When Earning $1 Million A Year Isn’t Enough To Retire Early

Is earning $1 million a year, a top 1% income, enough to retire early? Most would say yes. However, some people who earn $1 million a year having a hard time letting that money go.

After all, all you've got to do is work one more year and you will make another $1 million! For most people, I'm sure they'd happily sacrifice working at a crap job for another one million dollars.

This article explores when earning $1 million a year isn't enough to retire early. Many high-income households in big cities are having a difficult time escaping the rate race to do something new.

When Earning $1 Million A Year Isn't Enough To Retire Early

We know that a $300,000/year household income is pretty middle class if you live in an expensive coastal city like San Francisco or Washington DC.

However, we can all agree that earning $1,000,000 a year or more makes you rich, especially since a top 1% income level starts at roughly $470,000 in 2021. No household earning $1,000,000 or more should ever struggle unless they leveraged up and their investments imploded.

If you make $1,000,000 a year or more, you're free to celebrate. Just don't tell anyone lest you want an ax-wielding robber waiting for you in your living room after an evening of fine dining.

Let's explore the lifestyle of a typical household earning $1 million a year living in New York City. They've anonymously shared with me their expenses, and I've done my best to tell their story without sharing their exact details.

This post will give you a taste of what it's like to make $1 million a year. You'll also get to decide whether making a top 0.1% income is truly worth the price.

Very Profitable Earning $1 Million A Year

After tax cuts were introduced in 2018, making more money has never been more profitable. Not only did the top federal marginal tax rate get cut from 39.6% down to 37%, the income threshold for the top federal marginal tax rate also rose from $418,400 to $500,000 for singles and from $470,700 to $600,000 for married couples.

In other words, there's never been a better time for earning $1 million a year! However, beware as President Biden is looking to raise the federal marginal income tax rate on households making over $400,000 to 39.7% again.

Long-term capital gains tax rates by income for single filers

So, if you've been wanting to make over $500,00 a year as an individual or over $600,000 a year as a married couple, now is the time to do it. You're essentially getting about a $15,000 federal income tax break if you make $1,000,000 now versus in 2017.

But as we are all well aware, the desire for money and prestige tends to corrode lives after a certain point. Once you make over $200,000 as an individual or $350,000 as a family, there is no additional happiness that accrues from making more money.

Instead, lifestyle tends to deteriorate due to longer hours at the office, more stress, poorer physical health, and less family time.

Further, with Joe Biden planning to raise taxes for households making more than $400,000 a year, perhaps making so much is becoming less worth it.

$1 Million A Year Profile

Rachel Chen is one such person who doesn't know whether the $1 million lifestyle is worth it. At 45, Rachel is one of several portfolio managers at a small hedge fund with $1.5 billion in assets under management.

She toiled as a research analyst on the sell-side for six years before making the leap to buy-side analyst at 28. At 37, she was finally promoted to portfolio manager.

Rachel's husband, Colin, 43, has been a stay at home dad since their second son was born in 2011. Colin used to make about $350,000 as a strategy consultant, but got tired of all the travel and decided to give up the grind, especially after Rachel started making more.

Colin has been working on a non-fiction book to keep intellectually stimulated. But it's hard to stay focused with the kids and his wife's robust earnings.

Income Statement Of A $1 Million A Year Household

Let's take a look at the Chens' income statement. As you will see, earning $1 million a year goes fast due to taxes and other living expenses.

When Earning $1 Million A Year Isn't Enough To Retire Early

Income And Tax Analysis

After maxing out her 401(k) and contributing $6,000 a year to her Health Savings Account, Rachel has a taxable income of $975,500. Her income is in the 37% federal marginal income tax bracket, and she pays an effective federal tax rate of 31%, or $302,405.

Given this household lives in New York City, they pay a State tax rate of 6.85% ($323,200+), and city tax rate of 3.87% ($500,000+). Their effective State and City tax is therefore around 10.71%, or $104,574.

Their total Federal + State + City tax bill a year equals $406,979.

As a W2 wage earner, there's really no way around this enormous annual tax bill. Due to the SALT (State And Local Tax) limit of $10,000, high-income earners in high income tax states such as California, New York, New Jersey, Connecticut, Oregon, Minnesota, and Iowa lose out. Before 2018, the deduction was unlimited, but subject to Alternative Minimum Tax.

Even though the marriage penalty tax has been abolished for individuals earning up to $300,000 a year who decide to get married, the SALT cap limit of $10,000 is a marriage penalty tax. If you have two unmarried taxpayers both paying $10,000 in SALT, they will get an aggregate $20,000 when they file, whereas if they get married they suddenly lose $10,000 in deductions.


Private School Tuition – $100,000/Year

The couple forks out a hefty $100,000 a year for their two sons to attend The Dalton School. Tuition for the 2018 – 2019 school year is $48,450 a student, which includes books, computers/tablets, and lunch. Add a mere $1,550 for fundraisers and miscellaneous stuff and you're at $50,000 per child.

Given mom and dad went to Yale University, they'd like their children to also go to Yale University. They know that Yale and all the prestigious private schools have a legacy system which gives children of alumni a huge leg up in admittance, no matter their racial or economic background. Some call this affirmative action for rich kids.

Although legacy children have a roughly 3X higher chance of getting admitted than nonlegacy students, there is an understanding that alumni should provide regular donations to stay in good standings. Therefore, Rachel and Colin together donate $5,000 a year.

Finally, the Chens also contribute a maximum gift limit of $60,000 combined to their children's 529 College Savings Plan. They are fortunate to have paid off their student loans years ago.

Total cost of east coast private school tuition kindergarten through college

Food And Entertainment – $4,583/month

New York City is the best city in America for food and entertainment. Although many in San Francisco might contest this claim, the entertainment part of the equation is truly second to none.

The classic mutton chop at Keens Steakhouse costs $60 before tip and tax. Add on a glass of Cabernet Sauvignon, some creamed spinach, wedge salad, and a 1/2 dozen fresh oysters, and we're easily talking $150 per person. A meal at one of my favorite restaurants, Le Bernardin, will easily cost $600 for a couple with wine pairing. Have a look yourself.

When Earning $1 Million A Year Isn't Enough To Retire Early
Le Bernardin, one of my favorite NYC restaurants for $300/person

After a nice meal, the Chens like to hit up a Broadway show. Tickets range from $60 up to $1,500 on average for the latest hot show. But given they aren't earning multi-millions, they often settle for $250 tickets at most. In other words, a date night out easily costs $1,000+. Good thing they only go to shows about once a quarter because they're often too busy or too tired to do anything more than have a meal at their favorite local sushi restaurant for $150 total.

When the Chens are not eating out, they're eating home delivery from GrubHub, or having a simple home cooked meal prepared by Colin. Living in the culinary capital of America is both a blessing and a curse. Both Rachel and Colin are constantly watching their diets and working out so they don't die prematurely.

Housing – $9,749/month

They own a 5 bedroom, 3 bathroom, 2,700 sqft brownstone in Park Slope, Brooklyn they bought in 2012 for $2,000,000. It was a fortuitous time as their brownstone has appreciated by roughly 40% six years later.

When their first child was born in 2008, they had owned a $1.3 million, two bedroom, one bathroom condo on the Lower East Side bought in 2004. They realized very quickly that they needed more space for two kids. They plan to live in the house until their youngest goes off to university in 11 years.

With a loan-to-value ratio of just 53%, they feel comfortable paying down a $1,500,000 mortgage on her $1,000,000 income. They locked in a 30-year fixed interest rate at 4% in 2013 and can comfortably afford the $7,161 monthly mortgage payment, $2,600 of which goes to paying down principal.

Unfortunately, they've also got to pay property tax of $17,556 and home maintenance expenses of about $10,000 a year. Things tend to break or leak with old brownstones. They didn't truly realize how much more it would cost to maintain a larger home with outdoor space compared to their condo in Manhattan.

With the SALT deduction capped at $10,000, they will be losing out on thousands of dollars of tax deductions. As a result, they've diversified into real estate crowdfunding to take advantage of heartland real estate where valuations are cheaper and net rental yields are much higher.

Park Slope, Brooklyn Brownstone - Making $1 million a year can be tough
Current listing for $3,000,000 that is similar to the Chens' house.

Vehicles And Transportation – $2,842/month

Colin is a car enthusiast, and Rachel appreciates the utility and safety of an SUV for her kids. As a result, they own the newest Range Rover Velar and Porsche 911S. The P380 Dynamic Velar is leased for $850/month. The Porsche 911S costs $1,400/month.

The Chens drive their Velar to the Hamptons many weekends during the summer where they rent a vacation house with friends. Colin drives his Porsche to the country club to play golf a couple times a week while the kids are in school. It's his way of staying in shape and socializing given most of his peers still work full-time jobs.

Range Rover Velar - When Earning $1 Million A Year Isn't Enough To Retire Early
Range Rover Velar family car for the kids – $78,000

Vacations – $40,000/Year

The Chens take three vacations outside of New York City a year plus a combined week's worth of local vacation scattered through the year. Granted, they are spending more time locally due to the pandemic.

Given Rachel works ~65 hours a week, vacations are extremely valuable to her so she can recharge and spend quality time with family. The thing is, even when she's on vacation, she's checking in with her analysts and following global stock markets at all hours.

Rachel has long felt a tremendous amount of guilt for being away from her kids for so long, but she also realizes she's in an enviable position to maximize her career earnings while the stock market is still hot. Eventually, the market will turn and it will become much harder for her to outperform.

International Travel Is Not cheap

The Chens' favorite vacation spots are mostly in Europe: Dubrovnik, Almalfi Coast, St. Tropez, Provence, and Mallorca are some of their top destinations. It's easy to fly to Europe from the East Coast, but every other year, they'll take a trip back to see extended family in Taiwan. They also love visiting Japan, Thailand, and Vietnam when they can arrange two consecutive weeks off.

Each international trip for a family of four costs roughly $13,500 for the week. The cost can be broken down as follows: $4,000 – $6,000 for economy class flights, $4,000 – $5,000 for 7 nights at a five-star hotel, and $2,000 – $4,000 for food, excursions, and souvenirs.

The remaining $5,000 out of their yearly $40,000 vacation budget is allocated towards being a NYC tourist. Post-pandemic, international travel cost has surged higher.

