn't afford a $1,000 emergency before inflation hit...

rucker said:

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You would think that people would be cutting back given inflation and such but everywhere I go I see people buy new luxury items and going on extravagant trips. Now I consider myself pretty financially savvy but I can realistically understand how a majority of these people are able to afford such luxuries.

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Yes, the vast majority of people are in debt. This board is a total outlier.

Go to Pluckers on a Tuesday night. There isn't a line of rich people or people who were gifted gift cards waiting to pay $17.99 for some wings and fries. It isn't even a line made up of middle class dads. It's the common workforce man and his family.

People literally have no idea how to cook, clean, or provide for themselves. All they know is money in = money available to go out.

Ignore this board full of $250k millionaires who pick up pennies off the street to afford a high end watch in 5 years. This board is completely detached from the every day human. The vast majority of this country is stupid and poor. The next major bubble to pop is going to be the credit bubble. and it's going to be painful.

zagman said:

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Go to Pluckers on a Tuesday night.

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I had not been to Pluckers in a few years because it started to go downhill and made the mistake of giving it another try on a Tuesday. They apparently have kids eat free on Tuesday and it's two kids per every adult. I think every table maxed that ratio so the entire place had a 2:1 kid to adult ratio. I was sitting at the bar and after one beer I told the bar tender to cancel my order and close me out because it was just kids screaming and running around the whole restaurant. I now call that place Pluck E. Cheese and will likely never step foot inside of one again.

zagman said:

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Go to Pluckers on a Tuesday night. There isn't a line of rich people or people who were gifted gift cards waiting to pay $17.99 for some wings and fries. It isn't even a line made up of middle class dads. It's the common workforce man and his family.

People literally have no idea how to cook, clean, or provide for themselves. All they know is money in = money available to go out.

Ignore this board full of $250k millionaires who pick up pennies off the street to afford a high end watch in 5 years. This board is completely detached from the every day human. The vast majority of this country is stupid and poor. The next major bubble to pop is going to be the credit bubble. and it's going to be painful.

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A big part of that is just the familiarity that comes from your general associations.

If you work in any kind of office, imagine the dumbest person there that has been employed for over 1 year.

Now, realize that person is probably at least average intelligence... They are able to show up, not do something to get fired, and put in at least the bare minimum.

Then realize that there a whole hell of a lot of people that are dumber than that person and think about the moves they make.

There were a lot of people in college and post who have degrees in good fields that are completely ignorant to finances in general. I don't think a degree is a good indicator of financial stability anymore IMO

Not to sound too much like a $35k millionaire, but what kind of debt are we talking about?

Having a mortgage, but it is less than 20% of your take home pay? Or are we talking about 2 car leases that take up 40% of your THP and you have 0% going to some sort of retirement AND you pay minimums on your CC and have to call in and/or pay off a little bit more to prevent them from freezing your next CC?

I do wonder about seeing neighbors with 'new' things in the driveway. I remember at my old house that I'd see someone, who just bought a new house, have 2 new cars and a boat in the driveway. Wife stayed at home and husband was XOM employee (pipeline). And to make things even more fun, they put in a pool, outdoor kitchen and other 'upgrades' to the house.

How in God's name do you pay for all that?

~egon

Dr. Doctor said:

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Not to sound too much like a $35k millionaire, but what kind of debt are we talking about?

Having a mortgage, but it is less than 20% of your take home pay? Or are we talking about 2 car leases that take up 40% of your THP and you have 0% going to some sort of retirement AND you pay minimums on your CC and have to call in and/or pay off a little bit more to prevent them from freezing your next CC?

I do wonder about seeing neighbors with 'new' things in the driveway. I remember at my old house that I'd see someone, who just bought a new house, have 2 new cars and a boat in the driveway. Wife stayed at home and husband was XOM employee (pipeline). And to make things even more fun, they put in a pool, outdoor kitchen and other 'upgrades' to the house.

How in God's name do you pay for all that?

~egon

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Took out a home equity loan.

Dr. Doctor said:

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Not to sound too much like a $35k millionaire, but what kind of debt are we talking about?

Having a mortgage, but it is less than 20% of your take home pay? Or are we talking about 2 car leases that take up 40% of your THP and you have 0% going to some sort of retirement AND you pay minimums on your CC and have to call in and/or pay off a little bit more to prevent them from freezing your next CC?

I do wonder about seeing neighbors with 'new' things in the driveway. I remember at my old house that I'd see someone, who just bought a new house, have 2 new cars and a boat in the driveway. Wife stayed at home and husband was XOM employee (pipeline). And to make things even more fun, they put in a pool, outdoor kitchen and other 'upgrades' to the house.

