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58% of Americans are living paycheck to paycheck – including 30% earning $250k

64 points by crhulls 4y ago

ngokevin 4y ago
Can someone provide insight on how $250k earners find themselves in a paycheck to paycheck situation? Is it like mortgage + student loans + healthcare?
- bequanna 4y ago
  + auto loans + home equity loans. Many, many people will max out the house they can afford and pile 2 car loans on top of that. That right there can be 40-50% pre tax income. We now have a public with only a fuzzy memory of what a real recession looks like. Thanks to the accommodative Fed over the last ~14 years and more recent COVID free money bonanza, people have been rewarded for blindly taking risk and conditioned to think that prices always go up. A severe contraction with a jump in unemployment and no Fed bailout seems quite possible and might be a painful lesson for the overextended.
- DamnYuppie 4y ago
  Mortgage and student loans play a part. A lot of it comes down to lifestyle choices and discretionary spending, essentially they are either bad at budgeting or sticking to it. I see this a lot in all generations to be honest, some want to say it is driven by the yolo mindset but I have watched the vast majority of people be bad with money my whole life.
  - autoexec 4y ago
    > A lot of it comes down to lifestyle choices and discretionary spending, essentially they are either bad at budgeting or sticking to it. I also know some people who are very bad with money and even some who are certainly living an unsustainable lifestyle in order to project the appearance of genuine wealth, but that is by far the exception in my experience. Saying that it's lifestyle choices and spending habits doesn't sit right with me. I'm not saying that you are doing this, but there are some people who essentially repeat what you've said when what they really mean is something closer to "The dirty poors are living above their station and need to learn to stay in their place!". It's a kind of mindset where you get ridiculous statements about how poor people could pull themselves up by their bootstraps if only they didn't buy iphones or avocado toast. It ignores so many other much larger factors like increased costs, wages that haven't kept up, the effects and impacts of poverty, and the fact that economic mobility in the US is dismal and has been for a long time. I mean, it's certainly true that pretty much everyone could benefit from more education in managing personal finances. It isn't something most people are taught in school and much has changed over just a couple generations. Not to date myself too badly here, but my parents told me it was wise to put money in a savings account because it would earn interest and at that time, while still not the best advice, it was a whole lot more reasonable than it is today. Millennials were the first generation of Americans where the majority ended up worse off than their parents and I think going back at least as far as Gen-X that trend has caused an increase in debit as people struggle just to maintain the lifestyle they grew up in. I've also seen people more recently who don't believe that there is anything they can do to improve their situation, that home ownership is and will always be an impossibility for them, that retirement is a thing of the past etc. and that kind of hopelessness does seem to lead to reckless spending. Smart hardworking kids working 2-3 jobs, none of which give them any benefits, with little to no savings who spend a lot more than they should on convinces and momentary pleasures because they have zero faith in their future being any better than it is today. There's a lot more going on than people yoloing their money away, especially when it comes to the very poor who in my experience are usually carefully watching where every last dime goes.
- edmcnulty101 4y ago
  Yep with taxes plus all that they're prob clearing 8k a month. Which still seems not paycheck to paycheck.
  - tehwhale810 4y ago
    Paycheck to paycheck is relative. I’ve seen families bring in $500k/year and barely have any retirement savings. They go buy a home with a mortgage that’s $16k/month, a few fancy cars at $1000/mo each, childcare, maintenance on a home that expensive, and everything else that money is gone quick. They want to give the illusion of stupidly rich at the cost of spending every dime that comes in. Pretty common in every income bracket. Majority of people are terrible with money.
    - HWR_14 4y ago
      > barely have any retirement savings. They go buy a home with a mortgage that’s $16k/month, That's a 3.X million dollar home. If you have a multimillion dollar asset like that, your retirement savings is the house.
  - pkulak 4y ago
    House down the street from me sold for a 5k/month mortgage (I live in a duplex). Now pop two $1000 car payments on there and you maybe have enough left over for food and some bills.
- tastysandwich 4y ago
  I think for many people living expenses tend to go up in proportion to income. Bigger mortgage, fancier car, eating out. My mate got a decent payrise, the first thing he did was buy a $50k second-hand sports car. And that's after he just bought his first home with a $700k mortgage. So he's gonna be paying all that off for a loooong time. Glad he's happy but I never understood the whole sportscar thing. They go vroom vroom just like all the other cars.
  - miss_egghead 4y ago
    Worse, because you literally hurl them through traffic at high speeds. If I had to put one of my most valuable possessions on wheels and park it at the grocery store, I would not make that item an especially luxurious thing
