One-Third of Americans Making $250k Live Paycheck-to-Paycheck | Hacker News Reader

One-Third of Americans Making $250k Live Paycheck-to-Paycheck

bloomberg.com

124 pointscrhulls306 comments

Anyone can live paycheck to paycheck if they let lifestyle creep get past their income.

Looking at the difference in my income now vs 10 years ago and the difference in my savings rate, the savings is less than it should be in comparison. Inflation is part of it, sure. But it's a lot more that my lifestyle has changed. I choose to have a nicer place vs back then while living in a HCOL area, a nicer car. There are purchases I make without a second thought that would have been a big deal back then. And I make a conscious effort to monitor lifestyle creep. Plenty of people don't think about it at all and go all in.

The second my mom gets a dollar - she has the most insatiable desire in the world to spend ten.

There are spenders and savers.

No amount of money changes that.

Part of the point of making more money is to not think about cost. And then you learn how endless our desires are.

> There are spenders and savers.

This seems a little reductive, like nobody has any agency nor are there any shades of gray, you're either black or white, true or false, spend or save. I'd argue people prioritize different things and a lot of the reasons they prioritize those things has to do with their upbringing or personal history.

I'm sure, in general, people should save more. Just feels like everyone is quick to jump on others for making different choices without understanding the context of those choices. It is the whole "Should people on food stamps buy a birthday cake?" question again, and every time that comes up all hell breaks loose.

Many people have poor impulse control around certain decisions and are unable to control themselves despite wishing otherwise. The percentage of overweight and obese individuals in the world is a good indication of this.

Unless you feel obesity is their priority.

Not just poor impulse control, typically obese people and compulsive spenders are compensating for some psychological trauma.

For some reason they lack a positive emotional stake in their future

Some people just really like French Fries...

Seems like you are describing Why they have poor impulse control.

How many of them would not be making $250k if they moved away from the HCOL area? Rents in NYC have been through the roof. Even with wages up due to the great resignation, it hasn't kept up with housing. Spending 50%+ of your post tax high pay check on housing has become the norm.

You could live far away from the city and spend 3-4 hours commuting every time you wanted to enjoy the city life or your employer asked you to come in. Or you could move away and risk getting fired or "salary adjusted"

The article kind of ignores the fact the high salary is directly tied to office location. You can save more by moving away from HCOL areas, but you most likely won't be part of the $250k article anymore

HCOL has an interesting parallel to when women entered the workforce in large numbers, you'd think that households going from single-income to dual-income would make them better off, but much of that new income went into property prices leaving a lot of households little better off in the long term, and leaving single-income households much worse off.

To be clear, NOBODY is suggesting women in the workforce is a bad thing, I am merely saying that HCOL's housing cost just suck almost all the regional income gain back out of the market leaving households little better off overall. The best thing we could do as a society is more full-remote jobs, to break up HCOLs and revitalize more rural areas.

Georgists have studied the mechanism by which land captures the value of labour quite extensively and many of them even predicted this trend. The solution to land capturing excess amounts of labour is to reduce total labour capture by taxing land instead of labour.

Would that not just lead to increased rent?

Is there a way to do it so that rents become lower?

Taxes on land dont have economic incidence on rents.

The reasoning is that land's profit stems from its location and the land owner doesn't have any bargaining power - his only choice is to not rent the land and absorb the loss of all value.

Its not the same with property taxes because builders/buyers can choose not to build, so there is some distortion.

A land owner has a whole continuum of choices because he is setting the rent price. It's no different from any other seller on the market. The higher price will push the potential tenant elsewhere but if other places are taxed the same way they may also need to raise prices so it will be a wash in lost customers and higher rent across the board.

You can draw the supply and demand curves to see what happens when you add the tax. The supply curve is a straight vertical line since land is in fixed supply. When you tax someone $2000 for land, their demand for the same land falls by $2000. So if you charge the tenant the tax, prices will fall by $2000 making the landlords absorb the cost. If you charge the landlord the tax both the supply and demand curves are unchanged and the tenants pay the same.

Taxes on most things change prices by adjusting both supply and demand, it’s the adjustment to supply that can pass on part or most of the tax to the customer. If supply doesn’t adjust you can’t do that.

I really can't. What are supply and demand curves for non-fungible goods? Each plot of land is unique. The asking price doesn't not affect its size. It does affect the time on market: the higher the ask, the longer it will take to rent out.

And some pieces will take infinite time to rent out if the price is set too high. The point is the land was just as unique before and after the tax. If you believe in supply and demand curves at all, this example is straight forward. Land has essentially fixed supply, so the curve is vertical and outside of a few weird exceptions can't change. The demand curve for your individual unique piece of land will be unchanged if the landlord pays the tax (taxes don't cause tenants to be willing to pay more) or be lowered by the tax if the tenant pays the tax (total spend by tenant unchanged). The new intersection of the lines determining the market price is either unchanged or lowered by the tax depending on who pays. This is unlike other supply and demand examples where in response to the tax you reduce supply causing the supply and demand curves to intersect at a higher price point.

>And some pieces will take infinite time to rent out if the price is set too high.

Yes. Same as the demand curve goes to 0 if price is high enough.

>If you believe in supply and demand curves at all, this example is straight forward

I believe in supply and demand curves for fungible items. It's easy to observe that you can acquire less of a particular item at a lower price than at a higher price and also true that you can sell more at at a lower price than at a higher price. I don't see how, say, a particular painting becomes bigger or adds detail with price increase or how one can sell two Mona Lisas by cutting down the price.

If you have a unique item your supply curve is flat at 1 supply and steps down to 0 at a price at which you refuse to sell. It’s still a supply curve and there is still a corresponding demand curve that determines the price you can sell at. In this case, it’s the demand of the highest bidder that causes the intersection. But the theory of supply and demand doesn’t go out the window because items are non-fungible.

So now you have "demand curve of $CUSTOMER"?

There are also no individual demand curves. The whole idea of supply/demand curves is statistical and does not apply to a single individual (as same as unique items). I have no more questions about the "land tax won't be passed to the end consumer" though so here is some result from this exchange :)

> So if you charge the tenant the tax, prices will fall by $2000 making the landlords absorb the cost. If you charge the landlord the tax both the supply and demand curves are unchanged and the tenants pay the same.

Beautifully correct. Can you imagine peddling in politics a tax on renters claiming it is in their benefit?

They can't set rent prices - prices occur when supply meets demand, it's not unilateral.

The origin of rent in land - beware it is not the same for buildings - is the difference in value from one land to the least valuable land. (roughly, David Ricardo). A land tax is about taxing this rent, not about nominal land taxes on everything.

If the land tax is roughly correct, the owner of land cant charge more with the tax because it is less competitive than land that is a little farther away.

Adam smith, David Ricardo, Henry George, Milton Friedman and even Stiglitz have all lauded that land taxes are less distortive than any other tax and would be great as a local tax policy. (In the us, for cities and states).

>They can't set rent prices

They totally can. Go to any marketplace and see for yourself: sellers set prices. Buyers can negotiate, accept or refuse, but the seller setting the price (ask) is completely unilateral and happens billions of time every day.

>If the land tax is roughly correct, the owner of land cant charge more with the tax because it is less competitive than land that is a little farther away.

If this theory had been correct than raising taxes on businesses would not result in the increase of consumer prices.

>land taxes are less distortive than any other tax

Might be true or false, is orthogonal to the fact that land taxes, like any other taxes will be paid by the end consumer through increased prices.

> They totally can. Go to any marketplace and see for yourself: sellers set prices. Buyers can negotiate, accept or refuse, but the seller setting the price (ask) is completely unilateral and happens billions of time every day.

There is some subtlety about talking about prices conceptually. Both sellers and buyers can make an offer or a bid at any price, but market prices are the result of sellers and buyers meeting - about making the actual exchange.

In this context, saying "sets prices" would mean that the buyer takes the price, not that the seller has made a listing at an arbitrary number. Offering 1$ for a car and not buying a car is not setting a price - neither is Asking 1000000$ and not getting an offer.

Rent prices are paid at all because there is a benefit to the land. If the Ask for the land is higher than the value, it will meet demand and validate the price.

> If this theory had been correct than raising taxes on businesses would not result in the increase of consumer prices.

Thats not true - economic incidence requires evaluation in a case by case basis. It depends on the relative market strength or demand/supply elasticity. For example, a tax on life saving medication is borne by the consumer, but a tax on skittles is born on the skittles manufacturer (as consumers replace skittles with other candy).

The point is that the economic incidence on unimproved land is very much against the landlord - he can't do anything with the unimproved land but rent it.

For longer, wider and more interesting historical analysis of LVT I recommend reading from source - Henry George and Provery and Progress, a book denouncing homelessness and land speculation in...San Francisco, 100 years ago.

I understand what you are trying to say but your concept of market price is only applicable to fungible goods. "Market price" for land leases makes very little sense and only implies that it's whatever price you've managed to negotiate. There are no supply/demand curves, there is no spread, nothing like you are used to with pricing fungible goods.

But that is not the point of my argument, your original assertion was that "the land owner doesn't have any bargaining power - his only choice is to not rent the land and absorb the loss of all value." Now you are saying seller and buyer negotiate? Why would they do if the seller has no bargaining power?

> but a tax on skittles is born on the skittles manufacturer (as consumers replace skittles with other candy)

Why then a 1kg of Skittles on Amazon.co.uk costs more than 50 oz (1.5kg) of the same on Amazon.com (GBP 9.43 vs USD 9.98)? Is it really because British people want to taste the rainbow so much more than Americans?

> I understand what you are trying to say but your concept of market price is only applicable to fungible goods. "Market price" for land leases makes very little sense and only implies that it's whatever price you've managed to negotiate. There are no supply/demand curves, there is no spread, nothing like you are used to with pricing fungible goods.

To make sure I understand - you say that because each land is as unique as an NFT, the market for every single piece of land has supply of 1, and the classical supply/demand curves don't make sense/apply.

I have multiple answers to that concept:

1- From a mathematical abstraction, the key to riches would be to get one land and split it into as many sub-pieces of land as possible and sell them all at the same price as the larger one!

2- There are differences between fungibles and non-fungibles, crypto has taught us, but overall most properties are similar and allow for the exchange of a non-fungible for another. Each land NFT is unique, but there are many land NFTs, and they compete against each other as if they were fungible. Each wine is unique too, even each bottle of wine is unique! but albeit this does affect demand, it doesn't turn supply to perfect inelasticity. There are subsitutions!

> But that is not the point of my argument, your original assertion was that "the land owner doesn't have any bargaining power - his only choice is to not rent the land and absorb the loss of all value." Now you are saying seller and buyer negotiate? Why would they do if the seller has no bargaining power?

