Scraping By On $500,000 A Year: Why It’s So Hard To Escape The Rat Race

Can you imagine scraping by on $500,000 a year? Well, believe it. Thousands of households living in expensive cities are running on this never-ending treadmill. It's only when you can lock down expenses, save and invest aggressively, will you ever escape the rat race.

They've got big mortgages, private school tuition to pay, and fancy cars to drive. No matter how much they make, these households tend to spend all their income and not save as much as they should. Now with inflation running near 40-year highs, important costs are simply going up further.

I've highlighted in a previous article how living off $200,000 a year in an expensive city is really just an average lifestyle. In this article, I'll discuss how one couple is living paycheck to paycheck while making a combined $500,000 a year. They are a real couple who shared with me their financial details to anonymously share with you. Judging others, after all, is an American pastime!

$500,000 a year or higher is a level which I think is considered rich. Anybody who thinks otherwise has no concept of financial reality. Even the government agrees after compromising by raising the income level for when the highest marginal tax bracket kicks in to ~$400,000 from $200,000 back in 2013.

But starting in 2018, things got even more painful for the upper middle class. The SALT tax cap capped mortgage interest deduction and limited property tax deduction to $10,000.

Now Joe Biden is looking at raising taxes for households making over $400,000. Can you imagine working 60+ hours a week, never seeing your family, and still paying more in taxes?

No wonder why more high-income households are looking to retire early and enjoy the YOLO Economy to the maximum. Life is short and this pandemic has really motivated millions to finally live it up!

Who Makes $500,000 A Year? Household Combinations

Although making $500,000 a year may sound like a Herculean task, you'll be surprised to know there are plenty of regular folks who hit the half million mark every year. Here are some combinations.

1) A couple 30 year old lawyers in their fourth year at a big law firm

2) A couple 32 year old second year associates at an investment bank after business school

3) A single 31 year old VP at a private equity shop two years out of business school

4) A 35 year old senior project leader at a management consulting firm and her schoolteacher husband

5) A couple 35 year old doctors (cardiologist and anesthesiologist) three years after their fellowships

6) A 46 year old Chief Marketing Officer and her 52 year old police officer husband

7) A couple online marketing consultants in their mid-30s

8) A 41 year old super frugal personal finance blogger who preaches riding a bike, doing your own home construction, and living off $30,000 a year or less and his wife

9) An engineer at Google who has been there eight years and his partner at Salesforce

10) A 22 year old rookie professional basketball or football player and his product manager wife.

11) A junior partner at a law firm and her Silicon Alley engineer husband

12) A Bay Area janitor and his elevator technician spouse

As you can see from my examples above, plenty of professions make $500,000 a year or more in household income at a relatively young age (<40). Finances are much easier when you combine forces! Some are scraping by and some are doing just fine.

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How To Make $500,000 And Never Escape The Rat Race

People who consistently earn $500,000+ annually should not have any financial problems. If they are scraping by, they aren't getting sympathy from anybody since they're making roughly 6.7X the median household income of $75,000.

A very simple solution to growing rich is to simply track your finances for free online. The process is similar to how you'd track your weight by stepping on a scale at least once a week to keep yourself honest. The free tool I've used to manage my wealth since 2012 is Empower.

Just beware. Money can be intoxicatingly evil once the big bucks start rolling in. As soon as you start making multiple six figures, you begin associating yourself with other people who make similar amounts or much more.

Remember, it's nice making max money in the NBA. But it's even nicer if you are the owner who can cut max money checks!

We're Always Comparing Ourselves

There’s a never ending cycle of financial comparison. And with comparison comes envy, jealousy, depression, loneliness, and all sorts of feelings that would not be felt if you just took a step back and realized how fortunate you really are. If you try to keep up with your neighbors too much, scraping by may be inevitability, no matter how much you make.

This is why if you do want to beat the Joneses, you should compete on FREEDOM. After all, there will always one more dollar to be made. If you don't compete on having the most freedom, scraping by might very well be your reality with a high income.

The below chart is an annual spending example of a couple who each make $250,000 a year as lawyers. They have two children ages three and five. They are both in their early 30s and live in New York City, the most expensive city in America! One could say they are scraping by with just $7,300 left a year in cash flow.

Scraping By On $500,000 A Year


Largest Expense: Taxes ($185,600, ~39% effective tax rate).

The number one reason why high six-figure income households are scraping by is due to taxes. It's more efficient to earn investment income than W2 income due to lower tax rates.

The government doesn't believe in two high-earning working spouses. They want one spouse to stay at home and take care of the kids. If they didn't, why did President Obama campaign aggressively for $200,000 + $200,000 = $250,000 before taxes go up for the top? Equality would dictate that $200,000 + $200,000 = $400,000, which is the compromise our politicians made.

Living in NYC is expensive due to Federal (37% marginal tax bracket), State (10%+), City (4.25%+) taxes, and FICA tax of 6.4% for the first $142,800 you make for 2021. Unfortunately, NYC is where many of the jobs are.

At Least No More Marriage Penalty Tax!

This couple use to be paying roughly $8,000 – $10,000 extra a year due to the marriage penalty tax, which is now no more for individuals who turn into couples earning up to $300,000 each. Furthermore, they have AMT, an extra 0.9% Medicare tax they have to pay on income over $200,000, and net investment income tax (NIIT) of 3.8% on income over $250,000.

With tax reform in 2018, only $10,000 of State And Local Taxes (SALT) is deductible per person or per couple. This is a negative for residents in coastal cities like New York and San Francisco where property tax alone can be $18,000 a year based on the median home price of $1.5M.

Further, a taxable income of over $400,000 means a state income tax amount of over $26,000. This couple with $43,000+ in SALT deductions now loses $33,000. Then there is the cap on mortgage interest deduction on mortgages up to $750,000 from $1,000,000.

Further, President Biden is planning on raising taxes on single people making over $400,000 and married couples making over $450,000 if he gets his way.

Wise To Invest In Non-Coastal States

Given the high cost of living in big cities like NYC, is there any wonder why investing in the Heartland of America is becoming a more popular move by savvy investors? Instead of scraping by in New York City, you could live it up in Des Moines, Iowa, whoo hoo!

The Heartland is being rewarded and protected by the government. Further, property valuations are much cheaper and net interest yields are much higher. With technology and telecommuting now widely accepted post-pandemic, more people are migrating to lower cost of areas.

I've personally invested $810,000 in 18 different commercial real estate investments across the country.

My favorite real estate crowdfunding platform is Fundrise, which has diversified funds that invest in rental properties in the Sunbelt. Another option is CrowdStreet for accredited investors, which offer individual real estate opportunities. However, before investing in each deal, make sure to do extensive due diligence on each sponsor. Understanding each sponsor's track record and experience is vital. Both platforms are free to sign up and explore.


So far, my returns have averaged 12% a year and my capital is starting to really pay out. Below is my dashboard, which shows over $624,000 in distributions since I started investing in private real estate.

private real estate investment dashboard

Mortgage Expense ($60,000)

$5,000 a month in mortgage expense bought this family a ~$1,500,000, 3/2, 1,700 sqft condo in Brooklyn a couple years ago. In other words, they are living comfortably, but not large.

Luckily, they bought their condo a couple years ago because similar condos are now going for $1.6 – $1.8 million. I would say a mortgage, property taxes, and maintenance expenses are main reasons for scraping by.

Further, mortgages rates for 30-year fixed, 15-year fixed, and a 5/1 ARM are now close to 6-year lows as the Fed has decided to step off the gas pedal. If you haven't refinanced or check the latest mortgage rates, you can get a free mortgage rate quote to get the best rate possible.

Childcare Expense ($42,000)

Surprise! Children are expensive, especially in big cities. Without children, a $500,000 would likely never be scraping by.

They are actually getting a discount with two kids, given childcare for one kid costs closer to $30,000 a year. The $42,000 a year cost can be spent on daycare or a day nanny, although some contend that $42,000 is not enough.

If the couple wants to send their kids to private grade school after, then the cost of tuition is often even greater than child care. Here in San Francisco, private high school tuition is over $55,000 a year per child.

Student Loan Expense ($32,000)

Law school tuition runs $50,000 a year for three years. That's $300,000 in law school tuition plus room and board spent. If they didn't go to law school, they could have easily made $65,000 – $80,000 a year doing something else.

So many people conveniently forget that in order to get a high paying job, it often takes a lot of expensive education. It would be nice if the US education system was practically free as it is in Canada or Europe. Too bad it's not.

It's typical for many doctors and lawyers to have over $100,000 in student debt to pay off over a 10-20 years period. If there's one hack American parents should consider, it's sending them to Canadian universities. Not only are they easier to get in, they are much cheaper as well. Take advantage of Canada as the Canadians take advantage of a more lucrative U.S. job market!

Food For Four ($23,000): A Debatable Expense

Spending $23,000 a year on food means spending roughly $1,916 a month, or $63 a day for four, or $15.75 per person for breakfast, lunch, and dinner. I challenge anybody living in a big city to consistently live off $15.75 a day for longer than three months.

Work lunch alone costs $10-$15 for a mediocre meal compared to $5-6, 10-15 years ago. Therefore, the solution is to buy in bulk and always bring food to work. Unfortunately, that gets old after a while, especially when you're working 60+ hours a week.

Americans are clearly not scraping by on food given the majority of us are overweight or obese. But if we did start to cut down on food consumption, we might get closer to the ideal body weight and live longer.

Car Payments ($9,600): Also A Debatable Expense That Can Be Reduced

With two precious ones, the parents decided to lease two family-friendly vehicles: a BMW 5 series and a Toyota SUV with third row seating. $800 a month in lease payments means one less hassle when it's time to get rid of the cars.

They like the convenience of covered maintenance and the peace of mind by having a warranty. They are busy professionals with kids. Car problems are the last things they want to deal with.

Three Vacations A Year ($18,000): Reasonable!

Let's say each vacation is one week long and costs $6,000. Is that so unreasonable for four people? Seven nights at a 3-4 start hotel costs $300 a night ($2,300 including tax).

Roundtrip airfare for four to debt-laden Puerto Rico costs another $2,400. The family is left with $1,300 to spend on food and activities. It's not like they are flying anywhere via a private jet or anything!

Charity And Alumni Giving ($18,000): Can Be Cut

$18,000 equals 3.6% of the family's gross income, which is inline with the average donation percentage by income according to the National Center For Charitable statistics. They each give $7,000 to a charity they strongly believe in, and also give $2,000 a year each back to their respective undergraduate alma maters.

Children’s Lessons ($12,000): Raising Well-Rounded Students

It’s a competitive world out there and these parents want the best for their kids. The kids are taking violin lessons, Mandarin lessons, and tennis lessons throughout the year. At an average cost of $1,000 a month, they believe this money is well spent.

How else are they going to be able to get into private grade school that costs up to $50,000 a year? They're feeling the pressure at work, so their kids might as well feel the pressure in school.

Miscellaneous Expenses ($10,000): Something Always Comes Up

Unless you track your finances like the CIA, which you should, something always comes up. If nothing ever came up, you wouldn't have people with less than $5,000 in savings after 10+ years of work. If nothing ever came up, there wouldn't be so many budget deficits. Sometime unanticipated is bound to happen.

All The Push-backs Addressed

I'm sure by now many of you are wondering what the heck is wrong with this couple? They aren't scraping by. Instead, they are saving for retirement and living a pretty good lifestyle. But how could they earn so much money and be left with so little.

As someone who started his career working in Manhattan in 1999 with a $40,000 salary, and living in a studio with a high school buddy in order to save money, I've wondered the same thing. But let's see if we can understand this couple's point of view.

Here are your most common pushbacks and some further thoughts.

Pushback #1: A 40% effective tax rate is too high!

It does seem a little high given the charitable givings and mortgage interest expense. But due to AMT and mortgage interest deduction phaseouts, this couple isn't getting as big of a deduction as you might think, especially now that SALT deduction is capped at $10,000.

There's probably room to lower the couples effective tax rate by 5% with some aggressive accounting. It all depends on how much risk you want to take. Here's some quick math from an astute reader. Do your own!

  • NY State tax : (500K-18K-18K-15850)*0.0685= ~$30,700
  • NY City tax: (500K-18K-18K-90K)*0.3648+3000= ~$16,700
  • Social Security tax (FICA): 7347*2= ~$14,700
  • Medicare: 500K*.0145 = $7,250
  • Federal tax: Deductions: (47.4K state local), 20K real estate tax, 18K charity, 41K mortgage interest (This is the third year of the amortization as per your information). Child care tax credit: 1200 -> ~104K
  • Obamacare tax: (500K-250K)*.009= $2,250

Total taxes of $175,600, which is not too far off from my $185,600 estimate. The child tax credit phases out after a married couple starts earning more than $110,000. Therefore, my ~40% effective tax rate is pretty darn close to reality. Run the numbers if you don't believe me.

With Biden now as President, expect to see a federal marginal income tax rate go up to 39.7% from 37% for this $500,000 a year household.

Pushback #2: A $1,500,000 home is way too expensive! They should just move.

Yes, $1,500,000 is a lot for almost everywhere else in the world, but in Manhattan, the median home price is roughly $1,280,000 and $1,115,000 in Park Slope, Brooklyn.

Spending 20% more than the median home price when you have a family of four to house isn't that egregious. With selling costs still stubbornly high at 5% – 6%, selling so quickly after buying isn't an optimal move, especially because of the kids.

Real estate prices are a reflection of job growth and income levels. Yes, you can move to Idaho to save on housing costs, but you will have a much more difficult time finding multiple six figure jobs.

Invest in the heartland of America through real estate crowdfunding is a simpler, more efficient way to profit from higher yielding properties. Thanks to the pandemic, the spreading out of America is real.

Manhattan Real Estate Prices - A reason for scraping by

Pushback #3: Who needs two cars in NYC?

Nobody, really. With an awesome subway system and cheap ride sharing, one car is enough for a family of four. If they cut down on one car, they can save $400/month or $4,800 a year. Not a huge amount, but something.

The chart is an example of an imperfectly optimized financial budget. It has room for improvement. Having a large car becomes important with kids because you want to get away from the city and take their friends too.

Personally, I do think driving a cheaper, older car is much better for your mental health. He won’t worry about it getting dinged or stolen as much.

Pushback #4: $12,000 in music and sports lessons?!

The pressure to get into a private school in cities like SF, NYC, and LA is immense because of public fund mismanagement and strange lottery systems that don't allow students to attend their local public schools where they pay property taxes.

It's sad to put kids through the wringer so soon, but I guess the cycle never ends if the parents went through the wringer themselves. The funny thing is, most parents don’t continue to play sports as adults. So why are we pushing our kids to play sports so much when only about 1% play sports in college

After being a parent of two in San Francisco for six years, I clearly understand the angst and anxiety such households with children face. There is a deep concern for their children's futures because of how competitive society has gotten.

Ironically, the more a household makes, the less likely their child will be able to earn the same amount of money and live the same quality lifestyle. At some point, upward mobility ends.

Pushback #5: Having $7,300 left over is still a lot!

It is, if you don't live in a big city with two kids to support. One accident, and that money is gone. This is why having good health insurance, life insurance, and an umbrella policy is so vital. Even then, we hear horror stories about how insurance companies don't fully pay out.

Remember, everything is relative in finance. You can't compare your cost of living to their numbers if you don't also live where they live.

Pushback #6: Three vacations a year? What a joke!

It's sad that we view having three, one week long vacations a year in America as a difficult thing to do. Spend some time working in Europe or Asia and you'll discover how little vacations Americans actually take.

Is there any wonder why countries in Europe, despite their high taxes, consistently rank as the happiest countries in the world? Let's gain more perspective on work-life balance, money, and happiness by visiting other countries.

Pushback #7: At least they are building a 401k balance and home equity.

This is exactly right. When it's time for them to leave the rat race, they'll at least have a sizable 401k balance and a good amount of home equity if real estate continues to increase with inflation. Nothing is a guarantee as we saw during the financial crisis and during 2022, but chances are high their investments and home equity will continue to grow.

The reason why they might not feel rich is because they can't touch their 401k money before 59.5, unless they want to incur a 10% penalty. Further, given they only own one property, they're neutral the real estate market because they have to live somewhere.

Only if they own more than one property are they actually long. They could take out a home equity line of credit (HELOC) to fund their lifestyle, but that's what caused many homeowners to get in trouble in the last downturn.

For 2023, the maximum 401(k) contribution per employee is $22,500.

Pushback #8: Where's the line item for college savings?!

This is where all the cost savings we've conducted so far gets nullified. College tuition now ranges from $20,000 – $75,000 a year. When you add on room and board, we're now talking $35,000 – $100,000 a year for four or five years.

Now imagine how much college costs a year in 10-20 years? Holy crap! Every couple who plans to send a child to college needs to start saving at least $20,000 a year from year one! And that's if you don't plan to send your kids to private grade school.

Private school now costs a fortune. It is also one of the main reasons why high-income earnings are scraping by. It's a rat race to see who can over-educate their children the most!

Make sure to contribute to a 529 plan per child as soon as they are born. The gift tax exclusion amount is now $17,000 per person. You can also superfund a 529 plan now for $85,000. I suggest doing so if you can to get it out of the way.

public school or private school - scraping by due to the high cost of schooling

High Income = Lots Of Stress

If you’re making $500,000 a year in household income as a worker bee, you’re probably going through a lot of stress due to the amount of hours you are working plus the amount of taxes you are paying.

You should check out the miserable work feedback from Goldman Sachs analysts. Sure, these analysts will likely make a top 1% income if they stick with finance for over 10 years. However, at what cost?

Making money as a W2 wage slave is the worst way to go. Society won’t acknowledge the sacrifices you made. Nobody will know the time and money you spent. Finally, your competitors won't recognize the risks you took to get to your position today.

The Ideal Income For Maximum Happiness

Is there any wonder why money doesn't buy happiness? Once you make about $100,000 per person in the Midwest, or $250,000 a person on the coast, there is no incremental increase and happiness as you make more money.

A better income strategy and a happier lifestyle may be awaiting just a notch below in the upper middle class. When you are middle class, you no longer become a target of society's discontent.

Perhaps you can reduce earnings by dialing back work to a more leisurely 40 hours a week. Use the other time doing stuff you enjoy. Or maybe you can start a business so that some of your living expenses can be written off.

I started Financial Samurai in 2009 and it's been my greatest professional pleasure! I also wrote an instant Wall Street Journal bestseller during the pandemic entitled, Buy This, Not That: How To Spend Your Way To Wealth And Freedom. It was my way of making lemonade out of a difficult situation.

I highly recommend you pick up a copy if you want to escape the rat race.

It's Hard To Break Free Without Controlling Expenses

With over $250,000 a year in after-tax expenses, this family must change their lifestyle quite drastically. Even after eliminating 100% of charitable givings, getting rid of both car lease payments, and no longer paying for children's lessons, they've still got $200,000 in annual living expenses to cover!

This couple is saving $36,000 a year in pre tax retirement accounts plus $7,000 a year in after tax savings. With a monthly expense of $22,583 to maintain their lifestyle, can you guess how many more years they need to save at their pace to maintain a similar lifestyle in retirement?

At least another 63 years! The couple should have at least 10X their $271,000 annual expenses in net worth by age 60.

Here's a handy net worth target chart I've put together for those looking for some wealth accumulation guidance. Due to inflation, low interest rates, and the desire to not outlive your money, try to shoot for 20X your average gross income over the past three years.

If you are part of a household making $500,000 a year, then aim to accumulate a net worth of $10 million dollars a year before you retire. With $10 million dollars, you should be set for life!

Target net worth by age, income, or experience so you aren't scraping by on $500,000

Make The Money And Escape!

For those of you who are super ambitious, it's worth working your butt off to see how far you can go in your career. If you get to a multiple six-figure income level, shoot to last for 10 years while saving 50% or more of your after tax income. Eventually, you'll accumulate a large enough financial nest egg where you can do whatever your heart desires.

Not a day goes by where I'm not thankful for working brutal hours in my 20s and early 30s. Being free is absolutely priceless the older you get because you no longer are willing to put up with the world's bullshit.

After I left Corporate America in 2012 at the age of 34, all my chronic pain (TMJ, lower back pain, sciatica, tennis elbow, golfer's elbow, etc) went away. The health benefits of early retirement are priceless! The time for working on a side-hustle before or after work is now. You never know what might become of it.

It'll feel weird giving up so much money at first. Golden handcuffs are incredibly tough to break. But I bet the value of your new found freedom will far surpass any money you'll forsake.

Always remember that money is simply a tool for happiness. If you aren't happy then you must make a change. Either save more, change careers, or take some calculated risks. You don't want to look back at life with regret.

Wealth Building Recommendation

Instead of scraping by on $500,000 a year, why not live life to the fullest? To do so, sign up for Empower, the web's best wealth management tool. It will help you get a better handle on your finances. You can use Empower to track your net worth manage your cash flow. My favorite activity is x-raying my investment portfolios for excessive fees.

After you link all your accounts, run the Retirement Planner. It pulls your real data to give you as pure an estimation of your financial future as possible. Your goal should be to get to a 90% probability of achieving your goal.

There's no rewind button in life. Make the most of things today so you can enjoy life tomorrow. Scraping by sucks.

You won't be scraping by if you diligently track your finances
Is your retirement plan on track? Find out for free after you link your accounts.

Build Wealth Through Real Estate

If you want to get out of the rat race sooner, you've got to build passive income. Real estate is a core asset class that has proven to build long-term wealth for Americans. Real estate is a tangible asset that provides utility and a steady stream of income if you own rental properties.

Given interest rates have come way down, the value of rental income has gone way up. The reason why is because it now takes a lot more capital to generate the same amount of risk-adjusted income. Yet, real estate prices have not reflected this reality yet, hence the opportunity. 

Take a look at my two favorite real estate crowdfunding platforms.

Fundrise: A way for all investors to diversify into real estate through private funds with just $10. Fundrise has been around since 2012 and manages over $3.3 billion for 500,000+ investors. 

The real estate platform invests primarily in residential and industrial properties in the Sunbelt, where valuations are cheaper and yields are higher. The spreading out of America is a long-term demographic trend. For most people, investing in a diversified fund is the way to go. 

CrowdStreet: A way for accredited investors to invest in individual real estate opportunities mostly in 18-hour cities. 18-hour cities are secondary cities with lower valuations and higher rental yields. These cities also have higher growth potential due to job growth and demographic trends. 

If you are a real estate enthusiast with more time, you can build your own diversified real estate portfolio with CrowdStreet. However, before investing in each deal, make sure to do extensive due diligence on each sponsor. Understanding each sponsor's track record and experience is vital.

Both platforms are free to sign up and explore. 

I've personally invested $954,000 in real estate crowdfunding across 18 projects. My goal is to diversify, earn 100% passive income, and take advantage of lower valuations in the heartland of America. My real estate investments account for roughly 50% of my current passive income of ~$380,000. 

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Buy This, Not That: How To Spend Your Way To Wealth And Freedom Bestseller

680 thoughts on “Scraping By On $500,000 A Year: Why It’s So Hard To Escape The Rat Race”

  1. i don’t give a f* what city you live in. if you have 500K per year, you are NOT scraping by. what a load!

    1. Financial Samurai

      Where do you live? And have you ever lived and raised a family in an expensive coastal city?

      1. I live and raised my family of 5 in an expensive coastal city. I’m going to join Fredrick in not giving a f***. He is absolutely correct, and there is no argument that exists. I’ve been following this feed for 8 years, just to enjoy the laughs from people lamenting their good fortune.

  2. Some of your data is a bit old. For example, leasing 1 BMW alone is likely to cost close to $10,000 a year now! Maybe time to revise some of your data.

  3. This family is a victim of their own choices:
    1. Where they live — highest taxes, most expensive real estate
    2. Lifestyle they live
    3. Financing things they can’t afford (if you have to borrow, you can’t afford it)

    Cut vacations to 1, cut food budget by half, clothing by at least half, get rid of one of the cars, and pause 401k, then they’ll have about $70k to throw at their debt and start working toward real financial freedom.

    1. Cut vacation: agree
      Cut food budget by half: not feasible
      Get rid of one car: agree
      Pause 401K: last thing one should do

      BTW, the mortgage cost for $1.5 million property is way more than the indicated number (at least $30,000 more unless the down payment is huge). Anyway, the children E.C. and charity probably need to go in that case.

  4. My oldest did her undergraduate degree in Canada and got a great education. Never had to take loans and got better medical care that we have in the US.

  5. Forgot to add–most people earning 400k and up are not sending their kids to private schools because taxes already take almost half of what they earn! My granddaughters, whose mom is a doctor and their sole support, have gone to public schools their entire lives!

  6. My daughter is a doctor who earns 500k a year. She has to support a daughter who is schizophrenic & can’t work. It is difficult when she lives with them. So she lives separately in a $2000. a month plus she has to pay her energy bills, plus insurance and other assorted bills. When she divorced her 2 daughter’s father 14 years ago she had to pay him half of everything she had. To do this she had to take a second mortgage on her home, as we did ours.

