The Money Diaries: The 37 year-old homeowner who makes 6 figures

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Here’s another post in the Money Diaries series, which is based off New York Magazine’s Sex Diaries. We’ve collected stories from real people about their spending habits over seven days, anonymized them, and posted them here.

bills.jpg

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DAY 1

8am: Grab some cereal and sit down to a quiet house and pay some bills. My bills are a combination of automated and hand entered electronic bill payments. The fixed monthly costs are automated, everything else is set up where I just have to fill in the amounts. The breakdown:

Income:

Paycheck direct deposit: $8000 plus $475 expense reimbursement. This is after maxed out 401(k), benefits, and a ridiculous amount of taxes are taken out.

Fixed Costs:
IRA Contribution: $400
Transfer to Property Tax savings account: $500
Truck payment: $600
Mortgage: $3,200 (My house and land isn’t as big as this payment suggests).

Variable Costs:
Property Taxes: : $1300
Quarterly water bill: $80
Quarterly sewer bill: $50
House phone/internet: $111
Wife cellphone: $54
My cellphone: $108
Annual homeowners insurance: $991
Pay the minimum on my credit card bill: $250. Total bill is $17,584 right now (This needs explanation, but I’ll get to it later. Wife and I pay for everything on the shared credit card. My card limit is something like $40k. This amount has been lingering for 5 months now).

DAY 2

8:30am: Rode the bike to work. Ponder new jerseys for the cool mornings. $60/jersey. Crazy, decide to look at the Bike Nashbar specials when they’re on clearance.
12pm: Starving by lunch time, but I have a lunch meeting.
1:30pm: Lunch meeting over, still hungry, buy a $2 chocolate pudding at the company cafe.
5:30pm: Ride home.
6:30pm: Wife went food shopping, $159 in food. And she got gas, $85.
8pm: Check the mail, see a $43,000 tax bill adjustment from last year via “automated review”. Wtf? Call my accountant.

DAY 3

9am: Drive to work because I’m late.
12pm: Buy $8 lunch at company cafe.
8pm: At night, shop online for $1000 in parts for my project car. Decide to wait till I have the time to install them.
The project car is a car someone gave me for free if I could tow it out of their backyard. So hey, “free car” but just needs some fixing. It really only needs $500 in parts to repair and be drive-able. But it would want $1500 in parts to be slightly upgraded and make for an enjoyable, performing ride.

DAY 4

9am: Drive to work.
12pm: Buy $8 lunch at company cafe.
6:30pm: Meet with a financial advisor trying to sell me on his services. He buys fancy dinner, $150. He says his fee is ‘only’ 1.5%. Tell him I’ll consider it, but I’m lying. My ETFs (Exchange Traded Funds) are doing fine in my IRA and 401k. 1.5%?! No wonder he drives a Maserati.

DAY 5

8:30am: Ride to work.
12pm: Buy $8 lunch at company cafe (feeling a trend?)
2pm: Later in the afternoon, still hungry. Buy a $2 chocolate pudding.
6:30pm: Family wants to go to Disneyland for vacation. Disneyland wants $4k for in-park hotel, park tickets, and flights. Jetblue wants $2100 for just-outside-park hotel, tickets, and flights. Make a note I should start a travel company that answers “When is the cheapest vacation possible for destination X?”
7:30pm: Spend an hour playing with dates and flight times to find a cheaper vacation on a bunch of websites. End up finding $2200 for in-park hotel, park tickets, and flights, but kid has standardized testing that week. Gah.
9pm: Accountant calls back. Says he sees IRS error and it should be at most under $5k in tax adjustments. I invested in a business a few years ago, which failed. I used some tax software to do the returns then, and now I’m continually harassed about what were legitimate business expenses, depreciation, etc. My accountant has saved my financial ass from the “tax software returns” a few times already. He’s worth his $250/hr rate.

DAY 6

5:30pm: Fill up truck with biodiesel. $100 for a full tank, which typically lasts 2 weeks if I ride the bike to work more than 2 days a week.
6:30pm: Wife doesn’t feel like cooking, suggests Japanese steak house. $70 dinner for the family.
10:30pm: Check the accounts after everyone else is in bed. As part of my 10b5-1 plan, I sell a fixed amount of options on the last Friday of the quarter. Look at the stock price, guesstimate the funds that should be wired to me Monday. Looks like $8500. Stupid markets (and me). Like everyone else, my company stock is down, way down. I was hoping to pay off mortgage with my options; now, maybe just the truck and put the rest in savings.