Bargaining power to increase rents to cover the land value tax - he cant change the supply of land, or repurpose it for something else.

> Why then a 1kg of Skittles on Amazon.co.uk costs more than 50 oz (1.5kg) of the same on Amazon.com (GBP 9.43 vs USD 9.98)? Is it really because British people want to taste the rainbow so much more than Americans?

I've waited all my life to a microeconomics conversation about skittles. The bigger question, sir, is why do blue skittles sell at the same price as all the other skittles, when they are clearly the worst.

Many equal goods have different prices in different parts of the world for cost of labor, supply, taxes, etc etc. I have no idea in this particular case why it would be so, but relevant to economic incidence of taxes, sales taxes do change supply/demand curves of skittles bought on amazon. Because skittles are a unique product, but also substitutable for other non-sales taxable foods, its very likely both producer and purchaser eat part of the tax hike - they both lose.

Not exactly as NFT, which has no value at all and, in fact, is chiefly traded on the basis of other NFTs of exactly the same kind (but for some reason considered different).

The market model of fungible goods is based on maximizing the product number of items and price. It means that sellers will be increasing price as long the number of items sold also increases and will decrease price when the number of item sold drops, since the supply and demand is monotonic (someone willing to sell at $X will also sell at $X + anu positive number and someone willing to buy at $X will also buy at $X - any positive number) there is naturally a point where the number and price product is at the maximum. It still is affected by taxation and adding taxes moves prices up but this is besides the point.

None of the above applies to the land lease. The number of items to sell is 1, the value that the seller is maximizing is the lease value. If the price is too high then the land will stay unleased for longer time than acceptable to the particular seller and that may cause him to lower the price. The land will stay unleased longer because the prospective buyers will be choosing cheaper land elsewhere even if they otherwise would have chosen this particular parcel. But if all land owners are hit with the same tax then all of them can raise price and that will not affect unleased time because there won't be a price advantage for the buyer to go elsewhere.

>I have no idea in this particular case why it would be so, but relevant to economic incidence of taxes, sales taxes do change supply/demand curves of skittles bought on amazon.

Okay, we agree then. I was under impression you said they don't. Or you meant just sales taxes? What about VAT? What if there had been special Skittles tax in UK, would the manufacturer eat that since it's not a sales tax and the sellers are very inclined to just take a loss according to you?

LVT is not the same tax to all land, its precisely based on land rent.

Interesting. Can you recommend a book or an article on this?

Progress and Poverty is the most interesting original source but the first few chapters are an outdated theory of capital. I’d recommend one of the modern abridged editions that skips this.

Thank you! Quick follow up question, which abridged edition would you recommend? Also, are there any recent books on the subject that you would recommend?

Maybe its a chicken egg type problem. The solution was that households became dual income. I think the drive for a household to become dual income was probably the HCOL and not vice-versa.

>I think the drive for a household to become dual income was probably the HCOL and not vice-versa.

I'm not sure that's correct. I don't have the statistics off hand, but I believe the average home prices were much smaller multiples of household income when most households had a single income.

It's almost like the economy is designed to funnel money away from labor.

This is more than likely confusing correlation with causation.

There are a host of regulatory issues that made building anything expensive that arose just as women joined the workforce. The largest source of increase in COL over the last is housing. Rents have nearly doubled in constant dollars in most large cities.

FWIW the rise in women working has increased individualism and requirements in men pre-dating, which partially reflects in RE (more individual space, less families).

This doesn't mean women working is the problem, rather we should've thought harder about what measurements should've been taken when introducing women into the workforce. Several countries are now "fixing" this retroactively, though more so to give women a fighting chance rather than actually helping out workers as a whole (e.g. forced paternity leave).

I regret to inform you there are lots of people who think that women in the workforce is a bad thing. Fundamentalist evangelical Christians often view this as a negative. There was a conservative thinker on the Ezra Kline show who espoused this view just recently.

> NOBODY is suggesting women in the workforce is a bad thing

Lots of people, and not just religious conservatives, are arguing th as that, because the exact effect you point out makes it hard not to either say that or that capitalism is a bad thing or that people working more for less is a good thing.

NOBODY? How about anybody who cares for the future of their people or the stability of their society? Forcing women to work is arguably the root of most social ills in the last two generation.

So how do all the people making under $250k survive in those HCOL areas? It still seems lifestyle choices are a factor.

They survive by not having $200k (average and median) in student loan debt that needs servicing.

It's always been an unspoken truth behind the "the people with really high student debt have huge earning potential" counterargument for student-debt cancellation: yup, they do, those are your doctors (in particular). They go into tons of debt to get there, they forego many years of income due to an extended educational/credentialing period. And generally, so few people are willing to take that risk that we already have a massive shortage of them.

And unless you reform the educational system, the cost of that student-loan debt all gets rolled into the cost of their services and we all pay it. And it does show up as income in this fashion. It's one of the reasons that fixing the problem is so tough - it's really at the nexus of several broken systems that have complex problems with many stakeholders who are all reticent to reform.

> They survive by not having $200k (average and median) in student loan debt

Where do you get $200k from? The average student loan debt for a bachelors degree is $26-36k, depending on type of institution: https://nces.ed.gov/fastfacts/display.asp?id=900

It goes way up for advanced degrees.

https://educationdata.org/average-graduate-student-loan-debt....

"Among federal borrowers"

This doesn't include people who get graduate degrees paid for by their parents or by the company they work for. I got a Masters and didn't take on any debt because the company paid for most of it and I only needed to pay a few hundred in fees each semester.

Now is a good time for me to say that it was still a waste of money and time. It was no benefit to me and didn't increase my comp. It would have been better to just work 2 extra hours at my job every day instead.

> They survive by not having $200k (average and median) in student loan debt that needs servicing.

Both the share of the population with any student loan debt and the average student loan debt to income ratio consistently goes down with increasing income (even though the average student loan debt itself goes up with income until you reach the top decile, which has lower average student loan debt than the next highest decile.)

Maybe they just don’t?

For instance, I teach high school English. Cost of living in my city is 40% below SF, but I still couldn’t afford to live in the community where I teach. I commute from a cheaper area. Even then, I am actively planning an exit from teaching after this year because my wages aren’t keeping up with rising costs (10 yoe, TC 52k).

* If you're poor you deal with the terrible commute as non-negotiable. You might also live in a cheaper illegal basement apartment, put your child in a cheaper illegal daycare, etc. A richer family can avoid the risks and pay more. But some poorer families have to take on the risk or be homeless

* There are more subsidies for the poor. It sounds funny to type, but the $250k families might have a harder time to make ends meet than the $60k ones. Childcare being a big example. This is specific to a HCOL city like NYC where subsidized child care starts at 6 weeks old, but a $250k family will probably be spending $3k+ per child per month

> * There are more subsidies for the poor. It sounds funny to type, but the $250k families might have a harder time to make ends meet than the $60k ones. Childcare being a big example. This is specific to a HCOL city like NYC where subsidized child care starts at 6 weeks old, but a $250k family will probably be spending $3k+ per child per month

Yeah it sounds funny to type because it's not true

Probably not true nominally but proportionally 250k is very far away from being 4x 60k.

I make 235k in the bay area and just rent + daycare for 2 kids would be 10k a month - on a net income of 12k a month.

Talk to your servers next time your in a restaurant in the Bay Area or NYC, ask where (and how) they live.

Most likely they live quite far from where you are eating and with more roommates than you had in college. Or they still live at home, outside of the city in the suburbs they grew up in.

You don't even have to ask servers, go ahead talk to non-engineers/PMs at your company. They all likely both don't live in the city you work in and have an uncomfortable amount of roommates.

And maybe you can write off "living without roommates in your 30s" as a "lifestyle choice", but it certainly represents a decline in the standard of living from my expectations growing up.

They live in crowded spaces. I had friends in NYC who would live 4 to a 1 bedroom apt where there'd be 2 people in a bedroom and 2 people splitting the rest of the living space with a DIY curtain. It's definitely a lifestyle choice, but it's not a pleasant one in my opinion which is why I never did it.

> commuting every time you wanted to enjoy the city life

How do you enjoy the city life when half of your disposable income goes to shelter? And you haven't eaten yet??

But as long as enough people are willing to chase that dream rents will be high. That is, they will reflect what the market can bear.

> You could live far away from the city and spend 3-4 hours commuting every time

This is an example of my point. That's a choice one makes. One might claim, and I'd agree, that it's a shitty choice to have to make and it's better to bite the bullet of high housing costs, but it's still a choice.

> How many of them would not be making $250k if they moved away from the HCOL area?

I live in the D.C. metro, considered a "HCOL area." I'm less than an hour from downtown DC. Our house (almost 3,000 square feet) was under $500k in 2016, and there's still plenty of similar houses between here and D.C. that are still under $500k. But most folks making $250k would rather live an hour on the other side of DC, in the expensive Virginia suburbs where similar houses cost twice as much, but they can be surrounded by college educated professionals with similar complexions to themselves...

I used to work in Manhattan and had a great, 30 minute commute from New Rochelle. Looking at Redfin are plenty of 3BR homes in the $500s and $600s within a mile or so of the New Rochelle Metro North Station. That's not cheap, but the PITI on that is a couple of thousand dollars less per month than what the 28% rule gives you for a $250k/year income.

A larger percentage of people reported living paycheck to paycheck in lower income groups.

You can spend an awful lot on rent at $250k and still have plenty of money left.

Reminds me of those stories about broke athletes.

Some of them are quite tragic- they're preyed on by their entire family and birth village.

A large part of this is about housing and taxes: https://www.aeaweb.org/articles?id=10.1257/mac.20170388

HCOL areas are also usually the most productive.

In fact it's not a coincidence - economically productive areas are desirable to live. Everyone likes living in a thriving economy, and salaries are higher. HCOL isn't a bad thing in the abstract, there is no abstract "right" set point for cost-of-living, and you could equally view LCOL areas as generally being rural/underdeveloped areas that are underpriced relative to the broader economy.

HCOL is the law of rents catching up. If your right to exist in a place can be captured, then it will eventually cost you your entire productive output.

The best way to deal with this is to add savings-creep too.

There is no reason why you can't enjoy things if you make more money, but increase your savings and investing rate by an equal or greater % as your salary goes up.

If you do not have a savings or investing rate, the next time your salary goes up, if you think it will, take 50% of that and put it into savings and investments. Treat your salary increase as a 50% increase.

This is more or less what I do. Measured objectively against typical Americans I do save a ton. But back 10 years ago I figured I had everything I cared to have, so anything over and above would be gravy. Not so as it turns out.

