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> Even among those earning six figures, 42% said they were living paycheck to paycheck, the survey of more than 3,000 adults found. I know there are areas with

> Even among those earning six figures, 42% said they were living paycheck to paycheck, the survey of more than 3,000 adults found. I know there are areas with extremely HCOL, inflation, housing crisis... However, sometimes I do wonder though what some people's budgets are like that they are literally unable to save any money (paycheck to paycheck) making >$100k. Do we know what part lack of financial literacy or simply "living above one's means" play here in the grand scheme of things?

s1artibartfast 5y ago
Taxes are also a big factor. Depending on your location, you could see 35-40% of that 100k disappear in taxes, and anther 40% for hosing in high cost of living areas and you are looking at 20k per year residual location.
- amrocha 5y ago
  Nowhere in the US has a marginal tax rate of 40% let alone actual rate at 100K. I'm also very suspicious that it would cost 40K per year to rent a reasonable place for 1 or 2 people anywhere in the US except maybe SF
  - s1artibartfast 5y ago
    I pay 35% actual rate between California and Federal taxes. IF I were self employed OSADI tax would add another 6.2%. ...... EXAMPLE: 120k income breakdown: Federal actual rate 16.5% (24% marginal) CA State actual rate 6.4% (9.3% marginal) Medicare rate 2.9% OSDI rate 12.4 % CA SDI rate 1.0% = 39% right there
    - amrocha 5y ago
      Oh wow, I didn't know freelancers have a higher tax burden, thanks for the heads up!
  - s1artibartfast 5y ago
    >Nowhere in the US has a marginal tax rate of 40% let alone actual rate at 100K. PS the highest marginal tax rate in the US is 50.3%. Federal rate of 37% and California rate of 13.3%.
    - amrocha 5y ago
      Ah my bad, looks like I had the wrong numbers
      - s1artibartfast 5y ago
        Thanks for the acknowledgement. I think tax burden is a valid part of the discussion when we are talking about the affordability crisis. I take it kinda personally because I'm already at 35% and looking at another 10% of my pretax income going to property taxes if I want to buy a home for my family.
        amrocha 5y ago
        It is odd that middle class income taxes are so high, and yet government services are awful, infrastructure is crumbling and you don't even get healthcare. I still don't think there's an affordability crisis in general though. From what I've seen in this thread it's more of an inability to downsize. Everyone needs a car (sometimes 2), a big house, to live in the most expensive cities, to have kids, and they'd rather go into debt than compromise.
        s1artibartfast 5y ago
        Yeah, you can look at it that way. It depends on your starting position economically. There bottom steps on the economic ladder are missing. Cheap entry level homes near economic centers or good paying jobs in low cost of living areas are both missing. The working poor have tax breaks and see some public benefits, high earners have good tax breaks and no benefits.
        5y ago
brimble 5y ago
Not saying it's the main reason, but if you have to pay for your own health insurance, and you have a family, that can eat up a whole lot of even a low-six-figures household income. Then there's the cost if you actually need to use any healthcare.... Actually, even if your insurance is employer provided but you still have to pay a significant percentage of the premium, that can be a problem. $12+k/yr on top of what the employer's paying isn't uncommon. Most employers aren't as generous as FAANG and such. Doubt that's the case for most, but it's one way for that to happen. (I'd expect that poor spending choices are the main reason.) [EDIT] Oh, childcare. It can easily be the case that your household income is $120,000 but $25,000 of it goes to childcare—but your household income would be $80,000 without the childcare, so you're still coming out ahead.
speeder 5y ago
I am not in US, but I lived paycheck to paycheck some time ago when I was already in the top 5% earners of my country. The reason for it: 1. Chronic Health issues that are fairly expensive to treat, coupled with the fact I am too wealthy to get government help (this actually was my biggest money sink). 2. Renting in a place "near enough" of my workplace. (still wasn't that near, and the place was tiny, when I moved out a lot of furniture fit inside a hatchback car). 3. Constant inflation + health issues I mentioned before that require me have a diet of items that are more expensive. (I can't live off ramen...). 4. Thankfully this part is over, but some years ago there was the student debts too, at one point I had to pay to service my debt literally half of all my earnings, and had to pay food and rent with the other half.
- giantg2 5y ago
  I agree for the general population. But shouldn't a job paying 6 figures have decent insurance? I have two dependents with major health issues, hitting out of pocket max every year. Still I am able to save for retirement and not live paycheck to paycheck. I do not earn 6 figures.
  - ChuckNorris89 5y ago
    >But shouldn't a job paying 6 figures have decent insurance? Parent said he/she isn't from the US where this would be the norm. Here in the EU (Austria), in most cases you get no extra private insurance even with a high salary, just your public one, which in some cases may not be enough, especially if you optimize for quality doctors/therapists with short waiting times, which are all private, so you end up having to dig into your savings if you care about your health (who doesn't?). Still, at least even the poor and unemployed have access to half decent healthcare without going bankrupt so there's at least one silver lining.
    - giantg2 5y ago
      That's fair. I guess the interesting part is that many of the people in the US want public healthcare and generally think that the international examples cover everything.
colechristensen 5y ago
There’s a difference between “unable” and “not doing”. I’ve been in this position from time to time, and it always came down to making expensive choices or recovering from an unexpected necessary large expense. I might have a few financial regrets but when it comes down to it, spending as much as I made was always just a choice I could have changed at any time.
