I'll share something I learned myself in another Hacker News comment.

https://en.wikipedia.org/wiki/The_Millionaire_Next_Door

"Their findings, that millionaires are disproportionately clustered in middle-class and blue collar neighborhoods and not in more affluent or white-collar communities, came as a surprise to the authors who anticipated the contrary."

It really opened my eyes to the fact that most people I think are rich are actually not rich, just extremely completely in debt.

"The authors make a distinction between the 'Balance Sheet Affluent' (those with actual wealth, or high-net-worth) and the 'Income Affluent' (those with a high income, but little actual wealth, or low net-worth)."

If you're making $500,000 a year anywhere on the planet and struggling you've most likely let your lifestyle get the best of you. Sure, maybe there are a few circumstances where that's not the case: a major medical bill that you're paying off, caring for your parents or other loved ones. But otherwise, there would be lots of places to cut back without a notable change in quality of life.

"Some of these payments are applied to the principal on their loans, which increases the couple’s net worth by either building their home equity or by reducing their student debt. So that’s also savings."

I don't count paying down a debt as "savings". It might be an increase in net worth but not savings.

If paying down debt is considered "savings" now, then the entire USA is "saving money". But I think that not only goes against the definition, but the spirit of the idea.

This is a surprisingly reasonable article from Bloomberg and it's certainly true that Mortgage and 401k doesn't feel like saving excess money, but it does essentially map to savings.

I'm not sure it's really a useful conversation to have though. We live in a world where there are essentially an infinite number of things you cannot have. So feeling rich is pretty much a choice once you're beyond probably double the average household income for the area you're in.

103,500/year on unexplained "other expenses??" Over $8,500/month?!! Which is almost double their mortgage payments Um....

What the hell?

Their biggest line item is completely unexplained yet they are trying to explain where their money goes?

I live a fairly indulgent life and I spend less than that on everything in a year. I can't imagine spending six figures on "misc" unless there's a lot of hookers and blow involved.

I'd like to point out this is an opinion piece, and verifies the intuitive claim that 500k/yr is not struggling to make ends meet even in nyc. The piece concludes with questioning why people feel like they're paycheck to paycheck when they're not, and cites wealth inequality (skewed idea of how well off one is by knowing wealthier people) and a lack in paycheck deposits because of other payments into things like 401k.

We make a little over $500K and I would not say we are struggling day to day, but we won't have so much saved as people expect. We lead a modest life (live in an apt, drive a compact) and live in SV.

Monthly House rent is $3000, Kids schools is $2400, kids activities is $2000, groceries and eating out is $1500, travel expenses averaged is $1000, misc expenses (gas,utils,shopping,car maint) is $2000. We do not have any debt.

We pay over $160k in federal/state income taxes and save $38k in 401k, $15k in 529 accounts annually.

Most of these expenses are regular day to day expenses we can't cut down on to save more.

I'm in a small Midwestern city so my cost of living is very low compared to some places in the USA. I make less than some of my colleagues in larger cities but even with student loans and getting ready to buy a house, I am quite comfortable. Even still, I look at some of my coworkers who are making what I'm making and were freaking out when they changed our pay schedule so we would get paid a week later. What the hell are they spending their money on that one week is a huge deal for them but it isn't for me? Sure some of them have medical bills and children but I was still surprised that it was such a big deal to so many people.

Here is a detailed list of the missing $103.5 K, from another article with more details on this couple:

Childcare (Two Children)- $42K

Food for four (includes date night every two weeks) - $23K

Home Maintenance - $5K

Property Insurance $2.5K

Gas - $5K

Car insurance - $2K

Life Insurance ($3 million term) $2.5K

Clothes for four people (no fancy bags, shoes or threads) $9.5K

Childrens Lessons (sports, piano, violin, academics) $12K

Total - $103.5 K

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

I love how this old TV commercial pretty much sums up the way some people live:

https://www.youtube.com/watch?v=PV_YAeXOSiw

People who think it's OK to spend every dime that comes in. They've bought into the recent concept that they deserve everything they want and more... then when shit happens... it's a damn hard lesson.

I can genuinely see that anybody could 'struggle' anywhere, once you consider living costs and the miscellaneous monthly payments adult life insidiously inflicts upon you. Whilst income gradually rises, your corresponding monthly outgoings seem OK - until the income dries up (I've just watched the excellent NoClip documentary on the implosion of Telltale games in Marin County).

What I never quite grasp is why "Silicon Valley" job is still seen as a premium, rather than a massive risk. The sole benefit I can see is that you can flit between jobs and build up your income - but as your income goes up, so does your expenditure/exposure.

I know there are other 'hubs' emerging that are cheaper - but they always seem to be 'emerging'

Is the issue the 'gambler's-dilemma' or are you on average better off in Silicon Valley or what?

Didn’t read the article, assuming it “was intentionally crafted to make an audience hate someone to maximize ad revenue.”

https://mobile.twitter.com/patio11/status/111061524887089152...

>Just this month, CNBC ran a story entitled “Here’s a budget breakdown of a couple that makes $500,000 a year and still feels average.”