So instead I have a target savings rate, and while I don't live on a strict budget I keep my eye on it that I'm close enough over time.

> But back 10 years ago I figured I had everything I cared to have, so anything over and above would be gravy. Not so as it turns out.

Would you mind sharing what changed? This is actually something I've been thinking about lately. I'm trying to plan out the type of lifestyle that I'd ideally like to have while also estimating how much it would cost me. This way, I don't get needlessly tempted by chasing ever higher and higher salaries.

Sure. It's nothing profound. More a matter of having simpler tastes back then.

The first example that comes to mind would be there are restaurants I enjoyed that were a once in a year treat kind of place at the time. Now I go to those sorts of places multiple times a month. At some point I realized I could afford to do so, and I enjoy those places more, so why not? And then at some point they shifted to being among the default options when we think to go out for dinner.

There's also a lot of social pressure toward lifestyle creep. My parents hassle my wife and I regularly about our lifestyle choices. In their view, as two corporate attorneys, we should be living in a $2 million house in a posh DC suburb, driving a BMW and fighting with other people to get our kids into one of the "top" DC private schools. My wife and I couldn't bring ourselves to take on that kind of mortgage payment, and opted to buy a house that was less than one-quarter that price. We're not any further from D.C. than the expensive suburb where I grew up, but many of our neighbors have non-professional jobs or lack a college degree, which drives my parents nuts. Luckily my wife comes from a modest background and thinks our 10-year old paid-off Toyota 4Runner is a great car and would never let me buy a BMW (even though I really want one lol).

It's the best financial decision we ever made. Earlier this year when my wife decided she wanted to quit her job and bootstrap a business, we didn't have to spend months planning and downsizing. We just pulled the trigger.

why won't she let you buy a BMW if you can afford it without compromising savings goals?

Yeah that seems like it's getting into pathological territory.

> my wife decided she wanted to quit her job and bootstrap a business

Because, by saving the money, they had this opportunity.

Apart from not needing it, it would be rather conspicuous in our neighborhood, and given our small lot we’d have to park it at the community lot a quarter mile away. Lifestyle creep is easier to avoid if buying stuff is inconvenient…

> it would be rather conspicuous in our neighborhood

It's funny. In my gentrified lower income hood (eastern edge of Bushwick) what is conspicuous is the high percentage count of high end and expensive (e.g. Maserati SUV!) cars. So you guys just need to move to a lower income bracket neighborhood and you can have your BMW.

It's not a sound financial decision by many metrics and it seems like they get a lot more joy from financial independence allowing investments in more meaningful things.

Even though we have lots of marketing tell us how happy we might be if we spend money we can "afford" on things we don't need, but we want, we're pretty bad at predicting how much actual happiness we'd get from it. The BMW is a great example. You're getting joy and fulfillment from living a modest life, where good relationships and the reduced stress from your practical budgeting give you continual real world benefits and peace. The alternative, where you sign over a huge chunk of money, often with interest, so you can take home that BMW might put a smile on your face from time to time, but you also give up some of the joy you had before from knowing how much other parts of your life benefit from those smart budget choices. Ultimately, were those few smiles worth $50, 60, 70k? Seeing that car payment leave your bank account?

"Comparison is the thief of joy" -- Teddy Roosevelt (maybe)

Yeah, assuming a household of 2+2 in NYC/SF/Seattle:

* Renting a 3 bed near work (financial district) will cost around $70k/yr

* a nice car (a BMW M3-ish) + a cheap van (costs around $20k/yr

* Ordering in everyday costs $40k/yr

* Nice vacations and trips will easily cost $30k/yr

total = $160k/yr

wage = (250k x 0.7(taxes)) - 30k (401k, HSA) = $145k/yr

__________

Yep, I can totally see how allowing common types of 'tech-people life creep' will quickly lead to a paycheck-paycheck situation. I only outlined the macro-costs, and those still add up.

Of course, this also clearly outlines the main savings a person can make:

* Save on rent. always. 33% of your wage is a recommendation for poor-americans. Don't rent at 33% if you're making $250k (70k -> $35k)

* Cook if you can or pickup from your local street vendor, not doordash.($40k -> $15k)

* Buy a cheap car, or none at at all.

_________

It also outlines why a subsection of HN has been shouting about urban infrastructure reform in the US.

Higher density, more middle housing and better public transports allows for more housing supply, more walkable amenities and car-free lifestyles.

* Car free = save 15k/year (assume 5k for ubers, car rentals when needed, public transport)

* More walkable density = cheap food downstairs (NYC is an excellent example of this)

* More housing = cheaper rent (the biggest culprit)

__________

The numbers are staggering. I haven't added any of the extra costs that come with emergency medical care or children (except food and living). $250k is the top 5 percentile of households the US. Unless America makes its infrastructure efficient and sustainable, the current framework will bankrupt literally 95% of irresponsible spenders in HCOL regions in the US.

Worst of all, the cities are ugly, the concrete landscape is hellish and the hedonistic treadmill quickly catches up, as the new luxuries start feeling no different than a Motel or a Corolla.

Wow if only not owning a car worked outside of a city. Except it doesn't, even in the city, if you have family outside of the city how do you visit them? Would you rent a car or have someone make the trip to get you?

I interpreted the GP as suggesting instead of BMWs, Teslas, and nice SUVs there are cheaper alternatives. This includes more bottom of the barrel cars.

On your other question, I was a carless city dweller for many years. And yes I would fill in the blanks with rental cars on occasion.

Yeah, I understand that a family of 4 will want to own 1 car. However, upper-middle class American families often have 2/3 cars due to lack of public transport infrastructure.

Alternately, the densest cities can allow for a car-free lifestyle with rentals for out-of-town trips. However, the costs might be the same as owning a standard sedan. ($30-40k). I won't consider this bottom of the barrel at all.

If the +2 is kids than you left off an important $48K/yr expense.

https://patch.com/california/san-francisco/how-much-it-costs...

A hidden factor I don't think you hit on in your analysis was "- 30k (401k, HSA)". This right here is a huge difference. Sad as it might be, the numbers on what average people sock away in 401Ks is not good.

So it's another example of a choice people make. As with most of these situations there's a right answer. In this case if one can one should choose to invest in their 401Ks and such. But it's still a factor of not having an apples to apples comparison in these conversations between low income and high income people living paycheck to paycheck.

100%. I'm in the same boat as you. I could save more...but I like nice things and going out. I track all of my spend and my lifestyle creep year-over-year aggressively, so I know how much I'm letting it get to me, but I'm also putting money into my 401(k) and HSA and have back-out plans in case things go _really_ south.

Yeah, the article kicks in with an inflation angle but I don't buy it. Last year I moved to Orange County, their example of a paradigmatically expensive area, and the real estate certainly is pricey, but not out of reach for anyone with a quarter-mil in yearly income. But I've never seen so many Teslas, Lamborghinis, and Porsches on the road in my life. Not a mystery where the money is going.

I have often remarked that it is common for Americans to live beyond their means at all SES levels. Years ago, an acquaintance of mine got a promotion that brought his annual salary from $22k to $35k. I remember those numbers like it was yesterday. He celebrated by buying a mustang.

Years later, a collegue's wife got a huge promotion, such that their household income was in the neighborhood of $500k per year. They celebrated by buying a new house in a swanky neighborhood, and a boat. When I asked him about this, he replied that the house was (unsurprisingly) mortgaged and the boat was financed over a number of years. A couple of years later, he confessed that he was up to his ears in debt and that his home life was a disaster as a result.

It was then and there that I decided that being rich wasn't so much about having a lot of money as not having to worry about money.

At the time I got my first job in tech, I was working 2 jobs to clear $29K/year. My salary as a junior dev was $76K/year. My next role was $105K/year, then $120K/year, then $135K/year, then $150K/year.

At each level, my lifestyle adjusted to my income, and it did so completely subconsciously. It felt invisible; I can't think back to a particular time where I was like "I am going to spend more money because I can". It just happened.

I've always felt guilty about it, because I know that I'd be in a much more secure position if I had been more conscientious about how I managed my finances.

I suppose it’s somewhat natural for this to happen at the lower end of the pay-scale, because one stops actively restricting one’s expenses. But I’m curious, what form did the creep take from 135-150? Are you still living paycheck to paycheck?

I didn't adjust my lifestyle very much, though the extra income allowed me the opportunity to make some larger purchases that I wouldn't have otherwise made. An iPad Pro, a nice standing desk, a herman miller chair, etc. After around the $120 mark, I don't think I was living paycheck to paycheck. But I was not nearly as frugal as I should have been.

> It was then and there that I decided that being rich wasn't so much about having a lot of money as not having to worry about money.

I don't know if anyone would call me rich. I wear clothes from a cheap chain store, I have a 25 year old house I'm constantly working on and I drive a boring car..

But money worries aren't ever on my mind. I never have to worry about paying the bills. If I changed jobs tomorrow and made significantly less.. my lifestyle would not change.

I have a simple definition. "Rich" == doesn’t have to work for money. "Poor" == must work for money. Having said that, congratulations on your worry-free life! I’m not there yet but I’m focused on that goal, hopefully will reach it before I’m too old :)

This is basically the theme behind The Millionaire Next Door which argues that the people building wealth are often not the people flaunting it; they setup a fancy reception for people with a net worth of million+, expecting doctors and lawyers and other "high class" people and were surprised to get a bunch of construction workers and plumbers asking where the bud light was.

>But money worries aren't ever on my mind. I never have to worry about paying the bills. If I changed jobs tomorrow and made significantly less.. my lifestyle would not change.

Yep, that's me and my 22-year-old Subaru. I can even go to the restaurant without doing any mental arithmetic. It wasn't always like this, but now that it is, I have no desire to go back.

Reminds me of this wonderful little exchange between an interviewer and Jeff Bezos: https://www.youtube.com/watch?v=Yv8MrBBuRqI&t=5m08s

How many years later was that? That's a pretty big spread between one partner making $35k and the other $465k

different colleagues, and probably decades

Different people ;)

Leaving the house mortgaged is a reasonable and prudent decision, particularly at the rock-bottom interest rates of the past N years. The size of the house may be excessive, on the other hand -- most of the returns on a large home are not investment returns, but rather a form of consumption -- and the purchase of a boat, financed or otherwise, was probably the real five-or-six-figure mistake.

I made $500k last year (selling 1.5 years' of equity compensation near the top of the market) and I'm celebrating with a brand new mortgage and a car, but my monthly payment on both will be lower than what I was paying in rent, inflation is eroding the value of my mortgage debt. A conforming loan of $647,200 at 4% is an inflation hedge with a rate of return around $2000/mo, or ~60% of the mortgage payment.