- MomoXenosaga 5y ago
  There are those people who win the lottery and spend it all on expensive women and cars. Or football players who end up broke. I have very little empathy for people making 6 figures though.
  - JAlexoid 5y ago
    US government often doesn't recognize your family member as a dependent, so you get taxed a lot and you still get to support your family members that completely depend on you. So your FAANG $200k salary in CA will yield $120k in cashflow(no 401K or medical), and if you have two parents to support - you're screwed by the government and your real income is shared between 3 people. I mean.... I literally cannot get my mother to be my dependent, even though I fully financially support her.
mschuster91 5y ago
> Do we know what part lack of financial literacy or simply "living above one's means" play here in the grand scheme of things? Well, if your job is somewhere in an extremely HCOL area, you only have two options: rent (or buy) somewhere extremely expensive, or rent/buy for slightly less and spend a boatload of money on transportation. A large part of the H part in HCOL is, by the way, that banks and other investors (both domestic and, worse, foreign) have been scooping up rental real estate for way over a decade now - it began after the "fire sales" of the 2008ff crisis and now hit record highs in 2022 [1]. If politicians want to combat the poverty crisis, getting rents and real estate prices under control is one of the most important things. As for "financial literacy" - no amount of that can help you if you get sick or, worse, if you depend with your life on epi-pens or insulin. Both saw exploding prices over the last decade. [1]: https://news.ycombinator.com/item?id=30374372 https://news.ycombinator.com/item?id=30374372
giraffe_lady 5y ago
I'm the only one from my immediate family that 'escaped' the poverty so about half of my gross income goes for healthcare and living expenses for my parents and sometimes siblings depending. I won't be taking questions or entertaining discussions about the appropriateness of this arrangement. But it's not that rare and it's why I don't meaningfully save.
- kingaillas 5y ago
  I don't see a problem with this... I can't imagine not taking care of your family.
  - JAlexoid 5y ago
    Considering that per adult only about 10% of US households earn more than $100k, there's a lot of people who support their families. I literally fully pay for everything for my mother, she's a breast cancer survivor - that's a lot of $$$ for a household of mid 6 figure income.
- Mezzie 5y ago
  I'm a person with MS who is the sole breadwinner for myself and my sister, who has bipolar that prevents her from holding down a job. I also come from poverty. Two people with chronic, lifelong health conditions and a lack of safety nets do mean our savings are much less robust than I would prefer. What we are doing is good and part of a human desire to care for our social group.
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ProAm 5y ago
People I know who are earning 6 figures state three things: 1) student loans, 2) housing and 3) health care. (most of these people are single income, dual income house holds can afford a 3000k mortgage or rent easily if its divided) ...a dark horse has recently entered the race and that being inflation which will pressure everything else.
- kbelder 5y ago
  Do you mean a $3,000 per month mortgage, a $3,000,000 total mortgage, or something else there?
  - ProAm 5y ago
    $3,000 a month mortgage. Just the fact that an insane mortgage is affordable for a dual income house hold so much easier than a single.
adriand 5y ago
I totally agree with others that costs for childcare and healthcare can easily eat into even large incomes. And for anyone who is making less than six figures and has a family, yes, you have to manage your finances pretty carefully. However, for many other people, I think a huge part of the problem is consumerism coupled with borrowing. If you are able to be content with what you have or even to downsize, it is much easier to get ahead. And if you avoid all debt except a mortgage, your income will go a lot farther. People often think about debt as though it is only the interest that matters. But you still need to pay off the principal, if you ever want to be free of it. A $10k credit card debt that you can only apply $500 to per month lingers for a long time.
- milkytron 5y ago
  > However, for many other people, I think a huge part of the problem is consumerism coupled with borrowing. I think this is a large part of the problem as well. I see so many people taking out large and lengthy auto loans on a new car as soon as they graduate college.
time_to_smile 5y ago
What I find funny about comments like these is that there is clearly a subtle criticism of the very behavior that ultimately pays many of our salaries. People are encouraged to over spend at ever instance of their life. You go to buy a house, the mortgage company will try to get you spend to the limit of your ability. Every service out there today offers 0% loans to encourage consumer spending so that you can live outside of our means. People are blasted with ads each day encouraging them buy more and more. It's easy to criticize and make some moral argument about spending, but most of us spend a huge amount of our brain power trying to get people to do more of these things and are paid well for it. Nearly my whole career I've worked in some part of the marketing world, and when I haven't I worked in e-commerce. Every penny I've made has been trying to get people to spend more and buy more. I worked for a startup that ran ads encouraging people to buy our product rather than have any saving at all. In all my career the concept of "hey what if this leads consumers to an unhealthy spending habits" would be laughed out of the room if brought up. Now maybe you are one of the few that work in tech and don't either directly attempt to suck money from consumers or spend your day helping other companies doing that, but for the bulk of us it's ridiculous to wave your finger at the spending habits that we, directly or indirectly, work hard every day to encourage.
- barbazoo 5y ago
  I tried really hard not to come over as critical. I'm genuinely curious as someone that doesn't live in the US and is financially rather conservative. It wasn't meant as a value judgement at all.
