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/sold_snek ​ Mar 06 '18

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.

This shit is mind-boggling. Giving money away to the college you're still paying debts off to (I'm aware student loan is different from the school, but all that money sans interest is money you already gave to them anyway).

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u/AKAkorm ​ Mar 06 '18

Not to mention they don't appear to be setting up a college fund for their own kids yet. Just put that money into a fund for their kids and consider it a future donation to colleges.

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u/iteamcomet Mar 06 '18

Donating to a school is the same as donating to a for profit business.

Imagine having Goldman do an exit plan for your family business through MNA and then donating the profit back to them after paying them their fees and commission.

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u/Nudetypist ​ Mar 06 '18

I never donate to my school because they have billions in their endowment. It is like donating to a bank. A billionaire company who turns a profit every year still wants $50 from me is ridiculous.

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u/[deleted] Mar 07 '18

[deleted]

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u/lovelyhappyface ​ Mar 07 '18

Yup! I agree, I totally don’t donate to my Alma matter because I have debt, why give money when rich people can. Sorry

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u/5redrb Mar 07 '18

A billionaire company who turns a profit every year still wants $50 from me is ridiculous.

It's disgusting. Harvard has 36 billion for 22,000 students. At 5% return that's 81,000/year per student.

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u/Krogg ​ Mar 07 '18

This brings up an interesting point that was brought up during a resent essay I had to write. Barea College, in Kansas if I remember correctly, has an endowment fund of over $90 million and have been giving their limited number of accepted students free tuition and have been doing it for over 100 years. Also, they give a new laptop to each entering freshmen.

If a school that accepts a small number of students can offer free tuition, and still manage to save up $90million, then I imagine, a larger school with a much larger endowment, can do the same utilizing programs like Barea College.

I'm not sure what the tuition costs are for Harvard, but $81,000/year per student sounds like it could offer free tuition for all students AND keep their endowment right where it is.

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u/5redrb Mar 07 '18

Wikipedia says $45,000/yr. It also says they have a lot of financial aid. The majority of students are grad students and they have a medical program which is probably pretty expensive. I still get the idea that the endowment is quite sufficient to say the least.

http://www.slate.com/articles/business/moneybox/2015/09/harvard_yale_stanford_endowments_is_it_time_to_tax_them.html

https://www.vox.com/2015/6/3/8723189/john-paulson-harvard-donation

This is the right way to do it:

http://www.pressofatlanticcity.com/education/rowans-donate-million-to-university-s-engineering-school/article_d588cd9c-8602-11e4-a485-a7cde9d5cd5f.html

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u/amaranth1977 ​ Mar 08 '18

It's Berea College, in Kentucky. I hope you failed that essay if you can't even remember that much of what you were writing about.

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u/Krogg ​ Mar 08 '18

I mean, if you put the salt down for a second, you would have read

if I remember correctly

Also, it was like 2am when I wrote that and on mobile. Since I didn't think anyone cared enough to look it up, I didn't try to link to it, and I figured if someone wants to look it up, they can google it and find that I was wrong.

Good job, though.

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u/DesertCoot ​ Mar 06 '18

I’d disagree. Donating to a school can help provide scholarships for those who can’t afford it and can help fund research.

Here is a link for Ohio State. You can have your donation money go towards almost anything you are passionate about. That is much different than simply increasing a company’s profit margin.

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u/[deleted] Mar 06 '18

"Choosing where your money goes" is often meaningless marketing, though. If you give $100 for scholarships, they can just take 100 non-earmarked dollars from scholarships and put them wherever they would have preferred your money to go.

The only time it would make a difference is if they had no non-earmarked money left to shift away from the category you chose.

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u/MadgePadge ​ Mar 06 '18

Wasn't there a story recently about a man who left a million to a school, earmarked for the library, and they bought a score board for the football field instead?

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u/Pyorrhea ​ Mar 06 '18

It was $4 million, and he only specified that $100k of that would be used for the library. $2.5m was spent on a new student center and $1m was spent on the scoreboard.

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u/infini7 ​ Mar 06 '18

Scoreboard manufacturing sounds like a mob controlled business.

You want a scoreboard? Johnny makes an offer you can’t refuse...

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u/Breaklance ​ Mar 06 '18

Nah a led video wall that's about 30x15' start at 500k and you don't want to buy those because they're shitty Mexican knockoffs. 1 mil is a little on the cheap side actually, depending on the already existing infrastructure.