The car is going to be used (real interest rate around -4% to 0%, details TBD). Boat? Maybe a kayak or canoe. :)

What I consider to be imprudent is not the use of debt itself, but the use of debt as a tool for living beyond one's means.

The problem is generally those that believe debt is an investment. It's like believing professional gambler is a long term profession. People don't get rich taking out debt, banks do. You can beat the house once in a while, but you aren't winning over a lifetime of buying things with debt. 2-3 targeted purchases, you can win, a lifetime of car payments and you lost a ton.

Funny, Dutch people are raised the opposite. I say that, yet I'm still surprised how many Dutch people have student debt, which is around 1.6 million people with an average of around 15000 euro's [1]. So maybe it's just how I was raised?

[1] "2021 hadden 1,6 miljoen" and "15,2 duizend euro in 2020", see (CTRL + F): https://www.cbs.nl/nl-nl/nieuws/2021/47/meer-personen-met-st....

It's something that's "said" about Dutch people but from my own experience, Dutch people are pretty capable at living paycheck to paycheck, too. Often under the assumption that all our taxes, insurances and safety nets will save us from any kind of fall. We even have a term for what GP describes, "wooncarrière".

And in a twist of irony, that attitude has come back to bite us as we failed to apply it to the wealthy.

SES = SocioEconomic Status

I find it weird you mention taking on debt and financing these purchases that way. It’s typically the best way to purchase anything as long as the rates are good.

In fact - most people who are financially literate would say it’s completely moronic to buy things with cash or majority cash. It’s usually in your best interest to use debt as much as reasonably possible. (Obviously you want to be able to afford the payments and what not but debt is very good as long as the rates are optimal)

The issue isn't so much the debt as it is using debt to buy things you can't really afford.

> It was then and there that I decided that being rich wasn't so much about having a lot of money as not having to worry about money.

This is really a crucial insight. My wife recently got a promotion which moved us to a higher COL area. I'm a programmer (but at a non-tech company), and since we were in a low COL area I never cared much about salary before. We didn't worry about money and it just didn't matter.

Now, we are making more money, but we have a massive mortgage weighing over us. I keep thinking that I need to find a job at market rates to pay off this debt. It's a constant source of stress and a huge hit on QOL.

So from personal experience, I can tell you, if you are in a position where you are never worried about money... don't rock the boat.

"More than a third of Americans earning at least $250,000 annually say they are living paycheck to paycheck, underscoring how inflation is taking a bigger bite out of Americans’ budgets at all ends of the pay spectrum."

Um... no. It underscores how some people live at or beyond their means regardless of having high income.

It could be that some (maybe the majority) of these people are asset-rich but cashflow poor. They are not necessarily leaving beyond their means, their net worth may be millions. But the net worth is locked in the value of their home, which is not a liquid asset. They have to pay their mortgage, and high food and gas prices make the day-to-day cashflow calculus a bit complex, but that doesn't mean they are anywhere close to being broke.

How is someone making 250k in income cash flow poor unless they have overcomitted with respect to expenses?

It was not over-commitment when they committed (when they took the mortgage).

90% of US mortgages are fixed rate, so inflation shouldn't increase the mortgage. IF anything, Inflation decreases the cost of the mortgage for those who own homes because they are a fixed dollar amount.

> IF anything, Inflation decreases the cost of the mortgage for those who own homes because they are a fixed dollar amount

That’s only if you saw a salary increase. Lots of people have seen salary increases, but that happened mostly in the lower income brackets. At the 250k+ level, you got an increase only if you switched jobs.

Yeah, but that is irrelevant to the idea of mortgage increasing as a percent of income. No high earners are getting pay cuts.

> the net worth is locked in the value of their home

I keep explaining to people that while real estates are good investments, your primary residence is not part of your net worth.

It is part of net worth. It's just that typically you can't access it because you need somewhere to live. The exceptions are things like downsizing to access some of it, selling and them renting or moving to assisted living.

when you're required to financially qualify for something based on net worth/assets, primary residences are almost always explicitly excluded.

eg to qualify as an accredited investor.

https://www.sec.gov/education/capitalraising/building-blocks...

not to mention for commercial purposes such as private wealth management

Which seems wrong, somehow.

If I have 500K cash (no other assets/liabilities) and rent my place, I have a NW of 500K (according to this). If I go out and buy a house tomorrow, my NW is now $0?

The primary residency exceptions drive me bonkers. It should be counted just like any other asset.

It's not counted when they want liquidity to be able to cover losses on naked positions. Having a $500k house also doesn't show much financial savvy since a person could have bought it years ago without any experience in trading or finance.

Not sure how a net worth number shows financial savvy in the first place. There might be correlation, but there are always cases of people winning the lottery, making it big on bitcoin or Gamestop or other idiosyncratic bets - or, as you said, buying a house and watching it appreciate.

I think it's more about the capacity to absorb losses without having the government be on the hook for bailing you out.

Houses also are not as illiquid as most people claim, because things like HELOCs and reverse mortgages do exist, and ultimately you could sell the house (although that takes the most time of the three options).

The other thing about liquidity is that we would count private investments in net worth, which could be quite illiquid. Or things like expensive stamps or trading cards (with the same liquidity issues). It's only the primary residence that we make an exception for. We could make another category for "liquid" net worth, and I might buy that argument, with the caveat about house liquidity options that I outlined above.

That's because they want assets that can offset losses. They don't want to put a lien on a house. They're looking for a certain level of liquidity.

I would say I am close to paycheck to paycheck. I have a savings but it is more an emergency fund and I am unable to currently grow it. I also make a very good salary. Enough that I feel like shit complaining knowing that many will never even be close.

Now I could sit down and say, ok I will go out less, cut Netflix, some games, etc. but in reality that stuff will add up to at most maybe $300 a month if I am very aggressive.

My key issues are rent (which went up $500 a month this year) and the $1500 I am paying towards medical debt. And that is paying the minimum. Then student loans which I stupidly put off these last couple years.

I also currently live alone. I am planning on moving in with my partner later this year but that is only going to help so much.

The reality is my options are slim. Maybe I could get a roommate but I shouldn’t have too making as much as I do and at the point in my life I am at.

I am very fearful for an emergency, job loss, etc. But people tell me I should be more frugal or I buy too much. When the vast majority of my money is spoken for for the next 5 years (debt) and rent. Before I even make that money.

Putting off student loans that aren't charging interested in a time of high inflation is smart not stupid

Not to mention politicians teasing loan "forgiveness" makes me afraid to make payments for fear of being a sucker when the debt is wiped away in the name of buying votes.

I disagree, had I continued to pay the loans all of that money would have gone to principal instead of a good chunk going to interest. So I could have made some good progress on the loans themselves.

I know they are talking about forgiveness, but the numbers I see thrown around are about 10k of forgiveness and for people making less than 100k

Were the loans charging interest during that time though? You could have put the money in CDs / I bonds / savings account, earned some interest, then paid it all towards the loans when the pause ended.

Ahh I had not considered that, TBH I don't really let myself think about doing things like that given I don't have a safety net to fall back on yet.

But yes then I would agree, doing that and then putting it all towards the loans before the forgiveness ends would have been better.

But having really done nothing, if I had just continued to pay it that would have been better.

> most maybe $300 a month

$300 is $300. Better to have that in the bank than nothing.

> My key issues are rent (which went up $500 a month this year)

Have you considered moving somewhere less expensive?

Assuming that they can keep their job/income while moving somewhere less expensive.

You cut out the "bring aggressive" part. I have already made a ton of cuts to my budget this that additional $300 would be basically removing any fun I have left.

Yes I have considered that, I ran the costs of moving out to the suburbs. But in doing so I would need to buy a car, insurance, making a parking spot in a garage depending on where. With the suburbs even going up in rent the cost just doesn't makes sense. I would not be saving money by moving out of the city. Ignoring the question on what kind of car loan I would even get with almost 60k in medical debt having over me.

Add too that the increase costs for when I do need to come into the city to go to the office, the quality of life costs for that commute.

$300/mo is $3,600 a year or two months of medical debt payments.

If your rent increase was $500/year, I'm guessing you are spending a lot more money on eating out than you realize. Take a moment to pull your statements for the last two or three months and analyze how much spending is going into each category.

How does rent going up relate to eating out?

If your rent went up $500/mo and you didn't scream and immediately flee, you are in a high cost of living area.

That means eating out is expensive and has gotten more expensive in the last 120 days.

If you eat out at all - and almost everyone does, quite a bit - then it is likely a big chunk of change. Even if you previously calculated it ("I spend about $200 a month on eating out...") that number is almost certainly wrong now and needs to be recalculated.

It's possible parent doesn't eat out ever, just unlikely.

> The reality is my options are slim. Maybe I could get a roommate but I shouldn’t have too making as much as I do and at the point in my life I am at

This is the entitlement. You have options that you refuse to take that would significantly help due to some weird standard.

No, it's not. People who are in the top 10% of incomes shouldn't need a roommate to get by, they should be able to support other people (like a family.) The income distribution is nowhere near flat enough for that to be acceptable; if elites are worried about getting by, everybody else is a lot more worried.

While I agree with you overall, I hope you aren’t saying that someone in the top 10% of incomes is “elite.”

OK, then who would you say are elite, if not the people that make more than 90% of people?

I would personally think of “the elite” as people making millions a year and flying in private jets. Not people leveraged out of their minds so they can drive a new Tahoe and have Starbucks every morning.

I think of “elite” people as those making decisions for all of us behind the scenes in major governments or businesses.

Yea “elite” isn’t a difference in degree it’s a difference in kind. It’s not just more money, it’s a step function Wealth and Power.

See now that sounds entitled to me. They don't need a roommate to get by, unless of course they want to continue living at the edge of their means like they are right now. It's the sum of their choices that make that money disappear.

Agreed, but without more information its very hard to justify it. Some can't make more due to risk aversion issues, some can't to medical issues, others just are too lazy to hustle a side job.

It is not entitlement, There is zero reason that anyone making over 6 figures should not be able to sustain living on their own.

The ONLY reason I cannot is because rent prices continue to skyrocket. If someone making over 6 figures has to get roommates there is something seriously broken. That is not entitlement.

You wrote that you are going to move in with your partner but that it won't help much, yet you also are writing that rent is the biggest problem you have. This is a little confusing to me. If you don't want to go into more detail that's perfectly fine, but you aren't going to get much useful advice.