Santorini vacation - When Earning $1 Million A Year Isn't Enough To Retire Early
A villa they rented in Santorini, Greece for $5,000/week

Clothes For Four – $24,000/year

Rachel loves clothes and shoes, and Colin doesn't mind dressing up nicely to match his lovely wife, although he prefers to wear athletic gear all day. As a fund manager who expects to be taken seriously in a male-dominated industry, Rachel dresses her position.

Her pantsuits from Gucci, Dolce, and Chanel easily cost between $2,000 – $3,500 each. On average, she buys one work suit once a year to keep her threads fresh, although sometimes she buys a couple during holiday sales.

With every power suit must come matching Manolo Blahniks or Jimmy Choos at the cost of between $800 – $1,000 a pair on average. Below is a regular blue satin pump by Manolo for $995 before tax at Nieman Marcus.

After the pumps, Rachel must of course own a work-appropriate tote bag that can cost anywhere from $1,000 – $3,000. She prefers the understated Prada bags with their hard waterproof exterior. Below are some of her clothing examples.

When earning $1 million isn't enough to retire early
High powered jobs require high priced clothes

Simpler Clothes For The Dad

Given Colin is a stay at home dad, he doesn't need to spend anything on work clothes. However, he does own and appreciate an array of finely cut blazers to go along with his designer jeans and button down shirts for when they go out.

Each custom blazer costs between $1,000 – $1,500 on average. Designer jeans run between $180 – $300, and shirts from the likes of Thomas Pink can range from $80 – $250. He only has one watch, a stainless steel Royal Oak Audemars Piguet he bought for $16,000 years ago.

Charity – $25,000 / Year

The Chens feel extremely fortunate to be in their position as second generation Americans whose parents worked lower income jobs to put them through school. When you are given the opportunity to make it beyond your wildest dreams in the greatest country on Earth, the Chens feel it's their duty to regularly give roughly 2.5% of their gross income to charity.

Rachel and Colin are particularly passionate about helping foster kids get through a difficult system in order to be given a fair chance at life. They know their sons are extremely fortunate to attend private school, and deep down they feel it is unfair that their kids can have so much, while other kids, through no fault of their own can have so little.

Finally, they donate to organizations that do research on nystagmus, a visual condition their youngest son inherited. Nystagmus is a neurological condition that causes involuntary movement in the eyes, which leads to worse than 20/20 visual acuity, even with the use of glasses, contacts, and surgery.

Net Worth Summary After Earning $1 Million A Year

Rachel has a target of working for 15 more years until her youngest son graduates college. Once both kids are through college, this will free up roughly $200,000 a year in after-tax children related expenses, which is equivalent to roughly $340,000 in gross income based on their 41% effective total tax rate.

After 15 years, the Chens should be able to accumulate at minimum:

  • $277,500 in 401(k) plus $150,000 in profit sharing
  • $816,495 in after-tax cash
  • $500,000 in principal pay down (leaving $1,000,000 left in mortgage)

For a base case net worth increase of roughly $1,600,000 without any appreciation in their investments or house.

Future Net Worth Growth

Assuming $106,666 in base case net worth growth over 15 years, no compensation increase during this time period, and a current $3,000,000 net worth, including the equity in their primary residence, the Chens will realistically have a $10,000,000 net worth by the time their youngest graduates from college using a 6.2% annual growth rate. She'll be 60 years old and he'll be 58.

Net Worth Calculator

Once their brownstone is paid off, they'll save an additional $86,000 a year in after-tax cash flow, equivalent to $145,000 gross based on a 41% effective tax rate.

Therefore, the Chens can afford to maintain their lifestyles earning just $500,000 a year once they no longer have mortgage debt or child expenses.

With a $10 million net worth, all they would need to do is figure out some way to generate a 5% return to live a great retirement and diligently track their finances to make sure there's no leakage.

They've been surprised at how some of their rich friends ended up with so much less because they weren't aware of their risk exposure during a downturn or how much they were spending.

Not Sure If It's All Worth It

On paper, everything looks great for the Chens. Yet, Rachel tells me she doesn't know if it's worth working 65 hours a week for the next 15 years. Even the finest lobster at Le Bernardin or the most picturesque luxury villa off the Almalfi Coast gets old after a while.

Rachel sees a therapist every other week to help her manage the constant pressure she feels to provide for her family, outperform her peers, and outperform the markets. The market takes no prisoners and every month she starts with incredible anxiety. This type of pressure has begun to pulverize what little peace and quiet she has left inside. She's also recently begun to develop heart palpitations, which has her worried.

Colin also sees a therapist once a month to help him get through his feelings of unworthiness for being a stay at home father. Although he's truly a great dad, he often feels gutted to have given up his career. None of his friends, who all work, understand what he's going through. He feels isolated and occasionally depressed. Sometimes he gets jealous of Rachel's success, which leads to fights.

Wants To Spend More Time With Family

What Rachel misses most is spending time with her boys, who are growing up too fast for her liking. Like middle age, where she now has a greater sense of her mortality, she knows that she might only have 5-7 years left to spend time with her sons before they would prefer spending all their free time with their friends. Before she knows it, they'll be off to college where she might be lucky to see them twice a year.

Rachel envies Colin's time at home. Most of her girlfriends are stay at home moms who take turns hosting playdates when their kids are off. When they're in school, they often go to brunch at Blue Water Grill with bottomless mimosas over mounds of freshwater oysters.

They recognize they are extremely fortunate, and for the most part, they are happy. The Chens just wonder whether the grind is worth it, especially when they see friends from high school leading happy lives on much less.

But the family does worry their kids will be downwardly mobile, not upwardly mobile in this ultra-competitive world. After all, a $1 million income is a top 1% income level. As a result, the chances are low their children will earn the same amount and have a similar level of lifestyle.

As a result, they seek generational wealth equal to at least $10 million. But that's hard to come by for all but the very few.

Generate A Greater Net Worth

The only way to live a freer life is to drastically reduce expenses, change their lifestyle completely, or accumulate at least 20X their annual expenses in net worth. At their current $500,000 annual burn rate, Rachel will truly need to work another 15 years to finally experience the joys of financial freedom.

If I was Rachel, I'd either ask for a sabbatical or dial back work to 40 hours a week for less compensation if she cannot outperform. Making less money with less stress, fewer hours, and a lower effective tax rate sounds so much more reasonable. They'll have to cut down on entertainment, clothes, and travel, but they'll gain back so much more quality time as a family.

At high income levels, retiring early is a choice. Yet so many people cannot or will not because oftentimes, the money is too hard to quit.

How To Retire Earlier On A High Income

Even if you are earning $1 million a year, you must build a big net worth and track your finances. To do so, sign up for Empower, the web’s #1 free wealth management tool to get a better handle on your finances.

Run your investments through their award-winning Investment Checkup tool to see exactly how much you are paying in fees. After you link all your accounts, use their Retirement Planning calculator. It pulls your real data to give you as pure an estimation of your financial future as possible. What you measure can be optimized.

Earning $1 million a year is great, but you've got to save most of it and invest it.

Personal Capital Retirement Planner
Is your retirement plan on track? Find out for free after you link your accounts.

Invest In Real Estate

Earning $1 million a year is great, but you need to invest the money wisely as well. 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 syndication platforms:

Fundrise: A way for accredited and non-accredited investors to diversify into real estate through private eFunds. Fundrise has been around since 2012 and has consistently generated steady returns, no matter what the stock market is doing.

CrowdStreet: A way for accredited investors earning $1 million a year to invest in individual real estate opportunities mostly in 18-hour cities. 18-hour cities are secondary cities with lower valuations, higher rental yields, and potentially higher growth due to job growth and demographic trends.

Both platforms are free to sign up and explore. 

I've personally invested $810,000 in real estate syndication across 18 projects to take advantage of lower valuations in the heartland of America. My real estate investments account for roughly 50% of my current passive income of ~$300,000. 

About The Author

142 thoughts on “When Earning $1 Million A Year Isn’t Enough To Retire Early”

  1. I’m willing to hear an argument for any of these line items taken individually. But taken together, it’s way too much. If I were in this position, I would start by making sure at least half of my post-tax income went into investments of some kind, then figure out what kind of lifestyle I could afford from there.

    At any rate, there isn’t a whole lot you can do about the 401K/HSA/taxes section, so that’s fine. Their housing expenses are also pretty reasonable given their income as long as they didn’t buy a house that was poor value for the price they paid. And of course, this cashflow is going into equity in the home rather than into the wind. Transportation expenses are also fairly reasonable given their income, although I wonder if owning a car in NYC isn’t more of a hassle than it’s worth. I also find it somewhat hard to argue with the healthcare, charity (tax writeoff?), and life insurance section, although their net worth is high enough that their kids would be fine without a life insurance payment even if the mom were to die tomorrow.

    It’s the other two sections that are egregious. As for the education, I’m sure the parents see sparing no expense as a priceless investment in their children’s future, which is a somewhat noble sentiment, albeit a misguided one in my opinion. It would be far smarter to either go to a magnet school of some kind (of which there are plenty in NYC), live in an area with acceptable public schools, or if the dad is staying home anyway, consider homeschooling. Now, maybe there is some kind of marginal benefit to spending on this level of education. But at $7.5k/kid/month? Accumulate that at 8% from birth (preschool at the latest? probably also daycare) to high school (or college) graduation. You’d have something like $3.25m per kid in investments. That’s enough to pay full tuition at any university in cash, buy a very nice house outright, and still have $1-2m to either put into financial investments or start a business of some kind. This feels far more defensible, especially given that the parents already have a solid network and the kids can scratch any intellectual itch just reading on their own and talking to their dad (who has tons of free time), not to mention going to all sorts of events in NYC. I will say that the children’s lessons feels worse than it is when you consider a sleepaway summer camp in there.

    At $137k/year the entertainment/food expenses are also pretty indefensible. I wish they would have disaggregated groceries (necessary) from eating out (unnecessary). Especially given that the dad isn’t working, he should cook at least a few times a week. And there are plenty of great restaurants in Park Slope (not to mention the rest of Brooklyn or even NYC as a whole) that are very reasonably priced. They don’t need to be going to fancy restaurants more than like once a week. The country club makes sense if you love playing golf, the clothes make sense if you’re really into fashion, travel if that’s your passion. But going all out on all of them is excessive. You need to figure out what you truly like and economize on the rest.

  2. Found the article quite insightful, as from the age of 12 I feared becoming like this. Trapped and unable to be confident in my financial stability. I sought to be financially literate and began a retirement account at 16. I’m only 19 now, but I’ve been able to max out my Roth IRA contribution every year and intend to continue doing so. Probably won’t be making nearly as much, but hopefully, I can avoid the same mistakes.

