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$500k a Year yet Struggling? Let's Do a Double Take
- mikek 7y agoMortgage payments: $60,000 $60K / year isn't going to pay for the mortgage on even a small house in Silicon Valley.
- jedberg 7y agoSure it will. That's a $1.2M house with 20% down. There are plenty of 2-3 bedroom 1200-1500sq ft houses around here in that range. Sure, it would be an average school district and maybe have a bit of a commute, but you can find stuff in that range for sure.
- deleted 7y ago[deleted]
- ctvo 7y agoWhat does this have to do with the article about the couple living in NYC feeling average on 500k a year? In another separate market, in another region in the country... they'd pay more? OK.
- mijamo 7y agoAre you really sure about that? 60 000$ mortgage payment is probably more than 1 million in loan, and the property value can be double the loan (appreciation since they bought + initial payment outside of the loan). I don't exactly know the prices of houses but I guess 2 million dollar should buy you a house?
- weaksauce 7y agoMillion dollar 30 mortgage is approximately 5k / month which is 60k / year. Are small homes substantially more than that?
- yumraj 7y agoDepending on the down payment that is 1.25M home +/- 250K. SV is huge. You can definitely get a home for that. Note: property tax is extra. I'm in San Jose, with pretty good school district. In this area ~1400 sq.ft. townhomes are about $1.0xM.
- kangnkodos 7y agoFrom another article with more details on this couple: "$5,000 a month in mortgage expense bought this family a ~$1,500,000, 3/2, 1,700 sqft apartment in Brooklyn a couple years ago." https://www.financialsamurai.com/scraping-by-on-500000-a-year-high-income-earners-struggling/ https://www.financialsamurai.com/scraping-by-on-500000-a-yea...
- SolaceQuantum 7y agoI'd like to point out this is an opinion piece, and verifies the intuitive claim that 500k/yr is not struggling to make ends meet even in nyc. The piece concludes with questioning why people feel like they're paycheck to paycheck when they're not, and cites wealth inequality (skewed idea of how well off one is by knowing wealthier people) and a lack in paycheck deposits because of other payments into things like 401k.
- aantix 7y agoWhen my wife and I had our first child, we lived in SF. The neighborhood daycare in the Excelsior charged $1600/mo. This is five years ago. We're about to have our fourth child. With the upcoming summer, if we still lived in SF, we'd have four children in daycare. $6,400/mo.
- tdhoot 7y agoWith four kids is it cheaper to just hire a nanny?
- gnaritas 7y ago> my wife and I One of you stay home and raise your kids; that's rather the point of getting married. > With the upcoming summer, if we still lived in SF, we'd have four children in daycare. $6,400/mo. If paying other people to raise your kids is even on the table, you're doing it wrong.
- 6d6b73 7y agoThat's your choice isn't it?
- war1025 7y agoBased on their comment, the choice they made was to no longer live in SF. So yes, it was their choice, and they made it.
- manfredo 7y agoSo after daycare a couple making $0.5M/yr would "only" have $423,000 left to work with. What does rent cost? A 6 bedroom house can be rented for $11,500 a month [1]. So after rent and daycare the family has $285,000 to work with. Still very very far from struggling. 1. https://www.apartments.com/1934-powell-st-san-francisco-ca/efsm0tp/ https://www.apartments.com/1934-powell-st-san-francisco-ca/e...
- deathanatos 7y agoAnd that's giving each child their own bedroom and saving one for guests! I grew up with me and two siblings all in the same bedroom. (And honestly, it was alright, I'm probably better for it, and we definitely weren't poor by any measure. So, the figures above should be read as "if we spoil the children", IMO.)
- Traster 7y agoThis is a surprisingly reasonable article from Bloomberg and it's certainly true that Mortgage and 401k doesn't feel like saving excess money, but it does essentially map to savings. I'm not sure it's really a useful conversation to have though. We live in a world where there are essentially an infinite number of things you cannot have. So feeling rich is pretty much a choice once you're beyond probably double the average household income for the area you're in.
- MuffinFlavored 7y agoMaking $10k/yr allows you to do very little. Make $50k/yr allows you to do more, but still not a lot. Making $100k/yr opens some doors you didn't have access to before. Making $200k/yr puts you in pretty good comfort overall, but doesn't enable you to go get that supercar/yacht/private jet you wanted Making $300k/yr-$500k/yr probably puts you in $1m home, $200k supercar territory depending on how badly you want to stretch it. I think when you look at it as "income + wealth unlock levels", it makes more sense. I can't really go on lavish vacations, but nobody making $30k/yr is going to feel bad for me. I can't go reasonably buy $20k jewelry, but somebody making $500k/yr probably could. Then you get to yacht / private jet level of wealth that I know very little about. :P
- atwebb 7y agoIn your experience, do people really inflate lifestyles like that? Doesn't 5 years at a high income level less mean "more stuff" and more mean "you can save to never work again". You need to earn 500k for a handful of years, save vigorously, and you're done. Am I missing something? I have seen both sides up close so I guess it's more a rhetorical question, but it's not pretty when you didn't save that 300k and approach retirement in a changing job market...
