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$40K is more than the median personal income in the U.S ($35K as of 2019). Plenty of people would consider $40K/year without having to work wealthy. Even in V

$40K is more than the median personal income in the U.S ($35K as of 2019). Plenty of people would consider $40K/year without having to work wealthy. Even in VHCOL areas, $40K/year is fine if you own your own home and your kids are out of childcare years. VHCOL areas are typically VHCOL because of housing prices and their effect on service-provider wagss. If you take them out of the equation and only need to pay for food, gas, entertainment, utilities, insurance, and depreciation on your car, $40K/year (= $3.3K/month) is plenty.

gnicholas 5y ago
> Even in VHCOL areas, $40K/year is fine if you own your own home and your kids are out of childcare years. Are you considering "childcare years" to include college? Also, in CA/IL/NJ you could easily spend $15k/yr in property taxes alone. That would leave $25k for everything else. Lastly, the average price of a new car sold in the US is $40k. You can buy used, sure, but these days even those are getting more expensive.
- PaulDavisThe1st 5y ago
  So fine, US$40k/yr isn't comfortable living in some places. But it's very comfortable living (given the lack of any need to do paid work) in many others. Context is everything. If you really must live in an expensive part of the USA, then $1M in the bank is not going to cut it.
- nostrademons 5y ago
  "Are you considering "childcare years" to include college?" Somewhat. Personally I think college will be obsolete by the time kids today reach college age. It was a bubble in the early 2000s when I graduated (a significant number of my classmates did not get jobs that make back the debt they took out for it), it's certainly a bubble now, and I think the bubble will have burst in 18 years and people will realize that it's stupid to go to college. But even if you don't believe quite so extreme predictions - the advantage of thinking in balance-sheet terms is that you set aside funds for these expenses and let them compound until you need it. I just ran a NPV calculation on 4 years of college @ $37K/year starting in 18 years with a 7% discount rate, and it's about $40K. [Note that the effect of inflation on this applies to both college tuition and the discount rate; 7% is average real (after inflation) returns to stocks, but if college tuition rises faster than inflation (say an extra 3%, which is consistent with the last 2 decades), you'd subtract that from the discount rate, and the number comes out to about $70K.] So you'd set aside an extra $40K per child when you retire, target $1.08M instead of $1M, and then you have your kids' college funds. "Also, in CA/IL/NJ you could easily spend $15k/yr in property taxes alone." Yup property taxes in VHCOL areas are a big issue. The math still works out though - if you take the budget yupper32 posted down-thread and subtract out taxes and rent, you're spending $1570/month on necessities and have about $1800/month for everything else, more than enough for property taxes. Or just don't live in CA/IL/NJ. "Lastly, the average price of a new car sold in the US is $40k." Amortized over 10 years, that's $4K/year or about $333/month, probably a little less because of time-valued discounting. That's already in the budget below - they list $300/month as car payment.

gnicholas 5y ago

> Even in VHCOL areas, $40K/year is fine if you own your own home and your kids are out of childcare years. Are you considering "childcare years" to include college? Also, in CA/IL/NJ you could easily spend $15k/yr in property taxes alone. That would leave $25k for everything else. Lastly, the average price of a new car sold in the US is $40k. You can buy used, sure, but these days even those are getting more expensive.

PaulDavisThe1st 5y ago
So fine, US$40k/yr isn't comfortable living in some places. But it's very comfortable living (given the lack of any need to do paid work) in many others. Context is everything. If you really must live in an expensive part of the USA, then $1M in the bank is not going to cut it.
nostrademons 5y ago
"Are you considering "childcare years" to include college?" Somewhat. Personally I think college will be obsolete by the time kids today reach college age. It was a bubble in the early 2000s when I graduated (a significant number of my classmates did not get jobs that make back the debt they took out for it), it's certainly a bubble now, and I think the bubble will have burst in 18 years and people will realize that it's stupid to go to college. But even if you don't believe quite so extreme predictions - the advantage of thinking in balance-sheet terms is that you set aside funds for these expenses and let them compound until you need it. I just ran a NPV calculation on 4 years of college @ $37K/year starting in 18 years with a 7% discount rate, and it's about $40K. [Note that the effect of inflation on this applies to both college tuition and the discount rate; 7% is average real (after inflation) returns to stocks, but if college tuition rises faster than inflation (say an extra 3%, which is consistent with the last 2 decades), you'd subtract that from the discount rate, and the number comes out to about $70K.] So you'd set aside an extra $40K per child when you retire, target $1.08M instead of $1M, and then you have your kids' college funds. "Also, in CA/IL/NJ you could easily spend $15k/yr in property taxes alone." Yup property taxes in VHCOL areas are a big issue. The math still works out though - if you take the budget yupper32 posted down-thread and subtract out taxes and rent, you're spending $1570/month on necessities and have about $1800/month for everything else, more than enough for property taxes. Or just don't live in CA/IL/NJ. "Lastly, the average price of a new car sold in the US is $40k." Amortized over 10 years, that's $4K/year or about $333/month, probably a little less because of time-valued discounting. That's already in the budget below - they list $300/month as car payment.