8 ms·

Kind of makes sense to me, once you get to a point where you're set. That is you can easily afford the main things (housing, food), plus the extras (electronics

by howeyc 9y ago

Kind of makes sense to me, once you get to a point where you're set. That is you can easily afford the main things (housing, food), plus the extras (electronics, vacations, hobbies) you need a much larger income to "move the needle" so to speak. You still need to work 40 hours a week or whatever, and only get X weeks of vacation. Having a 180K salary instead of 150K doesn't change any of these obligations, or change your life in any significant way, you just put away more money into the bank. Of course, stepping from 40K to 100K in salary is practically life altering. Unless you absolutely suck at budgets you can easily get out of debt and start having real vacations. You can afford hobbies, etc. That's one thing I've always wondered. Unless you can reach super high incomes, the "buy/rent a jet" incomes, your life isn't that different from "all the rest." You still commute to work daily, have a house, etc. I mean sure, the house and car may have higher price points, but the lifestyle is still the same. Maybe I'm wrong and all those luxury brand commercials are right, spending 30 minutes (or however long) per day in a 80K car is so much more rewarding than spending those 30 minutes in a 40K car.

_dark_matter_ 9y ago
There are still lots of QOL improvements to be made above, say, $150k. It may depend a lot on if you have kids and where you live. This is especially true when compounded with typical retirement savings and kid expenses. For example: - Housekeepers who come often - Paying someone to manage the yard - Private school and college funds for kids - International vacations for the whole family - Paying for family to visit you if you are working adults
- ryandrake 9y ago
  Definitely depends heavily on region and your family situation. Using just actual dollar values makes this discussion difficult. A $150k lifestyle in the Bay Area with a spouse and 2 kids is vastly vastly different standard of living than $150k as a single dude in an apartment in a suburb of Atlanta. In the Bay Area for example, you’re not doing ANY of those things you listed making just $150k.
  - maccard 9y ago
    I've brought this up multiple times before, but even on 150k in the bay area, you're still living well. After tax, and rent at 4k/month, your remaining pay is greater than the gross income of most mid level software engineers in Europe. If you can't manage to survive on that, you're doing soemthign wrong.
    - ryandrake 9y ago
      Yea, it’s not bad, but you don’t have a nanny, gardener, and private school for the kids on $150k.
- criley2 9y ago
  The normal explanation is that the happiness derived per dollar decreases with every dollar. The idea being that a couple making $200k jointly per year spending $800/mo on a maid gives them far, far less happiness than a homeless person getting their first warm meal and shower this month.
  - darkerside 9y ago
    A working couple with young kids getting a regular maid for the first time can be life changing. It's not the same as your homeless example, but may be easy to underestimate or trivialize.
- skybrian 9y ago
  Or just don't spend it. You don't have to spend more just because you make more. If you save (invest) the money, you can retire earlier.
- mathgladiator 9y ago
  I second the housekeeper. I spent $40K on mine last year, and it was the best thing I have ever spent money on. I've done dishes once in the past year, and I generally come home to a made bed. Imagine getting all of that, but then know that you are providing a near livable wage with flexible schedule. She can be a good mom and make money.
jmelloy 9y ago
There is also a huge difference between $150k with no/manageable debt, and $150k with a lot of debt. Some people can't figure out how to budget even with a high income. "I deserve this, I make good money/work hard/whatever" is a dangerous statement.
tasuki 9y ago
Agree with most of your points! Just one thing: you don't need a "buy/rent a jet" income to not have to commute to work daily. Retiring early appears to be surprisingly easy with decent income and good spending habits. Taking a year or two off even more so. Eg with the 80k (the more expensive car you mentioned), you can live handsomely for 4+ years in South-East Asia or Eastern Europe.
- Qwertious 9y ago
  >Just one thing: you don't need a "buy/rent a jet" income to not have to commute to work daily $3mil let's you live on $50k/year for 60 years. And realistically, more than that due to interest - 2% of 3mil is 60k, so if you have it well-invested you could live off it with $50k/yr indefinitely.
  - ThrustVectoring 9y ago
    The amount of principle required to sustain $1 of annual real consumption in perpetuity costs between $25 and $35. $50 is far beyond enough - you'll die with far more money than you started with.
    - chii 9y ago
      in which case, you get to put your kids in a great position.
      - AstralStorm 9y ago
        That is presuming you weren't essentially forced to pay this early to help your kids in the first place. Say, housing, education (incl. extracurricular), incidentals. The truth is, most people can barely afford to save due to aforementioned high costs.
  - IkmoIkmo 9y ago
    With that kind of money (i.e., so much money you can risk not earning anything for 10 years straight) you can open yourself up to a higher risk-profile. Stocks for example have averaged, inflation adjusted, about 6% in the past 50 years. 6.6% in the past 60 years and 8.2% in the past 40 years, for comparison. So let's say 6%. This is inflation adjusted, and dividends reinvested. At that point you're earning $180k a year. Even if you spend $100k, you'll be accruing money over time while maintaining purchasing power. In 50 years, you'd add another $4m of inflation-adjusted wealth for example, but that's wildly underestimating reality as that doesn't figure in the compound effects of adding $80 to your wealth each year.
LaurensBER 9y ago
> Of course, stepping from 40K to 100K in salary is practically life altering. Unless you absolutely suck at budgets you can easily get out of debt and start having real vacations. You can afford hobbies, etc. I live in the Netherlands where 40K is quite a reasonable income. I really dont get why you would need 100k to do the things you need. Perhaps people need to become a bit more frugal? People here in general don't have any debt (except for mortgages) and a vacation to an Asian country is 1-2k/month'(yes people sometimes do take 2 months vacations here). Even a month of Australia is only 3-4k. Hobbies? I don't know what kind of exotic hobbies people have in the bay area but even flying drones (relative expensive) is relative affordable if you get started with a cheap Chinese drone before you buy an Expensive one. Rent, family size, location, etc probably makes a huge difference but I really don't think 100k is the magical number that you need to become happy.
- aldanor 9y ago
  I guess that is the whole point? I.e., you stop needing to be frugal and/or don’t have to count € when spending money on basic things like food or transportation. Also, more things become ‘basic’. Another point that makes a difference is that if you ever want to get a mortgage and buy a house, the maximum the banks will give you is a constant multiplier times your annual salary. In Ireland it’s 3.5x — good luck trying to buy a house on a €140k budget in Dublin. In my case, my total effective comp increased about 8x in the last 5 years after being corrected for taxes and CPIs of the countries I lived in, and I kind of concur with the OP in that it’s more of a log curve than linear. Things get progressively ‘easier’ but less lifestyle-changing over time.
  - IkmoIkmo 9y ago
    > the maximum the banks will give you is a constant multiplier times your annual salary. The multiplier isn't constant or fixed but dependent on interest rates. So there are certainly multipliers that work in certain periods, like about 4x now in the Netherlands. But that'll go down once rates rise, it's only a constant insofar as the long-term interest rates appear somewhat constant (or rather, sticky) in a given period of time. At the end of the day they look at ability-to-pay, and interest rates factor in to that, which are variable.
jjeaff 9y ago
I believe Bill Gates at one point said that there wasn't a lot of idfference, lifestyle wise between $10m and $10b. I think the biggest difference would be the outsized political, social influence and your own private jet. But of course even at $10m you could easily afford to rent a jet pretty frequently.
- leetcrew 9y ago
  if you have $10mil, you're not burning much more than ~$400k a year if you're smart. a charter flight across the continental US costs at least $6k. so you could definitely do that from time to time, but if you do it even once a month you are blowing almost a fifth of your yearly budget on transportation. you are probably gonna feel that. edit: the figure I used is just the cheapest possible aircraft you can rent. if you actually want a jet, you are looking at $10,500 and up, which would make your monthly flight eat more like 32% of your budget. most people are going to find this untenable.