  - pengaru 4y ago
    > Glad he's happy but I never understood the whole sportscar thing. They go vroom vroom just like all the other cars. There's sportscars and there's luxury/exotic sportscars. The latter is mostly a class/signaling thing, since you can't even _really_ abuse it unless you're so rich it's the dinghy for your private jet. But a proper prepared sports car is a substantially different driving experience than "all the other cars".
  - nonameiguess 4y ago
    You might be surprised how well certain cars hold their value if you take care of them, even pretty low-end sports cars. Go look at listings for a vintage Supra, M3, even an 80s Trans Am Firebird. They're all selling for much more than they were originally purchased for. They may not be a good investment relative to holding a broad equity index tracking fund, but if you need to own some sort of car, they're a good investment compared to most any other type of car. Likewise with the house. While you probably shouldn't be saturating your entire take home pay with mandatory recurring payments, you're a lot better off spending on assets that hold their value than buying vacations and dinners at expensive restaurants. This is yet another underappreciated difference between what "paycheck to paycheck" means for the affluent versus the poor. There's a big difference between spending all your money on nice houses and cars versus spending it all on rent that buys your landlord a house and beaters that require more in maintenance than purchase price and will be scrapped at best when you finish running it into the ground.
- niij 4y ago
  Lifestyle creep from the human desire to project status.
  - mushbino 4y ago
    Not just status but consumerism and the desire to accumulate stuff. George Carlin had a classic bet on this.
- pyuser583 4y ago
  Without financial planning, you can spend an infinite amount. Part of the problem is people think “budgeting” is for when you’re in crisis. A budget is just a financial plan. When you have more money, it gets harder and harder to understand where it’s going.
- lemax 4y ago
  Most people are notoriously bad at saving money. It's fairly well known phenomena that large lottery winners and inheritance recipients also tend to go bankrupt (something like 1/3?). I guess even at the smaller scale - even making the money yourself - it doesn't matter. Once you size up your lifestyle and get acclimated it's very hard to reduce.
- thatfrenchguy 4y ago
  Americans are always pushing their luck too much and spending too much money. So many people driving <20 mpg 40-50k$ cars and trucks in this country.
  - rschachte 4y ago
    Oh and the expensive education, lacking healthcare, insane home prices and zero social safety net.
    - thatfrenchguy 4y ago
      I mean healthcare and education are not a real issue for people making 250k$ since the ACA (unless they don’t educate themselves about how billing works), let’s be honest here.
- dclusin 4y ago
  A 1 bedroom apartment I live in near work is about 3k/month with utilities. I don’t do the super expensive car with a huge payment thing but put those two together and you’re halfway there. Throw in some expensive vacations (gotta fly business internationally can’t be a peasant) and you’ll make decent headway. Or maybe you are a dog owner so you rent a house so your dog has room. It’s fairly easy to do in a high cost of living area just to feel “middle class” Music festivals and Vegas trips are also a great way to set small piles of cash on fire.
- ei8htyfi5e 4y ago
  I was there. Paying off student loans like a mf’er doesn’t leave a lot left over. Now I have no loans so it’s easier to save, however when you’re in a hole, the best thing to do is fill the hole.
- doggwalker 4y ago
  A large percentage of people will spend everything they earn and then also spend every cent of their credit worthiness no matter the size of their cash flow. I remember watching a show on the actor Nicolas Cage going bankrupt. He bought like 15 motorcycles and a $300k dinosaur bone. I am sure some of these people are in unfortunate debt situations but a whole lot of them are on the Nicolas Cage version of financial planning for the future.
  - bionsystem 4y ago
    How did Cage go bankrupt with 15 motorcycles and a $300k dinosaur bone ? To me it sounds like what could be his pocket change...
- cafard 4y ago
  Suppose that you live in Washington, DC, have a couple of kids, and aren't happy with the public schools. Put them in Sidwell Friends, and the tuition can be $90 to $97 thousand. Washington International School is in the same range. Then there's the mortgage, etc. (Never had a kid either school, but am acquainted with some who have.)
sparker72678 4y ago
Big mortgage + 2 big car loans + private school for your kids + sports for your kids + the expensive yearly vacation you’ve been taking and don’t want to skip + name brand clothes for your kids + meal services, etc, etc. And sure maybe student loans in there, credit card debt, maybe medical debt, care for extended family members. It’s super easy to blow through a 250K salary (which is not 250k in your pocket each year.)
- autoexec 4y ago