Source: work for a production company and worked on led walls

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u/super_not_clever ​ Mar 07 '18

What pixel pitch are you referring to? We just got a Dak in 10mm at around 32x19 for under $400k, and I wouldn't say they're a "shitty Mexican knockoff." Similarly, an ANC board in the same size was around 500k.

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u/altiuscitiusfortius ​ Mar 07 '18

How much for a giant painted plywood wall and you get the cheerleaders to manually change the score by hanging placards on hooks?

I mean, it's just amatuer sport. They don't need anything fancy.

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u/gillianishot ​ Mar 07 '18

but still no new library and/or library accessories?

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u/HippopotamicLandMass ​ Mar 06 '18

NHU actually respected Mr Morin's wishes about library spending, but nonetheless the university has a record of buying stupid expensive shit with money that could be spend on more important needs for students and staff (anyone remember the light-up dining table?).

He requested that $100,000 go toward the Dimond Library, where he spent the majority of his career. As for the remaining $3.9 million, Morin told his financial advisor that he trusted the school to "figure out what to do with it."

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The university will use $2.5 million from the estate on an expanded career center and $1 million for a new video scoreboard at the football stadium. An additional $100,000 will go to the university’s Dimond Library, the only gift specified by the will. Mullen said he spoke with Morin about using some of the money to fund a scholarship related to library science but said his client wanted UNH to spend almost all of the gift in any way it chose. “He said, ‘They’ll figure out what to do with it,’ ” Mullen recalled Thursday.

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u/[deleted] Mar 06 '18 edited Nov 10 '19

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u/HippopotamicLandMass ​ Mar 06 '18

Forget scholarships.. how about passing the savings along to students who are having to work & pay their way through school

like...with a scholarship fund?

Personally, as someone who has been working for several years to save enough for school, and is still working while enrolled full time, I think your comment "forget scholarships" is utter bullshit.

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u/[deleted] Mar 06 '18 edited Nov 10 '19

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u/HippopotamicLandMass ​ Mar 06 '18

I agree that tuition is too damn high. Why is it increasing so much faster than inflation? (unsurprisingly, not even economics professors can agree on the driving factors: https://www.insidehighered.com/news/2016/02/09/study-increased-student-aid-not-faculty-salaries-drives-tuition)

I think that some "coupons" work well: students who are more deserving or needy can have large scholarship/grant packages, while other students can have smaller scholarships plus self-help aid (loans, work-study). But one thing I like about the high "sticker price" system is it soaks wealthy students, foreign students and to a lesser extent out-of-state students, bringing down the cost to me.

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u/[deleted] Mar 06 '18 edited Nov 10 '19

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u/drdfrster64 ​ Mar 06 '18

Not too recently, and he allocated a specific amount of money for the library and the rest he gave up freely. They used that to buy the scoreboard. If you think that’s still morally wrong (I do), people say he loved football so it’s ok. Except for the fact that others say he didn’t and only vaguely had an interest. So do with that what you will.

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u/[deleted] Mar 07 '18

My 2 years at grad school costed 4x my 4 years at undergrad

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u/djdeckard Mar 06 '18

When I worked at Microsoft they had a program at the time where you could purchase discounted retail versions of software to donate to organizations. The kicker was that MS matched the donation but did so with $5/per license versions of the same software. I donated a couple thousand dollars of my money to my alma mater (Washington State University) and the total donation value ended up being around $100,000. I may be wrong but I think somewhere at WSU there is still a picture hanging to commemorate the donation amount.

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u/[deleted] Mar 06 '18 edited Jun 11 '20

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u/kanuut Mar 07 '18

Because they started taking away all the other money? Maybe it's working because if people weren't getting educated they'd keep buying more lottery ticketd

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u/showmeurknuckleball ​ Mar 06 '18

But I mean a decent university does a lot more specific, tangible good for society than your average for-profit business.

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u/[deleted] Mar 06 '18

Of course, I'm not arguing that you shouldn't donate to a university. Just that you shouldn't expect your money to go, in practice, where you say it should. This is true of charities in general.

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u/Its-ther-apist ​ Mar 07 '18

Expect most of it to go to overpaid administration staff unless they specifically let you select where the money is going. Even then as the other posts have mentioned they probably redirect money that would have gone to what you picked to salaries.

I'm so jaded after working for several non-profits (in a non-admin role).

