The one where you lock into a mortgage and a car that assumes a $1.2M salary to keep ahead of.
It's really easy to let your lifestyle expenses balloon, especially in a high-COL city where minor increases in living space/amenities can end up costing large amounts of money.
Also don't give a damn what people think about you. Typically people get trapped in that mouse wheel because "look what they have."
Source: I sold a company and quadrupled my spend on housing. Something stupid that I regret. But I also spent money on high quality stuff that is still lasting almost a decade later.
The challenge there is it's hard to ramp those down once you lock in. Downsizing on housing means having to move and possibly sacrificing social life and opportunities along the way. Pulling your kids out of private school has consequences for their long term prospects and their socialization. And so on.
I respectfully disagree. Luxury goods are often flimsy or expensive to maintain (e.g., Toyotas vs Porches) so research is still required.
As for private school and housing, these are exactly the expenses I'm talking about not getting wound up in. I went to private school almost my whole life, and I understand what it is to not want to be pulled away from a community, but the reality is that $500k—let alone $1m—is more than enough to afford a good private school and a good home in any city. The struggle to live on $500k / year is an artificial, self-sabotaging one.
EDIT:
One breath of scandal—
—his spirits plunged even lower. One breath of scandal, and not only would the Giscard scheme collapse but his very career would be finished! And what would he do then? I'm already going broke on a million dollars a year! The appalling figures came popping up into his brain. Last year his income had been $980,000. But he had to pay $21,000 a month for the $1.8 million loan he had taken out to buy the apartment. What was $21,000 a month to someone making a million a year? That was the way he had thought of it at the same—and in fact, it was merely a crushing, grinding burden—that was all! It came to $252,000 a year, none of it deductible, because it was a personal loan, not a mortgage. (The cooperative boards in Good Park Avenue Buildings like his didn't allow you to take out a mortgage on your apartment.) So, considering the taxes, it required $420,000 in income to pay the $252,000. Of the $560,000 remaining of his income last year, $44,400 was required for the apartment's monthly maintenance fees; $116,000 for the house on Old Drover's Mooring Lane in Southampton ($84,000 for mortgage payment and interest, $18,000 for heat, utilities, insurance, and repairs, $6,000 for lawn and hedge cutting, $8,000 for taxes). Entertaining at home and in restaurants had come to $18,000.
-------------
It goes on. The guy needs Mr. Money Mustache.
Besides the fact that if you're earning $1.2M salary, you're taking home other bonus/stock that are comparable. Getting locked into this sort of lifestyle is a choice not driven by need. A drug dealer in "low cost" Detroit or Sinaloa might make the same claims...
If you have a family, a $1.5m house (which barely gets you a shabby 3-bedroom in a high cost city) will, assuming you put $300k down, be around $8-$10k/month in mortgage + property taxes + insurance + any hoa/maintenence, which is by itself 40% of your monthly take home.
Uh... median house price in Seattle is less than half that. $1.5 million for a house in Seattle will get you an extremely nice house. Extremely nice.
If you disagree, it's because you have incredibly high standards for what constitutes "nice". That's fine, but it makes it more than a bit silly to complain that you "can't afford" a different lifestyle.
You're just making bad choices at that point.
Honestly, if you're regretting your life choices so severely but you're unwilling to live anywhere but NYC/SF, you're either not really regretting your life choices that much, or you're just really bad at making good decisions with your life.
Suppose he lives on the UWS in a 2000 square foot 3-4 bedroom condo which he bought for $4mm and has a $3mm mortgage. With a 30year fixed mortgage, that's maybe $180k a year. Don't forget the $60+k a year in condo fees and taxes. Throw in anywhere from $40-80k for nanny/childcare/preschool for the 1-2 kids he may have and you already have nothing left over if he went to a $600k comp.
I'm not saying he can't choose to live more conservatively, but when you're used to making $1.2mm a year, it's not hard to imagine how he got here. High cost of living does play a part, especially in NYC.
[1]https://www.wallstreetoasis.com/salary/investment-banking-co...
And this dude bought that shit despite hating his professional life. Hard to feel bad for him.
from: https://www.cnet.com/news/silicon-valley-middle-class-earns-...
https://www.bizjournals.com/sanfrancisco/news/2016/12/01/pro...
If you sold your company, aren't working at FB/goog/etc and are sitting on a ton of stock holdings, your income is going to show as near $0
Yes, there is capital income from stocks and other market investments, but appreciation for those comes under capital gains, which are calculated (and taxed) separately, and don’t count as employment income, for good reason: You can’t use stock options vesting in 4 years to buy food tomorrow or pay mortgage next month.
It is pretty crazy how little extra money buys you. E.g. in NYC, the only differences between a $2,000 month apartment and a $20,000 a month apartment are going to be things like location, granite countertops, a well-designed bathroom, and better windows. But in most cases the actual floor space and layout is going to be almost identical.