Last year, my options gave me $220k in extra income, so the credit card bill went up (clearly because you spend what you make). I figured the good markets would last for a bit longer, bought new toys, started a race car habit, paid off wife’s car, paid $20k/qtr in credit card bills, paid lots of taxes. Maybe the market will magically rebound and I’ll be a paper millionaire again.

What I should have done is stop racing cars last year and paid off my truck and mortgage by cashing my options out more aggressively. I have a fancy race car, trailer, and all the parts sitting in my garage, unused for all of 2008. Clearly my “faith in the markets” strategy didn’t work too well.

DAY 7

10am: Ponder buying a fancy Xbox Elite. Decide I lack the time to play games and the Gamecube is fine; besides, when was the last time I played it? Avoid spending $400+.
11am: Head to gun shop. Buy $300 in ammo. Ponder buying that target rifle I’ve been wanting. Store owner offers to knock it down to $700 from $800. Still too much for a toy; I tell him I’ll take it for $600 if no one else buys it in the next week.
2pm: After lunch, take kid to the saddlery to look at saddles, bridles, and clothing for riding lessons and competition. Mentally add up $3000 in stuff needed for first competition. Good thing it’s not until the spring.
4pm: Head to animal rescue league to look at horses and dogs. They have 2 real nice horses, which have to go together as a pair. Lots of dogs, none up for adoption yet. Need to find a stable to put the horses at, or need to move to a house with a barn and corrals.
7pm: Neither wife nor I feel like cooking, so we head out to eat at the Italian place we like, $110.

In sum: Monthly income received: $8,475, Expenses: $7,644 (including IRA and savings contributions), spending for the week: $552.

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To be featured anonymously in a future Money Diary, click here. To invite me to speak at your company, university, or organization, see my speaking page.

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32 Comments

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  1. surrounded by dogfur Link to this comment

    I’d love to hear the explanation of the credit card bill — and I don’t doubt there is a good one.

    I love this series! Fascinating, voyeuristic, and educational.

  2. He does explain the credit card bill. During Day 6 he explains that a good turn in the stock market caused him to start spending all the extra (instead of saving and building further wealth with it).

    This sounds like a classic high income, under accumulator of wealth. If the $250/hr accountant he mentions is really good, that might be a good place to start for more advice.

    I found it interesting that the $552 per week actually comes out to $2,208 per month of discretionary spending like eating out, lunches out, and hobby stuff like ammo. The number $552 doesn’t look so bad against the $8K plus income per month. But that $2,208 could significantly reduce his credit card debt quickly, instead of only paying the minimum payment and allowing the horrible 15-20% interest continue to accrue against the card’s balance.

  3. This guy is simply irresponsible. End of story. It seems like he is more concerned about his public appearance than his financial future.

  4. I would like to say I wouldn’t spend like that if I made that much but there are so many hobbies I wish I could afford. It’s easy to justify this behaviour when you’ve already maxed out your 401k and IRA contributions. There was no mention of a house payment.

    What I don’t get is why he makes the minimum payment on the credit card. That’s a quick way to waste money.

  5. I don’t believe a word of this. Are you sure this is real?

    This entry reads more like someone who wants to flaunt his expenditures rather than someone who wishes to better manage them.

    Disneyland? Project car? Gamecube? Riding lessons? Are you fucking serious?

    If he is real, someone should kick him in the balls. This post makes me sick.

  6. No amount of money would entice me to travel the path of redneckdom.

    You can take the boy out of the trailer park, but you can’t…

  7. Rob, is it wrong to flaunt his purchases if he’s making enough and maxing out his investments? Why?

  8. But he is also making minimum payments on his credit card and continues to spend ridiculously.

  9. This sounds about right to me. I make slightly less than he does, and have different hobbies, but more or less my finances sound a lot like this.

    I max out my RRSPs (in canada) and pay the max monthly to my mortgage. After all expenses I *should* have $2600 left, but somehow every month this disappears on random things, like eating out, entertaining people, buying stuff. $17k doesn’t sound too bad, I’ve got almost double. Although at least my debt is on a low interest line of credit.

