Scraping By on $250K/Year

[Amethyst]

I feel like I keep seeing this same article over and over, except the income figure keeps rising:

ontd_political: Down and Out on $250,000 a Year

Amethyst

 

[haha]

I feel like I keep seeing this same article over and over, except the income figure keeps rising:

ontd_political: Down and Out on $250,000 a Year

Amethyst

I believe that the reason you keep seeing it is that it is accurate. Many people have children. Many people or at least their spouses would not be happy with continual scrimping. High incomes usually come from difficult, demanding work. Why do it if your only reward is perhaps stopping 10 years earlier than others? And this is nowhere certain anyway. Not everyone has special investment vehicles as many government workers have. I would say that a couple of no-children government workers with a $250,000 income should live very well, though their choices of real estate on the current markets in NYC, San Francisco, San Jose, or westernmost LA would not be top end.

My college roomate comes by from time to time. He would love to live in a small apartment right in the middle of the city, (or so he says) but he would have to arrange for a cost free way to lose his wife in order to try it.

Ha

 

[Amethyst]

One thing I noticed is this couple have a boat-load of student debt. I hope taking on all that student debt pays off for them eventually. Apparently it hasn't, yet...

Amethyst

 

[LOL!]

This appears to be a rehash of an old accounting because I recognize the cities used, since I lived in or near 3 of them and know folks who live in 2 others.

An issue I have is that they used averages for things. The problem is that if you spend too much on your house, then your cars are cheaper. Or if you spend too much on your cars, then your private school for the kids goes or the nanny goes.

Also most folks with this kind of income may have been in their houses for a while and don't pay what it costs to put 20% down today. Or they moved to those locations after achieving equity elsewhere.

I would also not be surprised if the figure used for "average student loan debt" only included folks who had student loan debt. It could be that 80% of the family living in Huntington, NY making $250K have no student loan debt, but the 20% that do average the amounts cited.

Believe me, $250K is a nice chunk of change.

 

[walkinwood]

You can play these numbers to get the results you want. For example, $2K in gasoline taxes? In a NY suburb? They're probably working in the city and use Metro North & pay for a chunk of the commuting cost with pre-tax money.

Besides, the $250K was taxable income IIRC - that means that a couple affected by the tax bracket would be earning more than that.

 

[RetiredGypsy]

You can play these numbers to get the results you want.

It does seem like they're trying everything they can to come up to that sum. I bet those hypothetical kids aren't happy about being shoehorned into every sport and after school activity imaginable. I know I wouldn't have been.

 

[luckyiknow]

You can play these numbers to get the results you want. For example, $2K in gasoline taxes? In a NY suburb? They're probably working in the city and use Metro North & pay for a chunk of the commuting cost with pre-tax money.
.

Don't understand your point. Are you saying a family in a NY suburb would pay less than that or more than that? I live in a NY suburb and use Metro North. It costs $240 a month. Plus we also buy lots of gas (very expensive in NY), mostly for shuttling our 3 kids around to activities and social things.

 

[Spanky]

Bottom line: For folks like the Joneses who live in high tax, high cost areas, who save for retirement and college, pay for child care to enable two incomes, and pay higher prices for housing in top school districts ─ $250,000 does not a rich family make.

If living in NY is such as a burden, they should consider living elsewhere. Their income is 72% higher than our income, but their federal & state taxes are only 33% higher than ours. Their take-home pay (after federal +state taxes) are almost 2x of our net take-home pay. We have one child attending college and another doing the same soon. Our expenses are very manageable, and our savings continue to grow. We are grateful with our income and very satisfied with our quality of life in a major metropolitan area in the Midwest.
My 2-cents worth: This article represents another futile attempt to convince us that a high income (top 2.9 percent in U.S.) is not that great while more than 97% making less in the U.S. and a lot higher than the rest of the population on other parts of the world -- give me a break!!!!!!!

 

[photoguy]

If living in NY is such as a burden, they should consider living elsewhere.

Sometimes you don't get a choice because your job is relatively specialized. Furthermore, if you have the two-body problem good luck outside of any of the big metropolitian areas.

 

[Moemg]

If living in NY is such as a burden, they should consider living elsewhere. Their income is 72% higher than our income, but their federal & state taxes are only 33% higher than ours. Their take-home pay (after federal +state taxes) are almost 2x of our net take-home pay. We have one child attending college and another doing the same soon. Our expenses are very manageable, and our savings continue to grow. We are grateful with our income and very satisfied with our quality of life in a major metropolitan area in the Midwest.
!

So should all the New Yorkers abandon New York and head for the Midwest ? They live there because the highest paying jobs are in New York City or the surrounding suburbs . I don't think the Midwesterners would be happy if there was a mass exodus of workers from New York to the Midwest.