    It’s a bit pitiful. The exorbitant costs and unwillingness to compromise. Felt rather sad when reading this.

  3. For those of us who are divorced, ‘child support’ is a major financial obligation.

    My ex-wife is upset because I convinced our family court judge to let me use a child support trust in the form of a special purpose joint checking account that BOTH parents put money into in order to provide for our children’s needs. This makes providing for the children’s needs a shared responsibility instead of requiring the paying parent to provide a government mandated lifestyle for the children, and by inference, the custodial parent.

    My children tell me that their mother is furious because she can no longer spend the ‘child support’ on herself and her live-in boyfriend. I’ve also noticed that the kids are no longer coming to me and telling me that their mother said that I need to pay additional expenses such as school field trips, clothing, haircuts, et cetera because those things are not being paid for out of the child support trust account.

    I’ve never had a problem with providing for my children’s needs. I do object to family courts allowing my ex-wife to treat what is supposed to be child support as additional income that she can spend any way she damned well pleases.

  4. I somewhat relate to the story. My wife and I live in Queens, having moved here after having lived in Manhattan for a decade or so. Kid is 25, has a job so those expenses are gone. College was 62k/yr and private school was low 40’s. That sucked up disposable income for many years.
    My wife worked as a CFO for a public company making about 250k/yr. I worked on wall street making with a very volatile income, ranging from 150k/yr to 950k/yr depending on which job I had.
    We both lost our jobs in ’09 and income dropped to zero.
    We’re both immigrants and worked our way through our respective schools (she has a masters in accounting, I have an MBA in finance.) We both worked 65+ hrs week plus work dinners / events at night and on weekends which sounds great if you don’t have to do them but they get pretty old fast.
    I started my own business (investment management) in 2012 and the first couple of years lost money on it. Growing assets is hard and compliance is very, very expensive.
    We lived off my wife’s income. In the meanwhile we moved to Queens and bought a 2 family, which, in hindsight, was probably one of the best moves we could have made. Our housing expenses are literally a (small) source of income which makes us sleep better at night. I understand that had we taken the same amount of equity and leverage and put in equities the return would have been higher but it provides peace of mind.
    Long story short, the business is grew and my wife quit her job to join me (which increases concentration risk) but financially it’s going well. We’re back to making 600 – 800k which may sound like a lot but frankly our lifestyle does not allow us to enjoy it. Working Saturdays and Sundays is par for the course.
    And, like other commenters have pointed out, it’s not like we can just work less and take a commensurate decrease in income. You’re either in or you’re not.
    Having non-W2 income is good. We can save a lot though our pension plan and a lot of expenses are now business expenses which helps tax efficiency. Given the nature of our business we need to be in NYC so there is really no way around the taxes that come along with that.
    We have a modest lifestyle – tenants to take care off and 1500 sqft of living space of us (more then enough). We own a used compact car that we use for business and groceries. We can’t take vacation – we can only take day flights with WiFi because we are expected to be always on call. Vacation is a due diligence trip to Cleveland on Thursday / Friday with the weekend tacked on to come back on Sunday. Travelling coach and staying in mid-priced (200/night or so) hotels.
    Having been on the other side of the pay scale (making less than 40k in NYC for the better part of a decade) for years and years I understand the irritation / anger that some people feel when they read a story like this. How can you make over half a mil and not be happy? The answer is pretty straightforward – money is only part of what makes life work (or not). There is way more to life than $$. And especially as you get older and friends around you are starting to have diseases and / or die money takes on a different role.
    What keeps us pushing forward is the desire for alternative income sources. We are working on buying rental properties (along with the proper management to take care of them) to provide with sufficient cashflow if this gig disappears. My guess is that we use around 120k/yr of after tax income and the rest is saved. To generate 120k of rental income you’ll need at least 2mm of rental real estate @6% effective yield. 6 may seem low but I think most people underestimate the cost of management and maintenance. Add 10% vacancy and you’re up to 2.2mm worth of assets.
    The Chens don’t have a lot of options. She is either a PM or she is not. I completely understand the stress between them on the various issues. I am not crying for them but their life is not a walk in the park, just like most other people. Their issues are just different, not better or worse than those of people who make either more or less than they do.

    1. Johanna L Klein

      Very thoughtful comment. It’s a great point that for many of these professions, you’re either in or your out, which presents its own set of binding constraints, which as you note aren’t better or worse than those of others, they’re just different. Very interesting perspective.

  5. Long time reader, great articles.

    Question: Is it truly realistic their net worth gets to 10 mio since this assumes their primary residence equity has to increase by 6.2% each year as well? Home prices wont go up 6.2% a year… Or did I interpret the sentence below correctly?

    “Assuming $106,666 in base case net worth growth over 15 years, no compensation increase during this time period, and a current $3,000,000 net worth, including the equity in their primary residence, the Chens will realistically have a $10,000,000 net worth by the time their youngest graduates from college using a 6.2% annual growth rate.”

  6. Corporate Peon

    I think we are probably a tough audience here on this website since most of us are probably savers. To me though, it’s only worth it to work hard when I know there is a payout for what I value – which is financial independence.

    If what they value is keeping up with the Jones, then they are succeeding. Maybe this *is* their life’s goal, and maybe it’s not. It doesn’t sound like they are very happy – and I don’t know if you can count of this income level until you are 60. I mean, can you keep this pace up? I can barely keep up the facade at my basic corporate job, but I do it and it’s easier because I know nothing in my life will change if I lose it because I have been saving for so long, so the pressure if off.

    Just like others have said, I also save more than them on a tiny fraction of what they earn. I work just 9 to 5ish and still feel like I miss out on many things in my daughter’s early school life, unlike my husband who works/earns less than I do. But, I don’t resent him for it, and he doesn’t resent me. It’s just how it’s worked out – and we would both be fine if we reversed roles. Maybe the extremishness (sp?) of the Chen’s life is what breeds those arguments. I wouldn’t pass up the opportunity to earn $1M a year, but I’d cash out after a few years, I know I would.

    Good for them though, I hope they make the most of their situation and if they benefit from this post or make changes because of it, I’d love to hear what is now different in their lives and what/when their retirement will look like.

  7. Where does one start to comment on this?
    A) 529 amounts are a form of savings so they should be added to the net cash saved, the 401k (any match from her employer? If yes, how much?) and the health savings. As a seperate row item they can also track unrealized investment income (incl. paid off principal and estimated house appreciation) just for giggles.
    B) Colin goes to a shrink cause he feels useless but chooses to mooch driving a Porsche to the country club? Is this serious? Why doesn’t he get a job? If he realizes he can no longer hold a high paying high responsibility job, any job would do really. Since when do men stay at home. A job makes a man feel like there is something between his pants (it sure as hell has this effect for me).
    C) why so expensive private schools? Any elementary school so close to tuition to a Yale is just ridiculous, have no return on investment, and helps towards nothing other than say how much you pay for private schools.
    D) she works 65 hour weeks but she gets 5 weeks off? Isn’t this too much vacation for her industry? Assuming it is not, why not go to cheaper vacations? It is not the experience they are seeking, the price tag is more valuable to Han the experience itself the way I see it.
    E) she constantly makes more than $1M? How long has this been th case? What is she going to do when she gets fired or laid off with only $3M saved? And how did they accumulate that amount assuming they were making way less when they started their careers (and presumably burnt the vast majority of those lower earnings if I had to guess based on their appetite to add cost just for the sake of it).

    Other notes: property tax rates are low in NY compared to Houston; makes sense given the delta in home prices.

    It is obvious that the couple wants to spend that much cause they just enjoying spending. Just like a gambler likes spending all at a casino, a drug addict gives everything for one more high etc. This is not what they have to spend to have a good and luxurious life in NY. I’m no stranger to making money and spending for a high standard of living. I make around 200k as an FP&A Director in a Fortune 500 in Houston, TX. I was promoted last year and before that I made around 140 as a manager. I went to Rice for my MBA and I live with my fiancé (who is employed of course) on the 29th floor of an uptown high rise that I rent for $1,725. I drive a Lincoln Navigator L. I spend about 5.7k a month. This amount has been rising at a 4% CAGR since I got out of grad school 10 years ago. I expect not to go above 9k per month (in today’s money) once kids are added to the mix and we buy a house in a decent suburb (of course the fiancé will keep working and contributing what sh can).

  8. Part of why Colin may not work is if he makes a fraction of what Rachel does, then all of that will essentially be taxed, when you view the income/tax as a whole. But maybe not if he can get a good job with his presumable MBA and loads of contacts. Nonetheless, I am side eyeing him… how’d he get such a good gig from you, girl? The kids are in school full time and there is a load of money spent monthly on extracurriculars for them- so there appears to be sufficient childcare such that he can golf less and take on some more income-generating stress so he can be truly sympathetic to his wife and enable her to downgrade to another job.

    The problem with the couple is they are keeping up with the Joneses when they are not as rich as the NY-Jones. Those Dalton parents make well over 1mm/year so Rachel and Colin are on the lower end of that spectrum, but trying to keep up with the rest of the parents. Accept your place on the NY totem pole- y’all haven’t “made it” yet, then reel in the outlandish spending you CANNOT afford. For real, this is vacuous and vomit worthy and I’m a NY attorney.

  9. Part of why Colin may not work is if he makes a fraction of what Rachel does, then all of that will essentially be taxed, when you view the income/tax as a whole. But maybe not if he can get a good job with his presumable MBA and loads of contacts. Nonetheless, I am side eyeing him… how’d he get such a good gig from you, girl?

    The problem with the couple is they are keeping up with the Joneses when they are not as rich as the NY-Jones. Those Dalton parents make well over 1mm/year so Rachel and Colin are on the lower end of that spectrum, but trying to keep up with the rest of the parents. Accept your place on the NY totem pole- y’all haven’t “made it” yet, then reel in the outlandish spending you CANNOT afford. For real, this is vacuous and vomit worthy and I’m a NY attorney.

  10. Having read the article and all the comments here, I just wanted to add one thing. For all the rather unnecessary spending in the budget, it is a great thing to see that the Chens are contributing 2.5% to charity. I really doubt that most commentators here donate that much in percentage terms to charity, let alone that in absolute terms! Many kudos to them.