by howeyc 9y ago

_dark_matter_ 9y ago

There are still lots of QOL improvements to be made above, say, $150k. It may depend a lot on if you have kids and where you live. This is especially true when compounded with typical retirement savings and kid expenses. For example: - Housekeepers who come often - Paying someone to manage the yard - Private school and college funds for kids - International vacations for the whole family - Paying for family to visit you if you are working adults

ryandrake 9y ago
Definitely depends heavily on region and your family situation. Using just actual dollar values makes this discussion difficult. A $150k lifestyle in the Bay Area with a spouse and 2 kids is vastly vastly different standard of living than $150k as a single dude in an apartment in a suburb of Atlanta. In the Bay Area for example, you’re not doing ANY of those things you listed making just $150k.
- maccard 9y ago
  I've brought this up multiple times before, but even on 150k in the bay area, you're still living well. After tax, and rent at 4k/month, your remaining pay is greater than the gross income of most mid level software engineers in Europe. If you can't manage to survive on that, you're doing soemthign wrong.
  - ryandrake 9y ago
    Yea, it’s not bad, but you don’t have a nanny, gardener, and private school for the kids on $150k.
criley2 9y ago
The normal explanation is that the happiness derived per dollar decreases with every dollar. The idea being that a couple making $200k jointly per year spending $800/mo on a maid gives them far, far less happiness than a homeless person getting their first warm meal and shower this month.
- darkerside 9y ago
  A working couple with young kids getting a regular maid for the first time can be life changing. It's not the same as your homeless example, but may be easy to underestimate or trivialize.
skybrian 9y ago
Or just don't spend it. You don't have to spend more just because you make more. If you save (invest) the money, you can retire earlier.
mathgladiator 9y ago
I second the housekeeper. I spent $40K on mine last year, and it was the best thing I have ever spent money on. I've done dishes once in the past year, and I generally come home to a made bed. Imagine getting all of that, but then know that you are providing a near livable wage with flexible schedule. She can be a good mom and make money.

jmelloy 9y ago

There is also a huge difference between $150k with no/manageable debt, and $150k with a lot of debt. Some people can't figure out how to budget even with a high income. "I deserve this, I make good money/work hard/whatever" is a dangerous statement.

tasuki 9y ago

Agree with most of your points! Just one thing: you don't need a "buy/rent a jet" income to not have to commute to work daily. Retiring early appears to be surprisingly easy with decent income and good spending habits. Taking a year or two off even more so. Eg with the 80k (the more expensive car you mentioned), you can live handsomely for 4+ years in South-East Asia or Eastern Europe.