  more realistically for most people than private schooling and expensive vacations are day care and routine medical bills (as opposed to debt). Day care costs some families nearly what I spend on rent, and that's just for standard run of the mill understaffed day care services, not private/in-home or specialized care. Medical expenses get insane very quickly, with many people spending hundreds every month on medications alone, but add recurring costs like dental, vision, and mental health services to that and you can blow through huge amounts of cash every year. Most people in the US were already living paycheck to paycheck before the pandemic which ate into what little savings they had or forced them into credit card debt and now sky-high prices are putting even more pressure on people's budgets. It'd be crazy if the number of people living paycheck to paycheck wasn't expanding.
- gopalv 4y ago
  > It’s super easy to blow through a 250K salary (which is not 250k in your pocket each year.) As someone in that side (if I made 180k post-tax, I would be living paycheck to paycheck - I became aware of it because I'm funemployed with a big spreadsheet), it is not at all poverty, but it is more of a cashflow quirk when they say this. They're saying their outflow matches their in-flow, but not that all of it is actually being spent (the mortgage at 2.5% is equity). Not having a bunch of cash in the bank or merely maintaining a 100k rainy day balance isn't paycheck to paycheck, even though these people might describe it so. So the people who make 250k who live "paycheck to paycheck" are actually sitting on top of a big comfort cushion which they are loathe to remove for financial cushion. That is okay if it is a deliberate choice instead of a "save face, keep with the joneses" peer pressure to keep spending. This is not even remotely comparable to actual poverty where the floor is fast approaching you if you miss a month. These articles can be described as feeding some people's "more money can't fix money problems" and some other's mistaken belief that spending everything you get is what paycheck to paycheck means. Also totally different if it is debt you are paying off instead of actually spending. Also a hit-piece on the "earn and spend" millenials, which is somewhat fair because I don't know if I could be this affluent in my retirement, the way the economy is tilting.
smilebot 4y ago
On a side note, we really need to start using post-tax/take home pay instead of pre-tax. In fact, I think most people would find it way easier to picture things on a monthly take home basis rather than a yearly one.
- Kon-Peki 4y ago
  To be absolutely clear I am not disagreeing with you, but... how on earth would you create a useful definition of post-tax/take-home pay that allows for comparisons between people? DCA, FSA, transportation, 409(a) deferred compensation, etc. It's mind-boggling how many ways there are to mess around with your paycheck.
  - ThunderSizzle 4y ago
    Easy: abolish federal income tax. If we want to keep it, remove all deductions/credits, adjust the rate to something realistic (e.g. 5%) and make the IRS responsible for sending an annual bill to collect.
    - patrick451 4y ago
      Totally agree. Automatic tax withholding from your paycheck makes it way to easy to forget how much big brother is taking from you. If we all had to write the IRS a check every quarter, the pitchforks would come out.
tekla 4y ago
After talking to some people, I've realized many people live in vastly different worlds than I do. People making significantly less money then me spending more than 2x on their rent versus mine. I have "expensive" hobbies, but that mostly entails a high upfront cost ($2-3K) for gear that will last a decade minimum, so its not a huge issue. What the hell are (somwhat rich) people doing with their money? I'm confused since I don't know what there is to spend big money on. Health care is a thing, but I assume high paying jobs have somewhat decent insurance that shouldn't bankrupt you immediately. There are only so many $20K watches and $75K cars you can buy before it just becomes pointless.
- bloqs 4y ago
  Children
- Kaotique 4y ago
  More income will result in higher expectations. Bigger house, more expensive car, branded clothes, eating out in fancier restaurants, etc. Some stuff you can hardly avoid like a mortgage. I think most single people would have an easier time being frugal, but if you have a partner good luck with that. And if you have children you are stuck in the ratrace to send them to the most expensive schools and out of school activities. If you would earn 250k, would you live in a trailer and take the bus to work? I can hardly blame people. We are constantly bombarded with ads to buy buy buy. Max out your creditcards, invest in crypto, buy a boat, buy a car, fly around the world for holidays. Before you know it you cannot get out anymore, no matter what your income is.
- glassary 4y ago
  First, the idea that the only way to spend 150k (post tax in CA) is expensive watches and cars is pretty ridiculous. A half decent accommodation will run you 30k if renting, or more like 60k for a mortgage at todays rates for a median cost SFH. Add in various insurance payments, car and home maintenance, the odd medical bill, etc. and you can spend the 90k remaining without any “luxury” purchases at all. Certainly you don’t have to but… Second and more importantly, they are spending on whatever the fuck they want. You do realize you’re going to die, yes? There’s no way in which saving more than your neighbor is “good”, morally or otherwise. Maybe by saving more “now” you have a more comfortable “later”, maybe you don’t — the former may be more likely but isn’t guaranteed, and you should not judge someone for having a different risk profile than you.
jshzglr 4y ago
