living paycheck to paycheck

[Judge Jude]

"the gas, hotels and meals would be more than cost of the flights."

not when there are 6 in the station wagon!

[gcstomp]

This thread has been a bit of a guilt trip for me, as I am in my late 40s and have very little in saving. I have a 401k that I started late in life, 2 times prior I cashed out completely for big life events that in retrospect wish I had not emptied it. Even so my retirement account is pretty healthy but less than 1 year in reserves, bulk of my assets would be my almost paid for house. Looking back, I have had lots of 4 and 5 digit expenses, many wasteful, some family related where I helped a bit more generously than I really could afford, and some zip code sized numbers that were health care related.

Still, every day I eat lunch out, a maybe $6 expense but I could avoide that. I vacation a couple times a year but looking forward to trips is what keeps the zip in my step. Even so, I have a million ways I could be more frugal so that when I get to my 60s I have enough of a nest egg that I can just live simply and stress free with expectation SS no longer will be a thing. I will try to be more serious about paying myself first, and appreciate this thread and the personal stories a few of you have shared.

[baldgriff]

I worked in a hospital for a number of years. Part of that was working patient accounts. All those numbers are gamed. Actual costs of treatment is a moving target, manipulated by hospitals and doctors to get as much as they can from whoever they are dealing with. Not blaming them, as they have to, because the other side tries to pay as little as they can as well. All of that amounts to inflated cash rates for folks not using insurance (if you ever have to pay cash, negotiate, because that is what insurers do--they don't pay the amount on your bill). The Medicare pay rate is pretty fair and sustainable, and there are other things not factored in, like how much longer some private insurances take to pay than medicare, and the resources needed to collect. Some carriers, Avmed being one, if my memory serves, took many wasted man hours of calling and follow up to ensure proper and timely payment.

Weird, medical care is the one thing where you cant get a "fixed price" for a procedure. How much is it to fix a broken leg? How much is it if you need knee replacement? Where is the disclosure of the cost - so I can shop around and find a price. You cant do it. There is no "menu" of medical procedure costs. You go to the doctor - pay a co-pay and then get a bill. You want to bring prices down - let me and others shop around for better pricing.

[Sour Masher]

Do you have a link showing the numbers being ‘gamed’ because my 87 cent figure is pretty well documented.

No, just my experience. Our stated hospital costs were over-inflated on purpose, because insurances never wanted to pay full sticker price. We quoted different amounts to medicare patient than some patients insured by carriers we knew would try to pay less than full ask. Also, many insurers negotiated flat rate fees, and the billing as a result was not precise enough to be well documented. For instance, Avmed paid a flat same day surgery payment of $750 for a 15 minute minor surgery, or a 4 hour surgery. We made a killing on the fast cataract surgeries and lost money on the long knee replacements. All of this means that I do not doubt the rigor or credibility of the studies you cite, but they are using imprecise data, from my experience, which is 20 years ago, so take it for what it is worth. Also, such numbers do not take into account operational costs to collect. We'd literally just file the paperwork and get medicare payment with no hassle, but for some insurance carriers, we'd spend man hours on the phone sorting many cases out.

I'm just trying to say here that sometimes we can't get the whole story for studies. And I'm just speaking to the one area I had a small amount of experience with long ago. Then, in my limited experience, dealing with government payment was easier and more efficient, and cost us less to collect, because of that. I did not see that issue addressed in the cost comparisons you cited. I don't know the exact number that difference would make, but there was a difference in promptness of payment and collection from medicare than some private insurances. At least way back then, for hospitals.

[Sour Masher]

Weird, medical care is the one thing where you cant get a "fixed price" for a procedure. How much is it to fix a broken leg? How much is it if you need knee replacement? Where is the disclosure of the cost - so I can shop around and find a price. You cant do it. There is no "menu" of medical procedure costs. You go to the doctor - pay a co-pay and then get a bill. You want to bring prices down - let me and others shop around for better pricing.

