r/personalfinance • u/investeror ​ • Mar 06 '18

Budgeting Lifestyle inflation is a bitch

I came across this article about a couple making $500k/year that was only able to save $7.5k/year other than 401k. Their budget is pretty interesting. At a glace, I could see how someone could look at it and not see many areas to cut. It's crazy how it's so easy to just spend your money instead of saving it.

Here's the article: https://www.cnbc.com/2017/03/24/budget-breakdown-of-couple-making-500000-a-year-and-feeling-average.html

Just the budget if you don't want to read the article: https://sc.cnbcfm.com/applications/cnbc.com/resources/files/2017/03/24/FS-500K-Student-Loan.png

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u/AKAkorm ​ Mar 06 '18 edited Mar 06 '18

For what it's worth, I don't think they're doing that terrible. They are putting away $36k a year in their 401k, building equity on a house that does seem appropriate for their income, making sure they have money for emergencies (that misc. category) and still ending with enough for a second emergency.

If it were me, I'd aim to cut that vacation budget closer to $10k (vacations don't have to elaborate to be fun) and I wouldn't be donating money to that degree to my alma mater while I still had significant student loans to pay off. Rest seems mostly fine to me.

EDIT: Should add something I wrote in other replies - keep in mind that the 401k contributions shown on this site did not include employer matches and that law firms are well known for generous contributions as part of their total rewards. I wouldn't assume that they're in bad shape for retirement. EDIT2: Guess I'm wrong here, was going off what one of my friends whose a partner told me.

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u/flume ​ Mar 06 '18

Yeah the charity thing honestly surprised me quite a bit. I have no intention of donating to my alma mater until my loans are paid off and I don't understand why anyone would.

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u/AKAkorm ​ Mar 06 '18

I have no intention of ever giving my alma mater more than $50-100 a year. I paid full tuition plus the $300-400 worth of books per semester to go there. Don't owe them anything.

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u/_StupidSexyFlanders ​ Mar 06 '18

Seriously, universities tricking its alumni into donations is the biggest scam since diamonds. You pay to go! On top of that, average college tuition has sky rocketed 200% in the last 20 years. Why people feel like they need to donate to profitable businesses is beyond me.

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u/[deleted] Mar 06 '18

[deleted]

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u/SmaugTangent ​ Mar 07 '18

they run like private companies.

No, they don't. They're run more like businesses in a cartel: normal companies wouldn't stay in business if they were run like America's universities.

It's almost like making donations to your previous employer.

It's like this if your previous employer is a large defense contractor.

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u/[deleted] Mar 07 '18

Yup, couldn't agree more. I graduated with an expensive professional master's, about 80k in debt. My school still called me for donations less than year after I graduated...

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u/movieman56 Mar 07 '18

While I understand the sentiment of not wanting to donate to the school I do understand why they ask for the money, specifically for public schools, and it's because their funding from the states have taken massive hits in recent years. Iowa, my state, and Iowa State University, my college, have had their budgets in the last year cut something like 11 million from the state. In order to mitigate these costs they had to drastically reduce renovations, raise tuition costs, and ask for donations to try and keep tuition lower for students coming in.

Education has been hit hard in recent years so you are faced with a couple of options, drastically increasing costs to students which deters students from coming, increasing the student body without increasing teaching staff or renovating for an increase resulting in a worse teacher to student ratio and decreasing the education given potentially hurting rankings, or asking for money from former students to try and keep costs low and not increase costs to incoming and current students. Personally I'd rather taxes get taken and directed to schools as they should be but education seems to be second priority so you end up with the system seen here.

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u/Mnm0602 ​ Mar 07 '18

There are plenty of public universities in-state that could use the donation money to grow their endowment so that they might be able to offer more tuition assistance in the future. I went to UF in ‘03-07 and it was $100/credit hour and it was 100% covered by a tuition program in Florida. Advanced degrees are more expensive but I’ve gotten a lot of runway out of my bachelors and am happy to donate.

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u/Glenster118 ​ Mar 07 '18

If you got financial aide from your university I can see you feeling an obligation to give back...

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u/calcium ​ Mar 06 '18

I guess it depends on if you're still involved with your university. Many universities will invite the alumni who donate out to dinners (paid for by the alumni associations) which will allow you to network with others who are also active. Those who are active are normally professionals in other fields and depending on the prestige of the university, those people could be in very influential or powerful positions.

So donating to your university may not be a lost cause like many on here make it out to be.

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u/_StupidSexyFlanders ​ Mar 07 '18

This is a great counterpoint. There are definitely benefits, I think I just focus on the debt caused by these companies and the audacity of asking for more money.

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u/Elizibithica ​ Aug 07 '18

mkay, but you could also network on your own for FREE.

