The formula is something like this: (Jacob likes formulas-more in his excellent book which I highly recommend)
$250,000 a year annual income (minus) a brain to manage that amount. Expressed as: 250K - ~0~. The "zero" comes in financial management.
Let's face it. They hypothetical family in the article are spendthrifts. There was a reference to gym memberships. Gym memberships? You don't need no friggin gym memberships! Anyone can walk for free. Spend the membership money on the fancy Nike running suit(whats wrong with a gray sweatshirt and jeans you already own?) even if you never jog a lick. Walk somewhere in the suit. Chop a few ricks of wood. Clean the house your paying someone else to clean. Do a few pushups or situps. Better than that do what I do at age 65:
Biweekly---Four mile walk/run in an hour.
(yes, it hurts some at my age, but I have done it all my life)
I don't have no friggin gym membership, just some get up and go.
At home, I dust, put things away, run the sweeper or mop, take out the trash, clean our windows, wash down our porches, deck and driveway, and fix things, grow a fair garden, and mow and trim the lawn. I don't need no friggin gym membership. I cut trees and chop wood and split wood and stack wood and share with my neighbors. I cut a rick on his land and split up half the rick with him. Works great. Sometimes we both go out and cut all day and stack a cord of wood for both of us.
Although the article is hypothetical, and the 250K is quite a bit above most people, the truth remains of it even down to 40K earners. Some 40-60K earners are trying to emulate the 250K earner. These people fold because the life they live is unsustainable. Meaning they cannot afford it. To determine if you can't afford something, ask yourself to produce the money for it. If you cannot produce the money, you can't afford it. Casually borrowing money at interest means you could not afford what you spent the money on. None of this is all that technical. No formulas needed. A hand held calculator is helpful in this exercise, and would make an excellent wedding present for newly married couples. I would get them the business model that displays loans, etc and their costs over the life of the loans. The gift is worthless if they don't use it, they don't know how to use it, or no one teaches them to use it. Or you could insult them with:
OK--you have a dollar. You spend .10 and save .10. How much of the dollar is available for other things and uses? If you have .80 left, and your mortgage is .30 and your food is .10, then how much is left for other things and uses? Ok don't do this--you might get a blank stare and lose a friend or relative's friendship. But sometimes you feel like doing the above.
So-- The thread and posts are not about arrogance or snobbery
at all. They are about common sense and facts and suggestions that people begin to think their way out of the pit they are in. There are certain laws of mathematics. These laws cannot be changed. You have 'x' so you can accomplish "y". If you borrow money, "y" suddenly becomes much more expensive. We have all driven around subdivisions in the past, and watched expensive homes being built. We say to each other "Who can afford these houses?" Answer: Hardly anyone we know, but they being sold by brokers who appeared willing to lend money to a dead cat. (Don't worry, this is not a treatise on the housing bubble).
So no one should take offense at this thread, or at least at the posts I have read on it so far.
MERRY CHRISTMAS TO ALL.