    All of you also neglected to mention that at a certain income level, a Medicare surcharge kicks in. It doesn’t give you any better Medicare treatment. You just pay more before the days comes when you qualify for it.

    So my my daughter is stuck with a 1,400,000 house that, as is true of so many houses in this price range, hasn’t gone up much in price, but, as large houses do, has one thing after another that needs fixing. The larger a house is, the greater the number of things that can go wrong. Don’t envy people with large houses.

    And her taxes? With Medicare surcharge, federal, state & local taxes she pays almost half of what she makes and she works weekends, nights, overtime. And now they’re increasing taxes on people who earn 400k and over? My daughter’s been talking about partially retiring. And guess what? There’s a shortage of doctors! Guess what? You all are going to find it more difficult to see your doctor when you want! But I won’t! Because my family has 4 of them in this country!

    1. I live on about $3,000+ a month in the NJ suburbs. Nice, safe town with ample amenities. I get by on freelance and some other minor income. It’s a good life. Total = $3000 x 12 = $36000, (+- $4000). Make a lot of lentil stuff, dal–cheap! delicious! Still have enough for store-bought sushi, poultry, jumbo crab cakes, etc. Drive a modest car that gets 38 to the gallon. Bought it new. Do a lot of volunteer work – about 50% of my time. Give me $500k and I would gladly pay the taxes and bank/invest the remainder.

        1. gleb petukhov

          I mean you can’t blame him – Nowadays you should swing for the fences or be extremely lazy because the government taxes earned income the most

        2. Chill Bill, there are plenty of lazy folks who make more than 500K. Your drive has next to nothing to do with your earnings. Otherwise, I would be a billionaire.

  7. Alright Sam. Well done once again. Let me add a few comments. I like some of comments from individuals that clearly lack some experience with kids, etc. Okay. So here are my thoughts. 1. you can indeed get a well paying jobs without advanced degrees. Accounting, consulting and writing code are great examples. 2. I agree that vacation is nice and three weeks is not out of line. However, if you have kids most likely you are spending a week at home, one week visiting grandparents and one week having fun (Disney is expensive) so $18 K is mostly too high – these parents with little kids will probably vacation cheaper than $18K most years. 3. Many parents in NY start parenthood at later ages (ie. older first time parents) so they should have some savings 4. Child care is expensive, not doubt – spot on — lot so time people piece it together and may rely on family (even “rich couples”). 5. Cars in NY – probably because they might work in Manhattan and live outside 6. $12 K on sports and activities is probably a double count if the parents are paying for child care. Difficult to have kids doing all those neat activities that cost money because they are young and in day care. As they age day care costs go down. As for private school and colleges — day care goes away, school costs then start — so a wash as they age depending on schools. If the family has a house and lives outside the city (and they do because they have cars) then getting into a good public school makes sense. I would think that there are solid public schools. College debt, $32 k in payments is a great example (for many) of poor financial decisions. Yes I know many think their kids must go to the bests schools. So be it, for me, public in state is a successful formula.

    By the way if this couple makes $500 K they are probably upwardly mobile and should expect higher earnings, more bonuses and perhaps even stock. Also if these two professionals racked up enough student debt to make $32 K in annual payments (assuming high end elite schools and high end advanced degrees) then definitely $500 k is just a level they be passing through. Okey, I could go on and on. but this is a hypothetical couple. I wouldn’t characterize them as scraping by but they could improve their savings a bit.

  8. Gwen Spracklen

    How are a $1,500,000 home, 3 vacations a year, a BMW and Land Cruiser, and maxed out 401K “average”? Am I supposed to feel sorry for these people that their life is so hard?

    1. Do you really think that everyone who earns 400k and over has all of this? My daughter is a doctor, earns 500k a year, is the sole support of her family has a 1,400,000 home but has none of the other things and is up to her ears in debt. She pays almost half of what she makes in Medicare surcharge, federal, state and local taxes.

      She has savings but they’re mostly for a mentally ill daughter who can not work & will probably never be able to. You guys are really eager to make her daughter either eventually destitute or a ward of the state, aren’t you? You all complain about welfare but you want to tax my daughter till she can’t save for hers! Or till she works herself to death! She’s been working overtime just to try to make some extra money and now you guys want to tax her MORE! SHAME!


  9. I am a 25 year old male living in Vancouver, I have a small business of renting apartments long term and re-renting them out on Airbnb. In one year I brought in 600K in income. Since this income is passive and so easy to come by. I have been blowing all of it and not even leaving enough money to pay taxes. I am also well connected, and I broker deals in the city between public/private companies looking to bring investors and take a fee on it. This on average brings me 150K a year for past 3 years. This is the only time I have saving in my account until I spend all of that as well. I am having a very difficult time getting out of this rat race and constantly have anxiety about money. For example, I went on a skiing trip with my father and obviously during winter holidays its a very good time of the year for Airbnb. I ended up blowing about 20,000 euros on clothing that I did not need at all. This happens all the time, this summer I went on a trip with my friend who is a trust fund kid. I ended up spending 250,000 over the 3 month period. I decided that I am better off moving to Monaco where I don’t pay taxes, to help this. Please help me…

    1. Strongly encourage you to get evaluated by a clinican for a mood disorder. If you ever feel energized or wired while dropping money like that, could be hypomanic episodes. This is not medical advice.

      1. Money just compounds the problems that were always there. Do some soul searching better yet talk to a therapist. You gotta find out about yourself just like you figured how to make Ca$h. It will be a game changer for you.

  10. Mr. Daniel Pimental

    This post’s all about how to escape the rat race- a goal that holds who have jobs that require them to work very hard in order to compete .So no, normal people don’t escape the rat race of steady cash flow, paying bills and feeding yourself becomes a little bit harder.

  11. This should really be entitled “Scraping By On $500,000 A Year: How to Poorly Structure your Life and Spend Your Money Frivolously”.

    Let’s see why:

    – Undergraduate and graduate student loan debt: I have no clue how a couple could rack up $300,000-600,000 in student loan debt and interest payments. Many states offer full-ride undergraduate scholarships if you have a decent grade-point average, do some community service, and score well on standardized tests. You’re mostly limited to matriculating at in-state, public universities. However, you can pursue double Bachelors degrees and do an accelerated Bachelors-Masters program.

    If you take an extra year to work as a paid research assistant, then you stand a good chance of transferring to a top-tier private university for either a professional degree or a doctorate. The latter is usually free if you work either as a research assistant or teaching assistant. Fellowships guarantee full-rides with stipends. The former can be free, in some cases, when combined with a doctorate. In the end, you can go from a high-school diploma to either a Ph.D., an M.D., or a J.D. with zero debt.

    – Charity: Charity is for when you either need a tax write-off, want to attend events to network, or can afford to give generously without touching your investment principal. Keep it to under $1000 per year until your investments pay for your lifestyle. Spend locally so you can see to where your money goes.

    Your alma mater is not going to miss the donation. They already got plenty from you when you were at university. Plus, they’ll probably end up spending it on stupid things anyway, not things that matter like more affordable dorms, more parking garages, merit-based scholarships, and so forth.

    – Children’s lessons: The high cost must be a big-city thing. Where I’m at, parents have their kids join a school’s sports teams. The parents pay a very small seasonal fee, pay for equipment, shuttle kids to and from practice, and so forth.

    Music lessons are not that much in my area. Granted, I’m considering only non-professional lessons. I would only pay for professional lessons if my kids had serious aptitude and wanted to pursue music heavily. If it was just a passing interest, then I’d get them a used instrument and have them either join band or get pay for a non-professional musician to teach them for a bit. I’d then instill some serious discipline in my kids, that way they could learn to learn on their own. YouTube is a great, free resource. They would likely get more out of that than actual paid lessons if they had the right attitude. I did.

    I’d take this money and instead spend it on private-school tuition.

    – Childcare: Is this figure legitimate? I must be out of touch. The only time I could see spending anywhere close to this amount would be when the kids are not at the age where they can attend primary school. It definitely wouldn’t last more than six years.

    My parents had me join every after-school club and before-school and after-school sports team that I could. I was part of the science club and the technology club. For sports, I did swimming, that way I’d have something to do in the morning when they dropped me off early. In the afternoons, I did baseball in the spring. I did football training in the summer and then football in the fall. Some years, I’d do track. I did this from middle school on up through high school. Aside from equipment and some travel to events, these sports were entirely free. The point was to have fun and build athleticism, not necessarily compete to be the best.

    In elementary school, I did Taekwondo, tennis, and basketball. I also did art club, drama club, and Cub Scouts.

    All of those events were basically well-structured substitutes for child care. By the time they were done, my parents would come pick me up from school and take me home.

    – Gas: Either get an electric car, ride the bus, take the metro, ride a bike, or walk.

    At my last company, one of our VPs didn’t own a car. He either took the public bus everywhere or I picked him up when we wanted to go downtown or out of the city. He used the time on the bus to work. It beats sitting in traffic and not being productive. Our CEO lived about forty minutes away from the office. He drove himself and would schedule conference calls and meetings to be productive during that time.

    I lived right across from work in a condo and walked. I drove to the grocery store and sometimes around town on the weekends.

    The house I’m currently building is close enough to my company that I can bike to work a majority of the year. When it gets too hot, then I’ll drive. The public bus, sadly, doesn’t come back to the community in which I’ll be living. I’d lobby for it, but all of the well-to-do people would probably fuss.

    – Car payment: Never pay for a car with cash. Never spend your salary on car payments, except for your first car. Buy a beater that’ll last years. Invest the money you would have spent on a car into an index fund or something with good annual returns and easy liquidity. Get to the point to where the investment principal is double or even quadruple the price of the car that you want to purchase. Use the tax-free long-term capital gains every year to pay for the monthly payments of a car if you actually do need a new car. Put the money from your salary that you would have spent on monthly car payments into the investment. The investment principal will continuously grow. You thus never waste the principal on a depreciating asset.

    If you’re going to buy a new car, then follow the above advice and purchase one that’s electric. Get the cheapest model. Make sure that it’s a tiny fraction of your overall annual salary. Don’t bother with gasoline cars any more. They have too many points of failure. Plus, they are going to be phased out. You also get to skip yearly emissions testing for states that require it; it’s just one less hassle.

    – Vacations: Take one nice vacation per year, if that. The rest of the time, just stay in the general area and explore. Museums are great. Going to the park and having a nice picnic is wonderful. Camping in the fall and spring is absolutely amazing. Same with hiking, canoeing, and so forth. Those are far more memorable than simply going to Disney World.

    If your company pays for you to travel around the world, then schedule a vacation within those trips. I head to Europe and Asia at least once per year. My hotel and round-trip flight are free. I only need to pay for plane tickets for my wife and either my parents or hers, along with potentially extra hotel days. I travel so much that I can pay for their tickets by redeeming miles. If you’re going somewhere in the off-season, then hotel rooms are inexpensive. You only pay for their food and any sight-seeing tours. My per diem honestly covers most of the food budget anyway.

    – Food for four: Two words: corporate cafeteria. If work is giving you free breakfast, lunch, and snacks, then take advantage of it. My wife and I only pay for meals on the weekends. We’d also be paying for food for the kids. We’ve learned to just eat two meals per day, plus a light snack. All of that is provided by our companies for free.

    Before we got free meals, we’d take turns making food every week. We’d find recipes on the Internet and make something inexpensive, but very tasty, that would last for at least three or four days. It was a fun way to try new things on a budget. You should see the amount of spices that we’ve accumulated over the years. It’s enough to almost fill a pantry now. We sometimes cook during the week just for the enjoyment of it.

    In all, you could easily save up around $120,000/yr on a $500,000/yr salary by not being foolish. Even with the new mortgage, I’ll be investing around $110,000/yr. My wife will be investing around $100,000/yr. It’ll probably go down a bit once we have kids. However, we’ll still be enjoying life and giving good opportunities to our kids.

    1. Your viewpoint is limited to your experience. Some people opt to go to private college and probably do not qualify for scholarship due to parental income. Plus both of them have undergrad and law school debt. Not saying its impossible to get a job of this caliber if you don’t go to ivy league elite school, but 90% of time you don’t even get looked at unless you come from one of these institutions, it carries more weight than it should.

      Unless you get in at the start, its almost impossible to work your way up to these more elite firms. I agree that donations are too much given they have not paid back student loans, but that’s a personal choice.

      Childcare cost is real in NYC, I would say they are getting away easy with $42k for 2 children. Given they both work high pressure long hour jobs this is absolutely a necessity. Friend of mine looked high and low for a daycare program and lowest cost she could find was $25k.

      The whole point of them enrolling their children in these programs is because its super competitive in NYC in terms of getting your children into top private schools (even pre-school). Because if you don’t get them into the best elementary school it impacts their chances for getting into the best middle/high school which impacts their college choices. Lots of these elite private school are feeder program into the ivy schools. Plus all extra curricular activities in the city cost $$$, not a small fee like other areas.

      Can’t comment on cars, I think this is more of a luxury that they want and is unnecessary to have 2 in the city, didn’t see a cost for parking which can be more than car payment. On food, if you work 60-100 hours a week, the last thing you want to think of is how to scrimp and save on food. This figure is actually a reasonable amount and might even be low.

      If they work at top law firms they probably get a lot of their meals comped and the amount probably only accounts for food for children and going out. Food in NYC is expensive, an average salad can cost ~$15 and I usually spend $15-$20 on lunch everyday.

      In all I think this is a very accurate picture of what it cost to survive in NYC with children. It’s why a lot of people don’t have children until much later. The cost of schooling and cost of living eats up a good chunk of your income and savings.

      Sure are there things they can cut out and save a bit extra yes, but to be honest they are choosing to balance work life with quality of life and pay for things that either save them time or give them joy and there is nothing wrong with that. The good news is if they stay at their jobs and make partner their income can significantly increase in the coming years.

        1. I agree with A that this is generally accurate picture of household finances in high COL areas. But I agree with HyenaDad that there is frivolous spending. There are also things that don’t make sense to me.

          1. I live in PA suburbs and can’t comment on low $5k maintenance costs. Landscaping alone is $10k annually here. Where’s cleaning cost, heating, cooling, water, electric, etc…

          2. Why the need for 2 cars in NYC? Why is $10k payment so low on $150k worth of cars? I paid ~$13.5k annually for 3 years/50% downpay for my Land Cruiser. Is it because of leasing? Why lease a Land Cruiser when they’re built for longevity and robustness?

          3. $32k in annual student loans yet they’re taking expensive vacations and donating to charity? Ok…

          4. I only see 401k. My wife and I max out both 401ks and know that’s not enough.

          5. Only $10k unexpected budget for their lifestyle and high COL?? I budget $24k annually…

  12. Part of the issue is the title which states “scraping by”. Having all basic needs, plus luxuries (3 vacations, private lessons, two nice cars), fully funding 401ks and still having some (if not a ton) of money left over is by definition NOT scraping by. Scraping by means only having enough for basic needs and hardly anything left over (at least to me). The family could save 10k more a year just by going on cheaper (not even eliminating) vacations and getting cheaper (but still nice) cars, and skipping private tennis lessons. That’s a pretty luxurious life in one of the most expensive cities in the country.

    That doesn’t even get into the fact that being super rich (which 500k a year is) does not entitle you to all your desires IN THE MOST EXPENSIVE CITIES. The couple could live in a 1M dollar 2 bed 2 bath and have their kids share a bedroom which would save a ton of money. Having kids share a room isn’t what rich people do you say? Well in the most expensive cities it might be. The fact that you CAN afford that (plus a whole bunch of other things) even in a super expensive city’s is what makes you rich.

    Can’t fathom having your kids share a bedroom? Not getting private tennis lessons? Having one of your 3 vacations be a camping trip? Then move or admit you’re obnoxiously entitled.

  13. A multi-millionaire started from savings & investing

    As mentioned …. people can get by very well with a lot less!
    NO Sympathy at all. We live in NYC, and can chop down the expenses in about a half, IF careful. By the way, I never earned more than 60G/yr, yet was a voracious saver since age 7, and an investor since 17! Now have a large income stream thru frugal life decisions.
    Everyone makes choices, if you want to be flashy, change clothes every season, drive luxury cars, spend on vacations top dollar, as opposed to on the lower end without sacrificing too much, then you are doomed to work, work, and work, and never have a large savings account, or investments.
    We choose to live more frugally and save, and invest thus have a large portfolio of investments to boot.
    Some want to live like the Jones’s some don’t. Personal choices…
    God Bless America! USA! And capitalism to be able to make choices!
    We own a 2019 Honda HR-V and a Toyota Scion xB 2006.
    We don’t need to impress anyone:)
    Maybe all should read The Millionaire Next Door:)

    1. Frugal life decisions

      That is fantastic how you started at a young age saving money & investing at age 17…… Smart Financial Moves from the beginning provide you a quantum Leap vs others that start much later!!

      It is crazy how people want want to Keep Up With the Kardashians!

  14. The couple in the annual expense example at the beginning of this link are making a combined gross income of around 500k a year and net over 250k after taxes. They claim to be “scraping by” after their poor budgeting skills leave them with only 7300 bucks left, which is still a lot a money and far more than most people have left of their yearly income, but the only reason they think they are actually struggling to get
    by with that much income is because they are beyond stupid. Even when only counting their non-essential purchases, these financially ignorant people are still literally SPENDING more money than most people MAKE in a year and when you spend more money on stuff you don’t need than the amount most people make in a year, it makes you look extremely dumb when you run into money problems and/or cllaim you’re scraping by.

  15. I don’t think they’re doing that bad. They’re on track to have millions of dollars in their retirement accounts and likely several million in home equity, all while living a top-notch lifestyle. Their biggest expenses are mortgage, loans, and education/child-related — all of those will go away and won’t need to be supported in retirement. They’ll likely be able to retire in NYC if they wanted to, or they could easily trade that home equity in for a cheap rural place and live out their lives in peace as modest multimillionaires.

    They could certainly save/invest a lot more but you only live once and for some people they’d rather live a nice life while young/middle-aged.

  16. Being a single earner of $75K, 5 kids and a spouse, and living check to check, many times getting overdraft charges a few times a year, I can relate on how painful it can be. However, I recently discovered how I can consistently make $500K a year in the stock market, with limited loss, if any. It’s all about risk management. I don’t plan on getting anything expensive other than just replacing some old broken things and such. I calculate net after tax (due to no FICA – Social Security/Medicare expenses from capital gains), I’ll have $320K+. Since I survived on about $60K after tax before, I should have well over $250K I can save PER YEAR. Money reveals who you are. If you’re a clown before, you’ll be an even bigger clown when you get rich.

    I also have $150K in 401K (which I doubled during the pandemic by shorting the market and then riding it back up) I’m going to convert into an IRA and put into leveraged ETF funds to get 20-40% annual returns. I’ve already done the math.

    BTW, I plan on starting a foundation to help the underpriviledged plan and retire early. I’m only 43 years old.

  17. are maxing out your 401k, driving both a $55k+ BMW and a $85k+ Toyota (wow!), paying your student loans with ease, taking several vacations each year, getting your kids the very best lessons (mandarin and tennis at age 3!), eating like kings, “go slumming” at Banana Republic, own an apartment (not rent) in NYC and still have $7400 left? Cry me a river. Move to Jersey and stop complaining you pricks!

  18. Late 20s, make ~400k in tech (SEA area, so no income tax). Split rent with a sibling, so not really any more expensive than living as a single in most places in the country.

    Result: Living expenses ~30k/yr, save the rest (~250k).

    I did lose ~100k in the market this year though, so that hurts a bit.

  19. How can you consider 500K a year rich when Jeff Bezos makes 300 million a day? Seriously, if you think 500K a year is a lot, you wouldn’t even be able to fathom a multi-billionaires salary. 500K a year is statistically above average, but to me, it’s about the lowest you can get.

    1. 500K a year puts your family in the top 5% of Americans. $531k would be top 1%. For the vast VAST majority of US households its an unfathomably large amount of money.

    2. Robert Ruschak

      Becoming the next Jeff Bezos is like winning the lottery.

      “ The odds of winning that jackpot are one in 302.5 million, according to Mega Millions.”

      Anybody on this planet making $500k is wealthy, but a certain percentage of them are ((wise)) with spending & investing.

      Less than 1% of the USA population makes more than $500k.

  20. EatThisOnion

    Feel average? Cut those vacation (3 times a year to ZERO) you put $18k back in your pocket. Put a tent in the back yard, tell the kids go play in the back yard and sleep outside. Get electric cars, save on gas. Stop saving for your future with those 401k. More money in your pocket. Now you can say your not like the average person and yell I’m rich bitch…

  21. When calculating annual savings, should you include employer 401(k) match? What about principal payment on a mortgage?

  22. Trying to get ahead

    I disagree 100% with the figures above and I can speak from personal experience. The below chart is my family’s annual spending example. We are also a couple who each make $250,000 per year as lawyers. We have one child around the same age as in FS’s example. We are both in our 30s and both commute to New York City daily for work, the most expensive city in America! We also travel more and live better than many of our peers. We just don’t WASTE money on small trivial items or a new LV bag or TB shoes every week over lunch.

    Gross 500k
    401k wife 19k
    401k husband 19k
    Backdoor ROTH IRA wife 6k
    Backdoor ROTH IRA husband 6k
    RSUs 15k
    ESPP 25k
    24% effective tax rate (due to tax planning) 122k
    Net salaries 288k

    Childcare free with grandparents
    Food and miscellaneous (we go out to eat every week) 20k
    Gas 4k
    Public transit 12k
    Medical (companies pay for employees but not children) 1,500
    Mortgage (800k above average home) paid off
    Property Taxes 10k
    Homeowner’s Insurance 1,400
    Utilities 3,500
    Cable/internet 1k
    Maintenance 5k
    Student Loans paid off 210k of loans
    Car lease (Honda) 2,400 (second car is owned)
    Car insurance (2 Hondas) 1,400
    Life insurance (3mm) 2,500
    Vacations (2 per year of Europe, South America, or Africa, etc.) 15k
    Charity 500
    Clothing 1,500
    Lessons (little gym) 1,000
    Total costs 82,700

    What’s left 205,300 plus 38k 401ks, 12k IRAs, 15k stock, and 25k ESPP = $295,300 savings (78% of net income including tax deferred accounts)

    It can be done. My wife and I are proof.

    1. I love your story. Please extrapolate on how you were able to pay off your house and student loans (>$1 million) while paying all the other expenses and dealing with recessions.

      1. Very late reply. Some people just making up stories or concealing intentionally the most important parts. I have a few people around who are barging about paid off student loans or properly managing income by buying the property. After knowing them a little bit closer turned out one person’s parents paid off 4 year BA college including accomodation, another, has wealthy parents and lived in their basement, and third person inherited passed away parent SSC and IRA.

        1. Trying to get ahead

          I understand why you feel like this. Many (if not most) of our family and friends have gotten alot of handouts. We have gotten none. We do have my inlaws watching the baby but we have done alot for them financially as well. They lost their home several years ago in a foreclosure. Long story. Lets just summarize by saying they were on the hedonistic treadmill and refused to listen to our advice and we ended up paying part of the price for their poor decisions (e.g., helping them buy a car and some rent). I paid for 100% of my college and law school. I got some college scholarships and $0 off for law school. The total was over $200,000 of loans. I also got $0 help for home purchases, etc. I started in BigLaw out of law school in 2007 and had a $160,000 starting salary plus a modest year-end bonus. I lived very modestly, had no car, and took a $1,000 vacation max per year for the first 5-6 years. During this time, I paid off all of my student loans and put a down payment on a condo. I brought in a roommate to pay half of my mortgage as well. I was 100% focused on paying off debt and building wealth. Some people do not want to believe this because they made different choices that led to sub-optimal results so they don’t want to believe others could have done better on their own. They want to believe they got help because that helps them justify their poor decisions. Anyway, now I am 13 years into my career and my wife isn’t too far behind me. We traded our larger salaries for more 9-5 in house gigs several years ago and are still doing fine. By far, our biggest mistake was paying off the house. Looking back, that was a 500k-1mm mistake given how the market performed over that period. I don’t even want to do the math. We are still inching closer to 3.5mm now. If I can do it, anyone can. It’s all about choices. We know alot of people who get alot of help and others who likely earn less but spend more. It’s about the little impulse purchases, luxury car leases for $1,000/month, and Nordstroms to buy new clothes all of the time. We have friends who have a 100% Burberry wardrobe and use a personal shopper. My sister in law and brother in law earn $200,000 combined max and they bought a $3,000 LV baby bag and drive a $100,000 leased SUV because they insist they need it for safety for the baby. We looked around alot before we bought our home and picked a house in a great school district on a less than perfect lot that saved us alot of money. We drive 2 economy cars (Honda Pilot and Honda Accord). We buy all designer clothes but we get them at TJX or other discount stores. Noone knows the difference. Everyone thinks we spend a fortune on clothing. My wife and I honestly do not know how everyone at our income level and higher aren’t in our situation or even much much better. Lately, now that we are comfortably over 3mm and will be 40 in a couple of years, we are starting to relax the savings rate a little and splurge a little here and there, but frugality is kinda ingrained in us. We do not live a spartan lifestyle though. We travel alot and go to dinner and do alot and enjoy our lives.

