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Chances are an engineer would get married before they're 40. $80k after tax? In the US, a single guy making $120k would have $32k in taxes taken out, leaving

Chances are an engineer would get married before they're 40. $80k after tax? In the US, a single guy making $120k would have $32k in taxes taken out, leaving them with $88k. Only $28k if they're married. Only $40k after living expenses? Depending where you live in the US, $40k for living expenses would be normal for a family of 4. That's about the $60k in disposable income in my other comment, requiring only a 8-9% return per year, which is the long term average of the S&P 500.

kd0amg 13y ago
Depending where you live in the US, $40k for living expenses would be normal for a family of 4. Does this still hold if we restrict ourselves to the subset of the US where an engineer is likely to get paid $120k per year?
- runako 13y ago
  American families of 4 usually have two wage earners. So there are a bunch of factors involved, but the math isn't far off. Median home price is ~$210k, which finances in the neighborhood of $1400/mo. Keeping the car & childcare budgets reasonable, $40k of living expenses all-in isn't crazy. Add a second wage-earner and the math works even better. Move to a low-cost city and the math works even better (and you're likely to find that the pay delta is smaller than the actual cost delta).
  - Iftheshoefits 13y ago
    Depends on what you're including in "living expenses, yes"? The figure you used for a home is way off, for example--it only factors in the P+I payment--not property taxes and homeowners insurance; when those are factored in, that $16,000/yr mortgage payment suddenly becomes about $20,000 (or more). Add another $8,000 for a single car (payment, insurance, gas, and maintenance), $6,000 for student loan debt (easily achievable for a $60,000--2x the average, one for each earner--load) and that leaves $6,000 for food, childcare, and utilities (and anything else I'm forgetting) before that $40k is gone. I don't know what area of the country you think $500/mo is enough to spread over childcare, phone, water, electricity, and food (no internet allowed; just the "necessities"), but I'd be interested to find out.
    - runako 13y ago
      The housing figure I used was for PITI (all-in). Obviously the T and I will vary by jurisdiction. But feel free to call realtors in e.g. Atlanta, Cincinnati (median price: $110k) or Jacksonville, FL (median price: $120k) to confirm that an all-in number of $1400 or substantially below is reasonable for a single-family house. (I know a number of people who pay < $1000/mo to own 3+BR houses in the city limits of Atlanta. Again, that's all-in, counting all the non-utilities expenses you think I'm leaving out.) Student loan payments will largely be made during years in which most people will not have two kids and a brand-new car. While I wouldn't begrudge anyone the choice to do both at the same time, they're obviously going to hurt a bit or push out hitting the seven-figure mark a few years. Plus, you doubled the student loan debt but didn't allow any increase in living expenses for having a second wage-earner in the HH or account for the second wage-earner's savings. Point I'm making is the math isn't that far off, if one chooses to live anywhere outside the most expensive real estate hotspots in the country.
wwweston 13y ago
> $80k after tax? In the US, a single guy making $120k would have $32k in taxes taken out, leaving them with $88k. If the 8k difference is part of the refutation, I think you may have inadvertently proved the point. > Depending where you live in the US, $40k for living expenses would be normal for a family of 4. Depending on where you live in the US, $120k may not be a typical engineering salary.
- enraged_camel 13y ago
  >>If the 8k difference is part of the refutation, I think you may have inadvertently proved the point. First, it was a 20% difference ($40,000 vs. $32,000). Second, if you invest that $8,000 at a conservative 6% annual growth for 30 years, you end up with $670,000. That's a really good chunk of money. It might even be enough to put your kid through college in 2044!
  - wwweston 13y ago
    > Second, if you invest that $8,000 at a conservative 6% annual growth for 30 years, you end up with $670,000. Point taken that a significant four-figure difference is enough to make a substantial contribution to accumulated wealth when regularly contributed and compounded on over multiple decades. Nobody should sneer at the power of diligent saving and compound interest (or, for that matter, at college tuition to grow faster than either inflation or your 529 plan :). That said, the original sentence that kicked off this subthread was talking about a 10 year time frame: "A 30-year old engineer making $120,000 a year should become a millionaire easily by the time they are 40" And by the time we got to where I commented, someone seemed to be believe that $88k vs $80k post-tax might make the difference in whether or not it's true that one could be a millionaire "easily" in a 10 year time frame. The answer, as far as I can tell, is no... uless you can live on $16k and invest the rest. It seems to me it takes roughly $72k invested annually at 6% to make you a million in 10 years. (I'm aware that it's possible to live on $16k per year. I've done so in the last five years. But not while working full-time in metro California.) > First, it was a 20% difference So, a person with $4,000 left over at the end of the year instead of $3,200 should be just as excited as someone with $40,000 instead of $32,000, I suppose. :)

kd0amg 13y ago

Depending where you live in the US, $40k for living expenses would be normal for a family of 4. Does this still hold if we restrict ourselves to the subset of the US where an engineer is likely to get paid $120k per year?

