>25% of workers making $200K or more now say they live paycheck to paycheck

[Frugal D]

https://www.marketwatch.com/picks/more-than-1-in-4-workers-making-200k-or-more-now-say-they-live-paycheck-to-paycheck-so-even-rich-people-are-struggling-to-save-and-pros-offer-3-solutions-01667417202

There's a large share of Americans who will just never be ready to take the red pill.

[Fomerly known as something]

Co-worker (who is retiring at 55 at the end of the year) and I were discussing this yesterday in regards to other coworkers who “can’t afford to retire.”  Mind you we have a pension and get to keep FEHB.  Conclusion they were doing it wrong the whole time.  Oh and coworker unlike me as a single person has put 2 kiddos through college.

[NorCal]

The poorest person I ever met made about $500K/yr as a VP of sales for a tech startup. 

His income took a temporary hit in the 2008 recession.  He was in debt up to his ears and he nearly had to declare bankruptcy.  I had a suspicion that he was dealing with actual loan-sharks as well.

[shuffler]

I couldn't find their definition of "paycheck to paycheck".  I suspect they just asked "Are you living paycheck to paycheck?" and allowed the survey respondent to infer their own meaning.

That might explain why they found that "In August 2022, 41% of consumers were living paycheck to paycheck without difficulty paying their monthly bills". (Emphasis mine.)

I don't really know how to interpret someone who is "living paycheck to paycheck" yet having "no difficulty paying bills".
The best I can come up with is that they have enough money, but they're just choosing to spend it all every month?
If the person is working/non-retired, then that sounds more like irresponsibility than it does hardship, to me.
(Presumably non-working or retired people are excluded from the survey, but who knows?)

Consequently, I wouldn't put too much stock in this survey.
Or at least not in the headline of the article/thread.  A less clicky statement might be "Lots of people making >$200k choose to spend it all."

[Dicey]

Lol, we just had visitors. They have multiple kids in college. They indicated they were struggling a bit financially. I felt really, really bad for them. Then I realized the car they were driving had some funny T logo and said "Dual Motor" on it. It looked brand new. LOL, DH's ride had its twentieth birthday this year. Mine is the "new" car. It's a 2014 we bought used. Hmmm.

[rockstache]

If I was chatting with coworkers, I would probably admit we’re living paycheck to paycheck too. You know, after I pay the bills and put everything else into investments…there’s just nothing left.

[solon]

I've never understood the phrase "paycheck-to-paycheck". Everyone's expenses rise to the level of their income. So whether you're making $25k or $125k, there isn't anything left at the end of the pay period.

And as rockstache mentioned, even us who are saving tons of money, still don't have any leftover.

[MrsSpendyPants]

If I was chatting with coworkers, I would probably admit we’re living paycheck to paycheck too. You know, after I pay the bills and put everything else into investments…there’s just nothing left.

agreed here.  If they didn't define what that meant then it's possible people thought this.

[EchoStache]

I think its tough for many to understand what paycheck paycheck means for the average American.  Our beliefs and how we handle finances are in a different universe that makes it difficult to comprehend how some people actually live.

Example.  I had a coworker who made decent money for the extremely low cost of living area we lived in.  No house payment....inherited from family.  Guy made $45-$50k and this was about 8 years ago.  We got paid weekly.  On Monday, he would complain, "damn, I'm almost out of gas and only have $3 in my account."  Not a penny to his name anywhere else.  He couldn't buy diapers for his baby.  On Friday, he'd be at the convenient store near work buying lunch out, and purchased $60 in lottery tickets.

My daughter went to a hobby store after work with a coworker.  Coworker's account was overdrawn, i.e., she has negative money, but a few dollars in her pocket. Saw something she wanted and bought it, because she had some cash in her pocket.

[charis]

If I was chatting with coworkers, I would probably admit we’re living paycheck to paycheck too. You know, after I pay the bills and put everything else into investments…there’s just nothing left.

So true. This discrepancy is clear with my friends. We both "spend" all of our paychecks, but I spend $$ on investments and they pends $$ on car payments, large mortgages, and private school tuition. We are doing the same thing but making different spending choices, right? (Although if you were to ask them, I can "afford" to invest, because I don't "have" these extra expenses. What 🤷‍♀️)

[redcedar]

I expect some people surveyed or would otherwise say they live paycheck to paycheck are saving into their 401k. If they stoped that, it could be $500+ a month and they would no longer say they live paycheck to paycheck. So a good number of people that have this feeling are far from near destitute side of the phrase paycheck to paycheck.

[EchoStache]

I expect some people surveyed or would otherwise say they live paycheck to paycheck are saving into their 401k. If they stoped that, it could be $500+ a month and they would no longer say they live paycheck to paycheck. So a good number of people that have this feeling are far from near destitute side of the phrase paycheck to paycheck.

I think most would still be paycheck to paycheck.  They would just buy more stuff and eat out more.

[rantk81]

I think I fit into that category... Of course, the reason I live paycheck to paycheck is because there are so many places that siphon off my paycheck before it hits my "living expenses" checking account!   401k, hsa, espp, ira, i-bonds, brokerage account, high fed and state tax withholding to offset taxes on dividend income, etc....

:)

[mistymoney]

Paycheck to paycheck has become a pretty hackneyed phrase, and it meaning diluted and distorted.

in the beginning........it did indeed describe people using up every penny of one paycheck before the next came in, and doing without in the last day or two....and just living on the next paycheck to come through to get food or pay an overdue heat bill.

I think it also used to be somewhat shameful? Now it seems to be almost a badge of honor for the working class.

I live paycheck to paycheck in my own head. I'm am watching that payday approaching with impatience and thinking with glee of the 401k depo, the company match, the HSA depo, and then if I can put extra into ibonds or treasuries, I am overflowing with very short-lived glee.....particularly short lived recently as those deposits are largely spitting into the wind as my NW continues to edge slowly downward!

And then I start waiting for the next pay day!

