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Why a Six-Figure Salary No Longer Means You’re Rich
- holri 12y agobecause money does not make you rich
- sgt101 12y agothere is a lot of truth in this statement.
- brightsize 12y agoOne of my favorite quotes below, attributed to Bob Dylan: “A man is a success if he gets up in the morning and gets to bed at night, and in between he does what he wants to do.”
- smackfu 12y agoInvesting more is certainly not a way to "stretch a six-figure salary." Not sure why they included that part. Investing in your own retirement (vs. a pension) is probably a big reason why salary money doesn't go as far.
- NoMoreNicksLeft 12y agoBecause inflation?
- jahnu 12y agoYeah. I'm not an American but adjusted for inflation $100,000 in 1985 would be $221,508.36 today. That's pretty rich. You'd be in the top 5% with that.
- adventured 12y agoYep. Since the year 2000: Median and average price of a home nationally is up about 50% (even worse in hot markets) US Dollar is down about 50% against the Swiss Franc US Dollar is down about 40% against the Canadian Dollar US Dollar is down about 30% vs. the Euro Gasoline is up over 200% Oil is up ~350% Gold is up 300% Silver is up 300% Cotton is up between 60% and 100% Corn is up 100% Average cost of a new car is up 40% to 50% And so on A $30k salary in 1990, is now roughly equivalent to $60k to $75k today. Six figures just doesn't buy anywhere near what it used to.
- chasing 12y agoIt sure as hell does mean you're rich. Median household income in the US is about $50k/yr. The average global income is about $10k/yr.
- PhasmaFelis 12y agoAgreed. Title is bullshit, and the article does nothing to change my mind: if you insist on living beyond your means, then no amount of income will seem like enough. $100,000/year is not a free license to move to the trendiest neighborhoods in the most expensive cities and start collecting yachts, but it's still rich by any reasonable human standards.
- smackfu 12y agoRich is such a meaningless word that people can argue all day over who is rich. Using salaries is an especially terrible choice though. Disposable income is a much better match for what we think of as rich.
- lnanek2 12y agoWhat if your job is in Manhattan where that means you are making negative income vs. your rent? And a good meal is ten times more than a beef soup shop in Taiwan? Or spending 2 hours every morning commuting into the city and back out on a bus to somewhere you can afford on $50k/yr? Is that still rich?
- middus 12y agoJust because your job is in Manhattan, does not necessarily mean that you need to live in Manhattan (especially not in that $15k/month penthouse).
- cbr 12y agoTo handle questions like "And a good meal is ten times more than a beef soup shop in Taiwan?" we can use "Purchasing Power Parity". And adjusting for PPP we still see that an income of $100k is in the top few percent worldwide: http://jefftk.com/world-income-distribution.png http://jefftk.com/world-income-distribution.png
- DanAndersen 12y agoAs the article mentions at the end, a big part of living within your means is reducing your spending -- and a lot of that has to do with recognizing what things are actually necessities. The chart of price increases mentions things like movie tickets, new cars, and private college tuition, which are certainly not necessities. Even high gas prices can be mitigated if you recognize the hidden costs of driving a fuel-inefficient vehicle long distances to and from work every day -- and that in many cases you're not forced to live so far away. I recommend the Mr Money Mustache blog as a source of some decent advice about how to think more frugally and focus on early retirement: http://www.mrmoneymustache.com/ http://www.mrmoneymustache.com/
- shawabawa3 12y agoI'm not sure why the article is so obsessed with this "six-figure salary" thing (which seems to mean exactly $100,000). $100k 30 years ago after inflation is $288k now. Anyone earning $288k now is definitely rich enough to "live the american dream" (in the article they price that at $130k). It would have been a much more interesting article if it had just focused on cost of living increasing faster than inflation
- smackfu 12y agoSame thing with millionaires. A million dollar net worth is not the same thing it once was.
- skizm 12y agoYou're still not poor though. In fact, if you have a million dollar net worth with expenses covered by your current income, you're definitely in the "rich" category compared to 99% of the US.
- deleted 12y ago[deleted]
- humanrebar 12y agoIf you own a family home in some neighborhoods, you have a million dollar net worth. Even if you inherited it from your folks and minimum wage goes to property taxes instead of rent. Granted, you could sell the home and join the regular rat race with everyone else, but what's the point of being frugal if you can't leave the surplus to your kids?