- granshaw 7y agoI think often its both that wealth changes people, and its often a certain kind of personality that seeks and succeeds in obtaining high-powered, high-income positions.
- jdlyga 7y ago130k supporting a spouse and living in manhattan, and even eating out constantly, is more than enough to save a ton of money per month. 500k and struggling is ridiculous.
- imtringued 7y agoThey are not struggling. They are increasing their networth faster than you are earning money. It's just a stupid accounting trick.
- jedberg 7y agoIf you're making $500,000 a year anywhere on the planet and struggling you've most likely let your lifestyle get the best of you. Sure, maybe there are a few circumstances where that's not the case: a major medical bill that you're paying off, caring for your parents or other loved ones. But otherwise, there would be lots of places to cut back without a notable change in quality of life.
- deleted 7y ago[deleted]
- blencdr 7y agoGod, this is insane. I live in France, I earn 30k€ net worth a year, my wife is 23k€ and we feel well. We're far from rich, but at no time in those last 12 months I asked myself "can I buy this ?". Last year I had to go to the hospital for an emergency, I stayed 3 days and paied... nothing. I'm thankfull for this even if I pay for that service. What you earn is fondamentaly dependant of the place you live. It seems like SF is quite a hard place to live.
- commandlinefan 7y agoI find it hard to imagine making that kind of money and blowing through it all, but I do know that my wife and I put together make 3x what I would have considered more money than I would have known what to do with when I was a teenager… and we still end up every month with nothing left over.
- deadc0de 7y agoNot in SV. $400k gets you to the lower middle class. That is you probably have a tiny chance of buying some real estate in your lifetime. House and expenses related to maintaining it is a huge chunk of change.
- jedberg 7y agoDon't kid yourself. Even here in the Bay Area, $400K a year is still upper middle class. You'd be in the top 3% of earners across the nine bay area counties.
- cableshaft 7y ago"Some of these payments are applied to the principal on their loans, which increases the couple’s net worth by either building their home equity or by reducing their student debt. So that’s also savings." I don't count paying down a debt as "savings". It might be an increase in net worth but not savings. If paying down debt is considered "savings" now, then the entire USA is "saving money". But I think that not only goes against the definition, but the spirit of the idea.
- rohit2412 7y agoI guess then net worth should be seen as savings
- wilg 7y agoCan you explain in more detail why you don't consider it savings? Maybe it is obvious but I am curious.
- nopriorarrests 7y agoIf you have used debt to buy a deprecating asset (car or almost anything you can buy with credit card, like iphone) you are not saving. In a long run, your asset will cost 0, and you haven't saved a penny.
- lutorm 7y agoI thought they were referring to principal payments on a house mortgage.
- cableshaft 7y agoHouse mortgage wasn't what I was referring to specifically. I meant more the paying down student loan debt.
- nopriorarrests 7y agoEven in this case, your house value can take a sudden plunge. Savings are savings, they are not going anywhere. It's money that sits in your bank account and you always know how many years without work you can afford.
- astura 7y ago103,500/year on unexplained "other expenses??" Over $8,500/month?!! Which is almost double their mortgage payments Um.... What the hell? Their biggest line item is completely unexplained yet they are trying to explain where their money goes? I live a fairly indulgent life and I spend less than that on everything in a year. I can't imagine spending six figures on "misc" unless there's a lot of hookers and blow involved.
- dbancajas 7y agoYeah. What's crazy is the article didn't talk about it. Biggest red flag right there.
- p1esk 7y agoPrivate school for two kids could be that much in NYC.
- astura 7y agoIf its private school tuition then it should have been under the line item of "private school tuition," not "other expenses."
- p1esk 7y agoI don't know about that family, but if I was making 500k my kids would probably be going to a private school.
- koolba 7y agoAt that income level your neighborhood is likely affluent enough that the public school would be very well funded as well.
- bluGill 7y agoNot always. Some are well funded. Others the rich kids from the nice neighborhood go to private schools, so the rich parents don't care about public school funding. Often poor parents don't care about school other than a cheap daycare and so they don't fund the public schools well either. Note that school funding and outcome is not well correlated.
- resters 7y agoTry raising a few kids in a major city and paying private school tuition and child care fees. It easily eats up most of $500K of income.
- crooked-v 7y agoIf you can send every kid to private school, you're not "struggling".
