$350K salary and has to hand wash dishes...

[MichaelB]

Savings rate was around zero up till a few years ago. Expenses equaled income roughly speaking. Some saved like us here, others spent more than their income, incurring debt.

Recently that trend has changed, and people on average save around 5% of their incomes now IIRC. Savers probably save more and spenders can't get access to enough credit to offset the savers savings.

The savings rate did fall to around 2.5% during the '08 recession, but that is a close as it has been to zero since the great depression. In the newspaper article we are discussing the individual is also saving, in the 401(k). The US personal savings rate published by the BEA is an aggregate economic number and not applicable to individuals, you can not use it to characterize groups across any income level.

 

[clifp]

My quick google shows a range of median household income of NYC from 34K in Bronx to 64K in Staten Island to 68K in Manhattan. So anyway you cut it more than 1/2 the families in the city live on less than 1/5 his salaries. Even if you factor taxes, various subsidies (rent control) for poor/middle income people his take home pay is still 3x more than median income.

I can be fairly empathetic to the actor, athlete, artist who was making 350K and gets a big pay cut and has money trouble. These people are not suppose to understand money. Somewhat less sympathetic to doctors, lawyer, owners of high end stores etc. But empathy for bankers, traders, Wall St. type, hell no. Understanding and properly managing money is their bloody job. If they don't have savings, overpay for services etc. I really don't want these people in charge of anybodies money. So I truly have no sympathy for them, and I'm not even somebody who places all the blame for the crisis on Wall St. and bankers. It is article like these admittedly written to cast the folks in a bad light that make me sympathize with the occupy the crowd, even though I disagree most of their ideas.

 

[Walt34]

Elizabeth Warren touches on this some in her lectures. It's not frivilous spending that is a problem in this situation. It's easy to stop that. It's the big monthly payments that you've locked yourself into that cause pain. Those aren't easy to change without severe upheaval.

I do think that's a big part of it, and why Zero Debt is important to myself and DW. With no payments to make, an adjustment to spending is easier to make since one is not "locked in" to a high spending level.

That, and the realization that living in a larger home than we do or owning a 'benz would not significantly affect the quality of our daily lives.

 

[Gone4Good]

That might be true but I have lived in NYC and do not want to live on what these other people live on. To make ends meet, they live in basement or in a shared housing situation and live in areas of the city that I would not recommend.

I too lived and worked around NYC, for 20 years. My earnings ranged from $27K to much, much higher. I was always able to save and I never lived in a basement. At a combined income of say, $120K my wife and I were able to buy a two bedroom condo 30-40 minutes from both of our jobs by public transportation - mine in the financial district, and hers in mid-town. Property values are higher today, but the difference between the 7.75% mortgage I took out and the ones available today makes the monthly payment on my property at current market value and interest rates only about 20% higher than what we were able to comfortably manage on an income 1/3 smaller than $350,000.

If you lived in NYC, then you also know there is more to the area than the upper west side. Large parts of NJ and PA are commutable. Many, many, many people who can't afford $32K per kid for private schools move out to the suburbs. Some commutes can be long, but nobody needs to live in a basement. And nobody should be crying poverty with a $350K income.

 

[Hamlet]

Does it have to be either/or?

If this was a friend of yours, wouldn't you say "that's hard" when they were talking to you about having to pull their kids out of school in the middle of the year, or thinking about how they could need to get rid of the family pet? I'd like to think that most of us would listen with a sympathetic ear, and give as much useful advice as we could.

One of my co-workers is going through bankruptcy, even though he makes a very good living (probably $110k+). He's made some bad but very common decisions to get to this point. That doesn't make the experience any more unpleasant for him. I feel his pain, even though it is mostly the result of his own decisions.

Seriously, no one enjoys seeing someone else have to cut spending. But I have more sympathy for a struggling ant than for a struggling grasshopper facing the cuts above.

 

[Hamlet]

I didn't draw that conclusion from the article, just my general experiences with people, and other articles talking about how little savings many people have.

Are you saying that most people don't spend almost all of their income?

Who's racking up all of that credit card debt?

I do not think you can draw the conclusion that most people live like this from the article. Certainly people here grasp that concept very clearly. If you have data that shows this to be the case for most people in the US please show it.

 

[Midpack]

Seriously, no one enjoys seeing someone else have to cut spending. But I have more sympathy for a struggling ant than for a struggling grasshopper facing the cuts above.

Does it have to be either/or?

If this was a friend of yours, wouldn't you say "that's hard" when they were talking to you about having to pull their kids out of school in the middle of the year, or thinking about how they could need to get rid of the family pet? I'd like to think that most of us would listen with a sympathetic ear, and give as much useful advice as we could.

