I heard an approximate statistic that for a 25 year-old to be in the top 20% in wealth in the US all they had to have was a net worth of $0. For those who have been able to pay for a college education for their kids without loans, kudos for providing the clean start.
S1 graduated with loans but is paying them off quickly and should hit that $0 net worth just before his 25th birthday. Broke is the new upper class.
Listened to The Millionaire Next Door on my bike ride. So interesting! The couple with a 228K combined salary with 14 credit cards! The doctor with a 700K annual salary but only 386K net worth! The high earning guy who turned down the opportunity to contribute to a retirement plan with a 100% employer match! The numerous stories of high earning people who never put one dollar into investments, the lady who spent 31K per year on clothes in the mid 90s, etc.
These are people who are “rich” in terms of salary, but who have very little “wealth” in terms of net worth and the ability to ever retire.
Boggles the mind.
It’s all a matter of perspective. DD2 has no loans and so much in savings ( from grandparents ) that among her classmates at nursing school she’s definitely in the top 1 percent. DD2 was in the exact same position financially but among her classmates at an elite private was probably in the top half only.
Back to your topic “Why don’t the 1% feel rich”?
That’s because most of them who think they are 1% through income isn’t really the top 1%. Ask the top 1% with net worth of at least $10M, they will tell you they are rich or if they are humble, they are at least very very comfortable.
Net worth trumps income.
Top 1% has been so frequently misused.
I also wish to add that I don’t think only 1 percenters can say they are rich…it’s all so relative to your expectations. I know a lot of people in the 50% group and lower who are satisfied with their lives and will say they are rich. Nothing wrong with that. Don’t get too caught up with the term 1%.
Over the referenced period, the average 30-year fixed mortgage rate was 6.6%. If leveraging with a 20% equity, one typically needs to make a larger gain than 3.2% on the borrowed amount to avoid an overall net loss, after mortgage interest (and other expenses).
^^^ yes. Those posting here as 1%ers May mean by income. Those that are in the top 1% by income ( most recent figures say in excess of 450k) while rich are in a very different place than those who are 1% by net worth who have 10 mil plus . It woukd probably help to understand their perspective if they clarified. We are about top 3-4 percent income and betweewn the 2 percent assets.
Yes, it is more complete to compare to the alternative option for a place to live. For example, the difference between buying a home and renting an apartment/home, rather than buying a home vs doing nothing. Depending on real estate market and the specific properties, buying can sometimes be a better financial option than renting and sometimes not. There are many related calculators online. In general, buying is a riskier option than renting, with greater potential gains and greater potential losses.
When factoring in the cost of house ownership, you need to look at the net gain after deducting mortgage interest and property taxes from personal income vs. renting where you essentially cannot deduct anything.
What location you buy is also critical. My grandparents owned and lived in a suburb of Akron (OH) for 60+ years. Bought their small house for around 5K. At the height of the housing market in 2007 their house was worth 90K (85K profit on paper). During this same time, I bought in 2005 my first small house in LA for 280K and sold it 3 years later for 450K (profit of 170K). To summarize, it took my grandparents 60 years to have a gain of 85K while it took me 3 years to double their gain. That is the power of home ownership in hot housing markets.
I’ll bite on @ucbalumnus and @gallentjill’s question in post #372 about “Even in San Francisco, $300,000 income leaves $156,650 after income and payroll taxes and rent (reply #216). Seems puzzling to me how people have trouble making ends meet or saving/investing substantial amounts of money on that.”
Here’s a very approximate budget of how that $13K per month would potentially be distributed for a family with two or three elementary/high school kids that I don’t think would raise any eyebrows at all among the people we know in Silicon Valley with incomes in that range (who are almost all home owners with a home that was bought a few years ago around the time their kids were born). $1.2M with 20% down would give you a 30 year mortgage payment around the $4500 assumed for current rent and would have got a reasonable but not spectacular 2500sq ft 4 bed/2.5 bath home 8-10 years ago in a decent suburb (not Palo Alto) - though not any longer, that house is now $2M-$2.5M depending on location and completely unaffordable on a $300K salary (so the people with $300K income are now buying in the East or South Bay). You might get a moderate tax benefit from the interest deduction, but its not that much above the standard deduction now so its only going to make a small difference to the numbers below. Some might have better healthcare policies than this or less insurance coverage, others might spend more on some things than on others.