Not quite so dramatic and dogmatic as that, but its labeled on my work calendar, so I do see the visual reminder and getting paid does help with feeling like work is paying off :)

[Fomerly known as something]

I expect some people surveyed or would otherwise say they live paycheck to paycheck are saving into their 401k. If they stoped that, it could be $500+ a month and they would no longer say they live paycheck to paycheck. So a good number of people that have this feeling are far from near destitute side of the phrase paycheck to paycheck.

I think most would still be paycheck to paycheck.  They would just buy more stuff and eat out more.

I think most would still consider themselves paycheck to paycheck, as the infamous Financial Samurai articles, when you are “only” saving as much as you are spending on vacation, you lose perspective on how much money you have.

[Dave1442397]

I feel like we live paycheck-to-paycheck, but we still save $5k a month. The last couple of years have had a lot of medical expenses and some other unexpected things, so it really felt like all our cash was disappearing every month. Most of it should be behind us now, so I'm looking forward to plowing some more into savings starting in the new year.

Things winding down in the next month or two:

Daughter's acne medication/monthly dermatologist visit, $200.
Daughter's math tutor, $90 per week.
Daughter's physical therapy, not even sure how much that will be yet.
Interest free loan for HVAC replacement, $300 per month, last payment is Jan 7.

That should give us at least an extra $1,000 a month in our pockets.

[charis]

We have this debate periodically on this forum.  We will never be able to narrow down the phrase because what people consider to be necessary spending will always vary.  Most P2P folks in the 200k category will have pricey mortgages and car payments that are necessary to them and still contribute 5%-10% to their 401ks because that's they've been told is necessary.  On the other end of the spectrum, "poor" working folks will probably still have car/lease payments (they need to get to work and can't afford to pay cash for a car) and burn some extra on take out or cigarettes, etc, because it's unrealistic to assume that people are living like spartans to qualify as P2P.  Both groups may have trouble paying the electric bill if they miss a paycheck.

[ender]

I much prefer something like "how long could you be financially fine without an income" vs "paycheck to paycheck" for this type of question.

[vand]

It shouldn't be a surprise that being a high earner doesn't preclude you from being lousy with money. That's why lottery winners and retire sports stars often go broke.

OTOH, the 25% number is still lower than the average across all income groups, so they're still better than average with what they have.

[Metalcat]

I know MANY folks making in this range who would be completely and utterly FUCKED if they missed a paycheque.

Professionals with massive student loans, massive mortgages and car payments, just leveraged up to their eyeballs.

[jinga nation]

Not an earning problem but a spending problem.
Tiny violins at wine and cheese party.

[coppertop]

When I worked in the Estates and Trusts department of a law firm, I attended a seminar at a financial services firm.  One of the takeaways was that medical doctors are often in financial trouble because they have an expectancy of a certain lifestyle and their incomes can't keep up with those expectations, including private school for the kids; expensive vacations; high-end homes and cars; and of course, their student loans.  I found that fascinating.  It's also interesting to me that after I was promoted to the accounting department, I realized that there were a number of high-earning attorneys at the firm who were in financial difficulty.  I had more than lawyer one tell me that he (it was always a he in my experience) couldn't afford to fund his 401(k) because he had too many bills to pay.  When we received wage garnishment orders, it was never for staff members...always attorneys.

[JupiterGreen]

I tend to agree that the question is vague, still it's crazy and makes me want to yell at them to rein in their spending.

[Metalcat]

Not an earning problem but a spending problem.
Tiny violins at wine and cheese party.

Well yeah, the first piece of advice in the article is that in order to save more, these people should "add discipline."

I don't think the article is pitying these people, just stating that having a high income doesn't necessarily equate to feeling financially secure for a lot of people.

This is a key element of mustachianism, that seemingly "nornal" middle class lifestyles can range from very cheap to insanely expensive.

So if we have two families living materially similar lifestyles and one makes 200+K while the other makes 80K, the one with the higher income won't necessarily feel wealthier.

To me, when I started making a huge income right out of school, this was the lesson that hit home most for me. I learned very quickly that even moderate upgrades in lifestyle were a MASSIVE cash-suck, and that unless I proactively kept my expenses low, I would never feel the benefit of my income.

People, fairly reasonably, feel like if they make enormous incomes that they should at least be able to afford the nicer versions of "normal" things. Not huge increases in lifestyle, just nicer versions of normal.

However, those nicer versions of normal are orders of magnitude more expensive, so it all adds up so incredibly fast, and a bit of hedonic adaptation can leave these people shocked at just how little money they have left over.

This isn't to say anyone should pity people who spend their way into trouble despite huge incomes, but I *get* why it happens. I understand how hard it is to accept the fact that despite working your ass off to "win" and make more than almost everyone else, you still can't afford much beyond a slightly nicer version of "normal."

I remember talking to my DH and saying "we ARE the 1% in our city, we should be able to afford a nice detached home, new cars, and vacations, but that's just not the case."

I was readily willing and able to accept that, but many of my young colleagues from much less modest backgrounds just weren't willing/able to see it.

Do I pity them? No.
But I do understand them and how they wilfully get themselves into such easily avoidable messes.

[mizzourah2006]

The report does differentiate on the level of "living paycheck to paycheck". So while it claims 60% of people are living paycheck to paycheck across all income levels, ~2/3rds of those that said they live paycheck to paycheck said they do so comfortably. Meaning, while if they lost their jobs they'd be in a bit of trouble, they aren't actually struggling to make ends meet. My guess is for people making $200k+ that is the majority of that 27%.

[Arbitrage]

A co-worker of my wife doesn't quite fit the letter of this, but might actually be worse.  He's single, with no dependents or college debt.  Salary is "only" $140k or so, but that doesn't include the following perks, 100% paid by company and/or family (it's a family business):

Luxury car lease
Gas, insurance, repairs (frequent accidents)
Half his $7k rent
Moving costs and other random expenses if they occur unexpectedly
Luxury car lease and all expenses for his now ex-girlfriend
Frequent interest free "loans" from the company, that he's paying back on about a 50-year timeline - totaling close to $100k by now.
Occasional "bonuses" to his paycheck whenever he does payroll. 
Pilot lessons and license
Legal bills

That's just what we know about.  Paycheck to paycheck, no savings, and does payroll or grabs another loan whenever he's short.  Draining that company dry.