- umeshunni 12y agoMost net worth calculators (e.g. to be an accredited investor) exclude the equity in your primary residence.
- 12y ago
- jawns 12y agoAs dual-income households have become more the norm, it's really the household income, rather than an individual's income, that's a better measure of (material) richness. For instance, you might have a family with a sole breadwinner who has a low six-figure salary, but that has to cover all the family's expenses. Meanwhile, even if his neighbors, a dual-income household, both earn less than him, their household income could be considerably more. By the way, the rising percentage of dual-income households has been suggested as an exacerbating factor in the growing income inequality in the U.S. If you figure that people tend to marry others of the same educational level (more so now than in generations past), and if educational level is roughly correlated with income, then you can see how the gulf widens. Whereas 50 years ago, when single-income households were the norm, a lower-educated fellow might bring in SALARY and a higher-educated fellow might bring in SALARY * 2. But now, with dual-income households, a lower-educated couple might bring in (SALARY * 2) and a higher-educated couple might bring in (SALARY * 2) * 2. So, 50 years ago, there was one SALARY worth of difference between the lower-educated household and the higher-educated household. Nowadays, there is (SALARY * 2) worth of difference.
- roc 12y ago> "the growing number of dual-income households has been suggested as an exacerbating factor in the growing income inequality in the U.S." That's a red herring. When people talk about inequality as a serious economic problem, they're not talking about any discrepancy between households living off a salary or two. They're not even talking about the discrepancy between the ninety-nine and the one percent -- they're talking about the point-one percent and everyone else.
- Iftheshoefits 12y agoI don't think it's as much of a red herring as you suggest. More and more, a dual income is required for basic sustenance. That has a significant impact in many intangible ways: stress, family dynamics, freedom to pursue entrepreneurial efforts, etc.
- roc 12y ago
- vittore 12y agoBecause we have to start with definition of what IS rich. I want to think about it of as how many months/years I can live the life I'm living right now If out of a sudden I loose a job. So being rich should be more about balance between earning and savings. And looking at those places like SF, how one can claim himself rich if 100k a year can barely cover cost of living there ( if can at all)
- chrishallquist 12y agoAs someone who recently quit a six-figure tech job in SF... 100k/year does not "barely" cover cost of living. When I first got the job, I decided I wanted to live close to where I was working in SOMA, which meant paying quite a bit more in rent, but I never had any illusions that what I was paying for was a necessity of life. Though I mainly picked it out for the location, it was easy to tell the building was built explicitly to cater to the wealthy (because that's the kind of building that's getting built in SF right now). When I first moved in, I felt everything about the place was conspiring to tell me, "Yup, you're a rich asshole now." Even with that expense, I still had plenty of money. Even if you feel like you're too good to pack a lunch, and need to eat at a hip restaurant for every single meal, I have no idea where this "barely covering living expenses" is coming from.
- twelve40 12y agoThat's sounds awesome until you factor in a family with several kids and some retirement goals. Not everyone lives in their 20's forever.
- chrishallquist 12y agoI'm friends with a married couple who's got one kid, planning on having more. Husband works in tech, wife doesn't work. Their finances end up looking a lot like mine, except they live in an area of Palo Alto where my rent gets them a decent-sized apartment. (Both I and they are saving for retirement.)
- 12y ago
- dkitchen 12y agoYou're rich because existence itself is shockingly improbable. Beyond that, you even got to be human, with a human mind, which as far as we know is the most expensive thing the universe has ever produced. Lucky you! You're poor because one day you will lose everything and everyone you've ever deeply cared for. That's a shame. Enjoy the few moments you have left. You will have a better chance at this if you stop comparing yourself to others in terms of the milliliters of 'comfort' you can or cannot afford within an OCEAN, a absolute carnival of delight available to all.
- lilsunnybee 12y agoDoes a homeless person have a carnival of delight available to them?
- dkitchen 12y agoNo. A completely demoralized person (I think that's a better descriptor than 'homeless') would not experience much delight in life. Demoralization is genuine poverty. It's our duty to reduce and eliminate demoralization in all its forms to the greatest extent possible. You cannot do that with money, houses, or guns (aka govt. force). The character traits that prevent demoralization are courage, forgiveness, gratitude, authenticity and willpower. But even so... finally, we all die a tragic, senseless, and humiliating death, the ultimate demoralization. So the only reasonable posture we can take towards a demoralized person (or any person for that matter) is empathy and compassion.