  10. Yeah, in general I would pay the credit card off immediately if I were him. Depends on the interest rate, though. If it’s low, there’s technically no reason to.

  11. Someone spends money and people get angry at them. The guy maxes out his investments. He searches for a deal on going to Disneyland and saves $1800. He rides a bike to work a couple days a week. He didn’t buy a new Xbox because he wouldn’t have time to play it. He made $220k ON OPTIONS in one year. Not sure what his income is, but $220k on just options is a lot of money. He’s looking for animals at the rescue league (to help animals that need it, but probably also to save money). The fact the the guy has hobbies and wants to do things for his kids doesn’t make him an idiot. I see plenty of cost consciousness in those 7 days and I also see stuff that I wouldn’t do, but everyone has hobbies and different priorities. There’s always room for improvement and the glaring thing is the credit card debt, but I’m sure he knows he has to pay it off sooner rather than later and my guess is that he probably will pay it off when he gets more serious about it. I’m waiting for someone to suggest he quit eating pudding and pack a lunch. That’s $10 a day! That’s also sarcasm.

    And if tinkering with cars and enjoying target shooting makes you a redneck, then sign me up. I must be an idiot from a trailer park because I like doing things you don’t. Good call.

  12. I hope the ammo and target rifle are for prairie dogs. Man, I hate those things. The holes break the legs of cattle and horses from time to time and ruin the vegetation for other species, but I digress.

    Yes, pack a lunch, but pay that cc debt off. That is more important than a vacation or getting that race car performing better. I have friends that race, and they are always losing money on that hobby. If you are going to lose money on a hobby, get a less expensive one. Take your kids fishing!!

  13. This guy is the same age/salary as me, but we have done a few (major) things differently, which equals me NOT spending as much as I earn.

    I remember about 3 years ago all of my friends were telling me I was a fool not to put an extra 100k I had into stocks. Instead I paid off my mortgage which felt so good that I was then inspired to save hard (no buying lunches at work, no new toys or anything) to pay off my 30k student loan and my family’s combined 20k owed in vehicles. I’m so glad I didn’t put that money into stocks. At this point the relative security that we have now feels much better than the gut wrenching panic I would feel if I was losing some/most of that money.

    I’m usually able to save around 2-3k a month (sometimes more or a little less) after retirement and college savings contributions and all other minor bills because we have no debt, period.

  14. this is an interesting comment by Ramit that I’d like to comment upon:
    ————
    Rob, is it wrong to flaunt his purchases if he’s making enough and maxing out his investments? Why?
    ———-
    I find it extremely distasteful to flaunt purchases. I don’t know if it’s actually *immoral* (although we could debate that until the cows come home). I can’t imagine wanting other people to feel envious toward me- it would just make me feel alienated in my neighborhood. I don’t think people envy our family at all, they have no clue about our finances and we don’t buy much that they could see.

  15. This guy seems like a person who doesn’t sit around the house a lot. Probably why he makes so much money to begin with.
    I think that this guy brings up some real issues. Even if he chooses to spend his money on some high dollar toys/fun, he doesn’t buy everything he wants. He is telling us that he wants a lot more than he has, but justifies not spending more than he does. It is also my opinion that he is thinking more about his financial goals and shortfalls because he is writing a diary.
    When do we think about buying stuff the most? It is when we restrain ourselves from getting stuff. Most people don’t think about what they put into their bodies until they start writing every little thing down. Then what do they think about when they do start a food diary? How horrible they eat and how much they want to eat the horrible things without writing it down in the diary.
    It takes a lot of hard work to break bad habits that were so easy to fall into in the first place. Most of us know what we should and shouldn’t do. Being prepared can help us stay out of a lot of financial pitfalls, but preparation takes work. (i.e. packed lunches, dinners, keeping organized receipts, making a budget before spending it, buying new clothes/toys) Most people don’t value the work higher than the cost of convenience on everything.
    I would go crazy trying to find the best deals on all the stuff this guy does, make my own meals, cook when the wife didn’t want to, and spend time with my family. I’m not saying that I would do all of the things this guy does, but to each his own, right?

  16. Carlin, I totally agree. There are plenty of areas where people make both good and questionable money decisions. It’s too easy to say ‘what an idiot’ without considering their priorities and decisions.