[Laura33]

I suspect part of this weird answer is the availability of credit.  My brother and SIL used to have what I'd call middle-class-professional jobs (teacher + young IT guy for a company), and they thought of money in terms of whether they could continue to afford the minimum payments on their credit cards.  In that world, you're always going to "feel" like you're paycheck to paycheck, because even if you have a light spending month, any extra goes to the CC; OTOH, it feels like you can easily meet your needs, because if you have a high spending month, you're fine as long as the CCs aren't maxed out -- you can float the overage.

I also think these broad studies aren't typically useful, because they hide so much variability.  Higher salaries are usually correlated with higher-COL areas, and often come from jobs that require at a minimum a 4-yr college degree, if not a JD/MD/Masters.  Someone making $200K in San Jose probably is living paycheck to paycheck -- but even if they're not, they're going to feel like they are, because they can't even get close to affording even a very basic house.  OTOH, if you can make $200K in many other parts of the country, you'd have to work pretty hard to live paycheck to paycheck.

Finally, the lifestyle creep that @Malcat refers to comes into play here as well.  If you're a lawyer, at a big firm, you're going to be surrounded by people who drive fancy cars and live in expensive neighborhoods, so you anchor to that as being "normal."  So you either buy the fancy car, or you struggle by with your beater while you pay off your $200K in law school loans and feel like you'll never catch up.  And then when you do make partner and buy the big house and all that, you again anchor to the standards in your neighborhood, and suddenly things that seemed optional become necessities -- when every block party for years degrades to a discussion about how the local schools are really going downhill and getting dangerous, somehow private school becomes a top priority (because why are you working so hard to make all that money if you're going to screw over your kid?).  And then your partners at work talk about their second homes, and your neighbor talks about their great vacation in St. Bart's, and before you've even noticed it, you've once again increased your spending to meet your income, without even thinking of or realizing it.

Truly, the best decision we made was buying in "less" of a neighborhood than we could have afforded.  It's been a tremendous benefit being surrounded every single day by government workers and teachers who drive Toyotas and Subarus and send their kids to public schools.

[Just Joe]

DW and I had a startle at the beginning of this month when there was more than usual money left over which we usually roll into a different account. Wait - didn't we pay the mortgage or ??? No, that was alot more than our mortgage. We looked back through our account activity and everything is good, we just spent less - despite inflation and a couple of DIY projects.

Once upon a time we were paycheck to paycheck just like everyone else. Thankfully (and strategically) no more. We've tried hard to grow our income while not growing our lifestyle.

We are trying to remember to go spend a little and have some fun.

[charis]

(because why are you working so hard to make all that money if you're going to screw over your kid?).

This is a very strong belief - if you can afford private school, you'd be insane/crappy parent not to do it.  My parents tried to offer to "help" with private school tuition when my oldest was starting kindergarten because they thought $$ was the reason we were going public.  There's pressure from all sides.  (I'm not taking $ from my elderly parents even if I wanted private school)

DW and I had a startle at the beginning of this month when there was more than usual money left over which we usually roll into a different account. Wait - didn't we pay the mortgage or ??? No, that was alot more than our mortgage. We looked back through our account activity and everything is good, we just spent less - despite inflation and a couple of DIY projects.

Once upon a time we were paycheck to paycheck just like everyone else. Thankfully (and strategically) no more. We've tried hard to grow our income while not growing our lifestyle.

We are trying to remember to go spend a little and have some fun.

Same here.  We are technically running a P2P play with our income, but a couple of clicks to stop auto contributions could end that.

[2sk22]

...
Truly, the best decision we made was buying in "less" of a neighborhood than we could have afforded.  It's been a tremendous benefit being surrounded every single day by government workers and teachers who drive Toyotas and Subarus and send their kids to public schools.

We also lucked out in a similar way. Many years ago, we bought our house (we still live there) in a thoroughly middle class town solely because it was half way between our respective workplaces. Our two daughters had a good education in our public school system and both are doing well, the younger is in college and the older one in grad school. Our school system could, at best, be described as being in the top 1/3 of the school districts in our state. The girls were exposed to people from a wide range of socio-economic status and it did them a lot of good.

[afox]

If I was chatting with coworkers, I would probably admit we’re living paycheck to paycheck too. You know, after I pay the bills and put everything else into investments…there’s just nothing left.

agreed here.  If they didn't define what that meant then it's possible people thought this.

Exactly. Without defining what "living paycheck to paycheck" means this is pretty meaningless clickbait.

I would define "living paycheck to paycheck" as: having less than one months spending in savings and saving less than say 1-2% of pay. Somehow I doubt that many 6 six figure salary workers meet this criteria.

[CrustyBadger]

I found a kind of definition from the organization that did this "study":

https://ir.lendingclub.com/news/news-details/2022/23-of-the-U.S.-Population-Now-Lives-Paycheck-to-Paycheck/default.aspx

Living paycheck to paycheck means devoting all of one's salary to expenses with little to nothing left over at the end of the month, yet many of these consumers remain credit worthy, actively managing their cash flows in real time. In fact, close to one-quarter of consumers living paycheck to paycheck report a credit score higher than the FICO average of 750.

Also this detail - the group of "paycheck to paycheck" consumers who do not report difficulty paying their bills seem to be maxing out their credit card limits.  I.e. I think they are using what YNAB calls the "credit card" float - they are paying this months expenses with a credit card, and then using their paycheck to pay the CC bill in full. Meaning they need to use credit card for this month's expenses.

Paycheck-to-paycheck consumers are three times as likely to revolve credit card debt and carry higher monthly balances overall. Those consumers who never pay their credit balances in full also tend to hold more credit cards than average. PYMNTS' research finds that 29% of credit card holders "always" or "usually" revolve their balances.