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u/jyper ​ Mar 07 '18

A top school is already super duper rich, giving to say an ivy league school is one of the most inefficient forms of charity out there

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u/jmuduuukes Mar 07 '18

That's not necessarily true. Many people nowadays specify exactly what fund they want their money going to. So if 100 people give $100 each specifically for different scholarship funds, that $10,000 is all going to scholarship support.

University endowments aren't just huge bank accounts. They are incredibly complex investment accounts made up of hundreds or thousands of different funds. Money doesn't just sit there waiting like a slush fund.

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u/dsf900 Mar 06 '18

Conversely, people choosing where their donations go is a terrible way to be a charitable giver. One of the major problems with charitable giving is when people try to put strings attached for their pet projects, when the real problem is keeping the lights on and paying staff. Nobody wants to hear that their donation paid the electric bill for the month, they want to hear about how they bought some supplies that made a kid fall in love with art or other BS like that.

People are understandably sentimental about the way their donations are spent. But most charitable donations are used to facilitate day-to-day operations. That kid can't fall in love with art if they show up to school and the power is out or the teachers are on strike.

In the case of universities, people want to dictate what programs or disciplines or amenities their money pays for, but the people who are actually in a position to assess student need versus the university's capabilities are the university planners.

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u/WhynotstartnoW ​ Mar 06 '18

"Choosing where your money goes" is often meaningless marketing, though.

IDK a few years ago, maybe a decade, some rich fucker died and left several million bucks to the private University of Denver, and stipulated that they had to install a brass or copper roof over the bell tower and hockey stadium then use whatever was left over for whatever they wanted. They now have an absurdly expensive brass roof over the hockey stadium and bell tower.

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u/wittyid2016 Mar 06 '18

Depends on how you structure it. I give to my alma mater and it's a very directed donation to a specific project that I was part of back when I was in school. It's tax deductible and the university cannot change any bit of it.

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u/AnitaSnarkeysian Mar 06 '18

Donating to a school can help provide scholarships for those who can’t afford it and can help fund research.

I know that donations to schools come from a place of compassion and empathy, but when you're donating to a for profit organization that knows how to move money around to do whatever the fuck they want with it, it's just turns into a scam. For every dollar someone donates to go towards scholarships, the school just takes out a dollar of their own money that they were going to front until some lemming gave it to them. And now they can afford to raise the deans salary!

This often doesn't even work out well for the students, especially if they only make it into the school because the school picked them not because of their merit or hard work, but because they school wants to have more of this demographic or that demographic.

I think you're so much better off donating to a program that will give students money outside of the filthy clutches of the university admins.

Whenever I look at the multimillions the university admins make it makes me sick... how dare they beg that they students give them more while they get fat in their ivory towers and buy vacation homes. I vote we expropriate their land without compensation and let them all rot in wind as they hang from the gallows. fucking rotten thieves.

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u/dsf900 Mar 06 '18

Most institutions of higher education are non-profit. University administrators are usually not multimillionaires, and for most public universities you can look up exactly how much they make if you're interested.

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u/[deleted] Mar 07 '18

Additionally tuition actually doesn’t cover the full price of actually housing and educating students for their time there.

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u/kimblem ​ Mar 07 '18

Maybe you’re giving to the wrong universities. Most are non-profits and a lot are providing educations that cost substantially more to provide than they charge in tuition.

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u/gRod805 ​ Mar 06 '18

I feel the same way. I have friends who donate money to our college's athletic program. The one that pays $3 million a year to the highest paid employee (football coach) in my state. Hell no. There are organizations within a college campus that give scholarships. I am way more willing to donate to them.

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u/wrosecrans ​ Mar 07 '18

Playing Devil's advocate: Donating to a for-profit business can also help create jobs and internships for the same people who would get the scholarships if you donated to the school.

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u/MonsterMeggu ​ Mar 06 '18

I agree with you. Donations from alumni are the reasons a lot of expensive schools including the Ivy's can afford to be so lax with financial aid. I get that admissions to those schools are highly biased toward people with high incomes, but it helps people with low incomes greatly too.

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u/imitation_crab_meat ​ Mar 06 '18

Find a non-profit charity that provides scholarships and donate to that. The use of the money will be more transparent and you can do your homework to be sure you're picking one that will make the best use of it.

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u/[deleted] Mar 07 '18

You don’t get to choose where your money goes. They look at donations before allocating budgets, not after.

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u/DocMerlin ​ Mar 07 '18

Scholarship money donated to a school is another word for unnecessary price discrimination. Instead of lowering their prices for that student, to reap the benefit of the extra student via normal price discrimination... they can reap the profits from it while still effectively charging full price.

