Living in a very expensive area and traveling are the two most common and highest expenses that most people run into, with cars being the third (boating and horses are not nearly so widespread, but very expensive of course). Doing whatever you enjoy is great, but some things require a large sustainable budget to enjoy for a long time.
I would definitely not call spending more money pissing it away, different things make different people happy, and it really doesn't matter a single bit whether they are expensive or not, as long as it can be fit within a reasonable budget. That was the point I was trying to make originally, though it may not have come across as clearly.
But, I don't agree 40% of 50K is easier to save than 40% of 100k, assuming they live in the same area at all. If you are living in a more expensive area, you should expect a similarly higher pay-rate. Determining how expensive an area is includes local and state taxes, not just food, housing, and transportation. The only thing (aside from work expenses) that increases directly with income is federal taxes, and the difference is actually marginal in real terms. While someone making $50K may be taxed 10% in real terms, a person making $100k is taxed something like 18% in real terms. That is just an 8% difference (these percentages are off the cuff, but are probably close). Let us assume the basic living expenses for a person in that area is 20k, and the local and state tax rates are 10%. The result would be, for the 100k person, they would have $52K to save, and the 50k person would have $20k to save.
That means the 50k person could save, at most, 40% if he saved every single bit of his extra income, and the 100k person could save 52% if he saved every single bit of his extra income. That doesn't even get into 401k's, which help a 100k person much more than a 50k person. Even on a percent basis, someone with a higher income can save more. Why did it happen this way? Because the basic expenses were all regressive, and consume a larger percentage of income (40% vs 20%), than the progressive effect of federal taxes (10% vs 18%).
Is a 100k person always able to save more than a 50k person? No, because the savings rate depends on the spending rate, and there are some (absurd, because the local/medicare/SS tax rates make this scenario impossible) examples where the 100k person is saving a lower percentage of their income than a 50k person. E.g. Let us say the basic living expenses are $5k in area. The 100k person would end up being only able to save 77% of his income, and the 50k person would end up being able to save 80%.
Another example in the opposite direction (and not absurd, since some areas are actually like this), if the basic expenses in area are very high, say $40k, the 100k person will be able to save 42% of their income, while the 50k person will only be able to save a meager 20%. I am thinking places like Manhattan, Orange County, and SV, actually it may be even worse than this in those areas.
] etc.