All I saw was the hospital costs, not doctor costs. What we were billing for was OR time and materials costs for the procedures (gowns, masks, scalpels, sutures, etc). I know anecdotal evidence is not all that reliable, but in my limited experience, the actual cost of such things was less than billed, because of the game/dance done with insurances. A cash payer who asked could get a reduction in price of as much as 50%, depending on the procedure. Again, that is just the hospital bill. Not the doctor bill.

[baldgriff]

All I saw was the hospital costs, not doctor costs. What we were billing for was OR time and materials costs for the procedures (gowns, masks, scalpels, sutures, etc). I know anecdotal evidence is not all that reliable, but in my limited experience, the actual cost of such things was less than billed, because of the game/dance done with insurances. A cash payer who asked could get a reduction in price of as much as 50%, depending on the procedure. Again, that is just the hospital bill. Not the doctor bill.

I know - but all of those cost are not disclosed to clients who are doing "non-emergency" type surgeries. They have no idea what the cost is - because the insurance company will just pay it. So there is no actually way to "shop around" by price. These prices continue to increase year over year, unlike the cost associated to things like Lasik surgery. This is a process that used to cost thousands per eye - now because these doctors disclose their costs - people go where they can get the best deal (because insurance is not paying for it).

[Sour Masher]

I know - but all of those cost are not disclosed to clients who are doing "non-emergency" type surgeries. They have no idea what the cost is - because the insurance company will just pay it. So there is no actually way to "shop around" by price. These prices continue to increase year over year, unlike the cost associated to things like Lasik surgery. This is a process that used to cost thousands per eye - now because these doctors disclose their costs - people go where they can get the best deal (because insurance is not paying for it).

Yeah, the current insurance process is overly complicated and opaque--it is the reason why you can't get cost quotes as a cash payer. It would be so much simpler with an above board single payer system .

[baldgriff]

Yeah, the current insurance process is overly complicated and opaque--it is the reason why you can't get cost quotes as a cash payer. It would be so much simpler with an above board single payer system .

Or an above board system that just discloses price like basically every other consumer industry is required to do. You cant buy any of the following without a price:
Food
Clothing
Shoes
Houses
Land
Cars
Stocks
Bonds
Mutual Funds
Financial Investor Advice
Movies
Vacation Trips
Various Licenses
College Education
Vocational Education
Computers
Phones
Eye Surgery
Bigger Boobs (or smaller NTTIAWWT)

If you need to have knee surgery, you cant shop around and find the most reasonable price - as such there is no price control based on what the consumer is willing to pay.

[Sour Masher]

Or an above board system that just discloses price like basically every other consumer industry is required to do. You cant buy any of the following without a price:
Food
Clothing
Shoes
Houses
Land
Cars
Stocks
Bonds
Mutual Funds
Financial Investor Advice
Movies
Vacation Trips
Various Licenses
College Education
Vocational Education
Computers
Phones
Eye Surgery
Bigger Boobs (or smaller NTTIAWWT)

If you need to have knee surgery, you cant shop around and find the most reasonable price - as such there is no price control based on what the consumer is willing to pay.

And again, the reason why we don't have this is that prices are variable based on insurance. Making the costs known to all would require making the costs the same for all, and that would require a massive overhaul to insurance regulations. It will never happen with the current set up.

And all of it is solved if/when we do the right thing for all and go to a single payer set up. No one will have to worry about being in debt forever over medical costs. We'd all have one less excuse to save and be fiscally responsible. More workers would be healthier and more productive.

[TranaGreg]

So just to carry the original scenario forward, at some point in the not-too-distant future, interest rates will rise; it's inevitable. When that happens there will be a heck of a lot of people that are way over-mortgaged, not able to make their payments. The real estate market will get hit, prices will drop, the market will get flooded with inventory from people trying to sell their homes, or from them getting foreclosed by the banks, making prices drop further.