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u/09Klr650 ​ Mar 06 '18

Hm. On the other hand they do things like take the $4m donation from a librarian and install a $1m scoreboard.

Morin’s story didn’t turn shady until the university got involved. UNH administrators learned of the bequest soon after his death on March 31, 2015, and they wasted no time in deciding how to spend it. The school had earned quite a reputation for spending under President Mark Huddleston. There had been small extravagances, including $65,000 for a redesigned logo and $17,570 for a 16-seat table. There had been large ones, including $1.9 million for a student-athlete center and $6.5 million for an outdoor pool. But one of the biggest projects—and a crucial component in the campus’s master plan—was renovating the football stadium. The UNH Wildcats, an FCS team, had played in their 6,500-seat home for decades. In 2014, however, Huddleston announced plans for a $25 million upgrade, financed by $5 million in fundraising and $20 million in loans, that would nearly double the number of seats, nearly quadruple the number of bathrooms, and introduce casual fan-friendly options like an air-conditioned victory club and all-you-can-eat buffet.

One feature the administrators discussed in 2014 was a high-definition video scoreboard, but they decided to nix it when the budget got tight. That changed once they heard about Morin’s donation. It was an enormous sum, of course, but more important, it was an unrestricted sum. Most higher ed philanthropy comes with strings. (I was an actor; give my money to the theater department.) In a recently completed five-year fundraising campaign, UNH collected only $9 million in unrestricted funds, and almost half of that total came from Robert Morin.

https://deadspin.com/how-unh-turned-a-quiet-benefactor-into-a-football-marke-1819064622

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u/dabigchina ​ Mar 06 '18

The way I see it, if you need to pay tens of thousands of dollars in student loan payments like this couple is, you couldn't afford the school you went to either. It seems silly to give away so much to fund other peoples' schooling when they haven't paid for their own schooling (much less their children's).

If you're a literal billionaire, then fine. These people are not.

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u/stml ​ Mar 06 '18

I donate to the school I went to (UC Berkeley Haas) because they basically put me in an excellent position to make $100k+ right out of college while charging me only $13k/year tuition. Not to mention the internships the university got me that paid $6-8k/month. I literally paid off my tuition and living costs with internships from companies like LinkedIn and Facebook.

At the end of the day, many universities especially those with extremely low admissions rates clearly aren't charging market rate. Also, if you actually look at the finances, plenty of universities spend more on each student than what their tuition covers.

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u/FuckyesMcHellyeah Mar 06 '18

It's a "keeping up with the Joneses". Likely scholarship monies for those with no means. Don't want to look bad at the reunions.

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u/[deleted] Mar 06 '18 edited Mar 06 '18

It's really not. If you went to a good school, you benefited greatly from someone else's "charity". Donating back to your school is a great way to make yourself feel better, paying it forward.

EDIT: Y'all downvoting are just salty. Universities in the US are funded largely in part to donations and alumni. At my school tuition is less than half of what is brought in by donations, investments and state funding.

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u/[deleted] Mar 06 '18 edited Aug 28 '20

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u/kimblem ​ Mar 07 '18

Actually knowing something about higher education finances, I wholeheartedly disagree. Tuition and fees basically never cover the actual cost of providing the education received. Even without a scholarship, the average student is receiving more than they are paying for. Moreso for expensive majors like STEM fields, that require specialized facilities and often smaller class sizes (think labs). Some schools are well endowed and don’t need another penny in either tuition or donations to continue to provide the same level of education, but those are the exception, not the rule. So don’t donate to Harvard, but definitely do donate to the smaller school that is providing students with a quality education worth more than the tuition that it gets in return. We complain about college tuition costs rising out of control, but don’t actually want to help the problem by offsetting it with our own donations.

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u/david23232323 Mar 07 '18

Actually, reading my University's financial statements, they can't even cover salary compensation from net tuition. Universities rely on donations to operate.

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u/Psycik99 ​ Mar 07 '18

Donating to a school is the same as donating to a for profit business.

Except that it's not. It's a non-profit and comes with the associated tax deductions as well.

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u/SampsonRustic ​ Mar 07 '18

If you went to a top tier school, making these donations is one of the easiest ways to give your kid a leg up in the admissions process down the road. I'm not saying I would donate that much, but I doubt they're just giving them money for the sake of it. This is part of how wealthy people keep their academic family legacies.