The best I can say is this: The world is cruel, and society isn't really all that into freely giving people what they deserve. "Entitlement" is a fairly loaded word these days, so I'll just skip using it. It's not about what you deserve, it's what you can pay for.

When I graduated and got my first real job, a bunch of old software engineers gave me a hard time about my fiscal habits. I met and married a wonderful woman and she gave me a hard time about my fiscal habits. I learned; I was pushed; I was pulled; I changed. And I never would have done it myself. We lived "cheaply" and had a high savings rate. We paid off credit cards, student loans, medical debt. All while renting. We eventually bought a place that was much cheaper than we could "afford", and eventually moved up to a nicer place. It's still not as nice as other people we know. If they care, they don't say anything to us about it.

Whatever. Long ago I stopped thinking about what I deserve. What society owes me as a highly-compensated person. It's fine over on this side.

6 figures isn't much in one of the most expensive locations on the planet today.

Inflation matters a lot and 6 figure designation doesn't mean what it once did. 100k in 2000 is 50K today. 100k in 1980 is 25k today.

I do realize this, but going by the 30% rule on 100k a year is still $2,500 a month on rent.

It should be possible find a place on your own for that much.

I will also say that for myself, I am below that 30% marker for what I pay and make. Even with the $500 increase I have mentioned. So either that 30% recommendation is broken, or something else is (I mean we all know that housing market is broken so no reason to dance around it).

So yes I do realize that inflation matters, but 100k is still a lot of money. There are entire families that live on less than that. And yet, the idea that I make well over that and want to live on my own is entitled?

And yes I do also acknowledge I live in a city, but I also don't have the expense of a car (monthly payment and insurance) or the gas to run it.

This is very broken. Yes my $1,500 a month towards medical loans is not helping my situation, but that is also why I am below 30% for rent.

So yeah that is reason 1. Plus your huge debts which are reasons 2 and 3. Not zero reasons. I have always lived with people, living alone seems like a great way to burn money. At least in England it is a little more commonly accepted.

Pick up a second full time remote job.

It's like losing weight - you HAVE to account for EVERYTHING.

Spend some serious time going over your spending (you don't need to make a "budget" per se, but DO map out exactly where the money is going) and preferably over an entire year. Many people get blown out of the water by expenses that only come in yearly (think: property tax that isn't escrowed, etc).

Convert everything to monthly billing (even if that means sending money monthly to escrow or a separate account) so you can track it down exactly.

Once you have it all laid out, it will be pretty clear what should be done (and just like with weight loss, it will often be something you don't want to hear).

If after all that, the debt load is way too high, consider bankruptcy. Done strategically it can be worthwhile.

I already do this, I have a budget app that I look at almost daily.

My "splurges": I give myself $150 a month to go out to eat. $30 to treat myself to a nice coffee every once in a while. $100 on video games. That going out to eat and coffee budget is part of a $200 misc budget (so I could decide to do a show instead of going out for example). I stick to my budget... but I am not leaving myself a ton of money here. If I got all of that, that's $300. But then... why bother working if I am just going to hate my life because I literally can't do anything?

That $300 is not going to make the difference between this being sustainable and not.

The small stuff is not the problem here.

Edit:

Regarding your yearly big stuff, I agree and that is taken into account as well. A couple years ago I put in the hard work to figure this out and I have continued to adjust it as need be. It finally hit a point this year that my rent raised higher than my pay raise (plus everything else going up) that I had to make the decision to cut things like Netflix. It is at the point that I feel like I have made nearly any reasonable cut I can make without removing my ability to at least do some things.

You are already miserable, what you wrote is fixed by contentment, not necessarily money. The question is the $300 now making you less miserable than using that money to pay off debt sooner or see a savings account go up again? Would you be happier in six months with $1800 less debt, would that free up more money by removing a payment?

Small stuff isn't always the problem, but for a lot of people it is. Some people need bigger changes, but those are often scary.

Have you looked into declaring bankruptcy?

It's there to keep people from being strangled by debt. Even just the threat of filling it can probably get your medical debt renegotiated.

I did briefly look into it, but my situation isn't credit card debt. I am not carrying balances that I can't pay down.

These are loans that have an end date, and that end date is less than 5 years. It is a tight 5 years don't get me wrong, but there is an end to this that I don't think bankruptcy is the answer for me.

It is 60k in medical debt, $1500 a month is a lot but to pay off that much in less than 5 years... And then admittedly I am in a very very good situation (suddenly I have $1500 extra money in my budget)

The medical debt seems to be the entire source of your problems. By your own accounting you'd be banking close to $2k a month without it. Were you uninsured?

If you have an emergency fund then you aren't living paycheck to paycheck. You could miss a paycheck and pay rent / eat using savings.

Alt title: Americans have no money after spending it all on luxury goods

Or on housing.

Americans surely spend a very disproportionate amount of income on housing, transportation, and healthcare compared to the rest of the world.

I disagree. Your houses are dirt cheap (outside of NYC and SF I suppose) and gas is basically given away.

The people making $250k outside of the ultra-expensive metropolises are probably not generally in the 1/3 here in the title.

My perception is that in much of the rest of the world, it's more common to live with one's family or other more communal housing situations for longer. In the US there is a slight stigma about not having "moved out" that starts at 18 years old.

Surely there is data that could answer that. Health care I could see. Transportation? We don't have nearly the tax rate on fuel that, say, European countries typically do. Housing seems pretty expensive everywhere, I'm not at all sure it's disproportionately so in the US.

> Transportation? We don't have nearly the tax rate on fuel that, say, European countries typically do.

Sure, but how many miles does the average European drive in a year, and what's their MPG? Before he semi-retired, my dad's daily round-trip commute was ~70 miles. Do any Europeans drive that much?

50 km is a long commute but it is not unheard of. Doing 50km under 40 min is doable, as long as that is possible by car you will have quite a lot of people commuting like that.

Almost all commutes are under 40 min but average is 25 min.

The US is a big place, we definitely drive more miles. But the fuel tax in Europe is high enough that the overall cost isn't necessarily dramatically higher in the US. Also, a lot of the public transit (at least in my experience) in Europe is surprisingly expensive, though that probably depends a lot on where you live and where you need to go.

Owning, maintaining, fueling, and insuring a car is much more expensive than walking, biking, and taking public transportation. Both in end-user costs and overall per-capita cost of transportation.

But in much of the US having your own car (one for every adult in the household) is basically a requirement to hold a job.

This is more true in Europe, though, than many people seem to think. Car ownership around the world is very common.

True, but there is a greater percentage of the population living in places where one car per adult is not a hard requirement.

And there are probably fewer 20mi+ commutes among car owners.

I'm also sure the data exists but I wouldn't know what to look for. On transportation I'm mainly talking about how much more common car ownership is in the US than what I perceive to be the case elsewhere in the world.

Per capita, the US ranks 25th [0] in car ownership. Though admittedly this is 10 year old information. Somewhat newer data ranks the US higher, but I still see some claims that Germany has higher per-capita car ownership than the US. But in either case, it's not a clear cut answer.

[0] https://www.theatlantic.com/international/archive/2012/08/it...

The nations that beat out the US is more damning to certain oft-repeated tropes than the US's position on the list.

Healthcare is a dead horse but I'm going to need to see citations for the other two, fraction of income preferred over raw dollar figures but I'll take what I can get.

Using the example from the article, buying a house in Orange County California is a luxury good:

1. Colloquially: they're rare, expensive, and highly prized

2. Economically: demand for them increases as income increases

It's the only such good with such a close tie to the ability to earn the high salary to begin with. Sure, a doctor is socially expected to drive a German luxury car, but they can in fact choose to drive a Corolla at the cost of some light ribbing.

A dentist in Orange County has a practice, I don't consider a twenty minute commute a luxury good. It's something people buy for common quality-of-life reasons if they can afford to, and it happens to be nauseatingly expensive.

The twenty-minute commute isn't a luxury good, but buying the single-family house would be if a condo, townhouse, or rental would serve the same function.

May as well throw in cardboard box with that kind of straw man.

What's the straw man?

1/3 of Americans in a small demographic is not “Americans”.

Only 2% of households make over $250k per year. So it's .67% of the overall population.

that seems crazy low?

The median US household income is only about $70k. So it seems this tracks.

I could blow almost that entire paycheck on just a 3 bedroom apartment in a nice part of NYC. Luxury goods like jewelry or handbags are surprisingly out of fashion amongst the upper middle class that I see. The big status symbol purchase I see more of is people buying Teslas.

it used to be iPods, then iPhones, now its Teslas.

The cheapest Tesla, while expensive for what it is, is not that much more expensive than any other mid-range car. Is it really a status symbol?

Coming from very humble beginnings, I default to living frugally and below my means. No credit card debt, no car loan, and a low principal, low rate mortgage on a fixer upper home. Each month I pay the mortgage and credit card in full, max out ESPP, and make sure I hit the 401k max annually. I still come out ahead and typically use that cash to fund home improvements. Last month I paid for a new fridge in cash.

It can be quite frustrating to watch folks who bring home much less live so much larger. I think it comes down to feeling that they’re being irresponsible. Perhaps growing up poor teaches you a thing or two.

I remember watching my mom ration her insulin as a kid. As an adult making solid money, I still try to be generally frugal and it’s frustrating to see people that (statistically) make far less than me driving much nicer cars and wearing nicer clothes. Possessions won’t make you happy, but it would be kind of cool to drive a nicer car. I just can’t swallow the payments for a fully loaded Jeep or truck. I guess I’ll stick to playing with the “build your model” tools on the various car company’s websites haha.

Here’s a thought, stop focusing on what other people do and mind your own financial business.

On the contrary, observing what other people do is a primary way to learn. Considering the utter lack of financial education many receive from school or parents, it’s a quite an important signal.

But something tells me you’re not interested in constructive dialogue.

The article is clickbaity and somewhat self-contradictory. For example:

> To finance their lifestyles, higher-income households are more likely to put expenses on credit cards -- but also more likely to be able to pay off their balance in full.

This means using cards as a convenience or optimizing for cashback (miles, status, ...) and not "to finance their lifestyles".

On the subject -- I am constantly surprised by the "you must buy as much house as you can afford, and then some" mentality in the US (I did not grow up here). I know several families, with 2 good professional incomes who loaded up on expensive housing to an extent that if either of them gets a noticeable pay cut they will be screwed. While there is still cheaper, smaller houses in the same town with the same school that they can handle on a single income (and invest or travel on the second; or just take it easy). So I am not particularly surprised that a high income family can dig themselves a financial hole. My 2c.