  - time_to_smile 5y ago
    apologies for assuming such then. I probably should take a bit of a break from HN
harpersealtako 5y ago
A charitable way of framing it would be "Up to 42% of Americans making 6 figures are so confident in the job market, the economy, etc. that they don't even bother saving money at all because they're confident they can handle an unexpected expense through other means than paying for it with cash savings." I think the 61% stat is kind of so broad as to be useless. A better way of understanding the issue is by breaking down how Americans claim to be able to deal with an unexpected expense [0]. [0]: https://www.federalreserve.gov/publications/2021-economic-well-being-of-us-households-in-2020-dealing-with-unexpected-expenses.htm https://www.federalreserve.gov/publications/2021-economic-we...
dogman144 5y ago
Have you lived in NYC or SF? Yes, it's doable for nearly everyone to stash some amount of money away, sub-$1k or whatever. However, if you're in the zone b/t $100k/yr and say $250k/yr, it's entirely possible to have your act together financially, and not be able to save a relevant amount due to the cost of basically existing, responsible student loans and a simple social life. The amount of money you're able to save vs the general cost of living means that your small savings is basically meaningless if something happens. A normal lifestyle can turn into being the walking dead financially. You make a lot on paper, but one wrong event knocks you out. This is why '08 was especially ugly for NYC finance types, despite being firmly upper middle class.
- Hermitian909 5y ago
  This doesn't quite jive with my experience living in SF. I have an older but comfortable apartment close to BART and an active social life (had lol). Pre-pandemic my CoL was ~40k. I'm fortunate to be on the higher end of dev salaries so I don't need to spend this little but living a life I enjoy this is just how much I end up spending. I have friends and colleagues whose experience matches yours, some have come to me for help with their finances. I've found it fairly easy to slash 30-40k/yr from their budgets by simply forcing them to think about which things they're spending money on actually add happiness or utility to their life.
  - dogman144 5y ago
    Do you have kids, do you have a dual income couple, and so on.
    - Hermitian909 5y ago
      No kids, no dual income. I recognize these costs are not representative if they have a child but OP didn't seem to imply those were the considerations.
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vmception 5y ago
Got to nurse those investments, if any
annoyingnoob 5y ago
Taxes, healthcare, housing, nothing left. To get average to below average healthcare for my family of 5, I pay around $24k/year for coverage before I've paid any deductible (and the deductibles are all over $10K each). Housing cost is the same (considering deductibles) or more. Taxes take 20-something percent right of the top. How many 25+% hits can one take and have anything left? With what is left we have to have utilities, food, clothing, etc. There isn't much left at the end of the month, most of what is left goes into retirement accounts that I cannot touch for many years.
runako 5y ago
This is easy, assuming an average American family size: - $8,333 gross ($100k) - call taxes 25% (this is aggressive) leaves $6,667 - housing expense of $2k leaves $4,667 - minus 2 auto expenses (used car average payment is $465) brings us to ~$3,400 - childcare (which: is not free even when your kids are in school) of $1,500 yields $1,900 - frugally feeds the family on $1,000 per month - $900 remaining for everything else. This includes all the one-off incidentals (car tires, physician co-pays, etc.). The astute reader will have noticed that I was generous in my tax, housing and childcare estimates. The more astute reader will note that I have omitted student loans, any healthcare or dental expense, vacations, etc. This is obviously not an estimate for a HCOL area, this is what the math looks like in much of the country. Edit: _The Two-Income Trap_ is a good read on this. IIRC it points out that most of the big costs are fixed, where financial gurus often tell people to cut the variable expenses (cut down on avocado toast, or make coffee at home). When obviously tweaking inside the $900 left over won't fix this budget no matter what. Also worth noting that even if they could halve their housing expense, they still would only be in a position to put away $12k annually. Which, given what we know about unexpected expenses, would probably put them right at actual break-even and prevent them from taking on consumer debt.
- bdcravens 5y ago
  A large part of what's left over probably goes to service consumer debt, as the average American carries about $6k in credit card debt. Paying for yesterday's stuff makes it hard to save for tomorrow.
  - runako 5y ago
    The hypothetical family I described above would easily end up with $6k of credit card debt after a few years on that budget, simply because $900/mo is not enough to cover all the remaining expenses and therefore they will need to tap a loan at some point. A single auto wreck, temporary job loss, physician visit, etc. can create long-term financial problems for this family because they don't have an extra $3k or whatever to cover a short-term expense. (I take an agnostic point of view on the debt itself. The alternatives to not having some kind of financial cushion -- even burdensome consumer debt -- are often worse. Think: "can't get to work because the car is dead and I don't have an extra $750 so now I lose my job and then my housing" as the realistic alternative. The real problem is compensation has not paced inflation for 2 generations, and that the $100k family should be earning much more for the same jobs.)
subsubzero 5y ago