- akgerber 7y agoOr — "after I spend all my money, I don't have any money left!"
- ido 7y agoHi! My wife & I are raising 2 children in Berlin (a major world city) & earn a lot less than $500k while not struggling at all (in fact I save about 1/3 of my net pay even after deductions for both private and public retirement funds). Sending your kids to private schools is hardly a must, especially if you live in at least a middle-class neighborhood (which I assume you do on a $500k income).
- akgerber 7y agoThe way the United States provides schooling free of charge from age 4 to age 18, and expects families to pay massive tuition bills before and after, does make parenting expensive at times— especially for young families starting out. $500,000 in income is, of course, enough money to pay even expensive bills, being well into the top 1% of family incomes.
- notfromhere 7y agoPeople pay for private k-12 because there's a perception of the public schools being awful (and it may be true depending on the area). But if you live in a nice area with a well-funded school district, paying for private school is just ego. You won't get much of a difference in learning outcomes
- JohnJamesRambo 7y agoI'll share something I learned myself in another Hacker News comment. https://en.wikipedia.org/wiki/The_Millionaire_Next_Door https://en.wikipedia.org/wiki/The_Millionaire_Next_Door "Their findings, that millionaires are disproportionately clustered in middle-class and blue collar neighborhoods and not in more affluent or white-collar communities, came as a surprise to the authors who anticipated the contrary." It really opened my eyes to the fact that most people I think are rich are actually not rich, just extremely completely in debt. "The authors make a distinction between the 'Balance Sheet Affluent' (those with actual wealth, or high-net-worth) and the 'Income Affluent' (those with a high income, but little actual wealth, or low net-worth)."
- war1025 7y agoMost people's idea of "Rich" is that you have a very high burn rate. Sort of fits with the "Work hard / Play hard" ethos of success in America. Financial freedom comes from minimizing your burn rate. Far less flashy, but you can stretch money amazingly far when you aren't trying to keep up with what you think people expect of you.
- amazingman 7y agoThere are people for whom the difference between $10 and $10k is effectively immaterial. These are the people I bin as “rich”, and I think that’s how we should all see it. While someone making $500k/yr is definitely prosperous, the “rich” are an entirely different category of individual. It only serves the more selfish interests of the truly rich to conflate the two.
- war1025 7y agoI think the tricky thing about it is that income / wealth distributions are exponential, so no matter where you are on the curve, it basically looks the same. The people that have more than you have massively more, and the people who have less don't really seem to have that much less.
- kgwgk 7y ago
- cableshaft 7y agoI took a look at the article they're sourcing, and that article actually has mentioned the counterpoints it expects to see about the various line items and has an argument about why they think it's reasonable that it's on there. I don't entirely agree with it, but I think the article is more nuanced than the bloomberg article suggests by just including the chart without any commentary from the article. https://www.financialsamurai.com/scraping-by-on-500000-a-year-high-income-earners-struggling/ https://www.financialsamurai.com/scraping-by-on-500000-a-yea...
- canada_dry 7y agoI love how this old TV commercial pretty much sums up the way some people live: https://www.youtube.com/watch?v=PV_YAeXOSiw https://www.youtube.com/watch?v=PV_YAeXOSiw People who think it's OK to spend every dime that comes in. They've bought into the recent concept that they deserve everything they want and more... then when shit happens... it's a damn hard lesson.
- seltzered_ 7y agoDidn’t read the article, assuming it “was intentionally crafted to make an audience hate someone to maximize ad revenue.” https://mobile.twitter.com/patio11/status/1110615248870891520 https://mobile.twitter.com/patio11/status/111061524887089152...
- Permit 7y ago>Just this month, CNBC ran a story entitled “Here’s a budget breakdown of a couple that makes $500,000 a year and still feels average.” Yes, because they have been running that story monthly since 2017! https://twitter.com/ejenk/status/1110616128118759424 https://twitter.com/ejenk/status/1110616128118759424 I don't think CNBC is trying to drive a narrative here, but I do imagine that they're getting ReallyGoodEngagement™ out of articles like this since they tend to inspire immediate outrage and incredulity. patio11's take on this: https://twitter.com/patio11/status/1110615594561212416 https://twitter.com/patio11/status/1110615594561212416
- flattone 7y agoI have second hand exposure to some of this mentality... and I believe a lot of the concern from individuals comes from being entirely of social cultural upbringing where under seven figures is totally inappropriate/failing . .
- jccalhoun 7y agoI'm in a small Midwestern city so my cost of living is very low compared to some places in the USA. I make less than some of my colleagues in larger cities but even with student loans and getting ready to buy a house, I am quite comfortable. Even still, I look at some of my coworkers who are making what I'm making and were freaking out when they changed our pay schedule so we would get paid a week later. What the hell are they spending their money on that one week is a huge deal for them but it isn't for me? Sure some of them have medical bills and children but I was still surprised that it was such a big deal to so many people.
