Barely Getting by on $250K/year

[LivingAlmostLarge]

Bingo that saving $41k/year is not barely getting by. Not by a long shot. They are doing well, considering they are saving almost the national average of what other people make.

[cjscully]

The budget is out of whack. First off no way in cities other than NY, Boston, SF, DC do people pay $15k in childcare. If it's a lower cost of living it's cheaper. Nor do they spend $5k on cleaning. Also I know that gas and electric in Glendale doesn't cost $5200/yr compared to NY. Sorry there are no heating bills and the A/C isn't run as much. the budgets don't reflect the true differences in cost of living like eating out, etc.

Yes the budget is way out of whack. But not necessarily in the places you mention. Daycare in the LA area is expensive and $15000/year is realistic for two children. Could you get it cheaper, possibly. If you're as upside down as these "Joneses" are you better. I know several people who pay close to $5000/year on house cleaning in So Cal as well. This hypothetical couple in the article shouldn't be paying that. In fact they shouldn't be paying a penny considering how negative they are. This would be pretty much the first luxury to go. It's total crap to say they wouldn't be able to do it themselves as they author alleges. I can tell you from first hand experience that Gas/Electric in the LA area including Glendale, Burbank or Pasadena can run in the $5200 range on average. This could also be reduced by conserving energy but the figure for Glendale isn't off base at all.

There are several other places where costs can be cut to balance that budget.

What I'd like to know is what was the author of that piece smoking when she wrote it. Saying $250k/year isn't easy street and then demonstrating it with a budget that reeks of irresponsible spending is just crazy, or stupid or drug induced.

[bennkar]

What I'd like to know is what was the author of that piece smoking when she wrote it. Saying $250k/year isn't easy street and then demonstrating it with a budget that reeks of irresponsible spending is just crazy, or stupid or drug induced.

The obvious answer is she was writing to her audience. A newspaper marketed to the highest earners in the country will write about how the readers are put upon by the government with all the taxes they pay. For her intended readers, this all made perfect sense.

[FrugalGirl321]

There is something seriously wrong with your finances if you make $250K/year and need a car payment.

This family is not frugal, that is the ultimate problem. Everyone needs some level of frugality in order to make their finances work for them, otherwise we're just working for our dollars.

I know many two-parent working familes who get by just fine without a housekeeper. The excuse of "entitlement" will burn your finances every time.

[disneysteve]

There is something seriously wrong with your finances if you make $250K/year and need a car payment.

People get caught up in thinking that they need to drive a certain type of car because they earn a certain income. So someone who might have been perfectly happy driving a Toyota suddenly feels they must upgrade to a Mercedes when they get that promotion because that's what all of the other guys in their position are driving.

I once had a patient ask me why I was still driving my Toyota Camry. When I asked why he said that, he told me that he figured that once I started making some money, I'd get something better.

My partner leases a BMW. In the 11 years I've been working with him, he's gotten a new BMW every couple of years while I'm still driving the same 1998 Camry I had when I started here in 2000. Guess which of us has our personal finances in much better shape.

[jpg7n16]

People get caught up in thinking that they need to drive a certain type of car because they earn a certain income. So someone who might have been perfectly happy driving a Toyota suddenly feels they must upgrade to a Mercedes when they get that promotion because that's what all of the other guys in their position are driving.

I think this idea is what causes the majority of those issues. Just because I can afford it, doesn't mean I have to have it.

Like your example of upgrading cars because income is higher - the same holds true for a home. Why do these $250k income families need a $750k home?? If people with $60k incomes and 3 kids can enjoy life just fine in a $150k home, why can't people with $250k income and 3 kids enjoy life just fine in a $150k home?

Is it part of the contract of making that much that you have to live in an expensive home? Expensive doesn't always equal nice.

Studies have shown that happiness is more about your mindset, than about your possessions.

From: Over long haul, money doesn’t buy happiness

"With incomes rising so rapidly in [certain] countries, it seems extraordinary that no surveys register the marked improvement in subjective well-being that mainstream economists and policy makers worldwide expect to find," Easterlin said.

For examples, Easterlin points to Chile, China and South Korea, three countries in which per capita income has doubled in less than 20 years.

Yet, over that period, both China and Chile showed mild, not statistically significant declines in life satisfaction. South Korea initially showed a mild, not statistically significant increase in the early 1980s. But in four surveys from 1990 to 2005, life satisfaction declined slightly.