On average, credit card holders have approximately two credit cards, which rises to three credit cards among those not likely to pay their credit card in full (i.e., those who "always" or "usually" have a revolving balance). Moreover, the data finds that the average sum of monthly balances over the last six months for those who always revolve balances on their credit cards is triple the average of those who always pay in full.

Struggling consumers also tend to nearly saturate the average credit card spending limit of $4,700, declaring an average balance of $3,800. Paycheck-to-paycheck consumers not struggling to pay their bills report an average spending of $3,100 and a limit of $6,500. Consumers not living paycheck to paycheck report an average spending of $2,100 and a $9,000 limit.Many paycheck-to-paycheck consumers remain creditworthy, maintain good credit scores, and are apt to tap into consumer loans, credit cards and other payment options such as personal loans to manage their cash flows.

[mistymoney]

thanks @CrustyBadger!

[vand]

P2P is not a very contentious term. It's generally accepted to mean that you aren't able to maintain your current standard of living if you missed one month of income.   The obvious inverse definition of that is that you are not making any meaningful contribution to savings.

[Laura33]

(because why are you working so hard to make all that money if you're going to screw over your kid?).

This is a very strong belief - if you can afford private school, you'd be insane/crappy parent not to do it.  My parents tried to offer to "help" with private school tuition when my oldest was starting kindergarten because they thought $$ was the reason we were going public.  There's pressure from all sides.  (I'm not taking $ from my elderly parents even if I wanted private school)

This is one thing I truly do not comprehend.  We bought our home in part because of the schools; it's not the wealthy neighborhood with the super-high test scores, but the test scores are better than the socioeconomic numbers would suggest.*  And homes in our neighborhood cost significantly more than homes in the adjacent school district (we're in the "wrong" MS district, and based on recent sales, that is probably costing us 15- 20% in home value, even though it's the "right" HS; the homes in the "wrong" HS are probably 40-50% less).  So once you've paid hundreds of thousands of dollars more to be in a better school district, why in the world would you then ignore that district and send your kids to private school??  Totally illogical to me.  I mean, I can see kid-specific situations (e.g., we considered a private school that specializes in ADHD kids for DD at one point), but to just ignore the benefit you're paying for every single month makes no sense. 


*It's also my alma mater, so I know from personal experience how important that broader socioeconomic spread was in learning all the stuff that isn't taught.

[Abe Froman]

I suspect part of this weird answer is the availability of credit.  My brother and SIL used to have what I'd call middle-class-professional jobs (teacher + young IT guy for a company), and they thought of money in terms of whether they could continue to afford the minimum payments on their credit cards.  In that world, you're always going to "feel" like you're paycheck to paycheck, because even if you have a light spending month, any extra goes to the CC; OTOH, it feels like you can easily meet your needs, because if you have a high spending month, you're fine as long as the CCs aren't maxed out -- you can float the overage.

I also think these broad studies aren't typically useful, because they hide so much variability.  Higher salaries are usually correlated with higher-COL areas, and often come from jobs that require at a minimum a 4-yr college degree, if not a JD/MD/Masters.  Someone making $200K in San Jose probably is living paycheck to paycheck -- but even if they're not, they're going to feel like they are, because they can't even get close to affording even a very basic house.  OTOH, if you can make $200K in many other parts of the country, you'd have to work pretty hard to live paycheck to paycheck.

Finally, the lifestyle creep that @Malcat refers to comes into play here as well.  If you're a lawyer, at a big firm, you're going to be surrounded by people who drive fancy cars and live in expensive neighborhoods, so you anchor to that as being "normal."  So you either buy the fancy car, or you struggle by with your beater while you pay off your $200K in law school loans and feel like you'll never catch up.  And then when you do make partner and buy the big house and all that, you again anchor to the standards in your neighborhood, and suddenly things that seemed optional become necessities -- when every block party for years degrades to a discussion about how the local schools are really going downhill and getting dangerous, somehow private school becomes a top priority (because why are you working so hard to make all that money if you're going to screw over your kid?).  And then your partners at work talk about their second homes, and your neighbor talks about their great vacation in St. Bart's, and before you've even noticed it, you've once again increased your spending to meet your income, without even thinking of or realizing it.

Truly, the best decision we made was buying in "less" of a neighborhood than we could have afforded.  It's been a tremendous benefit being surrounded every single day by government workers and teachers who drive Toyotas and Subarus and send their kids to public schools.

Glad you are back Laura33 - missed your insights.

What you say about lifestyle creep is so true - and in many ways sneakily hidden unless you actively guard against it. I saw the active pull of lifestyle creep in a few ways at work. When working my way up from Sr. Analyst to VP -

Lunch  The Sr. leadership (the boys including owner, CEO, VP #1, and VP #2 (me)) would always go get lunch together. One or another would walk to the other's office and ask where we are going. It was always a local spot - sometimes sit down - sometime carry out. The good part of it was facetime with THE leadership - and ability to move/influence decisions. The bad part was nearly spending $15 on average 3-4 times a week. Was it worth it? Maybe...? Meaning I was able to get access to projects - make points that would otherwise not happen. Did it positively affect my bonus - I think so. But the money I am sure added up big time. I got to a point where I would go get the cheaper option myself or bring my own - but I would at least do that lunch with the boys 1-2 a week to keep the relationship.

VP Sales   You know the type - he was it. He had a nice house (not opulent but expensive in a NICE part of the state). Had the Christmas parties there, was a member at a very exclusive golf club, would get a new car every few years, etc, etc, etc. He would relate to me very occasionally that he would need to go to CEO/Owner to get a raise, move on a bonus early - so that he could pay bills. WHAT!? I was thinking. He would tell me of his family's lake house property, and days of old at his old company when the yearly sales bonus would come - he would go buy a new classic car (like 70s T-Bird). So when he got divorced, forced to move into an apartment - I felt bad, but couldn't help but think some of it was self inflicted. I had asked him why he bought all these things - and he said this is what people in his position do - almost as a sign to potential customers that he is THAT good a salesman if he can afford all this.