  11. This is truly stunning. Collin is about 2 yards from saying “Enough is enough honey”. I mean seriously, they have a burn rate of $41K per month and they are just about 15 minutes from cardiac events or having an affair and leaving. What a preposterous lifestyle. Rover, Porsche, Piaget, Jimmy Choo, Dolce & Gabana, and on and on. Where is the barf bucket? They should take a pause and go buy tickets to the new movie, “Crazy Rich Asians” and then have a martini afterwards and study how miserably pathetic their lives are. The mere fact they are not on massive amounts of chemistry to keep this charade going is simply amazing.

  12. The only word I have for this is “horrifying”. This is such a tragedy that these two have worked themselves into. I really do feel bad for them in some way – especially the fact that they feel their kids MUST go to Yale and basically repeat their miserable lives. Hopefully the kids find a way to deviate and “escape” the cycle. I fear that it may be too late for the parents.

    For perspective, I made $2.4M last year and will do $2.9M this year, have 2 kids, live in Metro Boston and my expenses rarely exceed $10K a month and never exceed $17K. To each their own, but I work 30ish hours a week, spend tons of time with family, and have a great marriage. I’m definitely happy and can pretty much retire right now at 38 if I wanted to – but I won’t because I love owning a business and my industry is a blast to be in.

    I was in a similar rut back in 2012 – totally depressed and working as a Management Consultant (Making $200Kish) and was just completely burnt out. I took a sabbatical for 4 months that year, which cleared my head and gave me the idea for my business that I started in 2014 and has made me $8M to date. I think that is what the Dr. ordered for this couple. Scale back for a year, build up a war chest, take some time off to breath – and then set out on their own. Especially the husband. That could truly empower him to hustle and make something happen for the family.

    The other alternative (staying put) will likely just continue to lead to a dark place for these two …

    1. That’s a really good insight, Nick. There must be some cognitive dissonance going on, when you are miserable or at least unhappy with your own life but then are also wishing for you kids to begin the same path.

      1. I own a digital marketing agency, though the “agency” is really just me and it’s 100% Affiliate Marketing. To be fair, there were much longer hours at first building the business and credibility, but much of it is now passive due to a good track record with big clients, outsourced management by networks, etc.

  13. I’ve been pondering this post for awhile and find it rather irritating. I think we can all agree that there are people in NY who are not receiving government assistance who are feeding a family of four on after-tax income of not much more than $25K–plus paying for housing, transportation, etc. Her stay at home husband, while their children are in school, could be grocery shopping and cooking…and packing her a lunch. The clothing budget is insane–she’s justified her need for very expensive suits…but I think she just likes them. And the kids can certainly be outfitted for less than $1K a year, and her husband as well. The vacation budget is laughable, and saving $60K in the 529s should only need to happen for a couple of years…even for an Ivy League Education. Put $120K in and let the compound interest get to work. My husband and I make north of $400K in the Bay Area (also all W2 income) , and we save more than $100K a year. The mind boggles what we would save making a million. Maybe they should go read MMM if they want to escape the rat race.

  14. Amazing.

    I make less than 25% of their income and save more than they do. And I suspect I have way more free time and less stress as well.

    Hey, here’s an idea. Stop being mindless consumertrons.

  15. Wow, this seems like a tragedy in the making. High income and high expenses never equal security. We have a seven figure net worth, save about $120,000 a year (and have had this level of savings for about eight years as our income has risen) and spend about $55,000 on annual living expenses. We paid $235,000 for our home (we did remodel), even though we could have afforded quadruple that amount. We drive one 11 year old car and one 7 year old car, plus, I live four miles from work. Our favorite place to eat costs us $15.00 for three slices of pizza, a salad and two drinks. If we decide on pasta instead, still the same $15. While we have easily spent over $5,000 on vacations, it took three years to spend that much – come on. This is all about making the smart choices. Just because you can “afford it” doesn’t mean you should buy it. These expenses are ludicrous. If this family had a net worth of $10,000,000 right now, then maybe this makes way more sense. But thank goodness I’m not the only one who thinks the expenses this family is willingly engaged in makes sense. There’s a lot to say about this situation. Just as an example, the planning it must take just for these exorbitant vacations alone is exhausting. I’m close to mid six figures in North Texas, and just thinking about finding the time to plan these vacations alone…I don’t know where I’d find the hours after working all week. The cars, club memberships…wow. Seems like some lifestyle changes could help with the expenses and time with family. But, at the end of the day, it all boils down to priorities. This scenario doesn’t seem to provide even a nominal sense of security.


    I don’t get it. With $1 million a year, they should be able to accumulate $100 million or something. How is it possible?


    I turned 41 this month. I am a periodontist in denver and I became an entrepreneur in October of 2014. The 1st 7 1/2 years in my career I worked for a corporation. I had a very free life and I was making great money. I manage to pay off all of my student loans faster than anyone I knew and I got into a very nice house in Denver on a 100% loan. I sold that house October of 2016 made a $200000 profit and was able to buy a $600000 home near my new office at 2.875%.

    That same year I purchased the commercial property my offices in also at a great rate and a 15 year loan just like my house.

    My relationship ended and I have a 2 and a 1/2 year old daughter..

    I have lived on my own since I was 17. Clearly I am not lazy and I’m very smart with my living expenses most of the time.

    This article actually reduce my stress. It made me realize that when I cut my hours coming up very soon, I’m probly going to be just fine.. I don’t wanna send my daughter to preschool and leave her there from 8:00 a.m. till 6:30 p.m.

    It’s much more difficult than I could have known to balance all of this. I feel that I live in a constant state of guilt. I feel guilty if I’m not constantly there for my patients, guilty if I’m not constantly building strong relationships with my team, guilty if I’m not building enough relationships with my referring doctors, and then of course I do have a daughter, a family out of state, and a lot of friends. I am obligated to take a lot of continuing education and now not only for being a surgeon but also for being a business owner and owner of commercial realestate

    There’s just no way for someone to keep up with all of these things. The house I’m currently and I purchased from my boyfriend and I the father of my daughter who moved out last nov. I’m sitting in a great location on a 2.875% mortgage and it would make no sense for me to move at this point. Plus I actually hate moving more than most people, trust me I do.

    When Sam published his 1st few articles about becoming a father I understood every single thing he was going through. And reading his articles helps me to feel normal and to know that I’m not alone.

    At 41 years old I’m learning to focus on what really matters because I do not wanna look back one day and have any major regrets.

    But it’s tough and I have a very aggressive personality to go for the things I want and it’s been difficult for me to see how slow change happens when you have this many big things in your life. I’m learning to take a deep breath. Every time my daughter starts to have a meltdown I look at her and I teach her how to take a deep breath……..her face melts my heart when she dies. I know she is the most value investment I will ever have.

  18. As I get older, I value peace more than just about anything else. And this is not the feeling I am getting with this family. I like to focus on inspiring people to feel good about themselves on my blog and making rational decisions for your well-being.

    I have seen too many times in Hollywood and in life where high fixed expenses = BROKE!
    You want low fixed expenses so you do not have to stress about earning more money.

    I think one thing this family could change would be the amount spent on private school. Why not just hire excellent tutors for cheaper? If they invested that money instead, that would be how she escapes the race sooner.

    I am able to save a significant portion of my income (more than 25%) not including investments and have no where near the stress. In my opinion, when it starts to become more work than fun, its time to make changes and move on.

    I wish this family all the best.

    Miriam Joy

  19. Damn Millennial

    Well this family sure sounds happy!

    Earning a million a year and not being able to put more away is a tough concept. Hopefully they trade some Gucci for time with their kids.

    The spoiled kids with rich parents but no life lessons are the ones doing the white stuff come college age! Doesn’t matter the prep school you go to when it comes to street smarts either.

    But then again I am a product of our fantastically awful public school system…

  20. Wow this makes me sad for the family, the kids can’t be happy either. I can feel the pressure mom is under to provide it makes total sense on why she is dealing with heart palpitations and anxiety. Thank you for sharing, I have a lot of thoughts on this including NY’s system has some of the best public schools in the country but we are all making what we think are the best decisions – even if it’s at the expense of the kids. Are they sure they want to go to Yale (or college at all)? Fascinating.

  21. I think it depends on individuals and their lifestyles. If one is not disciplined financially, no amount of money can be enough. Your expenses will tend to grow to the level of your income. But with careful financial planning and the commitment to stay focused on your financial goal, $1,000,000 is a huge amount.

  22. @Anon – At 50 with the house cost paid, $180k in expenses, $400k salary, and $8mn liquid – you’ve got room to live it up some more while you’re working, unless you’re saving for a second home.

    Or are you trying to preserve most of your future gains for your child’s inheritance? Which is totally legit but a different approach than some.

    1. we’ll pay for our kid’s education that’s it. one day our money will all go to charity ( (and our kid already know)

  23. This is not necessarily how this works though…
    I make somewhere between 1 and 5M per year in the Valley and feel like I can make some comments here. (and have been for a long time now)
    I don’t make 200k a month. I make 30k a month and then every couple a months or so I make couple a hundred k. Sometimes its 200-300k, sometimes its 800-900k. The nice thing with this is that money comes in a big chunk. Generally the attitude of me and my peers is that you live from monthly check and invest the big checks. The big checks make purchases of second home/boat etc simple since you once spent one big check and got it out the system…

    1. Similar advice my son was given by all the pro athlete financial consultants. Live off your endorsement money and invest your league salary/contract bonuses. Made a lot of sense to me.

  24. Larry Williams

    Hello Sam Dogen, August 16, 2018

    My woman and I own a $300,000. 3 bedroom, 2 bath, 2 car garage, private back yard (not to big or small back yard) house in Austin Texas (a high tech city with a river that runs thru the center). Also has most students in university of any in USA…. A warm water lake to swim and boating…… Also a Hawaii type lagoon to swim with a water fall. About 2 million people live in Austin area……. So why not move to Austin, Texas……. Texas does NOT have income tax…. Our Annual property taxes on our house are $300. each month.

    1. In fact, I plan to move from CA to TX after my retirement. If I play my cards right, my income could continue to grow after retirement and hence the freaking CA income tax is a killer. Why should I pay high CA income taxes to support the imbeciles in the state government and the illegal immigrants. Last but not the least, CA’s gross and aggressive infringement of the second amendment is another reason we will move out of CA.

  25. FinallyAdulting1

    Something about this is really tragic. I think 1million a year is goals, but it doesn’t stretch like in my $40,000 a year daydreams. None of these expenses seemed so outrageous but after taxes and therapy I guess the question is, is it worth it?