          1. Dont worry man, some of us believe you. I make nowhere near as much as you do (like, NOWHERE near) but finding a good apartment at a nice price and be willing to rent the spare bedrooms do wonders for your economy in your 20´s. living in a cheaper city helps. The extra income is then used to buy land or another property which in about 5 years will have 5x value which you use to buy yet more property and on and on. The key is planning for the future and not spending in stupid things save for women and booze.

    2. Umm, free childcare is a pretty nice perk! It’s the biggest line item for many dual income families…wouldn’t be so full of myself about how clever I am with finances when someone is gifting me approx $50k/year…

      1. Not everyone is able to have free child care which is big chunk of expense that can be invested. As an immigrant who came to USA, I have to support my aging parents who still love back home and also my young children who have to attend daycare.

    3. I also am curious about how the mortgage got paid off.

      Our “Mortgage+Prop Tax+HOA” is 50% of our monthly expense (we live in San Francisco). We are putting on 15% every month and we opted for bi-weekly payments. That lowered the duration from 30 years to about 20 years. We have 15 years left.

      1. Trying to get ahead

        It was very easy. We have both been working for 13 years. The mortgage was paid off about 4-5 years ago. Like I said, we saved over 70% of our income after taxes each year and plowed much of that into our mortgage. Given we only have an 800k house, that only took a couple of years. Then we moved to other investments.

      2. Trying to get ahead

        If you look above, we said the house is only worth 800k now and we paid a little less than that. We put down around 20% when we bought it (around 160k). We said we saved 205k/yr after all retirement accounts were maxed out and RSUs and ESPP were deducted from savings. If you do the math, it took just over 3 years to pay off the whole house in full at this rate. We paid slightly less though and put down slightly over 20% so we actually paid it off in less that 3 years. We kept 15k in our checking account at all times during that period and paid whatever we had above that amount each month toward the mortgage in principal only payments until it was paid. That’s like another $17,000 per month (although it wasn’t exactly that amount per month because it was more in Dec with bonuses and less other months).

        1. Trying to get ahead

          $122,000 per year in income taxes + $10,000 property taxes + $20,000 property taxes on investment properties + $5,000 in sales taxes = 31.4% of our hard earned income. That’s 3x what the average household earns in America, so we are supporting 3 families somewhere and none of them even sent me a Christmas card. If that makes me “el cheapo” to support govt programs I do not even agree with for people I do not even know, what would make me generous?

          1. No, those don’t support “families somewhere.” Less than 10% of your taxes go to social support. The rest goes to the military which defends you; the roads you drive on; the schools that educate your children; the police that protect you; etc. So yes, you’re cheap, and you should be donating more to charity.

            1. ‘Military that defends you’
              What’s the last time American civilians were in any actual danger?

              1. Beautiful life

                What a great question! Maybe we should ask the billionaires and lobbyists who make dang sure that the military budget goes up year after year, no questions asked. I think Erik Prince and Dick Cheney would be a good start for your questions.

    4. Would you elaborate on how your effective tax rate is so low? I would like to learn to do the same. Thank you

      1. Trying to get ahead

        We max out all retirement tax-deferred accounts (401k and Backdoor Roth IRAs) and part of the income is from RE rentals where we depreciate the property so the income is tax free (for now). This lowers our effective tax rate.

    5. Very nice!! Your yearly spend is 85K. Social security will cover 60K, so you essentially need (25 * 25K) 525K in savings you maintain your current lifestyle during retirement (which I assume you already have). May I ask you what your medium/long-term financial goals are?

      1. Trying to get ahead

        We would like to know ourselves! We assume SS won’t be around when we retire, so that is not a factor for us. We assume it will be “means tested” or cut before we retire. If not, that will be a welcomed surprised. We have about $1mm in a taxable account and well over $1mm in retirement accounts plus a few rental properties that are cash flowing. Our plan is to just keep going. We both love our jobs and hope to be promoted, which means we will earn even more. We both work 9-5 and have 5-6 weeks vacation each and travel all over so we find little reason to stop working anytime soon. Now that we have passed a particular financial milestone, we are beginning to think about inflating our lifestyle a bit but haven’t really thought of anything we would want to do. We just don’t know what and don’t want to spend more just for the purpose of spending more. We may get a more luxurious car and may upgrade our home in a few years. We just don’t know.

    6. Your giving is quite stingy for your income and with free childcare too! We give much more on a $90,000/year income.

    7. I’m all for saving money… but it’s kind of messed up to use your parents for childcare everyday and not pay them a dime.

    8. There’s something off/misleading about this. As others have mentioned, you’ve omitted many of the biggest expenses faced by the couple in the original post. You also have a significantly lower effective tax rate of 24% versus their 40%. You also padded your annual savings number by including 401k balances, etc. — the couple in the original analysis wasn’t including this in their final number.

      Let’s add those extra expenses back in and use their tax rate and see how well you’re really doing in comparison.

      $42k childcare
      $60k mortgage
      $32k student loans
      $12k lessons for the kids to get them into private schools
      $74k in additional taxes


      Note that this figure exceeds the $205k you’re saving.

      By this account, you’re really not doing much better than the original couple. In fact, you might even be doing worse. You just have already paid off your house and student debt, don’t have any child-related costs, and somehow pay far less in taxes than you probably should. You also give far less to charity than the original couple — they donate over $17,000 more per year than you do.

  23. These people are spendthrifts.

    * They’re paying almost twice as much for daycare as they need to for starters. An online search turned up Brooklyn daycare rates of $11,xxx annually per toddler and $9,xxx per school age child. They could get away with spending just $21k/yr instead of $42k.
    * They should be able to make do on $18k/year in grocery costs – $300 in weekly groceries and, given NYC prices, $150 per bi-weekly date nights. Admittedly their job means a lot of hours at the office, but alternate which days each one gets out of work at 5 (M-W-F & T/Th) on a revolving basis, grab the kids from daycare, and get home to cook. You’ll be surprised at how much you can do with a $300/wk grocery budget – just go for a regular store like Hannaford’s instead of posh & pricey Whole Foods. And yes, bring in leftovers or homemade sandwiches to work is a *must. $20-30 minimum per at-work meal (x2) is simply ruinous.
    * They literally bought twice as much house as they needed. They did not *need a fancy neighborhood. shows Brooklyn housing – houses, co-ops, condos, or townhouses: all rated at a minimum 3 br, 2 ba, not less than 1,250 sq ft, and *with off street parking of whatever type – starts at about $550K and they could have easily bought something decent in the $750k range. Starting smaller means that their property taxes would be cut in half as well. I see one showy duplex condo unit on the site right now: 3 br, 2.5 ba, 2,764 sq ft, garage space, backyard space, two blocks from a park, listed for $749K. That breaks down to $3,288 per month, including tax, home insurance, and maintenance fee. Their current home is costing them about $87.5k (almost $7.3k monthly) annually. Savvy buying could have had them paying that $3.3K/mo. for an annual total of $39.6K – less than half of their current situation.
    * OMG, the vacations! What are they doing, flying to Maui or the Bahamas and staying at 5 star hotels?! They could visit family or drive up to the Catskills and cut down the expenses to $1,500-2,000 per vacation week, easily a 65%+ savings!
    * Car payments – unrealistic for a start. $9.6k annually is *far too low for two vehicles when a Toyota Land Cruiser (MSRP over $80k) is involved. What we *do know is that leased cars always start off new at a dealership, and leases typically run for 3 years a pop. I checked the online dealerships in a Brooklyn zip code and non-glammed models of the vehicles listed actually came out to about $22.8k annually. If they hadn’t been trying to show off their wealth they could have leased a Ford Taurus (SE?) for $430/mo. ($5,160/yr) and a Ford Edge SEL for $407/mo. ($4,884/yr) for an annual price $10,044, less than half of the adjusted total for the cars they currently have.
    * Clothes – they’re splurging again. I’ve raised two children and know how to shop for them. You can get them good clothes at Sears or Penney’s for around $600-800/yr., so let’s say $1,600 max. Kid’s shoes – they grow quickly, so let’s say up to 4 pairs a year (x2) will be needed. Again, shopping at an average store like Sears that should be $60 per pair x 8 = $480. Total kid’s outfits being just under $2.1K. That means the parents are spending a good $7.4k PER YEAR on their clothing and shoes. That’s not being clever with their money. Yes, they have appearances to uphold, but they aren’t growing and, with careful laundering, can make clothing easily last for up to 3 years. They can have 2-3 power suits each and the rest can be done with careful selection of mix-n-match separates and a basic set of accessories. Shoes can last for a year each pair so long as you aren’t dinging and scuffing them. Adding a few pieces carefully chosen pieces each year can enhance and extend the life of their wardrobe, and for barely $1k/yr.
    * Kid’s lessons. More a luxury item than a necessity, it should be capped at 2 activities per kid per year.
    * Charity spending. If you’re crying poverty, you don’t spend on non-essentials. Save it until you’ve actually made it, not while you’re still strapped.
    * Don’t spend on what you could get for free. Put them in public school and save $5k/yr per kid for their college, and send them into SUNY schools so they can start off life relatively debt-free – it’s the greatest gift you can give your child.

    1. The point of the article is that a family making $500k isn’t necessarily rich and you recommendation that they live in the hood and buy all their clothes at kohl’s kind of proves that point…. I think I’m reality the food and clothing would be much higher you know those fancy lawyers are going to need to have some expensive suits plus they probably both working 60+ hours a week which means no time to cook.

      1. Re: Ian $500k is a very well-to-do income, they could and should have a *lot of disposable income with it. Because they’re being stupid with their spending they don’t. Better a $10 wallet with $290 in it than a $290 wallet with $10 in it. Didn’t you see where I did the break down of what the parents could and should do for clothing? Power suits were included.
        And I clearly laid out *how they can get that time to cook each week, they just have to remember that they *have a family instead of choosing to neglect it all.

    2. You really don’t understand NYC real estate or costs. There is no Hannafords in NYC. Groceries are double what they cost in the rest of the country easily. Whole Foods is actually the cheapest thing in my neighborhood. 1.5 mil on an apartment in Brooklyn is actually quite reasonable. The only outrageous expense here is clothing. Everything else seems super typical of NYC.

    1. Samantha Salmon

      So, I’m from Queens and I just checked you can get a 4 bedroom 3 bath house for less than $600K. They can definitely get a more affordable home. They will have to commute like everyone else.

  24. How about they should have delayed having children until one of them could and would have stayed home and raised them. Or just remember living like kings means no children. They spend way too much compared to what I did, and therefore won’t be retiring any time soon.

    1. Obi-Wan Kenobi

      If you’re making 250k a year it doesn’t make sense financially to stay home with no income when you can pay 40k for someone to do it while you’re still making 250k. If you make less than ~60k then yes it will be worth to actually take a year off to raise your kids.

  25. I skimmed through the comments, but I saw the majority of the comments were about how they feel like even the rich can feel like their struggling. So I’m going to give a reality check here. Those who say even this couple can feel the straits of financial hardship is an idiot and so is the couple. All you guys’ perception of struggle is warped beyond recognition. I do the uber, make about $80K+/yr and live in NYC and YET still save more than these bozos. I know peoplewho make less nd still SCRAPE by. SO they get no sympathy points for that.

    They’re lawyers and yet are so ignorant that they still pay 40% income tax? WTF? Any smart wealthy person would tax advantage of as many tax breaks as they can. If you’re not trying to get an investment property or some sort of big wig loan, take advantage of tax breaks, they help the super rich, they can help the average Joe.

    3: has NOBODY seen that they have literally checked off all their financial boxes every 9-5 american wishes they can check off. They comfortably can take care of basic life necessities, they invested in their 401Ks (they’re not exactly intelligent because they didn’t expand their investment porfolio options, but investing in something is better than nothing), they invested in their children’s academics, luxury dates and vacations and over the top mortgage house bills etc, no problem. AND according to the graph one can guess they’re socking away money for their child’s college tuition. PLUS charity, come on guys. You’re doing more than the average bear. CRAZY part of all this is they STILL have $7.5K left over AFTER TAXES. That’s not struggling, especially for all the other investment advantages they missed, they’re doing better than expected. This is even AFTER their “misc. expenses because something always break”. THAT’S INCREDIBLE!
    Sure they can only put in $7,500 in their savings account, but put it in an account with outstanding APY, they can beat the market of inflation and watch their money grow passively. Or invest it in stocks, bonds, ETFs, small side hustles, whatever. Or literally burn it as a fun pass time. They just sound like their greedy and want more. ANd hey, I’m all about that garnering more, but don’t go and pretend, and folks here don’t pretend this is a struggle, because it is FAR from not.

    Moral of the story/TL:DR: if you can HIT ALL your checkboxes comfortably and STILL have spillover money, you’re not struggling, you’re just greedy.

    1. You have no idea what you are talking about if you think you can pay less than 40% income tax on 500k. The actual tax rate in NYC for that income is actually 44% of your post 401(k) income.

      1. …and why Sam needs a thumbs up thingy on his comments

        Cmon Sam, I bought two of your books!

  26. “how many more years they need to save at their pace to maintain a similar lifestyle in retirement? At least another 63 years if we believe the couple should have at least 10X their $271,000 annual expenses in net worth by age 60.”

    Within about 25 years they won’t have childcare expenses or a mortgage. That’s over $100,000 they don’t have to spend.

  27. Would you agree that this family is living “comfortably” in one of the most expensive cities in the world while building their net worth by over 100k per year?

    1. Yes, relatively comfortably and feeling like they are keeping up with the Joneses. But one day they will get burnt out, and if they stop making the money they do, they will need to face a big lifestyle adjustment.

      Financial Samurai is all about growing the gap between income and expenses.

      1. I dunno.
        There are clear ways for this family to cut (although you defend each category of their spending), but even with zero changes to their budget (or salary bumps), I see them being able to retire at 55 with around 5 million in savings and a multi-million dollar home in NYC that is almost paid off. Am I supposed to feel bad that they are “scraping by?”

        1. Please enlighten me where the 5M in savings is going to come from? Because I am saving 250K a year and still haven’t gotten there.

          1. 13 years at 21k/month at 6% return = 4.94M. Taxes would add a little friction even with tax efficient investing, so ether call it 15 years or bump the IRR slightly.

            30 years at 3k / month (18k x 2) at 6% = 3M. The 6% is a real rate of return, with inflation removed. The prior poster may not have done so. 8.5% return would = 4.95M in current dollars.

    2. The author has done a masterful job of creating headline to get attention. According to him, 500k household income feels average, 100k jobs are dime a dozen for just about anyone in SF bay area, and SF is an inexpensive international city. None of these are true for a large segment of the population, but the headline is what creates the reaction. Someone can write an article about how great black people are doing in America by providing examples of all the successful pro athletes and celebrities and it would be just as tone deaf.

  28. I would call this blog post a joke, except Financial Samurai has done a masterful job of creating a clickbait title and then fabricating financial expenses that drive the controversy further. When one reads the article, it is not clear that this post is based on an imaginary family … in fact, he deliberately misleads the reader in the second paragraph (“They are a real couple who shared with me their financial details to anonymously share with you.).

    It’s only when one reads deeply into the comments section that you realize FS has concocted this “real couple’s” budget based on an “amalgamation” of other couples’ expenses. In the comments, he admits I “may be underestimating expenses.” If this is a real couple sharing their financial details, he shouldn’t have to estimate at all!

    He mentions that he “forgot about parking” which would be an exorbitant expense in NYC. Also questionable is that 2 NYC lawyers living in Brooklyn would be driving 2 cars and spending $5k a year on gas – estimating $4/gallon and 17 mph for their cars, we get 21k mi driven. Again, that’s nonsense for people likely using public transportation.

    The cars: a BMW 5 series and Toyota Landcruiser. Current costs on leasing are $1200/month for the Landcruiser and $540/month for the BMW. That doesn’t even include the down payments or fees to lease which will have to be paid every 3 years. Also not included are maintenance costs on these vehicles, which isn’t going to be cheap. All told, the cost of leasing these cars is way underestimated. But, hey, throw in a BMW and $90k SUV into a budget where the couple is “barely making ends meet” and you definitely stoke some incredulity and anger.

    Food: $15 a day, really? In Brooklyn? There is no way that that is their food costs when they also have 2 date nights every month. Even if they are getting lunches for free at work. This budget means they can’t buy food or coffee at work or they blow their budget. Hard to believe that a couple that wants to save time by leasing a car is willing to spend the time brown-bagging their lunch.

    Health Care expenses are absent from the budget but this is explained in the comments that they have total coverage by their employer. Maybe they don’t pay any monthly premiums but that doesn’t mean they don’t have co-pays for office visits to the pediatrician, their doctor, for prescriptions, or to urgent care when their kid has an ear infection.

    Speaking of kids, $1k per month for violin, academic and sports lessons for 2 kids that are 3 and 5 years old? Did FS even think this through when he came up with the expense for this family? Sure, I can see that for a family with kids *actually in school*, but these kids are 3 and 5.

    In the end, what you have read is a well crafted blog piece with a title designed as click bait: “who are these rich fools barely making it on an income some number X my own?” Then the article lists their budget with items designed to provoke either stupefaction (who donates to the College Alumni fund when they are burdened by student debt?) or outrage (leasing luxury car/SUV when far more economical options exist and yet seeking financial advice about how to save money).

    I’m sure there are $500k family incomes who have some of the expenses of this budget – it is after all, an amalgamation as he says. But there are too many holes in plausibility not to mention his own admission that he made up the expenses for this couple/family. In the comments, he states “This budget is a very real reflection of many $500K income earners in expensive cities. I’ve spoken to dozens to come up with this article.” And yet, he has to estimate what their expense are rather than just listing what said family’s expenses *actually* are. And it’s too bad, because there are important lessons to be learned here … but when you learn that you’ve been taken for a ride by a blog writer trying to increase clicks, views and comments to increase their revenue stream, the “lessons” become a little biased, unfounded and not based on the reality one requires to arrive at knowledge or wisdom (kind of the whole point of “lessons”).

  29. Did I miss healthcare costs somewhere? Do their employers pay 100% of their premiums?

    No matter how you slice it, what they’re doing isn’t average. They’re choosing to live in a high demand area and that’s worth the stress to them. In an LCOL area, they’d still live easier on much smaller salaries.

  30. My heart goes out to this couple. I cannot believe they are getting by on just $500,000 a year. A true American Success story.

  31. A couple of points as someone acquainted with this market and the realities of the income level:

    1) This couple will likely NOT pay AMT anymore under new tax rules and will be better off because they probably got little of their SALT deductions in the past because they almost certainly got nailed for AMT. I’d be the BMW they effectivelyonly got deductions for Mortgage and Charitable in past and now they will get lower tax rates, an extra $10k in deductions and escape AMT. Taxes should be $10k less.

    2. In NYC you do not need 1 car let alone 2, unless you decide to live somewhere remote from transport (like Staten Island or deep into Brooklyn) in which case your housing will be cheaper. These folks are not living in these spots. Arguably, you might get a car when your kids are older and you have travel sports to contend with. But Zip Car will do the trick I gave observed.

    3. You absolutely can use public school in NYC particularly if you live in Manhattan but also in many parts of outer boros. Until de Blasio destroys them, NYC is home to some of the most storied public high schools in the nation (Stuyvesant, Bronx Sci) and there are plenty of excellent zoned elementary schools. Middle school is tricky but can be done. That said, you still will have to pay-to-play in NYC for sports and lessons because it won’t come free as it often does is suburbs. And you will need to supplement math (which you should be doing anyway since US public schools generally weak math even in the fancy privates), which you can do yourself or pay for…

    4. The housing costs are in-line to low for a family of 4, particularly if they need 3 beds (children of opposite gender). 3 beds sell and rent at a huge premium over 2 beds (think $10k in rent) particularly in good school zones.

    5. I applaud these people for taking vacations. I wish we did. I’m sure they work close to 80-100 hour weeks. So, that is money well spent in my opinion.

    My advice:
    Ditch the cars
    Bag private
    Keep the mortgage and charitable because with that your taxes should be lower this year than last. START SAVING FOR COLLEGE because YOU WILL PAY FULL FREIGHT!!!

    1. Wow!!! I make 16$ a Hour Busting My Damn Ass Like A Slave Then Harassed 5-6 Times a day By Nagging Managers to the point my stress Is Unbearable to Have A Third Of my Pay check Taken By Taxes Alone! Go Cry A river Some Where Else! Makes me Sick As Shit to Listen To a wealthy Person Bitch about How Its So Hard I Make 40 Grand a year not 500,00 Thousand Dollars!!! And Pay Over 500 $ a Month in Just Taxes!!! Do the Math!!! The Weathly Bitch With there Tax Cuts And Breaks they get While the Little Ppl Pay 40% of there income to make sure the government dont have a fucking melt down! And your roads are Paved! While you go on 3 vacations a year… Mean While I have to work To Jobs just to be able to eat and drive to work And Have a house

  32. We lived in California for the last 20 years and knew plenty of families scraping by on $500k per year. Education expenses are much different than when my wife and I attended college back in the ’80s. We are currently paying about $170k per year for 2 in private college and one in a private high school. Luckily we knew that our children would likely attend private colleges so we started saving when they were born and have at least 85% of their college expenses in 529k’s.

  33. If they want to retire well, sure they should cut expenses (lots of discussion on the difficulties/opportunities), but unless they make some serious sacrifices in standard of living now, it’s all about geoarbitrage. Saving $36K per year is plenty to get you to a retirement in the Midwest. Might be hard if they love NYC, but the costs there are huge. They could own a nice house with a yard outright in exchange for their equity in the house pretty soon, if they would relocate.
    As for moving now, if their pay goes down to $150K per year, they could probably still live easier.

  34. Ariana Miller

    Missed this. I work in midtown Manhattan. Just bought eggs from a suburban Whole Foods and still don’t recall seeing any for $7+. Even if they are there, that is not the average price of eggs at Whole Foods.

    Again, just because there are expensive things being sold, does not mean that one must buy them. That is the lesson for this couple.

  35. Sam,

    I think about this post quite often and what it really says about our society. What I take away from this, unless you are in the special 0.1% of Americans (call it a net worth of $25-$30mil), being rich is not all it’s cracked up to be.

    When I look at the list of expenditures – $32k for student loans (the second biggest expenditure on the list!) & $10K Miscellaneous (I assume bulk of this for most people is healthcare – I question why we have done this to ourselves? We’re willing to strip everyone equal opportunity of a healthy life with universal health care coverage or the right to a good education because we think we can win the game of life.

    There is a lot of division and resentment in this country, and the way many people can have polarized reactions to this post is a prime example of it. Currently zip code defines our style, announces our values, establishes our status, preserves our wealth, and allows us to pass it along to our children. It’s also slowly strangling our economy and killing our democracy. These $200-$500k earners are the ones who have the ability to lead us towards a better society, I just wonder when and what will cause them to say “this is enough.”

  36. Financial Samurai

    If one were to calculate their savings on a yearly basis more accurately, they need to include Housing Principal Payments as well:

    I see that they pay around 60K per year towards P & I. Assuming a min of 30K in Principal payments, that would bring their total savings to 73K (30K + 36 K in 401k + 7k in left over savings).

    That would be around a 14% savings rate. I think thats pretty decent given that they live in HCOL area.

    That is without changing a single thing. Add to that the savings they can generate by trimming food expense, fuel expense and others, I believe they can easily hit 20% savings rate.

    1. Fair point. They are definitely building their net worth by being down principal. Unfortunately for this family, it’s hard to type the equity in their house unless they take out a home-equity line of credit. With their level of burn, they need to be more diligent in savings and cutting on extraneous expenses.

    2. Actually, even the student loan repayment builds their net worth and is also savings. It’s also likely that something like 60% of the mortgage payment amortized over the whole loan is principal. This brings their post-tax savings to 36k + 32k + 7k = 74k, plus the pre-tax savings of 36k. It’s also likely that their employers have some 401k match, which likely brings their pre-tax savings to 36k+18k = 54k, which is a total equivalent savings of around 74k + .6*54k = 106k.

      I think this budget has been written/presented in a way that makes it look like they have very little savings, but once you dig into it, this family is quite far from living paycheck to paycheck.

  37. Just came across this article through a link, and it seems there are already a ton of comments on here, so apologies if it was already pointed out, but it’s irresponsible to say they are only “saving” $7,300. You need to keep in mind the entire balance sheet, not just cash in a deposit account (why personal finance people think this is a proxy for savings blows my mind). Retirement accounts are savings. Employer matches are savings. Reduction in debt is savings.