And my car I had been driving my same old Honda Accord for over 300K miles and guys at work would always give me a hard time about me being CHEAP - and not getting a new car. This peeved me. Almost as much as the time I was in a golf tourney scramble - and my teammates busted my ass for not spending $40 on buying mulligans! I mean - who are you to tell ME how to spend my money!? In any case I felt like driving that car so long I got the most amount of value I could from it. Especially when I would see my VP counterpart with his brand new pimped out Jeep in the shop all the time.

Secretly by not spending all that money - and guarding against lifestyle creep - as much as I could/did - I felt like I was playing a game where they were all losing and I was winning. Maybe that is still true - because now  I am spending more time golfing, sailing, with my kids, helping them with homework - while they are still working - stressing over the next milestone, KPI, deliverable.
Part of this game was thinking about the future value of a dollar. The younger I was - the more valuable it was - but on average in my 30s - $1 saved might have equated to $40-$45 in the future. That adds up to a lot of Benjamin's.

[Much Fishing to Do]

There's a partner at my Co. that is 65 and struggling to not get pushed out (once you get up to that age PLUS don't bring in enough new revenue sources you know your time is short).  I'm pretty sure the partners there make close to $1M/year (though maybe it was only half that not that many years ago, they've done well lately).  Very likeable guy that, given this recent struggle, I just assumed was one of those that defined themselves by their job and wouldn't know what else to do without it.  Never considered money was an issue.  But in recent conversation it was made clear he "just had never planned for retirement financially....and really needs to make a few more years to be set up for it".   

Yikes.

[bryan995]

200k is really not that much living in HCOL or VHCOL (CA) with higher taxes, especially if you have a family with small children. 

$200k/yr =  ~$12,000/mo net.

-------------------------------
$4500/mo (mortgage - this is now a tiny junky 2/1 condo)
$3000/mo (daycare for 2)
$1000/mo (food for family of 4)
$300/mo (utilities)
$500/mo (shopping/clothes)
$1500/mo (401k person 1)
$1500/mo (401k person 2)
-------------------------------
$12,300/mo - just hitting the major line items

Granted most folks with a >$200k/yr base salary also make a $50,000 yearly bonus or another $200k/yr in stock awards.  Or have a spouse making similar :)

At higher incomes it is also far more efficient to save time and pay a bit more for convenience.  That saved time can to be devoted to work to accelerate the next promotion/bonus.  Far more efficient to work towards the $25,000 raise or the $50,000 bonus than it is to cut your food budget down to $600/mo or find a way to save $ with a less convenient daycare option.  time is money

[Fomerly known as something]

200k is really not that much living in HCOL or VHCOL (CA) with higher taxes, especially if you have a family with small children. 

$200k/yr =  ~$12,000/mo net.

-------------------------------
$4500/mo (mortgage - this is now a tiny junky 2/1 condo)
$3000/mo (daycare for 2)
$1000/mo (food for family of 4)
$300/mo (utilities)
$500/mo (shopping/clothes)
$1500/mo (401k person 1)
$1500/mo (401k person 2)
-------------------------------
$12,300/mo - just hitting the major line items

Granted most folks with a >$200k/yr base salary also make a $50,000 yearly bonus or another $200k/yr in stock awards.  Or have a spouse making similar :)

At higher incomes it is also far more efficient to save time and pay a bit more for convenience.  That saved time can to be devoted to work to accelerate the next promotion/bonus.  Far more efficient to work towards the $25,000 raise or the $50,000 bonus than it is to cut your food budget down to $600/mo or find a way to save $ with a less convenient daycare option.  time is money

I do get tired of the VHCOL apologists in situations like this.  Mind you I live in a VHCOL, I’ve also lived in a very low LOC Saving $3k a month or $36k a year isn’t paycheck to paycheck, it is a paycheck. 

Life in each is different, better in someways worse in others.  I have no desire to return to that low COL area.  Yup I have that 2 bed condo, nope I don’t pay pay as much as you mention.  I was deliberately looking for that condo though.  I’ve had that house with an acre of land, I figured out it didn’t match my desires.

[Metalcat]

200k is really not that much living in HCOL or VHCOL (CA) with higher taxes, especially if you have a family with small children. 

$200k/yr =  ~$12,000/mo net.

-------------------------------
$4500/mo (mortgage - this is now a tiny junky 2/1 condo)
$3000/mo (daycare for 2)
$1000/mo (food for family of 4)
$300/mo (utilities)
$500/mo (shopping/clothes)
$1500/mo (401k person 1)
$1500/mo (401k person 2)
-------------------------------
$12,300/mo - just hitting the major line items

Granted most folks with a >$200k/yr base salary also make a $50,000 yearly bonus or another $200k/yr in stock awards.  Or have a spouse making similar :)

At higher incomes it is also far more efficient to save time and pay a bit more for convenience.  That saved time can to be devoted to work to accelerate the next promotion/bonus.  Far more efficient to work towards the $25,000 raise or the $50,000 bonus than it is to cut your food budget down to $600/mo or find a way to save $ with a less convenient daycare option.  time is money

I do get tired of the VHCOL apologists in situations like this.  Mind you I live in a VHCOL, I’ve also lived in a very low LOC Saving $3k a month or $36k a year isn’t paycheck to paycheck, it is a paycheck. 

Life in each is different, better in someways worse in others.  I have no desire to return to that low COL area.  Yup I have that 2 bed condo, nope I don’t pay pay as much as you mention.  I was deliberately looking for that condo though.  I’ve had that house with an acre of land, I figured out it didn’t match my desires.

I think a few points are being made.

First, there's a difference between VHCOL apologist and commenting on how easy it is to spend huge sums in VHCOL areas while still living a rather modest lifestyle in terms of quality of life.

One is making an excuse and the other is explaining how it's possible for so many high earners to end up cash-strapped.