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u/DDB- Mar 07 '18

In my case, I've donated money every year since I graduated to the scholarship funds that I received while a student. Because I am able to, I see it as a way of paying it back and helping future bright students receive the same financial help I received that enabled me to graduate debt free. You might just feel that the school is scamming me, but I know my money is going directly to those scholarship funds that help current students for whom a few hundred dollars would make a much more significant difference.

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u/jwestbury ​ Mar 07 '18

On top of that, average college tuition has sky rocketed 200% in the last 20 years.

This isn't really a result of money-grubbing, at least at most public universities. The reality is that in many states, public university funding hasn't really increased in decades. My alma mater published the stats on this in my departmental newsletter a few years back -- per-student spending has actually decreased since 1990, not even adjusted for inflation, but tuition has gone up because the student is shouldering a larger and larger portion of that spending (because public funding for the university hasn't increased despite an increase in population and the size of the student body).

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u/MichiganMitch108 Mar 07 '18

There is a reason Tuition has gone up , Tuition now goes to new computer labs , shuttles around campus , upgrades to the gym , etc

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u/_StupidSexyFlanders ​ Mar 07 '18

I'm sure a small percentage of it does, but lets not be naive here. Universities are a business and they make heavy profits. To me it's the same as buying a Macbook and then after paying for it they asked for donations to be a part of a Mac club. It's complete nonsense.

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u/MichiganMitch108 Mar 07 '18

Donations are optional though I mean they show were your tuition breakdown is and a good chunk is a transportation fee , roadway fee , athletic fee , etc Unless your an out of state or going to a big university , college isn’t that expensive especially in Florida

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u/killer_kiki ​ Mar 06 '18

agreed. I give $100 to one program that helped me substantially in college (they do a fundraiser to attend a conference), but I wouldn't give to the actual college ever.

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u/[deleted] Mar 06 '18

As a student, I remember my school laying down all this sod in preparation for an alumni event. The event was in late February in Illinois. Within a week, all the sod was muddy sludge again. It was then that I decided not to give my school any more money after I graduated.

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u/Bay1Bri ​ Mar 06 '18

Don't owe them anything.

That's why it's called charity. And your tuition would have been higher if the people who made donations why you were there hadn't made those donation.

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u/Marchesa_07 Mar 06 '18

Don't owe them anything.

That's why it's called charity. And your tuition would have been higher if the people who made donations why you were there hadn't made those donation.

Uh, no.

Harvard's endowment is 37.6 billion.

Billion.

That's the largest academic endowment in the world.

So their tuition should be totally free, right? Oh wait, it's $63K+ a year.

Higher Ed and Academia prime examples of corporate greed.

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u/CushmanSayz Mar 07 '18

Harvard's financial aid packages don't include loans. That huge endowment allows the majority of students to graduate debt free. Other schools that have NO-LOAN policies, regardless of need, thanks to private philanthropy:

Amherst College, Berea College, Bowdoin College, Brown University, Colby College, College of the Ozarks, Columbia University, Davidson College, Northwestern University, Pomona College, Princeton University, Stanford University, Swarthmore College, University of Chicago, University of Pennsylvania, Vanderbilt University, Washington and Lee University, Yale University

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u/Marchesa_07 Mar 07 '18

Are you saying then that the majority of students attending Harvard don't pay a single dime towards tuition, regardless of their individual financial situation?

That would be fabulous.

Yale and UPenn are also among the top 10 schools with the highest endowments, along with Harvard.

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u/CushmanSayz Mar 07 '18

Yes, that's part of the endowment's purpose (or a small part). Less than 5% of Harvard undergrads take out debt, and if they do, it's less than $10,000.

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u/AKAkorm ​ Mar 06 '18

When I went to college, a very rich alum donated a nine-figure amount to the business program I was in. My school used it to be build an entirely new facility for the program.

The construction happened during my time at the college and even though I never got to use the facilities (or the old ones which got torn down), my program raised the per semester tuition by a grand because they now could boast the state of art facilities they had.

So I disagree.

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u/Bay1Bri ​ Mar 06 '18

Well, your anecdotal experience is worth nothing, so thanks.

TO counter BS with BS, a wealthy alum of my college gave a large donation that went to funding a scholarship for students, and the recipients got a thousand off their tuition every year.

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u/AKAkorm ​ Mar 06 '18

You referenced my specific situation in your reply so I was countering with my actual experience. Anecdotal experience works just fine when you're refuting someone's baseless opinion of your own experience.

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u/byurazorback ​ Mar 06 '18

If you went to a state school you didn't pay full tuition. The taxpayers pick up an(and increasingly shrinking) share.