    I don’t feel sympathy for them but I do empathize with the desire to have the best for your kids, vacation where your friends vacation, and look the part for the position you hold. Isn’t that what all that school was for?

    I guess when keeping up with the Jones you always have to remember, the Jones are broke, and probably not having sex…

  26. Congratulations on your story on CNBC online – I woke up this morning and saw it on the main page of Yahoo.com. I know most if not all of what was written from reading you blog for many years but I still really enjoyed.

    I felt like an old friend had written the story – of course we have never met.


    Keep up the great work on this blog and in other sources!


  27. Given how ridiculously irresponsible these folks are, I can’t fathom how they can be worth the annual salaries they are paid. It is remarkable that skimming 1 million a year off of other peoples investments is not only a career but one of the largest industries in this country. That’s the real tradgedy here. Beyond that, them blowing it all on clothes and exorbinate vacations just proves they didn’t work hard enough for it.

  28. reformedbanker

    Another great post Sam!

    Since I’ve run the numbers myself, if you start saving from the moment a kid is born, it’s about $1k a month to cover full tuition and living expenses at an Ivy College (Stanford, Princeton, ETC). That comes to $24k annually for 2 kids. Assume this family is playing some catch-up?

  29. Great post Sam. We relocated from NYC to bay area so we are familiar with the expenses and lifestyles in both coasts. I am 50 and single income (~$400K/yr), our monthly expenses are ~$15K and very similar to the Chen’s, except for these differences:
    – only ~$300K mortgage (thanks to stock options)
    – our kid goes to public school
    – we spend less in food + clothing
    – private tutoring ~$1K/month
    – our liquid net worth (not incl. home) is ~$8M, mostly in company stock & S&P.

    The funny thing is: our expenses used to be very low, like $4K/month, but once our net worth increases, it’s easier to live it up and say, well, let’s just have nicer vacations and go to interesting places. But we don’t mean staying at Four Seasons or the Waldorf like that, but more like, Costco vacations with breakfast included, a few times a year would run you up to $40K in total. Until a few years ago we used to prepare our own breakfast & lunch during vacations by shopping at Walmart!

    As my grandma used to say, you won’t become poor by eating or clothing, it’s your lack of planning that makes you poor for life. We see families in bay area buying $3M homes with $2M mortgage, and after $1M down payment has nothing left to invest except 401K. The wives didn’t realize they have to work 30 years to pay off the mortgage while working and raising their children and cooking, etc.., we’re like, this is insane: you are just one layoff or sickness away from losing your home, and there’ll be one every 10 years! (In my ~20+ years of working, I’ve been laid off once and would’ve been fired twice more had I not change my jobs before the axes fell).

  30. Trauma Trekkers

    Fantastic post and congrats to the Chen family for much success. That being said, you either have time or money in life. Obviously there are exceptions to this but this is generally the case. Generally, it is the foregone life experiences (and family time) that people regret more in the long run than foregone material possessions and “status”.

  31. I am a strategy manager and the numbers seems right for consulting. Legend says partners make more than that on average but I do not think the data points are support of said myth.

    In any case, thanks a lot for the information you provide on here. I am nearly debt free after my MBA and starting to think about next steps.
    Step 1 is to exit consulting as the high burn is fast making the money not worth it. Why stay to become a partner when you can move to industry, which is less demanding, and make more money eventually?

    Quality of life is very important

  32. In my family, we laugh and say, “we are WW2 babies with depression parents and immigrant children, we are all cheap!”
    Not so, we are frugal. However much is earned, some has to be saved “for a rainy day”.
    We home cook nearly all our meals, much better for our health and budget. We are now in the 5th generation of “cookers”.
    The local library is free.
    We buy pre owned cars.
    We paid the mortgage off ASAP and carry no debt.
    Even though I taught at a private school for many years, we sent our children to the public school. Better value and excellent teachers. I know, I substitute there in my retirement.
    Our children went to the University of California. Superb value and much lower cost. They lived at home, no student loans.
    My hobby is the Boy Scouts. Enormous fun.
    My husband cleans the pool and cuts the grass. I do have a house cleaner every month.
    I am incredibly happy even though I am 77. No financial stress.

  33. “Isn’t enough to retire early” isn’t really an accurate title for the post. This is about a specific couple that chooses to save less than a lot of us would if we were in their shoes. They save around $75k/year including retirement and health savings. If they’ve been doing that for any amount of time they can retire early, especially factoring in the equity in their house. Most people reading this post aren’t stashing away that kind of cash every year.

    Would they be ok living the lifestyle that retirement brings? Who knows, but probably not. Still, they have enough to retire early (or they will very soon). They’re just choosing not to.

  34. 1) Get a job Colin. If you have time to play golf 3 times a week, you can work. Even if it isn’t a salary commensurate with your “worth”, do something. The kids are in school and you don’t need to sit home twiddling your thumbs.
    2) Get rid of the Porsche. Maybe you are a car enthusiast but like many other enthusiasts, you might need to wait until later to realize your car dreams.
    3) $1,000 a week for entertainment? Yeah, maybe direct that towards some more family entertainment.
    4) Better hope those kids are worth that cost of education. If they don’t earn $500K a year or more, that education will have been wasted money.
    5) Rachel and Colin stand to have a good windfall once the kids are out of private school. They will no longer be paying $100k a year in tuition to private school and they will no longer be funding the 529 plans.

  35. Great read. Seems like they would really benefit from meeting with fee only financial advisor for advice simply to agree on their goals/budget/how they picture their ideal lives in 15 years. They obviously are not getting satisfaction out the current spending they have. I bet $1million a year isn’t unusual(maybe even low) when they surround themselves with similar people(country clubs/classmates/hamptons/work) that have similar expectations…It might be good to travel on a trip where they do volunteer work as a family to re-evalutate what is really necessary to be happy and re-evaluate perspective.

    Colin could easily start some freelance consulting work since it sounds like he has an expertise and not have to travel…..or start an online business (ecommerce/blog) since he likes to write and could dictate his hours or just buy an already established online business(just look thru some of the active online business marketplaces to get an idea of businesses for sale). He would feel more fulfilled. He could write off more expenses(even home office) as a self employed person and do a solo 401k to have most of his income go into retirement savings and tax efficient investments like NY Muni’s since he is in such a high income tax. He should not fixate on what he should be earning at a job but rather just starting making extra income online(online income can snowball).

    They could easily buy out of state rental real estate in maybe a state they like to visit in the USA like Florida that doesn’t have income tax on your rents collected and write off visits and get deductions. The would take advantage of the depreciation writeoffs. If Colin likes owning real estate after testing with a rental he could scale up with out of state rentals and become a “real estate professional” for larger writeoffs. Just have a property manager manage it. Tons of people in biggerpockets invest successfully out of state because they live in high cost of living areas.

    Their housing expense isn’t crazy but more people should consider house hacking and find houses where they can rent out a basement or half a nice duplex and have their most of their housing paid for by their tenants(The rents would at least cover their property taxes/insurance/maintenance).

    Anyways very interesting post.

  36. Thanks to the Chens for their willingness to share their personal information. If they seek to maintain this lifestyle, then yes, their will be plenty of stress and pressure.

    I, too, am the sole earner of a NYC family (1 child), and my annual income is FAR LESS that theirs, albeit more than $100k. I’d say we’re middle income based on the NYC cost of living. We have a home, a nice car, and my child attends public school. He receives a good education, and his school has plenty of resources. We eat out at local restaurants occasionally, get take out, and so on.

    Park Slope has become a rather wealthy enclave over the years from what was a working class neighborhood many, many years ago.

    Easy savings suggestions:

    1. Park Slope has excellent public schools and the NYC school system has a gifted and talented program. So, for a little effort, there’s $100k annual savings right off the bat.
    2. Park Slope has notoriously poor parking, as bad or worse than parts of Manhattan. Ditch the 2 cars and garage payment. There’s plenty of nearby transit, subways and bus lines, as well as CitiBike, Uber, taxis, etc. Assuming Ms. Chen works in Manhattan, and her company pays for her black car home, lease a top of the line Acura MDX and park on the street. As Mr. Chen is home, he can move the car for alternate sides. That’s another at least $50k savings, easily.
    3. Sell the building and buy another with a rental unit. That will help offset the mortgage, another $30-$50k savings per year.

    I can keep going because this is just off the top of my head.

    I hope that the Chens can find a more peaceful place.

    1. Hang on, they’re paying to park their cars on a daily basis? Doesn’t their home have garage facilities?

  37. Am I the only one who started vomiting after the spending breakdown?
    Working 65 hours per week and visiting a therapist because you need an Amalfi Castle for your week of holiday, to “relax and recharge” so that you can afford another 15 years of stress and may not be able to retire then as well.
    Spending 50k per child since kindergarten, I sincerely hope the kids won’t delude their parents, but I can’t imagine the social pressure they start their journey in life with!

    Thanks Sam for the article, I hope you posted to be provocative about how miserable a luxury life is. Even with 2-3k Gucci shoes.

  38. Given how responsible they are with their housing expenses, relative to gross income, I’m pretty stunned at their other spending habits.

    Usually, I see profligate people who earn 7-figures blow about $400-700K in pre-tax earnings on an expensive house, with other minor expenses mopping up the rest.

    They do need to invest a lot more. It’s not realistic to pound at that kind of job for another 15 years, and just to get to $10M networth. They should be half way there already and thinking about retirement planning.

    I think the Yale tuition estimate is way too low. There’s no chance that they’re going to hold today’s tuition rates stable for 11-15 years. It would likely be double by then.

  39. This is a very sad post to see in the morning Sam. I understand that NY is an expensive city but that budget is so far from happiness. This is the mentality I saw in the movie Enron, the crooked E. They’re trying to have it all, not realizing they can’t. This couple really need to trim their excesses if they want to find some peace: the clothing, the car, the vacations, the eating out and the country club membership (which I don’t really understand).

    Spend time cooking meals with your kids instead of eating out. They’ll love it more than some fancy shmancy meal. Vacations don’t have to be crazy expensive (and frustrating when you go in-season). Maybe one big expensive vacation a year and the rest of the time, go local. The key thing is to spend TIME with your family, not throw money at them.