In other words status and trying to fit in is one hell of a drug. Has there ever been a time when frugalness was cool? Many of the people I admire the most have insanely old gear that they maintain and still use. Almost as if they would prefer to use what they already have as opposed to something new, what a thought.
- viraptor 4y ago
  It's always been cool to some. Just not uniformly distributed, since people vary with their values and goals.
- batiudrami 4y ago
  It is easier to do that if you have enough money to buy great quality stuff in the first place, though.
  - jshzglr 4y ago
    It's also easier to do when you're not caught in the newest trap, which was my point.
brundolf 4y ago
Hard to take much from this without data for the last several (read: pre-pandemic) years to compare with
5350-uiop-1130 4y ago
> including 30% earning $250k that's what happens when you over leverage your greed. no sympathy from me.
- wbsun 4y ago
  Note that in 2016, $250k was considered low income in Palo Alto, CA, and was qualified for subsidized housing: https://www.reuters.com/article/us-california-rent/palo-alto-considers-subsidized-housing-for-salary-up-to-250k-idUSKCN0WQ0CB https://www.reuters.com/article/us-california-rent/palo-alto... 6 years passed, and now with high inflation, maybe the number is already >$300k.
bigpeopleareold 4y ago
I will just say that at this point in my life, making the "savings payment" every month from my post-tax salary is a relief and feel it is a sacred thing to see that money go into savings every month. It happened with getting lucky and being able to put a down payment on a reasonably priced apartment in a great area.
dav_Oz 4y ago
The financial system with its incentives (read: the currency itself) is basically tilted to that kind of money spending. The decoupling from the 'Gold Standard' in 1971 gave this a big boost. So, essentially banks can create money (fiat ... borrowed from the expression from Genesis 1:3 fiat lux: "Let there be light") by simply inputting the number into a ledger (credit/debit). All the banks then settle between each other and finally with the Central Banks, here: FED. For convenience I have skipped the fractional reserve mechanisms. On top of that for "international settlements", there exists conveniently a Bank of International Settlement (BIS). From that viewpoint "saving money on a bank account" is 'recursive' (an historic remnant still floating in a lot of minds from the time when banknotes actually denoted legally binding claims on fixed amounts of gold/silver) and highly discouraged and effectively penalized. If one understands the basic accounting/settlements mechanisms involved this becomes evident. Cash is 'inferior' money. The whole argument about Bitcoin (which I'm not in favor of) as a "superior form" of currency or now rebranded as a "commodity"/"store of value" revolves around this crucial point/promise: Saving money like in the old days. (The 'bible' exploring this topic is accordingly called the "Bitcoin Standard"). The kind of money spending encouraged, now, through fiat money and all its entourage discourages long term thinking and planning - reflected in the more and more fleeting life spans and decreasing quality of the products overall and by the current investing practices - and "robs" the vast majority of people by diluting the money supply, benefitting the few ones with basically unlimited access to "credits" (state, the "rich"). Historically, this "financial intsruments/leverages" allowed industrial large scale wars like WWI or WWII to be "funded" in the first place.
- mythopedia 4y ago
  Can't speak to most of this, but: > The term fiat derives from the Latin word fiat, meaning "let it be done" used in the sense of an order, decree or resolution.[0] I know it's annoyingly pedantic, but I had to look it up because I had never heard the assertion that the word fiat comes directly from Genesis. [0] https://en.wikipedia.org/wiki/Fiat_money https://en.wikipedia.org/wiki/Fiat_money
  - jaclaz 4y ago
    Yes, JFYI, "fiat lux" redirects to "Let there be light": https://en.wikipedia.org/wiki/Let_there_be_light https://en.wikipedia.org/wiki/Let_there_be_light and represent probably the most reknown two words of the Latin Bible (depending on which version it may be "sit lux").
JoeAltmaier 4y ago
Comfortable myself. But my three sons are pretty much in this boat. Oldest married a doctor, Resident still, they earn some but just enough for the bills. Middle one is exhausting savings on his startup. Counts pennies. Youngest burned out on software, is back to a 'day job' and doing music. So maybe not the usual stories. But there are all sorts of stories.
egberts1 4y ago
21% of Americans (69.1M) are on Social Security which is largely living paycheck-to-paycheck. So only 37% of the working Americans are living paycheck-to-paycheck. Sounds largely unchanged since the 1970s.
egberts1 4y ago
5.7% of American households earn over $250K, or about 1.7% of American households are living paycheck-to-paycheck while making $250K or more: NEXT!
- egberts1 4y ago
  Inconvenient truth hurts! Thanks for the downvote.
mbrodersen 4y ago
If you spend everything you earn then you will be living paycheck to paycheck. No matter how much you earn. If instead you take 10% of your monthly after tax pay and invest then you won’t. Millionaires have gone bankrupt because they didn’t have the financial education/understanding needed to handle money. And in contrast, people who are not millionaires have build investment portfolios over many years that have given them financial independence. It’s all about financial intelligent/skills/literacy not about how much you earn.

