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The Struggle is Real

Beau Vine

By Beau Vine
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Beau Vine

Beau Vine 54215

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Americans are falling short when it comes to saving. Even some families earning six-figures have little to no savings.

As the example of one New York City couple shows, you and your partner could be making $500,000 a year and still end up with very little besides 401(k) money.

Sam Dogen of "Financial Samurai" breaks down the budget of two New York City-based spouses, each of whom makes $250,000 a year as a lawyer. They're 35-years-old and they have two young children. "This one couple shared their story and I decided to anonymously highlight their reported expenses," Dogen tells CNBC Make It.

 

Take a look at exactly where their money goes.

FS-500K-Student-Loan.png

As you can see, they both max out their 401(k) plan each year and are working on paying down student loan debt. But, even though they qualify as "upper class," after taxes, fixed costs, childcare and discretionary expenses, there's only $7,300 left each year to go towards other savings goals, investment accounts or retirement funds.

 

They're not the only high earners having a hard time saving.

In North Fulton, Georgia, a suburban area where homes sell for $500,000 to $800,000, residents earning six figures are struggling to set aside money for retirement, college and other major expenses. Some living in the area who earn $100,000 "are living paycheck to paycheck," the Washington Post reports, and even families earning up to $250,000 "don't consider themselves to be high-earners."

These situations illustrate how difficult it can be to avoid lifestyle creep, especially in expensive cities like New York and San Francisco, where highly paid Facebook engineers recently resorted to asking Mark Zuckerberg for help paying rent.

https://www.cnbc.com/2018/03/06/budget-breakdown-of-a-couple-that-makes-500000-a-year-but-cant-save.html?__source=twitter|main

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Sandman

Sandman 3403

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25 minutes ago, Pato del Muerto said:

In nyc, there’s no reason to have cars. Lose the car payments, insurance, and gas. 

Then lose the 18k to charity. There’s over 30 thousand right there. 

Plus the aforementioned vacation budget. 

I just assumed that was done solely for tax purposes.

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Bill Lumbergh

Bill Lumbergh 7171

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Posted
Americans are falling short when it comes to saving. Even some families earning six-figures have little to no savings.

As the example of one New York City couple shows, you and your partner could be making $500,000 a year and still end up with very little besides 401(k) money.

Sam Dogen of "Financial Samurai" breaks down the budget of two New York City-based spouses, each of whom makes $250,000 a year as a lawyer. They're 35-years-old and they have two young children. "This one couple shared their story and I decided to anonymously highlight their reported expenses," Dogen tells CNBC Make It.

  Take a look at exactly where their money goes.

FS-500K-Student-Loan.png As you can see, they both max out their 401(k) plan each year and are working on paying down student loan debt. But, even though they qualify as "upper class," after taxes, fixed costs, childcare and discretionary expenses, there's only $7,300 left each year to go towards other savings goals, investment accounts or retirement funds.

  They're not the only high earners having a hard time saving.

In North Fulton, Georgia, a suburban area where homes sell for $500,000 to $800,000, residents earning six figures are struggling to set aside money for retirement, college and other major expenses. Some living in the area who earn $100,000 "are living paycheck to paycheck," the Washington Post reports, and even families earning up to $250,000 "don't consider themselves to be high-earners."

These situations illustrate how difficult it can be to avoid lifestyle creep, especially in expensive cities like New York and San Francisco, where highly paid Facebook engineers recently resorted to asking Mark Zuckerberg for help paying rent.

 

Outside of their savings, I count $75k in purely discretionary spending. That's $6k a month, after their retirement savings, that they could easily pull back if they needed or wanted to.

 

My wife and I have a similar budget that is designed to leave very little not accounted for at the end of each month (even including a misc bucket just as theirs does). Just because you have a budget that ends at zero each month doesn't mean you're living tight. You've just built all of your discretionary spending into your budget.

 

They should try to live without the money from all of those non-essential lines in their budget for a few months to see how living "average" really feels.

 

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Nice Guy Eddie

Nice Guy Eddie 13511

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Posted (edited)

Is 500K in NYC (Manhattan) really that much?  According to the CNN cost of living calc, that's like earning ~200K in Houston.  https://money.cnn.com/calculator/pf/cost-of-living/index.html  200K in Houston is better than 75K in Houston but for a working professional couple, I don't think 200K is setting the world on fire in terms of income.

If that couple has a decent emergency fund, I don't see too many problems with their budget. Its a bit tight, but I imagine they could drastically cut their spending if one of them lost their job. And they're also paying into the equity of a $1.5m home that may end up appreciating considerably.   

The 32K for student loans looks painful especially since its showing as 10-20 years.

 

Edited by Nice Guy Eddie
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Pato del Muerto

Pato del Muerto 52490

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23 minutes ago, Nice Guy Eddie said:

Is 500K in NYC (Manhattan) really that much?  According to the CNN cost of living calc, that's like earning ~200K in Houston.  https://money.cnn.com/calculator/pf/cost-of-living/index.html  200K in Houston is better than 75K in Houston but for a working professional couple, I don't think 200K is setting the world on fire in terms of income.