  40. Well, our family makes about a third of the Chen’s, also with a single income (and 5 kids). But, we save/invest about 20% and tithe 10% each year. I’m self-employed, so often business conferences allow for some extravagant dinners and stays at 5-star resort hotels. I think we’re a little more guerrilla when it comes to education and college expenses. No college debt, for either parent, or the college ages kids. About $35K left on the 15 year mortgage, which will be retired by December this year. Last 2 vehicles adhered to the 1/50 rule. Traveling to Costa Rica, Florida, Arizona, Montana, Ohio, and Aruba within the next 6 months. Your’re right Financial Samurai, at our income level, we don’t really experience much stress.

  41. Sad!
    I know it’s hard to believe the numbers and story here, but I can vouch for Sam’s facts.
    I’ve been in the same industry for a while and I’m a little younger. I see most people on either side of the business making 1M+ household income get on treadmills and keep going. They trivialize and normalize every thing from private school, fancy cars, crappy co-op apartments in prestigious address, summering ‘out east’ or the South of France, designer clothes, etc. They have very little taste and have lost their propensity to enjoy life, if they ever had it. I feel sorry for them as well, but since they went to an Ivy League, they can’t be that daft.
    Just for reference, I make a similar (or more) income many years, I don’t work anywhere near as many hours, I have very little stress, and deal with no BS and pretense at work or in my social life. Public school is just fine. Rent modern apartments cheaply compared to paying through the nose for old crusty co-ops filled with stuck up grumpy snobs. No fancy car. Take plenty of vacations abroad for a fraction of the cost (flights cost the same assuming economy). And yes in Manhattan, on a 1M income, I’d save about 300-400k easily after splurging and having a ball. My expenses don’t increase with my income – a common trait amongst those on the hamster wheel!

  42. GetRichorDieTrying

    I am the total opposite of folks posting how crazy this family spends.

    It’s actually depressing to see that a $1 million a year income doesn’t even pay for a Ferrari, G Wagon, and first class plane ticket.

    Man things are so expensive now. 1 mil sure doesn’t go very far these days :(

  43. Fascinating insights into their expenses! NYC is crazy expensive but is nice when you have a lot of money. I don’t envy Rachel though. I couldn’t handle the pressure of a PM position with kids at home and being the sole income provider. That is a lot of weight to carry. It’s good they go on regular date nights though. That’s really important for a marriage after having kids.

  44. Dr. Remoulak

    Great post Sam. As someone who didn’t follow the herd to Wall St following B-school, posts like this are reassuring I made the right choice for me. One question- I thought a portion of portfolio managers would be carried interest, but bared on the post I’m guessing that’s not the case??Thanks.

  45. The math on the 529 doesn’t make sense to me. $60K a year would put over a one million in principle alone after 18 years, not to mention even a slight bit of growth. That and you would be exceeding federal gift limits after contributing that amount any more than a few years.

      1. Still doesn’t make sense. They are paying private school tuition out of income stream as they go. Yale is barely more expensive than the private primary and secondary schools. They can easily afford the Yale tuition check. It’s only a couple thousand more than Dalton. I guess there are the tax advantages of 529 plans. But still. I’d be looking to put more in general savings as well as whatever additional tax advantaged savings one can find. Backdoor Roth?

        I guess if you are trying to pre-pay college tuition now in the event that income falls later.

      1. $520K is the max account balance, not the max contribution amount. Once the account balance + amounts withdrawn for qualified expenses exceeds $520K in all NYS 529 accounts for a single beneficiary exceed $520K, no more contributions are permitted by NYS.

        Assuming that the balance grows because the 529 plan investments have positive returns, the actual contribution limit is less than $520K. (How much less depends on the amount of earnings.)

    1. Agreed, this makes zero sense to me. Basically two years of money into the 529 will make up any difference in the Yale bill as compared to their current school spending and likely pay for four years of off campus housing if that’s their concern. Right there I see $60K a year they can start saving to get them out of the rat race sooner, especially if they have over $100K in the 529’s now. Even if they want a bigger buffer, $60K a year seems too much if they’ve got ten years or more before the kids go to college. That difference would buff up their after tax savings to around 10% of their income, which would be great for them IMHO.

  46. I honestly thought I was reading a parody article for a moment. I don’t feel bad for these folks. There’s so much excess that they’re enjoying. Working 65 hours a week to provide that much for a stay at home parent and a kid? Absolute luxury dream.

  47. I am surprised nobody has said it yet: this is a prime example of the hedonic treadmill in action. There will be little sympathy in the comments, because the expenses are so far away for most people. The truth is, none of the spending detailed above is necessary. None of it. Yet by Sam’s narrative, it has both parents in therapy–to some extent, it risks the marriage itself.

    If Rachel has truly not made this amount of money for long, then they have the first step on their path to get out earlier: spend like you used to, when you made $200k, or $300k, or whatever. Bingo, take your savings above 50%. While still hard to relate to, I can understand their focus on the kids, but I can’t imagine the other things bringing much joy. You get a week off vacation, so you constantly spend 2 days of it in the air?? How fast does the Porsche go…in Brooklyn?? It also seems like Colin’s conflict over his career is expressed in his spending. I can understand some clothes for her professional events, but why the country club membership? What is he networking for?

    Also at a detail level, it seems that the house is the cause of several issues. They have done well with it, but maybe it’s time to switch to renting, if the market has cooled? It sinks a lot of time, it is a large part of the net worth, and it soaks up taxes that they don’t get to deduct anymore. Maybe they would be happier back in a condo closer to work. (I’m sure that wouldn’t be cheaper, but could solve other problems)

  48. The kids education is a must but send the dude back to work, man-up and pay for his own Porsche and then stop already with the Gucci eawhuchi stuff!

    1. Embarassing that a man would put his wife under such stress. I must be really “old school”
      I would be too embarassed

  49. I can’t wait to see the movie (read all 3 books), because it seems so surreal that people live this way.

    My question to the couple if you’re out there and read these comments is – are you happy in your life?

    I am also an Asian immigrant and thankful for all that I have grown up with, and see the pressures put on children in the community to “do more.” I also see the divorce, levels of unhappiness, therapy and medications that are a result of this.

    In the end it is a personal choice, and I would hope that this couple would look at joint therapy to discuss what happiness looks like for them and what they hope it looks like for their children.

    Sounding very harsh and judgmental, but as an outsider, I wouldn’t wish their lifestyle on my children, I would use this as an example of what NOT to work towards.

    I wish them happiness and I hope they find it sooner than later.

  50. Wow crazy to see how the other half live. But I feel like you also hear stories of people who make mid to high six figures or more in NYC already on FIRE and are pretty close to leaving the work force or have already “retired”.

    Like you suggested, I probably would cut many things out of the budget, but that’s just me. My values and goals are different than this family. For me when I look at that, I see a ton of lifestyle inflation I could do without. Again this is just me.

    Wish them all the best in their FI journey.

  51. I applaud Colin for staying home with the kids. Very noble profession. As a man with a very powerful wife, living in a big ego city it’s got to be difficult.

  52. Always interesting to see even those categorized as well off scraping by. One question though, are they insured enough? $3 million sounds like a lot, but at this level that is only 3 years of expenses. I personally am insured at 10x my income, by far enough to get my wife (and most importantly my kids) past a possible loss of me (and my earning power) considering all of our assets switch to her.

  53. The spending seems to imply expectations of bonus, albeit a large one at that. As you know, the bonus can be a significant portion of comp, especially for hedge fund managers.

  54. Love seeing these snapshots and I laughed at several of your quips on the luxury items. LOL.

    “If I was Rachel, I’d either ask for a three-month sabbatical or dial back work to 40 hours a week for less compensation. Making $500,000 a year with less stress, fewer hours, and a lower effective tax rate sounds so much more reasonable. They’ll have to cut down on entertainment, clothes, and travel, but they’ll gain back so much more quality time as a family.”

    The depressing problem is that cutting back to 40 hours is not really an option. In this field, like being a partner in NYC biglaw, you’re either in or you’re out. Sure, she could cut back to 40 hours but if that impacts her work, it’s a no-go, and it’ll probably cause her more stress!

    Hopefully she loves the markets and likes what she does.

    Also that clothes budget makes it seem like clothing items have a useful life of one year!

    1. Dood, el Farbe

      Biglawburnout – I think you’re correct about the unlikelihood of being able to draw down to 40 hours, but I think it’s like that in most fields – probably just about any where one is working as an exempt employee.

      I worked 5 years as a chemical engineer before law school, and worked out a deal with that employer to work “three quarter time” to go to law school full time.

      While my company agreed and I was only paid 3/4 salary Sept to Dec and mid-Jan through April each year during LS, my workload really didn’t decrease much, if at all. So although I was only officially in the office about 32 hours a week, I was still working pretty much the same ~ 50 hpw.

      I’m in-house counsel now, and the same problem exists. There’s literally no way to cut back from 60-65 hpw to a “regular” 40 hour schedule.

      I can either keep doing what I’m doing. Or I can walk away. But there’s really no in-between.

  55. The real winners in this world are the “prestige” institutions. You pay for the privilege to get the prestige, and then work yourself into heart palpitations and therapy to generate enough income to pay them again with the earnings they helped you generate (because your kids HAVE to go there). Then you die and realize you gave all your money (i.e. time) to ivy league schools,a few cocaine dealers, and NYC bar/restaurant scene…lol joke is on you.

  56. I love Paper Tiger’s (right above) comment. Its always so interesting to see it from the other side. Our household doesn’t make close to 1 million so its like a mini “what their lives are like” without the annoying reality TV music.

    I wonder about the stress of the Chen’s legacy children too. I wonder if the parents, depending on what they choose to do, will reflect the same spirit as their sons down the road.

    Oh and another topic I guess is, maybe the stressful work environment of portfolio managers need to be taken into consideration on the whole. To keep talent….how does one take the edge off?

    I hope there’s a part 2!!

  57. Ms. Conviviality

    It seems that Rachel and Colin really need to discuss what’s most important to them and make lifestyle changes as soon as possible considering that Rachel’s income is dependent on how well the markets do and a recession might not be that far away. The Chens do not seem like a happy family and isn’t happiness the ultimate goal in life? They probably have happy moments while on vacation or on dates but is that enough? It’s understandable that they would want their sons to have the best education, so they could one day get into Yale and achieve similar successes as them but if the parents are suffering from stress, why would they want their children following a similar path? I think the most important thing is for Rachel to take care of her health and if that can be achieved by reduced work hours then she should do it. Another change I would make would be to cut the private school expenses. The money spent on Dalton is so significant that if it were invested, it could be a huge nest egg/trust fund for the family’s peace of mind.