It is relevant to Mustachianism to explore just how easy it is to feel poor while spending 6 figures a year. That, to me, is one of the most powerful messages of MMM, that you can put all of your energy into earning more, but unless you find a way to control the spend, you can easily just end up living pretty much the exact same quality of life, but for a lot more money.

That's the worst of all scenarios.

I was just visiting a dear friend who is a lawyer and her spouse has an even higher income job, and they are not financially comfortable at all because of their choice of neighbourhood, the insane cost of support in that area for their special needs child, etc, etc.

They spend several times what DH and I do for a quality of life that is dramatically less luxurious. In fact, I bought her a beautiful diamond bracelet not too long ago and she cried because she can't afford such nice things for herself.

It's INSANE how expensive a relatively modest, middle class life can be if you choose key options that make it astronomically expensive. Prioritizing ways to keep those costs lower can have such an enormous benefit.

That means that seeing those run downs of what can make middle class life so costly is important. It drives home that if you have to live an expensive life to do a high income job, then the trade off may not be worth it.

That's important to understand.

Now onto the second point, which is that time is money and it's more lucrative to make more when you are high income compared to cutting costs. Well fancy that! MMM already has a post on this very topic!

You have to actually run the numbers on this and they have to be done with post-tax dollars and marginal tax rates. For me, anything over a certain amount means around 50% marginal tax.

If I'm going to outsource work, it has to cost less per hour of after tax dollars and comparable energy needs to be a good trade off as well.

So for example, if I make $100/hr (~200k/yr, assuming only 40hrs/week) I can work extra hours and pay someone $30/hr to clean and cook my house. After tax that's $50 of my time to pay for $30 of their time. Financially, that's a good deal.

However, if my job takes a huge toll on me, and cooking and cleaning are generally easy things that allow me to mentally take a break from work, move my body, and listen to great audiobooks, then what net gain am I getting by outsourcing?

Whether or not this outsourcing is beneficial entirely depends on how much I enjoy/thrive while doing my work.

So if we're talking about the difference of $20/hr, then that is actually quite comparable to saving a few hundred bucks per month on groceries.

Now remember, this all assumes only 40hrs/week of work. The longer I work per week for my 200K salary, the poorer the math works out for outsourcing.

Now, these numbers are all based on my tax bracket and cost of labour in my region. These are by no means universal numbers. However, they make the point that you actually have to do some math to figure out exactly what outsourcing is worth to you.

It's not as simple as "I make a lot hourly and this doesn't cost a lot hourly to outsource." It's not that simple, but can easily *feel* that way, which is what can trap people in this enormous pit of outsourcing expenses.

[charis]

200k is really not that much living in HCOL or VHCOL (CA) with higher taxes, especially if you have a family with small children. 

$200k/yr =  ~$12,000/mo net.

-------------------------------
$4500/mo (mortgage - this is now a tiny junky 2/1 condo)
$3000/mo (daycare for 2)
$1000/mo (food for family of 4)
$300/mo (utilities)
$500/mo (shopping/clothes)
$1500/mo (401k person 1)
$1500/mo (401k person 2)
-------------------------------
$12,300/mo - just hitting the major line items

Granted most folks with a >$200k/yr base salary also make a $50,000 yearly bonus or another $200k/yr in stock awards.  Or have a spouse making similar :)

At higher incomes it is also far more efficient to save time and pay a bit more for convenience.  That saved time can to be devoted to work to accelerate the next promotion/bonus.  Far more efficient to work towards the $25,000 raise or the $50,000 bonus than it is to cut your food budget down to $600/mo or find a way to save $ with a less convenient daycare option.  time is money

Are people (adults who have stopped growing) really buying clothes on a regular basis?  I haven't made any substantial additions to my wardrobe in years.  It's just a piece here and there from a consignment or second hand shop as needed and maybe a new coat or pair of boots every other year, if that.

[Must_ache]

if they missed a paycheque.

Canadian alert!

[rockstache]

200k is really not that much living in HCOL or VHCOL (CA) with higher taxes, especially if you have a family with small children. 

$200k/yr =  ~$12,000/mo net.

-------------------------------
$4500/mo (mortgage - this is now a tiny junky 2/1 condo)
$3000/mo (daycare for 2)
$1000/mo (food for family of 4)
$300/mo (utilities)
$500/mo (shopping/clothes)
$1500/mo (401k person 1)
$1500/mo (401k person 2)
-------------------------------
$12,300/mo - just hitting the major line items

Granted most folks with a >$200k/yr base salary also make a $50,000 yearly bonus or another $200k/yr in stock awards.  Or have a spouse making similar :)

At higher incomes it is also far more efficient to save time and pay a bit more for convenience.  That saved time can to be devoted to work to accelerate the next promotion/bonus.  Far more efficient to work towards the $25,000 raise or the $50,000 bonus than it is to cut your food budget down to $600/mo or find a way to save $ with a less convenient daycare option.  time is money

Are people (adults who have stopped growing) really buying clothes on a regular basis?  I haven't made any substantial additions to my wardrobe in years.  It's just a piece here and there from a consignment or second hand shop as needed and maybe a new coat or pair of boots every other year, if that.

That one stood out to me too. I think $500/year could be argued for replacing things that get worn out, but $500/mo seems like a typo. Even with the kids growing and changing sizes that seems super high to me.

[bryan995]

200k is really not that much living in HCOL or VHCOL (CA) with higher taxes, especially if you have a family with small children. 

$200k/yr =  ~$12,000/mo net.

-------------------------------
$4500/mo (mortgage - this is now a tiny junky 2/1 condo)
$3000/mo (daycare for 2)
$1000/mo (food for family of 4)
$300/mo (utilities)
$500/mo (shopping/clothes)
$1500/mo (401k person 1)
$1500/mo (401k person 2)
-------------------------------
$12,300/mo - just hitting the major line items

Granted most folks with a >$200k/yr base salary also make a $50,000 yearly bonus or another $200k/yr in stock awards.  Or have a spouse making similar :)

At higher incomes it is also far more efficient to save time and pay a bit more for convenience.  That saved time can to be devoted to work to accelerate the next promotion/bonus.  Far more efficient to work towards the $25,000 raise or the $50,000 bonus than it is to cut your food budget down to $600/mo or find a way to save $ with a less convenient daycare option.  time is money

Are people (adults who have stopped growing) really buying clothes on a regular basis?  I haven't made any substantial additions to my wardrobe in years.  It's just a piece here and there from a consignment or second hand shop as needed and maybe a new coat or pair of boots every other year, if that.