Keep in mind that the survey was done by a company whose business model is short term loans. The last time one of these Lending Club surveys was posted here I dug into their methodology and some parts of it seemed designed to produce a certain result. For example the "living paycheck to paycheck" bucket is self-reported. Like 95% of the people in that group also said said that they aren't struggling to pay their bills and/or that they'd be able to handle an emergency expense without taking on any debt (like by putting it on a credit card and paying it off on time)

It's the logical play. A 5x leveraged investment that is constrained by politics to move upwards? Stupid move not to play.

The problem with leveraged investments is that if it goes down you can get wiped out. If you have $100 and buy one share at $100, which goes to $50, then to $150 you end up with a $50 profit. Buy 2 shares at 2x leverage instead and you can, after a margin call, end up with $0.

The house also brings in the need to pay taxes and do repairs. And if one is constrained financially they are tempted to defer necessary repairs or go the DIY path without the right skills, which is often disastrous.

Right, but that's a problem for my BTC-USDT perpetuals. For housing, political force can be brought to bear. After all, you don't get margin called on a house. It's a non-recourse loan usually. So if you can't pay, you walk away and the bank forecloses. And usually, you can pay, it's just a question of it being worth it. And it's worth it because you can force politicians to make it worth it by taxing society to backstop your property value.

Yes, but you can be stuck with the house for a very long time, all the while paying the taxes and repairs. And selling a house is a BIG hassle (plus a payment of 2-5% to the realtor). If you change your work (or your work changes you) and need to move, you may have to sell into a weak market and lose a lot of money. A good neighborhood can become bad, motown-style, etc. Foreclosings are a thing, especially in recessions.

If you walk from a loan, you lose your principal (and get a lifestyle penalty: future loans, future jobs, etc.). This is not nearly in the same league as selling a stock you no longer like.

> For housing, political force can be brought to bear.

Sorry, by whom? By a large group, maybe; after a few years of lobbying. By a homeowner hit with an unlucky spell -- forget it.

Sure, if you rate flexibility highly, you don't want this financial instrument, but you are insulated from total society risk since you can ensure that you take money out of anyone's pocket to keep your housing instrument strong.

It's probably the safest instrument one could use and definitely the safest instrument with leverage. But we don't have to discuss. We can each take our bets to the market and see what manifests best.

To be clear, I think your points on the lock-in are sound and the sales 'tax' effectively of a realtor etc.

A big part of that is because houses are seen as an investment rather than a utility. They are also hugely subsidized by the government.

I wonder how many people here on hacker news live paycheck to paycheck? I make significantly more than 250k and spend all of it (single income family of four) and my savings are my equity.

I mean, I lived paycheck to paycheck last month after some unexpected large bills (May was a hell of a month!) but that was only because I didn't want to raid savings.

I don't have sympathy for folks making as much as we do who are "broke" or up to their ears in debt. If they're fortunate and privileged enough to get to our positions, they only brought it on themselves.

>or up to their ears in debt

See this depends. If the following are true:

1) The interest rate on your debt is below inflation

2) The cost to service the debt is a sufficiently low percentage of your monthly take home

Then taking a loan is often MUCH smarter than buying it cash, because your cash can earn interest in excess of the loan interest in most scenarios. I know people with ten houses on 30-year 2.5% notes. They could pay them all off tomorrow but it wouldn't make sense financially.

Leverage is excellent in good times but horrible in bad ones. As they say, after an ebb you see who was swimming naked.

The risk that you may lose your job has to be considered in the equation, taking into account how "rare" your situation is (if you're work-from-home at $250k, will you be able to find that again, or will you have to move to get a similar income?) and how much savings you have.

Remember, when you take a loan you have extremely large banks on the other side of your "great idea" so either they're incredibly stupid, or they can take into account more factors.

Sure, but you can always sell assets to cover expenses.

Say you have $250k in diversified assets and a $500k note.

In scenario A you put $250k and have no earning power, owing $250k. If you lose your job and foreclose that downpayment is lost.

In scenario B you lose your job but you still have $250k on assets, you can draw on that to pay the $500k note as it comes due. You have options.

“I lived paycheck-to-paycheck, except I have savings” is a gross misunderstanding of the term.

The article is talking about people who self report as living "paycheck-to-paycheck", which means the term means whatever the surveyed population feels like it means. If you want a more controlled responce, you need to ask more specific questions and classify the responces yourself.

I guess I do by their definition although it doesn't matter short/medium term since I have decent savings. And medium/long term the bonuses and equity increase that savings.

Are you saying that you spend your base salary but save your RSUs? If this counts as "living paycheck to paycheck" I'm much less concerned.

I’m not living paycheck to paycheck since I’ve been lucky with my company, but I do somehow spend an entire high six figure salary and I live very well but not lavishly.

I guess I’m wondering if others here follow the same model of spend the dollars and save the stock.

How are you defining "spend an entire salary" in a different way from "living paycheck to paycheck"?

RSUs are a form of work comp. If you are saving them, that's not "paycheck to paycheck" as at any moment you can freely convert them to cash.

So they do not spend all of their income... got it!

It would be shocked if the original survey included RSU, 401Ks, and capital gains in the estimation.

Make a bit over half that.

Spend about $65k / year.

The rest goes into 401k / brokerage.

Live in a (relatively) high cost-of-living area (HCOLA), bought large house with an acre in 2016, have 2 cars that are 7-8 years old with relatively low miles on them, paid off 5 years ago.

If you could buy an acre on $125K~ year - I don’t think you live in hcol.

It's the most expensive county in this state (due to being outside the biggest city, but close to it, and being a lush, tree-filled area). And home prices are only one factor of a HCOLA area. But by saving up to put a down payment, and getting good interest rates (3.75% initially, refinanced to 2.99%) the overall payment is quite reasonable.

Compared to the absolute most expensive places in the country (San Fran/NYC) it is not a "high" cost-of-living, but compared to much of the rest of the country it is. Median home price in the U.S. in 2016 was $225k or so, and our home was $390k. (Sales and value estimates now are approaching $600k for the same comparable homes in this area.)

> And home prices are only one factor of a HCOLA area

Spoken like someone who doesn't live in a HCOL area

So... all the other things in my life other than my home that are high-cost... are not high-cost, because of your bizarre comment? That doesn't follow.

And my house is high-cost compared to the median. Just not compared to the top x% of the country.

Again - if you lived in HCOL... You'd understand.

> So... all the other things in my life other than my home that are high-cost... are not high-cost, because of your bizarre comment? That doesn't follow.

Aside from housing and sometimes fuel, almost everything a normal person buys costs about the same everywhere in the country.

Cars, TVs, phones, washing machines, clothing, shoes, tools, and so forth are not selling at different MSRP in different parts of the country.

In truly high cost of living areas, like Silicon Valley, the down payment for a home is enough money to buy a handful of new cars outright -- literally several hundred thousand dollars. If you live in an area like that, and you can afford a home, almost everything else you buy will be very cheap in comparison.

> Aside from housing and sometimes fuel, almost everything a normal person buys costs about the same everywhere in the country.

Lots of common grocery items like milk, eggs, meat, and fresh produce have highly regionally variable pricing. (Highly processed dry and frozen foods tend to be more consistent in pricing.)

> I make significantly more than 250k and spend all of it

Why? How do you justify that? Do you have no concept of how to manage money?

I spend my whole paycheck, I don’t live paycheck to paycheck, which is a huge difference. I don’t have a money management issue but it is interesting how quickly it can go. And then in California marginal tax rate goes over 50% so headline earnings is not take home.

>I spend my whole paycheck, I don’t live paycheck to paycheck

You keep saying this without explaining how that can possibly be true

Paycheck might be 50k a month - Spent

401k, RSUs, capital gains on investments might be another 50K - Saved.

Living "paycheck to paycheck" implies that if you miss a single paycheck (due to losing you job) then you'll no longer be able to make ends meet. If you have any savings or emergency fund built up, then you could conceivably quit/lose your job and continue paying your bills for some time, even if you had previously been spending your entire paycheck.

Make investing a bill. That's the easiest way to do it.

Same - with a family in the bay area 250k is not a lot of money.

For the month of May, total of $5,989.81 for just the "necessities". This does not include anything bought on Amazon or project stuff from HomeDepot or other misc expenses.

Mortgage: 2280.07 Groceries: 2,279.13 (eat mostly vegetarian/pescetarian... fresh fruits, vegetables, fish/shrimp, beans, tortillas, eggs, cereals, healthy and beauty crap, household supplies) Medication: 22.14 Entertainment: 38.47 Restaurants: 52.94 Fuel: 234.03 Doctor: 334.07 Dentist: 257.00 Electric: 151.31 Garbage: 35 Water/Sewer: 125.77 (includes mandatory city fees for "street maintenance") Internet: 99.99 Phone: 79.89

EDIT: this is for a household of 4

I'm skeptical of provocative labels like this, and the article demonstrates why:

> Living paycheck-to-paycheck doesn’t necessarily mean hardship, and LendingClub makes the distinction between those can pay their bills easily and those who can’t. Only a fraction of high earners -- roughly one in ten -- reported issues covering all their household expenses in April, according to the survey.

Without spending breakdowns, this article isn't informative. Of those in the one-third, how much of their budgets is non-discretionary? How are they classifying expenses like retirement contributions?

>Living paycheck-to-paycheck doesn’t necessarily mean hardship

I must have a different definition of hardship then. That's WAY too close to the knife's edge for my liking, but different strokes for different folks.

I guess the question is how much of that stuff could they cut back if they needed to. There's a lot of expenses in my life I could easily cut back if I lost my job or had some other expense come up.

If part of your paycheck-to-paycheck is subscriptions to food services, or memberships at fancy gyms or a cleaning service or such you could probably free up a lot of money if you needed to.

This is a really good point to keep in mind when looking at your expenses/budget - what things are mandatory, which can be changed with little effort, which can be changed with major effort, and which are entirely optional.

It doesn't mean hardship, but it's an express train to hardship the minute something crashes down.

Ah yes the hardship of fine dining, luxury vehicles, and McMansion mortgages.

More seriously, I take issue with the definition of “paycheck-to-paycheck”, they at least thankfully split the groups into those who struggle to pay their bills (a small minority) and those that don’t. I don’t know how you can claim to live check to check (“on the knife’s edge”) while also claiming to easily pay your bills every month. Just because you’re able to allocate all of your money doesn’t mean you’re living check to check.

They have the cash flow to avoid catastrophe.

Fascinating, since that's several times what I make and I have so much money that I never worry about it. I have difficulty conceiving of an emergency expense large enough to drain my bank account, let alone other places I keep my money. The only reason I'd ever want more is if it were enough that I could stop working.