runako 13y ago
American families of 4 usually have two wage earners. So there are a bunch of factors involved, but the math isn't far off. Median home price is ~$210k, which finances in the neighborhood of $1400/mo. Keeping the car & childcare budgets reasonable, $40k of living expenses all-in isn't crazy. Add a second wage-earner and the math works even better. Move to a low-cost city and the math works even better (and you're likely to find that the pay delta is smaller than the actual cost delta).
- Iftheshoefits 13y ago
  Depends on what you're including in "living expenses, yes"? The figure you used for a home is way off, for example--it only factors in the P+I payment--not property taxes and homeowners insurance; when those are factored in, that $16,000/yr mortgage payment suddenly becomes about $20,000 (or more). Add another $8,000 for a single car (payment, insurance, gas, and maintenance), $6,000 for student loan debt (easily achievable for a $60,000--2x the average, one for each earner--load) and that leaves $6,000 for food, childcare, and utilities (and anything else I'm forgetting) before that $40k is gone. I don't know what area of the country you think $500/mo is enough to spread over childcare, phone, water, electricity, and food (no internet allowed; just the "necessities"), but I'd be interested to find out.
  - runako 13y ago
    The housing figure I used was for PITI (all-in). Obviously the T and I will vary by jurisdiction. But feel free to call realtors in e.g. Atlanta, Cincinnati (median price: $110k) or Jacksonville, FL (median price: $120k) to confirm that an all-in number of $1400 or substantially below is reasonable for a single-family house. (I know a number of people who pay < $1000/mo to own 3+BR houses in the city limits of Atlanta. Again, that's all-in, counting all the non-utilities expenses you think I'm leaving out.) Student loan payments will largely be made during years in which most people will not have two kids and a brand-new car. While I wouldn't begrudge anyone the choice to do both at the same time, they're obviously going to hurt a bit or push out hitting the seven-figure mark a few years. Plus, you doubled the student loan debt but didn't allow any increase in living expenses for having a second wage-earner in the HH or account for the second wage-earner's savings. Point I'm making is the math isn't that far off, if one chooses to live anywhere outside the most expensive real estate hotspots in the country.

wwweston 13y ago

> $80k after tax? In the US, a single guy making $120k would have $32k in taxes taken out, leaving them with $88k. If the 8k difference is part of the refutation, I think you may have inadvertently proved the point. > Depending where you live in the US, $40k for living expenses would be normal for a family of 4. Depending on where you live in the US, $120k may not be a typical engineering salary.

enraged_camel 13y ago
>>If the 8k difference is part of the refutation, I think you may have inadvertently proved the point. First, it was a 20% difference ($40,000 vs. $32,000). Second, if you invest that $8,000 at a conservative 6% annual growth for 30 years, you end up with $670,000. That's a really good chunk of money. It might even be enough to put your kid through college in 2044!
- wwweston 13y ago
  > Second, if you invest that $8,000 at a conservative 6% annual growth for 30 years, you end up with $670,000. Point taken that a significant four-figure difference is enough to make a substantial contribution to accumulated wealth when regularly contributed and compounded on over multiple decades. Nobody should sneer at the power of diligent saving and compound interest (or, for that matter, at college tuition to grow faster than either inflation or your 529 plan :). That said, the original sentence that kicked off this subthread was talking about a 10 year time frame: "A 30-year old engineer making $120,000 a year should become a millionaire easily by the time they are 40" And by the time we got to where I commented, someone seemed to be believe that $88k vs $80k post-tax might make the difference in whether or not it's true that one could be a millionaire "easily" in a 10 year time frame. The answer, as far as I can tell, is no... uless you can live on $16k and invest the rest. It seems to me it takes roughly $72k invested annually at 6% to make you a million in 10 years. (I'm aware that it's possible to live on $16k per year. I've done so in the last five years. But not while working full-time in metro California.) > First, it was a 20% difference So, a person with $4,000 left over at the end of the year instead of $3,200 should be just as excited as someone with $40,000 instead of $32,000, I suppose. :)