  58. I have so much to say about this bloated budget that I am speechless. My wife and I live in South Florida walking distance to the beach, make <$200K/per year and save more than this. I simply don't get it. This post has ruined my day.

  59. Paper Tiger

    “Wherever your treasure is, there the desires of your heart will also be.”

    This really is a discussion about values as much as it is about money management. They should take a hard look in the mirror, decide what is really important to them, place priorities and values around attaining joy and happiness rather than wealth and power and maybe, just maybe they will have a chance to “pull the nose up on this jet” before it gloriously crashes to earth.

    Remember, money is not the root of all evil; it is the LOVE OF MONEY that causes all the problems!

  60. Thanks, Sam. We live considerably more frugal lives about a dozen miles away from Central Park and are constantly amazed by how many people just spend it like crazy.

  61. I got nauseated when I got to the spending table and I couldn’t finish reading…how come people choose to live a life like that…they think they are happy? really? never mind

  62. I think one mistake in your calculation is the cost of education. Depending on how old their kids are those tuition rates, especially at Yale are likely to go up..by alot. Aren’t tuition costs growing at like 7% per year.

    Better factor in a lot more to be Yale Bulldogs.

  63. Nice play on characters – excited for the movie.

    If they’re unhappy and want to cut back, there are a few easier targets, like leasing 2 luxury cars in NYC, the country club membership, clothing, food budget and travel budget (3-star hotels aren’t so bad), but there are some things that pull harder on one’s heart strings. Like how do you pull your kids out of Dalton once they’re in? And who can fault them for contributing $60,000 per year to college funds, especially since their alma mater now costs well over $60,000 per year to attend? It’s hard to provide your children with less than what your parents could provide you, and so the cycle continues.

    One question I’ve been pondering recently is how much is a reasonable amount to spend on activities for your kids, such as sports and music lessons? Say you’re already living a more reasonable, upper middleclass lifestyle and spend less than the Rachel and Colin and save more. If your child is a talented athlete and makes the top travel team for 2 sports (which are largely in different seasons), how much would you need to make to conclude it’s reasonable to spend $2,000 per sport per year for that child? Or if your child is a gifted musician, what’s a reasonable amount to spend on music lessons? And what if you have 2 or 3 children, each who plays two sports, and an instrument? It adds up pretty fast, and it’s harder for some people to say no to their kids than it is to say no to themselves.

    1. Christine Minasian

      Having older children now…I’d say do not spend a lot of money on sports as I’ve seen kids burn out and get hurt at a young age…so all that time & money wasted. If a child REALLY wants to play an instrument- I’d spend the money there as long as you’re not begging them to practice. Save the money for education from what I’ve seen. Very few of our kids friends went on to play professional sports.

      1. Thanks for sharing this. As an athletic kid growing up, I loved playing sports. But I did get injured, and you’re right, few become professional athletes. But, sports can make you have a better life in school due to our sports culture (I was tennis team captain and got some love there in HS), and may help get you into college. I’m a HS tennis coach for 3 months a year for 15 hours a week.

        I’d love, love for my son to master a musical instrument like guitar, sing, write, and do some long term athletic activity. We shall see!

  64. Wow. If they are really concerned about finances, the husband ought to go back to work and then they need to trim those expenses. All of those expenditures on vacations, clothes, food is crazy! They can still do lots of things in those areas but could be much more frugal/sensible about it.

    I might have missed it, but what is their current level of savings? How much tucked away in 401ks, IRAs, 529s, brokerage accounts etc etc? Any help from family? Feel like there may be other parts of their financial lives not shown here which would provide a fuller picture.

    At that income level, and a few smart investments, they should be in a much better spot. Otherwise trying to keep up with the Joneses in NYC is a losing battle.

  65. Thanks again Sam – these lifestyle posts are so interesting to read, sort of like watching soap operas or lifestyles of the rich and famous!

    Similar to Jurassic Park movie sequels to your past articles of living on $200,000 and then 500,000 a year that generate so much commentary and interest,
    maybe the next posts can be pre-quels like Star Wars and show a family of 4 living on $100,000 and then 50,000! (or have you already done this)

    On a side note, our family of 4 spent a glorious month in France and San Sebastian for a total of $22,000 (actually 19,000 if you subtracted items we would have spent at home like groceries, utilities etc) and I’m sure others do it for much less but to each their own if they can afford it! One tip I have is it cost us a total of $1780 for the four of us to fly non-stop economy in high season (June/July) from LAX to Paris by applying for 2 travel credit cards that each earned $60,000 miles 6 months before we left for our trip to pay for 2 flights!!! We also airbnb it and always stayed in at least 2 bedrooms for under $300 a night – beach front in San Sebastian- do not know how to attach a photo but is was a dream come true!

    Thank you for your posts, I am a fan!

    1. Ah yes, a Star Wars prequel series for sure! I plan to survey readers in my private newsletter, or here, if they want to share their story.

      I’m interested in people who live in: Austin, Denver, San Antonio, Seattle, LA, San Diego, Honolulu, DC, Boston, and Miami for starters.

      Gonna create a Google Docs survey for people to fill in.

      Sounds like a fun adventure you guys had!

  66. “Unfortunately, the only way to live a freer life is to drastically reduce expenses, have Colin go back to work, change their lifestyle completely, or accumulate at least 20X their annual expenses in net worth.”

    I couldn’t agree more. As I was reading your post, I kept wondering what world I am living in since it’s so different from Rachel’s. And honestly, I’d love to try their lifestyle for a day to see what it’s like. Not sure if I’d enjoy it eternally, but it’d be a great break from the frugal lives we have.

    Envy in a marriage/relationship is real. I understand why they feel that way about each other. I agree with you that Colin should go back to work, and Rachel can reduce her workload or change her career to better balance work and life. If it doesn’t work, they can go back to the way things were. Having a bitter spouse is a recipe for a stressful and deteriorating marriage IMHO.

    1. Agreed. He is driving a porche around playing golf and he’s upset with her working long hours. Living this way on one salary has to be stressful for both of them, because, her job isn’t 100 percent guaranteed either. The irony is they seem to need a financial planner.

  67. Colin should suck it up and make up with his ah-mah so he’ll inherit a bundle. She’s old and she won’t live forever. ;) I read all 3 books.
    As for Rachael, I think your plan is good. Cut back on the hours and learn to live with a bit less income. Less stress will lead to a more harmonious family life. They’ve got to get along and stop fighting.

    1. Recovering Engineer

      Unfortunately that’s not how it works in this industry. You get paid for your performance, not your hours worked. It’s not like you can go to the fund manager and say, you paid my $1M last year and I worked 60 hours a week, this year I’ll work only 40 hours a week (2/3rds) and you just pay me $666k. You get paid $1M to outperform the market; if you can outperform while only working 40 hours a week you can cut back your hours without sacrificing pay. The reality is people work long hours in this industry because that is what it takes to beat all the other smart people working long hours trying to beat you.

  68. Making all of a family’s income as a W-2 wage earner is a killer. This is my biggest take away here, who cares if they blow 26K on cars (paltry compared to income) or 100K+ on their kids (great investment) just looking at the 40% loss to the government should give the Chen’s some cause for thought. If they can team up and maximize their combined corporate experience and connections there is a business that can be grown from there. I am continuously shocked at how many extremely intelligent people choose to work for others. Get out and meet some business owners. As a group there isn’t something magical than makes them better, they just choose to say yes to having to figure things out.

  69. What an unhappy, hopeless family. And the poor kids are destined to be as screwed up as their parents. It is insane to choose that lifestyle.

  70. Isn’t it ironic that she manages money for a living, maximizing returns for others, probably trying to get them to financial freedom with their investments, yet her retirement age is 60.

    1. It is ironic, but it’s what I’ve observed working in the finance industry from 1999-2012. Lots of people made good money. But lots of people spent aggressively and got caught with their pants down when the 2000 and 2008 recessions hit. Many got their bonuses slashed or lost their jobs and they could never get back to making similar money again.

      Hence, why there’s an important need for personal finance education.

  71. I will say it if no one else will. The expenses on the kids are fine, to each his own, and the home is relatively reasonable in cost too, since they bought at a good time and it’s appreciated well so far. The big elephant in the room are the other lifestyle expenses, like luxury car payments, clothes, dining out with entertainment and those overseas holidays. If she is getting stressed, these things represent living beyond their means. I’m not expecting them to wind down immensely but just halving these depreciating expenses like the cars, clothes and halving the costs of the dining out and holidays would make a massive difference to financial well being and peace of mind. I noticed they don’t seem to be investing much if any either which is asking for trouble especially in a single income household.

  72. No go fund me link ? Not thinking they are going to get a lot of sympathy on this blog. Part of the tenants of FIRE is to live simply……46K per year in kindergarten may be viewed as a tad excessive.

    I think I would change up stuff quick if the husband is already restless with the current arrangement.

      1. Especially in Park Slope, where PS 321 is one of the best public schools in the city.


        One tactic of the wealthy in NY is to pick a top school district, then contribute to their local public school. That’s a lot cheaper than paying private tuition. This couple already has the right district.

        PS 321’s PTA draws more than $1M/year, making it (as of 2013-2014) the ninth richest PTA in the country:

        Regarding Yale: ignoring inflation, they’re looking at about $400K total for two children for four years each. They’re putting $60K into 529 plans annually. After seven years, the colleges will be fully funded. Growth in the 529 plans should keep up with inflation. So well before the younger child (born in 2011) hits college, they should be able to stop funding the 529 plans.

        They also get a state/city deduction of $10K/year on those 529 contributions (NYS has one of the best 529 plans). Not a big dent, but since you’re computing city/state income taxes down to the dollar, this $1K+ should go into the mix.

        As should deductions for all their contributions (their mortgage interest alone takes them into itemization). These are at least $25K on one line, plus $5K contribution to their alma mater.

        A big line item that’s missing in all of this is their medical expenses. Since they’re contributing to an HSA they have a high deductible plan, meaning that they’re basically liable for all their medical expenses, including those therapy sessions. Virtually anyone with this much money uses HSAs as super-IRAs and pays out of pocket. That’s got to make another dent in their cash flow.

        1. $400,000 of college costs in each of the 529s won’t max out the lifetime contributions in NY ($540,000 I think). They could be running some of the current private school tuition through the 529 plans and get a state tax deduction, since the tax changes in effect for this year made private pre-college educational costs 529 eligible.

          1. Good point. Honestly, I’d forgotten about the possibility of using a 529 plan for pre-college. As it turns out though, not all states have made the same change as the federal government.