How in God's name do you pay for all that?

~egon

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probably middle level mgmt - so making 200k a year or so. Big bonuses/stock programs.

People finance boats/rvs over 10-15 years all the time.

But yeah, lots of debt there I'm sure - not necessarily bad debt.

I can't stomach looking at pool prices (we want to put one in). A fully loaded package with outdoor kitchen easily runs $175k+ these days. gross.

I think we're seeing wealth and asset transfer from boomers beginning to drive the lifestyle of a heck of a lot of people. People don't usually tell you about that source of wealth.

Pluck e cheese.

Lol awesome

I think you will see the travel spending cut back starting next spring as people finish sowing their oats after the past two years and get back to a normal routine. In the meantime they have to get those winter ski and beach vacations in that they have been putting off.

Sandman98 said:

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I think we're seeing wealth and asset transfer from boomers beginning to drive the lifestyle of a heck of a lot of people. People don't usually tell you about that source of wealth.

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bingo. I see this with many of our friend circles.

10 day cruise to St. Lucia? 60yr old parent is footing that $10k+ bill - kid just has to get there.

From what I'm seeing... our peers that had corporate parents that did well... they're really seeing the benefit.

The main thing is.. they don't have to save for retirement (I could have a pool and $200k boat right now if that expense didn't exist). When the parents are going to have an $7.5+MM nest egg, plus a house, vacation home, etc. and who knows what else to pass down to 2-3 kids... it makes it easier to understand.

And I'm not talking big balling parents either (I'm sure we all have that buddy who's dad is worth $50++MM). I'm talking the regular corporate person that just made their way up over 30 years or so in Texas. Didn't blow it on divorces or trying to embezzle money. Just kept ticking away with bonuses and stock options and good raises and living cheap as hell in this state... rode an amazing economy for the last 10+ years into retirement and here they are with 0 to little debt and a ****pile of assets to share with their kids and grandkids.

I look at people's credit reports every day. Today I got an application from a 69 year old couple that lives in the higher end part of Kingwood. They owe $180K for their children's college and need additional money to pay for the youngest daughter's wedding. If you look them as most people would you would think they had lived the American dream. What they've lived is the American nightmare. They are looking at needing $350K total to cover the student loans, wedding and 18 open credit cards at age 69.

jja79 said:

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I look at people's credit reports every day. Today I got an application from a 69 year old couple that lives in the higher end part of Kingwood. They owe $180K for their children's college and need additional money to pay for the youngest daughter's wedding. If you look them as most people would you would think they had lived the American dream. What they've lived is the American nightmare. They are looking at needing $350K total to cover the student loans, wedding and 18 open credit cards at age 69.

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at 69 shouldn't their kids be paying for college at this point? I guess that debt will just go with them in the next 10 years or so.

I have worked with many men and women who are always one commission check away from the repo man.

I witnessed sales guys make $350k a year in the 1990s and were always sweating deals because the ski boat payment was one month behind because that month was lean and the two car payments + mortgage were paid first.

One really good sales woman befriended some wealthy Mexican nationals. That opened up her eyes to their spending habits. Not a good thing.

There is a peace about not owing people $$$.

I think it is more common to find people who have their "parents lake house" or "<insert relative here> place in the mountains or beach" than it is to find some Joe from corp world who has bought a second beach/lake/mountain home on their own with no assistance. People die, their assets go somewhere. Some people are beneficiaries of that process that makes their corp life living much easier.

I know a couple who lived in their parents "other house" for 5 years while waiting for their house to be built. 5 years mortgage and tax free. I wish I had that luxury. That enables so much more for investing, spending, or both.

$350k in the hole at age 69 - I mean shame on everyone in that family for getting to that point.

jja79 said:

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I look at people's credit reports every day. Today I got an application from a 69 year old couple that lives in the higher end part of Kingwood. They owe $180K for their children's college and need additional money to pay for the youngest daughter's wedding. If you look them as most people would you would think they had lived the American dream. What they've lived is the American nightmare. They are looking at needing $350K total to cover the student loans, wedding and 18 open credit cards at age 69.

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This is a brutal story. I don't know how the guy hasn't had a heart attack. Maybe he has a 90+ year old parent that will leave him $1M?

I still get pissed when my electric bill goes over $200.

I've done this for a long time so nothing surprises me any more. A couple of weeks ago a guy applied for a construction loan and when I ran his credit he had 2 missed mortgage payments since February. When I asked about it he said they went on vacation and he forgot. Then he was incredulous that we won't look at a $1MM construction loan for him. People buy two $100K vehicles and then apply for a mortgage twice the size of their existing mortgage and don't even think about it.

No debt, been that for a long time. Awesome feeling.