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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.)

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.)