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Why a Six-Figure Salary No Longer Means You’re Rich

blog.personalcapital.com

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Re: Why a Six-Figure Salary No Longer Means You’re Rich

#61

Post by otoburb »

antihero wrote: post #20
jawns wrote: post #10

As dual-income households have become more the norm, it's really the household income, rather than an individual's income, that's a better measure of (material) richness. For instance, you might have a family with a sole breadwinner who has a low six-figure salary, but that has to cover all the family's expenses. Meanwhile, even if his neighbors, a dual-income household, both earn less than him, their household incom…

Surely requiring two incomes in a household is extraordinarily problematic? Before, one partner could sustain the household and the other could stay at home and raise kids. Now, if both partners are expected to earn and have careers, who looks after the home life? Who looks after the kids? Surely this is really really damaging? And doesn't that mean that in real terms we're earning half as much?

It is problematic for dual-income households with kids.

In these situations, kids are raised by a combination of:

1) Extended family (typically retired grandparents) 2) Daycare / child-care / "school system" 3) Private child-care (e.g. nannies or babysitters)

#1 is cheapest, but ties the family down to where the grandparents are. Both parent jobs need to be located relatively close by.

#2 typically take a huge chunk out of the 2nd income (which is almost always unfairly compared against the mother's income), at least until a family can survive/pay for such child-care until public schooling becomes an option.

#3 is only really an option for those that earn enough to support a full or part-time babysitter.

Sometimes you'll see a combination of #2 and #3, but that again is only really an option for those with enough cash-flow. Some preschool programs are even more expensive than a decent nanny, although ones loses out on the socialization aspects that come built-in with a daycare program.

Home life (beyond kids) for dual-income households is a shared responsibility. I don't think much changes there whether you're a single income or dual-income household. If you're talking about chores like groceries, cooking dinner and cleaning up, that's what weekends and evenings are for.

In real terms, we may be earning half as much (or even less depending on the combined income), but the marginal incremental value of the career experience and/or additional dollars is usually enough that going dual-income wins out.

EDIT: @humanrebar mentioned the "safety premium". Households that have experienced layoffs in the past (friends/family/themselves) probably take into account that although both adults may be working today, that doesn't mean both adults will be guaranteed jobs X months/years in advance.

Re: Why a Six-Figure Salary No Longer Means You’re Rich

#63

Post by geebee »

ccallebs wrote: post #33

Consumerism. It convinces people that once they make $100k/year, they require a vehicle that befits someone who makes that much money. It convinces people that they require a place to live that compares to their other 6-figure earning peers. More, bigger, better -- the importance of those three things outweighs most everything else. I grew up (and now live) in rural Appalachia. The "American dream" is defined much di…

This comes up a lot. Sometimes they talk about a car, for a while there it was always a "plasma tv". Financial advisors, talking about middle class debt and financial struggles, would ask you, do you really need that "plasma tv".

San Francisco is probably an outlier, but with the median house price at 1.1 mil, and full time child care costs for two preschool kids at $40-50k a year, a plasma tv is a minor rounding error in the cost of living.

So while I agree with you about the TV, and the car, and the consumerism in general, I do think it may be a way to blame the middle class for not paddling hard enough toward shore as the ocean current carries them out around the rocks.

Re: Why a Six-Figure Salary No Longer Means You’re Rich

#64

Post by humanrebar »

skizm wrote: post #24
smackfu wrote: post #17

Earlier quoted context omitted.

Same thing with millionaires. A million dollar net worth is not the same thing it once was.

You're still not poor though. In fact, if you have a million dollar net worth with expenses covered by your current income, you're definitely in the "rich" category compared to 99% of the US.

If you own a family home in some neighborhoods, you have a million dollar net worth. Even if you inherited it from your folks and minimum wage goes to property taxes instead of rent.

Granted, you could sell the home and join the regular rat race with everyone else, but what's the point of being frugal if you can't leave the surplus to your kids?

Re: Why a Six-Figure Salary No Longer Means You’re Rich

#65

Post by lilsunnybee »

dkitchen wrote: post #14

You're rich because existence itself is shockingly improbable. Beyond that, you even got to be human, with a human mind, which as far as we know is the most expensive thing the universe has ever produced. Lucky you! You're poor because one day you will lose everything and everyone you've ever deeply cared for. That's a shame. Enjoy the few moments you have left. You will have a better chance at this if you stop compa…

Does a homeless person have a carnival of delight available to them?

Re: Why a Six-Figure Salary No Longer Means You’re Rich

#66

Post by ccallebs »

a_c_s wrote: post #58
ccallebs wrote: post #33

Consumerism. It convinces people that once they make $100k/year, they require a vehicle that befits someone who makes that much money. It convinces people that they require a place to live that compares to their other 6-figure earning peers. More, bigger, better -- the importance of those three things outweighs most everything else. I grew up (and now live) in rural Appalachia. The "American dream" is defined much di…

"...is enough to have a warm place to live and healthy food to eat, with enough left over to provide security during times of famine" That's a great definition of being middle class. I'd argue being rich involves having far more resources than that.