If that couple has a decent emergency fund, I don't see too many problems with their budget. Its a bit tight, but I imagine they could drastically cut their spending if one of them lost their job. And they're also paying into the equity of a $1.5m home that may end up appreciating considerably.   

The 32K for student loans looks painful especially since its showing as 10-20 years.

 

Guess they both borrowed their way through undergrad and law school. 

Maybe skip a vacation, a second car, a few date nights, and attack that student loan debt?

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52-80

52-80 19151

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Posted

New York City has state tax and city tax. 

That said, if you're living in the city - and in america, THE "city" - you have 2 luxury cars? 18k donations?  And 5k/mo mortgage...and 1k/mo in extracurriculars for the kids.

 

the while you haven't paid off your student loans?

 

Lol worldssmallestviolin.gif

 

Our ETR is higher than that and we ain't crying

 

 

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Bill Lumbergh

Bill Lumbergh 7171

Posted
Posted
New York City has state tax and city tax. 
That said, if you're living in the city - and in america, THE "city" - you have 2 luxury cars? 18k donations?  And 5k/mo mortgage...and 1k/mo in extracurriculars for the kids.
 
the while you haven't paid off your student loans?
 
Lol worldssmallestviolin.gif
 
Our ETR is higher than that and we ain't crying
 
 
They say NYC but I don't think they can possibly be in the city. Between the cars and the gas, I'm guessing they live well outside and have a long driving commute. Those two don't make any sense otherwise.
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Pato del Muerto

Pato del Muerto 52490

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Just now, Bill Lumbergh said:
8 minutes ago, 52-80 said:
New York City has state tax and city tax. 
That said, if you're living in the city - and in america, THE "city" - you have 2 luxury cars? 18k donations?  And 5k/mo mortgage...and 1k/mo in extracurriculars for the kids.
 
the while you haven't paid off your student loans?
 
Lol worldssmallestviolin.gif
 
Our ETR is higher than that and we ain't crying
 
 

Read more  

They say NYC but I don't think they can possibly be in the city. Between the cars and the gas, I'm guessing they live well outside and have a long driving commute. Those two don't make any sense otherwise.

Does this jibe with the 1.5 million dollar home price?  (I’m assuming that figure is the sales price and not current value, if the two numbers would be different)

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Bill Lumbergh

Bill Lumbergh 7171

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Does this jibe with the 1.5 million dollar home price?  (I’m assuming that figure is the sales price and not current value, if the two numbers would be different)
It definitely could, depending on where the home is. I work for a ny based company and there are some folks with families who do a long commute from areas with prices like that bc they want a yard and house for kids. Most of them take the train and at most have one car, but I'm guessing based on two cars and gas this couple isn't doing that.
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Wally Fairway

Wally Fairway 5544

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2 hours ago, Cheeseweasel said:

Who pays a 40% effective tax rate? 

I'm guessing they include SS (6.2%), Medicare (1.45%), Fed (24%), State (6.75%) , City withholding (3.75%) - gets you close to 40%, but SS caps out at about $132,000
note: rates are blended, but they aren't off that much - probably all in closer to 37%

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52-80

52-80 19151

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Posted
22 minutes ago, Bill Lumbergh said:
30 minutes ago, 52-80 said:
New York City has state tax and city tax. 
That said, if you're living in the city - and in america, THE "city" - you have 2 luxury cars? 18k donations?  And 5k/mo mortgage...and 1k/mo in extracurriculars for the kids.
 
the while you haven't paid off your student loans?
 
Lol worldssmallestviolin.gif
 
Our ETR is higher than that and we ain't crying
 
 

Read more  

They say NYC but I don't think they can possibly be in the city. Between the cars and the gas, I'm guessing they live well outside and have a long driving commute. Those two don't make any sense otherwise.

im not intimately familiar with NY area, but if theyre living farther away, why the fuck they buying a 1.5m house for?

 

this is half a million less

 

https://www.zillow.com/homes/for_sale/White-Plains-NY/32979387_zpid/34819_rid/400000-1000000_price/1552-3880_mp/globalrelevanceex_sort/41.085626,-73.673029,40.966483,-73.836451_rect/12_zm/

 

 

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Gene Parmesan

Gene Parmesan 4006

Posted
Posted (edited)
21 minutes ago, Dennis Taylor said:

$800 / month actually seems low for payments for those two douchewagons 

No single line really sticks out as overly ridiculous for a couple making 500k, but add it all up and throw in giant mortgage and taxes then yeah their ending balance becomes zero.  They've pretty much got everything necessary to have a great life budgeted in.  They haven't even attempted to sacrifice.