As much as I think it is obvious that rent and housing costs are completely insane right now, I'm not sure that (and inflation as the article suggests) is sufficient to explain why so many (apparently millennial) people making nearly four times the national median income are in this situation.

In some ways maybe I'm lucky I grew up in a barely-lower-middle-class family as it kept my lifestyle expectations low.

The vast majority of those large salaries go to taxes and housing costs, the first is mainly avoided by not having a large salary and the second can be avoided by location.

Once you're willing to gasp live somewhere where houses don't cost $1.7 million, things suddenly start to work out.

Problem is that often gasp the high compensation doesn’t follow to BFE!

If you're living paycheck to paycheck on "high compensation", then what f'ing good is it anyway? I'm out here in south central Wisconsin making a poverty wage by the standard of SV-types and I own my own home with a couple retirement accounts, some investments, and significant savings. I don't even have a fancy bachelor's degree, just 3 associates.

Because most people don't want to live in the middle of nowhere. Especially if you have an Ivy League degree, come from an upper class household, and like to be surrounded by similar.

SV isn't full of the same type of people that you'd find in software in BFE. It's a different class of people entirely. It's more similar to doctors, lawyers, and IBs.

> Especially if you have an Ivy League degree, come from an upper class household, and like to be surrounded by similar.

Right, so, entitled. Sorry if I don't cry over their entirely self-induced money troubles.

> SV isn't full of the same type of people that you'd find in software in BFE. It's a different class of people entirely. It's more similar to doctors, lawyers, and IBs.

And as arrogant as everyone outside of SV thinks they are, apparently.

> Especially if you have an Ivy League degree, come from an upper class household, and like to be surrounded by similar.

The key to diversity is make carefully sure it happens to someone else somewhere else.

Having come from a poor rural background - I have no intention of going back. The brain rot that exists in those communities is beyond toxic.

At least there's a chance in cities of interacting with someone reasonable. I have no intention of putting my kids through the hell that is the extremely xenophobic racism that exists in rural areas either. But - no - I'm just intolerant because I won't tolerate intolerance.

I technically live paycheck to paycheck after deductions, but I have a fairly high percentage (20%) going into 401k/Roth type stuff (before taxes income of ~80k). I bet these people are saving a lot for retirement as well.

I make 95k and I have more money than I know what to do with. I have enough cash to live on for months. I'm in the green 2k per month even after taxes, mortgage and student loans. I don't know how you end up in a paycheck to paycheck situation making this much money. I guess it wasn't brains that got them there..

I mean: I have a dishwasher that you have to plug into the sink with a hose. My car is a rusty subcompact and has 120k miles on it. My countertops are plastic.

Do I care? No. Not even a little. Why would you? My friends are all a bunch of hippies anyway, they wouldn't care if I had rock countertops either. When the bearing or the liners on my dryer die, I replace them myself. When am I going to buy a nice new dryer? Never, hopefully. And why spend money on a car? You're going to sit in traffic in it for 20 minutes a day. Who cares? I just don't understand the way that some people think.

The only thing I would change, if I could, is that I would like to work fewer hours at the same hourly rate, so I could spend more time climbing mountains and playing board games with friends. I like my freedom and I like my friends. But having rock countertops would make no difference in my life whatsoever. And it really doesn't for you, dear reader, either, no matter what the glossy ads say. It won't improve your life.

> I don't know how you end up in a paycheck to paycheck situation making this much money. I guess it wasn't brains that got them there.

I'm inclined to agree. I make even less than you do and for the most part money just sits in my bank account until the number is uncomfortably high and I move it to the savings account. They can come up with all sorts of explanations about HCOL areas and what not, but there are simple solutions to those problems, like "don't live there".

I think cash-wise i would fall in this bucket. Of course i have plenty of savings, but most of my income is spent away.

One issue when talking about incomes is that its not properly adjusted for COL and taxes. A 250k salary in the bay area is about 12k a month in hand. Im a head of family - I support my wife and my kid with this income. Rent is 5k, and pre-school is another 2.5k. Between unnegotiables like phone lines, food, internet, electricity etc etc the reminder to be stingy about is not a lot.

I used to live in this area with 100k and still save, but as a single person living in a dump and eating in the office every day.

One word: rents. My rent is going up by 40% next year. I will have to take it because comparable places will be at least just as much, probably move and it will cost me a couple of grand to move.

If you're paying down a $1.7 million mortgage like mentioned in the article, it may feel like you have nothing left at the end of the month, but a lot of that money goes into an asset that is almost guaranteed to appreciate over the 30-year period.

So clearly these home-owning Americans making $250k/year are not actually living paycheck-to-paycheck in the usual meaning, since they're going to be multimillionaires in a few decades. Maybe the main problem here is that too much of their net worth is tied into a single asset.

It really depends. Higher cost homes are tricky. Often hard to sell. Often they do not appreciate as much as your average home.

I would say $1.7m is probably on the edge of this category tho.

In some places $1.7m is a median priced home.

The usual rule of thumb is don't be too far from the median house in the area, either below or above, but if you have to miss aim below.

In very, very, very few places is that the median price for a home.

I agree. All tied into a single, non-cash-flow generating asset is risky, to say the least. And it will really be an asset only when they sell it. Until then, they only pour more and more money into a bottomless pit that a house is. EDIT: for $250,000/year income, the most expensive house one can afford is $750,000. Their $1.7 million house is way above their means.

It's not only strange that these sort of stories are coming back after being so brutally mocked a few years ago, but again the examples have a large part of their huge monthly nut going into their savings, retirement accounts, and assets (mortgages.)

The home I live in is viewed as a consumption instead of investment to me. I would try to really limit my expense on buying the primary residency home, and if there are $ left, invest them.

Am I missing something? The article repeatedly mentions that it's a LendingClub/pymnts.com study, but I don't see the actual citation or link[2] so I can review it myself and drill down exactly what "living paycheck-to-paycheck" means. It makes a huge difference whether we're talking "all disposable income goes to hard-to-exit obligations" like mortgages and credit card minimums, vs "they happen to spend it all on consumption but could reduce it with no problem", and I'd like to know which they mean.

From googling the study sponsors and terms I found this press release[1], which might be what they mean (though it's from three weeks ago). The article also links a Federal Reserve study [3], ostensibly as support, but it says 78% are doing okay (sampled over all income levels) or better with 1 in 9 unable to come up with an emergency $400 by any means, though with no connection to the result about $250k income households.

The closest thing that study has is a result saying that 5% of adults with incomes over $100k can't fully pay the month's bills (p. 43 by the pdf numbering).

[1] https://www.pymnts.com/consumer-finance/2022/paycheck-to-pay...

EDIT: Looks like this is the one, which references a $250k figure: https://www.pymnts.com/consumer-finance/2022/report-36-of-co...

[2] The link anchored to "Lendingclub.com" just goes to a generic company profile page.

[3] https://www.federalreserve.gov/publications/files/2021-repor...

Seems a bit unavoidable when you have the most efficient society even in creating artificial desires and enabling them through easy loans.

Combined with literally rent-seeking and the expectation that real-estate with always increase in value, seem to be a perfect recipe for longterm misery.

Americans like to pretend they’re rich when they’re not.

All of us, exactly. There is no reason to use nuance on the internet when talking about a large group of heterogeneous people.

Did you know there's maybe 600 million people in North America and over 400 million in South America?

Ah but you just meant all of those United States suckers?! 320 million. All of them "like to pretend they're rich when they're not."

And everyone on Hacker News uses broad sweeping statements to refer to a fractional subdivision of a much larger group.

Everyone knows "Americans" refers exclusively to the people in the USA. True, two continents also happened to have the name "America" in them, but their relation doesn't matter.

As you can see here [1], America is the short form of USA.

1: https://en.wikipedia.org/wiki/America_(disambiguation)

Right, I inferred they meant "Americans" (from the United States), which I included in my comment. 320 million (which I included in my comment.) Are you refuting my sarcastic rebuttal? Is the original comment accurate, that all citizens of United States share that same behavior?

How much of a population has to meet a criteria for a generalization to become acceptable? I would say 2/3 is a nice measure. For sure, 2/3s of Americans live far beyond their means. I also think that the word "average" is implied when talking about large groups, by default. "The Average American lives beyond their means" to most people has the same meaning as "Americans live beyond their means."

According to the LendingClub survey, 61% are living paycheck-to-paycheck, though that is not the same as "pretending to be rich when they are not" since many of them have much lower incomes than the $250k figure that the article focuses on.

Where are you getting the figure that 2/3 of Americans pretend to be rich (when they are not)?

I said living beyond their means, not necessarily pretending to be rich. They're just pretending not to be impoverished, because being impoverished is shameful in America.

OK, but that's different from the thread comment that started this.

> Americans like to pretend they’re rich when they’re not.

Arguably many on the lower end of the income scale aren't pretending not be impoverished. They are, they know it, and there's not much they can do about it. That's living paycheck-to-paycheck, not by choice, but by necessity. It's a very different animal to live beyond your means. It is pretending to have more income than you have, though whether it's for appearances or other misguided notions of what they "deserve" would require deeper insight into their internal motivations!

https://www.cnbc.com/2017/10/09/budget-breakdown-of-a-couple...

Making $200k, maxing out 401k ($18k)

But $700k home, child care, vacations, car, somehow $400/month on gas! "Children's lessons" $400+/month

https://www.financialsamurai.com/scraping-by-on-500000-a-yea...

$500k / year and max out 401k but... whoa. 40% taxes and huge student loans don't help but $1.5m home, expensive vacations and cars, etc.

I live somewhere much lower cost of living than San Francisco, but $400 in gas doesn't seem outrageous. I spent ~$90 on gas in May on my Honda Accord alone and I work from home, plus gas is under $4/gal here. That's not counting whatever my wife spent on her car who drives a whole lot more than me.

Could also see "children's lessons" creeping up that high in places like San Francisco as well. It's easily $120-150/month for us per child per activity which may only cover 2 nights a week. We let our 2 kids pick one thing whether it's tennis, tae-kwon-do, etc. Luckily my kids don't need any extra tutoring either.

Yeah I realized that - my driving habits have decreased wildly since pre-pandemic, so I pay more like $40 every two months... but that particular expense isn't too crazy. (Doesn't take away from the rest of their budget being over-the-top though).

Being in this bracket, I can see how easy it can be to live paycheck-to-paycheck at this income in a VHCOL with kids. $1M+ house (and not a fancy house either), $3k/mo on daycare, $800/mo car payment, $1000/mo student loans...it goes quickly.

That said, lifestyle inflation is the worst! There are folks making way more than this that are ALSO living check-to-check. As someone said on here, there are spenders, and there are savers!