    Rob, plenty of people I know play Gamecube and go to Disneyland with their families, and would jump on the chance for an almost-free car. If it were me, I know I’d be flaunting six figures way more than that.

  17. I decided I’d follow up on my divulging of info above. Only Ramit and his assistant can confirm I’m the original poster.

    In general, I didn’t even think I was flaunting anything until my wife read the post, and said it seemed a bit like I was bragging. Ok fine, I can see that now.

    What did I do with the 220k from 2007? 65k went into the house for new heating, cooling, siding, roof, and all new windows. 20k went to kids college plans. 50k went to a trust fund for the kids, in the event wife and I are killed (or kicked in the nuts as one poster states). 30k went to credit card debt. 15k went to the race car, trailer, truck. The rest went to paying off the wife’s car loan and taxes on short-term capital gains.

    Where did the credit card bill come from? Well, when selling options, it’s not like you just sell them and magically money appears in your account. As a significant shareholder, I’m severely constrained on dates and amounts I can sell. If I sold everything at once, it may dramatically affect the stock. Therefore, I consolidated all my credit card debt into one behemoth card, hence the 40k limit, and started paying it off. The credit card debt was built up over years in various cards, store cards, etc.

    Where did the credit card debt come from? Years of living beyond our means and me working for startups with reduced salaries in exchange for options (which are now worth less than toilet paper). My wife doesn’t work now so she can raise the kids. When she did, we fell into the trap of a 2-earner income. After her first miscarriage, I realized having only one income was going to ruin us financially. 2006 was really the awakening to the “wtf am I doing with my money?!” Wife and I cut expenses, drastically. We moved to a smaller house, bought, not leased, our cars, re-financed the mortgage once when rates dropped in ’06, and prepped for 1 income living; and I grew up and took a job at a startup with funding, but traded excessive options for more salary to pay the bills.

    She’d love a new kitchen, I’d love a home office. I could pay off the credit card debt with one option exercise now. And I will by the end of the year. However, having it there has forced the family into a cash-only existence, and forcing me to pay myself first (401k and IRA) and then everyone else. 35 years from now, I should be all set financially.

    Have I made mistakes? Sure. I believe I’m on the right path now. I need to automate my life to protect from myself. Racing cars and competition target shooting are hobbies, one is vastly more expensive than the other. But hell, it was fun to live life on the track for a year.

  18. bikecommuter, I think it’s cool you had the balls in the first place to come on Ramit’s site and lay everything bare for the world to see.

    I don’t even know what options are yet….I’m just starting to get my financial shit together at 40. For the folks who feel the need to judge, remember you are not perfect, and you didn’t crawl out of the womb making the best decisions.

    Otherwise, you wouldn’t be reading Ramit’s blog.

  19. It seems harsh to me to claim the diary author was flaunting his wealth. The point of the diary is to let him talk about his daily experiences with money. Wouldn’t the diary seem much less interesting and educational if the author politely hid those details?

    Maybe those comments reveal more about our cultural attitudes towards money than it does about the author. We seem to want everyone to save money like they were conserving water. But unlike water conservation, I’m not sure it helps anyone for big earners to pinch every penny.

    I’m quite happy that the author shared this diary. Although we are at very different income levels, I can see a lot of similarities between his money issues and mine. It’s almost like he is living in a parallel universe where everything costs double. He spends at least as much time pondering how he spends money as I do, which is both reassuring and scary.

  20. Other than the credit card bill, he is on the right track. This guy is maxing out investments as well as booking trips for family vacations. He has a fulfilling life. And he is not cutting back on little luxuries like eating out.

    Love it

  21. I think it is interesting how easy it is to find where people who make more money than we do waste money. I wonder how many places I would find that I am wasting money now if I made half what I make today?

  22. I think it is safe to say the credit card bill is due to the type of spending described in the post. It seems like there is a lot of impulsive decisions being made on a day-to-day basis. Nothing wrong with indulging every now and again, but would like to see them plan for the purchases. Really enjoying this series.

  23. I am curious to see when this post was originally written. With the market down over 500 today, I am sure this will affect his spending habits from this day forward Those stock options must be spirally down in value.

