Scraping By on $250K/Year

[MichaelB]

Quote:

Originally Posted by Westernskies Here's how I see it: I probably make more than some on this forum. Apparently that make me a rich, evil, fat cat in the eyes of more than a few of our members.

WS, it's not because of the money.

[Texas Proud]

Quote:

Originally Posted by Spanky No, I am NOT suggesting that they should move to the Midwest specifically. There are places even cheaper than the Midwest. We have sales reps making $300K in NY city complaining not making enough. When asked why they chose to live there, they would cite the exciting night live, the museums, the culture, the fast pace, etc and wouldn't want to give that up. That's fine and the price to live there. While it's true some of the highest paying jobs are in NYC, most likely in the financial or high-fashion sectors, how about those who work at hotels as doorman, maids and fast-food restaurants? How do they survive?

Just started reading this and am 5 pages behind so I do not know if this was answered...

Doormen in NYC get paid very well... when I was there I heard on the news the average was over $100K... but I do get your point... most of the people get ordinary salaries... but they live a lot farther out where it is cheaper...

[Westernskies]

Quote:

Originally Posted by MichaelB WS, it's not because of the money.

Quote:

Originally Posted by Westernskies Get over it.

[NW-Bound]

I am not sure what people are arguing about here!

Reading the originally quoted article, I agree that the cost of living is so expensive in some areas that $250K would not be enough. My brother had to leave Google because he did not want to live in a tiny house in that area, which would fit his budget (no I don't ask, but I don't think they pay him as much as $250K in base salary).

Of course the people there will complain, but what good would that do them? The "market" only wants to pay them so much. Tough luck!

On the other hand, I can see the point that if society declares that $250K is a high-level salary and wants to tax them more, perhaps their employers would have to compensate to raise their pay. That in turns brings a bad side effect. A higher percentage of the GNP leaves the private sector to enter the grubby hands of politicians!

It would be better that people generally have a lower cost of living, and to forfeit an inflated salary. But how can we arrange that in a free market, where people are free to chose where to live? My brother voted with his feet. Some earlier posters said as much.

[FinanceDude]

I don't care what anyone makes, I hope all of you on here make $10 million a year. However, I have read enough whiny weepy stories of folks not being able to get by on $250,000 or more a year that I am going to throw up soon.

Whatever happened to taking responsibility for their own actions? If you want to drive luxury cars, send kids to private high schools, join a country club, etc, well, noone put a gun to your head and made you do that...........if that screws up your personal finances, that's noone's fault but yours.......

[Independent]

Quote:

Originally Posted by photoguy I think getting to 125k is not going to be easy for many people, but I believe it is achievable by those with average (to above average) intelligence with lots of hard work, sacrifices, and the right decisions. Here's what I think are the decisions that need to be made: (1) The choice of school program. For example, instead of physics enroll in engineering, instead of english take accounting, instead of biology do nursing. (2) Move to the big city where salaries are higher. I would guess that in silicon valley, salaries might be double what they'd be compared to low cost of living areas like the midwest. Obviously varies by occupation. (3) Choice of employer. Work for a consulting firm that rewards performance (aka 50-60+ work weeks) instead of a government job. If you have a math degree don't go into teaching but instead work for the man in a corporate job. Be willing to be a road warrior. Regarding intelligence levels IQ Ranges of Occupations - Careers - | LearnHub which I believe is taken from http://www.ssc.wisc.edu/cde/cdewp/98-07.pdf suggests that even for highly competitive occupations like MD the range of IQs (105-130) allows for people with average intelligence (median should be 100 with 15 pts for +/- one std dev.). (Note I am unsure of the quality of this paper as I didn't have time to do more than skim it and this is not my field). With respect to police officers, the base pay in San Jose is 108K and with overtime many hit 125K. I think San Jose pays more than most, but I'm guessing you will get similar salaries at other high cost of living areas. The city publishes salaries at: Employees Salaries Lookup As an aside the police chief made $525K in 2010!!! The top police sargent was at 263K, top police officer at 224K. I suspect there's a lot of pension spiking going on, but if you select the Police dept and scroll down a few pages, you can see POs who get most of their pay from base + overtime. I think we don't see more people at $125K because folks don't want to make these choices. Which is a perfectly reasonable thing to do. I would never recommend to a high school student to take engineering/accounting solely because of the pay.

Thanks for the research. I figured high cost areas would have higher salaries, but I hadn't looked for details. Your estimate of "double" looks about right. I entered "trooper" into this site State Salaries 2010 | The Des Moines Register | DesMoinesRegister.com and got a median around $64k and a top end of $77k for state police in Iowa (I assume this is non-supervisory).

