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The following is a staff writer post from MikeS.  He is a married father of 2.  So, with the cat, he ranks number 5 in the house.  He loves numbers and helping people. Please leave any questions or comments below for either Mike or Crystal.

I have come to realize, as I was wrapping up my mother’s estate, that my parents probably were not the best money managers.  I mean, they took care of me, but who will take care of them?  That is not to say they I went without as a kid growing up; at least I don’t think I did.  It’s just that in comparing my finances to theirs, I realize what a precarious position they were in.  The remarkable thing is they managed to raise 3 kids on such a small income.

Income Variation

I do not know truly what my parents’ salaries were growing up, as personal finance was never really discussed.  I learned most of my current personal finance knowledge on my own.  I do have a pretty good guess on their income and it was probably in the $50K range.  When I think about this, I think that I should feel flush with cash because I bring home about twice that with my salary and bonus.  I think, “How did they have a home and raise 3 kids on half of what I am making now?”

Housing Costs

The cost of housing is a big difference.  I’ve learned in closing out the estate that my parents bought their house for about $20K back in 1967.  Assuming they took out a 30 year mortgage, and had an interest rate of 7%, their payment would have been about $135 a month.  Now, granted, that is only the principal and interest, property taxes and insurance would be additional.  Let’s assume that property taxes were about $60 a month.  I got this by taking the most recent property taxes and discounting back 30 years at a 4% rate.  A conservative bet for the homeowners insurance would be about $20 a month.  So, all in their housing costs were about $215 a month.  My housing costs are significantly more.  I pay about $2,100 a month everything included.  That’s a huge difference, but it’s also a choice I have made and am comfortable with.

Savings

My parents were not diligent savers.  They had little, if any, liquid savings.  They lived more of a paycheck to paycheck lifestyle.  They didn’t use tools like the ones available at the Genworth site to make long-term plans.  I try to be more deliberate with my savings.  I currently set aside 6% of my salary into my 401k for retirement.  I also set aside money for emergencies in 2 different spots, liquid in Capital One 360 and a Vanguard brokerage account.  I have about 3-months worth of expenses saved between the two, with an overall goal of 6-months.

Cars

We only had one car when I was growing up and it was always purchased used.  My dad knew someone who would keep an eye out for a good deal for him.  So, my parents never had a car payment and often only carried liability coverage on their auto insurance.  I have 2 cars in my household, thankfully with only 1 car payment.  I also have full coverage on both cars.

Lifestyle Inflation

There are a lot of things now that most people would say are needs that did not exist 20 or 30 years ago.  Take cable television for instance.  We did not have cable TV for awhile when I was young.  Even when we did get it, it was the basic package.  For my case today, I pay about $155 a month for my TV, phone and internet package.  My parents likely paid only around $25 for theirs.  Cell phones did not exist back then, so there were no monthly charges.  My wife and I both have TracFones, so our cost is minimal at about $20 a month.  How many other people spend $100 or more per month?

Times Change

When I started thinking about it, I thought things should feel easier financially for me.  I mean, I make about twice as much as they did and have 1 less child.  What I came to realize though, is that I am in a much more secure position financially than they were and that lifestyle inflation is hard to avoid over the course of 30 years.   🙂