With the rise of social media, people feel the need to flaunt things(cars, houses, vacations, jewelry, you name it). Both me and my Wife are making extremely good tech money, shes a director and I am senior+ engineer. And I feel like everyone is living a lifestyle even we cannot afford. We drive Japanese cars (mid level) a few years old. Bought a very sensible house with a payment that if something happened to one of us the other could handle living expenses and not lose the place. We go on somewhat normal vacations, hawaii being an outlier, typically mountain areas in the US and stay at airbnbs and don't wear designer clothes, just t-shirts and jeans etc. Most of our neighbors(and families in our kids school) drive tesla's and other luxury cars or brand new non-luxury cars, they always have brand new clothes and iphones and a few have rolex watches or other high end brands. I do feel like maybe its a southern california thing to live extravagantly but I suspect most are living way beyond their means and if a partner would lose their job things would drastically change for them overnight.
- siddarthd2919 5y ago
  We are in a similar situation and I have come to the conclusion, there is a money tree giving people free money that I am not aware of :)
  - strikelaserclaw 5y ago
    some people are genuinely rich, but America is a debt based country so without looking at peoples finances you can't really tell much about how rich they really are vs them being able to afford monthly down payments.
- sdoering 5y ago
  I can relate. I mean I am in Germany. Living and working here. Last year with my job and freelance on the side I did absolutely not make 6 figures. We have our house we bought 12 years ago and renovated for 8 years. My SO left her job 3 years ago to study again and in essence doesn't make money. So for the time being it is me. But we value great local organic food and produce and that next to our mortgage is by far the biggest part of our spending. We still put money on the side, but maybe because while we like to spend money (even just for fun) we don't overindulge. Maybe because we are not as social so that we do not compare and because our values are not in line with spending money to be walking advertisement carriers. Not sure but when I hear of people in the US with 250k+ living paycheck to paycheck I wonder how that is possible. On the other hand I know people where both make 125 - 150k in Germany and also are living paycheck to paycheck. So maybe I just can't imagine how this works because living in such a way is something too far from my experience.
JAlexoid 5y ago
There are things like debt, obligations, extended family, etc... We're a double income no kids couple.... We haven't saved much money living in NYC, with our parents needing financial assistance and residual debts. Dietary constraints also make it much more expensive to live in US.(celiac and lactose intolerance add to costs) So it's not unfathomable.
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sjg007 5y ago
Just to put things into perspective for you: a family of 4 making up to $140k qualifies for affordable housing in San Mateo County. That's about $7.7k a month after tax. Now factor in some variable combination of: 1. Rent (3-4k for a 2bdrm or larger) 2. Student Loans 3. Debt 4. Childcare (daycare) ($2-3k) 5. Health care This excludes 401k contributions, saving for a financial buffer, any type of car or commuting expense.
chadash 5y ago
A lot of people on HN don't have families, so let me illustrate some costs. Let's say you are a married couple with 2 young kids and you make a combined $150,000k and you live in Boston. Federal tax: ~26k State tax: ~7.5k Work covers 20% of health insurance premium, leaving you with 20%: ~4k OK, now we are at $112,500 take home pay. 2 BR apartment accessible to public transit in Boston and in a safe neighborhood, let's say $3000/month + $250 utilities = 39,000. (you are probably not getting a particularly lavish apartment at this price point). Now you have $73,500 left. Daycare for two kids from 8 - 5:30: $15k x 2 = 30k $43,500 left. Throw in a reasonable life insurance policy, car + insurance payments for a modest car (kind of necessary if you live in Boston and have kids, unless you spend more to live in the kind of neighborhood where you don't need a car), modest medical and dental care out of pocket costs, basic kids clothing, basic clothing for you, diapers, and groceries and you are already eating pretty substantially into what you have left. Pretty much everything above is stuff that you need to spend in order to live reasonably comfortably (by US standards). Let's say after all of that you have 30k left. So you have 30k that you can spend on quality of life improvements, entertainment, travel, etc. You can hopefully save some of the money too, but if you are hoping to save towards a down payment on a house in the boston area, you're really not going to be living a lavish lifestyle on that kind of money either.
- ska 5y ago
  The hand waving of 43.5 to 30k is probably being unrealistically conservative. Probably closer to 20 than 30.
  - chadash 5y ago
    Oh, absolutely. All these numbers are pretty conservative. Real life is full of situations like cars breaking, HVAC systems getting too old to repair and daycare closing down for a week and now I need to fly grandpa in with a day's notice to cover for me so that I can go to work. My point is that HN is full of young people without families who can't imagine how other people aren't saving money. Meanwhile, the cost of raising two or three kids in a high cost of living area would buy a single person a lifestyle that most people would agree is pretty lavish.
giantrobot 5y ago
In the Bay Area making "six figures" under $200k isn't as much as it seems on paper. Taxes and pre-tax deductions (insurance premiums etc) easily eat a third of your bi-weekly check. Unless you've got a half dozen roommates rent will easily eat a whole bi-weekly paycheck. The other check goes to a car payment (essentially required in the South and East bay), insurance for same, at least a cellular plan if that and a residential broadband plan, utilities and other monthly bills, and then food for the month. Because rent is always due at a particular time of the month people need to use whatever cash buffer they have to cover expenses until their next check. So there's people living "paycheck to paycheck" that do have a non-zero amount of dollars in the bank but that buffer is constantly being drained and refreshed paying all the non-rent bills. If they don't have a cash buffer then they need to use credit cards which have fees and interest that obviate any savings margins. There's a wide dynamic range in the "six figures" category of salaries. In HCOL areas it takes a pretty high "six figures" salary to get over the "paycheck to paycheck" living.