 

[Spanky]

So should all the New Yorkers abandon New York and head for the Midwest ? They live there because the highest paying jobs are in New York City or the surrounding suburbs . I don't think the Midwesterners would be happy if there was a mass exodus of workers from New York to the Midwest.

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?

 

[FIREd]

Playing Devil's advocate here...

$250K/year is not a ton of money, even here in Alabama. OK, pick up your jaw from the floor.

After paying payroll and income taxes and after maxing out a 401K, the $250K gross might leave you with $200K or less to take home.

Now, let's be clear. Someone making $250K around here would be considered upper-middle class (the average household income in my zip code is ~50K/year). It would be someone with a flashy title like "director" or "VP" maybe. Here, like elsewhere, there are certain lifestyle expectations that come with the privilege of belonging to the upper-middle class. Such person would probably live in an upper middle class neighborhood where homes go for $500-$700K. Such person would probably drive nice cars. Such person would probably send his kids to private school (since our public schools are so-so). Such person would probably donate heavily to their church and be active on the local fund raising circuit (this is the bible belt after all). How much would all that cost?

DW and I make more than $250K/year. We don't live lavishly yet we still spend $70-$80K/year. We live in a middle class neighborhood and our home is modest (<$200K). We drive run-of-the-mill cars. We spend less than $5K a year on travel. We don't tithe or are not active in fund raising activities (though we do give to charities). We are definitely oddballs among our upper-middle class friends.

Now, take the $70-$80K we spend, add kids expenses (food, extra-curricular activities, clothes, health insurance, plus whatever else), add private school tuition ($30K per year for 2 kids in my area), add the extra mortgage for the larger house (plus all the extra property taxes, utilities, maintenance costs, etc...), upgrade to a couple of nice cars, tithe 10 % of your income and I wouldn't be surprised to see upper-middle class people's expenses fall in the $150-$200K range in my area. That doesn't live a lot of room for boats, exotic getaways, luxury cars, country club memberships or even retirement savings.

 

[eridanus]

$1 million a year isn't that much either. Sure, it's more than most everyone makes but think about it.

Private school for the kids;
Summer school for the kids (in Spain!);
$2.5MM house (have to keep up appearances for that kind of income);
housekeeper;
chef for dinner, 5 days a week (busy professionals don't have time to make dinner);
payment and upkeep on the 50' SeaRay 500;
2 BMW 5 series cars (don't want to appear too ostentatious!);
minivan for hauling the kids around;
Porsche 911 GT2 for weekend fun;
full-time nanny to drive the van and kids around (busy professionals don't have time to take their kids to soccer and ballet);
Christmas trip in Paris;
Spring break in Aspen;
and stainless steel appliances.

Yeah, they don't need the Porsche but then they wouldn't be living the American Dream.

 

[eridanus]

Don't understand your point. Are you saying a family in a NY suburb would pay less than that or more than that? I live in a NY suburb and use Metro North. It costs $240 a month. Plus we also buy lots of gas (very expensive in NY), mostly for shuttling our 3 kids around to activities and social things.

The couple spent $2,679 in gas taxes. NY state has $.63/gallon in gas taxes (combined state and federal), giving us 4252 gallons used over the course of a year. That's 354 gallons/month. Given 2 cars, that's 177 gallons/month/car, which is 5.9 gallons/day/car. If we assume 20mpg, they're individually driving 43000 miles/year. Wow, no wonder they need a new car every other year.

 

[MichaelB]

What? Is $250K enough?

Seems to me most of the forum members make or have made much less and not only lived well but also managed to set aside enough to become financially independent and also retire early.

Numbers are fun. Creative minds can justify just about any conclusion. Just ask Arthur Laffer.

 

[Spanky]

What? Is $250K enough?

Seems to me most of the forum members make or have made much less and not only lived well but also managed to set aside enough to become financially independent and also retire early.

Numbers are fun. Creative minds can justify just about any conclusion. Just ask Arthur Laffer.

Humans are very adaptable beings that they can always find ways to spend money no matter how much they make. The more they make, the more they spend.

 

[Independent]

Same old story - some people decide they "need" things that most Americans can only dream of, then they complain that they can't have everything they "need".

Since the lead is taxes, I'll point out that the $250k was on taxable income. Even then, a couple with exactly $250k of taxable income (maybe $375k gross?) would have paid exactly $0 in additional taxes.

 

[BigNick]

The couple spent $2,679 in gas taxes. NY state has $.63/gallon in gas taxes (combined state and federal), giving us 4252 gallons used over the course of a year. That's 354 gallons/month. Given 2 cars, that's 177 gallons/month/car, which is 5.9 gallons/day/car. If we assume 20mpg, they're individually driving 43000 miles/year. Wow, no wonder they need a new car every other year.