I don't read either/or into my post to begin with...sympathetic in all cases, just not necessarily equally so.

 

[Andre1969]

A few years ago, I worked with a guy who moved from New York City (not sure what part) to Annapolis, Maryland. All he did was gripe and moan about how expensive everything was in Maryland and how in NYC "they paid for this", "that was covered", etc.

One thing he griped about was child care. Evidently, in NYC, they had some kind of daycare thing that watched his kids, that he didn't have to pay for. But here in Maryland, he had to suddenly cough up the $250 per week or whatever it is that daycare costs. When I tried to explain to him that it wasn't really "free", that in the end the taxpayers were footing that bill, he would get mad.

I also remember him griping about the price of gasoline one day, and almost in the same paragraph mentioned something about the $200 pair of jeans he was wearing.

Needless to say, I didn't take too much pity on him.

 

[Texas Proud]

One of the problems with looking at median income etc. for NY is that there are a lot of low paid people who are young and share an apartment. Heck, my sister met someone who worked in a comedy club and said they had 9 people sharing a 2 BR apt.

It is not common for a low level person to live alone in Manhattan... in Jersy, yes, maybe in Queens...

But then again, I am only getting my info from what I was told... as mentioned, I got a free ride...

 

[Independent]

I can be fairly empathetic to the actor, athlete, artist who was making 350K and gets a big pay cut and has money trouble. These people are not suppose to understand money. Somewhat less sympathetic to doctors, lawyer, owners of high end stores etc. But empathy for bankers, traders, Wall St. type, hell no. Understanding and properly managing money is their bloody job.

+1

I imagine talking to these people before the crash and telling a story about someone who started a small business, worked at it very hard, but the business failed at great cost to the owner.

I'm sure the Wall Street response would be "That's the way private enterprise is supposed to work. You take your chances and live with the result."

I read the article and I see people who took a chance on a potentially very lucrative business, and who committed to expenses that could only be supported by non-guaranteed income. It didn't work out. I expect them to say "That's the way Wall Street works. I took my chances, now I need to live with the result."

 

[Gone4Good]

If a friend who used to make five times my income, showed up on my doorstep complaining about how tough it is to live on three times my income, I'd show him the appropriate amount of sympathy by slapping him only half as hard as he deserves.

 

[Sesq]

My favorite part of the story is the guy extensively quoted is a marketing guy. If any of these guys should know better than to talk to the press it should be that guy.

I don't live in NYC, but I am in the prime of my career and I understand the dangers of lifestyle creep. My grocery/eating out bill is obscene. But I am saving regularly and growing my net worth.

The jist of the guys quotes about a drop in income when you've built up all these fixed expenses is very real. I wouldn't put that in print, but I'd probably sympathize over a beer if I knew him personally. My job is very ordinary, but my company manages its labor cost by putting huge chunks of our pay into a bonus. I try to get by on the base, but sometimes I am counting down till the bonus.

Then again, I don't talk about my finances with anyone but my wife in real life.

 

[Andre1969]

Those wall street types aren't the only ones who get thrown for a spin at the slightest drop in pay. I remember a few years back, 2005 or so, a story of a UAW forklift operator in Michigan who was making something like $103,000 per year, but when his overtime got cut, he couldn't make it on "only" $87,000, and had to declare bankruptcy. He had also managed to run up something like $469K in debt.

 

[ziggy29]

Those wall street types aren't the only ones who get thrown for a spin at the slightest drop in pay. I remember a few years back, 2005 or so, a story of a UAW forklift operator in Michigan who was making something like $103,000 per year, but when his overtime got cut, he couldn't make it on "only" $87,000, and had to declare bankruptcy. He had also managed to run up something like $469K in debt.

In reality, it's not just a matter of how much you make -- it's the false sense of invincibility, the feeling that the gravy train can never be derailed.

$103K is a good living in most areas, but not what one would call filthy rich. Still, that (and even $87K) should be enough to get by reasonably well, even in high-cost areas, if you don't overextend yourself to the point where a small drop in income can bring the house of cards crashing down. That can happen whether you earn $50K or $500K.

 

[W2R]

$103K is a good living in most areas, but not what one would call filthy rich.

I guess that depends on your perspective and perhaps salary history! It sure sounds filthy rich to me.

I do agree that a high level of regular fixed expenses is hard to overcome. For me, the key to an early retirement was to slash these and keep them at an absolute minimum.

 

[Major Tom]

In reality, it's not just a matter of how much you make -- it's the false sense of invincibility, the feeling that the gravy train can never be derailed.