s1artibartfast 5y ago

Taxes are also a big factor. Depending on your location, you could see 35-40% of that 100k disappear in taxes, and anther 40% for hosing in high cost of living areas and you are looking at 20k per year residual location.

amrocha 5y ago
Nowhere in the US has a marginal tax rate of 40% let alone actual rate at 100K. I'm also very suspicious that it would cost 40K per year to rent a reasonable place for 1 or 2 people anywhere in the US except maybe SF
- s1artibartfast 5y ago
  I pay 35% actual rate between California and Federal taxes. IF I were self employed OSADI tax would add another 6.2%. ...... EXAMPLE: 120k income breakdown: Federal actual rate 16.5% (24% marginal) CA State actual rate 6.4% (9.3% marginal) Medicare rate 2.9% OSDI rate 12.4 % CA SDI rate 1.0% = 39% right there
  - amrocha 5y ago
    Oh wow, I didn't know freelancers have a higher tax burden, thanks for the heads up!
- s1artibartfast 5y ago
  >Nowhere in the US has a marginal tax rate of 40% let alone actual rate at 100K. PS the highest marginal tax rate in the US is 50.3%. Federal rate of 37% and California rate of 13.3%.
  - amrocha 5y ago
    Ah my bad, looks like I had the wrong numbers
    - s1artibartfast 5y ago
      Thanks for the acknowledgement. I think tax burden is a valid part of the discussion when we are talking about the affordability crisis. I take it kinda personally because I'm already at 35% and looking at another 10% of my pretax income going to property taxes if I want to buy a home for my family.
      - amrocha 5y ago
        It is odd that middle class income taxes are so high, and yet government services are awful, infrastructure is crumbling and you don't even get healthcare. I still don't think there's an affordability crisis in general though. From what I've seen in this thread it's more of an inability to downsize. Everyone needs a car (sometimes 2), a big house, to live in the most expensive cities, to have kids, and they'd rather go into debt than compromise.
        s1artibartfast 5y ago
        Yeah, you can look at it that way. It depends on your starting position economically. There bottom steps on the economic ladder are missing. Cheap entry level homes near economic centers or good paying jobs in low cost of living areas are both missing. The working poor have tax breaks and see some public benefits, high earners have good tax breaks and no benefits.
        5y ago

brimble 5y ago

Not saying it's the main reason, but if you have to pay for your own health insurance, and you have a family, that can eat up a whole lot of even a low-six-figures household income. Then there's the cost if you actually need to use any healthcare.... Actually, even if your insurance is employer provided but you still have to pay a significant percentage of the premium, that can be a problem. $12+k/yr on top of what the employer's paying isn't uncommon. Most employers aren't as generous as FAANG and such. Doubt that's the case for most, but it's one way for that to happen. (I'd expect that poor spending choices are the main reason.) [EDIT] Oh, childcare. It can easily be the case that your household income is $120,000 but $25,000 of it goes to childcare—but your household income would be $80,000 without the childcare, so you're still coming out ahead.

speeder 5y ago

I am not in US, but I lived paycheck to paycheck some time ago when I was already in the top 5% earners of my country. The reason for it: 1. Chronic Health issues that are fairly expensive to treat, coupled with the fact I am too wealthy to get government help (this actually was my biggest money sink). 2. Renting in a place "near enough" of my workplace. (still wasn't that near, and the place was tiny, when I moved out a lot of furniture fit inside a hatchback car). 3. Constant inflation + health issues I mentioned before that require me have a diet of items that are more expensive. (I can't live off ramen...). 4. Thankfully this part is over, but some years ago there was the student debts too, at one point I had to pay to service my debt literally half of all my earnings, and had to pay food and rent with the other half.

giantg2 5y ago
I agree for the general population. But shouldn't a job paying 6 figures have decent insurance? I have two dependents with major health issues, hitting out of pocket max every year. Still I am able to save for retirement and not live paycheck to paycheck. I do not earn 6 figures.
- ChuckNorris89 5y ago
  >But shouldn't a job paying 6 figures have decent insurance? Parent said he/she isn't from the US where this would be the norm. Here in the EU (Austria), in most cases you get no extra private insurance even with a high salary, just your public one, which in some cases may not be enough, especially if you optimize for quality doctors/therapists with short waiting times, which are all private, so you end up having to dig into your savings if you care about your health (who doesn't?). Still, at least even the poor and unemployed have access to half decent healthcare without going bankrupt so there's at least one silver lining.
  - giantg2 5y ago
    That's fair. I guess the interesting part is that many of the people in the US want public healthcare and generally think that the international examples cover everything.

colechristensen 5y ago

There’s a difference between “unable” and “not doing”. I’ve been in this position from time to time, and it always came down to making expensive choices or recovering from an unexpected necessary large expense. I might have a few financial regrets but when it comes down to it, spending as much as I made was always just a choice I could have changed at any time.