    First, the $36,000 in 401(k) contributions is savings.
    If the employer matches 50%, that’s an additional $18,000 in savings.
    Let’s assume their mortgage payment is 50% interest and 50% principal. The principal portion of the payment is just paying themselves back from when they borrowed against future earnings when they took out the mortgage. That’s an additional $30,000 in savings.
    Let’s additionally assume those student loan payments are 50% interest / 50% principal. That’s an additional $16,000 in family equity each year.

    Those coincidentally add up to $100,000, or 20% of gross income. 20% is a pretty healthy number to put aside, even without considering different ways to tighten the belt on some of the discretionary items.

    Further, those charitable contributions and miscellaneous expenses are about as discretionary as you can get. That’s an additional $28,000 in “leftover” money they simply chose to spend on something. The $7,300 in actual “leftover” is simply money they didn’t know what to do with at the end of the year (vacation #4!?!?!). All told, even after saving that $100,000 from above, they still have extra cash flow of $35,000 per year, or nearly $3,000 extra each month.

  38. I scoff when my college sends me donation requests. $4,000 a year to their old schools? No way. By the size of their student loans it looks like they already donated plenty.

  39. Regarding your statement about the lawyer couple’s charitable contributions, “..which is inline with the average donation percentage by income according to the National Center For Charitable statistics.” That reads like a Brokerage site retirement calculator after you plug in your portfolio numbers. I.e. “You’re only 20% close to your retirement goal.” Oh, so “I really should be transferring more money into your bank to get that number to a higher amount.” Basically, it reads like a evolved bait & switch tactic similar to retail stores throwing a guilt trip at the cashier line to get another dollar or two from your total grocery bill (look this up – these corporate grocers/retailers use this to get a huge tax credit).

    I donate to charity every year, volunteer locally when I can, and mentor younger colleagues and friends. I certainly encourage anyone who have the means to help people and causes everywhere that could use our help. But be careful on not becoming a charitable case yourself to your community, family, or government when you no longer can earn money reasonably. Pay yourself first. Go volunteer — it’s free, you’ll learn new skills, meet like-minded altruistic people, and have given back in ways that are immeasurable.

  40. Mark Lambert

    This is SUCH a great article and I am glad to see it still get’s picked up and circulated. I also think the author has been *pretty amazing* in responding to the comments.

    Over and over again I see people go into attack mode when they hear a *salary* and hand wave away *cost of living*.


    Also very interesting to note is the fact that this couple pays *nearly $200K per year in taxes*. Thanks to the blue state screwing that came with the tax reform bill, they will be paying *more* next year.

    This means they pay the equivalent of about ELEVEN median income households (2 people working, $80k total) in North Carolina. Yet they have *nowhere near* 11x the income. In addition, housing in NYC is *at least* 10x NC.

    Now one can say “well dont live in NYC then!”, but this is a ridiculous and specious point.

    The point is that “$500k/year family income” is *not* created equal. A $500k/yr small biz owner hiding half of it b/c it is all cash and living in a no tax red state looks *nothing like* these two.

    In NYC $500k/year could easily be a nurse who puts in big OT married to a senior IT person. These are not “rich” people.

  41. The tax calculation is wrong – every heard of progressive tax system? Also with deductions such as standard deduction, house interest deduction etc. it will come down further.

    As other folks are saying, lot of other expenses can be cut down; for example: 3 vacations a year doesn’t have to be of $18K

    1. Never heard of a progressive tax system. I think it’s clear you don’t make over $500,000 year and live in New York or San Francisco. If you did, you would understand better instead of pontificate the tax liability.

      Further, with the salt cap limit and $750K Mortgage interest cap, Texas for such income earners and expense of coastal cities will go up this year.

  42. Do you want guillotines in Zuccotti Park? Because this is how you get guillotines in Zuccotti Park.

  43. R. Pickering

    If you’re scraping by on $500K a year, then you’re simply spending too much. Stop buying your kids brand new clothes, buy your groceries at Walmart and use coupons as well as shopping the sales. Get rid of your luxury vehicles (boats, jet skis, quad runners, antique cars etc.) Don’t pay for services you don’t need or use like gym membership–work out at home, land lines and cable/satellite service. Take mini- vacations close to home instead of going abroad. When the economy tanked in 2009 my husband and I earned close to $200k a year. We lost our jobs on the same day and now we live on a fraction of that. I had to sit down and take a long hard look at what I was spending and why. I constantly asked myself, “can I live without that?” “what things am I paying someone else to do for me that I could do myself?” We also had to move to a smaller home in a less desirable neighborhood. If you are honest with yourself you’ll be amazed at the fat you can trim from your budget.

    1. Agreed. Being broke on $500k a year gets a rating of BS. I understand a person can get into a painful situation, but low on money is not the real problem only a symptom.

    2. We earn combined wages of $350k which sounds like a lot, but after mortgage, cars (2, both over 10 years old), taxes (30% effective rate), private school (local schools are so-so), and nanny (because we’re both working ~60 hour weeks, in finance for a big tech company in Seattle), we end up with barely any savings. That’s with 2 kids, and a third on the way. Our children occasionally get new clothes from relatives, but mostly we use the local buy nothing community to get used clothes and toys (and then return them to that community to pass along to other kids). We eat healthily, but often it’s beans and rice or lentil soup, with veggies. My point is, we’re definitely not flashy. The only new clothing we bought was a pair of running trousers for my husband, who runs to and from work. Our lifestyle is very frugal, other than private school and nanny which we view as an investment and necessity, respectively. They also go to activities (gym, swimming, piano, soccer) when they are old enough. I really don’t know how people get by on a lower income, and have no idea how we’ll cope when the third arrives. For now, we’re going to take Sam’s advice to start a home business…would love to learn how blogs generate income. Like I said, we work in finance so I’d probably blog about business or finance, but not personal finance as we are clearly not great at that!

    3. You clearly don’t live in NYC. You cannot buy groceries at Walmart here. And, in fact, if you want to do Costco you need a car, which is the first expense they should ditch. These people likely work 7 days a week and their value to their employer is measured in billable hours. Meaning every hour they are working instead of tooling around Costco or hunting down cheapest milk is worth $1000 to their employer. They need to maximize the amount of hours they can bill and still function as parents. So they have to pay to save time…on commute, on groceries, childcare and vacations. I get why it shocks you but I guarantee if you walked 10 blocks in their shoes it would make a lot more sense.

      Frankly we should all be grateful that people are willing to sacrifice their health and well being to pay $170k in taxes! A lot of which is redistributed to less wealthy parts of the country.

      That said, they should ditch the cars and forget private. They cannot afford private for 2 kids on that salary.

  44. “$500,000 a year or higher is a level which I think is considered rich”

    $500k is a measure of income. “Rich” is an adjective that describes wealth, i.e. level of assets, not income. Conflating the two is a huge mistake, and something that policy makers need to stop doing if they are going to actually address these issues.

    Of course there is a high correlation to people earning $500k/year and those who have a large asset base (the wealthy). But mixing the concepts of income and wealth is problematic because it prevents us from addressing many of the important nuances between the two.

    For one, by and large we are taxed on income but not on wealth. Also, a person’s/family’s level of wealth is a big determinant of choices that are made regarding income. Take a family with two professional earners at the upper end, say $250k each, which pays for childcare 5 days a week. If this family had assets of $3 million versus say $250k, do you really think both parents would continue to pursue their careers nonstop while not seeing their children most of the week? Maybe, but from my experience, probably not.

    The list goes on. Bottom line, can we please stop using income as a means by which we refer to “the rich” etc.?

  45. Just gonna poke some holes in this.

    1. 3 vacations a year? And you only feel “average”? Do themselves a favor, cut out those 3 vacations, they’ll have an extra 18k every year. But then what would they do with it? Oh right, probably go on vacation a few times…which isn’t “average”.

    2. Not one, but TWO luxury cars? In NY? I’m guessing its in NYC. Yes, a Land Cruiser is a luxury car, its an $83k car. Save some money, save some time, get a Camry or Avalon and an Explorer. I just cut your car payment into 1/4 of what it was before. And gas would be lower, as both of those cars are more fuel efficient (well, maybe not an Avalon, but an I4 camry would definitely be better than an I6 or V8 5 series)

  46. My husband and I make 550k a year ( both physicians ). Live on 80-100k per year. Maxing out our 401ks and the rest goes to med school debt which is approx 250k combined. We wanted to pay our loans in 2 -3 years after graduation/residency. We are expecting our first child soon. No cc debt no car loan/ debt, paid off in residency. Home with about 500k mortgage. We are content with what we have and where we are in life. Money doesn’t equal happiness. No matter how much you make, you have to learn to appreciate and cherish what you have, otherwise you’ll never be happy.

  47. My friend sent me this article, asked what I thought, so figured I’d post.

    First, I think the numbers are illustrative, but realistic in the NY area. 2 cars is too much, but food is right – a half pint a blueberries at a grocery store is $5-6. Student loan debt for this family is prob $2500-3k a month, home maintenance at $5k is too low, private schools weren’t even mentioned (most schools in NYC suck), the tax rates are about right for this income. Given the foreign investors, $1.5mm doesn’t buy much in the NY… But people tweaking this specific budget are missing the point…

    In my view, those at $500 should seek to save $50k per year excluding Pension/401k. And ultimately $100k as income rise. So lifestyle needs to adjust to that. It may not happen every year – the year after buying a house, or having a kid. But again, this saving is a path to create LT wealth and get off the treadmill.

    Plus, understand, many of these types of jobs can disappear quickly (’01, ’08, + coming tech disruption) and people should have at least 12 months of liquidity. There aren’t a ton of these high paying jobs and they take time to find. This isn’t retail. So,$7500 a year won’t achieve liquidity / safety needs in this example. These #s may sound like a lot to those making < $300k but $50k+ (ex 401k) should be the base case for $500k gross, in my opinion.

    Those commenting are right, there isn't a decision between gas and milk for this family. Thy aren't roughing it compared to most. Though if we are taking this argument, look globally, and be thankful you have water, electricity and education in a safe country.

    But the point of the post, I think, is $500k is not "rich" on the coasts and these people aren't really "keeping up with the Jones" and living a lavish lifestyle. Taxes crush $500k incomes for families on the coasts and the perception of high incomes is off for people living in Ny, SF, LA, Boston (the places were they are $500k jobs)

    not brought up is how ugly these numbers look for divorced couples with kids.

  48. Not sure if anyone else mentioned the $42k childcare (which is reasonable for 2 kids for NYC). This goes away when they start school and can be redirected to 529 accounts, and when those are full, they can be redirected to retirement savings. Staying at home with the children may save these costs (especially for those earning less than these earners), but there is no guarantee that there will be a job at the end, especially at equivalent earnings, plus the stay-at-home parent loses out on SS and 401k contributions and match. We felt squeezed, too, when the children were young, but our cash flow improved significantly when they reached school age because they went to public school. The $12k for kids’ activities is overkill given their age but not unreasonable once they are school age.

    1. I disagree. Childcare does not go away when kids start school unless your job starts at 8:30 and ends at 1:30 PM. In fact it becomes profoundly more complicated and stressful. My kids are in public school 2miles from our house. And yet there are sick days, school closures, teacher in-service days, late openings, travel to practices/games/after school activities, parent teacher conferences…. Oh and of course summer, winter and spring break. And if you have a terrific nanny who has been working 40hrs a week for you and you suddenly chop her hours to 15-20 she starts looking for another job to fill in the gap.

  49. I don’t see anything that indicates they are struggling. In my opinion they are living a great life. Families that are struggling cannot afford to donate or go on vacation, they spend $36k each year on this. If they were really struggling they would be living in NJ or Staten Island where housing costs less than Brooklyn.

    For all their education, they lack financial savvy.

  50. There’s nothing wrong with how much this couple is saving annually, and the whole thing is a little misleading.

    They’re saving $36,000/year in retirement accounts. They’re also paying off a mortgage, paying off student loans, and paying off car debt. They include these debts in their budget but in reality paying down debts is explicitly saving to build your net worth, it’s just taking down the negatives instead of building up the positives. They then have $7,300 left over on top of that. They’re not “just” saving $7,300 on an income of $500,000. In reality I would guess it’s more like $85,000, not counting interest on the debts.

    Adding all that together, and they have a fairly reasonable savings rate for their income. 20% or so leaves a little to be desired for a lot of us, but if they’re happy with that then it’s fine. It’s their money to spend as wisely or foolishly as they choose, and if push comes to shove, 85 grand is a lot of money to be saving anyway.

    1. Kate,

      Good observation. I hope nothing is misleading because the chart shows exactly how much they are saving in the retirement accounts each year. But you do bring up a good point about paying down the mortgage and paying down student loans, which does add to the couples’ net worth.

      Within 30 years, they will have a fully paid off multi million dollar property. If they had rented, they would have nothing to live in for free or pass on to their children. This is why I strongly believe everybody should get neutral information by at least owning their primary residence. Save like mad and get neutral!


  51. David Burke

    I cannot feel any sympathy for these people. There ‘keeping up with the Joneses’ lifestyle is just abhorrent. I live in Maine. Make $60k a year. Have a beautiful house on 2 acres. It’s paid off. 1/2 hour to the coast, 1/2 hour to the mountains.

    My daughter just graduated high school and will be attending Northeastern University in the fall. I’m pleased that I have been able to spend so much time with her throughout the years. I could of chosen a high pressure, try to be big wheel career. I chose not to. Life is not about things. It’s about making memories.

    Let me correct my initial statement I do feel sorry for these people. While obviously school smart, they are stupid on another level. Money will not buy you happiness.

  52. Your response to the push-back regarding vacations ignores how unreasonably expensive those vacations are. I’m someone who loves taking time off, but there is no way I am spending $18,000 a year on vacations. There are cheap adventures one can take in their own state, not to mention their own city, and traveling out of state or out of country can be done in a way that doesn’t result in an annual expense of $18,000.

  53. I’m stuck on this going out to lunch every day, or ordering every day. I get that you may not want to bring lunch every day, but it’s really not that hard to do, and it’s way healthier. If you have to eat lunch out, why can’t people grab a slice of pizza or an egg roll or two? There is almost always a cheap place to eat near work. Koreatown, Chinatown, your local pizzeria- they are all cheap!

    I grew up in NYC- no one expected luxuries like this!

  54. Charity expenses should be brought down to a max of 5k annually. Gas – 5k pa? Kidding me? Should be much less or just get a Tesla, and you clearly do not need 2 cars.
    On the other hand, 18k for three vacations is far from enough – you should easily double this.

  55. Shogun Warrior

    On the “real estate neutral” comment: one must more so consider the leverage on the single largest asset in most personal portfolios. I cannot argue against the neutrality of their real estate postion as much as it cannot be argued that 2x800k pieces of real estate – one personal and one investment, represent an effectively equivalent non-neutral position. Real estate is a builder of wealth, family wealth, whether it be bequethed or just simply an asset cornerstone.

    It is not just simply that they have chosen to live a $1.6m housing lifestyle and they must live it somehow, even as similar alternative homes (or rents) rise, or even fall, in value. Their wealth accumulation, leveraged and tax subsidized, continues regardless the number of parcels.

    Using the argument of neutrality is too dismissive to the more pertinent fact at hand – likely about $300k was deployed to control $1.6m, to be used in any way shape or form when it is all said and done… retiring abroad, funding their kids college, starting their tube meat meat truck business after they get tired of the lawyering rat race, etc etc. It is all like saying they are 401(k) neutral because ,well, they just have to have and fund one.

  56. Jeffrey Campbell

    There are a number of holes here. Not accusing anyone of making stuff up but some of this does not add up and suggests this was some sort of chimera of a number of different lives rolled into one.

    First, 529 plans provide discipline in saving for college and give a nice tax break, which they apparently need. This is a no-brainer that any educated person should do. My wife and I saved $180K for our daughter’s college in this manner, saving $10K/year maximum from DAY 1.

    Children ages 3 and 5 do not need nor necessarily appreciate elaborate vacations. In fact, they may find flying, going through security, seemingly endless walking through airports stressful. Taking kids to faraway places and then having to watch them like hawks is not so relaxing for the parents either.

    In a city as rich with possibilities as NYC, the parents could simply take days off from work for a big visit to the American Museum of Natural History, the Statue of Liberty, the Aquarium at Coney Island, Bronx Zoo, etc. There are plenty of fun day trips to LI or NJ that could include an overnight stay someplace just to get out of the house. Since they supposedly care about their children’s learning, these are great places to start building a foundation at a young age with many opportunities for further and more advanced learning as they grow older. The AMNH in particular has a very robust commitment to science education.

    I find the part about extracurricular enrichment expenses relative to a 3 and 5 year-old absurd. In the first place, subjecting a 3 year-old to so many structured activities is counter-productive. Young children need time to just play, not spend the whole day developing specific skills. Second, Mandarin study does not need to be expensive. There are lots of Chinese-related resources in NYC and not just in Manhattan. My daughter is half Chinese so I know. Spending large sums on tennis lessons for a 3 and even a 5 year-old sounds bogus at best and a waste of money at worse. It is far smarter to send them to an intensive summer program when they are ready for first exposure. More cost effective and a better chance to retain something useful. If one of the kids is a prodigy that is different, but that was not the description provided above.

    Other observations from readers about cars have merit. If the parents have flexible working schedules, having a car is a great time-saver for running errands, but it is still a luxury. With alternatives like car services, Uber, and when convenient public transportation–and assuming the parents work long hours–there is no way car ownership is as economical as using the above services and renting a car on the weekend. With their schedules it is unlikely they have time to fool with parking two cars on the street. Garaging two cars in NYC costs a fortune–could easily be $1K/month or more even in Brooklyn, and I doubt if that was even included in the calculations.

    Regarding the cost of education, NYC has a number of very strong elementary schools. There are also strong public middle and high schools that require testing to get into. I would argue that at 3 and 5 years old sending kids to expensive private schools is a waste of money and more likely motivated by racial, religious, or social biases than anything else (caveat: unless one or both parents went to a given private school themselves, loved it, and strongly believes it is worth the expense for their kids).

    I personally know of a dozens of children that have started out in a strong public schools and switched to private school somewhere between 6-9th grade, unless they successfully tested into one of NYC’s top merit-based high schools. I can’t remember every college they got into, plus I am not a starry-eyed Ivy League worshiper, but I don’t remember any getting into obviously weak schools, and do remember a couple of Ivies, strong liberal arts schools, and prestigious public universities such as Berkeley.

    The savings in putting off the move to private schools for 6 years with 2 kids could easily exceed $600-$700K right there. This expense is why so many New Yorkers with kids end up moving to NJ. Even with high property taxes, if the schools are good the savings vs two kids in NYC private schools is huge, even with commuting expense, plus you usually get more home for your money.

    In the parents defense, the calculation of what they spend a month currently and extrapolating that to their old age is a straw man. Children are the most expensive luxury they have by far. Eventually the kids grow up and take on their own responsibilities. With kids gone the parents can downsize their apartment and potentially make a lot off the sale if they can move or retire to a less expensive locale. They will not need to carry 2 cars. Vacations, food, clothing and all the rest will decline in cost. And if they have continued to fully fund their 401Ks and invested them conservatively, they should not be eating cat food at retirement time.

    Finally, and this may not be possible for these and many other people, I strongly agree with this website’s implication that time is the most valuable commodity we have and spending it with your children is far more important than seeing bigger numbers in the bank account. While I live in Manhattan and am much closer to institutions like the AMNH, the MET, and others with strong educational offerings, Brooklyn is not a wasteland, plus it isn’t that far from Manhattan if one provides the time to the effort. I purposely worked less hours when my daughter was age 4-12 to spend more time with her education outside of the schoolhouse. My wife did the same. What emerged was a kid who did well academically, is going to a famous college with a nice merit scholarship, and we maintain a close relationship. As I am now looking back a bit from the descending curve of life I realize even more than I did in the process that this was fulfilling time incredibly well spent.

    1. Wonderful feedback about spending time with your daughter especially. That must be so gratifying to see her do so well.

      That’s all I really want now. To be a good father who is always there for my kids.

      1. Jeffrey Campbell

        Thanks. I proud of her and relieved for myself. Had a great kid and did not entirely blow it.

        What I said about time with children is very much specific to one’s situation. Wife and I were lucky enough to have flexibility and we were not driven to have an extravagant life style. We were far more interested in helping daughter develop her potential. Not because we were such awesome people but because we truly found it fun! And still do.

        I think any parent that finds their children interesting and can summon up all the patience they can muster from time to time will do a great job in parenting.

  57. Curfew Wilson

    Well, first of all – they DON’T have to have a mortgage on a $1.4 million home. Buy a condo for 1/2. And then the daycare. Higher a grad student or nanny for $30,000 a year. And then what really gets me is the Mercedes and Land Rover. I mean come in, in NY. Trains go everywhere. Okay, if you need a car – buy used. Toyota’s are wonderful cars used. That will take away the car payment and all you need is insurance period.

    Also, you children are babies. There is no reason to take 3 vacations a year. They will not remember anyway. Wait till they get older and take trips.

    I feed a family of three on $400 a month. That’s a total of $4,800 a year. What in the hell are buying for $23,000 a year. You are spending $479 a week on food. WTF. Where are you buying your food. The babies don’t eat that much – they are only 3 and 5 – are feeding them steak and lobster every night.

    And finally, children’s lessons. No 3 or 5 year old needs piano and violin lessons. Also, you should only be given to charity if you can afford too. $18,000 is a bit much if your are “STRUGGLING” don’t you think.

  58. It is crazy to think a couple making $500k a year could be living paycheck to paycheck. Wow..just wow. My husband works and I work a few hours a day blogging, we do not make close to $500k a year and I will admit we barely budget. We enjoy and yes it would be nice to have more money, but I am grateful for the life we have. I think once you start making that amount of money you enter into another lifestyle and things start to just get away from you. What would they do if god forbid one of them was disabled and they now are down to one income? I hope they will still feel happy within themselves as money is only good at bringing happiness and joy if you already feel that inside.

  59. Thanks for posting this article. It very accurately depicts the struggle for people in higher *salary* income households living in high cost areas. We live in the San Francisco Bay Area. We have a household income just at $1M with $800K salary and $300K passive income yet find it hard to save much. The comments here reflect the common misunderstandings from people who don’t understand why we are not “wealthy.” The tax for higher income households is an absolute killer. At $500K and above your deductions hit phase-outs and AMT is a heavy burden. In order to generate $800K in salary we had to invest in lots of expensive professional school education so the monthly payments are large. Tuition is a lot higher than even 15 years ago. As you might expect student loan interest deductions are phased out. We have kids but of course don’t qualify for any child tax credits. Child care costs are astronomical in the Bay Area. We need to hire nannies so we can both go to work to generate that $800K salary. Educating the kids in a better school district means either private school tuition or a better neighborhood with astronomical mortgage and property tax. In fact the combination of Federal / CA tax and outrageous housing costs will deplete much of the household income. Saving up for every increasing college tuition for the kids will pretty much make it difficult to save for retirement.

    There a great deal exponentially increasing headwinds as you push to higher incomes (much higher taxes, required child care for two working parents, professional school student loans). The Federal and state government believes that $250K+ is wealthy but they never account for where you live. $250K is definitely wealthy in Idaho but not so much in SF or NYC. $250K is also great for an individual but not for a married couple on the coast. This is where the penalty for being married really hurts (e.g. $2M mortgage interest deduction for two individuals vs $1M for married).

    We have actually considered having one of us quit to become a stay at home dad/mom. Household income goes down but taxes to down quite a bit. Nanny costs go away. With a single bread winner it’s much easier relocate to another state. Moving out of the Bay Area dramatically lowers housing costs and tuition for the kids. It’s ironic that the Bay Area currently has a strong financial incentive to not contribute to the labor force.

    1. Mark greene

      Your lifestyle is your burden. Have you considered scaling down some expenses? How many vechiles, brand and make do you own? Consider a change? Is the newest gadget a must for you, consider a change? And so on. You make plenty then cry about the taxes. You get no sympathy from many who much less and would love to make 20% of what you earn. It’s terrific that you have worked long, hard hours and turned your talents into cash but stop yelping like a puppy with its tail caught in the door. Be grateful for what you have. People in lower brackets have many more problems than you do. Scale back grow up

      1. Yeah, problems like which bills to put off, how to afford getting dental care for their family, what to do if a car needs a repair. Those things can break us and you want sympathy because your retirement savings aren’t what you want? I hate people like you.

  60. I knew a guy who made $500k a year individual who literally had zero savings. I’m talking borrow cash from buddies to make his next rent payment. I agree with you: it’s definitely about what you keep, not what you make.

  61. We linked to this post on our blog – second comment after a second read – so interesting.

    We reviewed The Millionaire Next Door and this post really shows just how people in America could change their mindset to become millionaires instead of scraping by.

