If current spending levels are comfortable, wouldn’t a reasonable default be to continue spending at the same level and just let the extra income go to savings and investment?
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Yes, but it’s easy to fall into the trap of lifestyle inflation. You need to make a conscious effort to avoid it. This is something my wife and I have put effort into, and something we’ll emphasize regularly to our daughter as she enters the workforce.
“Live well below your means” (when you’re able to) is key to avoiding the feeling of living paycheck to paycheck.
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I don’t believe so. Not in this particular case and report. This is a report of people who want to increase retirement savings. Across the board (and to some surprise by the people who did the study) the main factor appears to be credit card debt.
That seems foreign to many of us who grew up with depression era parents. You simply didn’t spend money you didn’t have. Cash was king. But that hasn’t held true over the years. It’s really not (according to factors studied) tied to employment, COL, etc.–it’s tied to debt that is self inflicted but not necessarily based on need.
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That doesn’t seem surprising to me. People put everything nowadays onto credit cards…..medical debt, education, taxes, sometimes housing expenses. I do that myself for airline miles and hotel points.
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A few other random thoughts/comments…
Survey results depend heavily on how the questions are worded. For example, “Do you feel your financial situation is sound?” might elicit a very different response than “Do you feel you’re able to make significant progress toward your long-term retirement goals, only make moderate progress, or feel like you’re living paycheck to paycheck?” I have no idea how this survey was worded.
People tend to compare their circumstances to those of their peer group, rather than to others (including who might be in much worse financial circumstances).
Yes, people got by with much lower incomes 20 or 30 years ago, but the cost of essentials like housing, childcare, health insurance, and college has increased very substantially. So that’s a factor.
The U-shaped curve is the most insightful takeaway for me. It suggests that lifestyle inflation doesn’t happen immediately, but kicks in at higher income levels.
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That’s me. Never made more than $55k (and very few years at that), single parent in Brooklyn, renter. Kid went to great public schools, pre-k through high school. But I threaded the needle and managed those school decisions, and had enough flexibility in my work life to get her to and from those schools in Manhattan. And I was lucky to find adequate apartments for us. Others are not so lucky and I don’t think I would have been able to get her into those schools today. Systems change.
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Our son and his wife will jump several tiers in income when he starts his new job in a couple of weeks. He’s well aware of the pitfalls of lifestyle inflation and does not intend to make any changes because they are comfortable with their current life and just want to see their investments grow. They value future security and have no plans to spend other than to buy a house when their lease runs out next summer and he has a better feel for the commute scenarios between his new office and client site.
At any income level, you set goals and make choices that either move you toward or away from those goals. Any high-income earner who feels dissatisfied with their progress toward savings goals has the ability to make changes. Otherwise, they need to be honest with themselves that the choices they’ve made that eat up that income and preclude the savings rate they’d like to see are self-inflicted. If they don’t make changes, they also must be honest that they prefer their lifestyle choices to improving their balance sheet and let the dissatisfaction go. There is no problem when the solution is within your control.
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We tried to always live below H’s income, so that when I stayed home to raise the kids, we’d be OK (barely but managing). Then as H started earning more over the years, we tried to save. Once the kids started private school and were looking at OOS private Us, we realized we’d have to save A LOT more, so I scrambled and was able to get a job that paid enough to help pay a lot of the new bills. We were very fortunate that we were able to make it work. We were also fortunate that my SisIL chose to help us out financially a bit at strategic times, which helped us avoid having to dip heavily into savings.
How things are worked in their questionnaire, whom they chose to survey, all of these make a huge difference.
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For those in the suburbs or rural areas, it was a home and a car.
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I think that’s a huge factor. My parents bought a 10K house in a nice part of Seattle when my mom was 19 and my dad was 30, while working their way through college. No parental help with either college or the house, people could actually pay for these things at a young age. Now the house is worth over 100 times what they bought it for, and wages sure haven’t gone up 100 times (except for CEO’s). Their company paid medical costs, and college was cheap.
Boy have times changed.
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I read this NYT article elsewhere, so can’t gift link. Wonder if someone could provide a gift link as this article is relevant to the topic of this thread.
https://www.nytimes.com/2026/10/21/us/san-francisco-cost-living-affordable-housing.html
For Seattle Times readers, here is the same article
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Reading that article, I can say that those couples screwed up. They should have arranged to be born to wealthy parents who paid for their houses, obviously. 
I hadn’t realized the cost of living had gone up so much in SF, wow. California has some serious state taxes, also. I would think the only way for many people is to share living spaces and share child care, which certainly isn’t always easy, especially in small spaces. I’d also forget about living near the city, you’d have to take the BART and commute.