Clearly those things are worth something, but it's easy to see how the work and stress of paying for those accents is to result in a net negative happiness for many if not most people.
https://streeteasy.com/building/chelsea-modern/rental/265743...
https://streeteasy.com/building/336-west-23-street-manhattan...
Where did you get 1-2k sq/ft 2 bed 1 bath shithole from?
For those who don't feel like clicking the link: most are very large (5-6 br) apartments, in expensive neighborhoods, in nice new buildings.
> vacation properties
I'm glad there's a "stupid tax" for wealthy people too.
My personal hunch as to what causes the demographic transition is that we have an evolved system for determining whether we are doing well or doing poorly and that system calibrates itself by examining the people around us. But, because our current economic and social system sorts people by income and status (talented people migrated into the cities from farms, even more talented people moved into more expensive neighborhoods, etc.), and because advertising constantly shows us higher levels of consumption to aspire to, even people who are, in an absolute sense, raking in obscene amounts of money are surrounded by a peer group that are roughly at their level. So it never really feels like you're rich; even though you live in a $3 million dollar home, you live on a street with $8 million dollar homes; even though your kid goes to a $30k/year private school, you can't afford to spend $200k vacationing in France during the summer like some of their peers, etc.
Interestingly, this parallels my own experience. As a senior developer, I'm now making roughly 3x what I made before becoming a programmer. Back then I would have imagined that all of my wants would be satisfied by 3xing my income. Yet somehow I still yearn to make more.
Why isn't it? Afaik in biology, healthy populations tend to be stable populations.
Populations that shrink or grow too fast are often a sign for something going very wrong, usually having to do with sustainability.
That's why I think people in rich nations having fewer children is a feature and not a bug. It's the result of increasing living standards because when you have very low child-mortality rates you don't need to "try" several times to get one into adult age, just like the availability of contraception allows for more reliable family planning.
The same applies to having a social security net: Without that, you have to depend on your offspring to take care of you when you get too old to work/sick.
In a situation like that, more off-spring is always better, as long as you get them through childhood into productive adulthood. Each child is a future potential care-taker and each one of them could end up being a big earner. In that context, a whole lot of people treat getting children like playing the lottery.
This is not correct. Rich people in rich nations have more kids than middle-income people in rich nations. What matters is your comparative purchasing power.
Fertility actually increases with income, even for women with education; this is mostly due to rich being able to afford the costs of child care, and feeling secure enough to invest into all of their children as much as they feel they need to. (whereas a middle-class, educated woman would only feel secure investing into 1 child)
What isn't correct based on what?
But if you go even further, you'll see that fertility actually declines with income in developed nations. It's not until you get to the top several percent of income that fertility starts rising again.
Yes, that's what I meant. You could argue about the significance of the top percentage rise in fertility, but if anything, it shows that fertility is constrained by lack of resources in a significant way as well as education specifically.
I didn't say it is constrained by lack of resources, I said it's also constrained by lack of resources.
What I'm saying, though, is that if you look at the fertility curve[1] you'll see that many middle class families could eliminate one earner and still have 2-3x the income as poor families that have more children. But people are choosing not to do that (well, secular people are choosing not to do that; intensely religious people often do exactly that).
That's what's interesting to me.
Animals evolved using competition as a mechanism to select the best mates. Advertising is not the cause, it's the nature of all animals to project power. There might be some people here and there who are satisfied or whatnot, but even without advertising, people would be competing.
tl;dr Not a root cause, but a powerful multiplier.
My great grandmother gave birth to 16 children (this is my mom's mom's mom) who lived to adulthood. She (with my great grandfather) had no trouble housing them, feeding them, clothing them and ensuring they got educations to at least 8th grade, most to 12th grade. Does the CPI accurately reflect the changing costs of each of the things that were then easy to afford? How much would it cost to raise 16 children now? In theory, we are much more wealthy now than my great-grandparents were in the period 1880 to 1910, and yet they were able to afford something that nowadays would take a great deal to afford. Why is that?
Another thing that the CPI does not capture is how some new expenses have arisen that have become essential. In particular, automobiles. In much of the USA, having an automobile is non-optional.
We should think about those changes in lifestyle that make comparisons difficult across time. My great-grandparents raised 16 children in a dense town where transportation was dominated by walking. If you were trying to recreate that lifestyle in a USA suburb, some odd questions come up. Can you fit 16 children in one car? Do you get multiple cars? Who drives them? These questions point out how difficult it is to make direct comparisons.
Nor is it correct to simply say "No one needs to live in the suburbs in the USA, they can, if they wish, continue to live in a dense urban center". But the USA economy is a cohesive whole, and the existence of the suburbs effects the price of things in the urban core, as well as the focus of transportation infrastructure. Over the last 100 years, most USA urban centers have built significant transportation infrastructure to help workers in distant suburbs come into jobs in the urban core, and then go home at night. The money spent on those infrastructure projects could have been spent on some other priority, but instead were spent as they were because of the existence of the suburbs.