  62. It never ceases to amaze me how no matter how much money I make, I find a way to spend it. I used to be happy with a three star resort, but the few lucky occasions I had to go the 5 star route ruined me for life. Same thing with cars. Might be time for a reset.

  63. Good comments and some widely divergent opinions. I am reminded of the old saying “where you stand (on an issue) depends on where you sit.

    Like a few have said, I grew up lower middle class. Dad owned a gas station in a small town in middle America. Mom was a housewife until after I was in HS then went to work for a friend working in a jewelry store.

    Dad found time to serve on the planning and zoning commission, serve on the city council for 15 yrs, bowl, sponsor and participate on baseball and softball teams in his younger years, serve on the church steering committee, was JayCee and Elk of the year several times and farm after he sold his station at age 65.

    When he was killed in a farming accident at 72, over 500 people signed the guest book at the visitation (not at the funeral)…that was 10% of his small town. I don’t think he ever made more than $25,000 in a single year.

    THAT my friends was a rich man.

    My brother and I were fortunate to pick up full scholarships. He went to the US Merchant Marine Academy, I went to the Naval Academy in Annapolis.

    I spanned an income level in the military from below the poverty line ($5,000) during the Carter years to a maximum of $133,000. My wife chose to stay home and raise our two kids, something I value more and more every day.

    We chose to bank my raises and invest them. Until I made 06, we lived pretty much on my 04 level salary and invested the rest.

    It comes down to priorities. We did a few expensive vacations like Disneyworld (2x), but generally spent time visiting relatives and not spending a ton on expensive vacations every year. I turned down assignments in places like Washington, DC which would have eaten up my whole salary, and paid attention to the cost of living for where we were going to be based.

    I was asked to apply for a high level government job out in Hawaii when I retired. I did the math and then thanked them for the opportunity as I politely declined the job…it would have taken most of my retirement pay, plus the salary of the govt job to maintain the same level of quality of life and housing that I had in “fly over country” in the Midwest, where I did my final assignment as a Commanding Officer of an NROTC unit and college professor teaching ethics.

    Ultimately, I’ve been retired 10 years, and we are doing fine. Not vacationing in the Hamptons, but enjoying life, and we were in Grand Cayman 3x visiting our daughter at school there.

    Like many others, we got sandbagged a few times along the way with the 2001 tech crash, some corporate bankruptcies that hurt the portfolio and the crash of 2008 right after I retired from the military. Still, we managed to pay $120k for one kid’s college, $300k for her Vet school (overseas, no student loans) and I still have over $600k in the bank and almost $100k/yr in defined benefits pension. The oldest went to a service academy and saved us her education costs, just transit to/from and some add ons.

    As Sam says, you have to examine all your options. If you have bad spending habits and don’t look for ways to economize, chances are that unless you have a rich uncle leave you cash, you’ll live on the edge. Likewise, if you look for ways to economize and make sound choices, you may eventually get away from the daily grind.

    Thanks for including me in the conversation, and hope all had a blessed Easter.

  64. Wow this article hits home. My wife and I live in SF and currently make a combined 500k a year as W2 earners (in our mid-thirties). 2016 was the first year she went back to work full-time after spending 3 years at home raising our twins. I had to re-check my taxes 3 times before I believed the bill was correct. Marriage penalty and AMT will bite you if you don’t withhold properly.

    We rent a 2 bed 2 bath apartment and walk to work, walk our daughters to school, and rent is cheap (barely increased since I moved in 12 years ago). We drive two used vehicles (a 2007 that cost $12k and a 1995 that cost $3k). Preschool is our largest monthly expense ($4k per month). Our big decision is when do we take on a mountain of debt and buy a home. Hard to justify right now because home prices are very high, we are enjoying our lifestyle, and we are saving 45% of our after tax income. But even saving such a high amount of our after tax income, if we leave in 3 years we’ll still be shopping for a suburban home in the $1.2-$1.4M range. It sounds like and is a lot of money, but won’t be a rich person’s home (likely a 3/2 built in the 1970’s within 45 minute-1 hour commute of SF).

    We are very fortunate to live where we live, have jobs we both enjoy, and have two wonderful daughters to raise. But we certainly don’t think of ourselves as rich.

    1. I sympathize you and everyone else in the same w-2 income bracket. The tax rate is unfair and penalizing. Sure, many other countries have (slightly) higher income tax but they also provide much better benefit, such as day care and public education. The country just milks hard working people to death.

  65. Please expound on the Mr. Money Mustache reference. He is obviously a full-time blogger, not a retired guy, but are you implying he makes over $500k per year and asked you for financial advice?

    White Coat Investor’s book has a great chapter that discusses why physicians should avoid expensive cities unless some personal obligation absolutely requires them to live there. This article is a great example of that.

    1. Pete has been making hundreds of thousands of dollars a year from his site for years because he’s been able to focus on the most basic concept of frugality and savings. Everybody can be more frugal and save, not everybody can hustle to make more money. This is his brilliance, and the key to making a lot of money online and in other business ventures. You need reach the most amount of people in any business to get rich.

      I just have a difficult time writing about basics frugality because it’s too boring for me. When I’m bored, I can’t write. More fun to focus on income upside, but it can be off putting to others who can’t or don’t want to try.

  66. I’ve thought about living in New York in my 20s to really ramp up on side hustles. The taxes alone really make it hard to leave another city in the US when your cost of living is much cheaper, and there are still many people to side hustle with.

    After reading this post, this is quite the opposite of the Mr. Money Mustache philosphy, but after reading from both perspectives, I can see how it can be easy to spend that amount of money in such an expensive city. What is really amazing to me, is how they literally pay more taxes than the median income!! That’s insane!

    Many times we hear the rich should be taxed at higher rates, when I see those numbers it really makes me feel more on the fence. I see both sides, but if I was in that position, I would be doing anything I could to reduce that tax bill for sure.

    Two things I’ve really taken away from this article:
    1. Thomas Stanley’s mindset of the millionaires in the US relates more to how I see my life in the future
    2. We should never assume its easy for people with high income to save as much as those who make less. The article points out reasons for their thinking (whether or not you agree), things like wanting the best for our kids is something we wall can relate too. They could definitely reduce vacations, but if your working like mad, would you want a nice vacation from the work you put in? Certainly!!

    Thanks for the new perspectives and great post!!

  67. We are a family of 3 living in LA and made about $450,000 last year, but our circumstances are way different. We paid about 30% in taxes, lived on a bit more than 25%, and saved the rest. Even with a $4,500 mortgage and a $500/mo student loan to pay. When our son was born I (Dad) started working from home and I gotta say, the relationship I have with my son is second to none. I feel bad for parents that drop $40k a year in childcare and have a weak relationship with their kids. It’s all about priorities. Same goes with spending. If you have to keep up withe Jones’s, you will never get ahead. We go to the park together almost every day and have fun. Fun doesn’t have to cost much, but it certainly can.

  68. Mikael Cohen

    Thank you for really good article. For me, living in Stockholm’s suburbs, it is really interesting to look across the pond and compare. I have created comparison chart to the one you have provided in the beginning of this page. We were a family of 3 in 2016 (my data is taken from there. Now we have a lovely 2mo baby girl.) We are average middle age and middle class white collars working in one of Swedish media companies. We are about to move to our own semi-detached house soon and we both use public transport to get to work on daily basis since its fantastic here.
    We do not have such extremely high salaries over here but expenses are not that huge either. We save a lot on health and education since its free to everyone.
    Here you will find our 2016 income and expenses converted into USD. Could be interesting for some.

  69. I really enjoyed this article. Many years ago I was a flight attendant and a pilot told me the same thing. He said, my problems are your problems. Mine just cost more.

    It was a great comment and I was probably 23 at the time. It made me realize people normally do not gain financial freedom. We live in a world where cars get nicer and houses get bigger.

    Here I was thinking he had all. Six figure income. What else was there…but according to him he was living pay check to pay check like the rest of us.

    Over the years it has helped me think about what I spend money on. While we have two good incomes and have done significantly better than most our counter parts, we have a lot of room to grow.

  70. What about exemptions and deductions?

    You seem to be indicating that they paid taxes on their entire income minus the 401(k) contributions, which is of course ridiculous. What about the exemptions for themselves and 2 kids? The charitable contributions? The mortgage interest (2 years into the mortgage, that’s goings to be a lot)? The student loan interest? The property taxes? Surely those haven’t been phased out at that income level?

    Seems to me that’s going to knock at least $90,000 off the taxable income, making the result look considerably less grim.

    1. Dood, el Farbe

      Hi Whatabout. Normally you’d think so, but for people with high earned income things are very different.

      For example, a theoretical household of 4 gets $28.8K between standard deduction (12.6K) and exemptions (16.2K). Also, a direct $2000 tax credit.

      But not this family. All of these items (including deductions, whether they take the standard or (obviously here) would itemize) are subject to phase-outs. So they don’t actually get their exemptions or their child tax credit – any of it.

      So their AGI really is pretty much gross less 401(k) contributions. (And medical plan – not mentioned in the article, but surely they pay some amount for medical coverage.)

      As for deductions, you are correct that the phase-outs don’t entirely eat them up. Based on the information above, they should have about $142,000 in itemizable deductions.

      So, with these deductions and if they had the exemptions/credit available, their taxable income would be right around $306K and they’d owe around $74K in federal income tax.

      However, while the routine deduction phaseout scheme isn’t too hard on deductions, AMT is, and AMT kills a lot of the value of their deductions.

      I ran form 6251 (with only the information we have available to us from this post) and their federal income tax due to AMT came to $107K ($33,000 more than you’d think based on deductions etc. and without the other things being phased out) which puts their taxed income right around $400K.

      So they lost about $94K of the value of their $142K total deductions (or put another way, because of AMT, the value of their whopper deductions was reduced to about 33% of their original amount).

      1. You are right on. We are in the same income bracket and AMT in my opinion puts undue burden on the upper middle class. There is no way around it if your income is primarily w-2.

  71. Professional degrees (law school, business school, medical school, etc.) are not “practically free” in Canada. There are no tuition controls for these degrees and are quite expensive. Even academic degrees are pricey. My husband has an MA in political science and I have a PhD. Our combined student debt was $130000.

  72. Satyam Patel

    In your example, you present mortgage principal and interest together. This constitutes 60k/year.

    If you want to accurately estimate the after tax savings rate for this couple you would have to add the principal component to the $7300 annual cash savings that they have.

    Otherwise couples that aggressively pay down their mortgage look worse off financially than those who rent and save / invest that money.

  73. I am a Canadian citizen and have lived here my entire life and paid for my post secondary education- not sure where you got our education is practically free! Please enlighten me? Did I miss something?

  74. I was ecstatic to see this article and affirm that my financial being was not nuthouse worthy. There were a couple of key expenses here that I didn’t see:

    i) health insurance + out of pocket, which for a family of four is easily $15k+
    ii) College savings (could easily be $20-25k/yr)
    iii)Entertainment; while you’ve got vacations, there aren’t other entertainment and weekend trips listed here.

    There is some obvious puts and takes with everyone’s situation compared to this, but all-in-all, a reasonable depiction of why making $500k doesn’t automatically confer “wealthy” status on a family.

    There are many who will have no sympathy or really appreciation for this type of situation, but there is a big element here of “you have to spend money to be in the game i.e. it costs alot to be in position to make a lot)

    The other big factor that needs much greater attention are taxes and it’s not geography dependent. While NYC is a prime offender, the incremental $$ spent on taxes are absurd. Effective tax rates of 35%-40% on half a million is a huge chunk. Just imagine if there was a a max rate of 30%. That would leave such a family with another $25-$50k left over.

      1. Are you joking – I paid over 100k like the rest of my fellow post secondary compadres to get 4 years and an MBA. I would like you to elaborate where you got your info that our education is practically free?

      2. Here are the actual costs of university education in Canada (Canadian dollars):

        – “On average, undergraduate students paid $6,191 in tuition fees in 2015/2016”
        – “Undergraduate students in dentistry ($18,934) paid the highest average tuition fees in 2015/2016. They were followed by students in medicine ($13,416), pharmacy ($11,723) and law ($10,983)”
        – “Students enrolled in a graduate program paid an average of $6,432 in tuition fees in 2015/2016”
        – “At the graduate level, the most expensive programs in 2015/2016 remained the executive master of business administration program (with average tuition fees of $42,235) and the regular master of business administration program, at $28,567”


  75. I see no reason to donate to your alma mater while you are still paying off student loans.

  76. Karlee Nevree

    I don’t see a line item for clothes and footwear and toiletries for two career people plus growing children. That must be at least $10,000 annually.

  77. I read your blog regularly (great advice and always entertaining) but this is my first reply to a post and I had a question for you.

    Sam, you said in this post that you started working ” in Manhattan in 1999 with a $40,000 salary”. In other posts you said that you always maxed out your retirement account… How did you do it? Assumptions: At least $7,000 in taxes and rent was $1,000/month but even if you split, it would still be $6,000 per year add cable/phone/internet/utilities. Food for a year least $5,200. Student loan payments? 7% sales tax on everything purchased. If your employer made you pay a portion of health insurance premiums or benefits package… how could you manage $18,000 into retirement? (if $18,000 was the limit in 1999)

    My scenario: I graduated college in 2011 (yay recession); I started out at $30,000 (I am a molecular biologist) at a biotech start up. Between rent/aggressively paying off student loan debt/taxes and part of my company’s health insurance premiums, that was more that $20,000 right there. Pittsburgh has terrible public transportation so I had a car (no car payments however) add just basic food costs (no eating out). My company doesn’t offer a match and I had little left add to a retirement plan. So putting $18,000 into retirement seems mystical even at $40,000. However, we get stock options and that’s why I have stayed for almost 6 years now. Do you think it is worth sticking around with a low salary and hope for an IPO or get out? And biology is pretty limited unless I go back for a PhD.

    Second question how did you make the leap from $40,000 to over $100,000 while working for “the man”?

    Cheers! TJ

    1. Excellent questions TJ.

      1) The 401k contribution limit in 1999 was $10,000 and $10,500 in 2000. See: Historical 401k Contribution Limits

      I shared a studio with my friend and paid $900 a month. I also stayed until 7:30pm every evening to eat the free cafeteria food at 85 Broad Street!

      2) Making over $100,000 largely is a function of performance and time. There are so many occupations that pay over $100,000 after a long enough time. There are also many that pay $100,000 right out of college today. Heck, even janitors make over $200,000 here in SF!


      1. Thank you, Sam, for the quick response!! For better or worse, the US was a very different place 18 years ago, pre-dotcom, 9/11 and housing bubble… Maxing out a $10,000 would still be very difficult (especially in NY!) but doable… When I found a year ago, I read your posts about maxing out 401Ks every year and I felt like a total failure! I think more millennials need a reality check like that… My goal right now is to increase my 401k saving by >1% of my pay every year until I max out. And find a job that has a match.
        I am lucky, I live in a cheap city, my little 1600sqft house would have cost me almost 1.5M in SF and I have no desire to pay California taxes. But I think it is time to leave bio and go back to IT!

        If the max 401k in 1999 would have been set to $18,000 do you think you could have attained that on a $40,000 salary?

        Cheers TJ

        1. Don’t count on that ipo. Plus, at this point, your ISO should have been fully vested. If there is an ipo, you will be able to cash out (somehow I doubt you have a significant stake though since this is your first job)

          1. Barry,

            I appreciate your input… I have a little over 100K in stock options, which is about 0.25-0.5% of the company right now (but that is only a guess). But the longer it takes the less likely it seems. I drank the kool-aid and stayed too long!

            1. New grads in Silicon Valley make the same mistake as you all the time(including me). I hope you were able to learn a lot at the start-up, that really should be the only reason new grads work at start-up, big exit is really just an extra lottery ticket.

  78. If you review the personal bankruptcy filings of individuals making $500k or more, you will see what federal judges and bankruptcy trustees believe are “necessary expenses” and which are not. That budget would be reduced substantially.

    Life is a series of choices.

    This narrative of the old blues song “Cry me a river” …

  79. Daniel Montry

    You have got to be kidding me right? I should feel any type of sympathy for people that make $500,000 simply because they are morons when it comes to budgeting? There are about a dozen ways I could step into that scenario and had $100,000 + a year left over EASILY. Off the top of my head and a quick glance at the numbers it would be closer to $112,000, but I bet I could take it to $150,000 if I pushed it hard. Just because they have no idea what a real budget would look like doesn’t make them a target for sympathy. It makes them a part of the clueless elite.

    1. You couldn’t step in. Because you couldn’t do the work and time required to get to that level of income. Maybe if you were smart enough to reach that level you’d be smart enough to understand the post.

      1. Dynx, your comment walks the line of saying that rich people deserve to be rich because they are inherently better than poor people.

        Taking the time to become educated enough or having the connections to get a 6 figure job is a luxury.

        Your cashier or mechanic isn’t any less intelligent or motivated than yourself. They just have different opportunities.

        1. Wrong.
          That may be an overstatement….wrong most of the time.
          I make a nice living. My sister, same opportunities, not so much so.
          My medical school roommate, well off. His brother? Not so much so.
          If it makes you feel better that’s great but I’ve seen plenty of same opportunity with much poorer outcome. I’ve seen plenty of no opportunity with good outcomes. It’s not nice to say, but really your life is what you make it.
          FYI I grew up on food stamps in a divorced household with a park bench ( wood…from a park, to eat off) my dad worked at (one of many jobs) 7-11.
          I’ve seen it, I’ve lived it.
          Poor people that remain poor generally make piss poor decisions.
          People that have opportunity that make piss poor decisions end up poor.

          1. Skippy Shelton

            Your comment is questionable because you assume that others have your inherent talent, work ethic, and intellect. I divined that you are a doctor (medical school roommate) and come off like the arrogant MDs I have dated. Not everybody can get through med school. I was pre-med at Columbia until the first problem set was due:) Kudos to you (and me) but we can’t assume the rest of population can do what we did. That being said, I don’t shun anyone for being blessed with exceptional talent and making the right decisions. To do otherwise would be fundamentally unAmerican.

  80. 47th Element

    God bless these hard working wage slaves whose high taxes allow half of their fellow Americans to get a free ride every April 15th.

    Their children, born in wedlock, will have good role models of ambitious upwardly mobile parents with Puritan work ethics. Their children are actively engaged, and are not being raised and brainwashed by TV and Youtube 6 hours a day.

    They work hard, but take three weeks or so every year to stop and smell the roses, and enjoy the fruits of their labors. These are the types hard working, generous, and charitable people who make America great and keep the American Dream alive and well.

    God bless them, and God bless America!

  81. Perhaps the author and the couple in the article would like to try living on 40k a year for a couple years and then see if they think living on 500 grand is oh so difficult.

  82. I gotta say it for my own sanity:

    This couple’s financial choices are appallingly bad. But I won’t judge.

    They are also very shortsighted. Their 401k, plus their current and future savings (kids do grow up and go to college… although in their case, I would suggest sending their kids to the military to unburden society from having to finance the law degrees of another two idiot future lawyers) provides with a solid money base to start investing in a variety of high return financial products.
    Most, the vast majority that is, of Americans could only dream about viably opening a brokers account.
    Absolutly no sympathy for people like this.
    If there is one thing people hate more than rich folks living in a bubble is dumb rich folks living in a bubble.

  83. its off by 40k, rest is sound so technically couple making 220 would be in shit. I live in Canada and our house hold cost is 150k per year, but with no mortgage/no RRSP. so NYC being higher make sense.

  84. Bonnie Headington

    I’m confused by your comparisons. Where is the budgeted amount for medical expenses? for savings? and for planning for kid’s college? I understand the other categories, but if my budget left out those items I’d be in real trouble.

  85. Having $7300 a year left over, which is over $600 a month, is not living paycheck to paycheck.

    The food, housing, meals and clothes for business, I understand.

    Even if you don’t use public transportation, you can lease a 2017 Toyota Camry for $255 a month, including an allocation of the $1999 payment due at signing. That is just a 36 month lease allowing someone to lease a new luxury sedan every 3 years, saving $290 over your example and still have room to save.

    You showed 3 vacations a year, but the average is only 1 a year and the difference has nothing to do with business, just foolishly trying to compete with overspending coworkers.

    They are saving $36K a year toward retirement, and while something is a necessity, that is almost 9 times the average and once they are retired, it will no longer be necessary to live in expensive areas and spend so much on dining and clothing for business purposes.

    The $1000 a week for lessons for children to get into a private school again have nothing to do with business, just foolishly trying to compete with overspending coworkers.

    One hiccup and they have $10,000 already earmarked for that plus $7,300 in annual savings to fall back on and lots of ways to save.

    There are average families going to public schools, taking 1 vacation a year, saving not enough for retirement, and having nowhere near the $17,300 cushion of your sad $500K a year couple. Four out of ten families do not have any life insurance. Three out of ten have nothing saved for retirement. So there are many families just below the average who also cannot shed a tear for your model $500K a year couple’s financial woes.

  86. FormerEastcoaster

    Man people here are judgmental jerks.
    NYC is expensive to live in plain and simple.
    There is a trade off between quality of life, savings and security.

    Although people are pointing out that they still save near 10k a year it is far less than 1 month of security fund.

    There are a whole lot of comments about clothes and eating expenses that show people aren’t thinking. You need to dress and act appropriately for your expected job, FULL STOP.
    If your co workers do business over lunches out, you eat out or miss out. Being part of the group builds social capitol. Now that is something they can scale back on but not as much as some people thinks. Dropping $50-60 for a business lunch 3x a week isn’t crazy.

    Same with clothes. You need to be professionally presentable. at higher levels of work you need clothes that pay more attention to details. Where I am business casual is a must. I could save money by getting jeans and a t-shirt, but that is considered unprofessional.

    When I worked corporate jobs I needed MULTIPLE suits and appropriate shirts and shoes. Good quality professional shirts cost $50-100 each. Ties about the same.Shoes from 75-150$ a pair and suits 200-800 each. so 10 shirts,5 ties,3 pairs of shoes and 4 suits will run bargain basement ~1600 and I am a man. On the higher end 7k for a mens professional wardrobe. Women have it worse. NYC has seasonal wear as well and the costs of dry cleaning and the fact that clothes wear out.

    There is a point where it becomes excessive, but realistically they are expected to keep up a professional level of expense that is higher than most.

    I wonder if the people here get all of their business appropriate wear from salvation army and the trash or if they scour grocery stores for expired foods to bring home.

    Less for your kids by some are considered investments as well as being quality of life enhancements for both the parents and the children.

    In many years, the student loans will be paid off, their salaries will increase and they will have a fixed house payment. Their kids will have a better shot at attening the excellent public schools in ny and they will have about 40k.

    But for now they are saving less than one month of expenses per year. they are one emergency away from personal tragedy. They have a few places to save more money but there is no magic bullet for them except to stick it out and hope no one looses a job. Seems they are like everyone else I know.

    1. Maureen Mergen

      I agree with your perceptions. However, perceptions are not necessarily reality. Look at Warren Buffett and his dusty old suits. Courage! Be yourself. No one is probably even looking that closely, only in your mind.

      1. Ha, Buffett has the same courage zuckerburg does…the courage that comes with billions of dollars. Following his lead is foolish to say the least. It would be like showing the same courage and experienced climber shows when climbing Everest. He’ll end up and the top and you’ll end up frozen in a block of ice 100yards from base camp. But otherwise a very good point.
        On the clothes front I’ve seen it in business settings. The higher the salary the more the expectations. I’ve seen senior partners straight tell junior members to buy nicer clothes. That’s not presented as an option.
        The article as a whole I can sympathize. I’m in that income group and yeah, you can spend it. It’s a battle not just with your own desires (I want a Ferrari, I could pay for it…but I don’t cause it’s stupid) a battle with your significant other: “we can afford a maid, we can afford this vacation, we can afford these shoes” and we can, but when you total all the little “we can” together it becomes a lot. And it’s a battle with what you want for your kids. Better school? This lesson? That lessson? More for the 529?
        I don’t expect anyone to feel sorry for me and it’s not the same as choosing between milk and gas but people don’t realize that you don’t get paid 500k for nothing. You have a job that other people won’t or can’t do…period. They THINK they can. But I’ve had to give underlyings a fraction of the decision and executional freedom I exercise every day and had them come to me saying “I can’t sleep at night” thinking about the consequences.
        So in short. The article is a good reflection of reality, that desires grow to budget, that life at 500k ain’t all roses and diamonds. And that those making 50k that think we’re the enemy should STFU.

        1. Oh my, aren’t you full of yourself. Underlings might not sleep at night simply because their boss is a prick and if they eff up, it’s their neck and out on the street they go. So they worry. But most likely, their boss has given no support, no training to help them succeed – and may give assignments knowing they are unprepared and will fail – just to ensure his mile-wide ego is stroked when he comes in and “saves the day”. 10:1 that fits your management style to a T, eh?