64 points by crhulls 4y ago

Can someone provide insight on how $250k earners find themselves in a paycheck to paycheck situation? Is it like mortgage + student loans + healthcare?

bequanna 4y ago
+ auto loans + home equity loans. Many, many people will max out the house they can afford and pile 2 car loans on top of that. That right there can be 40-50% pre tax income. We now have a public with only a fuzzy memory of what a real recession looks like. Thanks to the accommodative Fed over the last ~14 years and more recent COVID free money bonanza, people have been rewarded for blindly taking risk and conditioned to think that prices always go up. A severe contraction with a jump in unemployment and no Fed bailout seems quite possible and might be a painful lesson for the overextended.
DamnYuppie 4y ago
Mortgage and student loans play a part. A lot of it comes down to lifestyle choices and discretionary spending, essentially they are either bad at budgeting or sticking to it. I see this a lot in all generations to be honest, some want to say it is driven by the yolo mindset but I have watched the vast majority of people be bad with money my whole life.
- autoexec 4y ago
  > A lot of it comes down to lifestyle choices and discretionary spending, essentially they are either bad at budgeting or sticking to it. I also know some people who are very bad with money and even some who are certainly living an unsustainable lifestyle in order to project the appearance of genuine wealth, but that is by far the exception in my experience. Saying that it's lifestyle choices and spending habits doesn't sit right with me. I'm not saying that you are doing this, but there are some people who essentially repeat what you've said when what they really mean is something closer to "The dirty poors are living above their station and need to learn to stay in their place!". It's a kind of mindset where you get ridiculous statements about how poor people could pull themselves up by their bootstraps if only they didn't buy iphones or avocado toast. It ignores so many other much larger factors like increased costs, wages that haven't kept up, the effects and impacts of poverty, and the fact that economic mobility in the US is dismal and has been for a long time. I mean, it's certainly true that pretty much everyone could benefit from more education in managing personal finances. It isn't something most people are taught in school and much has changed over just a couple generations. Not to date myself too badly here, but my parents told me it was wise to put money in a savings account because it would earn interest and at that time, while still not the best advice, it was a whole lot more reasonable than it is today. Millennials were the first generation of Americans where the majority ended up worse off than their parents and I think going back at least as far as Gen-X that trend has caused an increase in debit as people struggle just to maintain the lifestyle they grew up in. I've also seen people more recently who don't believe that there is anything they can do to improve their situation, that home ownership is and will always be an impossibility for them, that retirement is a thing of the past etc. and that kind of hopelessness does seem to lead to reckless spending. Smart hardworking kids working 2-3 jobs, none of which give them any benefits, with little to no savings who spend a lot more than they should on convinces and momentary pleasures because they have zero faith in their future being any better than it is today. There's a lot more going on than people yoloing their money away, especially when it comes to the very poor who in my experience are usually carefully watching where every last dime goes.
edmcnulty101 4y ago
Yep with taxes plus all that they're prob clearing 8k a month. Which still seems not paycheck to paycheck.
- tehwhale810 4y ago
  Paycheck to paycheck is relative. I’ve seen families bring in $500k/year and barely have any retirement savings. They go buy a home with a mortgage that’s $16k/month, a few fancy cars at $1000/mo each, childcare, maintenance on a home that expensive, and everything else that money is gone quick. They want to give the illusion of stupidly rich at the cost of spending every dime that comes in. Pretty common in every income bracket. Majority of people are terrible with money.
  - HWR_14 4y ago
    > barely have any retirement savings. They go buy a home with a mortgage that’s $16k/month, That's a 3.X million dollar home. If you have a multimillion dollar asset like that, your retirement savings is the house.
- pkulak 4y ago
  House down the street from me sold for a 5k/month mortgage (I live in a duplex). Now pop two $1000 car payments on there and you maybe have enough left over for food and some bills.
tastysandwich 4y ago
I think for many people living expenses tend to go up in proportion to income. Bigger mortgage, fancier car, eating out. My mate got a decent payrise, the first thing he did was buy a $50k second-hand sports car. And that's after he just bought his first home with a $700k mortgage. So he's gonna be paying all that off for a loooong time. Glad he's happy but I never understood the whole sportscar thing. They go vroom vroom just like all the other cars.