  24. Part of what makes most people sick when the see something like this is that most people make nowhere near that amount of money. And I can understand the nonbelievers; who goes around biking to work, filling up their truck with biodiesel, buying ammo, and making enough to max out their 401K and IRA? Playing Halo on a $400 xbox would be a bargain compared to spending $900 on guns and ammo; where was the point to all of that. The whole post might be believable and palatable if he told us what he does for a living.

  25. I just don’t understand why anyone who could pay off a credit card bill wouldn’t do that before any other type of savings/investments. How many investments that you have are guaranteed to return 15%?

    My advice to the author is to get that credit card down to zero as fast as possible. Think about it, your trying to prepay a mortgage and a car that have interest rates of like 8% probably. Put that money into your credit cards and your return will be double.

  26. bikecommutr: thank you for sharing. I found it very informative. I especially like the “automate my life to protect from myself” as it rings true to my own personality.

  27. @Irina the week chosen was in September 2008.

    @Adam Jones, I used to be sick of hearing about people being wealthy as well. And then I realized I’m working to be wealthy, and some day I’ll have that life. Yes, I made some dumb mistakes in the past, but until you accept you are human, you can’t move on. As any book on getting rich will tell you, if you hate the rich, and hate being rich, you’ll never be rich. Having money isn’t evil, how you make it may be.

    I bike to work because it’s exercise, otherwise I wouldn’t get any. I don’t do it because of some love for fellow man and saving the world; that’s a secondary benefit.

    Biodiesel is consistently $0.50 to $0.85/gal cheaper than petrodiesel, and my friend runs the company, so why not?

    As for what I do for a living, I’m a CTO. Also, I need a hobby. Work is not a hobby. Racing cars was awesome fun, albeit expensive. I’m good at competition target shooting, so I enjoy it and it’s my hobby. Raising a kid into horse competitions is about to become my other hobby.

    @KevinH, I’m working on paying off the credit card, but I’m in no rush. My credit card rate is 9%, my investments until this week were in the 30% return range. That 30% return is not guaranteed, no. But over 30 years, it’ll be much higher than 30%. The rate on my truck loan is 3.75%. I also have the benefit of tens of thousands of options i can exercise to pay off debts modulo selling restrictions. Exercising these options now is a dumb move, as the stock is low. It’ll go back up, it may take 1-2 years, but it’ll go back up. In fact, I’ve been buying lots of stocks from my watchlist, because they’ll go back up, and I can sell for a profit.

    @MikeP Yes, I realized the more money I have, the more stupid I get. Automating payments and keeping my “operational” cash low is good. Keeping the credit card bill high, for now, is also good. It stops me from spending more. I plan to pay off the credit card, and freeze it. And then switch to a pre-paid debit with automated deposits to limit my spending. Hopefully, I’ll look back at my actions now and appreciate it when I’m in my late 60′s and looking to retire.

  28. Ahhh..I would love to make some $$ like that.. I’m 31 and am nowhere close to what this guy or some of you are making. What do you guys do :)
    Thanks for the post!

  29. I don’t understand those who said he is flaunting his money. Wasn’t the assignment to report his spending habits? It makes sense that he can spend more on recreation and other extras with that kind of salary.

    I don’t make anywhere near that much, but I didn’t feel the need to call him a redneck or accuse him of flaunting wealth. Get a grip, people, and try to get over your own insecurities.

  30. Good post. The only thing that amazes me is the spending on eating out.. I can’t imagine eating out at restaurant that often, no matter how much money I made. I just have the feeling I’d gain a lot of weight really really fast.

  31. Every post that goes up, somebody feels the need to question it’s authenticity. Why would Ramit pick someone who was making something up, and WHY would someone sit down and make up a week’s worth of false spending habits? Come ON.

    It’s amazing how a person can bring in this kind of income, be contributing to VARIOUS savings accounts so aggressively, is navigating the stock market with ease and everyone can still continue to annonymously rag on one alleged “fault”. Based on his APR’s and credit line, he clearly has higher than average credit, which is more than I’m sure most people can say for themselves. With the way APR’s are rising, it almost seems safer to carry a balance with a low rate, doesn’t it?

    If someone with some disposable income wants a “pricey” hobby, why the hell shouldn’t he divulge?! I would! There’s no “flaunting” here.

    You can hate all you want, but his lifestyle and spending habits are what I aspire to.