I can believe that someone in San Jose could look at national wage data and think that doesn't relate to his own experience. Both the cost of living and the cost of keeping up with the neighbors is unusually high in San Jose. "The cost of living in San Jose and the surrounding areas is among the highest in California and the nation. ... Despite the high cost of living in San Jose, households in city limits have the highest disposable income of any city in the U.S. with over 500,000 residents." San Jose, California - Wikipedia, the free encyclopedia

From a tax policy perspective, some people who post here think we should vary tax brackets by geographic area because of that. I tend to be more like FD and think location is a choice.

So I should re-phrase my statement to something like "Most people can't get into the top 10% of earnings for their area simply by hard work". That may close half the disagreement we seem to have.

The Wisconsin paper looks interesting. Based just on the intro and a couple tables he seems to be saying that while we're sure "that children’s opportunities are anything but equal", sociologists have concentrated their research on things like family and community support and haven't done much with IQ. I've been using "IQ" as if it represented all the uncontrollable factors, and that can be misleading.

So again, I should clean up my wording. Let "A" be all the things in life we can't control: genes, parents, schools, childhood health, corporate takeovers, your boss quitting at the ideal time, the macro economy, etc. Then let "B" be all the things we can control: how many hours we work, choosing engineering instead of math teaching, investing time in education instead of earning/spending now, etc. Let "E" be total financial results.

There is a range of possible values for A. If we track 1,000 people with the same value of A, we'll see a variation in E, which will reflect individual choices regarding B. For any value of A, it's possible to find people with E=0, since anyone can choose to make B=0. But, for any A, we'll observe a maximum value of E, and that value will go up as A goes up.

That's pretty abstract. I'll compare it to the IQ vs. occupation chart. IQ is just one part of A, and occupation is just one part of E. Suppose we could sharpen up that chart by having the rows represent various levels of E instead of just occupation, and the bars show ranges of A instead of IQ.

I'm thinking the bars, at least toward the bottom (the high E's) would be noticeably shorter than they are on the IQ/occupation chart, primarily because the left edge would move over to the right.

Even on the IQ/education chart, they didn't see anyone with an IQ below 105 becoming an MD. But lots of kids want to be doctors when they grow up, and I'm sure that plenty of them have IQs below 105 and really tried to get there (at least for a while). But none of them survived. So for 63% of the population, "MD" seems impossible. I go further and think the one person with the 105 had lots of other things going for him/her, and maybe ended up with an income well below the average MD. So if we corrected for that kind of fuzziness, replacing IQ with all of A, the 63% will go up. I end up thinking that for 80% or 90% of the possible values for A, we won't be able to find anyone who reached the income level of the typical MD.

Of course, I don't have the resources to prove that. Even with the good longitudinal pool, we'd have to do face-to-face interviews with everyone designed to pull out all the possible A and B factors. I can easily provide anecdotes of people I know who appear to have never had a chance, you'd say you've heard of people who seemed to beat the odds in a way that anybody could copy. I'll say, you don't know enough about them, if B alone is enough to get anyone up to a certain earnings level, is more B adequate to get to ten times that level? You'd say ..... etc...

[LOL!]

The budget in the article was a contrived budget specifically designed by an accounting firm to use up $250,000 income in the locations. While some families might spend more in some of the categories, I don't believe that a rational family would spend the amounts in all those categories every year. It just doesn't make sense, pass the smell test, fails a reality check, etc.

Folks who have this kind of income are welcome to post their own numbers (please try to use the categories in the article) to show that they are living paycheck-to-paycheck, scraping by, or down-and-out, but I think we won't have any takers on that.

[Katsmeow]

Quote:

So for 63% of the population, "MD" seems impossible. I go further and think the one person with the 105 had lots of other things going for him/her, and maybe ended up with an income well below the average MD.

Or....maybe the test of that person wasn't particularly valid. Maybe that person was someone who has undiagnosed ADHD and was very distracted and so scored a very average 103.

Maybe that person's ability were better reflected by another test done the same day and scored 113 on that IQ test.

Maybe that person was on medication later and had a learning disability remediated and then scored 147 in the highly gifted range.

Maybe that person was distracted by traffic noise during an IQ test later and scored 127.

Maybe that person was tested by a different IQ test and on that day scored 143.

BTW, all those test scores reflect some of the varying IQ test scores that my son had from the time he was 6 until he was 14. There is a roughly 3 standard deviation difference in his highest and lowest scores. He was tested by a number of different IQ tests.

People talk about IQ like everyone would score the same on every IQ test. That simply isn't true. Some tests will favor people with good verbal abilities, other favor people with good spatial reasoning and so on.