Edited by Gene Parmesan
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Guest Lobo

Guest Lobo

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I don’t know that I’ll ever get ahead as we annually do  30-40% income to charity.  We Forego new cars, vacation, clothing, home decor, etc in order to it.  It brings us more joy than stuff but we need to dial it back to start saving more or college for two kids.  It’s a grind.  

Edited by Lobo
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Spankytoes

Spankytoes 1739

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As someone that lives in Long Island, works in Manhattan, and doesn't earn a cumulative $500,000.00 per year, this breakdown is bullshit. 

We have 2 mortgages (1 with a pool payment; 1 with flood insurance due to location), 3 cars (paid off), about to be 2 college tuition payments, maxed out 401Ks, the gambit of insurance and zero credit card/loan debt outside of our mortgage. We still average more than $1,500.00+ per month in savings. We are solid Middle Class in NY.

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Trey3216

Trey3216 15346

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How the hell does one pay $2500 for insurance on a $1.5mm home?   

 

There are tons of line items in there, as has been said, that are purely 'show'.  

There are 30 different ways to attack this and get ahead of where they are.  Maxing out 401k is great, until you have to pay the unknown tax rate on the withdrawal or an emergency rises where you need to access those funds now, but have to pay ordinary income + 10%.  Perhaps trim that back and overfund whole life where you have access to the cash anytime you need it.  Yes, it at a slower rate, and can seem expensive, until you run the eventual tax implications further down the line.  Use it as your bond fund.

$1.5mm home.  3x gross income.  I mean, that's borderline absurd.  Larry Ellison and Bill Gates think that's a bad idea.  

 

 

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JimmyHoffa

JimmyHoffa 1188

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Posted
15 minutes ago, Trey3216 said:

How the hell does one pay $2500 for insurance on a $1.5mm home?   

 

There are tons of line items in there, as has been said, that are purely 'show'.  

There are 30 different ways to attack this and get ahead of where they are.  Maxing out 401k is great, until you have to pay the unknown tax rate on the withdrawal or an emergency rises where you need to access those funds now, but have to pay ordinary income + 10%.  Perhaps trim that back and overfund whole life where you have access to the cash anytime you need it.  Yes, it at a slower rate, and can seem expensive, until you run the eventual tax implications further down the line.  Use it as your bond fund.

$1.5mm home.  3x gross income.  I mean, that's borderline absurd.  Larry Ellison and Bill Gates think that's a bad idea.  

 

 

Zz1hYzI1YjNhODEzYTJhZWQwNDVlMjE4NzlhNGIz

 

and 

tenor.gif?itemid=5026106

 

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Trey3216

Trey3216 15346

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18 minutes ago, JimmyHoffa said:

Zz1hYzI1YjNhODEzYTJhZWQwNDVlMjE4NzlhNGIz

 

and 

tenor.gif?itemid=5026106

 

I live my life gathering assets, but still apply this as part of a plan.  And no, I don't work for Ameriprise.  Learned my lesson the hard way working at wirehouse firms, and have learned how the numbers work on a blended plan.  They work much better.  

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Archer

Archer 474

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40 minutes ago, Trey3216 said:

 

$1.5mm home.  3x gross income.  I mean, that's borderline absurd.  Larry Ellison and Bill Gates think that's a bad idea.  

I was curious what the calculators would tell me I could afford as a home payment. Calculators said I was good with a payment that was 62.5% of my take home. I hope I love the house because I couldn’t afford to do anything else.

 

My current payment is 16.7% of take home and I don’t even like that. 

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Beau Vine

Beau Vine 54215

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6 minutes ago, Trey3216 said:

I live my life gathering assets, but still apply this as part of a plan.  And no, I don't work for Ameriprise.  Learned my lesson the hard way working at wirehouse firms, and have learned how the numbers work on a blended plan.  They work much better.  

Hank_DSC5450.jpg

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Trey3216

Trey3216 15346

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4 minutes ago, Archer said:

I was curious what the calculators would tell me I could afford as a home payment. Calculators said I was good with a payment that was 62.5% of my take home. I hope I love the house because I couldn’t afford to do anything else.

 

My current payment is 16.7% of take home and I don’t even like that. 

That's not a bad number, but feeling uncomfortable with it is a good thing.  I'm about the same boat as you.  

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Sbbruin

Sbbruin 21847

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1 hour ago, Gene Parmesan said:

They shouldn't have had kids.  They'd be living a pretty kick ass life without those account drainers.

You have no idea.  Two private school tuition payments is a giant kick in the nuts.  And I'm not getting into the public/private school debate again on here.  Public is a really shitty option where we live (cue the "then move" comment).

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Trey3216

Trey3216 15346

Posted
Posted
2 minutes ago, Beau Vine said:

Hank_DSC5450.jpg

Definitely ain't me.  lol.  I didn't say dump everything into it, but when used as an asset rather than for the death benefit purposes, it turns the tables quite a bit.  Math works in funny ways when you access it in different manners.  

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