FWIW, the folks that have plenty of money saved up at lower incomes are mostly homebodies and don't do much, which is fine, but that's not how everyone wants to live (myself included). Can't take it with you and all that.

One of the things I did early in my career was live as frugally as possible and dump all extra $$$ I could into quickly getting rid of my student loans, car payments, etc.

Talking to a lot of peers over the years, I've realized that most people carry around insanely high levels of debt and grow accustomed to spending multiple thousands of dollars per month on debt servicing. It's crazy how much of a difference it can make to get rid of those and free up all that cashflow.

Obviously, this isn't doable without an income buffer, but if you are able to cut down expenses for a while and aggressively pay down debt: it was one of the best decisions I made early in life.

I agree! That's what I did to get my student loans paid off. Not as aggressive as you, since my impulse control isn't as good as yours (if it were up to me, I'd eat out daily at around $200-300/week), but I definitely spent much less than I could have.

I paid my $200k student loans in ten years and paid off my (consolidated) credit card debt two years after that. I carry revolving credit card debt, but it's almost always paid off by month's end. Feels great!

"if your outgoing exceeds your income then your upkeep will be your downfall"

Article doesn't make it clear what the definition of paycheck-to-paycheck is, so I'm wondering if behind all this is that famous, infuriating "budget" of the $500k earner that still feels poor, somehow:

https://i2.wp.com/financialsamurai.com/wp-content/uploads/20...

This outlay list is so stupid it borders on rage bait. That's the feeling I get from this article.

I've kept very strict rules since the start of my work life. I save half of my income and try not to spend more than 20% of income on rent (which required living with my partner in a tiny 150 square feet apartment when most of my friends had much better apartments).

But that has helped a lot preventing lifestyle creep. I undoubtedly spend more now than I used to since I went from roughly 20k a year to 350k a year but I still keep saving half of my income. It does mean that I live a less luxurious lifestyle than my peers.

I’m not living paycheck-to-paycheck, but it’s easy to see how that can still happen. Even in a relatively low COL area (comparing a town like Huntsville or Fort Worth to Seattle or San Fran), it’s easy to plow through a bunch of money between your mortgage, car lease, student debt, sending kids to daycare, and saving for retirement. I know you don’t have to have a new car and you can always try to get a smaller house, but that money goes pretty quickly if you aren’t careful.

I know this is the article title but it's highly deceptive on the part of the site.

"One-Third of Americans Making $250k Say They Live Paycheck-to-Paycheck" is more accurate.

Lifestyle creep is a very real thing, I feel sorry for folks who can't manage their money. If you make $250k a year, and can't save at least a third of it, you should seriously examine your lifestyle choices. No, I'm not talking about Netflix subscriptions, or hobbies, or avocado toast, I'm talking about cars, homes, luxury items, and the debt that comes with them.

Really interesting.

My wife and I are about to go from ~70k yearly income to ~250k yearly income.

I have done a ton of planning for how our lifestyle will change and new expenses (buying a house, having kids). 250k is an insane amount to me, but as I am doing the math for our monthly income and expenses, it does go quickly if you are not careful.

Wish there were more resources on navigating this kind of income jump. Anyone know any?

what does live paycheck to paycheck even mean. all of my retirement investing, mortgage, and bills are automatically withdrawn monthly. we make something like that amount jointly but at the end of the month there's very little cash leftover. we don't buy luxury items and we don't have nice cars.

"More than half of top earners in that generation report having little left at the end of the month."

That’s no surprise at all. I also have almost nothing left at the end of the month. At the beginning of the month, however, they should have plenty of money left and should save/invest then.

$250k is not a lot of money in most of these places live. In Canada it’s not even enough to buy a house in 2/3 of our major cities. What’s it like in NYC or the Bay Area? I can’t blame them for spending so much when that’s what it takes to have a lower middle class lifestyle.

I make a pretty good living, know more or less what I can reasonably afford. I always assume the people driving fancy cars here in Scottsdale are mostly deeply in debt. As an aside though, the gen-x erasure continues here, comparing only millennials with boomers.

I tell myself those people are in debt mostly for self preservation. My household income is great, but my wife drives a 2012 minivan and I drive a 2007 station wagon. I could not imagine spending $1000 or more a month on a new vehicle.

Put aside money every month now as a "car payment" and buy your next car in cash. Save yourself the interest and still have a plan if a vehicle gets lost.

For many people, a nice vehicle is 'the thing' they've always wanted. Many people I know seem to spend as much as they can afford on a vehicle, it's part of the personality somehow.

On the one hand, I can't really identify on spending so much money on something with so little utility. On the other hand, why are we making all this money if not to spend it on the things we desire?

Before the world shut down, I was spending between $5-$10k per year on travel, but I have no vehicle payments and that represents (a good bit) less than 10% of my annual income.

The problems really on start when you want to do both. If you need to have a new vehicle and travel, and whatever else, you're going to over extend.

A brand new Sienna will run you $600 a month or so on a good loan, with down-payment.

And it'll get 32 MPG whilst doing it. It could be worth taking a look.

I drive a 2019 CRV, 369 a month. It's really do-able if you have good credit and a downpayment. There is no need to spend 500+ on a vehicle a month. I could spend 1000/m on a car but that would be stupid for my salary range.

Baby boomers and their kids, and soon their grandkids.

> As an aside though, the gen-x erasure continues here, comparing only millennials with boomers.

Oh interesting. I hadn't picked up on that and I'll have to keep an eye out.

From the article (sort of related):

I don't understand this/not enough information.

> To finance their lifestyles, higher-income households are more likely to put expenses on credit cards -- but also more likely to be able to pay off their balance in full.

If they're anything like me, they do this because not doing it is a 1% - 4% increase in cost. Apple Card, for example, offers 2% cash back if you use Apple Pay. I do this (among using other cards) and pay off my balance in full each month. We have a monthly budget spreadsheet where we log expenses so it doesn't matter what method we use for payment, except that we get 2% cash back (among other things like fraud protection - not my money) which we sort of "don't account for" so that we have some extra savings that doesn't feel like savings.

I feel like this article has a catchy headline, but ultimately they're trying to string together lots of pieces in some sort of frankenstein article.

Yeah, if someone is paying off their credit card in full every single month, I think it’s inaccurate to say they’re financing anything. They’re doing it for the points.

> If they're anything like me, they do this because not doing it is a 1% - 4% increase in cost.

Yep, I have 3% cash back so I put every bill I can on my credit card, even if there's a fixed fee (usually $2-3) on it. I earn about $30-60/month that goes straight to savings.

If you don't mind my asking, where have you found a card that offers flat 3% cash back?

Yeah, whenever I see young people driving brand new BMWs my first thought is always "I know that I make more money than you, and I could never afford that car". I truly do not understand who can actually afford a $1k car payment who isn't a millionaire.

If your mortgage is paid off it's definitely possible. I wouldn't waste that kind of money on a car, but a lot of things change when your housing costs drop drastically.

Most software engineers can afford $1k/m and still save plenty of money for retirement. The key is not living in a HCOL area and reducing your other spending.

This is referred to as 'daddy's money.'

A large portion of the youth today are living off of their parent's income or existing wealth. Their parents might not pay for their car, per se, but they're likely footing the majority of their other expenses such as paying for their apartment or condo, paying their tuition, giving them regular allowances, etc.

I don’t live in the US. But I’m wondering: Is that a function of inflation, or is it a function of overspending? (Or, third option, a function of high paying jobs beyond geographically clustered in cities where living expenses are especially high.)

Yes.

I gotta think overspending.

While housing is absurdly expensive depending on where you live that doesn't mean that at 250k you can't live within your means / have to be living paycheck to paycheck. I suspect they don't want to make the compromises required (commuting and so on) to spend less.

It might not be easy to live cheaper in expensive areas, but at 250k it should be possible.

As the article notes the majority of these people are still paying their bills "easily".

True. I cannot comprehend how people can spend $8 on a cup of coffee. To me, that isn’t even a question of whether one can afford it. It’s a question of sanity. I can make a great cup of coffee myself for mere cents. And if a business that specializes in selling hundreds of cups of coffee a day does it orders of magnitude worse than I can at home, I would feel foolish patronizing them. That makes me almost feel insulted. Same with clothing, btw.

Overspending causes inflation, so...

I am an immigrant in NA. It's an extremely materialistic culture. Before coming to NA I've heard the phrase 'NA is a culture of excess'. After living here for few years I've realized what the culture of excess means. Exercising restraint is not in DNA of NA culture. The whole culture is just me-me-me and what more I can consume.

Got an example to share?

Crazy. Then again, perhaps it would be worse for the economy if people hoarded their money. Perhaps better to be a saver in an economy of spenders than to be spender in an economy of savers?

Overspending. Americans often light large piles of money on fire without a second thought, which has traditionally been enabled by having far more money left after paying all ordinary expenses from their income than people in other industrialized countries. Even though Americans notoriously spend a lot on unnecessary luxury in their day to day expenses, the median household in the US still has $1000 per month left over for buying the latest iPhone or boat or whatever.

Americans have prodigious amounts of money to save or spend on frivolous things by any global standard. Americans strongly lean toward the "spend" side of that, having one of the lowest saving rates in the industrialized world.

$250k ain't what it used to be. And salaries aren't keeping up with inflation. All the wage inflation is happening at the bottom of the pyramid. Nobody is having trouble hiring software engineers.

It might be interesting to investigate the larger dynamic context of this situation. Of Americans making $250k how many recently made more than that and have been forced to downsize?

This is a big indicator of how close we are to another recession. It's a slippery slope, a little downturn and some folks loosing their jobs could turn into a big deal quickly.

Cue San Francisco residents who make half a million a year complaining that they are really poor because of out of control housing prices.

Is this $250k pre or post tax? if pre-tax, what is the disposable income out of that in average US state?

Usually these numbers are given before tax. The sum after taxes will vary depending on the state and the family size. You can check here [1] for various options.

[1] https://www.paycheckcity.com/calculator/salary

I love how the article's chart shows Millennial and Boomer, once again erasing the existence Generation X.

If there's one cohort that has gotten the shaft is Gen X.

Millennials conflate them with boomers and, quite often, blame them along with Boomers.

Yet, very few of Gen Xers got all the perks of being a boomer such as a affordable education and housing on one income. Especially the ones born in the early late '70s.

And, too old to get to enjoy conveniences that millennials got that made childhood fun like Saturday morning cartoons or Nintendo (remember that gaming used to be mainly for kids. It wasn't until late '90s that gaming was targeted at young adults)

Pure fucking middle child syndrome.

But they made some kick ass music in the '90s.

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