- miss_egghead 4y ago
  Worse, because you literally hurl them through traffic at high speeds. If I had to put one of my most valuable possessions on wheels and park it at the grocery store, I would not make that item an especially luxurious thing
- pengaru 4y ago
  > Glad he's happy but I never understood the whole sportscar thing. They go vroom vroom just like all the other cars. There's sportscars and there's luxury/exotic sportscars. The latter is mostly a class/signaling thing, since you can't even _really_ abuse it unless you're so rich it's the dinghy for your private jet. But a proper prepared sports car is a substantially different driving experience than "all the other cars".
- nonameiguess 4y ago
  You might be surprised how well certain cars hold their value if you take care of them, even pretty low-end sports cars. Go look at listings for a vintage Supra, M3, even an 80s Trans Am Firebird. They're all selling for much more than they were originally purchased for. They may not be a good investment relative to holding a broad equity index tracking fund, but if you need to own some sort of car, they're a good investment compared to most any other type of car. Likewise with the house. While you probably shouldn't be saturating your entire take home pay with mandatory recurring payments, you're a lot better off spending on assets that hold their value than buying vacations and dinners at expensive restaurants. This is yet another underappreciated difference between what "paycheck to paycheck" means for the affluent versus the poor. There's a big difference between spending all your money on nice houses and cars versus spending it all on rent that buys your landlord a house and beaters that require more in maintenance than purchase price and will be scrapped at best when you finish running it into the ground.
niij 4y ago
Lifestyle creep from the human desire to project status.
- mushbino 4y ago
  Not just status but consumerism and the desire to accumulate stuff. George Carlin had a classic bet on this.
pyuser583 4y ago
Without financial planning, you can spend an infinite amount. Part of the problem is people think “budgeting” is for when you’re in crisis. A budget is just a financial plan. When you have more money, it gets harder and harder to understand where it’s going.
lemax 4y ago
Most people are notoriously bad at saving money. It's fairly well known phenomena that large lottery winners and inheritance recipients also tend to go bankrupt (something like 1/3?). I guess even at the smaller scale - even making the money yourself - it doesn't matter. Once you size up your lifestyle and get acclimated it's very hard to reduce.
thatfrenchguy 4y ago
Americans are always pushing their luck too much and spending too much money. So many people driving <20 mpg 40-50k$ cars and trucks in this country.
- rschachte 4y ago
  Oh and the expensive education, lacking healthcare, insane home prices and zero social safety net.
  - thatfrenchguy 4y ago
    I mean healthcare and education are not a real issue for people making 250k$ since the ACA (unless they don’t educate themselves about how billing works), let’s be honest here.
dclusin 4y ago
A 1 bedroom apartment I live in near work is about 3k/month with utilities. I don’t do the super expensive car with a huge payment thing but put those two together and you’re halfway there. Throw in some expensive vacations (gotta fly business internationally can’t be a peasant) and you’ll make decent headway. Or maybe you are a dog owner so you rent a house so your dog has room. It’s fairly easy to do in a high cost of living area just to feel “middle class” Music festivals and Vegas trips are also a great way to set small piles of cash on fire.
ei8htyfi5e 4y ago
I was there. Paying off student loans like a mf’er doesn’t leave a lot left over. Now I have no loans so it’s easier to save, however when you’re in a hole, the best thing to do is fill the hole.
doggwalker 4y ago
A large percentage of people will spend everything they earn and then also spend every cent of their credit worthiness no matter the size of their cash flow. I remember watching a show on the actor Nicolas Cage going bankrupt. He bought like 15 motorcycles and a $300k dinosaur bone. I am sure some of these people are in unfortunate debt situations but a whole lot of them are on the Nicolas Cage version of financial planning for the future.
- bionsystem 4y ago
  How did Cage go bankrupt with 15 motorcycles and a $300k dinosaur bone ? To me it sounds like what could be his pocket change...
cafard 4y ago
Suppose that you live in Washington, DC, have a couple of kids, and aren't happy with the public schools. Put them in Sidwell Friends, and the tuition can be $90 to $97 thousand. Washington International School is in the same range. Then there's the mortgage, etc. (Never had a kid either school, but am acquainted with some who have.)