Yes, plus I'll bet that in the "full" version of the article, the after-tax income is used as a basis to buy gas at the current pump price, thus including the tax twice. It's legitimate to include gas tax as a measure of total taxation when discussing government spending or tax take, but not when discussing household expenditure.

I also laughed at this:

Some of the expenses incurred by couples like the Joneses may seem lavish – such as $5,000 on a housecleaner, a $1,200 annual dry cleaning tab and $4,000 on kids’ activities. But when both parents are working, it is impossible for them to maintain the home, care for the kids and dress for their professional jobs without a big outlay.

$1,200 /year on dry cleaning? Are they incontinent? Do they eat soup with a fork?

 

[Gone4Good]

Didn't I read that Charlie Sheen is broke? Wasn't he earning $1.2 million per episode of Two and a Half Men?

Is there any reason to think that people going broke on $250K per year are any different?

 

[Nords]

I also laughed at this:
$1,200 /year on dry cleaning? Are they incontinent? Do they eat soup with a fork?

Having watched my teen daughter do laundry, I suspect that $1200 is low...

 

[Ronnieboy]

Didn't I read that Charlie Sheen is broke? Wasn't he earning $1.2 million per episode of Two and a Half Men?

I read somewhere that he is still going to earn $40 million/yr with syndication rights. I'll take one year of that please....

 

[NW-Bound]

$1200/yr for dry cleaning? Let's see...

That's $100/month or $25/week. A place near me advertises the price of $2.5 per item. That's 10 items/week, which is 5 items per week for each of the couple, or 1 item per workday. Bingo!

 

[walkinwood]

Don't understand your point. Are you saying a family in a NY suburb would pay less than that or more than that? I live in a NY suburb and use Metro North. It costs $240 a month. Plus we also buy lots of gas (very expensive in NY), mostly for shuttling our 3 kids around to activities and social things.

I was questioning the $2K in "gasoline taxes" that the article mentions.

 

[Rambler]

$1200/yr for dry cleaning? Let's see...

That's $100/month or $25/week. A place near me advertises the price of $2.5 per item. That's 10 items/week, which is 5 items per week for each of the couple, or 1 item per workday. Bingo!

You took the words right out of my mouth...

In our case the price is a little over $3 per shirt, but suits are much more, as are coats and leather goods. DW does not work outside the home, so very few shirts for her. Considering vacations and holidays, we spend $700 per year on my shirts alone. With suits and coats added, it easily adds up to $1200 a year. Good thing FIRE t-shirts, shorts and jeans don't need dry cleaning. I also prefer jean jackets and fleece...washable. Most cleaning bills in FIRE will be DW's jackets and coats.

R

 

[sheehs1]

My 2-cents worth: This article represents another futile attempt to convince us that a high income (top 2.9 percent in U.S.) is not that great while more than 97% making less in the U.S. and a lot higher than the rest of the population on other parts of the world -- give me a break!!!!!!!

Playing devils advocate. Right out of college and over 30 years ago, I took a job in orthopedic research as a Laboratory Specialist/Researcher. It paid a little of $9,000 if memory serves me correctly. I was also licensed to teach. The reason I took the research position over a teaching position is it paid $1,500 more than teaching....plus I didn't want to be a teacher. I just looked up the average salary for the same research position and today it pays an average of $32,000. In 30 years due to CPI, the salary went up 3.6 times.
So...if you take the $250,000 and divide it by 3.6 you get a salary for what was $69,444 back in 1977. Would we consider someone making $69,777 back in 1977 rich?

I get that the $250,000 is AGI...so let's bump that $69,777 to say $85,000.
Was that person rich?

I think what has gotten lost in the political mantra is what CPI has done to salaries over the years.

I also get that the government tells us that someone with a AGI of $250,000 is in the top 5%...but I question that....as I know a LOT of people that surround me in my small city of 9,000 that make that. So...next question is do we really believe that at that level...it is only the top 5%?

Some of the federal and state tax bills quoted in articles like this astound me. I WISH I only paid $29,000 in federal taxes. Believe me, I pay way more...but then I don't have a huge mortgage deduction. Anyone making that already is getting hit with the extra AMT tax, loosing most tax credits and deductions...so....my take is that if they are paying less in tax...they are donating a fair portion to charities, church whether directly or thru charitable remainder trusts.
Simply put...I remained baffled...that the designated $250,000 is considered RICH. No doubt ...well off...and "trying to get there"...but it takes many years....even at this salary level to "get there".