So it is very difficult to make direct comparisons, because some lifestyle changes make direct comparisons blurry. But in that blurriness, we can argue that in important ways our standard of living has not increased as much as the CPI seems to suggest. In particular, for those people who have a strong craving to have a large family, one can reasonably argue that their standard of living has actually decreased over time.
Maybe early on a Sunday morning? Or maybe if you're stopping the clock as soon as you get to the other side of the GWB?
On a weekday morning, you'd be lucky if you can get from Secaucus to the Manhattan side of the Lincoln Tunnel in 30 min.
New York City
Source: https://www.census.gov/quickfacts/fact/table/newyorkcitynewy...
Private school tuition - $50k/kid/year Additional activities such as tutoring, sports, etc - $10-20k/kid/year Mortgages+fees or rent for a 1,500 square foot apartment in a doorman building in East 80's - $75,000-150,000/year Mortgage or rent for country home in Hamptons or Litchfield County - $40,000-100,000/year
Literally half of his income is going to be taxed as an NYC resident. So he's got $600k of cash flow and if he has 2 or 3 kids, the very basic fixed costs of housing and schooling are likely taking up about half of that. With the remaining half he has to pay for food, vacations, cars, clothing, etc, and anything left after that will get saved.
To be clear, nobody is making this guy do this. Nobody's forcing him to "summer" anywhere, nobody's forcing him to enroll his daughters at Spence when PS 6 is free. But at the same time, this is a guy who came up through a system in which preppy affluence was the chosen lifestyle of his "me 10 years from now" role models. As easy as it is to mock the concept of anyone being "trapped" when they make 1.2mm a year, the truth is that stopping his current job would be profoundly disruptive and stressful for this guy, his wife and their kids. So I get where his wife is coming from when she laughs at his mention of the startup.
I dunno, his wife did laugh at his startup job offer and divorce is expensive. Not that I feel bad for the guy, but it is often something like that.
That might be a small example, but it shows the way the wealthy lead their lives. Luxury cars, high end electronics, multiple homes ... they all add up.
After all, it's not like wealthy bachelors were common during the recession.
There are many ways to go through your career and your 'wealth' cycle. What worked for me was that when ever I got a raise or "extra" money (bonus, stock vesting, etc) I always adjusted my savings rate so that my take home pay was unchanged relative to inflation. The company gave me a 10% raise and inflation was 3%? I added 7% of that raise to my savings rate. As a result, my savings grew and my lifestyle didn't change, I could always "live on" a much more modest salary than I was being paid. That gave me tremendous flexibility in being able to take jobs that had a 'pay cut' but had other aspects that made them desirable (learning something new, opportunities to develop a new skill, more fun, Etc.) And after a while the amount of money your "savings" is kicking off gets to be more and more significant. If you're lucky, then one day the number your savings is kicking off is the same amount you're paying yourself out of your own paycheck and then you can walk away at anytime, keep your life style, and never have to work again. That gives you a tremendous amount of flexibility in how you spend your time.
The same one where a dev making $160k can't give up a job they hate because they can't afford to take a job paying $80k.
Everything is relative. To many Americans and $80k desk job is the lap of luxury. To many devs, that pay would be insulting.
City + State + Federal taxes are around 50%. So $600k. Private School per kid is $50k. Assume two kids so about $100k.
Okay, now a 4 bedroom apartment in NYC is like $25k/month (on Zillow, eyeballing it), or about $300k/year.
You're down to $100k-$200k for food, vacations, clothes, cars etc.
Oh, the humanity.
I'm just explaining why the move would feel tough for a family.
People inside tech having anxiety about it?
Seems to me the anxiety has far less to do with tech than with the nature of the economy and employment in general.
But to most people who actually make $1.2 million per year, it means giving up all kinds of status symbols and creature comforts. Many of which they are locked in to via mortgages, leases, etc.
Many people could retire after one year at 500k or 1M because their cost of living is such that they would be able to save almost all of it, and this would spread across their retirement..
Thinking about retirement savings at all is kind of a luxury.
but it's possible, is my point - the difference on whether it is possible or not possible is the lifestyle one chooses to lead with it.
It just take a lot more to retire than the average person realizes, and not eat Alpo.
I estimate the top sales people are the highest compensated people in a company. It is true meritocracy, however. You are judged on a single metric more or less and the bottom of the group is dismissed without second thought.
You can make a great living on the engineer side of the operation and it's steady but you'll never see the highs of the top sales people even when you're at a point with stock and salary being many hundreds of thousands.
It's not a life for me but I have nothing but respect for the effort, time and relationship building great sales people put in. It's a hard, competitive ladder but if you make it work you'll hit high 6 figures and at times 7 figures for many years.
Ok, looks like it was actually New York, but under the same principle: golden handcuffs.