We did this early in our marriage till about 15 years ago when our last kid was off our payroll and we relaxed on our spending. But we’ve always had a cleaning lady and gardener which DH and I mutually agreed on.
As for #4, both DH’s and my parents paid our way through private schools and we graduated with zero debts which we also did for our children.
I also want to add
However, not everyone will increase spending on luxuries to consume all added income. The millionaires next door may not increase spending at all. Others may increase spending, but also increase saving, because their spending increases less than their (after tax) income.
One thing I realized (I mean, it’s not a mystery, everyone kinda knows it) when I started making decent money is how easy it is to turn money into more money. If you pay rent, that’s just an expense, and of course you’re at the mercy of changing market values and landlords. But if you pay a mortgage, most of what you pay is going back to you in the form of equity. And if you time it well, you can make a ton of money very quickly without any work–I’m happy to be benefiting from this, but it doesn’t feel right to make more money passively than I do at my (extremely demanding, fairly lucrative) job.
In the early part of a mortgage, most of what you pay is rent (interest to rent the money from the lender).
However, because you have only small equity in a much larger valued asset (the house), it is a highly leveraged investment. If you have 20% equity and the house price goes up 30%, then you just made 150% so that your equity is 2.5 times what it was. But if it drops 30%, your equity becomes negative, so that your investment is wiped out and then some (like what happened to many who bought in 2005-2007 just before the crash). Of course, if you walk away at this time, the lender also loses because it will not recover the loan amount by selling the foreclosed house.
Because most non rich people in the US mainly save and invest with home equity, the real estate crash recession significantly increased asset inequality, as many non rich people had their (mostly home equity) assets wiped out if they lost their jobs and could not hang on through the (slow) recovery in real estate prices (if that occurred where they live). Rich people tended to have more asset diversity and better ability to stay in through the recovery.
Yeah, that’s all true: there’s always some risk in investing. But real estate is shockingly safe and lucrative, and even people who bought in that worst time right before the crash are doing well now if they were able to weather the crash (which I know many weren’t, sadly). But that’s still nothing compared to the travails of being a lifelong renter, like so many people are. Passive income is really weird and unavailable to huge swaths of the population.
" even people who bought in that worst time right before the crash are doing well now if they were able to weather the crash"
Not everywhere. Prices in my area just returned to 2007 levels in the past year or so. In some places, folks remain underwater.
Yikes, that’s sad. I should probably admit that I don’t have my finger on the pulse of US real estate markets (although I do watch a few areas closely, in case US healthcare ever improves enough that I’d consider a return).
Being able to weather a real estate crash is not necessarily a given. Local real estate crashes tend to happen due to local economic downturns, where many people get foreclosed or have to relocate out of the area because their jobs no longer exist. Those whose jobs remain may be able to weather a crash, though if the local economy does not recover (e.g. because it is heavily based on a dying industry and nothing is coming in to replace it), even those who can weather a crash may not recover their investment in their homes.
Also note that real estate transaction costs are relatively high compared to that of other typical investment assets, and transactions happen relatively slowly. So the risk is higher and the reward is lower in the short term (e.g. for people who may have to relocate in the next decade).
Passive / capital / non-labor income often comes from letting others use what you own (e.g. buying bonds is letting someone else rent your money). Owner occupied houses are an alternate situation where buying the house (often renting the money to do so) replaces renting the house; in this case, you assume the risk and collect the reward of any changes in the house price (both risk and reward can be magnified due to the leverage).
It is true that, other than owner occupied houses, investment assets and income are predominantly held by the top end of the income scale (although, as this thread indicates, many with very high incomes spend it all and therefore save and invest very little). Note also that the homeownership rate fell from 69.2% in 2004 to 63.7% in 2016, slightly recovering to 64.3% now: https://www.census.gov/housing/hvs/files/currenthvspress.pdf , so the participation (by the non-rich) in capital markets through owner occupied housing has fallen.
When you turn 65, you become eligible for subsidized single payer government medical insurance (Medicare) with optional private supplemental insurance, or taking it as effectively a voucher for a private plan (Medicare Advantage), without worrying about pre-existing conditions.
