To think living within your means has become the exception?

[SmokeyApo]

Hi all, I just wanted to share some observations and hear other people's inputs.

It seems to me that is becoming more and more rare for people to live within their means and try to save a little money for a rainy day. In my circles I know many people on good and even great salaries, that lead seemingly extremely expensive lifestyles and don't save a penny, or even go into debt to afford extravagant holidays or cars.

A good friend of mine is a senior executive in tech, makes an absolute fortune and had to ask around his friends (me included) to borrow money when he bought a house last year, because he couldn't cover the down payment. Another friend of mine got divorced last year, both spouses on really excellent wages, and it turned out that they had almost no assets to share after being married for 15 years because they had spent everything they got.

I am starting to wonder if I live in a bubble of financial irresponsibility or if this phenomenon is widespread. AIBU to think that saving and being mindful with money has become the exception rather than the rule?

There was another thread talked about spending all you assets and savings on your own care home when you are too old to look after yourself. You never know how life turns out.

The pension is the best vehicle of all because of the up front relief, and I plan on drawing down barely anything from it later i life because it’s exempt from iht

Why do you think it’s exempt from inheritance tax?

I thought most pensions were exempt from IHT?

@Alsohuman

The pension is the best vehicle of all because of the up front relief, and I plan on drawing down barely anything from it later i life because it’s exempt from iht

Why do you think it’s exempt from inheritance tax?

Because provided it’s a defined contribution fund and it hasn’t exceeded the LTA, it does not count as part of your estate. The successor can either take it tax free completely if I die before 75, or have it as a drawdown fund at their personal marginal rate after.

I'm disabled, live alone on benefits and simply can't afford to save but I do try my hardest to stay within my means, my mortgage will be fully paid off in about 6 weeks, I lease my car so don't have repair bills and I've paid for my funeral (hopefully won't need it just yet) and I do have a credit card but do my best to only use it for major things and pay off ASAP.

I'm clearly in the minority but as far as I'm concerned, each to their own, if you have a huge salary and spend it all but don't have savings or a contingency plan, you'll soon learn if you lose the job or become seriously ill and can no longer work, these situations are real eye openers!!

I have to agree. Of course, my income is so tiny that saving is almost impossible, but I do try not to live above my means. I have three credit cards...one is for medical use only...and right now I have no debt on them at all. I generally have less than $200 between the three, and pay more than the minimum on each one, each month. I am frugal, I squirrel money away for special items. And all around me, neighbors are buying brand new cars, replacing ALL of their furniture, buying their young kids designer clothes...and I KNOW that their incomes are not much more than mine! One neighbor orders take-away for herself and her two children 3-4 nights a week, and sweats paying her electric bill every month. Another goes to bingo at least 4 nights a week, and tries (without any success at all) to borrow money from me for petrol! May I add that this neighbor has refused to give me a ride to the store (with me paying for petrol, and the store only about 6 blocks away) because she just doesn't want to go anywhere more than once. Which is fine, but don't ask to borrow money to get to bingo.

In my case circumstances have left me not in the position I would want have been in my life in my 50s. The divorce from hell 21 years ago which took 3 years to clear up the practicalities and even longer the aftermath.

However we do ok. I've learnt money isn't my God anymore. It used to be. I live on far less today yet I am happy and as its a stable life my money is stable. I have insurance and prepayment funeral plan

I have a lovely little home, 4 wonderful grown up children, 3 grandchildren and enough. I happily remarried and though I have now been widowed 3 years I've found that all the money I had at my disposal before we fled the ex bought me nothing worth while.

I used to be bad with money. I have improved as the years have gone on. I save some. I have some affordable credit and I have enough.

My eldest is in a very good position with a well paid job he worked hard for with uni, working around it etc as he went back into education in his 20s.

A bit of luck has his wife had an inheritance come which was solely only payable for a deposit on a house. There debt is their house and his newly bought car he needs for work. Our DiL works too and childminding is covered by us grandparents and school.

2 of mine live abroad and 1 still at home. They all do OK too

Yes I do think some do live beyond. Done it in the past at times with enabling my adult children when I didn't need too

I'm disabled, unable to work & a single parent. Right from when I got my first job I used to blow my salary every month, the week before payday I was down to scrounging & hunting in pockets & bags for bits of cash. When I met exh & I bought a house once the mortgage & bills were paid I used to spend money on clothes & makeup, I never saved. When I got divorced I got a council house, I was on the bones of my arse, after paying the rent & bills I had less than £50 a week to feed & clothe ds & I, I lost my job due to illness & got my ill heath retirement pension & benefits, I was constantly juggling money often not paying a bill so that I could buy food or clothes for ds. Then three years ago I got a lump sum for a PPI refund & out of the blue a cheque from the building society I had my mortgage from when I owned my house for an overpayment, it added up to over £2000, I put it all in the bank & started to change my ways. I decided I wanted to move from the flat we live in to a housing association house, gradually I have kept saving & I have managed to save enough for all new white goods, carpets, new sofas, decorating & some new furniture. I have discovered that far from struggling on less money, by saving I actually have more money to spend. I've been able to pay for ds to go on two foreign school trips, bought myself new tech like a top of the range tablet & smart watch, paid for a tutor for ds, been able to treat ds & my mum during lockdown & not spent any of the money I have saved for our new home. I'm three months in front with my rent, loads in credit with my gas & electric, all my bills are paid on time, we have Sky TV, Netflix, Amazon, we eat well & for the first time in my life I have no money worries. The best advice I can give anyone is sign up to Martin Lewis's Money-saving expert & read all the advice on there, I always check on there before I buy anything, through the site I have found loads of discounts, ways to collect massive amounts of loyalty points like Boots & Nectar points. I never buy anything without investigating the best deals, I haggle all my bills where I can, this year I must have saved over £250 a month by being cheeky & haggling, I actually enjoy it.