          As for your suggestion that it’s somehow tough to live on $500K a year, that’s a laugh. SO and I are in same income bracket, same high-cost environment, but save >$250K a year (not including portfolio gains). Of course, we don’t have to dress to impress – our work product speaks for itself. We drive 11 and 13 year-old cars (we live in upscale ‘burb outside SFO), have a $2M property paid for and a sizable nest egg. We don’t belong to the country club nor give a crap out owning something as stupid as a Ferrari (honestly, what sort of complete tool do you have to be to want one, let alone own one?). Other than enjoying nicer vacations/nicer vehicles than when we were younger, we live a very similar middle-class lifestyle – we help family as needed, but there isn’t going to be any intra-generational gifting to nieces and nephews so they can grow up to be entitled tools like so many well-to-do children become. We’re fortunate that we’ll never touch principle and can let our portfolio compound for the next ~40 years and then give it all away to charity. Wife and I started with nothing – both paid our way thru college (State colleges – nobody gives a rat’s patootie where you graduate from once you’re in the real world) with engineering degrees (no big WS salaries-straight-from-Ivy-League school here). Nevertheless, I estimate that we’ll die with $30-$50M since our portfolio will compound for decades. Then it all goes to charity (with healthy contributions along the way). You can bet we’ll never own a Ferarri. I’ll likely keep my ’06 Rover (bought used) until the engine falls out.

          1. Digression,

            It is awesome that you are living the American dream and sharing with charities along the way and at the end. Congratulations, and well done!

          2. People DO care where you graduate from in some fields. In finance, academics, and literary world for example having Harvard degree will open doors. In medical field no one cares where you went to undergrad. I do agree though leasing a Beamer and Landcruiser in NYC seem like a real extravagance. The other thing about vacations, no relatives or road trips or camping seems most people can squeeze out at least one or two really cheap vacations a year and these are often the best.

          3. Digression – impressive savings.
            Do you have kids? I only ask because it is a lot easier to put away significant money without. Many decisions and expenses come from trying to do your best for them (largest housing, school, savings, clothes, etc).
            If you do, they may go live your inexpensive lifestyle but the expenses still pileup as you now have four bodies (4 plane tickets, etc) with needs as opposed to two who’ve already gone through schooling without debt.
            Just trying to put a little perspective on things.

            1. Good catch. Two things struck me about that comment. There were no kids (and no elderly parents to care for) and also they don’t live in NYC.

          4. Actually, owning an older Ferrari as an investment is pretty smart. A 1980s Ferrari 328 was selling for $30-35K 5 years ago. Now they’re going for $80-125K. A lot better than buying some new car and watching 80% of its value depreciate in 5 years, or throwing away $800 a month on leasing (essentially, car rental).

    2. If they were truly just getting by they would cut the vacations to only 1 a year at most. I’ve been poor my whole life and as a kid I realized 1 vacation a year was enough for me to be happy with what I got. And 2 cars in a big city, that’s just ridiculous if you’re “barely getting by”. I don’t understand donating to charity either if you’re so bad off?

    3. Shirts for 50 bucks?? Shoes for 150?? OMG where do you even get that crap from – second-hand stores?? Good shirt for a professional working in an environment where he has to be presentable starts from 200 absolute min, but closer to 300 more realistically, and higher. Shoes – min I can imagine would be 500, but closer to 1k is a bit more realistic. You could try outlets, but that is still nowhere near 100 bucks for shoes – the crappiest ever Ecco would be 200

      1. Peter, I can’t tell if you’re kidding or not. The difference between a $40 shirt and a $200 shirt is $160 and nothing else.

    4. Robert Arthur

      Oh, please! Right off the bat they can get rid of one of their expensive cars – not necessary to have in Brooklyn. They can rent a house out on Long Island for a week instead of going on a $6,000 vacation three times a year. There are plenty of ways they can cut back their spending without making big sacrifices.

  87. hi! i think your property tax estimate is way off for nyc. i have a house in park slope valued at more than the apartment in your scenario and my annual tax bill is $3300 or so.

    1. Thanks! I have a feeling it is off as well. Can you tell me what the city says your property for, when you bought it, and what the percentage $3300 comes out to based off the assessment? I’m running a follow up post now as we speak. Thanks

    2. Agree. Most Brooklyn townhouses run around $2500 a year. If these people live in a large 3/2 apartment, that would most definitely be a new build condo, which usually have a 15 or 20 year abatement and taxes would be very minimal. A couple hundred a month at most.

      1. Denis Wyrwoll

        Actually not. I bought a condo in a new construction building in Park Slope last year and they changed the assessment on us so now we pay $22K in taxes on a $1.7M property. This is 3x of what I was expecting to pay. Assessments for new construction have increased significantly since they are limited in the increases they can make for old construction.

        1. Agreed. Once the tax abatement is off, taxes run VERY high. Taxes are even higher in NJ and Westchester so moving out of the city isn’t a solution

  88. It is all about choices. I work for a Houston law firm as a paralegal making around $70k per year. My husband and I make jointly around $100k a year. I have been maxing out my 401k contributions for several years now and jointly we save about $35k a year. One of the partners at my law firm told me once that I was the only one in the firm (10 employees total with 5 attorneys) who contributes the maximum amount to the 401k. Other attorneys make twice as much as me. However, my husband and I drive cars that are 10 years old and except our mortgage, don’t have any debt. We are planning to retire on $1million in 10 years or less. We have one child and pay child care – $825 a month.

    1. The attorneys probably can’t make the maximum contribution. If they are making over $120k a year, they’re considered “highly compensated employees” (HCEs) and can only contribute at the same rate as the average of all other eligible employees making less than $120k.

      Given the contribution rates in my company and my HCE status, this means that I can contribute a max of $4k/year to my 401(k) account. Very frustrating.

  89. The accounting trickery here is that they’re putting $36,000 into what are essentially savings/investments available for the future, and counting that as an expense. “Oh, goodness … after I invest all this money, see how little I have left!” Well, they still actually have the money they invested. The 401K contributions should be included in the ‘what’s left’ category, as it is money they’ve earned which is still available to them as an asset.

    1. It’s not horrible trickery because it’s not money they can touch – so $36,000 a year saved is definitely a good thing but it doesn’t mean they can realistically access it in a few years so they can retire.

  90. BattleChicken

    The trappings of affluence are not “costs of living”, these lawyers in your example waste squander their money, and evidently don’t have perspective on what “poor” actually is.

    … barely making it on 500k… I bet they’ve never had to decide between gas to get to work and a gallon of milk – THAT is barely making it.

    1. Robert Siegel

      ” The trappings of affluence are not ‘ costs of living’ ” Perfectly stated, Battle Chicken.

    2. No one pays that much in taxes. If they are, they really should consider that expense and talk to an accountant, a lawyer, and a financial planner to strategize. During my time as a financial planner, the real issue for people making this much money is their expenses. When you have a high income, the mindset becomes “I can afford anything so why not make that purchase”. That and the extra “mortgage” they are paying for grad school.

      1. Erik Warren

        My wife and I both work for Fortune 100 companies and we paid a 32% federal rate last year and an 11.4% CA state. We have one of the best accountant in N. California. That does not include social security or Medicare taxes. The good news is we are exiting the state of California in May for good and also retiring in our early 50’s.

    3. Gotrichonmyown

      Smart people make smart choices and struggle to their own rewards….critics, criticize and hope their neighbor will pay for their healthcare to cover up their inept laziness.

  91. Forgive me, but I didn’t read all of the comments. To me (and as someone making about the same money, albeit in Seattle), this is an example of living beyond their means.

    For example, I have not made car payments since I was in my 20s. When I want a new car, I save, and I pay cash (and if I lived in NYC, I wouldn’t have a car, let alone two).

    I was lucky and locked in a low interest rate on a 15 year mortgage on a million dollar house. Using my previous house as a hefty down payment, I’m now only 300k in debt on a 1.4 million dollar home, so that’s been good for me.

    I have over 60k of college tuition saved for each of my two children. I realize now that one big advantage I have is that my wife stayed home for about 10 years to watch the kids. Although she’s now back at work, the cost of childcare to keep them alive until one of us gets home is much less than what these folks are paying. However, there are other options potentially open if a family wants to cut down on child care. For example, since my wife and I both have extremely flexible schedules, during the summer when the kids don’t have school, I work from 6:00am to 3:00 or so, and she works from 1:00 to 9:00. The kids are old enough to be at home for two hours on their own, and we can all still have an hour together before heading to bed.

    I guess the short story is that if you are creative, you can find some ways to save money and make it work. It seems to me like this is an example of a family that wants it all, no matter the cost.

    1. I believe the takeaway here isn’t that this scenario is typical, average, or expected – but how easy it is to make half a million dollars in a high cost of living area and for it not to look like an absurd scenario. You can certainly cut back from this budget and save more (there are a lot of fun sub-$6,000 week-long vacations out there!) if you wanted to but this paints a picture that doesn’t look as crazy as “they make $500k and are barely scraping buy” headline would make it seem.

      1. Maureen Mergen

        There is a fundamental truth that explains this. Humans are different from animals in that they have many desires. Its very powerful and deeply ingrained. The more the more. The budget is the solution. Otherwise human nature is in charge and runs wild.

        1. Oh, animals have many powerful, deeply ingrained desires. We aren’t nearly as different as you think.

      2. As I read the comments I observe that one essential thing is being missed. These high income earners are subsidizing our lower tax rates; essentially bolstering the amounts we don’t pay.
        The amounts this sample couple pay in taxes are more than double what I take home in a year, and that fact is the biggest reason I believe they are doing as well as they reasonably can be expected to, given what they have to work with. To criticize them for three vacations a year is somewhat unfair, because as loving parents they are dealing with the guilt of not being around for their kids as much as they’d like to, and these intensive times away help keep the bond going. If they were going into the hole to subsidize their vacations it would be problematic, but that’s not the case. And, as Mr. Wang pointed out, you don’t make that kind of money working just 40 hours a week. You need times away to decompress, and if you can afford it, then go for it.
        This article was a fantastic read.

    2. Justin Clarke

      Dang. I want to move to Seattle when I get my degree. I’m currently living in Texas but the climate of Seattle, WA and the fact that it lacks a state income tax are both incentives to move there (so does Texas). I want to be a CRNA, so I’m expecting to start off around 120k-150k in my mid-twenties, and then as I progress through the practice be making closer to 200k-250k. I’m just wondering, is that enough for a single male in Seattle or should I choose a different part of Washington? I’ve considered Forks (Think cloudy, rainy, and cold ish), but I kind of have my heart set on or near Seattle.

      Thanks, Justin.

      1. Seattle resident

        I live in Seattle. You do NOT want to got to Forks. There you might make $20k. It is a beautiful area and close to the ocean and yes cloudy and rainy but it is also a very small town (3000 people) and there is no economy. Logging is basically dead and so is the town economy. My in laws still live there so I know. 120K is fine to start in Seattle as a single male (especially if you are at all financially responsible and as a reader of this website I assume you are). Housing is what is really expensive here and traffic is bad. If you are willing to live and work outside of Seattle it is more reasonable. Tacoma, Olympia, Everett, Issaquah etc are alternatives. But if I were you and you have your heart set on Seattle then try the city first, especially if you can walk or bike or use public transit (mediocre by the way) and move further out in a year if you find it does not work for you.

    3. Very good of you to note that your wife is saving you tens of thousands a year by not working. That’s the biggest saving right there. But not every woman wants to (or can afford to) stay home. So no point criticizing this couple anymore than someone could criticize you for keeping your wife at home

      1. “…keeping your wife at home.”
        Thats so funny! As if he has control over his wife like some kind of master.
        Ah, misogyny!

    4. You live in Washington state with no state income tax. That’s an extra 50-60k you get that a new Yorkers loses from our high state tax and ridiculous city tax. Keep that in mind

      1. Keep in mind that $50-60k you don’t pay in state income will be taxed at your highest marginal federal rates (39.6% if your AGI is in the $500k range). Albeit the pesky Pease limitations/AMT will claw back some of your $50k AGI deduction so it can be complicated to actually calculate your cash in pocket benefit. I had my Accountant calculate what I would save if I moved to Washington state specifically (my state has a 9.9% income tax) and it turned out to be about a net cash in pocket 3.5-4% (not 10%). Ergo I didn’t move.

  92. I just don’t get the philosophy and culture of vacation haters. Its like those of us that take them are weak or doing something akin to laziness. We take 4 vacations per year with our family of 4 – but we don’t spend anywhere near $18K a year. We get a bit more vaca time here in Canada I think – (I get about 5 weeks) and my wife is a teacher so she gets the whole summer off. We do one big trip that costs about $6K and the remainder are low budget – about $2K each. We work our buts off – the vacation time is needed to recharge the batteries and spend time as a family. What the hell is the point in working so hard if you can’t take time to enjoy life? The fact that there is no legal minimum for vacation time in the USA is criminal in my opinion.

    1. I’m with you! There really is no point in working and making a lot of money if you don’t get time off to relax and have fun. I believe people should take as much time off as possible – vacations are not evil, and people shouldn’t demonize others who have lots of time off.

      Everyone is going to attack you and say “BUT US NORMAL PEOPLE don’t get 3 weeks off a year.” All I can is, gee, that sucks. Stop being jealous and keep working until you get a job that gives that much time off. Or work for yourself. I bet if you’re employer did give you 3+ weeks off a year, you would take it.

      (6k for EVERY vacation is a bit extravagant…but who am I to judge.)

      I don’t think any employer should be required by law to ensure time off, but I do wish it was more culturally accepted in the US to have a lot of time off without being considered “lazy”.

  93. Squimpleton

    What I mostly took from this:

    That couple would have a lot more to save if they didn’t have any kids at all.

    Also, you don’t need lessons to get into an Ivy League, nor do you need to get into an Ivy league school to get a competitive job. People in SUNY can get good/great-paying jobs too. So those little tykes don’t need all that; those parents are just trying too hard. There are also commutable cheaper places to Manhattan. I live in Westchester and go to Manhattan every day via subway.

    Vacations also don’t have to be that expensive.

    But that being said, it is very easy for people who make a lot to spend more and thus not have much left behind. That’s why even millionaires can end up broke after just a few financial hiccups.

    People should look at their finances to see what they can cut/change at least once a year.

  94. I think people are missing the point of the post. The point is not about whining about making 500K. The point is, if you aren’t careful, it is perfectly possible (and realistic) to make $500,000 and not have that much left over. I will give you a real life example. My boss, a legal executive, is married to another legal executive of a company. Combined they must make at least 600k-700k a year, not including bonuses. They have three kids who they all send to our area’s most prestigious private school. Tuition and fees are $30,000 per kid at this school! That’s already 90K a year in tuition!! I know for a fact that they take at at least three (min) week-long vacations a year. Think about it…Spring break, Christmas, Summer. And these aren’t your run of the mill vacations. Think international, hire a daily guide, upscale vacations (e.g. Europe, Asia, etc). They live in the blue blood area of our city and their house must be at least 1.5 million. Since they both work, they have a full time nanny (another 40k-50k in expenses). I’m pretty sure my boss has the kids in all sorts of activities. So pretty much fits the bill for this profile. I’m most surprised at the reaction regarding high income earner vacations. Of course they are going to take vacations!

    It’s just a fact of human nature, most people consume to the level of their income. Is it wise? No. But does it happen often? Yes!

  95. $18.5k per month for a family of 4 in NYC (if you don’t count their 401k + student debt + charity). That’s not crazy.

    I know at least a dozen families in NYC personally (either in prime Manhattan or Bk). Just about everyone of them would love to get by on $18.5k per month for 4. Usually, it is more like $25k. And I know families that pay up to $60k per month.

    Is it really “struggling”? Not really. However, it use to be the case that $500k was an insane amount of money. Now there are over 20,000 people in Manhattan alone making over $1m annually so the families don’t feel like they can keep up.

    I would bet most of the angry posters here are American and if they shared their personal budgets on a forum in India or China, they would get similar people losing their minds!

  96. Hopefully these young professionals are looking for a better way, and hopefully the Financial Samurai helps them find it.

    The saddest fact in this situation is they work 60+ hours per week. This means they are spending most of their waking hours working to pay for a house they can’t spend much time in, to pay for child care and activities for kids they can’t see much, to pay for cars they can’t even use or enjoy, and to buy meals that they likely don’t have the time to eat together as a family.

    As a high earner, the best thing you can buy with your money is your freedom, or your time.

  97. Chris Travers

    I see a couple takeaways from this. Note I have turned down 6 figure salaries for my 5 figure salary over cost of living issues. I have a family of five. There are many cities in the world where 100k USD/year gross is not enough for my family to make it. I wouldn’t move to NYC for less than 200k. I am also one of t

    The first is that an important theme is that keeping up a high income is expensive, and preserving the same opportunities for one’s children is also. The second is that I am quite lucky, in fact, that my wife does not work but stays home, takes care of the kids, etc.

    You look at the clothes budget for example and at first glance that looks very high, but then thinking what high-powered lawyers are expected to wear to work, it starts looking less unreasonable.

    We like to think the rich are above the ordinary problems but I take away from this the fact that they are not. The same problems exist for them as for the rest of us, and what they have is not so much “wealth” as “status.”

  98. Brooklyn Money

    I live in Brooklyn and make what each of these people do individually, but I’m single so my total is half of theirs and I have no kids. I know it’s expensive here. That said, I still think this is beyond ridiculous!!!! First of all, who likes traveling with toddlers/young kids? Let alone 3x a year and they are clearly flying places with that cost. Also, 2 CARS? In Brooklyn? That is the dumbest thing I’ve ever heard. And, if they do have those 2 CARS you better believe they are parking them in a garage and I don’t see that expense here. Maybe that’s in the 10K MISC bucket (head desk). I know it’s a national pastime to gawk at how much we in the big city spend for so little, but as someone in the same city and the same income bracket, I have to agree with everyone that their expenses and OOC.

  99. Anybody who thinks that these costs are unreasonable simply has no idea what they are talking about or has never lived in one of the top, expensive cities in the country.

    I don’t mean that these costs are NECESSARY, I’m saying they are totally reasonable. They could definitely save much more if they wanted to, but that’s not the point of the article.

    Those costs are totally reasonable for a major metro like NYC, LA, SF or Boston. Having lived in three of those, here are some experiences:

    A 30 minute guitar lesson in LA cost me on average 45 dollars. For an hour, you could easily be paying 60-75. Expertise is expensive. Living in a big city just makes it more so. A 1 hour piano lesson in the Boston SUBURBS is $50. Personal Experience.

    Sports? Also expensive.

    Now, food. Like Sam, I would challenge anybody to spend less than $15 a day in a big city for any considerable period of time. 23,000/4 = 5750 per year, per person. $110 a week. $15 a day. That’s CHEAP!

    Eating healthy is expensive. I do all my own cooking due to allergies, and I WISH I could spend $15 a day on healthy, natural food (Boston). I like to eat fruit and veggies and some meat and milk. A gallon of milk is easily 4.50 here! An avocado – 2.50. Eggs? $3+ a dozen. I don’t even want to know what food costs in NYC. In a rush and need to grab something to eat out while working? Chipotle will be like 8 bucks, and that’s a cheap meal. Sure, BK and McDonald’s is cheap on the dollar menu, but that crap that will give you cancer. Don’t even waste your time on it.

    Even the chicken you buy at Costco is 2.99 a lb and is full of white synthetic crap that oozes out when you cook it.

    When I was broke struggling artist in LA, I spent $150 on food a week, easy. If you don’t care about your health, sure, eat crap and save money. You’ll just pay for it later, by feeling like crap all the time and getting sick and developing allergies and diseases.

    Clothes – yeah 9K is expensive, and they could save a lot more…but when you work at a big law firm…you can’t exactly shop at Goodwill. Hell, people in law and Wall Street often get hired/fired based on their choice shoes, or the label on the inside of their suit. No, I’m not joking. You have to dress well, and that’s expensive anywhere. Moreso in NYC.

    I seriously have no idea what childcare costs…but 42 for 2 doesn’t seem at all outrageous in NYC, seeing as I know full-time nannies who make like $15 an hour in much cheaper locales.

    Again, I’m not saying these costs are all COMPLETELY NECESSARY, but a lot of them are totally average.

    1. Ariana Miller

      Yes, the costs are unreasonable. Reasonable or unreasonable is determined by how much money you have to spend on an item, not how much a business may charge for it. If you lease two luxury cars, yes, you will have huge car expenses. No one said BMWs and Land Rovers weren’t expensive, they said it is unreasonable for this couple to be one, leasing them, and two, driving not one but two cars in NYC. Unreasonable choice.

      If a family buys all of their groceries at Whole Foods or eats out for most meals, then yes, they will have a high grocery bill. What is unreasonable is their choice to do so when they apparently feel strapped for cash.

      People greatly exaggerate the lifestyle demands of big law firms. Went to law school myself and know plenty of biglaw people, and most of them make much more modest choices in terms of cars and dress. Few people can even tell whether you are wearing a high end designer suit or one you got from Macy’s. If someone feels that they must wear Armani and such, then buy on consignment not at retail.

      $1000 of lessons and activities for preschool aged kids whose sustained interest and aptitude is unknown is an unreasonable choice unless the family has so much money that it doesn’t matter. This couple is not at the point where money is no longer an object, and so they need to find less expensive alternatives.

      Everyone has to live within the constraints of what they make and adjust their choices accordingly. There will always be something you can spend your money on. This couple is not exempt from any of the financial principles anyone else is bound by.

      1. I don’t think we’re on the same page at all. Reasonable does, actually, mean how much it costs. If I go to the grocery store and they are charging 7 bucks for a dozen eggs for no reason and it normally costs $3.29, that unreasonable. Even if I’m trying to cut down on my spending, spending 3.29 on a dozen eggs is reasonable….if I eat a lot eggs and that is what they cost where I live.

        I defer to your big law knowledge. I made the mistake of mixing it with private equity, hedge funds, etc. which I am more familiar with. I honestly do know people who have been asked to show the suit label they were wearing to their interviewer.

        My comment was meant to say that quite simply, those prices are completely average in a major metro area like NYC. I never said that piano lessons for a child are necessary.

        Those prices are detailed are for average, non-organic food at the average grocery store. Not Whole Foods. Whole Foods is overpriced. Though if you were to shop at WholeFoods in NYC, I can assure you would spend a hell of a lot more than 23k a year on food. I would still say it is unreasonable and very difficult to spend less than $15 a day on food, per person, in NYC.

        Anyway, I totally agree that having two cars in NYC is completely unreasonable. But if you WERE to have two cars, as wasteful as that is…9600 a year on those two cars is, actually, quite cheap.

        Anyway, I think most of this blowback is from the article’s implication that these people are “scraping by” which is obviously not true. You don’t have to feel sorry for them and shouldn’t, they make bank, and clearly aren’t being wise with it. But most of these costs are completely average for a place like NYC.

        Also because most of the people came from here the LATimes and never read Financial Samurai. Sam writes tongue-in-cheek quite a bit, and is actually trying to drive home a point: Living in big-cities, making the big bucks and living the rat race is probably not worth it.

        1. Ariana Miller

          It’s not possible for these costs to be average for NYC when the median household income in Brooklyn is less than $45,000. How is anyone else living?

          Yes, it is unreasonable for eggs to cost $7.00, but there’s no store that I’m aware of that charges $7.00 for eggs–not even Whole Foods. All items that you can buy are priced according to whatever value you’re supposed to be getting for that price, whether it’s because it’s organic/free-range, hand-crafted, imported, super rare, luxury, bespoke, personalized customer service, etc. It’s not unreasonable for a piano lesson to cost $65 per half-hour, assuming the teacher has the background and skill to provide commensurate value to the student. Nor is it unreasonable for a new bespoke suit to cost over $1000 dollars. However, there are cheaper alternatives that would be good enough, and a better choice could be made given the financial constraints of this couple.

          So it’s not that this couple is throwing money away for things that they aren’t receiving commensurate value for. It’s just that they are making unreasonable choices given where they live, the age of their children, and their current income level. If they were truly rich, none of this would matter.

          But I agree that this couple really isn’t scraping buy, even if they don’t change anything. They want to live like they are living and also want to have more left over. In reality, they are more than fine financially. It’s their conviction that they should have even more than they do that is insulting to the majority of people.

          1. lando calrissian

            whole foods sells pasture raised eggs for $7.49 a dozen…

            ariana, you don’t live in nyc do you?

          2. To be honest, I have no idea how anybody manages to live on less than 45K a year there. They are either dirt poor, or there is something wrong with those stats. I always wonder how people with low incomes manage to live in big cities – something tells me they don’t have much in the way of savings…

            But yes….those prices are quite average. I was using 7 merely rhetorically, and I can’t verify that eggs cost $7 at Whole Foods in NYC, but seeing as how they cost 5-6 easy in Boston and LA, I imagine lando is right. (I would never spend $7 on eggs, TBH).

