Money Magazine: Scraping by on $150,000 a year

I was insulted when I saw the Money Magazine headline. Then I saw the sub-title.

The Schuetts have an enviable income. So why are they having a hard time making ends meet,

then I realized they were talking about a family (like so many) who had made a lot of financial mistakes. So much so, they struggle financially like someone or even a family that makes less then $20,000.

f she thought it would really fix her family's finances, Amy Schuett would make it her New Year's resolution to squeeze every bit of extra spending from the family budget.

But she's already slashed so many little luxuries - the gourmet coffee, the restaurant lunches, the weekly dates with husband Brian - that she's fresh out of ideas.

Cable TV? Unplugged. Pool membership? Down the drain.

They've even considered giving up their unlisted phone number. At a cost of $3 a month, this move wouldn't save much - even over, say, 150 years - but it shows how desperate the couple feel about easing their financial strain. "We're struggling week to week to get by," says Brian, 42. "Any money that comes in gets chewed up right away."

Digesting that fact becomes harder when you consider that the Schuetts earn a comfortable living, with Amy, 39, pulling in $150,000 a year as a hospital psychiatrist. True, their income did take a big hit last summer when Brian got laid off from his job as a sales rep for a pharmaceutical firm (he'd been making a base salary of $82,000 a year, plus commissions as high as $24,000).

Whoa, whoa, right there, did I read that right? His annual commissions alone is more then I make in a year? This couple is in serious need of learning, how to spend within their means. Of course it's, not just this family, but a lot of families of all income levels. What can we learn from their mistakes?

There's only one thing that stands between the average person and the discipline needed to save on a regular basis: human nature. When it comes to money, "we tend to spend as much as we have," says Susan Kaplan, a financial planner in Newton, Mass.

So take self-discipline out of the equation by enrolling in automatic investing plans through your employer and financial services providers; you tell them how much to deduct from your paycheck or checking account, and the money will be shifted every month into investments of your choice without further ado from you. In effect, you make the discipline of saving your money someone else's job.

Set targets for how much you should be saving for various goals through these automatic investing plans, then slowly work your way up to the goal.

Financial planner Bonnie Hughes, for instance, suggests that you aim to have at least 10 percent of your income directed to a 401(k) or similar retirement account (15 percent would be ideal); 4 percent in a savings account or money-market fund designated for emergencies (you can stop once the account is equal to six months' worth of your living expenses); and another $100 a month going into 529 plans for each of your kids.

The important thing, though, is just to get started with a different way of thinking about money: From this day forward, you will treat saving like a bill and make it the first one you pay each month. And you will no doubt find yourself automatically adjusting your spending downward as a result.

Kaplan notes, "If you never have the money at hand, you can't spend it."

As we continue to read the article, we learn that this couple also owns several rental properties. Now for me and I am sure Dave Ramsey, there is no question about it, sell these properties.

But there is more. They don't want to give up some expenses, even temporarily while they are getting out of debt.

"The feeling that you can never get ahead can be demoralizing," says Kaplan. So make sure in your zeal to spend less and save more, you still allow yourself a few expenditures that bring your family real pleasure. You just need to figure out in advance how you'll pay for them.

Last year, for instance, Brian's parents gave the Schuetts a horse named Red for their kids to ride. They think it will cost a few hundred dollars a month to feed and care for the animal, and they're willing to give up ballet lessons and gymnastics classes for the girls to pay for it.

The trade-off is worth it, says Brian, because "the kids so love having a horse."

In fact, Amy has already got a name if they get a second horse: Buttercup. "We'll probably have to wait a while for that," says Brian. "We've got another beast to tame first."

Until, they take drastic action this couple will not be debt-free. If they keep the attitude of keeping some luxeries, that many Americans can't afford, like keeping a horse (and especially getting a 2ND horse), ballet lessons and/or gymnastics, they will continue to have a harder time to pay off their debts. Just ask Leigh Ann of saveleighann.blogspot.com, who recently got debt-free by cutting out all unnecessary expenses.