Qwertious 9y ago
>Just one thing: you don't need a "buy/rent a jet" income to not have to commute to work daily $3mil let's you live on $50k/year for 60 years. And realistically, more than that due to interest - 2% of 3mil is 60k, so if you have it well-invested you could live off it with $50k/yr indefinitely.
- ThrustVectoring 9y ago
  The amount of principle required to sustain $1 of annual real consumption in perpetuity costs between $25 and $35. $50 is far beyond enough - you'll die with far more money than you started with.
  - chii 9y ago
    in which case, you get to put your kids in a great position.
    - AstralStorm 9y ago
      That is presuming you weren't essentially forced to pay this early to help your kids in the first place. Say, housing, education (incl. extracurricular), incidentals. The truth is, most people can barely afford to save due to aforementioned high costs.
- IkmoIkmo 9y ago
  With that kind of money (i.e., so much money you can risk not earning anything for 10 years straight) you can open yourself up to a higher risk-profile. Stocks for example have averaged, inflation adjusted, about 6% in the past 50 years. 6.6% in the past 60 years and 8.2% in the past 40 years, for comparison. So let's say 6%. This is inflation adjusted, and dividends reinvested. At that point you're earning $180k a year. Even if you spend $100k, you'll be accruing money over time while maintaining purchasing power. In 50 years, you'd add another $4m of inflation-adjusted wealth for example, but that's wildly underestimating reality as that doesn't figure in the compound effects of adding $80 to your wealth each year.

LaurensBER 9y ago

> Of course, stepping from 40K to 100K in salary is practically life altering. Unless you absolutely suck at budgets you can easily get out of debt and start having real vacations. You can afford hobbies, etc. I live in the Netherlands where 40K is quite a reasonable income. I really dont get why you would need 100k to do the things you need. Perhaps people need to become a bit more frugal? People here in general don't have any debt (except for mortgages) and a vacation to an Asian country is 1-2k/month'(yes people sometimes do take 2 months vacations here). Even a month of Australia is only 3-4k. Hobbies? I don't know what kind of exotic hobbies people have in the bay area but even flying drones (relative expensive) is relative affordable if you get started with a cheap Chinese drone before you buy an Expensive one. Rent, family size, location, etc probably makes a huge difference but I really don't think 100k is the magical number that you need to become happy.

aldanor 9y ago
I guess that is the whole point? I.e., you stop needing to be frugal and/or don’t have to count € when spending money on basic things like food or transportation. Also, more things become ‘basic’. Another point that makes a difference is that if you ever want to get a mortgage and buy a house, the maximum the banks will give you is a constant multiplier times your annual salary. In Ireland it’s 3.5x — good luck trying to buy a house on a €140k budget in Dublin. In my case, my total effective comp increased about 8x in the last 5 years after being corrected for taxes and CPIs of the countries I lived in, and I kind of concur with the OP in that it’s more of a log curve than linear. Things get progressively ‘easier’ but less lifestyle-changing over time.
- IkmoIkmo 9y ago
  > the maximum the banks will give you is a constant multiplier times your annual salary. The multiplier isn't constant or fixed but dependent on interest rates. So there are certainly multipliers that work in certain periods, like about 4x now in the Netherlands. But that'll go down once rates rise, it's only a constant insofar as the long-term interest rates appear somewhat constant (or rather, sticky) in a given period of time. At the end of the day they look at ability-to-pay, and interest rates factor in to that, which are variable.

jjeaff 9y ago

I believe Bill Gates at one point said that there wasn't a lot of idfference, lifestyle wise between $10m and $10b. I think the biggest difference would be the outsized political, social influence and your own private jet. But of course even at $10m you could easily afford to rent a jet pretty frequently.

leetcrew 9y ago
if you have $10mil, you're not burning much more than ~$400k a year if you're smart. a charter flight across the continental US costs at least $6k. so you could definitely do that from time to time, but if you do it even once a month you are blowing almost a fifth of your yearly budget on transportation. you are probably gonna feel that. edit: the figure I used is just the cheapest possible aircraft you can rent. if you actually want a jet, you are looking at $10,500 and up, which would make your monthly flight eat more like 32% of your budget. most people are going to find this untenable.