Even high earners are living paycheck to paycheck
That’s according to a new Goldman Sachs report that finds even top earners are struggling to stay ahead of their bills. (1) A quarter of workers earning more than $100,000 a year say they’re living paycheck to paycheck, and surprisingly, that percentage jumps significantly — to 41% — for those making between $300,000 and $500,000, and to 40% for those making more than $500,000.
One has to surmise that is the case precisely because of their consumption habits.
Pete
“Consumption habits” is a very nice way of saying “these people are morons.”
We may be prematurely judging people who have a tougher row to hoe than we did. My older daughter, aged 46, was able to buy a nice $400,000 house soon after her husband graduated medical school but they would be hard pressed to buy that same house near the hospital at it’s presently estimated value of $750,0000 right out of medical school.
My younger daughter was barely able to buy her 12 acre orchard for $120,000 and put a small $165,000 on it 8 years ago but there is no way they could have bought it at its present value of about $500,000.
Ou goddaughter, in her early thirties, and her husband both earn solid incomes but cannot come close to buying a modestly sized home near their work for $750-800,000.
The younger half of millennials, in their thirties, are facing a squeeze that we did not face.
Many, many, years ago I was approached by a lovely couple who where being pestered by their bank. The problem was that they had all their money on an instant access accounts and the bank suggested they put it on a term account where they would get more interest. Their biggest concern was that they could get to the money immediately. I looked at their bank books (yes, it was all written down in a book then!) and they had never with drawn anything out. They had just saved all the money from their jobs. They liven in a small house that had cost £4k, had no children and just saved. They seemed a very happy couple. I advised that if they wanted immediate access to the money then they were doing the right thing.
He was a school caretaker and she worked in the school canteen, jobs that they had done for all of their lives. Very low paying jobs.
Their savings in today’s money, about half a million pounds! They must be dead by now but I’d often wondered if they ended up as millionaires!
Each generation is different. The point here is that these people are not living below their means – which is very important no matter what one’s income.
DB2
Yes, the point of the op, and the families featured in the op, is that they are making home purchases that are beyond their means and that they are living beyond their means.
But if you read the article that you posted a day or two ago, you will also see evidence that housing prices are rising so fast, especially in neighborhoods near the best available jobs, that are making it increasingly difficult for the younger millennials to buy affordable houses anywhere near the high paying jobs:
Another pearl of wisdom that I had from an ex-client was:
“It isn’t what you earn, it’s what you spend”
Was one or two weeksa go, we were discussing 31% are now upper middle class? Yet the K economy talks of 20%. A lot of leverage coming into bad times.
But it was probably poor (no pun intended) advice.
I meet with people on a regular basis that have way too much in cash because they want immediate access to it - yet they will never ever need that much cash. All the while, inflation takes a bite of their purchasing power every single year.
Agreed! It also seems much more difficult for youngsters to leave the nest nowadays.
I could be wrong, but I’d guess that your daughters and goddaughter are not in the $300,000 - $500,000, nor the +$500,000 income brackets. I’m not trying to downplay their struggles, I’m pointing out their challenges are probably different, and more justified than someone making $500,000.
It seems ludicrous to me that people making that much money would live paycheck to paycheck. Granted, everyone’s life is different, with different costs. For example, a family having to pay high medical costs, higher school tuition costs, higher housing costs, higher insurance costs, etc. could find lots of their income eaten up pretty quick. That said, lifestyle choices play a big role.
La Demonia and I are losers who still work for a living. We make good money and have experienced our fair share of life’s challenges that can bankrupt families. We’ve also been incredibly blessed. I drive a 2012 Tacoma, my wife drives a 2013 BMW. We could afford new vehicles, but we choose not to. Instead, we’re socking away $700 per week into retirement.
From the linked article -
“Economists call it “social comparison,” the quiet pressure to keep pace with peers whose lifestyles broadcast success on Instagram or in the school pickup line.”
Not caring what other people think of you is an emotional, spiritual, and financial superpower!
Back when we were younger, we paid for a trip to Scotland with cash money La Demonia stashed in a savings envelope. We had a health care envelope, a vacation envelope, a kids’ activities envelope…you get the picture. Living within your means doesn’t mean you can’t live.
I asked what they wanted and agreed that if that was what they were most comfortable with then they were doing the right thing.
At the time they were worth far more than me so they must have been doing something right.
Logically false. If someone wins the lottery, it doesn’t mean that what follows would be wise decisions. Doing what is comfortable is not always the wisest decision. Often people need to step outside of their comfort zone to grow their wealth. It is the reason why I have more wealth today than the rest of my entire extended family (aunts, uncles, cousins) combined. They never left their comfort zone.
People can be wealthy and still make poor decisions on how to grow/protect their wealth.
Doing what is comfortable is not always the wisest decision.
Conditional. I guess sometimes it is the better option
Often people need to step outside of their comfort zone to grow their wealth.
Yes but knowing those times is a carp shoot. How would you know…?
It is the reason why I have more wealth today than the rest of my entire extended family (aunts, uncles, cousins) combined.
Well, you’re inferring that it is and even if true it’s survivorship bias. i.e. Luck. Remember, life ain’t fair.
They never left their comfort zone.
See above
Sounds like a self justification.
I’ve never left my comfort zone and I have done alright.
I’ve never left my comfort zone and have done alright.