And, people that IQ test scores aren't subject to any variation from time to time. That can be true for some people but for others (like my son) scores can be very variable. Someone who tested my son and found an IQ of 103 would say he was average and probably think he couldn't be a physician. On the other hand, those who tested him on multiple instruments where he scored over 140 would say that he clearly had the intellectual ability to be a physician.

[jdw_fire]

Quote:

Originally Posted by LOL! The budget in the article was a contrived budget specifically designed by an accounting firm to use up $250,000 income in the locations. While some families might spend more in some of the categories, I don't believe that a rational family would spend the amounts in all those categories every year. It just doesn't make sense, pass the smell test, fails a reality check, etc. Folks who have this kind of income are welcome to post their own numbers (please try to use the categories in the article) to show that they are living paycheck-to-paycheck, scraping by, or down-and-out, but I think we won't have any takers on that.

thank you for that (i agree with you). i think this observation only adds weight to my statement that an article like this is insulting to people who earn (much) less than $250k/yr. and that it is displaying a bad example by providing justification for living above one's means (i.e. it invokes the thought "if someone making $250k/yr cant live within their means how can i, making less than that, live within my means").

[photoguy]

Quote:

Originally Posted by Independent But lots of kids want to be doctors when they grow up, and I'm sure that plenty of them have IQs below 105 and really tried to get there (at least for a while). But none of them survived. So for 63% of the population, "MD" seems impossible.

I think it's really interesting that we can look at the same numbers essentially, but have very different views. I look at the 63% number on the opposite side and say that wow 37% of people in the U.S. have the raw intelligence to become an MD, one of the most respected and financially rewarding professions. (note: I think the 105 cutoff was the bottom 10th percentile so it might be a bit more, but we also have to take off some number to account for those that don't have the financial resources to go to college.). Even if the number when we account for IQ/resources is only 10% that's huge to me because it's only one path to an affluent lifestyle.

I know that lots of kids say they want to become doctors when they grow up, but I always wonder how many of them actually put in the hours of studying (and volunteering to improve their application), to get good enough grades through both high school and college to make it happen. If your IQ is only average, you're going to need to spend much more time studying to make the grades.

I think maybe also our difference in opinion comes from what is considered achievable. In my opinion, if you have a slightly above average IQ, could afford to go to college for a bachelors degree, then you could have become an M.D. if you worked hard enough (baring things like disabilities).

[sheehs1]

Quote:

Originally Posted by NW-Bound On the other hand, I can see the point that if society declares that $250K is a high-level salary and wants to tax them more, perhaps their employers would have to compensate to raise their pay. That in turns brings a bad side effect. A higher percentage of the GNP leaves the private sector to enter the grubby hands of politicians! .

Just a point of clarification. The article was designed around $250K per couple.... Not a single taxpayer. So as others have pointed out....this takes some variation of both spouses making a salary along with some investment income that comes up to $250K. Granted... hitting the $200K mark with each making about $100K may be somewhat easier. Wondering how many would be calling this a whiny and insulting article if the author had decided to use the $200K figure or the $150K figure per family....both of which are still way above the median income.

[FinanceDude]

Quote:

Originally Posted by sheehs1 Wondering how many would be calling this a whiny and insulting article if the author had decided to use the $200K figure or the $150K figure per family....both of which are still way above the median income.

It wouldn't matter, do we really need articles like this? I mean, its silly, you don't even have to LBYM, you can LAYM (Live At Your Means)

A series of bad financial decisions does not elicit a lot of empathy from me, and I am in the investment business. I have lost track of the number of people I met who have huge credit card debt but have a big cable bill, Smartphones for everyone, and drive brand new cars. Stupid is as stupid does..........

[Independent]

Quote:

Originally Posted by Katsmeow Or....maybe the test of that person wasn't particularly valid. Maybe that person was someone who has undiagnosed ADHD and was very distracted and so scored a very average 103. .....

Another good point. One IQ test is hardly an accurate measure of an individual's mental ability, even if we restrict ourselves to those abilities that IQ tests are supposed to measure. This increases the dispersion on the graph and makes mental ability appear less important than it really is.

[sheehs1]

Quote:

Originally Posted by FinanceDude Stupid is as stupid does..........

Agree!

[HFWR]

Quote:

Originally Posted by FinanceDude I don't care what anyone makes, I hope all of you on here make $10 million a year. However, I have read enough whiny weepy stories of folks not being able to get by on $250,000 or more a year that I am going to throw up soon. Whatever happened to taking responsibility for their own actions? If you want to drive luxury cars, send kids to private high schools, join a country club, etc, well, noone put a gun to your head and made you do that...........if that screws up your personal finances, that's noone's fault but yours.......