I hope that this happens in a controlled way, but this really could escalate quickly. The pressures on social programs will be dramatic.

I don't know what the solution is. I understand not wanting to force people to increase their savings through regulations, but I'm not seeing a lot of other options out there. Up here our gov't has tried out a number of tax-free savings vehicles to help people increase their savings - it has helped a bit, but not dramatically - we're still spending/borrowing more than ever.

After reading this thread, I'm more pessimistic than ever. Personally I'm extremely thankful that I'm in a good pension plan.

[Judge Jude]

This thread has been a bit of a guilt trip for me, as I am in my late 40s and have very little in saving. I have a 401k that I started late in life, 2 times prior I cashed out completely for big life events that in retrospect wish I had not emptied it. Even so my retirement account is pretty healthy but less than 1 year in reserves, bulk of my assets would be my almost paid for house. Looking back, I have had lots of 4 and 5 digit expenses, many wasteful, some family related where I helped a bit more generously than I really could afford, and some zip code sized numbers that were health care related.

Still, every day I eat lunch out, a maybe $6 expense but I could avoide that. I vacation a couple times a year but looking forward to trips is what keeps the zip in my step. Even so, I have a million ways I could be more frugal so that when I get to my 60s I have enough of a nest egg that I can just live simply and stress free with expectation SS no longer will be a thing. I will try to be more serious about paying myself first, and appreciate this thread and the personal stories a few of you have shared.

well, I wish you well in your efforts.

I would think this is obvious, but Revo will tell me it isn't - there is ZERO excuse for not investing into your company 401K (if there is one) at least as much as is matched by your company. so if they match up to 3 pct, you put that much in and you just doubled that money.

beyond that, of course we'll tell you that history suggests you put more in since you tend to make money on that money, too, over time. but if you have 5 figures worth of credit card debt or you're almost upside down on your mortgage, it gets more complicated (I'll pass that one to Revo).

it really comes down to choices. many people can take nice vacations OR go out to dinner a lot OR spend significant money relative to their income on clothing, OR a high-end car, OR on housing. any of those are fine. just notice that "OR" is not "AND."

pick your splurge, and cut back elsewhere. house, car, vacations are among the keys. do you really need to live in a place the size of your home? why buy a new car (unless that is your top priority and you'll cut back elsewhere?) can you enjoy 5 nights in Florida instead of 10, and use the savings to help pay off an 18 percent credit card debt?

I wasn't born smart; as I've noted, growing up with parents who often had "food worries" and obviously limited entertainment options makes it a hell of a lot easier to live simply. our culture demands that you buy whatever you want, without any info on what happens on the back side of the equation.

[Sour Masher]

How you grew up is definitely part of it. I grew up fairly poor and was always aware of the value of a dollar. I was never allowed to waste food or think I could have things just because I wanted them. My wife did not grow up rich, but she was never exposed to money issues. Her parents gave her reasonable amounts of things, and never exposed her to the idea that sometimes one must give up things to gain long term. Even as adults who understand things intellectually now in the same way, it fundamentally affects how each of us sees money. Financial compatibility is not something I think most folks focus on when they first fall for each other. And I think there is the added traditional social pressures of men being able to provide the lifestyle that a woman grew up accustomed to (that isn't to say in my case that my wife does not work--she does, and makes as much as me, but we have different lifestyle expectations).

The key difference between us is the concept of "deserve." She believes she works hard, makes a decent living, and thus deserves at least two vacations a year to see family and have some fun. I want those things for her, me, and the kids. But to me there is no deserve, just what we can afford. The travel is the only real cost cutting debate we have, as we spend several thousand a year on it (over 10K this year, as we splurged to celebrate her getting tenure and turning 40 to take the kids to Universal). But the sanity argument, as well as the bringing our two kids to see family that may not live much longer argument, is compelling. Our jobs took us far from any family (we didn't care about that too much before we had kids). Traveling to see them is pricey.