That's a fair point and I understand why you'd argue that.

However, you'll notice that most people consider rich to be "having more than what I have" or "having more than other people". Many millionaires don't think themselves wealthy -- and they're not necessarily wrong. They've reached a point where many of their peers have more capital than they do. Others may consider them "poor".

Re: Why a Six-Figure Salary No Longer Means You’re Rich

#67

Post by humanrebar »

geebee wrote: post #63
ccallebs wrote: post #33

Consumerism. It convinces people that once they make $100k/year, they require a vehicle that befits someone who makes that much money. It convinces people that they require a place to live that compares to their other 6-figure earning peers. More, bigger, better -- the importance of those three things outweighs most everything else. I grew up (and now live) in rural Appalachia. The "American dream" is defined much di…

This comes up a lot. Sometimes they talk about a car, for a while there it was always a "plasma tv". Financial advisors, talking about middle class debt and financial struggles, would ask you, do you really need that "plasma tv". San Francisco is probably an outlier, but with the median house price at 1.1 mil, and full time child care costs for two preschool kids at $40-50k a year, a plasma tv is a minor rounding err…

> a plasma tv is a minor rounding error in the cost of living.

Also true compared to college tuition, bills for problem pregnancies, and other major medical events including the last two or three years of life.

It's probably time to admit that the child tax credit hasn't been keeping up with the cost of living and needs a major adjustment.

Re: Why a Six-Figure Salary No Longer Means You’re Rich

#68

Post by ccallebs »

geebee wrote: post #63
ccallebs wrote: post #33

Consumerism. It convinces people that once they make $100k/year, they require a vehicle that befits someone who makes that much money. It convinces people that they require a place to live that compares to their other 6-figure earning peers. More, bigger, better -- the importance of those three things outweighs most everything else. I grew up (and now live) in rural Appalachia. The "American dream" is defined much di…

This comes up a lot. Sometimes they talk about a car, for a while there it was always a "plasma tv". Financial advisors, talking about middle class debt and financial struggles, would ask you, do you really need that "plasma tv". San Francisco is probably an outlier, but with the median house price at 1.1 mil, and full time child care costs for two preschool kids at $40-50k a year, a plasma tv is a minor rounding err…

San Francisco, Manhattan, D.C. -- they're all outliers. My great-aunt runs a day-care facility in Kentucky. They charge $200/month/child. (This is definitely an outlier on the other end of the spectrum)

It's very difficult to talk about wealth, as wealth means different things in different places. My argument for a $100k/year salary being "rich" falls apart in expensive cities.

Re: Why a Six-Figure Salary No Longer Means You’re Rich

#69

Post by geebee »

ccallebs wrote: post #68
geebee wrote: post #63

Earlier quoted context omitted.

This comes up a lot. Sometimes they talk about a car, for a while there it was always a "plasma tv". Financial advisors, talking about middle class debt and financial struggles, would ask you, do you really need that "plasma tv". San Francisco is probably an outlier, but with the median house price at 1.1 mil, and full time child care costs for two preschool kids at $40-50k a year, a plasma tv is a minor rounding err…

San Francisco, Manhattan, D.C. -- they're all outliers. My great-aunt runs a day-care facility in Kentucky. They charge $200/month/child. (This is definitely an outlier on the other end of the spectrum) It's very difficult to talk about wealth, as wealth means different things in different places. My argument for a $100k/year salary being "rich" falls apart in expensive cities.

True, but keep in mind, 100k is a lot easier to achieve in those cities. Registered nurses and dental hygienists (and software developers), who all earn about 110k a year (median) in SF, tend to fall well below that threshold outside these centers.

Re: Why a Six-Figure Salary No Longer Means You’re Rich

#70

Post by humanrebar »

specialp wrote: post #53
antihero wrote: post #20

Earlier quoted context omitted.

Surely requiring two incomes in a household is extraordinarily problematic? Before, one partner could sustain the household and the other could stay at home and raise kids. Now, if both partners are expected to earn and have careers, who looks after the home life? Who looks after the kids? Surely this is really really damaging? And doesn't that mean that in real terms we're earning half as much?

Two incomes in a home is not required, it is just that our lifestyles have evolved to "require" that. Home prices over last 40 years adjusted for inflation have not changed very much (besides in the bubble in mid 2000's). Previously on that one income a reasonable 40 years ago family could have a home, a TV, a car, and take inexpensive road trip vacations. Now the typical family has multiple cars, homes much larger t…

> So if one wanted to live like in the past it is certainly attainable on a single reasonable income... That may mean "only" having a 1700 sf house with one bathroom and one car.

I agree with the attitude here but cultural norms have shifted so much that there isn't nearly enough supply of those sorts of homes. The reality is that people typically "downsize" by moving far outside of town and commuting long distances, which isn't really a solution to the problem.

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