Over the past 30 years, the median home sales price in the US has increased by an average rate of 3.24% per year. After adjusting for inflation, the average home appreciation gain decreases to 0.69% per year above inflation. The average property tax rate is 1.2%, so after property taxes and inflation, there is a small loss. After factoring in additional home expenses besides property taxes such as insurance, maintenance, repairs, home services, and sale expenses; that average loss per year becomes more significant. Most people have a mortgage, initially for as high as 80% of the property value. When you consider mortgage interest, the average loss per year becomes large. Real estate is often not a lucrative investment.
Median real estate prices across the full United States are fairly stable compared to alternative investments. However, most real estate involves one primary home purchase at a time, rather than a real estate index. A single home has little diversity, which makes it a far riskier investment. For example, if your neighborhood becomes less popular, you may end up selling for a lower price, regardless of national real estate trends. If a major employer closes (Detroit), your home value may drop. There may be major repair issues that are not covered by insurance. You may have bought at a higher price than optimal. Job opportunities may force non-ideal sales and/or the home may limit pursuing job opportunities. When you combine this lack of diversity with a highly leveraged investment, such as only paying 20% down, then the investment becomes far riskier. Real estate is often not a safe investment.
However, for the same lack of diversity reasons, one can make a large gain as well as well as a large loss. There are certain areas in which real estate has appreciated far higher than the national average, such as the Bay Area. Someone who bought a home in Palo Alto decades ago, likely made a large gain. However, someone who takes out a 80% mortgage to buy a $2+ million home today is taking a big financial risk, as there is good reason to believe the past abnormally high appreciation rates will not continue forever.
One can also find individual properties that are better investments than the national average. For example, I closed my primary home on the day before a short sale became a foreclosure. The rush to close before foreclosure allowed me to get it at price well below market value. The bank ending up selling for ~$600k less than what the previous owner owed them, taking a large loss. Starting well ahead of market value gives a lot of flexibility for unexpected future events.
We are not in the 1% but close to it. I don’t go around saying we are rich, but I do feel as if we are.
Why do we feel rich?
-H and I are both 61, and technically we could retire right now although we both plan to work another 3-5 years. At that point we will have a better idea where the kids will be and will likely move.
-Both kids were able to attend private colleges (their choice) with no FA and no debt.
-We have great health insurance.
-We can spend on travel for pleasure and to see family.
The above makes me feel very, very lucky. This is due to a combination of factors some of which we were able to control and many factors which were the result of good fortune. I always keep in mind that others do not/did not have some of the advantages that we had/have.
@Data10 Thanks for the great explanation refuting the myth that home ownership is a great and easy investment. I was going to chime in but you did a far better job. Its important that people understand that a home is NOT a good investment. Its a place to live. It only seems like a great investment because of some misconceptions about a short period in American history when real estate did appreciate significantly.
Buy a home because you want to live there. Look elsewhere for investments.
@alwaysamom said:
Just wanted to repeat that not all nannies are live-in. Ours certainly wasn’t. We were very fortunate to find our nanny. She only wanted part time, I worked part time, it was a perfect match. She is a wonderful person and is now a mother of two herself.
We were in similar circumstances. Might have had $250 though. 
@Marvin100 said:
Why? You take a risk when you invest your money. Why are investment dividends “not right”?
Also would like to add that “real estate investment” can encompass a whole lot more than personal home equity. But you have to know what you are doing.This is DH’s specialty, and sometimes it seems like he has a golden touch. The problem is that, as with all things, it takes money to make money. This certainly applies to real estate. It was slow and steady wins the game, until he had amassed the kind of money it takes to really make it count.
As with all things, this just depends on location, timing, etc. We lived in our “family home” for 15 years and made a significant profit when we sold. We bought in a very desired location, and 15 years later, it was still a desired location. We bought our current home in a real estate downturn. If recent comps are any indication, we could sell this one for a tidy profit as well. I agree it’s not something you can necessarily count on, but if you time it right and buy smart, home equity can be a home run investment.
The book that Sarah Stanley Fallaw was working on with her dad when he was killed by a drunk driver is out today https://rowman.com/ISBN/9781493035366/The-Next-Millionaire-Next-Door-Enduring-Strategies-for-Building-Wealth
How timely, @jym626!