That one stood out to me too. I think $500/year could be argued for replacing things that get worn out, but $500/mo seems like a typo. Even with the kids growing and changing sizes that seems super high to me.

This was just a toy budget. You should notice that it is not even close to complete. That was just a catch all for other household necessities / shopping / insurance / travel / gas / cars / repairs / phones /  internet / fun etc.

Agreed that 500/mo in clothing alone would be extreme :)

The point was that when you make 200k, 400k, 800k, spending $500/mo on whatever should be ok, if it provides you convenience and makes life easier.  Percentage wise it is negligible. Or at least that’s how I view it !

If I could spend even $5,000 extra per month in convenience to focus more on work and see an ultimate $10,000/mo return then I would do it anytime, everytime.    There is more to the equation than cutting expenses to $0.

[Metalcat]

if they missed a paycheque.

Canadian alert!

Yep, there are a lot of us here.

[charis]

200k is really not that much living in HCOL or VHCOL (CA) with higher taxes, especially if you have a family with small children. 

$200k/yr =  ~$12,000/mo net.

-------------------------------
$4500/mo (mortgage - this is now a tiny junky 2/1 condo)
$3000/mo (daycare for 2)
$1000/mo (food for family of 4)
$300/mo (utilities)
$500/mo (shopping/clothes)
$1500/mo (401k person 1)
$1500/mo (401k person 2)
-------------------------------
$12,300/mo - just hitting the major line items

Granted most folks with a >$200k/yr base salary also make a $50,000 yearly bonus or another $200k/yr in stock awards.  Or have a spouse making similar :)

At higher incomes it is also far more efficient to save time and pay a bit more for convenience.  That saved time can to be devoted to work to accelerate the next promotion/bonus.  Far more efficient to work towards the $25,000 raise or the $50,000 bonus than it is to cut your food budget down to $600/mo or find a way to save $ with a less convenient daycare option.  time is money

Are people (adults who have stopped growing) really buying clothes on a regular basis?  I haven't made any substantial additions to my wardrobe in years.  It's just a piece here and there from a consignment or second hand shop as needed and maybe a new coat or pair of boots every other year, if that.

That one stood out to me too. I think $500/year could be argued for replacing things that get worn out, but $500/mo seems like a typo. Even with the kids growing and changing sizes that seems super high to me.

This was just a toy budget. You should notice that it is not even close to complete. That was just a catch all for other household necessities / shopping / insurance / travel / gas / cars / repairs / phones /  internet / fun etc.

Agreed that 500/mo in clothing alone would be extreme :)

The point was that when you make 200k, 400k, 800k, spending $500/mo on whatever should be ok, if it provides you convenience and makes life easier.  Percentage wise it is negligible. Or at least that’s how I view it !

If I could spend even $5,000 extra per month in convenience to focus more on work and see an ultimate $10,000/mo return then I would do it anytime, everytime.    There is more to the equation than cutting expenses to $0.

I don't get this mentality at all.  First (this is a less point), spending an extra $500/month on shopping doesn't provide me any additional convenience or ease.  I have to spend time doing this extra shopping and figuring out where to store/organize my shopping.  My life is already convenient.  I think this is just something that upper income earners tell themselves rather just living a simpler life.  Second, if I have extra time not working, it's spending time with my family, not focusing more on work.  I've never made over 200K as an individual but my life is deliberately not expensive and my investments work harder than I do at this point.

[mm1970]

Lunch  The Sr. leadership (the boys including owner, CEO, VP #1, and VP #2 (me)) would always go get lunch together. One or another would walk to the other's office and ask where we are going. It was always a local spot - sometimes sit down - sometime carry out. The good part of it was facetime with THE leadership - and ability to move/influence decisions. The bad part was nearly spending $15 on average 3-4 times a week. Was it worth it? Maybe...? Meaning I was able to get access to projects - make points that would otherwise not happen. Did it positively affect my bonus - I think so. But the money I am sure added up big time. I got to a point where I would go get the cheaper option myself or bring my own - but I would at least do that lunch with the boys 1-2 a week to keep the relationship.

I know for sure I am missing out on this. I carry my lunch.  Only recently, we've hired a couple of new senior management folks, and the boys' lunch is a thing.   A couple of times I was almost invited...but I was already eating.

I don't get this mentality at all.  First (this is a less point), spending an extra $500/month on shopping doesn't provide me any additional convenience or ease.

This really very much depends on lifestyle and personality.  There are a lot of high income people who get really jazzed by the income and climbing the ladder.  It's not just the raises, bonuses, and current titles - it's the long-term plan to be a CFO or company president.  So, if you are 35 yo, making $200k and you hate cooking or scheduling - it may be worth it to you to order in/ buy the GreenChef monthly subscription and pay for a babysitter to take your kids to and from daycare - so that you aren't missing that 5:30 pm hallway meeting with the CEO.  Basically, time is money.

I'm in my 50s with kids, and this is not my personality.  Yes, you can pry my cleaning service from my cold dead hands.  However, I don't mind cooking to save money on food.  If I had extra time, I'm not spending it on work either!

[wageslave23]

Lunch  The Sr. leadership (the boys including owner, CEO, VP #1, and VP #2 (me)) would always go get lunch together. One or another would walk to the other's office and ask where we are going. It was always a local spot - sometimes sit down - sometime carry out. The good part of it was facetime with THE leadership - and ability to move/influence decisions. The bad part was nearly spending $15 on average 3-4 times a week. Was it worth it? Maybe...? Meaning I was able to get access to projects - make points that would otherwise not happen. Did it positively affect my bonus - I think so. But the money I am sure added up big time. I got to a point where I would go get the cheaper option myself or bring my own - but I would at least do that lunch with the boys 1-2 a week to keep the relationship.

