Salary is about to double, how to cope? (best, value, old)

[MJ7]

Originally Posted by jasper12

The issue here, is a better job at work? You better look the part. You can't dress the same for a $40,000 a year job, and an $80,000 a year job. You need to look a bit more polished. You were hired, meaning probation. You don't have the job forever. You need to look the part. If you don't, you better be used to your frugal lifestyle, because you won't keep the job.

Get a decent haircut, see what others wear at work, emulate them.

I see this often, people get hired out of college, and keep wearing their college clothes to work, they don't look professional, or put together. They stay in lower level jobs.

I know, many people will say go to Goodwill, and what snazzy dressers they are for zero money, blah blah, and you can be a sharp dresser buying clothes at Wal Mart. Whatever.

You want the job, please just review your wardrobe, and look the part.

LMAO

Okay, we get it already. How do you know he doesn't already 'look the part'?

In any case, it's better to ease into the new earning rather than be frugal and then go off the deep end later. There are a lot of people that make good money and they spend every dime of it, and are in debt for it. Stay grounded but expand your standard of a living slightly. Good luck.

[Malloric]

Originally Posted by AmFest

That's a very difficult thing to do in practice. When income goes up, it's human nature to desire more comfort. It's the same thing that happened when you graduated from school and got a real job. Suddenly the need to buy something will pop up. A more realistic plan is to upgrade your life in a controlled manner. For example, rent a nicer apartment, buy new clothes, go to music events, eat out once in a while, and also set aside more money for retirement. Build a more generous budget, but still stick with it the same way you've stuck to your current budget all those years.

For someone living comfortably on $26k/year when they have $40k available after taxes it might not be.

OP: Enjoy an extra vacation or a longer one. Triple your savings to 30k/year. If there's anything left over after saving an additional $20k and another $2-6k on vacations, and there probably won't be after the higher taxes, worry about it then.

[Malloric]

Originally Posted by MJ7

LMAO

Okay, we get it already. How do you know he doesn't already 'look the part'?

In any case, it's better to ease into the new earning rather than be frugal and then go off the deep end later. There are a lot of people that make good money and they spend every dime of it, and are in debt for it. Stay grounded but expand your standard of a living slightly. Good luck.

I agree, it's way overblown.

You don't have to rush out and buy a Mercedes and some new Brooks Brothers suits. That's called keeping up with the Joneses. Most of the people making $80k here wear jeans and t-shirts.

[Listener2307]

Originally Posted by MDrenter223

Ok, I know, what a problem to have right?

But here is the thing, my family makes a comfortable 40k after taxes. We have zero debt, eat good food, live in a decent neighborhood, and don't want for anything. We put away 10k a year into retirement, and still have 6k a year for vacation. We have had a fairly constant income for the last 7 years, and have gotten very good at living at this level.

Soon our take home will double, and then triple just a few months later, but I have no idea how to adjust to that. Already our savings is a years worth of expenses, and our cars have less than 100k miles between the two of them.

First world problems I know, but any advice is appreciated.

That happened to us, once. Here's what we did:

We took all the active money (but not the investments) we had and put it into an interest bearing account. We called it the cushion account.
Then we started putting all the money we made into the cushion account. All of it. Every penny.
The first of every month we took what we were going to need and electronically transferred it into the checking accounts. We called it our working accounts.
When we got about 6 months money saved into our cushion account we started transferring the excess into our investments. We called this our foundation account.

By the time we retired, we were so used to the system it didn't matter what we made. We always spent the same amount every month.
1 months money in checking (working). 6 months money into savings (cushion). And, finally, 10 years money in our investments (foundation).

Maybe you will never want more than 4000/month. Fine. Just retire early.
Or not.

[pipsters]

Enjoy the money. I saw my income grow and held off spending money, but when I hit my low 30's I started spending it. Frugal is fine when you need to be, and don't go crazy, but at some point you really want to start enjoying the fruits of your labor. I started buying things I always wanted to as a kid. Lots of tools, shop equipment etc. like a welder, made some expensive work benches out of metal. I bought my wife a $400 DSLR camera this Xmas and didn't even blink an eye. I also started hiring out some things because my time became more important than the money, and I've begun to look at money as a renewable resource instead of this scare commodity.

Where people get into trouble is when they spend money on things that will cost them more money in the future (example, a much larger house or expensive car). Just buy those things with cash and you won't ever have any issues. The money management skills you learned when you were earning less carry with you as your income grows. I highly doubt you'll get yourself in trouble.

Yes, you can live on a low income. Congrats. But why do it? Either save and retire early or enjoy it IMO. People on this forum get ridiculous. I look at the way my sister lives on $35k and I do not EVER want to go back to living like that. Sorry that life is no fun. "He who dies with the most toys wins".