            Anyway, like I said in my last post, you’re arguing something different than I am. I’m merely stating that those prices are quite typical for big-city life. You’re arguing that I am justifying wasting money.

            1. lando calrissian

              pasture raised eggs of a certain brand whose name i forget cost $7.49/dozen at whole foods. of course you can get generic, non-organic eggs for less. but yes, 7.49/dozen. and yes, i buy them.

              and sure, go buy your non-organic eggs and your daughter will reach puberty that much faster.

  100. I think childcare and food costs are reasonable in this budget.
    I do not think a 1.5 million house in NYC would have 20K property tax. More like 5K/6K.
    I think one car is enough and they should just buy it outright and not deal with car payments. I will treat the gas budget as a proxy for gas and commute fees in which 5K is reasonable.
    My main objection to this budget is: If they have such high student debt. I would rent and avoid buying a 1.5 million house or take 18K annual vacations or 18K to charity. They should save up enough to pay off these student loans and then work on a down payment on the 1.5 million house. Only after that would I then take 3 6K vacations a year or ramp up on charity.
    I think its is reasonable that a couple making 500K can buy a house that is worth 1.5 million and be able to be generous to charities of their choice. It is a question of sequence.

  101. Please tell at what point do people stop knowing how to be frugal?
    I’m not arguing that you can’t live like you make 500k a year, certainly that entitles you to raise your standard of living but don’t try to tell me that you’re “scrapping by”.
    You’re not scrapping by, you’re living above your means.
    It’s insulting.

  102. Get rid of both of the financed cars and save $9600 + $5000 (gas) + $2000 (insurance) per year. That is $16,600 or more than double what they have left over now. Use Uber or a cab when you need a car to go somewhere. That will cut into the savings a little bit, but it will probably be offset by not having to pay for parking.

    $9500 on clothes? Are they buying a new outfit everyday?

  103. Brandon Wood

    The moral of this story is to live comfortable in an expensive city you need to make an abnormal amount of money. 120K isn’t gonna cut it in NYC and SF. 80K a year in house related expenses?? WTH. I would argue you could move somewhere else cheaper that you still like, take a pay-cut, and still come out way ahead.

  104. Seriously? $1900/mo for food and two “dates” a month (others have gone into other budget line items that are way out of whack, even in NYC). What the heck are they eating? Gold plated fruit? OR alternatively where the heck are they going on their dates? Bahamas for the weekend? Unless they eat out just about all meals – and that is just plain stupid, not to mention unhealthy – they could save quite a bit by eating at home for most dinners, all breakfasts, and bringing lunch a couple of days a week to work. That would also help their kids have realistic expectations for life as well. Just shaking my head over this. Crying crocodile tears for these “poor” little snowflakes. Life is just so hard. LOL.

    Be interesting to put them in my situation. Professional with advanced education, got 2 major cancers in one year (one of which has no cure), fired for “being too expensive for their insurance” via email no less (yes I filed an EEOC complaint), when COBRA ran out had to choose between health insurance and rent – took 18 mo for my savings to run out and I made no where near what they made (of course I don’t live in NYC either), was homeless 19 months until I got into hud housing, I have food stamps, can only find part time jobs, and temp jobs, needed (and still need) a gofundme (put /78d3nc after that site’s url) to keep myself in health insurance (no medicaid expansion in this state)… Grant you I wouldn’t wish my current lifestyle on anyone, but when I had a decent job I had far more left over in my budget each year than they do, which I saved, as a single parent of one (who played on two traveling teams -basketball and soccer) on less than 1/5th of their income… yes I put less in my retirement but the percentage I put in was far higher. And my car was old, a 1990 that died 2 years ago and now I own a 2005.

    Plenty of ways they can cut back on their out of control spending, still do and spend a lot, and have lots more left over each month. Not rocket science.

  105. So much BS in this article. I worked in Manhattan for 15 years (until 2015), and you don’t need to pay 1.5 mill for a home. In fact, to work in NYC, you don’t need to live there at all. So many forms of transportation make it stupid to live there unless you can REALLY afford it. Looking at that payment, they cannot afford it. They have car payments while making 500K a year? What???? I haven’t had a car payment in 20 years. They should be able to pay cash for cars, unless (wait for it) they can’t afford them. I made half of their total (literally half), and was able to save 7 figures. In fact, for most of my time there I made much less. I bought my cars in cash, rented until I could pay for a house. Saved, and invested. At 80-100k you should be able to buy a car with cash. They are living beyond their means, and they are also stupid with money. Their real concern is how they look to their friends and co-workers. I know them- I worked there- that is all people in that city care about. They could save one of their ENTIRE PAYCHECKS and be rich in 5-10 years time. Just because you make money, doesn’t mean you know how to keep it. They could live in Hoboken and have a 10 minute commute- I see 2 BR for sale in the 6-700K range. 3BR ~750k. Jersey City even cheaper…they want to live IN NYC- sorry, you can’t afford it if you haven’t saved anything.

    I left NYC and took a paycut- ended up taking home much more due to cost of living savings. Don’t blame the city, because nobody forced you two to live and work there. Making 500k and having 7k left over makes me question how you have enough brain power to power your legs to walk around. You won’t win this debate.

  106. 500K a year and they’re whining they can’t scrape by? Yeah, tell that to someone who barely makes 20K a year who works three jobs to make ends meet and see what kind of reply you get. Good lord – I do NOT feel sorry for these people and I resent that this is even a headline. Poor little rich whiners.

  107. They’re spending almost as much per year than my family of 3 Lives on in clothing alone (and I still manage to dress in nicely tailored dresses). I’ve never had that kind of vacation in my life, and neither did my parents. Even when both parents are working 80hours a week I don’t know anyone who has a nanny. Buying a car, even if that means making a phone call & paying for repairs when something breaks, would save them a ton of money. Even two cars.

    They’re buying a lifestyle. I don’t begrudge them it, but lets not pretend this is a question of not having choices. Lets not pretend that other people who live on a fraction of what they don’t don’t work just as hard or just as many hours(even In NyC). Lets not pretend that other people who can’t afford all that enrichment don’t have children who are just as full of potential.

    They’re making choices here that the vast majority of the country can’t afford to make. Again, I don’t hate them for making those choices, but I resent that they complain about not having more money left over after they’ve made them.

  108. Problems with the whole budget:
    1. Tax in incorrectly calculated because you don’t show the deductions for Mortgage interest, Charity, Property tax, state tax. Who the hell is their accountant? Effective rate cannot be 40% so incorrect.
    2. $42k for child care. There are many excellent daycares that are much cheaper. In case kids are school age why not send to public school? Most people do that.
    3. Food $23k, are they eating out all the time? Why not cook more at home? Have they even heard about the place called Costco?
    4. 3 vacations for 18k, that just living rich. There are much cheaper ways to go for vacations. Again, have they heard about Costco?
    5. Car payment of 9.6k, why the hell are they even leasing? Why not just buy like most other people and also why need two cars in the place like NYC where there is so good public transport?
    6. Gas for 5k, wow again, have you heard about Costco?
    7. Cloths for 9.5k, are you kidding? This is totally ridiculous.
    8. Children’s lesson 12k, what are you doing with your kids? From lines above it feels like kids are not even in school and you are sending them to so many classes now? Let’s say even if you want them to learn many things there is time.
    9. What the hell is this 10k of misc?

    From this budget, it looks like there is no inclination to save anything.

    1. lando calrissian

      re: $42k for child care : financial samurai is spot on.

      nannies for two kids are $16-18/hour

      *50 hours a week is $800-900/week

      *52 weeks is $41,600-46,800/year

      if anything, he was underestimating this.

  109. Reality is this family with $500,000 in income in Manhattan, if at all smart, would live in a really nice town in NJ and commute to the city. No need for a crappy $1.5 million 3/2 apartment in Brooklyn when you can live in a beautiful home with access to a midtown direct train for under $1,000,000.

    Commute would likely be the same into NYC as it is from Brooklyn.

    Also, there is no need for $1,000 a month in “activities” to get your child into a prestigious private school (top tier parochial schools in NJ will get you into the very best colleges in the country.)

    1. Isn’t there a joke that says,”Why are New Yorkers afraid to die? Because the light at the end of the tunnel is New Jersey!”

      I love New York City. It’s the greatest city in the world for about six months a year.

      The property taxes in New Jersey are a killer!


    I am amazed at many of the responses

    1k per month on kids lessons is absurd? not at all. I paid 250 a month for piano lessons for a single kid and we live in suburban Virginia. And yes, 4-5 is a good age to start any instrument. Add to that other activities, such as swim lessons. Even the community swim pool charges at least 1 k for the summer

    Vacations! i am from India and winter visits home are pretty standard, 2-3 weeks, the problem is its easier to get that much time off over holiday season when fares double to 2k ballpark per head. 8k for the family, 1 k in gifts for folks at home who like all stuff from Hershey candies and ziploic bags, besides expenses there, and Europe stopovers (after all, we didn’t come to the US to eat out at McDonalds)

    Charity/gifts – 500$ per month to parents living expenses in India is again standard for even grad students and middle class Indians, besides a third of our goverments foreign exchange say to import oil comes from non resident remittances. Add to that many pay parents medical expenses, home improvements. I had a lady friend, also Indian and a single mother to boot, who bought her parents a house. Another Indian American couple paid the elder’s private medical insurance since she was not Medicare eligible

    1. Ariana Miller

      $250 for one instrument is a lot, especially for a young child. That equates to a little more than $60 per hour, and most teachers will only give young children half hour lessons, meaning that such a rate would equate to over $120 per lesson.

      That is an unnecessary expense for a young child whose aptitude and longterm interest in an instrument or any other activity is unknown. Group enrichment classes and a less expensive teacher would be more than adequate for young kids. These types of decisions are much more often reflective of parents who decide that their children need “the best” and expect the best to mean expensive, prestigious, etc. What is needful or appropriate or most reasonable seems to be secondary.

  111. You’re in nyc for vacation all you have to do is drive to six flags or go to hershey park. Spend a weekend in boston or something. It’s cheap and fun and will save a lot of money. You could even vacation more often and still save money, unless that’s just not a good enough vacation for the 1%

  112. Why would a couple with 500K a year lease cars? Why not buy the cars barely used from previous outright, IN CASH!? Making payments is for people without the cash to just throw down! Totally absurd!

  113. Man, these lawyers are stupid. I am an engineering manager and my wife is a teacher. We make a combined income of $375K per year (I work in the oil industry for a major). My wife is able to shelter 36K in her 401K and 403B. I shelter 5.6K in my HSA, 18K in my 401K, 32% of my salary in executive deferred compensation, and 90K of my bonus per year in deferred comp. I live in an average 3600 sq ft house on a 15 year mortgage, all three of my kids have fully funded college accounts, my newest car is at least 10 yrs old, I dont take vacations, my net worth is 2MM, and Im 37 years old. These lawyers are stupid.

  114. click bait.
    this forum is getting ridiculous by day.
    next article, “how to invest on the moon to lower tax bracket”

  115. Sure they can cut some expenses (Charity seems egregious), but this couple despite making 500k a year still has to get stressed out about having enough money. It shows they don’t live in that different a world than other people in that respect. More money just led to more expenses.

  116. Ariana Miller

    The solution for this couple is quite simple. They can keep all of their spending categories and simply swap their current choices for less expensive ones.

    $1.5 million is expensive *especially for Brooklyn* right now. They could definitely find a nice home for $1 million, saving on mortgage payments, interest, taxes, and insurance. And their home would still appreciate in value over time.

    As someone else said, fine, take your 3 vacations. Let one week be relaxing at home, another week *driving* upstate to the Adirondacks (I mean, they do have 2 cars after all) and fly somewhere for the 3rd. They could also take a few weekend trips instead of full weeks.

    Unless your children are already showing giftedness in a particular domain, expensive, competition level lessons are not at all necessary. These kids aren’t even school-aged. Replace private lessons with less expensive group enrichment programs and classes until private lessons are justified. Or hire a talented high school student to teach your kids to play piano or tennis and pay them $20/hr per week. 2 kids, 2 activities each, $80/week, almost $4500 per year. Even if they play a sport too, there’s no reason for this couple to be paying more than $6000 per year for lessons and activities. The kids are young. They just need the basics.

    The Land Rover and BMW are probably the most ridiculous aspect of this example. And leasing them to boot. And two cars? Why? Unless they are commuting out of the city, no need for that. Decline to renew the lease on both vehicles, then visit the local Honda or Toyota dealer and make a more sensible choice.

    I’m skeptical about the clothing expense. Shopping at places like Kohl’s and JC Penny would not put this couple out by that much. The parents shouldn’t have to replace all of their clothes and shoes every year.

    Put less in a 401k and put more towards accessible savings-though some companies let you borrow against your 401k if you need to. Once their loans are paid off and kids are in school, they will be able to save significantly more.

    And I hope they aren’t choosing private school, as paying so much for a mortgage and property taxes should at least mean you get a good school district. If not, they need to move into a better district.

    This couple is hardly scraping by. They will likely continue to earn more, their home will appreciate in value, they’ll pay off their loans, their kids will likely be out of the house several years before they retire, so they would likely have plenty of time to play financial catch up if necessary, and at that point may well be earning close to $1 million combined.

    Instead of waiting until they really have it to live like this, this couple is choosing to spend most all of their money on things they want but do not need. If they feel stressed about their situation, it’s because they’ve somehow decided that theu are entitled to a certain lifestlye and that limitations on that are a problem.

    1. lando calrissian

      $1.5mm expensive for brooklyn??? maybe for southern brooklyn. NOT for brownstone brooklyn. and as i said before, this couple is most likely living in brownstone brooklyn, what with their blue chip jobs and 3 vacations.

      1. lando calrissian

        clothing at kohl’s and jc penney? they live in brownstone brooklyn, not bayonne, nj…

        no one’s feeling sorry for this couple. the point is that this is reality for many ppl in manhattan/brownstone brooklyn. and it’s accurate. part of it is the lifestyle they’ve been living and part of it is keeping up with the joneses.

        again, NO ONE feels sorry for them. this is reality, though..

        1. Ariana Miller

          JCPenny and Kohl’s are totally respectable stores for middle and upper middle class families. They are not slumming it.

          No one said this wasn’t reality. But it is a chosen reality. And that’s the point. This couple needs to re-evaluate their choices.

      2. Ariana Miller

        You can go to Zillow and see that there are, indeed, 3+ bedroom townhouses and condos in “Brownstone Brooklyn” that are going for hundreds of thousands of dollars less than $1.5 million.

        And even if there weren’t, the point of the post is that this couple is making choices to stretch themselves to the max financially. There is absolutely nothing about their situation that dictates any of these particular choices.,pf_pt/62016_rid/3-_beds/0-1000000_price/0-3799_mp/globalrelevanceex_sort/40.719127,-73.936744,40.677611,-73.994937_rect/13_zm/

  117. I was taken to this article from the LA Times. I made about $350K a year, max out on 401K and live in one of the most expensive cities in Orange County. I live in a $1.5M house here and have two kids including one in college. We drive 10 years old cars. Don’t have cable. Have cheap cell phone plan. Do gourmet cooking at home. Don’t have to send the kids to these fancy tennis or language lessons earlier in their life. Those are wasteful as kids should and will always be kids. Do go on nice international vacation each year. And managed to save 35% of annual gross income. Ever read the Millionaires Next Door? None of them are lawyers or investment bankers.

  118. Im doing ok on $18-22k a year.
    House paid for.
    Car paid for.
    ACA high deductable insurance=0. (for now)

    Far away from NYC.

    Nobody says you have to live in NYC.

  119. My wife and I lived (rented) in NYC and only had 48,000 yr to work with. $500 is definitely doable. They want 2 cars? Fine.. they don’t have to be luxury, but really, one car and public transit works. 23,000 on food and restaurants? Crazy. No need. We feed a family of 4 on $400 a month. NYC wasn’t that much more expensive if you shop appropriately. No need to go out to eat ALL THE TIME. My wife and I don’t get many date nights because we want to spend time with the family when we can (for the record, she is a doctor with a 6figure income… and we pay 31K on her student loans) We prioritize.

    The author’s 200+200 = 250 is messed up. If both people work and married file jointly isn’t as cost effective as married filing separately, then FILE SEPARATELY. At 200K there are no deductions for kids anyway. None for student loans. So combining or not doesn’t matter. All you’ll get a writeoff on is the mortgage.

    And since they have TWO CARS anyway, no need to live IN the city. If you are driving, live more affordably on the outskirts. If you want the convenience of the city, live in and use them… take public transit!!!

    Sorry, as someone who is part of a 6figure family that is still greatly in debt (clinic buy in, student loans and only one in the workforce) we make it work and I don’t feel bad for them

    1. We live in Scarsdale in Westchester County of NY. The food costs does not seem to far out. We have a family of 4 just like this household. We have a Nannie that also cooks. We buy lunch at work in NYC (usually around $10 a meal a person) and eat the meals prepared by the Nannie for dinner. For the weekend we each out on day and get takeout for another day. We then eat leftovers from the weekdays and the takeout for the rest of the meals on the weekend. This routine costs around $400 a week which does not include the cost of the Nannie (who does not dine with us.) That adds up to around 20K a year which is similar to this budget. None of our meals out are at expensive restaurants and in fact most are middle-of-the-road places. This family are in NYC which should be more expensive so 23K for food sounds reasonable.

  120. I thank these people for paying so many others peoples taxes. Can you imagine the amount of work and stress they go through with law firms in NYC. They should make double that. Everyone complaining can go to law school, study your ass off and then work 80 hour weeks for the next 30 years.

  121. Vistahermosa

    There are a lot of poors commenting in this thread. We have an HHI of $2 million in DC and after private school, house payments, nanny payments, car payments, there is not a lot left– we save maybe $400k a year.

    1. Saving $400k on a HHI of $2000k is pretty good if you’re living a millionaire lifestyle; you’ve got some sense of self-preservation and budgeting for the future. 20% savings is a goal that not very many people aside from the compulsively frugal can reliably hit — if you can keep that up for even a decade you’ve got a large wad of money to backstop your children when you hurl them out the door at 18, and even before then you’ve got an almost unbeatable disaster recovery fund.

      “not a lot left”? Hardly; don’t run yourself down for not managing your millions like a drunken sailor.

  122. I think some of the blowback the author is getting is the title of the article (“scrapping by”). No they are not scrapping by. However, this is not an unreasonable set of expenses for a couple in their situation (yeah, we could all quibble about this or that line item being a little higher that it otherwise should/could be). I think it just shows that a couple who reached the level in their careers where they are making $500K per year can “fairly easily” spend what they earn. It is not as far fetched as one might think. Author did a nice job of laying out the case IMHO.

    I would add for those who argue that $6K on a vacation for a family of four is excessive, where do you people go on vacation? I have not spent that little on a vacation for my family of four in years. Two recent examples. Trip for one week to Carribean last year for family of four was almost $10,000. Trip this winter to resort in Florida for just the wife and I was $5,500 (two people for 5 days). Also, three vacations a year is not excessive for folks who may well be working 60+ hours per week. I know this from first hand experience.

    1. Absolutely agree with this. The article was good. The point of the article was not that anyone should feel sympathy for this couple, but to show how a $500,000 per year family income split among two earners can easily be used up with little left over. The fact that they indulge in a few luxuries is reasonable because two busy hardworking professional people are going to want to treat themselves to several nice vacations a year. This is not excessive. The taxes might be slightly high but are in the ball park. The people who say get a good accountant–whom are they kidding? These people earn a salary and work in an office their employers give them, and the taxes are the taxes. It’s not as if they can manufacture deductions out of thin air. Yes, the property taxes seem very high as most of Brooklyn newer apartments have low subsidized taxes, but as this is an example of a real couple, perhaps the taxes are what they pay. It is also true that over time their incomes could increase much faster than their expenses. However, they could also have private schooling expenses and those college savings costs, so they might not grow their income left over all that much. Also, sure the two cars are excessive, but that might only save around 5500 a year. The gas seems a little high too. But overall, it is in the ballpark. The loans are what was needed for them to earn high salaries. Instead of criticizing this couple, let’s compliment them on their hard work and significant contributions to the government coffers. Without people like this, there would be no money for social programs, defense, public schools, Obamacare, etc. OK, they could live in the suburbs for less perhaps, but it is not unreasonable to expect that two working parents with busy lives would want that coveted urban lifestyle in brownstone Brooklyn.

  123. Canada doesn’t have free tuition for college/university. We pay tuition.

    I wrote a long reply and realized it can be summed up: just because you are making 500k per year doesn’t mean you can spend beyond your means. This is finance 101. “high income = high stress” yeah if you’re keeping up with the neighbors. Think outside the box, be reasonable.

    Like those of us who make 50k a year, cut your expenses to something reasonable (10 k on clothing, 18 k on vacations, 18 k on charitable giving– these come off as whiners to those who don’t live in 1.5 million dollar housing) There are people who live in NYC who don’t live in 1.5 million dollar housing, because they don’t make 500 k a year, and are quite happy. There are kids who go to public school and don’t take tennis lessons. They play at the local (free) park and go the local swimming pool.

    You don’t have to spend money on all these things just because everyone around you is. Get a grip.

  124. TheWorkingMillenial

    Hey now. I’m a millennial and take 1 vacation per year. It sure as hell doesn’t cost $6,000. How is school debt something to be chastised for? There aren’t scholarships for grad school, I checked.

    To live rich takes money. If they truly were scraping by, there would be no lessons, no luxury cars, no huge clothes allowances, no vacations. They’d sel the house and the cars, move and commute, and make their own waffles in the morning to save $63 per meal. They choose to live that way, they clearly aren’t suffering.

    Scraping by is paying the power bill next check so you can pay the water bill today.

    And be real. 2 lawyers for sure have an accountant that finds them plenty of deductions. Not like the rest of us using Turbo Tax. Their agi is nowhere near $450k.

    1. LivingInTheRealWorld

      Their AGING is more like 335000. Their effective federal tax rate is 28%. They pay 4% (as opposed to everyone else paying 7.65%) in payroll taxes and that is only because of the surcharge for high income households (which is likely to be repealed their friends in Congress). The 40% rate the author claims includes state / local taxes.

  125. Any one who says that tax rate is incorrect …. simply shows ignorance.


    Who the F goes on Vacation 3-times a year marking $500k. F’n millennials……

    $2,800/month in Student Loan Payments? F’n Millennials…..

    $700/month for the All-Star Travel Team Soccer Program. F’n millennials….

    These Millennial Entitlements (ugh Necessary Living Expenses) over-shadow the Real Atrocity….the 40% in Income Taxes!!

    The Article should have simply focused on the Effective Tax Rate of what the General Public considers “higher income” individuals. The FACT that this family pays 40% in Income Taxes, not including the Sales Tax and Property Taxes, is absurd.

    And those people who are talking Tax Reform, lol. Good Luck.

    USA = The World’s Police and until that FACT changes, Uncle Sam needs every
    F’n dollar it can get his hands on.

    Yours Truly,

    The Angry Accountant

    1. Yeah those millennials their high student loan debt!! How dare they get a college degree so they can have a job that isn’t minimum wage and/or pays their bills. Why can’t they have 1970’s era tuition costs??

  126. Most of you on this thread are soooo out of touch with how most Americans live…they barely scrape by. I was a teacher and counselor for 30 years and I did all the things I was supposed to do financially. My monthly pension check is $1849.00. I wasn’t worried because I saved money and put it in the “right areas”. 2008 took just about everything I’d saved and invested. My elderly mother who is 94, gets a Social Security check for $644.00–half of that is taken up by her supplemental insurance. I have no sympathy for any of you on this thread.

  127. So much horrendously wrong with this I don’t even know where to begin or end.

    I guess I’ll just address the House issue here….

    Yes, $1.5M is a lot, even for Manhattan today. Except you didn’t even say they live in Manhattan, you said they live in Brooklyn (where median home price today is about $700k), and you said they bought “a couple years ago” back when even the Manhattan median house price was down in the $900k range. So if they bought a $1.5M home in Brooklyn a few years ago, that means they paid more than double median Brooklyn price, and about 60% above even Manhattan median price. Which means their home is probably worth around $1.8M now. And get out of here with that “family of 4” garbage. Having kids is what the average house is for so no, they don’t need to pay 20% above median. Yes, I know it is expensive to live in the most expensive houses, in the most expensive neighborhoods, in the most expensive city, in the most expensive country. Waaaah. So, how about this…..the couple sells their home and pays the 5-6% selling cost (or maybe just starts out by not being incredibly incompetent fools), moves about 5-6 blocks (no, not to Idaho), buys a home in Brooklyn that is actually only 20% above median…..BOOM! I just cut their mortgage payments and property taxes by 2/3rds, AND gave them enough equity to pay off all their student loan debt FOREVER!