+1

[Independent]

Quote:

Originally Posted by photoguy I think it's really interesting that we can look at the same numbers essentially, but have very different views. I look at the 63% number on the opposite side and say that wow 37% of people in the U.S. have the raw intelligence to become an MD, one of the most respected and financially rewarding professions. (note: I think the 105 cutoff was the bottom 10th percentile so it might be a bit more, but we also have to take off some number to account for those that don't have the financial resources to go to college.). Even if the number when we account for IQ/resources is only 10% that's huge to me because it's only one path to an affluent lifestyle. I know that lots of kids say they want to become doctors when they grow up, but I always wonder how many of them actually put in the hours of studying (and volunteering to improve their application), to get good enough grades through both high school and college to make it happen. If your IQ is only average, you're going to need to spend much more time studying to make the grades. I think maybe also our difference in opinion comes from what is considered achievable. In my opinion, if you have a slightly above average IQ, could afford to go to college for a bachelors degree, then you could have become an M.D. if you worked hard enough (baring things like disabilities).

I thought it might come down to this, I see the glass mostly empty, you see it remarkably full. I think that's why numbers clarify views.

As I said, I think 67% is an understatement because it looks at only one uncontrollable factor - the score on one IQ test. IMO, if we could look at the entire package of factors (parent's education, parent's income, schools, health, etc.) we'd get a sharper focus and find that uncontrollables are an even bigger factor.

[Hamlet]

My wife and I make about $150k combined in the Minneapolis area. We are saving ~40-50k per year without feeling deprived at all. We eat out when we want to (although eating out is the local pizza place, not Manny's steakhouse), buy season tickets to the Guthrie, etc.

I feel immensely wealthy because I never have to truly worry about money. If we both lost our jobs we could still live for years without it impacting our lifestyle.

The things we save money on are housing (200k house instead of the 350k house many people with our income buy), cars (1997 Celica convertible, 2008 Kia Rhondo), and not having kids (although that is about to change )

If we were only making $100k, it would not be hard to cut 10-20k and be saving a decent amount again. Heck, I spend $3k/year on comic books. We're not crazy frugal.

If we were making $50k, we would move down in housing and drop a car to make it work.

I was saving money when I made $24,000/year in 1996. I made sure that my living costs were less than my income.

I have sympathy for people making a third of what we make and trying to raise kids. That is hard.

I have sympathy for people who have kids with special needs.

I don't have sympathy for people who can't seem to live rationally based on an income that is wildly higher than what everyone else is managing to live on.

Quote:

Originally Posted by sheehs1 Just a point of clarification. The article was designed around $250K per couple.... Not a single taxpayer. So as others have pointed out....this takes some variation of both spouses making a salary along with some investment income that comes up to $250K. Granted... hitting the $200K mark with each making about $100K may be somewhat easier. Wondering how many would be calling this a whiny and insulting article if the author had decided to use the $200K figure or the $150K figure per family....both of which are still way above the median income.

[sheehs1]

Quote:

Originally Posted by Hamlet I don't have sympathy for people who can't seem to live rationally based on an income that is wildly higher than what everyone else is managing to live on.

Don't think the article was written to try to illicit sympathy. Interesting that a few have taken it that way. But each to his own. It was "just an article"...showing how easy it is to spend the $250k as a couple . That is all it was...IMHO

[RetiredGypsy]

Quote:

Originally Posted by Hamlet Heck, I spend $3k/year on comic books.

You're my hero.

[ItDontMeanAThing]

Quote:

Originally Posted by photoguy Regarding intelligence levels IQ Ranges of Occupations - Careers - | LearnHub which I believe is taken from http://www.ssc.wisc.edu/cde/cdewp/98-07.pdf suggests that even for highly competitive occupations like MD the range of IQs (105-130) allows for people with average intelligence (median should be 100 with 15 pts for +/- one std dev.). (Note I am unsure of the quality of this paper as I didn't have time to do more than skim it and this is not my field).

The paper is crap. It's self-published (where 'self' is the academic group an U of Wisconsin the author is part of). As far as I'm concerned anything claiming to be SCIENCE that wasn't published in a peer reviewed journal isn't worth the paper it was written on.

The sample graphed is U of Wisc. graduates and their siblings, so it's not representative. I can't find anything about sample size or response rate (of those asked for info, what % responded) Other relations in the study between intelligence and occupation do have large and representative samples.

The IQ test used, the Henmon Nelson test, seems to exist on Google almost entirely in relation to this study or what it's mean and SD are. Furthermore, Mensa doesn't list it as one of the standardized IQ tests. Sounds like a U of Wisconsin in-house project.

The occupation categories are so broad to be meaningless, unless the intent was to show low correlation between intelligence and occupation. The definition of the occupation groups is not stated in the graphs, instead one is referred to an appendix. Seems like another in-house substitution where national standards exist. We'll never know, as the pdf contains no appendices.