"Money doesn't buy happiness" is what people without money will say. True, in a way, but it sure makes life a lot more fun.

[MJ7]

Originally Posted by pipsters

"Money doesn't buy happiness" is what people without money will say. True, in a way, but it sure makes life a lot more fun.

As long as you know what you like and what makes you happy, money can bring great happiness.

[L0ve]

Invest and save it as others have mentioned.

Don't fall into the affluenza sickness that tells you you must spend it on garbage.

Use your extra discretionary cash on things that matter. Buying healthier organic food at the grocery, tutoring or educational/arts classes for yourself or kids, joining a gym for better health, or doing more maintenance and upkeep on your home which will improve/maintain it's value down the road. These are some life improving things that people often overlook due to not being able to afford them.

[sirron]

One thing I didn't see mentioned, but is very important:

Realize that by being in a higher income tax bracket, you'll pay much more in taxes. Adjust your W-4 accordingly. Try to estimate how much more you'll be expected to pay, and plan ahead. If you now get huge refunds every year, that will change unless you adjust that W-4 form.

[Stagemomma]

Jasper had some great thoughts.

And also, 10K per year into retirement is NOTHING. You may have missed part of the point of saving for retirement. If you save enough, you could retire EARLY and maintain your current standard of living indefinitely.

[MDrenter223]

Originally Posted by CaptainNJ

your wife doesn't want for anything? a cartier love bracelet perhaps?

Well, I guess there is the fondness we have for Peter Lik photos. I just hate how they are sold as investments and not as just really nice photographs.

Originally Posted by BostonAccountant

Try to live the exact same lifestyle you are currently living and save the excess. Half in a Roth IRA, half in a traditional 401k.

Look me up in five years and thank me for giving you the best advice ever five years ago! Feel free to throw some of the wealth you will have built-up my way!

We are definitely planning on maxing out our ROTH accounts. And I'll set up for some to go into a Traditional IRA, but the job is a fairly secure position and it has a pension, so I don't want to go overboard with saving for retirement (so many stories of dead secret millionaires).

Originally Posted by CSD610

Why would you change how you live because of money?
Do what you do now but put the excess in the 401k, IRA, donate to charities, stick it in a trust for grandchildren or children .
There is no reason at all to change your lifestyle just because you are going to have more income. I doubt that you have the desire to put yourself in debt since you are out of debt now so just continue on like you currently live and stash the excess in different savings and investments.

I guess the issue is that all the financial advice I've ever followed up until now focused on zero debt, 6 months worth of living expenses and 25% into retirement. Now we are going from 40k after taxes and FICA to 89k after taxes and FICA when our 'fixed' expenses are only 24k (we rarely use up the funds in our various subbudgets).

Originally Posted by AmFest

That's a very difficult thing to do in practice. When income goes up, it's human nature to desire more comfort. It's the same thing that happened when you graduated from school and got a real job. Suddenly the need to buy something will pop up. A more realistic plan is to upgrade your life in a controlled manner. For example, rent a nicer apartment, buy new clothes, go to music events, eat out once in a while, and also set aside more money for retirement. Build a more generous budget, but still stick with it the same way you've stuck to your current budget all those years.

And this was what I was kind of thinking of doing, upgrading from movies to theater and concerts and eating better food. Setting ourselves up to live in good school districts, or even to pay for private schools if an area goes solely by lottery and buses kids around.

Originally Posted by jasper12

The issue here, is a better job at work? You better look the part. You can't dress the same for a $40,000 a year job, and an $80,000 a year job. You need to look a bit more polished. You were hired, meaning probation. You don't have the job forever. You need to look the part. If you don't, you better be used to your frugal lifestyle, because you won't keep the job.

Get a decent haircut, see what others wear at work, emulate them.

I see this often, people get hired out of college, and keep wearing their college clothes to work, they don't look professional, or put together. They stay in lower level jobs.

I know, many people will say go to Goodwill, and what snazzy dressers they are for zero money, blah blah, and you can be a sharp dresser buying clothes at Wal Mart. Whatever.

You want the job, please just review your wardrobe, and look the part.

Actually, the clothes don't change at all as the field has a set attire. But with networking it does make sense to upgrade the off the clock wardrobe.

Originally Posted by Chicago87

What exactly will happen that will cause your household income to double then triple?

A transition from a training position to a fully qualified position.

Originally Posted by MJ7

LMAO

Okay, we get it already. How do you know he doesn't already 'look the part'?

In any case, it's better to ease into the new earning rather than be frugal and then go off the deep end later. There are a lot of people that make good money and they spend every dime of it, and are in debt for it. Stay grounded but expand your standard of a living slightly. Good luck.