- jdimov 12y agoWhen has this EVER meant that you're rich? It doesn't, never has, and never will. Even a 7-figure salary doesn't by itself make you rich. You are only rich when you've learned how to make money work for you and when you have the freedom to do with your time as you please. This automatically excludes any kind of salary making you rich. Salary and riches do not mix. It's the wrong mindset altogether. A high salary CAN be a good initial catalyst on your way to riches, but by itself will never get you there.
- dpeterson 12y agoIs everyone on here a communist? Christ. The article is simple. The government uses it's hidden tax of inflation to steal the wealth of everyone and the media continues to (apparently successfully) fool people into thinking hard working wage slaves that make slightly over 100,000 are "rich". They are not. To make the equivalent of a 100k salary from 1980, you have to make 288k today. The government continues to print more money and this trend will continue until creating value instead of consuming it becomes what most americans strive to do. We have not reached utopia where everything is automated and work is an outdated concept. Yet, the "ism" of jealousy and envy, and perhaps more than a dash of laziness, prevents people from seeing the truth. Hating and taxing everyone that makes a living wage will not lead to prosperity. Yes I am talking about socialism. Although, most of the people on this site seem to lean more toward wanting full blown communism. Let the down votes commence.
- dkitchen 12y agoYes! It's about creation vs. consumption. We appear to be the only thing in the universe that has a choice about which of those two activities we want to be primarily engaged in moment to moment. It's a heady responsibility.
- ccallebs 12y agoConsumerism. It convinces people that once they make $100k/year, they require a vehicle that befits someone who makes that much money. It convinces people that they require a place to live that compares to their other 6-figure earning peers. More, bigger, better -- the importance of those three things outweighs most everything else. I grew up (and now live) in rural Appalachia. The "American dream" is defined much differently here. The American dream is owning a trailer and not having to live off of food stamps. Let's ignore the absurdity of comparing a 1980 $100k/year salary to a 2014 $100k/year salary. In most areas of the United States, six figures is enough to qualify as well-off. Compared against the backdrop of abject poverty, six figures is certainly rich. My wife's cousin was talking to her about a new job he landed. He was giddy with excitement, as he told her he was going to be "making bank." The salary was $22k/year. My point is that "rich" is relative to your geography and your upbringing. In most areas of the U.S., a six-figure household income is enough to have a warm place to live and healthy food to eat, with enough left over to provide security during times of famine
- zoidb 12y agoMy favorite quote from the article: > There are a lot of ways to be frugal, but you can start with driving older (paid-off) cars and tracking your expenses to ensure that your family spending aligns with your values and goals. So I guess being "frugal" means that you track your expenses and not live beyond your means?
- ccallebs 12y agoI caught that too, words cannot express my distaste for that kind of mentality. It's unfortunate that normalcy to the author is not keeping track of finances and buying things you cannot afford.
- gshubert17 12y agoThe article lists factors such as inflation, geography (the coasts are more expensive), kids, and healthcare, but not underlying reasons. Some people want larger homes, more cars, bigger lifestyles (over-the-top weddings as an example), communication and entertainment (expensive cable, internet, and phone providers, just to start). And the allocation or misallocation of resources within the health "care" system is another reason that average income doesn't seem enough. The few tips at the end -- live modestly, save a lot, and don't get hung up on status -- are barely a start. The goal of "living the dream" is left unexamined or unquestioned.
- davidf18 12y agoA major cause of the increased cost of living in NYC, SF, Boston, SV is the "rent seeking" activity increasing cost of renting or purchasing a house through restricting housing density through zoning and through overuse of historic buildings designations. Harvard Economist Edward Glaeser speaks of this. In these cities, the cost of housing is far higher than the cost of construction because politics is used to make wealthy landowners even wealthier at the cost to others. Rent seeking is a sign of market inefficiency.
- rdudek 12y agoHow much of this is just personal perspective? What exactly defines being rich? $100k a year? $1m a year? More? Why go after being rich when you can go after being wealthy? If you have enough money generating assets that cover all your expenses, you're pretty much set. It's all about the cashflow.
- knackers 12y agoInflation.