- silversconfused 7y agoMy first job after moving out paid weekly, my second job paid monthly, my subsequent jobs have all paid twice monthly. I learned a LOT about managing spending in that first year or two. Changing when you are paid changes everything when you are paycheck to paycheck, UNLESS you comfortably have a month of savings in the bank. (For anyone in this situation, I learned to first pay your bills, put some money in savings, THEN buy your food and gas and stuff you can technically do without or have the option to choose cheaper alternatives. You can always remove money from savings, but never do it for something that you don't need to survive.)
- kangnkodos 7y agoHere is a detailed list of the missing $103.5 K, from another article with more details on this couple: Childcare (Two Children)- $42K Food for four (includes date night every two weeks) - $23K Home Maintenance - $5K Property Insurance $2.5K Gas - $5K Car insurance - $2K Life Insurance ($3 million term) $2.5K Clothes for four people (no fancy bags, shoes or threads) $9.5K Childrens Lessons (sports, piano, violin, academics) $12K Total - $103.5 K https://www.financialsamurai.com/scraping-by-on-500000-a-year-high-income-earners-struggling/ https://www.financialsamurai.com/scraping-by-on-500000-a-yea...
- RyanCavanaugh 7y agoIt's instructive to take the "What's left over" amount ($7,300) and add back all the things which are actually savings (401k, ~half of the mortgage, student loans): $47,600. This couple has a national household median income (pre-tax!) worth of money left over after their already ridiculous expenditures. They should just stick the $7,300 into an "Other savings" line item and proclaim themselves to be living literally paycheck-to-paycheck.
- Konnstann 7y agoI can't say anything for most of those but clothes for 4 people should not come out to 10k a year, especially since they said nothing fancy. Even buying high-quality name brand clothing, how do you go through enough in a year to need to buy more? All of the >$20 clothes I have have lasted years, and will continue to be usable for the next few. I would be surprised if most of them don't get donated, in close to perfect condition. I get that they have kids and so must buy new clothes more often, but if you buy designer brands for your kid that's the problem.
- dagw 7y agoespecially since they said nothing fancy Fancy is relative. A lot of people would consider a $1k suit as a cheap baseline suit.
- throwaway0516 7y agoWe make a little over $500K and I would not say we are struggling day to day, but we won't have so much saved as people expect. We lead a modest life (live in an apt, drive a compact) and live in SV. Monthly House rent is $3000, Kids schools is $2400, kids activities is $2000, groceries and eating out is $1500, travel expenses averaged is $1000, misc expenses (gas,utils,shopping,car maint) is $2000. We do not have any debt. We pay over $160k in federal/state income taxes and save $38k in 401k, $15k in 529 accounts annually. Most of these expenses are regular day to day expenses we can't cut down on to save more.
- bluGill 7y agoKids school could be zero if you would go to public school. You can eat out less and eat cheaper food at home cutting the grocery bill by a lot. You don't have to travel. Your misc expenses seem high as well, you could buy an older reliable car (some cars are much cheaper to maintain than others). You could probably get a cheaper house. You don't WANT to do those things - I don't blame you - but that doesn't mean you can't.
- silversconfused 7y ago3000/m on 500/y is extremely inexpensive. They will not find cheaper for 4 people without driving up transportation costs and killing leisure time. They probably have an affordable car, as compacts tend not to be "luxury" cars with many bells and whistles to maintain. Tuition, well, you pay for what's important to you, and obviously they would rather dump this into the kids than saving. Hardly worth criticizing as excess. Groceries and eating out are not going to get cheaper. They are already less than $10 per day per person. Again, one couldn't call that excessive.
- imtringued 7y ago$3000 monthly is less than 10% of the household income so I don't see how that could ever be considered frivolous.
- throwaway0516 7y ago
- goldcd 7y agoI can genuinely see that anybody could 'struggle' anywhere, once you consider living costs and the miscellaneous monthly payments adult life insidiously inflicts upon you. Whilst income gradually rises, your corresponding monthly outgoings seem OK - until the income dries up (I've just watched the excellent NoClip documentary on the implosion of Telltale games in Marin County). What I never quite grasp is why "Silicon Valley" job is still seen as a premium, rather than a massive risk. The sole benefit I can see is that you can flit between jobs and build up your income - but as your income goes up, so does your expenditure/exposure. I know there are other 'hubs' emerging that are cheaper - but they always seem to be 'emerging' Is the issue the 'gambler's-dilemma' or are you on average better off in Silicon Valley or what?