Definately not going into debt for anything other than a house with a 15 year mortgage or a car on a three year loan. And we are not going to be getting either anytime soon.

Originally Posted by Malloric

For someone living comfortably on $26k/year when they have $40k available after taxes it might not be.

OP: Enjoy an extra vacation or a longer one. Triple your savings to 30k/year. If there's anything left over after saving an additional $20k and another $2-6k on vacations, and there probably won't be after the higher taxes, worry about it then.

Based on this years taxes I ran our expected income and it looks like after taxes we can expect about 89k. But the work will be hard so there will be more, and better vacations (plus we have a kid now so that will add a lot to the cost of traveling).

Originally Posted by Listener2307

That happened to us, once. Here's what we did:

We took all the active money (but not the investments) we had and put it into an interest bearing account. We called it the cushion account.
Then we started putting all the money we made into the cushion account. All of it. Every penny.
The first of every month we took what we were going to need and electronically transferred it into the checking accounts. We called it our working accounts.
When we got about 6 months money saved into our cushion account we started transferring the excess into our investments. We called this our foundation account.

By the time we retired, we were so used to the system it didn't matter what we made. We always spent the same amount every month.
1 months money in checking (working). 6 months money into savings (cushion). And, finally, 10 years money in our investments (foundation).

Maybe you will never want more than 4000/month. Fine. Just retire early.
Or not.

No retiring early, maybe a reduction in workload later in life, but definitely can't imagine stopping before physically necessary.

Originally Posted by pipsters

Enjoy the money. I saw my income grow and held off spending money, but when I hit my low 30's I started spending it. Frugal is fine when you need to be, and don't go crazy, but at some point you really want to start enjoying the fruits of your labor. I started buying things I always wanted to as a kid. Lots of tools, shop equipment etc. like a welder, made some expensive work benches out of metal. I bought my wife a $400 DSLR camera this Xmas and didn't even blink an eye. I also started hiring out some things because my time became more important than the money, and I've begun to look at money as a renewable resource instead of this scare commodity.

Where people get into trouble is when they spend money on things that will cost them more money in the future (example, a much larger house or expensive car). Just buy those things with cash and you won't ever have any issues. The money management skills you learned when you were earning less carry with you as your income grows. I highly doubt you'll get yourself in trouble.

Yes, you can live on a low income. Congrats. But why do it? Either save and retire early or enjoy it IMO. People on this forum get ridiculous. I look at the way my sister lives on $35k and I do not EVER want to go back to living like that. Sorry that life is no fun. "He who dies with the most toys wins".

"Money doesn't buy happiness" is what people without money will say. True, in a way, but it sure makes life a lot more fun.

This is kind of where we are now though. If there is something we want its really no issue to buy it.

I do like the idea of a bigger car either on a short loan at 0% or paid outright (kids and compact cars is getting old, but we have great cars with low miles so upgrading seems so wasteful).

Originally Posted by Bmachina

Invest and save it as others have mentioned.

Don't fall into the affluenza sickness that tells you you must spend it on garbage.

Use your extra discretionary cash on things that matter. Buying healthier organic food at the grocery, tutoring or educational/arts classes for yourself or kids, joining a gym for better health, or doing more maintenance and upkeep on your home which will improve/maintain it's value down the road. These are some life improving things that people often overlook due to not being able to afford them.

I've had a lot of great, and supportive comments in this thread. I really thought I was going to get flamed for having difficulty adjusting to a larger income (and it's still really daunting), but you all have been great. That being said this comment by Bmachina really resonates with me. Looking back, using the money where needed to improve live was a theme that many posters brought up but Bmachina just said it in a way that got to me.

Originally Posted by sirron

One thing I didn't see mentioned, but is very important:

Realize that by being in a higher income tax bracket, you'll pay much more in taxes. Adjust your W-4 accordingly. Try to estimate how much more you'll be expected to pay, and plan ahead. If you now get huge refunds every year, that will change unless you adjust that W-4 form.

Oh I did that last night, it was a prompt to do this thread. I calculated out the next few years of taxed income based on the 2013 tax brackets and exemptions (staying keen on income limits for tax breaks I currently enjoy) as well as FICA taxes. Take home will be jumping from 40k to 89k, which is staggering considering my current expenses are just 24k

Originally Posted by Stagemomma

Jasper had some great thoughts.

And also, 10K per year into retirement is NOTHING. You may have missed part of the point of saving for retirement. If you save enough, you could retire EARLY and maintain your current standard of living indefinitely.

Of course I will up the retirement savings when my income goes up (big fan of 25% into retirement savings), but, the 10k is 25% of my income now so its pretty good for where I am at currently.

But again. I will maintain a high rate of retirement savings, just not 66.3% (what I would be putting into retirement if I invested my whole increase).