            New York is one of those states that doesn’t allow 529 plans to be used for K-12 expenses. The state will “recapture of any New York State tax benefits that had accrued on contributions.”

            So simply running the K-12 money through the 529 plan wouldn’t gain much in tax benefits.

            FWIW, “Effective September 22, 2017, the Maximum [529] Account Balance will increase from $375,000 to $520,000.” (same reference)

  73. Earning $500,000 in a low cost of living part of the country looks better and better after reading this. I realize this family has no choice but to live in the NY area because of career choice, but wow, earning half of what they do and living in a less stressful and costly environment is beginning to look like a better choice (which is how we live). And we have a 50% savings rate to boot. BTW, they could always move to the suburbs and save some money all around, but the commute would add additional hours to her day.

  74. Here is a rough rough budget I did for myself for 2018, who works overseas with my spouse & child (who is in an international school) in a decently expensive city.

    I don’t pinch pennies at all, and it is pretty easy to save a ton of money. In almost every case I rounded up (ie I sign up for CC’s for miles to get free flights back, usually eat in and don’t eat out like I listed, etc.so my costs are actually lower than below)

    If the US government stopped being the only one in the world to tax overseas citizens, this would look even better.

    Gross Income $750,000
    IRA ($11,000)
    Net Income $739,000

    Foreign Taxes ($45,000)
    US Taxes ($180,000)
    Tuition ($12,000)
    Rent ($44,615)
    Car ($4,000)
    Food/Ent ($24,000)
    Children Activity (Language Tutors) ($8,000)
    Vacations/Travel Home ($25,000)
    Clothes ($10,000)
    Gas/Insurance/Taxi ($2,000)
    Misc ($10,000)
    Total Expenses ($364,615)

    Total Savings inc. IRA $385,385
    Savings if the US joined the rest of the world and stopped taxing people who don’t live there (much like individual states don’t tax former residents state income taxes) $565,385

      1. For the “no state tax” part, there are safe harbor rules for each State. For example, Safe harbor is available for certain individuals leaving California under employment-related contracts. The safe harbor provides that an individual domiciled in California who is outside California under an employment-related contract for an uninterrupted period of at least 546 consecutive days will be considered a nonresident. There are certain exceptions to this rule.

    1. Would love for you to expand on your 24% effective tax rate. Is this because of the foreign tax exclusion on the first $100K, even though I see the foreign taxes paid?

      Also, how do you contribute to two traditional IRAs with income at $750K? After about $196K in the US, a married couple can no longer contribute to an IRA.

  75. Freedom 40 Plan

    It’s all about priorities. I’ll take sitting at this nice cafe and reading the paper and a few blog articles over working long stressful hours to accumulate a bunch of crap and turn out some spoiled kids. Time > Money

  76. Sam, as you know, at the $1M income level in big cities, the spending and saving profiles all look different, and there is quite a bit of latitude. But, this one is definitely representative.

    I know it seems incredible to many that people live like this. But they do, by the many 10’s of thousands in NY, SF, Vancouver, Boston, LA, Toronto, London, Paris, Munich, etc.

    I would know. Both personally and by close observation of this cohort in a similar place.

  77. Yikes! Reality is humbling.

    I can’t relate to anything at the top but everything at the bottom.

    I’m 5 years younger than Rachel, make roughly 90% less, have two 7-year-olds, and live in the DC area. I’ve experienced the heart palpitations from working 60+ hours a day and stressing over client satisfaction.

    But if I’m experiencing that at this level, why even bother to get to the next, if all I have to look forward to is MORE… MORE stress and health scares; MORE taxes and relationship worries; MORE child support payments (in my case).

    I hired a personal trainer and started working out more at the gym to give me a physical and mental outlet from the stressful work. My trainer has also become my therapist.

    The Chens should consider hiring a personal trainer to keep them focused on a healthy lifestyle because that’s the only way they’ll make it through the all of the stress their lifestyle is putting on their bodies and their relationships.

    The reality is they are top performers. And it’s hard to get top performers to stop pushing themselves. Even if Rachel falls back on her hours, Colin will see it as his chance to get back into working.

    1. D’Angelo, thank you for making the point of questioning why MORE.

      What I discovered after leaving corporate America is how much stress I was caring in my for so long that it became normal. Well, it ain’t normal. And looking back, I clearly understand how/why work was killing my quietly.

      Hang in there! Therapist / trainers sounds like a good 2:1.

  78. Wow. Congrats to the Chens on sacrificing and earning the right to have such a great income. That said, this story is a perfect example of the saying “It’s not what you earn, it’s what you keep.”

    Outside of their 401k and HSA, they’re not regularly investing. With that kind of income, they could quickly become very, very, wealthy were they to allocate more of it towards buying income-producing assets like rental real estate or income dividend-paying stocks. It’s especially surprising they don’t do more investing considering what she does for a living.

    1.5 million dollars in assets (really 1 million because I don’t count their home) after earning over 15 million in the space of 15 years is nothing to celebrate. I hope they read the comments in this post. They’ve done wonderfully in their careers. It’s time to get more serious about their investing.

    Their future selves will thank them 15 years from now. You can only eat so much steak before it begins to taste like soap.

    1. Recovering Engineer

      Considering those are all cash expenses I’m guessing the $1M is her cash compensation and doesn’t include her carry in the fund. She’s been on the buy-side for 17 years and a Portfolio Manager for the last 8 years. She should have at least a 6-figure if not 7-figure investment in her own fund. Your equity payout each year at most funds I know is paid out as a share of the fund, not as cash. So it isn’t true to say they aren’t investing outside of their 401k, I just don’t think that investment is accounted for in this article/description.

      Also she hasn’t been earning $1M/year for the last 15 years. Hedge fund analyst pay starts around $200k salary + $100k-$150k bonus. It takes a while to work up to the $1M/year level, certainly not until making portfolio manager at a fund of that size.

      1. Agreed about other sources of income or savings. Her current income statement may not not look so great, but her balance sheet probably looks healthier. I’ll bet she knows know a thing or two about investing. I was a little unclear whether the base case net worth of $1.6M was an actual number or an assumption but Sam excluded house appreciation which is huge.

        Also, people who have a big future nest egg (whether earned or inherited) have a completely different relationship with money. I know a couple who are intentionally taking it easy and earning very little because they have a wealthy parent (referred to as Grandma):
        1. Grandma will take care of all college expenses for both kids
        2. Grandma frequently pays for family vacations
        3. Grandma chips in whenever they buy/upgrade their house
        4. Grandma will bestow a large inheritance
        5. Grandma recently bought an Audi Q7 for them
        6. Any money they earn/invest now is fun/mad money

        For their potential wealth, they live a relatively modest upper middle class lifestyle without the associated stress.

        If I had the benefit of just number 1, I’d already be at number 5.

  79. Accidental FIRE

    Oh man get the popcorn out for this one… :)

    Yes, I would work a few years at $1 million a year and I would do it, let’s say, completely differently. Then I would stop and enjoy the fruits of my labor for the rest of eternity.

  80. Thanks Sam for sharing that and for Rachel and her family to provide all the details.

    It really does shed light that the grass is not always greener on the other side. There is definitely a lot of lifestyle inflation here that although they could clearly afford it (evidenced by a high current net worth) if they were able to reduce some of it Rachel could exit the rat race much sooner and maybe save her sanity.

    The other thing you pointed in the article is that she is taking advantage of the market while it is hot. Her job and salary will be intimately tied to how the stock market performs and that is a bit unsettling.

    If there starts to be a recession (which you have given previous warning about with the yield curve post) her amazing salary can come crashing down and she may then be over leveraged and lose a lot to keep afloat.

    Shocking about those property taxes as well as all the state and city taxes necessary living there.

    I am thrilled I am able to take advantage of geoarbitrage to make my path to FIRE so much easier than hers.

    1. Yes, the money management/finance industry is very cyclical. When times are good, they are really good. When times are bad, you not only earn poorly, you may also lose your job.

      Hence, why it is prudent that folks save aggressively during good times to weather the bad times.

      NYC prop tax is actually better than San Francisco’s, by a lot! 0.7% vs 1.3%.

      1. I have a house worth less than half of theirs ($1.15M), and property taxes are substantially higher than theirs… I pay $25k+/year.

        I thought those taxes looked cheap! What I did find pricey was their college savings. $30k/year per kid? That seems like a lot, no?

    1. Agreed- I’ve never commented before, but I actually felt a little sad for this family. Our little family saves double what they do on a quarter of what they do. It seems like without major adjustments, they won’t have any peace.

      1. This family is clueless financially. Cut back, save like crazy, give yourself a chance to scale back / semi-retire in 5-7 yrs. Or keep on running the treadmill. Two cars living in Manhattan – inventing dumb ways to waste money

      2. I get to save nothing because most hogs like you don’t share your salary with coworkers that stay late and work extra hours, too.

    2. I saw that is was 54k general savings plus $18.5k in the 401k plus 6k in the HSA plus 60k PER YEAR in the 529 of their kids. So actually a total savings amount of 138.5k / year.

      Still a really low amount given their income.

      1. And mortgage principal payments are also savings. Sam is guilty of a little hyperbole by emphasing the “free cash flow for investments” rather than the full savings.

          1. Indeed, I just think there would have been less knee-jerk hostility in the comments to this family’s situation if a ‘full saving rate’ had been presented too. It may not be very nice for them if they read this !

            I would feel very stressed in their situation though as redundancy would be devastating. While there is a lot of room to cut expenses in ( private school fees one car etc ) there is an incompressible level of core expenses of ~ 150k ( mostly house + some living expenses ) which is 3x previous annual free cash flow. Perhaps showing this & money makeover could be a follow up article ?

  81. Depending on the year I make between high 6 figures to slightly over a million. It’s really surprising to see the expenses of other high-income households. I’ve lived in HCOL cities in the last 3 years (Singapore, Hong Kong, Sydney and London) and I rarely break $10k USD a month in expenses. Granted we rent and we have no kids or vehicles but I couldn’t imagine spending that much on clothing or food & entertainment every month! To each his own I suppose.

    1. sisinobubbles

      We live in HCOL cities too, our cost before kids could be below 10k USD but with kids we could not keep it even under 20k some months. We keep track of our expenses and are not big spenders. It is the cost of bigger house, education expenses, extra help, food, car etc. that you would not imagine compare to cost of single life. We are doing everything we can to cut down cost while maintain a certain lifestyle.

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