sparker72678 4y ago

Big mortgage + 2 big car loans + private school for your kids + sports for your kids + the expensive yearly vacation you’ve been taking and don’t want to skip + name brand clothes for your kids + meal services, etc, etc. And sure maybe student loans in there, credit card debt, maybe medical debt, care for extended family members. It’s super easy to blow through a 250K salary (which is not 250k in your pocket each year.)

autoexec 4y ago
more realistically for most people than private schooling and expensive vacations are day care and routine medical bills (as opposed to debt). Day care costs some families nearly what I spend on rent, and that's just for standard run of the mill understaffed day care services, not private/in-home or specialized care. Medical expenses get insane very quickly, with many people spending hundreds every month on medications alone, but add recurring costs like dental, vision, and mental health services to that and you can blow through huge amounts of cash every year. Most people in the US were already living paycheck to paycheck before the pandemic which ate into what little savings they had or forced them into credit card debt and now sky-high prices are putting even more pressure on people's budgets. It'd be crazy if the number of people living paycheck to paycheck wasn't expanding.
gopalv 4y ago
> It’s super easy to blow through a 250K salary (which is not 250k in your pocket each year.) As someone in that side (if I made 180k post-tax, I would be living paycheck to paycheck - I became aware of it because I'm funemployed with a big spreadsheet), it is not at all poverty, but it is more of a cashflow quirk when they say this. They're saying their outflow matches their in-flow, but not that all of it is actually being spent (the mortgage at 2.5% is equity). Not having a bunch of cash in the bank or merely maintaining a 100k rainy day balance isn't paycheck to paycheck, even though these people might describe it so. So the people who make 250k who live "paycheck to paycheck" are actually sitting on top of a big comfort cushion which they are loathe to remove for financial cushion. That is okay if it is a deliberate choice instead of a "save face, keep with the joneses" peer pressure to keep spending. This is not even remotely comparable to actual poverty where the floor is fast approaching you if you miss a month. These articles can be described as feeding some people's "more money can't fix money problems" and some other's mistaken belief that spending everything you get is what paycheck to paycheck means. Also totally different if it is debt you are paying off instead of actually spending. Also a hit-piece on the "earn and spend" millenials, which is somewhat fair because I don't know if I could be this affluent in my retirement, the way the economy is tilting.

smilebot 4y ago

On a side note, we really need to start using post-tax/take home pay instead of pre-tax. In fact, I think most people would find it way easier to picture things on a monthly take home basis rather than a yearly one.

Kon-Peki 4y ago
To be absolutely clear I am not disagreeing with you, but... how on earth would you create a useful definition of post-tax/take-home pay that allows for comparisons between people? DCA, FSA, transportation, 409(a) deferred compensation, etc. It's mind-boggling how many ways there are to mess around with your paycheck.
- ThunderSizzle 4y ago
  Easy: abolish federal income tax. If we want to keep it, remove all deductions/credits, adjust the rate to something realistic (e.g. 5%) and make the IRS responsible for sending an annual bill to collect.
  - patrick451 4y ago
    Totally agree. Automatic tax withholding from your paycheck makes it way to easy to forget how much big brother is taking from you. If we all had to write the IRS a check every quarter, the pitchforks would come out.

tekla 4y ago

After talking to some people, I've realized many people live in vastly different worlds than I do. People making significantly less money then me spending more than 2x on their rent versus mine. I have "expensive" hobbies, but that mostly entails a high upfront cost ($2-3K) for gear that will last a decade minimum, so its not a huge issue. What the hell are (somwhat rich) people doing with their money? I'm confused since I don't know what there is to spend big money on. Health care is a thing, but I assume high paying jobs have somewhat decent insurance that shouldn't bankrupt you immediately. There are only so many $20K watches and $75K cars you can buy before it just becomes pointless.

bloqs 4y ago
Children
Kaotique 4y ago
More income will result in higher expectations. Bigger house, more expensive car, branded clothes, eating out in fancier restaurants, etc. Some stuff you can hardly avoid like a mortgage. I think most single people would have an easier time being frugal, but if you have a partner good luck with that. And if you have children you are stuck in the ratrace to send them to the most expensive schools and out of school activities. If you would earn 250k, would you live in a trailer and take the bus to work? I can hardly blame people. We are constantly bombarded with ads to buy buy buy. Max out your creditcards, invest in crypto, buy a boat, buy a car, fly around the world for holidays. Before you know it you cannot get out anymore, no matter what your income is.
glassary 4y ago
First, the idea that the only way to spend 150k (post tax in CA) is expensive watches and cars is pretty ridiculous. A half decent accommodation will run you 30k if renting, or more like 60k for a mortgage at todays rates for a median cost SFH. Add in various insurance payments, car and home maintenance, the odd medical bill, etc. and you can spend the 90k remaining without any “luxury” purchases at all. Certainly you don’t have to but… Second and more importantly, they are spending on whatever the fuck they want. You do realize you’re going to die, yes? There’s no way in which saving more than your neighbor is “good”, morally or otherwise. Maybe by saving more “now” you have a more comfortable “later”, maybe you don’t — the former may be more likely but isn’t guaranteed, and you should not judge someone for having a different risk profile than you.

jshzglr 4y ago

In other words status and trying to fit in is one hell of a drug. Has there ever been a time when frugalness was cool? Many of the people I admire the most have insanely old gear that they maintain and still use. Almost as if they would prefer to use what they already have as opposed to something new, what a thought.