I don't really think there was ever a golden age of no debt. Even Jesus lost his temper with money lenders in The Temple. People were sent to debtors prison for not repaying and n the 80s a lot of people rented tvs and videos or bought on credit. All my clothes as a teen came from Freemans catalogue.
I think there is way more stuff to spend on these days and some people consume more.
I think larger salaries are more common now. But overspending and debt is as old as society. I would love to be a saver but spending is in my genes just can't help it.

If your salary allows it my advice is pay into a pension. Rainy days came in my 50’s with a breakdown as a teacher. My health improved I landed another part time teaching post only to face redundancy after two years. Out of work at 53 ... two years to wait to draw my pension. So thankful I paid into it as many colleagues opted out. I think rainy days are more like stormy hurricanes when you find yourself unemployable in your 50’s.

DH has had two different work pension schemes go bust.

Being naive about pensions, but trying not to be, how does or did that happen @RampantIvy?
Sorry to hear that.

The company went bust in both cases. One of them ended up paying out millions in compensation because workers developed cancer from asbestos poisoning so there was no money left in the pot.

DH says avoid group pension schemes - remember Robert Maxwell? Personal pension schemes are fine.

Thank you for the reply. Worth knowing.

I agree that it is easy,in your 20s, to assume that you'll still be working at 67 years old and feel not much different.

The reality is that large number of people can't wait to retire at 60, and some more earlier on because of ill health, exhaustion, total.loss of interest in the job or redundancy and inability to find another job.

Knowing that you have something to fall back in is such a blessing at these times.

Very few 20 yr olds today will be able to retire at 60.

@lightand if it’s a workplace pension you are wondering about , the rules are much stricter these days. Without boring you with the details that means if a company and scheme goes bust your pension is protected to a worst case scenario , I think 75%, but often 100% by the pension protection fund.

@lightand I should have added Best to check what kind of scheme you have at work and the protection it has in place.

Most people i know live beyond their means, but if you have a very low income then its really hard to live within your means.

dh’s uncle’s wife spends £73 a week on cigarettes yet hes asked dh to lend him £800 for a shed only 4 days ago! Some people just have different priorities.

Someone i know has an obsession with buying boots and coats yet had to lend the money from a relative to fund a £1000 disability pram for their child.

Years ago when i was a kid (in the late 80s early 90s) people used to take the carpet with them when they moved house (they would end up with half a carpet in their living room for months after they had moved into their new house) nobody does that these days.

People want everything right now instead of saving for things.

Thank you @redgirl1
I am in a bit of a strange position[but maybe not, my knowledge of such things is scant], of possibly taking some out of 1 or maybe not of a workplace long standing bank one and poss starting a new one[with who knows who at this point] as well.

DH and I have always been savers, it's built into our DNA, I think! We've always been "save to buy" type of people
We have credit cards but I can only recall 2 occasions (both in the early 1980s) in the 43 years we've been married when we've actually used the credit in order to spread the payments out. Otherwise, we always pay in full every month and thereby avoid interest charges.

I also find it difficult to enjoy something that seems to be very poor value for money. One of my pet peeves is the cost of a simple cup of coffee in a café or restaurant. At the end of a meal out (rare occasion!) I prefer to go home and have a coffee there, rather than fork out nearly £20 for 4 cups of coffee!

@lightand I know a little bit about pensons for work but I’m no expert.
The meaningful money podcast has amazing info and there is a season on pensions that I’m sure would be worth a listen. they give really sensible advice about arranging your finances for retirement.

I know people who are earning mouthwatering amounts of money. However, they are constantly complaining that they are broke.
There is absolutely nothing wrong with having nice things, but to put yourself in great debt is ridiculous
The COVID virus made me realise that many well paid people have very little savings and basically live pay cheque to pay cheque

[quote redgirl1]@lightand I know a little bit about pensons for work but I’m no expert.
The meaningful money podcast has amazing info and there is a season on pensions that I’m sure would be worth a listen. they give really sensible advice about arranging your finances for retirement.[/quote]
Thanks. I will have a listen.

I bought or started reading a government booklet of about 64 pages all about pensions, that was brought out about 5 years ago. I didnt understand past page 4! I seem to have a bit of a mental block about pensions for some reason.

@redgirl1 @lightand
Pensions in a nutshell:

There are generally two types of pensions offered by workplaces:

• defined benefit (rare today but you are golden generally if you have one of these - basically they are the old style final salary pensions where you are promised a guaranteed final benefit - fantasy land in financial terms and a big problem, but good if you have one). If you have one, there’s not much to do. Just count your blessings

• defined contribution : you build up a pot of money, via a combination of your contributions, employer contributions, tax relief and potentially NI relief if you are doing salary sacrifice (which you almost always should if available).

As I said up thread - there is almost no part of the income spectrum where stuffing your pension with as much as you can doesn’t make sense if you have a salary sacrifice arrangement because you will almost always be getting a huge immediate benefit.

Actual Investing : hopefully your pension provider has vanguard life strategy/ target retirement age style funds. If it does, just dollar cost average into these. It almost always beats active investing. I am a weirdo so I have a SIPP (a self invested pension) where I can buy direct shares, commodities as well. But I’m insane

Drawing out pension: with defined contribution pots you can buy an annuity (an income for life) at retirement age, or go into drawdown. Drawdown is better if you think you can manage the pot reasonably. You can take as much as you like at your marginal tax rate. I plan on taking very little other than the personal allowance tax free, and keep the rest invested because of the death benefits.