This doesn’t include childcare or private school, which are both common additional expenses. It doesn’t include holidays in Europe or Hawaii, which are also very common. While clearly a very comfortable lifestyle, most wouldn’t necessarily “feel rich”, since they wouldn’t easily be able to afford overseas holidays for the whole family or save enough for full pay private colleges or pay for private elementary/high school, or afford a Tesla like many of their neighbors. And they almost certainly aren’t saving anything close enough to sustain their lifestyle in retirement without moving somewhere much cheaper. Nevertheless I suspect many people in that income bracket are spending more and saving less than this (often borrowing against their increasing home equity) to keep up with the Joneses. But obviously there’s a lot that could be cut if people really wanted to.
$1000 healthcare (family contribution plus out of pocket, excluding company provided benefits) and gym/pool membership
$1200 property tax (assume house bought for ~$1.2M 8-10 years ago)
$1000 car loans/leases and maintenance (assume 2 newish $40K cars, though most have a third car if they have high school aged kids who drive themselves to school)
$1000 car/life/house/umbrella/disability insurance
$1000 kids activities (ballet, music, coding classes, sports, etc.) and summer camps (or allowances for older kids)
$1500 groceries, wine, take out, etc.
$700 date nights (2/mo) and family outings (e.g. sports games or concerts)
$1100 utilities, mobile phones, TV, gas for cars
$500 clothes, holiday presents, etc.
$700 cleaner and gardener (once per week)
$800 vacations (2 weeks in Tahoe in the summer, 1 week of skiing in the winter plus a few weekends away)
$1000 college savings (just about enough for 2 kids for UCB/UCLA if you start saving after they go to kindergarten)
$1500 retirement savings (6% of income)
heard a really good talk/speech by a guy named John Hope Bryant on NPR the other day. google it.
One thing he mentioned: there’s a HUGE difference between being BROKE and being POOR. Broke means you have/had choices and things can change. Poor means you have/had no choices and its very hard to change. I certainly feel broke right now with 2 in college, my underemployment now due to being a SAHM many years, and more kids coming up. But, i know we are not poor. I’m thankful for that.
@Twoin18 said:
A home currently valued at $1.2 million in my county comes with a yearly property tax of over $25,000 dollars. Just goes to show you how varied things are by location!
Thanks @BunsenBurner and @Twoin18 That really does explain a great deal.
“A home currently valued at $1.2 million in my county comes with a yearly property tax of over $25,000 dollars. Just goes to show you how varied things are by location!”
And remember that $1.2M house is now worth $2M-$2.5M. But Prop 13 means the tax can only increase 2% pa in California from the original purchase price. Which is a big reason why the prices can go so high, because existing homeowners aren’t hit by property tax increases that might cause them to leave.
This is reminding me a bit of the ancient joke about the older man who takes a fall crossing the street in the garment district. A small crowd gathers as they wait for the ambulance. One of them folds his own coat, puts it behind the man’s back as he sits propped up against a hydrant, and asks “Are you comfortable?”
The man looks up at him and says “I make a good living.”
Credit to Henny Youngman and others.
I would think that it’s probably safe to say that the “1%ers” who insist that they are not rich or who complain that it’s hard to put kids through elite colleges (or even just college) are 1%ers by salary. Anyone with a net worth in excess of $10 million who says that should probably be expected to be hit by lightning. 
The budget in the post #429 by @Twoin18 on the previous page that listed $1200 for homeowner taxes was a MONTHLY budget. Says to me that is a$24k/yr in taxes on the home.
@jym626 That sounds about right for taxes in high cost of living areas. Its pretty awful in the NY and NJ subburbs as well.
There aren’t 20 months in a year, so am I missing something?