"Where does this leave us? If economic growth is not the main route to greater happiness, what is?" Easterlin asks. "We may need to focus policy more directly on urgent personal concerns relating to things such as health and family life, rather than on the mere escalation of material goods."

[disneysteve]

Why do these $250k income families need a $750k home?? If people with $60k incomes and 3 kids can enjoy life just fine in a $150k home, why can't people with $250k income and 3 kids enjoy life just fine in a $150k home?.

I couldn't agree more. I see this all the time amongst my peers. Going back to the car example, when I used to work at the hospital, I'd pull into the doctor parking lot in my Camry and I'd be the black sheep parked along with Mercedes, Lexus, Infiniti, BMW, Audi and Jaguar. Did it mean I was less successful in my career? Did it mean I was earning less than all of those other guys? Nope. It just meant that I chose not to blow 50-60K or more on a car. I was perfectly happy with my 18K Camry.

As for housing, I live in a house that we bought in 1994 for 142K. We haven't moved. We haven't upgraded. We haven't expanded. The house is fine. It meets our needs. We'd like something bigger. We'd like something newer. But having those things isn't enough of a priority to us to come before saving for retirement and college and living the lifestyle that we want to enjoy now.

People upgrade and upsize and lock themselves into a lifestyle that hampers them from doing anything else. Then they go around complaining that things cost too much and they can't make ends meet even though they are making 250K. Sorry, no sympathy here.

[dfeucht]

Bingo that saving $41k/year is not barely getting by. Not by a long shot. They are doing well, considering they are saving almost the national average of what other people make.

Love the discussion - thanks! I think this a a huge point that I try to get through to my wife. She often had the impression that we are living paycheck to paycheck - but trying to convince her that is by design because we are saving 20+% of our income means we aren't close to living paycheck to paycheck (knock on wood...).

[disneysteve]

Love the discussion - thanks! I think this a a huge point that I try to get through to my wife. She often had the impression that we are living paycheck to paycheck - but trying to convince her that is by design because we are saving 20+% of our income means we aren't close to living paycheck to paycheck (knock on wood...).

Exactly. We occasionally get into a discussion here of what people mean when they say "paycheck to paycheck" and there are always some folks who use that term to describe spending everything they make after funding their 401k and Roth and keeping an adequate EF. That isn't paycheck to paycheck IMO. Living paycheck to paycheck means spending everything you earn and not putting any money into savings, not having an reserves. It even includes people who are spending more than they earn by using credit to cover the excess spending.

[jpg7n16]

Love the discussion - thanks! I think this a a huge point that I try to get through to my wife. She often had the impression that we are living paycheck to paycheck - but trying to convince her that is by design because we are saving 20+% of our income means we aren't close to living paycheck to paycheck (knock on wood...).

Do you have a 3-6 month EF in place?

Usually that cash buffer eliminates the feelings of living paycheck to paycheck...



You might also want to put some of your 20% into a Roth IRA (if you qualify). Having the money in the bank account and then intentionally transferring it to a retirment account has a different feel than the auto deduct from paycheck method. Not really a big difference in the end, cause either way you're saving, but at least she might feel differently about it.

[Shewillbemine]

I make $100k/year while the gf finishes school (hence we are a single income household until she graduates). After expenses and a little fun, I still have $800 a month extra (that's after 401k, Roth IRA and spending money).

Sometimes the households that take home the most money have the least amount of financial responsibility.

[elessar78]

Love the discussion - thanks! I think this a a huge point that I try to get through to my wife. She often had the impression that we are living paycheck to paycheck - but trying to convince her that is by design because we are saving 20+% of our income means we aren't close to living paycheck to paycheck (knock on wood...).

I feel ya. My wife is in a similar boat. I think she envies her sister who has much more spending money/week, they belong to the country club, yadda, yadda, yadda. Not that my in-laws are broke, but we save a huge percentage of our income.

[Alan_MoneySanity]

Wow down and out on $250K - now that's a disaster waiting to happen.

[NolaP]

disneysteve, thanks for that last post. So many people get caught up in appearances. You have reminded me that smart people don't spend money just because they have it to spend. I just signed up on this board because I need to stop spending and get my finances in order, and reading these posts is good inspiration. : )