Interesting article. I feel the more you make the more you spend. The challenge is living below your means and not competing with friends. It would be interesting to hear the perspectives of those living in expensive cities. I feel as income grows the things that are nice to have become a requirement for some.
Almost $10k for car payments. That’s about $800 a month. Must be some mighty fine cars. I guess they have their priorities straight.
I don’t care how other people spend their money, but it really bothers me when people make a lot and complain about how they have a hard time. At that income level it is a matter of choices made.
First, this is a fictional family. Second, there are a lot of assumptions in that table, although some numbers seem spot on. Third, since it shows 2 401k contributions, it is 2 people making $500k a year, which is not that unusual in NYC.
And the headline is misleading, as usual. The fictional family is left with a 7k after all of that lavish spending and retirement saving, so they are not exactly in the red.
The budget didn’t make sense to me. They gave $18,000 in charity but had $32000 in student loan debt.
They also have a car payment. I would try to pay off the student loans and car loans before giving to charity but maybe that is just me or try to cut expenses somewhere else to have more savings.
I dunno how you learn much from a fictional family. It’s just a story, nothing more.
Also, by the time their kids go to college the $42k per year in child care is gone. So is 32k in student loan pmts (hopefully). So that $74k/yr open for college. Yay them;)
Here is the origin of this story at the Financial Samurai web site, rather than the secondary story at the MSN website:
http://www.financialsamurai.com/scraping-by-on-500000-a-year-high-income-earners-struggling/
Note that there is also a link to a story on $200,000 per year income earners:
http://www.financialsamurai.com/how-to-make-six-figures-a-year-and-not-feel-rich-200000-income-edition/
For comparison, https://www.census.gov/quickfacts/table/PST045216/36061 indicates that the median household income in New York County (Manhattan Borough) is $72,871 (compare to the $500,000 example), while https://www.census.gov/quickfacts/table/RHI125215/06075 indicates that the median household income in San Francisco is $81,294 (compare to the $200,000 example).
If I might say: if your HH income in Manhattan is 73k, you are eligible for free or very reduced housing. For instance, when you look at co OPs only for sale, you may see a great 2br co op for $250k. But your income must be below the median line to buy it. (Or if it is a rental, to rent). So that family of four may pay very little for housing compared to the $200k people who pay $5k per month. It’s not really comparing apples to apples.
I live in a wealthy NJ suburb. I know a family making upwards of $500k. The house was $1.2 million (now worth about $850k?), additional $100k plus for the pool/patio/hot tub/landscaping/fence, property taxes in the $20k/year range, cars are leased - never bought - always $50k+ each. 17 year old leased a brand new 4 door Mercedes for her birthday (which sat until the drivers test was passed on the 3rd try!). 4 kids. Not 1 college fund in existence for any child. Daughter got a good merit award to a LAC, younger son committed to play lacrosse as a freshman in HS at another LAC (after thousands spent on camps and clinics over the years). It’s not that unusual in these parts. I wouldn’t be able to sleep at night, but to each their own!
^If you have all that and don’t pay for your kid’s college, that is BS. Yes, I’m judging them. I walk in their shoes, so yes, I’m judging!
This is FICTION.
http://www.financialsamurai.com/scraping-by-on-500000-a-year-high-income-earners-struggling/ uses leased vehicles, “a BMW 5 series and a Toyota SUV with third row seating”.
My wife does taxes and she says quite a few of her clients make $400k or $500k and have no savings. That just blows my mind.
I’ll never, ever be sympathetic to any family, fictional or otherwise. with an $18,000 budget for vacations and a 10 grand clothing budget and 10 grand car budget. That’s 40 grand in their pocket each year that could be used much ore sensibly…even in a high cost of living area.
And this is an incredibly sad statement on what younger couples are thinking IMO.
I’ll be more than happy to help this “fictitious” family “find money”.
NYC people like this are not ‘normal.’ Why didn’t they pick some other location where there is great public schools, so no need to pay private school tuition? Who spends $10k a year on clothes?
@NoVADad99 - the wife in my example! (who happens to be the primary earner). If I guessed, I’m guessing she doubles that! Prada, Gucci, Kors, etc… No expense spared! It’s all for show. If her business ever goes south, it won’t be pretty.
“After factoring in taxes, 401(k)contributions, home and child care costs, the family was left with just $7,300 for the year — as if they were living “paycheck to paycheck.””
I don’t consider the example of the fictional couple provided as living paycheck to paycheck. I kind of feel like the guy who came up with the example had an agenda and plugged in numbers to make it work to suit the picture he was looking to paint.
In the example, each spouse is contributing $18K per year to a 401k, $36K total.
$18K per year on vacations.
$10K misc.
That’s not living paycheck to paycheck in the typical sense.
Plus, factoring in 2 leased cars. Do most people living in NYC own 2 cars? If so, why?
^^ Living paycheck to paycheck doesn’t mean you haven’t allotted the money that comes in your paycheck. This couple pays their bills, puts money in savings, has taxes withheld, must even have a little put away for those $18k in vacations. If an emergency happens, they have that money.
$12,000 for instrument lessons and the like? Sounds like a bargain to me. We had two kids each taking two different instrument lessons, participating in pre-college wind ensemble and orchestra, and attending summer music programs. We spent WAYYYY more than $12,000 a year…and our income is not $500,000 a year…and this had NOTHING to do with getting accepted to prep schools.
I agree with the others above. They have the money for emergencies if needed in this make believe family. So what if the spend every penny they earn as they earn it. Their money…their choice.