Here I thought everyone was leaving California and moving to Texas and Florida. I guess not.
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I have to admit that I was romanticizing how much we were able to save when we were new grads and first married on our “meager” earnings. But in today’s money, the calculators say that we were making the equivalent of $150k/year. Two years later we were making $200K in today’s money. I think a young couple absolutely can be investing heavily at that income.
We did live in a cheap basement apartment for a while, put my entire salary into savings and investments, and bought a house a year later. We also always maxed out our retirement accounts. We also used just my H’s salary alone to qualify for our mortgage and the household budget because it was always my intention to stop working when we started a family. We did wait quite a number of years before starting a family so we would feel more financially secure. When I did go back to work later, my salary was always investment money. We also never used H’s actual bonus in any kind of budgeting, even when it was reliable, and that went straight into investments as well. Credit cards always always always paid off in full every month.
That’s the way our D is living her financial life now. Living below her means, saving and investing everything she can in her 401K, her Roth, and investment accounts, not counting on her bonus, not accruing any debt, having a healthy emergency fund, etc… The only exception is she’s holding off on buying a house because she’s not sure where she’ll be living next year. She already has a healthy downpayment saved and ready to go but she needs to know where she’ll be longer term first.
H has been giving her financial planning and investment lessons since she was a young teen. She joined us for our yearly budget reviews and goal setting meetings too. At this point she’s savvy enough that she just reviews her portfolio with him to get his blessing when she’s making any major changes.
I think in many families money discussions are taboo so kids aren’t learning about this stuff. Our public school system did try to do some personal economics 101 in both middle school and high school but it didn’t have enough depth to be helpful.
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This couple made the classic mistake many make - spending $8600k for housing and transportation while knowing they will have some expensive years ahead with young children. Their mortgage while high probably locks in a pretty low cost of housing for the long term given prop 13 and rental trajectory. The real killer is the $2200 per month for car payments given that SF has a decent amount of public transit but their location in the west side of the city definitely makes it harder to rely solely on public transit. The real issue here is that they seem to be saving less than they should for retirement.
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Many people who make a lot of money are highly leveraged. They buy an expensive house or car and borrow lots to pay for it. Thus the living paycheck to paycheck and not paying off their debt in a timely fashion.
There are tons of celebrities who made a lot of money and end up broke (lottery winners also).
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I understand the lottery phenomenon- lottery ticket buyers skew towards people who are bad with money. So once in a blue moon someone wins- and they are STILL bad with money, but this time very visibly and publicly bad with money.
Celebrities also- they hire a manager to take care of finances; they sign contracts and all they look at is the top line and forget how many mouths are being fed out of that top line. And they believe that the outrageous spend on clothes and “self-care” is necessary for their image. And perhaps it is. And the younger the person, the more prone they are to being used by everyone in their “ecosystem” including family members.
But your run of the mill orthopedic surgeon- partner in a big law firm- why do THEY feel the need to spend like they’re billionaires? They can do math. They can calculate their taxes. They understand capital gains. Why are so many of them spending every penny?
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There are many contributing factors for the apparent U-shaped curve. One that has not been mentioned (in posts I’ve seen) is differences related to the types of jobs associated with >$500k household income. For example, I’d expect physicians to be one of the more common positions among household income of >$500k. However, in similar surveys ~60% of attending physicians report living paycheck to paycheck – far higher than the 37% for >$500k household income listed in the survey. Along with the higher income than most, physicians also tend to have higher expenses than most – medical school debt, private medical practice costs/overhead, malpractice insurance, etc.
It’s a similar idea for small business ownership, such as local brick and mortar store. It’s a common position among high income households, yet is also associated with high expenses.
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There is an entire segment of the private banking industry that is dedicated to physicians.
They are known to be high earners and terrible money managers. This has nothing to do with loans, malpractice insurance, the high cost of leasing diagnostic equipment. They are easy prey for purchasing annuities (very high fees), high fee mutual funds, “exotic” investments in non-liquid assets (mining rights) and commodities. They drive more expensive cars than the guy across the street who owns a fleet of refrigerated trucks and warehouses (who has similar annual income but a higher net worth due to conservative investing strategies), and they generally live larger.
Not every doctor is paying off loans. And even THEY are described as “prime targets” for the wealth management industry. The notion of buying a basket of no-load mutual funds or passive index fund and just leaving it alone is not terribly popular with this group! Good for their investment advisor, bad for them…
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This tracks with my experience with doctors. I’ve never met one that was unhappy with their lot in life. All I have to do is mention how proud their parents must have been - and their faces brighten. They are the complete opposite of people I’ve met in finance who in most cases have less debt, more money and next to no overhead.
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