Yes, because they have been running that story monthly since 2017!

https://twitter.com/ejenk/status/1110616128118759424

I don't think CNBC is trying to drive a narrative here, but I do imagine that they're getting ReallyGoodEngagement™ out of articles like this since they tend to inspire immediate outrage and incredulity.

patio11's take on this: https://twitter.com/patio11/status/1110615594561212416

I took a look at the article they're sourcing, and that article actually has mentioned the counterpoints it expects to see about the various line items and has an argument about why they think it's reasonable that it's on there. I don't entirely agree with it, but I think the article is more nuanced than the bloomberg article suggests by just including the chart without any commentary from the article.

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

130k supporting a spouse and living in manhattan, and even eating out constantly, is more than enough to save a ton of money per month. 500k and struggling is ridiculous.

When my wife and I had our first child, we lived in SF.

The neighborhood daycare in the Excelsior charged $1600/mo. This is five years ago.

We're about to have our fourth child. With the upcoming summer, if we still lived in SF, we'd have four children in daycare. $6,400/mo.

I have second hand exposure to some of this mentality... and I believe a lot of the concern from individuals comes from being entirely of social cultural upbringing where under seven figures is totally inappropriate/failing . .

Mortgage payments: $60,000

$60K / year isn't going to pay for the mortgage on even a small house in Silicon Valley.

Try raising a few kids in a major city and paying private school tuition and child care fees. It easily eats up most of $500K of income.

It sounds like you missed the key point "some of that money is going to principal".

Let's say you bought a house for $100K and for this argument it can always sell for $100K. And you have a 30 year fixed mortgage on it (debt for 30 years). After paying on that debt for 10 years, the principal remaining on the loan is down by about 20%. Now if you sell the house for $100K, you get back in cash $20K.

See how that works? You "saved" $20K over 10 years by making mortgage payments.

It is a little trickier with student loans because really what it means as you pay down your student loans is that you "owe less". Conceptually, if you decided to zero out your accounts, pay all your debts, sell all your assets. Then the amount of money left over would be "more" if you had spent 10 years paying down your student debt than if you had not. That difference is calculable and adds to your "net worth" (your cash value after zeroing everything out).

Anything that increases net worth, by definition, increases your net worth. That means you are using a currently surplus to pay down previous deficit.

The issue most "common people" have is they increase their debt load rather than paying it down.

Income - Spending = Savings. It's an accounting identity.

A common trick people pull in the shitty version of these articles is counting savings as "spending" and then declaring that "At the end of the month, there's $0 left!", because by definition if you count savings as spending, then you never "save" anything.

Let's say I have a $100k mortgage, take in $1000 a month, and spend (in the true sense of the word) $500. Whether I apply the remaining $500 to my mortgage balance or put it in my savings account has no material bearing on my net worth. The unspent money is "saved" whether it goes into cash reserves or debt reduction.

This doesn't make any sense -- paying down debt instead of SPENDING the money increases net worth and is ultimately the same as socking money into a savings account if you're debt-free.

All debt isn't the same. I see it as savings when the debt is backed by an asset like a a mortgage is, then paying it down gives you more equity in the asset. If you sell the home, this equity converts into cash. You could also get another low interest loan with the equity. It's just as much savings as a 401k which can go up or down but generally up in value over long periods of time. Paying off another type of debt like student loan debt doesn't have the same benefits.

First, I totally agree that that argument is terribly worded. Nonetheless:

a. against that median $30k income, you're building equity, which is net worth. Someone on $30k might be paying rent (and they're not able to afford a mortgage), and thus, that money is just a flat expense.¹

b. w.r.t. student loans, someone making $500k/yr is going to be able to pay vastly more into that loan, and pay down the principal a lot quicker, which will translate to lower interest costs, vs. someone making $30k/yr. (Depending on whether this is parents or the student, if that rate could be refinanced or not, etc., I would also think a $500k/yr might also net you a lot lower interest rate due to the risk of your inability to pay being significantly less.)

¹and yes, houses have their own issues, such as maintenance, and some of that mortgage is going to interest.

It absolutely is savings. Compare two people:

Person #1 - Makes $6000/month

- Has an interest-only mortgage payment of $1000/month (yes it's still possible to get interest-only mortgages)

- All other expenses are $4000/month

- Puts $1000/month in a savings account

Person #2 - Makes $6000/month

- Has a mortgage payment of $1000 interest + $1000 principal = $2000/month

- All other expenses are $4000/month

Person #1 and #2 are saving the exact same amount of money. Over time if nothing changes Person #2 will actually be saving more, because the interest portion of the mortgage payment will decrease and the principal portion will increase.

Its considered a savings because you're increasing equity in the house, which you can later resell. Its not a general statement about debt.

My guess is the author considers it savings because you are contributing to net worth presumably by:

1) increasing home equity, which increases your net assets 2) increasing earning potential via education, which increases your ability to acquire future assets

Both come with assumptions of course (like the home value stability/appreciation or the education actually resulting in higher earnings).

It all depends on the interest rates.