MomoXenosaga 5y ago
There are those people who win the lottery and spend it all on expensive women and cars. Or football players who end up broke. I have very little empathy for people making 6 figures though.
- JAlexoid 5y ago
  US government often doesn't recognize your family member as a dependent, so you get taxed a lot and you still get to support your family members that completely depend on you. So your FAANG $200k salary in CA will yield $120k in cashflow(no 401K or medical), and if you have two parents to support - you're screwed by the government and your real income is shared between 3 people. I mean.... I literally cannot get my mother to be my dependent, even though I fully financially support her.

mschuster91 5y ago

> Do we know what part lack of financial literacy or simply "living above one's means" play here in the grand scheme of things? Well, if your job is somewhere in an extremely HCOL area, you only have two options: rent (or buy) somewhere extremely expensive, or rent/buy for slightly less and spend a boatload of money on transportation. A large part of the H part in HCOL is, by the way, that banks and other investors (both domestic and, worse, foreign) have been scooping up rental real estate for way over a decade now - it began after the "fire sales" of the 2008ff crisis and now hit record highs in 2022 [1]. If politicians want to combat the poverty crisis, getting rents and real estate prices under control is one of the most important things. As for "financial literacy" - no amount of that can help you if you get sick or, worse, if you depend with your life on epi-pens or insulin. Both saw exploding prices over the last decade. [1]: https://news.ycombinator.com/item?id=30374372 https://news.ycombinator.com/item?id=30374372

giraffe_lady 5y ago

I'm the only one from my immediate family that 'escaped' the poverty so about half of my gross income goes for healthcare and living expenses for my parents and sometimes siblings depending. I won't be taking questions or entertaining discussions about the appropriateness of this arrangement. But it's not that rare and it's why I don't meaningfully save.

kingaillas 5y ago
I don't see a problem with this... I can't imagine not taking care of your family.
- JAlexoid 5y ago
  Considering that per adult only about 10% of US households earn more than $100k, there's a lot of people who support their families. I literally fully pay for everything for my mother, she's a breast cancer survivor - that's a lot of $$$ for a household of mid 6 figure income.
Mezzie 5y ago
I'm a person with MS who is the sole breadwinner for myself and my sister, who has bipolar that prevents her from holding down a job. I also come from poverty. Two people with chronic, lifelong health conditions and a lack of safety nets do mean our savings are much less robust than I would prefer. What we are doing is good and part of a human desire to care for our social group.

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ProAm 5y ago

People I know who are earning 6 figures state three things: 1) student loans, 2) housing and 3) health care. (most of these people are single income, dual income house holds can afford a 3000k mortgage or rent easily if its divided) ...a dark horse has recently entered the race and that being inflation which will pressure everything else.

kbelder 5y ago
Do you mean a $3,000 per month mortgage, a $3,000,000 total mortgage, or something else there?
- ProAm 5y ago
  $3,000 a month mortgage. Just the fact that an insane mortgage is affordable for a dual income house hold so much easier than a single.

adriand 5y ago

I totally agree with others that costs for childcare and healthcare can easily eat into even large incomes. And for anyone who is making less than six figures and has a family, yes, you have to manage your finances pretty carefully. However, for many other people, I think a huge part of the problem is consumerism coupled with borrowing. If you are able to be content with what you have or even to downsize, it is much easier to get ahead. And if you avoid all debt except a mortgage, your income will go a lot farther. People often think about debt as though it is only the interest that matters. But you still need to pay off the principal, if you ever want to be free of it. A $10k credit card debt that you can only apply $500 to per month lingers for a long time.

milkytron 5y ago
> However, for many other people, I think a huge part of the problem is consumerism coupled with borrowing. I think this is a large part of the problem as well. I see so many people taking out large and lengthy auto loans on a new car as soon as they graduate college.

time_to_smile 5y ago

What I find funny about comments like these is that there is clearly a subtle criticism of the very behavior that ultimately pays many of our salaries. People are encouraged to over spend at ever instance of their life. You go to buy a house, the mortgage company will try to get you spend to the limit of your ability. Every service out there today offers 0% loans to encourage consumer spending so that you can live outside of our means. People are blasted with ads each day encouraging them buy more and more. It's easy to criticize and make some moral argument about spending, but most of us spend a huge amount of our brain power trying to get people to do more of these things and are paid well for it. Nearly my whole career I've worked in some part of the marketing world, and when I haven't I worked in e-commerce. Every penny I've made has been trying to get people to spend more and buy more. I worked for a startup that ran ads encouraging people to buy our product rather than have any saving at all. In all my career the concept of "hey what if this leads consumers to an unhealthy spending habits" would be laughed out of the room if brought up. Now maybe you are one of the few that work in tech and don't either directly attempt to suck money from consumers or spend your day helping other companies doing that, but for the bulk of us it's ridiculous to wave your finger at the spending habits that we, directly or indirectly, work hard every day to encourage.