[baldgriff]

And I get to move the youngest son from AZ to CO over the weekend. HE is moving in with his cousins and start working out there (where - your guess is as good as mine). So whether I can afford it or not - I am renting a vehicle and driving him out there and then driving back. 14 hours both ways. Leave tomorrow morning - stay with Sister-in-law for Saturday while moving him in. Then drive home Sunday....

Yeah - the things we do for our kids.........

[Judge Jude]

I would be remiss if I didn't mention having had our own financial issues.

when I got married 20 years ago, I recalled that my sister and her husband had a plan where, for their first year of marriage, they would live in one of their apartments and put aside all of the money saved on rent no longer being paid toward any wedding expenses they had. it worked perfectly.

well, we tried that - only to find that my wife, having moved 750 miles, was not able to find a job in her field as expected. yeah, we blew it.

so we had all this credit card debt and not enough extra income to wipe it out quickly. fortunately this was a time when if you had good credit and 'played the game,' you could keep transferring the balances to interest-free credit cards. we stopped using cards entirely, and no interest really helped greatly - then my wife did settle into a good job.

our personal choices were to drive crappy cars for a couple of years (I bought a 1987 Dodge Colt with 100,000 miles on it for $1,500) and to skip taking vacations until we could go on one without owing interest when we came back. she didn't have much growing up, so neither of us expected to live large.

the point at which we finally could have looked at buying a house was around 2005-06. my wife, who has experience in real estate, looked at the numbers - typical mortgage payment for a median household income family - and correctly concluded that the bubble was nigh. so we never did buy a house (no kids, that makes it easier of course).

[revo]

I don't live paycheck to paycheck and am very thankful for it. But I got laid off from my job more than a few times (the life of a financial salesperson), and a few times it got pretty rough, but we made it through OK. Now, I have my own financial advisory business that does very well, and while I only get paid once every three months (my wife has a normal job), it's more than enough to satisfy what we need. We do have an emergency account that is about 6 months worth of income and took us a long time to build up, and our retirement savings are more than where we should be at this point in our lives.

That's not to say we haven't worked hard to get to this point, and we've cut back greatly where many others usually don't. It helps that my wife is very frugal too.

We own and live in a multi-family house, which I was lucky enough to buy, along with two others, when I was making very good money 15 years ago. But not many wives want to buy a multi-family house in an urban suburb, they want the beautiful house with a white picket fence. But ya know what, tenants (when they pay) contribute to your mortgage. I fully subscribe to Robert Kiyosaki's theories in his great financial books ("Rich Dad, Poor Dad") and they very much influenced my thinking over the years.

Being a landlord isn't easy, but it's a pathway to wealth that many refuse to take because they don't want to be bothered. I've been bothered with it for 15 years, and in another 7-8 years they'll all be paid off and will bring in a six-figure income that will act as a pension. If we want to sell before that, which is unlikely, we would make an extremely handsome profit thanks to tenants paying off my mortgage (along with a solid property price appreciation).

Additionally, we rarely take vacations, and when we do, they're high on the cheap -- driving instead of flying, staying with relatives, using AirBnB over resorts, etc. We usually only order takeout once or twice a month. I mow my own lawn and trim my own hedges -- no pricey landscapers here. We own both our own cars outright -- one's 7 years old, the other 17(!!) years old. My wife is one of those couponaholics, and we have a huge stockpile in our basement that resembles our own CVS -- most of which she got for free. We've learned to do our own home renovations and have saved tens of thousands of dollars over the years. My wife shops for hers and the kids' clothes at consignment stores.

Doing all that allowed us to buy a weekend home, which we use instead of vacationing, and we're now are thinking about moving into full-time and renting out our unit here (which will lead to another $24k in annual income).

I try to teach these philosophies to my clients and get them to cut back on unnecessary expenditures. Most of them get it. A few don't, and they're beyond help. It happens. But what I'm saying is that if you work hard and smart financially, you'll succeed more than you can imagine.