If I can invest with a 10% return, and can borrow at 0%, I'm better off borrowing as much as I can to invest.

But if I have to borrow at 10% and can only invest at 0%, paying off debt is better than saving.

Paying down debt against an appreciating asset absolutely "counts as savings". Every dollar applied against the mortgage principle is an extra dollar of net worth.

Can you explain in more detail why you don't consider it savings? Maybe it is obvious but I am curious.

I guess then net worth should be seen as savings

The linked CNN article[1] breaks it down as essentially $52k on childcare and expensive child activities, 23k on food including some undoubtedly expensive "date nights" and the rest on the sort of insurance and maintenance costs you incur when everything you have is very expensive. The Bloomberg author's probably aiming to make it seem even more frivolous by having "other" as a massive line item, not that I'm convinced sure many people facing real rather than self-imposed spending constraints would consider $9k per annum on "no fancy bags, shoes or threads" clothing an example of the sort of thriftiness the article subjects seem to think they're demonstrating, or $23k to be a food budget for two adults and two kids that couldn't possibly be trimmed a little...

[1]https://www.cnbc.com/2018/03/06/budget-breakdown-of-a-couple...

Apparently "miscellaneous" is only $10k/year, "other expenses" is separate from that. The single biggest line item outside of taxes!

There is a further breakdown in the linked article: https://www.financialsamurai.com/scraping-by-on-500000-a-yea...

It includes things like food, student loan payments and "children's lessons".

It’s crazy how accurate the “$100 gas $800 rent $400 food $2000 $impulse_expense please someone help me budget my family is dying” meme is.

At the risk of repeating what gets said every time this topic comes up, basic financial education should be taught in schools.

Yeah. What's crazy is the article didn't talk about it. Biggest red flag right there.

Eating all organic, fresh-from-farm food, eating at luxury restaurants, attending internationally acclaimed shows in the best seating, and maybe even investing in a little bit of modern art? Oh, and purchasing all the best in skincare, makup, spas, saunas, cryotherapy, light therapy, etc? Personal trainers, coaches, cleaners, cooks? I could imagine a combination of all of those could be 8,500$ a month.

(EDIT: And I bet it's still feel inadequately uncultured compared to an even wealthier peer who owns several paintings, vintage wines, attends every big show in the best seating + hires a personal stylist!)

Do you have kids? Maybe not 8500 but there is always something from summer camp to orthodontics etc... Life with kids is worth it 200 percent but expensive.

Probably child care / private schooling for the two children. Don't see it itemized in the table.

That's probably utilities, cell phone, tv, after school/nanny/sports/etc for kids activities, Starbucks, food, etc. Not that it isn't a lot but I don't see any other line items for all the stuff and it can add up depending on how you live.

The Bloomberg article did a pretty poor job summarizing the expenses - the linked article actually has a better breakdown: https://www.cnbc.com/2018/03/06/budget-breakdown-of-a-couple...?

$42k for childcare and $23k for food are two of the biggest items listed as "other".

Private school for two kids could be that much in NYC.

They have mortgage payments: it's trivial for a house to just up and eat $10k of your money, for one example. That's the big differentiator: at this level of income, they can afford to just pay random expenses that many folks would have to just jam onto eternal credit card debt.

EDIT: nvm, I misread the parent, and other sibling comments illuminate the actual breakdown of this line item.

That would be the monthly credit card bill :-). It autopays the gym, the uber rides, the gifts, etc etc etc.

Kids school could be zero if you would go to public school. You can eat out less and eat cheaper food at home cutting the grocery bill by a lot. You don't have to travel. Your misc expenses seem high as well, you could buy an older reliable car (some cars are much cheaper to maintain than others). You could probably get a cheaper house.

You don't WANT to do those things - I don't blame you - but that doesn't mean you can't.

After your expenses, you still have 28k (post tax $ per month) - 12 (added all your expenses) ~ 16k per month = 192k per annum. 192 - 38 - 15 = 139k still left after taxes, expenses, 401k, and 529. Isn't that a really huge number?

> kids activities is $2000

Woah... My wife is a teacher and grosses $2000/month.

This is a crazy thing to spend 2,000 on.

With four kids is it cheaper to just hire a nanny?

So after daycare a couple making $0.5M/yr would "only" have $423,000 left to work with. What does rent cost? A 6 bedroom house can be rented for $11,500 a month [1]. So after rent and daycare the family has $285,000 to work with. Still very very far from struggling.

1. https://www.apartments.com/1934-powell-st-san-francisco-ca/e...

Anyone living in a high COL city with multiple kids should look into importing an au pair. $2k a month would really help the au pair and her family back home and save the family potentially hundreds of dollars a month

That's your choice isn't it?

> my wife and I

One of you stay home and raise your kids; that's rather the point of getting married.

> With the upcoming summer, if we still lived in SF, we'd have four children in daycare. $6,400/mo.

If paying other people to raise your kids is even on the table, you're doing it wrong.

My point is that this is not the case. When you take out high Federal and State taxes, high rents, tuition, etc., it's about equivalent to $80K/year income without kids. Seriously.