barbazoo 5y ago
I tried really hard not to come over as critical. I'm genuinely curious as someone that doesn't live in the US and is financially rather conservative. It wasn't meant as a value judgement at all.
- time_to_smile 5y ago
  apologies for assuming such then. I probably should take a bit of a break from HN

harpersealtako 5y ago

A charitable way of framing it would be "Up to 42% of Americans making 6 figures are so confident in the job market, the economy, etc. that they don't even bother saving money at all because they're confident they can handle an unexpected expense through other means than paying for it with cash savings." I think the 61% stat is kind of so broad as to be useless. A better way of understanding the issue is by breaking down how Americans claim to be able to deal with an unexpected expense [0]. [0]: https://www.federalreserve.gov/publications/2021-economic-well-being-of-us-households-in-2020-dealing-with-unexpected-expenses.htm https://www.federalreserve.gov/publications/2021-economic-we...

dogman144 5y ago

Have you lived in NYC or SF? Yes, it's doable for nearly everyone to stash some amount of money away, sub-$1k or whatever. However, if you're in the zone b/t $100k/yr and say $250k/yr, it's entirely possible to have your act together financially, and not be able to save a relevant amount due to the cost of basically existing, responsible student loans and a simple social life. The amount of money you're able to save vs the general cost of living means that your small savings is basically meaningless if something happens. A normal lifestyle can turn into being the walking dead financially. You make a lot on paper, but one wrong event knocks you out. This is why '08 was especially ugly for NYC finance types, despite being firmly upper middle class.

Hermitian909 5y ago
This doesn't quite jive with my experience living in SF. I have an older but comfortable apartment close to BART and an active social life (had lol). Pre-pandemic my CoL was ~40k. I'm fortunate to be on the higher end of dev salaries so I don't need to spend this little but living a life I enjoy this is just how much I end up spending. I have friends and colleagues whose experience matches yours, some have come to me for help with their finances. I've found it fairly easy to slash 30-40k/yr from their budgets by simply forcing them to think about which things they're spending money on actually add happiness or utility to their life.
- dogman144 5y ago
  Do you have kids, do you have a dual income couple, and so on.
  - Hermitian909 5y ago
    No kids, no dual income. I recognize these costs are not representative if they have a child but OP didn't seem to imply those were the considerations.

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vmception 5y ago

Got to nurse those investments, if any

annoyingnoob 5y ago

Taxes, healthcare, housing, nothing left. To get average to below average healthcare for my family of 5, I pay around $24k/year for coverage before I've paid any deductible (and the deductibles are all over $10K each). Housing cost is the same (considering deductibles) or more. Taxes take 20-something percent right of the top. How many 25+% hits can one take and have anything left? With what is left we have to have utilities, food, clothing, etc. There isn't much left at the end of the month, most of what is left goes into retirement accounts that I cannot touch for many years.

runako 5y ago

This is easy, assuming an average American family size: - $8,333 gross ($100k) - call taxes 25% (this is aggressive) leaves $6,667 - housing expense of $2k leaves $4,667 - minus 2 auto expenses (used car average payment is $465) brings us to ~$3,400 - childcare (which: is not free even when your kids are in school) of $1,500 yields $1,900 - frugally feeds the family on $1,000 per month - $900 remaining for everything else. This includes all the one-off incidentals (car tires, physician co-pays, etc.). The astute reader will have noticed that I was generous in my tax, housing and childcare estimates. The more astute reader will note that I have omitted student loans, any healthcare or dental expense, vacations, etc. This is obviously not an estimate for a HCOL area, this is what the math looks like in much of the country. Edit: _The Two-Income Trap_ is a good read on this. IIRC it points out that most of the big costs are fixed, where financial gurus often tell people to cut the variable expenses (cut down on avocado toast, or make coffee at home). When obviously tweaking inside the $900 left over won't fix this budget no matter what. Also worth noting that even if they could halve their housing expense, they still would only be in a position to put away $12k annually. Which, given what we know about unexpected expenses, would probably put them right at actual break-even and prevent them from taking on consumer debt.

bdcravens 5y ago
A large part of what's left over probably goes to service consumer debt, as the average American carries about $6k in credit card debt. Paying for yesterday's stuff makes it hard to save for tomorrow.
- runako 5y ago
  The hypothetical family I described above would easily end up with $6k of credit card debt after a few years on that budget, simply because $900/mo is not enough to cover all the remaining expenses and therefore they will need to tap a loan at some point. A single auto wreck, temporary job loss, physician visit, etc. can create long-term financial problems for this family because they don't have an extra $3k or whatever to cover a short-term expense. (I take an agnostic point of view on the debt itself. The alternatives to not having some kind of financial cushion -- even burdensome consumer debt -- are often worse. Think: "can't get to work because the car is dead and I don't have an extra $750 so now I lose my job and then my housing" as the realistic alternative. The real problem is compensation has not paced inflation for 2 generations, and that the $100k family should be earning much more for the same jobs.)

subsubzero 5y ago

With the rise of social media, people feel the need to flaunt things(cars, houses, vacations, jewelry, you name it). Both me and my Wife are making extremely good tech money, shes a director and I am senior+ engineer. And I feel like everyone is living a lifestyle even we cannot afford. We drive Japanese cars (mid level) a few years old. Bought a very sensible house with a payment that if something happened to one of us the other could handle living expenses and not lose the place. We go on somewhat normal vacations, hawaii being an outlier, typically mountain areas in the US and stay at airbnbs and don't wear designer clothes, just t-shirts and jeans etc. Most of our neighbors(and families in our kids school) drive tesla's and other luxury cars or brand new non-luxury cars, they always have brand new clothes and iphones and a few have rolex watches or other high end brands. I do feel like maybe its a southern california thing to live extravagantly but I suspect most are living way beyond their means and if a partner would lose their job things would drastically change for them overnight.