viraptor 4y ago
It's always been cool to some. Just not uniformly distributed, since people vary with their values and goals.
batiudrami 4y ago
It is easier to do that if you have enough money to buy great quality stuff in the first place, though.
- jshzglr 4y ago
  It's also easier to do when you're not caught in the newest trap, which was my point.

brundolf 4y ago

Hard to take much from this without data for the last several (read: pre-pandemic) years to compare with

5350-uiop-1130 4y ago

> including 30% earning $250k that's what happens when you over leverage your greed. no sympathy from me.

wbsun 4y ago
Note that in 2016, $250k was considered low income in Palo Alto, CA, and was qualified for subsidized housing: https://www.reuters.com/article/us-california-rent/palo-alto-considers-subsidized-housing-for-salary-up-to-250k-idUSKCN0WQ0CB https://www.reuters.com/article/us-california-rent/palo-alto... 6 years passed, and now with high inflation, maybe the number is already >$300k.

bigpeopleareold 4y ago

I will just say that at this point in my life, making the "savings payment" every month from my post-tax salary is a relief and feel it is a sacred thing to see that money go into savings every month. It happened with getting lucky and being able to put a down payment on a reasonably priced apartment in a great area.

dav_Oz 4y ago

The financial system with its incentives (read: the currency itself) is basically tilted to that kind of money spending. The decoupling from the 'Gold Standard' in 1971 gave this a big boost. So, essentially banks can create money (fiat ... borrowed from the expression from Genesis 1:3 fiat lux: "Let there be light") by simply inputting the number into a ledger (credit/debit). All the banks then settle between each other and finally with the Central Banks, here: FED. For convenience I have skipped the fractional reserve mechanisms. On top of that for "international settlements", there exists conveniently a Bank of International Settlement (BIS). From that viewpoint "saving money on a bank account" is 'recursive' (an historic remnant still floating in a lot of minds from the time when banknotes actually denoted legally binding claims on fixed amounts of gold/silver) and highly discouraged and effectively penalized. If one understands the basic accounting/settlements mechanisms involved this becomes evident. Cash is 'inferior' money. The whole argument about Bitcoin (which I'm not in favor of) as a "superior form" of currency or now rebranded as a "commodity"/"store of value" revolves around this crucial point/promise: Saving money like in the old days. (The 'bible' exploring this topic is accordingly called the "Bitcoin Standard"). The kind of money spending encouraged, now, through fiat money and all its entourage discourages long term thinking and planning - reflected in the more and more fleeting life spans and decreasing quality of the products overall and by the current investing practices - and "robs" the vast majority of people by diluting the money supply, benefitting the few ones with basically unlimited access to "credits" (state, the "rich"). Historically, this "financial intsruments/leverages" allowed industrial large scale wars like WWI or WWII to be "funded" in the first place.

mythopedia 4y ago
Can't speak to most of this, but: > The term fiat derives from the Latin word fiat, meaning "let it be done" used in the sense of an order, decree or resolution.[0] I know it's annoyingly pedantic, but I had to look it up because I had never heard the assertion that the word fiat comes directly from Genesis. [0] https://en.wikipedia.org/wiki/Fiat_money https://en.wikipedia.org/wiki/Fiat_money
- jaclaz 4y ago
  Yes, JFYI, "fiat lux" redirects to "Let there be light": https://en.wikipedia.org/wiki/Let_there_be_light https://en.wikipedia.org/wiki/Let_there_be_light and represent probably the most reknown two words of the Latin Bible (depending on which version it may be "sit lux").

JoeAltmaier 4y ago

Comfortable myself. But my three sons are pretty much in this boat. Oldest married a doctor, Resident still, they earn some but just enough for the bills. Middle one is exhausting savings on his startup. Counts pennies. Youngest burned out on software, is back to a 'day job' and doing music. So maybe not the usual stories. But there are all sorts of stories.

egberts1 4y ago

21% of Americans (69.1M) are on Social Security which is largely living paycheck-to-paycheck. So only 37% of the working Americans are living paycheck-to-paycheck. Sounds largely unchanged since the 1970s.

egberts1 4y ago

5.7% of American households earn over $250K, or about 1.7% of American households are living paycheck-to-paycheck while making $250K or more: NEXT!

egberts1 4y ago
Inconvenient truth hurts! Thanks for the downvote.

mbrodersen 4y ago

If you spend everything you earn then you will be living paycheck to paycheck. No matter how much you earn. If instead you take 10% of your monthly after tax pay and invest then you won’t. Millionaires have gone bankrupt because they didn’t have the financial education/understanding needed to handle money. And in contrast, people who are not millionaires have build investment portfolios over many years that have given them financial independence. It’s all about financial intelligent/skills/literacy not about how much you earn.