    For crying out loud, they live and work in NYC, and they’re still somehow spending more on gas than I did when I was commuting 40 miles each direction while gas was $4/gallon! As long as they’re driving that much (in cars which they are spending more to lease than it would cost to just buy outright brand new every 5 years)….move to a freaking suburb! You can buy a large home in New Rochelle for half that price. I’ve also heard some unconfirmed rumors that New Jersey is a place that supposedly exists. AND that it is NYC accessible. Who knew?!

    1. $1.5m is a lot in Manhattan for a family of four?

      Keep in mind, Manhattan (like Brooklyn) has a coded/implied meaning in this context, essentially below 96th street (not really but close). What can you find for 1,200-1,500 ft, for ex, for a family of 4 at that price?

      Please share because I’ve been looking for 3-4 years at the listings.

  128. lando calrissian

    you can definitely tell who lives in nyc/sf vs elsewhere.

    decent projections from mr samurai.

    but, if they live in brooklyn or anywhere in the five boros, there’s no way they are paying $20k a year in RE taxes. if they do, it’s likely because they’re johnny-come-latelys who bought their condo in brownstone brooklyn after the 421a abatement ended.

    plus the two cars in brownstone brooklyn is highly doubtful. they probably own one at most, or none and just use uber/lyft around town. since these are blue chip ivy league types, there’s no way they would be living outside of brownstone brooklyn.

    lessons are correct – budget $1k/month for afterschool type activities. btw, i guess their kids are under the age of 2 or 3, since they dont’ have private school costs yet.

    clothes of $9k is not outrageous. kids blow through shoes every 3-6 months at that age. unless they’re using coupons off boden or crewcuts, i can see how it gets that high. the wife has to get her anthropologie clothes and the hubby may be getting custom made shirts at $120-185 a pop. average a pair of sneakers a year and some nice dress shoes, and that’s $500 right there.

    childcare is spot on. nanny for 2 kids at $16-18/hour, 50 hours a week– that’s $40k-45k right there.

  129. $42k on childcare disappears with a stay at home wife
    $23k on food is exorbatant by any measure
    $60k on mortgage = poor life choices
    $18k on vacation = whining bitches
    $9k on car payments = poor life choices
    $12k on lessons = poor life choices (you’re wrong that it makes kids more competitive)
    $32k on student loans = poor life choices
    $10k on misc is extremely excessive

    On the flip side, save $43,300 per year, with $7,300 of that savings being after taxes is something to celebrate. This article is the epitome of first world problems. Showing someone the above numbers, then saying you’re “scraping by” is the height of lack of awareness or even a shred of perspective.

    “I challenge anybody living in a big city to consistently live off $15.75 a day for longer than three months.”

    It’s called “grocery shopping”. For $15.75 you can feed yourself for at least two days by cooking at home. Challenging someone to live on $15.75 per person per day in a big city is a slap in the face to 50% of NYC workers who make less than $90k per year, thus HAVE to live on less than $15.75 per person per day. The challenge speaks of extreme emotional immaturity.

    “Let’s say each vacation is one week long and costs $6,000. Is that so unreasonable for four people?”

    Again, extreme emotional immaturity. The median income in the US is $51k. The it’s totally reasonable to spend $18k on vacation is slap in the face to nearly all Americans.

    “It’s sad that we view having three, one week long vacations a year in America as a difficult thing to do.”

    Almost no one views it as “difficult” to do. But to say you have to take three one week vacations, each costing $6k is first world problems.

  130. Seriously? I lived in NYC for thirty-four years, the last fourteen in a simple two bedroom co-op I owned in Jackson Heights. Did not own a car and my wife and I had no kids. Our combined income was less than 100K/year, went to state school and graduated with no debt. We also took at least one European vacation for five of our last seven years in NYC

    Three years ago I sold my apartment for a 250% profit, used the money to build a retirement home 400 yards from the beach in Brazil and have been living on the tax-free profit from the apartment sale for three years and expect to use this same profit for at least two more years.

    Can’t make it on $500K a year? Cry me an effing river.

  131. Waldorf & Statler, LLP

    alternate headline: “People That Spend All Of Their Money Have No Money Left Over”

    well there’s a shocker! I feel reasonably confident you can make a similar chart for a couple scraping by on $5M/yr. All you have to do is spend it as fast as it’s coming in!

    1. M. Waldorf, Esq.

      Clearly they need a big tax cut, and NYC can pay for it by spending less on its public schools. Then these rich kids’ private schools will make them even more “competitive”! It’s a win-win!

  132. FinancePatriot

    A lot of highly paid people, at least from my experience, also continue to work out of fear, fear they won’t have enough ever to live their current lifestyle.

  133. Livin Large(butnotthatlarge)

    Others have commented on having two cars in NYC, so I won’t throw gasoline on that fire.

    But speaking of gasoline, $5000 for gas? Even at nigher NYC prices and, if I recall correctly, the Land Rover (which is absolutely essential to scale the heights of Boerum Hill in Brooklyn) needs high-test, at $3.00 a gallon, that’s 1,667 gallons of gas consumed. At 20 mpg, they would have driven over 33,000 miles in a year, on the average over 90 miles daily. I understand that schlepping the children would have put on some mileage, but still. Maybe one or both the parents are moonlighting as Uber drivers. But to bill enough hours to justify $250K salaries, one would think that they wouldn’t have much time to drive around, for Uber or for any other purpose. Also, isn’t 16,000 miles per car more that what most leases allow?

  134. They make $500K, and they live according to how they believe a family making $500K should live. They have a significant amount of disposable income, and they dispose of it. Good for them.

    Having so dispositioned their money, they are convinced those choices all contributed to their lifestyle, and without any of those expenses, their lifestyle would be impacted. Well, of course it would. Spending money without receiving a benefit worth the money is stupid. Of course they’re getting value for their money.

    But here’s the thing.

    If they had to take a $75K pay cut, they would have to decide what to change – lower car payments, fewer lessons for the kids, less vacation. Whatever it took. They’d get by.

    Conversely, if next year things went well and they made $100K more, there is no universe in which they’d be saving $60K more of it. There would be some new expense they’d discover would seem an obvious lifestyle choice for a couple making $600K/year.

    This is how personal budgets work.

  135. Wow, a lot of jealous judgmental a-holes commenting here. This couple is paying more in taxes than most couples MAKE in a year. Doing their part to keep this country operating. And yes, I can throw my own hat into the ring of “oh I saw more than them while making 1/3 their income blah blah blah”. Who cares? I’d still rather be this couple. Saving more is much easier than making more. They pay more than their fair share into taxes, pay into charities, without asking for handouts from other people. That’s more than I can say for a lot of people in this country. If they want to reward their years of hard work by giving their children a leg-up, taking nice vacations, and driving nice cars, who are any of us to judge?

    1. Luxuries Aren't Necessities

      > Saving more is much easier than making more.

      Not if you delude yourself that luxuries are necessities, and the only way this couple–and the blog author–is ever going to save more is to realize the difference between them.

      > If they want to reward their years of hard work by giving their children a leg-up, taking nice vacations, and driving nice cars, who are any of us to judge?

      Yes, but this post was presumably supposed to drum up sympathy for a fictional couple “just scraping by on $500K a year”.

      It failed miserably at that because most of us realize that people who waste money by confusing luxuries with necessities don’t deserve our sympathy “for just scraping by”–regardless of the amount they earn.

      Don’t delude yourself. It isn’t taxes that make living on $500K a year difficult. It is questionable lifestyle choices, same as for many of those living on less.

    2. VirtualBalboa

      They better not ask for handouts; their children’s enrichment and miscellany budgets combine to be greater than the median per capita income in Mississippi. They are wealthy and will be able to live extremely comfortably unless they are total and complete imbeciles.

    3. I agree. My husband and I are NY attorneys . We worked DAMN hard to get through law school. It is not easy. While some of you folks were partying and settling for less we were pulling all nighters with a stack of law books ,night after night. Then we graduated and the real fun began. 6 days a week, 10 hours a day of stress. NOT EASY. After all that the government takes about HALF of it off the top, just because we’re successful. Do most of you lose 40-50% of your salary. It’s disgusting. So, yes, we take $10,000 vacations three times a year. We worked for it. So did this couple. Stop being jealous and evaluate why YOU didn’t accomplish what we have….

  136. Luxuries Aren't Necessities

    It is easily possible to spend all of or more than what you earn, no matter how high your income is. That’s really the primary takeaway I see here.

    There are so many discretionary expenses that make their plight seem worse than it is. Even given that necessities are more expensive in Manhattan/NYC/major cities than elsewhere, many of these “expenses” are for luxuries, not necessities.

    People (including the author of this blog) have a very high capacity for self-delusion when it comes what they count as necessities. This is equally as true of those who make low incomes as those who make high incomes. Both are capable of deluding themselves, and spending all of or even more than they earn.

    Accumulating wealth isn’t so hard: (1) Spend less than you earn. (2) Save and/or invest the difference wisely. (3) Be lucky and avoid medical catastrophes, divorce, etc. (4) Don’t delude yourself about what you actually need to spend money on in life.

    Compare this fictional couple to someone who is genuinely poor, who isn’t accumulating wealth by owning but instead rents, who doesn’t have any left over for a 401k/IRA/retirement savings, and you might have a blog post which isn’t as laughable as Trump’s “alternative facts”.

    But then that wouldn’t drive as much traffic to your blog as how a $500k/year couple is just scraping by, would it?

  137. They’re putting $36,000 a year into a savings account (401k) and they’re living “paycheck to paycheck”? Does this author know what that means? There are people literally earning $36,000 per year who ride the bus to work because they can’t afford a 1987 Honda Civic, let alone a frickin’ BMW and who are saving NOTHING and have to decide whether to buy food or pay the electric bill. They don’t have the option to just pay for a slightly less expensive vehicle or maybe contribute a little less to their 401k this month so they don’t have to pick between food or heat.

    If you can save $36k per year, you are NOT scraping by. If you can afford not one, but TWO $50k+ vehicles in a city with the most robust public transit system in the country, you are not scraping by. If you can afford not only health insurance, but also LIFE insurance, you are NOT SCRAPING BY. You are making CHOICES to pay for things the majority of Americans can’t choose. You are CHOOSING to save in a 401k rather than a savings account. You are CHOOSING to buy an expensive car instead of a cheaper car. If you have a CHOICE in how you spend your money, you’re not living paycheck to paycheck.

    1. Right on! We live in a great country where many of us can actually decide what to do for a living and how to spend our money, compared to a couple generations ago.

      I’m a proud owner of a Honda Fit named Rhino. I love him! So economical, and can fit in so many more parking spots in a big city. We tend to spend however much we make, which is a big problem. Long term investing is about saving yourself from yourself!

      For car buying recommendation check out: The 1/10th Rule For Car Buying Everyone Must Follow

  138. Mike Puterbaugh

    A household making $500,000.00 annually was percentile 99.4% in 2016. Spare us the folksy examples of how wunderkind Wall Street VPs are actually just like you and me.

    These people aren’t “scraping by”. They’re living a life of extravagant luxury that’s inaccessible to all but 0.75 million of the 124.6 million households in the U.S.

    Sell the Brooklyn apartment and move to a large house in Maplewood, NJ. Trade in the luxury cars for a Toyota and another Toyota. Start vacationing in Point Pleasant instead of Puerto Rico, your kids don’t care as long as there’s sand and water. SHEESH.

    1. Alter Kacker

      I wouldn’t call it a life of “extravagant luxury.” They are living the current version of the American dream — the lifestyle that middle class parents aspire to for their children — a comfortable lifestyle typical of people in early middle age in the big city professional class. It’s the lifestyle they are taught (or brainwashed) to pursue every time they turn on the TV. To some extent they can’t scale back on spending and still maintain that income, because they have to meet the expectations of senior partners and clients (not to mention their parents and peers) to share their values and ways of living. To be in the game you have to wear the uniform.

      I was in a smaller-city version of their position. In my case, and my observation of friends and colleagues, the biggest problem isn’t “financial stress” due to extravagance but finding that being very good at a high-status profession (in my case real estate and business law) just isn’t very enjoyable. I was able to get past that by making some easy trade-offs — finding a job that paid about a 40% less (but had paid leave and a pension plan) doing the same sort of work in a university general counsel’s office, living in a decent but not fashionable neighborhood near my job, and living in an otherwise-mediocre urban school district that happened to have a superb “gifted and talented” track for which my children qualified. Those trade-offs allowed us to put that private school tuition aside for college (enabling our children to graduate debt-free), and we still got to take those nice vacations.

  139. this article is missing some big points..

    1) income is likely to continue to grow outpacing many of the expenses (fixed mortgage/car pmt)
    2) some of the expenses will end eventualy – 300k saved for college after 10 years is likely “enough”..
    3)there is enough discretionary spending here that any “emergency” can easily be covered by cancelling 1 vacation/ cutting back on charity for a year… example
    4)dont tell me this filler is getting a monster IRS refund every year.. 40% is not realistic
    5)9,500 for clothing for 4 is probably too much..



  141. VirtualBalboa

    >With a monthly expense of $22,583 to maintain their lifestyle, can you guess how many more years they need to save at their pace to maintain a similar lifestyle in retirement?<

    1/3 of their spending is directly related to their children and paying college debt. Throw in the mortgage and half of their present monthly spending is not required to maintain a similar lifestyle in retirement. Assuming company managing, compound interest, and sale of the house in Manhattan (which is not required after retirement), and they should have somewhere in the range of 6-10 million dollars to retire with. Given average life expectancy, you could reasonably assume that they would leave their children with 7 figures in assets and cash upon death.

    Any couple in this position complaining about "struggling" deserves to get mugged.

  142. A couple with expensive habits. No wonder they are “scraping by”. Roll eyes.

    But this is a joke example designed to exagerate costs 2 large cars in NYC? BS. High gas expense. BS. Double car insurance. BS.. 3 vacations a year with 2 kids. BS. 40% tax bracket. BS (effective rate is lower). $60K/yr mortgage payments on $1.5M home implies roughly $1M mortgage, so they have $600K equity (where did they get the $500K for the down payment if they “only” save $7.5K/yr???). $9.5K a year in clothing is high. Childcare drops as soon as they get in school. And if in childcare, they aren’t spending an additional $12K for sports/lessons for the kids as they are too young.

    SO and I are apparently “rich” too. DINKs with Engineering degrees from State colleges in our 50s. We save more a month than these two supposedly do in a year. Similar high-cost area, more expensive home (albeit smaller mortgage), 6-8 weeks vacation/yr. Cars are 11-13 years old and other expenses much lower. (Mortgage to be paid off later this year so savings rate will increase). Add in pensions, real estate and we will have mid-7 figures nest egg. We feel comfortable, but not rich. Don’t know what a private jet feels like. Never drank expensive wines . Only bought 1 new car (VW – others purchased used). Worked our way thru high-quality, low-cost State universitiies/got scholarships = no student debt. Think we are fairly typical of sensible professionals living nice lifestyle in high-cost areas (ie, major cities on the coasts). Not struggling, but not people who can afford beachfront home in Hawaii/Hamptons either (those are for Trust Fund, Dot Com, WS, Entertainment, Politicians and Druggies). .

  143. “With two precious ones, the parents decided to lease two family-friendly vehicles: a BMW 5 series and a Toyota SUV with third row seating. $800 a month in lease payments means one less hassle when it’s time to get rid of the cars. They like the convenience of covered maintenance and the peace of mind by having a warranty. They are busy professionals with kids. Car problems are the last things they want to deal with.”

    Let’s leave aside the whole “two cars in Manhattan” thing for the moment and focus on how your fictional family is leasing a BMW and Land Rover. When they could lease a Toyota Camry and Honda CR-V which are every bit as safe and reliable. Or the parent that isn’t taking the “precious ones” to school could use public transportation like every other schmuck in the city.

    1. *Land Cruiser* not Land Rover. The LC is a Toyota that costs 80k. A Land Rover could be a Ranger Rover (100kish), a Range Rover Sport (75kish) or something smaller (unlikely).

      Leasing a luxury car is actually a relatively small expense. You can lease two 50k BMWs for 3 years for the monthly price to finance a Honda CR-V ($26,000 MSRP plus tax, tags, destination, etc. The only option is AWD for NY Winters. Let’s call that $30,000 when all said and done) for 6 years.

      Now, sure, at the end of 6 years you have a 6 year old CRV which is worth something– let’s call that $13,000. At the end of a BMW lease you have nada. Zip.

      Let’s also assume there were no major repairs for the Honda. So, at the end of 6 years, you paid around $420/mo for either: 1. a 6 year old CRV plus $13,000 or 2 new BMW leases.

      So, is it worth an extra $2,000/year to drive two new BMWs, with better fuel efficiency and the latest safety features? Keep in mind, that $2,000 savings goes down the tubes once you have to start repairing the Honda.

      Can you save even more money if you drive the Honda into the ground? Sure! Buuuuut now you are creeping up on a decade old car.

      1. AWD won’t help you for any winters, NY or otherwise. Get snow tires.

        Check the plurality of videos on Youtube testing AWD with all-seasons vs FWD with snow tires or RWD with snow tires.

        Now, if you get snow tires AND AWD, that will certainly give you more hill climbing ability but does nothing to improve road holding in a turn or stopping distances compared to a FWD with snow tires.

      2. [quote]So, is it worth an extra $2,000/year to drive two new BMWs, with better fuel efficiency and the latest safety features? Keep in mind, that $2,000 savings goes down the tubes once you have to start repairing the Honda.

        I see your math and I get your point but you stopped your calculations too soon. At the end of 6 years I have a CRV and you have nothing. So you start a fresh lease on another car (or two). At the end of another 6 years I still have a CR-V and you have nothing, again.

        CR-Vs can last a long time. Toyota Camries can leave CRVs in the dust.

        I’ll grant that you make a good argument in favor of leases but the nice thing about owning a car, free and clear? It is one less bill to worry about when you hit hard times.

        The rest of your argument doesn’t hold a lot of water with me.

        My sister and I have both been in serious accidents while driving >10yo cars. I was rear-ended by someone texting & driving a 93 Chevy. My sister was practically t-boned by an old lady who mistook the gas for the brakes. All cars were totalled but everyone walked away. Except for the old lady. She needed an ambulance. Ironically she was driving a Mercedes.

  144. Karl Marx Was Right

    If anyone is in a similar situation I am willing to offer my inside knowledge as a low-income retail worker at the quite reasonable cost of 400 dollars an hour. I’ll even give everyone reading a free tip: don’t average 40 fucking gallons of gas a day.

  145. “Let’s say each vacation is one week long and costs $6,000. Is that so unreasonable for four people?”

    Effing yes, and that’s just for starters.


    1. VirtualBalboa

      “How will Reginaldette compete for a place in Miss Porter’s without mastery of the golf course at age 7? We shant drive her there in anything less than a German automobile. An American car would be too crass.”

    1. Exactly! With college tuition ranging from $20,000 – $50,000 today, goodness knows how much tuition alone will be in 10-20 years. Maybe $40,000 – $100,000 a year? It’s ridiculous that a college diploma is becoming a commodity and the internet is allowing education to be free for all, yet college costs continue to soar with their massive endowments.


      Is Private Grade School K-12 Worth It?

      Public Or Private University? It Depends On Your Level Of Guilt And Motivation

      1. Ever heard of public universities and getting scholarships? With all the lessons, these kids should be brain surgeons by the time they get to college.

        1. Definitely. I’m a huge believer in public school. I went to public school for high school, college (William & Mary), and for my MBA (UC Berkeley). I’m been trying to encourage my readers to seriously consider public school since the internet is making education free, yet a college diploma is getting diluted as time goes on.

          See: Public University Or Private University? Depends On Your Fear And Risk Tolerance

          I’ve also explored private grade school as well: Is Private Grade School K-12 Worth It?

          I think it is sad that homeowners who pay property taxes each year STILL feel they need to send their kids to private school. If only the government was more efficient with our money.

          1. Depends where you live. Some are blessed by great public schools, while there are other public systems that are roads to failure.

      2. You are way off base about college costs. NYU has inched to $65,000 and Washington University in St. Louis is $72,000. Even state universities like UT and TTU cost $26,000 a year.

        1. Yikes, NYU tuition is SCARY! $65,000 in tuition + living expenses = $90,000 after tax? That’s just ridiculous! Hopefully many students get financial aid, because that has to be one of the biggest ripoffs around given information is free now thanks to the internet.

          So to all the folks who are saying this couple’s budget is out of whack, do you still think that way if they plan to send their kids to college?

          1. 3isamagicnumb3r

            I know it’s an odd concept, but a lot of people pay for their own college education. These kids are being set up for success in every way. They should be eligible for school loans just like the rest of us losers.

        2. I am at TTU for my doctorate. It does NOT cost 26k annually for undergraduates. Try 12k and that includes tuition, fees, and supplies without living on campus. It’s less than 20k even with student housing. This is also in Lubbock where the cost of living is pretty low. Most state universities in Texas don’t have tuition over 5.5k a semester.

    2. My sense is that college costs increase will slow down and perhaps even decline over the next 10-15 years. College costs are a bubble support by government subsidies and the absurd notion that college increase earnings. Being in the top 20%-30% in terms of intelligence increase earnings. Back in the old days that 20%-30% went to college so it seems that college correlates with earnings. Now if 60% of the population pays there absurd fees to go to college, employers will find another way to distinguish the top 20%-30% and those which are not but still got into a large debt with the help of the government will find out the truth when they come into the job market. Once the feedback loop on this takes place long enough the demand for college will decline and the bubble will burst.

  146. The federal tax amount was calculated incorrectly, you have them paying a higher amount than owed. Even ignoring possible deductions for mortgage, charitable giving, etc. their federal income tax amount is wrong.

    You assumed a 40% tax rate across the board. This is not how income tax is calculated, there is a step up in percentages, so for example the first $20,000 is taxed at a rate of 10%, the next amount from $20k to $75k is taxed at 15%, etc.

    This imaginary couple should have an extra $40-50k even without taking into account deductions.

    1. Max,

      Feel free to write out what the real effective tax rate is based on this couple’s earnings living in Manhattan. A line item by line item calculation would be great. Take into account AMT, phaseouts, etc.

      This is not a perfect income statement. It’s an imperfect one that can be optimized. If everybody’s finances were optimal, then everything would be great, with zero angst.


        1. You realize people pay more than just federal income taxes, right?

          Federal income tax: 27% (effective rate)

          FICA: 3.25%

          State income tax (NY): 6.25%

          City income tax (in addition to state tax): 3.5%

          Adds up to a 40% effective tax rate.

    2. I posted this earlier. Note I did not even take into account Federal AMT and PEASE deduction limites so most likely this 40% is even more accurate than my post would surmise.


      Hi. Thanks for this. I found this budget very interesting. Like many others I also feel that the tax burden seems higher then I would expect. But I did the math and found while you are off a bit with your 40% effective tax burden you were not too off. I used 2015 tax year as the basis of my calculation since this entry was in 2015.

      NY State tax : (500K-18K-18K-15850)*0.0685= ~30700
      NY City tax: (500K-18K-18K-90K)*0.3648+3000= ~16700
      SS: 7347*2= ~14700
      Medicare: 500K*.0145 = 7250
      Federal tax: Deductions using your budget: (47400 state local), 20K real estate tax, 18K charity, 41K mortgage interest (This is the third year of the amortization as per your information). Child care tax credit: 1200 -> ~104K
      Obamacare tax: (500K-250K)*.009=2250

      For a total of $175,600 which is not TOO far off from you $185,600

      1. Thanks for reposting and re-highlighting. Nothing is going to be exact, when it comes to complicated taxes. But 40% is sadly close enough.

        For those interested in discussing the 8 most common push-backs people have with the budget chart, I’ve added some more thoughts and details in the post today.

  147. Ignoring the questionable expenses causing these hypothetical people to “just scrape by” there is so much wrong with this article’s math it’s laughable.

    No, they aren’t paying 40% on $464k. The fact that they’re paying $5k a month on a mortgage they “got a couple years ago” alone means 90%+ of that is (deductible) interest. So there’s another $50k of income they aren’t paying taxes on. Add the $18k charitable donations to that and their AGI drops below $400k, and that’s even before they add in other deductions (state taxes, kids, etc). Oh, and you don’t pay AMT *and* regular fed tax, you pay one or the other. The AMT is two brackets, 26%/28% … so, yeah, they’re not paying that.

    Just the two things mentioned above provide $28k back into the pockets of this couple, and again, their other deductions will provide more.

    If “just scraping by” means living a life > 90% of Americans couldn’t even imagine all the while putting away $36k in 401k and $50k a year in savings/investments … sign me up.

  148. 40% effective tax rate?!?! That seems awfully high, unless you are assuming this family lives in CA.

    Also, $9k for clothes/shoes for a family of 4, not including luxurious stuff? You are funny.

    1. They live in Park Slope, Brooklyn. Taxes are even worse. But I agree, they can do things to lower their effective tax rate. That’s the beauty of finance. This is an imperfect bu