I don’t make anything near $300K, but I still agree with @doschicos upthread somewhere that there is a lot of shaming of people for what they earn and spend. Here’s my question: why is it seen by many people as morally righteous for an educated parent to stay home with the kids, but morally corrupt for a dual-earner family to spend one earner’s salary on private school and fancy camps or vacations? Aren’t both families just allocating their resources (time/money) toward what they value most? Why the judgement of that latter family for earning and spending their money? I just don’t get it. Yes, I think it’s ridiculous if people act entitled or don’t own their decisions, but I honestly don’t experience that on this forum as much as others seem to. I see lots of people who make more money than me spending a lot of time to help posters out. I really appreciate that, as they don’t have to do that.
Reading this, one would conclude that home ownership is a losing proposition. And yes, the cost of owning real estate typically exceeds its annual appreciation. But the analysis above ignores the primary benefit of owning real estate: providing a place to live.
Unlike @Data10 (“the average loss per year becomes large”), I wouldn’t characterize one’s annual housing expense as a loss, regardless of whether they own or rent. It’s simply their cost of shelter.
And in the big picture, any of us with the good fortune to live in a time and place where we can take for granted the fact we have comfortable shelter, we are historically rich.
However, it has been an accidentally lucrative investment for those who happened to buy in rising markets, as often happens during local or national economic growth.
Due to leverage, for someone with 20% equity in a house, a 3.24% gain on house price becomes a 16.2% gain on equity. Of course, a 3.24% loss on house price becomes a 16.2% loss on equity.
Note also that the cost of renting the money, property tax, homeowner insurance, and maintenance replaces rent and renter insurance in the household budget. While these amounts may not be equal (and are often higher in the homeowner case), the replacement of rent and renter insurance does mean that these carrying costs of houses come at some discount.
Obviously, this does not mean that buying a home means easy money. But it does explain why so many people did gain a lot of home equity wealth, while others got wiped out.
For most people who buy homes, home ownership is an unavoidable high risk investment with high potential rewards and losses due to leverage. Most homeowners’ investments are also highly overconcentrated in their homes, due to little savings and investments of other types.
Just put us in the column of those who have earned an awful lot via real estate investing - far more than we could have elsewhere without hindsight clairvoyance on a few stocks. With our rentals I appreciate tenants who pay the expenses for us while also adding to our retirement fund, but not all of our investing is rental property. Tenants cover insurance, taxes, repairs, the complete mortgage (including interest), and are building our personal equity - all packed into their rent - with just a relatively minor investment on our part.
But as with any investment, YMMV, so do your homework. Not all houses, lots, or general locations are good investments in the same way that not all stocks are terrific. In general, any investment is a gamble.
"why is it seen by many people as morally righteous for an educated parent to stay home with the kids, but morally corrupt for a dual-earner family to spend one earner’s salary on private school and fancy camps or vacations? Aren’t both families just allocating their resources (time/money) toward what they value most? Why the judgement of that latter family for earning and spending their money? "
I don’t judge either choice (or others) as long as those folks aren’t whining about not having enough $$ or affording college, etc. Everyone prioritizes their spending but there are needs (shelter, food, clothing) and then there are wants. Differentiate between the two and own it and you’ll get no judgment from me. I just don’t want to here someone whining when they make decent $$, spend beyond their means, and then whine about it. 
^^^ I agree. Spending what you have on what you want is no big deal to pretty much anyone. Enjoy the car, food, vacation, or whatever indulgence you like. It’s only when people of any income buy wants, then claim poverty for other things (like needs) that folks get annoyed and judgmental. It’s the same way for the person going to a pricey concert, then not being able to afford food so hitting the food bank, the man who put the milk back when he found out he couldn’t buy both that and his cigarettes and diapers for his kid, and the mother who told our school she didn’t have the money for a $5 field trip for her son because she was going on a week long trip to the Bahamas - so could he go for free under a scholarship program?
All of those are examples I know personally and yes, all adult humans involved were judged. I felt sorry for the lad when he couldn’t go on the field trip due to a crappy mother… but apparently this was normal behavior for her so no one was allowed to chip in the $5 for him (again).
Income doesn’t matter. Responsible ways of spending it do. It’s actually good that so many opt for different choices as it’s those choices that keep our world running. If no one bought English show ponies, a good part of my non-working life would have been impossible. By raising and selling them I’ve enjoyed years with ponies… but they certainly aren’t something everyone needs or can afford. Some folks have to make the choices to spend money there.