Most definitely. I was always motivated by the fear that the good times might one day come to an end, so I saved and invested and when things actually did hit the fan, I was reasonably prepared.

It's that old "hope for the best and plan for the worst" thing, though I think that some (many?) people don't plan for the worst, or just don't plan that much at all.

 

[Texas Proud]

Interesting response from the guy...


Banker Bonuses: Wall Streeter With $350K Salary Responds To The Outrage Over His Comments | Daily Ticker - Yahoo! Finance

 

[MichaelB]

The Bloomberg article intended to provoke a negative response. The real issue for the guy in the article was his income is part variable. Bonus income may pay or not, and the earner needs to make sure that 1) fixed expenses are less that guaranteed income, and 2) variables expenses are not incurred until the after tax bonus is in the bank.

Another issue little discussed is most people with high paying jobs are pressured to spend. Not just peer pressure, either. Businesses use money - bonuses, stock options, etc, to motivate and manage, and they want people that need the money. People who earn and save can, and often do, say no thanks, and this can be a hugh problem. Much better the employees that spend everything they make, because they will respond to the stock and carrot much more predictably.

 

[ls99]

Another issue little discussed is most people with high paying jobs are pressured to spend. Not just peer pressure, either. Businesses use money - bonuses, stock options, etc, to motivate and manage, and they want people that need the money. People who earn and save can, and often do, say no thanks, and this can be a hugh problem. Much better the employees that spend everything they make, because they will respond to the stock and carrot much more predictably.

Which is why employers prefer "married with children" over single and footloose.

 

[ziggy29]

Which is why employers prefer "married with children" over single and footloose.

At least for men. "Married with children" women are often perceived as mothers first and employees second, unlike the men who are seen as breadwinners first and foremost who must be committed to their job above all else.

 

[clifp]

Interesting response from the guy...


Banker Bonuses: Wall Streeter With $350K Salary Responds To The Outrage Over His Comments | Daily Ticker - Yahoo! Finance

Even after listening to his explanation I can say I am still not sympathic. A couple of things were interesting first of all his brother is the CEO of the company he works for. Second despite what the article says he in no way at the bottom of the Wall St food chain. The janitors who clean his office they are.

I think the larger point about the "middle class" of which he puts himself being squeezed and having it worse than our parents, is pure hogwash and not at all supported by the data.

By pretty much any measure the top 20% much less the top 1% where this Wall St guy 350K salary puts him is doing much better than their parents much less their grandparents. House size, number of cars, amount spent of vacations, eating out, time spent working on household chore etc.

While Michael is right there is pressure to spend and business like to keep their worker hungry. I still expect people who get a lot of compensation in bonus and such to live on their salary and use the bonus for
1. Saving
2. Make big ticket purchase like cars and houses
3 Luxury purchase like vacations, sending kids to a special camp etc.

They should not count on a bonus for normal expenses.

The more their job involves handling money, the more they should understand the volatility of the market and the less sympathy I have for not following these rules.

 

[Danmar]

Easy to be critical of this guy and that certainly was the point of the article. The 99% always likes to crap on the 1% if they can. My only question is why would the schmuck open up his life to such criticism like this. A marketting guy really should have known better. Then he keeps digging the hole?

 

[H2ODude]

I found this pretty interesting as I have a daughter and son in law who lived and worked in Manhattan for years, he in finance and she an engineer. I was appalled at what expenses were ($650/month for parking space!) and rents. I don't know what he made, but am pretty sure saving and leaving well within means was a part of the plan; they relocated to London for two years and in 2008 came back to US where he chilled for a year. They're now back in London living in what I'd describe as a nice but cramped (maybe 2000 sf spread on FOUR floors) townhouse that costs close to $9,000 a month. With three kids. Don't have any idea what he makes but they chose to not own a car this time, and it's obvious they don't worry about money. They're both high integrity compassionate people.

My point is that there are good people who make a lot of money, don't live to flaunt it or blow it on frivolities. I'm sure if my SIL lost his job you wouldn't catch him trolling for sympathy; certainly not to a reporter.

 

[devans0]

If he was creative, the dog walker could help clean his dishes, at least the meaty parts.

 

[explanade]

San Francisco, La Jolla, Boston, Nantucket, LA and many other cities in CA, CT, MA are equally hard for me to comprehend. Wonderful places, but why would anyone put up with a COL like that? No answer...

Probably because they're near industries where you can make these big salaries?

I could move from the Bay Area to NV or AZ, with lower housing, taxes and COL. But presumably the job opportunities are not the same.

It would make sense in retirement but unless you like to gamble or golf a lot, those places aren't particularly appealing either.