I know for sure I am missing out on this. I carry my lunch.  Only recently, we've hired a couple of new senior management folks, and the boys' lunch is a think.   A couple of times I was almost invited...but I was already eating.

I don't get this mentality at all.  First (this is a less point), spending an extra $500/month on shopping doesn't provide me any additional convenience or ease.

This really very much depends on lifestyle and personality.  There are a lot of high income people who get really jazzed by the income and climbing the ladder.  It's not just the raises, bonuses, and current titles - it's the long-term plan to be a CFO or company president.  So, if you are 35 yo, making $200k and you hate cooking or scheduling - it may be worth it to you to order in/ buy the GreenChef monthly subscription and pay for a babysitter to take your kids to and from daycare - so that you aren't missing that 5:30 pm hallway meeting with the CEO.  Basically, time is money.

I'm in my 50s with kids, and this is not my personality.  Yes, you can pry my cleaning service from my cold dead hands.  However, I don't mind cooking to save money on food.  If I had extra time, I'm not spending it on work either!

The other point to consider is that it's not always a choice between doing chores or working more. A lot of jobs have a set amount of hours. I would love to be part time because it would lead to a more balanced life, but that's not an option. So if I can pay someone $50 per hour to give me more free time, it's worth it. Because my free time is a very valuable commodity. More so while working full time than it will be on the backend when I'm retired and working an extra hour when I have the whole rest of the week free may even be enjoyable.  Right now, while working full time and a baby at home, those extra one or two hour chores seem like climbing Mt everest. I make about $50/hr but if someone asked me to work an extra hour, I'd demand $100. Because the marginal utility of those free hours keeps going up the scarcer they become.  I've turned down side gigs that would pay $200 per hr. And I've hired out jobs around the house that I'm effectively paying $200 per hour not to do. It's all a tradeoff and you need to sit back and reflect logically on it. Everyone will have their own $ value.

[bryan995]

Lunch  The Sr. leadership (the boys including owner, CEO, VP #1, and VP #2 (me)) would always go get lunch together. One or another would walk to the other's office and ask where we are going. It was always a local spot - sometimes sit down - sometime carry out. The good part of it was facetime with THE leadership - and ability to move/influence decisions. The bad part was nearly spending $15 on average 3-4 times a week. Was it worth it? Maybe...? Meaning I was able to get access to projects - make points that would otherwise not happen. Did it positively affect my bonus - I think so. But the money I am sure added up big time. I got to a point where I would go get the cheaper option myself or bring my own - but I would at least do that lunch with the boys 1-2 a week to keep the relationship.

I know for sure I am missing out on this. I carry my lunch.  Only recently, we've hired a couple of new senior management folks, and the boys' lunch is a think.   A couple of times I was almost invited...but I was already eating.

I don't get this mentality at all.  First (this is a less point), spending an extra $500/month on shopping doesn't provide me any additional convenience or ease.

This really very much depends on lifestyle and personality.  There are a lot of high income people who get really jazzed by the income and climbing the ladder.  It's not just the raises, bonuses, and current titles - it's the long-term plan to be a CFO or company president.  So, if you are 35 yo, making $200k and you hate cooking or scheduling - it may be worth it to you to order in/ buy the GreenChef monthly subscription and pay for a babysitter to take your kids to and from daycare - so that you aren't missing that 5:30 pm hallway meeting with the CEO.  Basically, time is money.

I'm in my 50s with kids, and this is not my personality.  Yes, you can pry my cleaning service from my cold dead hands.  However, I don't mind cooking to save money on food.  If I had extra time, I'm not spending it on work either!

The other point to consider is that it's not always a choice between doing chores or working more. A lot of jobs have a set amount of hours. I would love to be part time because it would lead to a more balanced life, but that's not an option. So if I can pay someone $50 per hour to give me more free time, it's worth it. Because my free time is a very valuable commodity. More so while working full time than it will be on the backend when I'm retired and working an extra hour when I have the whole rest of the week free may even be enjoyable.  Right now, while working full time and a baby at home, those extra one or two hour chores seem like climbing Mt everest. I make about $50/hr but if someone asked me to work an extra hour, I'd demand $100. Because the marginal utility of those free hours keeps going up the scarcer they become.  I've turned down side gigs that would pay $200 per hr. And I've hired out jobs around the house that I'm effectively paying $200 per hour not to do. It's all a tradeoff and you need to sit back and reflect logically on it. Everyone will have their own $ value.

I am the exact opposite :)

I see it as more efficient to simply work more hours now, while one is still in their prime earning years, and still on an exponential income curve, than it would be to slow down and do it over a longer term time horizon.

Work 60 (extreme) hours for the next 6.6 years and then FIRE? (3-5 promotions)
Work 40 (leisure)  hours for the next 10 years and then FIRE? (0-3 promotions)

A 10-20% salary increase becomes quite substantial when base-salary is >200k. And it compounds...

Same concept as working part time in retirement, absolutely not.  Why trade 1 less year working now at >$200+/hr for the risk of working multiple years post-FIRE (part-time) at ~$20/hr?.  I will just do it now, overshoot my FIRE goal and push that risk to 0.

If income stops growing, then yes it makes less and less sense to work more or spend more for convenience. Or even work more than the bare minimum.  But if income is stalling, you can always hop around companies to kick start things again.

My guess is that many of the folks who are living paycheck-to-paycheck at >200k are simply in a temporary lull.  Income will continue to increase while most expenses fall (fixed cost housing, child care etc). 

#TeamRatRaceToTheFinish

[charis]

I'd do 35 for 10 years in a heartbeat over 60 for 6.6 years, or which is most of my children's remaining childhoods.  But (1) they are also in school so I'm fine with working during that time and (2) I already have enough saved and low enough expenses that working longer hours for more $ isn't enticing anymore.