siddarthd2919 5y ago
We are in a similar situation and I have come to the conclusion, there is a money tree giving people free money that I am not aware of :)
- strikelaserclaw 5y ago
  some people are genuinely rich, but America is a debt based country so without looking at peoples finances you can't really tell much about how rich they really are vs them being able to afford monthly down payments.
sdoering 5y ago
I can relate. I mean I am in Germany. Living and working here. Last year with my job and freelance on the side I did absolutely not make 6 figures. We have our house we bought 12 years ago and renovated for 8 years. My SO left her job 3 years ago to study again and in essence doesn't make money. So for the time being it is me. But we value great local organic food and produce and that next to our mortgage is by far the biggest part of our spending. We still put money on the side, but maybe because while we like to spend money (even just for fun) we don't overindulge. Maybe because we are not as social so that we do not compare and because our values are not in line with spending money to be walking advertisement carriers. Not sure but when I hear of people in the US with 250k+ living paycheck to paycheck I wonder how that is possible. On the other hand I know people where both make 125 - 150k in Germany and also are living paycheck to paycheck. So maybe I just can't imagine how this works because living in such a way is something too far from my experience.

JAlexoid 5y ago

There are things like debt, obligations, extended family, etc... We're a double income no kids couple.... We haven't saved much money living in NYC, with our parents needing financial assistance and residual debts. Dietary constraints also make it much more expensive to live in US.(celiac and lactose intolerance add to costs) So it's not unfathomable.

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sjg007 5y ago

Just to put things into perspective for you: a family of 4 making up to $140k qualifies for affordable housing in San Mateo County. That's about $7.7k a month after tax. Now factor in some variable combination of: 1. Rent (3-4k for a 2bdrm or larger) 2. Student Loans 3. Debt 4. Childcare (daycare) ($2-3k) 5. Health care This excludes 401k contributions, saving for a financial buffer, any type of car or commuting expense.

chadash 5y ago

A lot of people on HN don't have families, so let me illustrate some costs. Let's say you are a married couple with 2 young kids and you make a combined $150,000k and you live in Boston. Federal tax: ~26k State tax: ~7.5k Work covers 20% of health insurance premium, leaving you with 20%: ~4k OK, now we are at $112,500 take home pay. 2 BR apartment accessible to public transit in Boston and in a safe neighborhood, let's say $3000/month + $250 utilities = 39,000. (you are probably not getting a particularly lavish apartment at this price point). Now you have $73,500 left. Daycare for two kids from 8 - 5:30: $15k x 2 = 30k $43,500 left. Throw in a reasonable life insurance policy, car + insurance payments for a modest car (kind of necessary if you live in Boston and have kids, unless you spend more to live in the kind of neighborhood where you don't need a car), modest medical and dental care out of pocket costs, basic kids clothing, basic clothing for you, diapers, and groceries and you are already eating pretty substantially into what you have left. Pretty much everything above is stuff that you need to spend in order to live reasonably comfortably (by US standards). Let's say after all of that you have 30k left. So you have 30k that you can spend on quality of life improvements, entertainment, travel, etc. You can hopefully save some of the money too, but if you are hoping to save towards a down payment on a house in the boston area, you're really not going to be living a lavish lifestyle on that kind of money either.

ska 5y ago
The hand waving of 43.5 to 30k is probably being unrealistically conservative. Probably closer to 20 than 30.
- chadash 5y ago
  Oh, absolutely. All these numbers are pretty conservative. Real life is full of situations like cars breaking, HVAC systems getting too old to repair and daycare closing down for a week and now I need to fly grandpa in with a day's notice to cover for me so that I can go to work. My point is that HN is full of young people without families who can't imagine how other people aren't saving money. Meanwhile, the cost of raising two or three kids in a high cost of living area would buy a single person a lifestyle that most people would agree is pretty lavish.

giantrobot 5y ago

In the Bay Area making "six figures" under $200k isn't as much as it seems on paper. Taxes and pre-tax deductions (insurance premiums etc) easily eat a third of your bi-weekly check. Unless you've got a half dozen roommates rent will easily eat a whole bi-weekly paycheck. The other check goes to a car payment (essentially required in the South and East bay), insurance for same, at least a cellular plan if that and a residential broadband plan, utilities and other monthly bills, and then food for the month. Because rent is always due at a particular time of the month people need to use whatever cash buffer they have to cover expenses until their next check. So there's people living "paycheck to paycheck" that do have a non-zero amount of dollars in the bank but that buffer is constantly being drained and refreshed paying all the non-rent bills. If they don't have a cash buffer then they need to use credit cards which have fees and interest that obviate any savings margins. There's a wide dynamic range in the "six figures" category of salaries. In HCOL areas it takes a pretty high "six figures" salary to get over the "paycheck to paycheck" living.