Author Topic: Six figure incomes and facing financial ruin  (Read 12944 times)

Bigote

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Six figure incomes and facing financial ruin
« on: September 08, 2014, 07:55:24 AM »
200k income, 300k credit card debt, and other stories.

http://online.wsj.com/articles/six-figure-incomesand-facing-financial-ruin-1409936418




if you run into a pay wall, just put the below in google and you'll be able to access the article from there:

"Hey, big spender: Pulling down a six-figure salary can make your dreams come true, but it doesn't eliminate the risk of living beyond your means."


Chranstronaut

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Re: Six figure incomes and facing financial ruin
« Reply #1 on: September 08, 2014, 08:20:53 AM »
People are fascinated with how "the other half" lives, so I have a hope that they can also learn from how "the other half" pays off debt. 

But I'm usually just disappointed:
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"There are other useful strategies. Document your income and your necessary spending, experts say, so that you have a clear sense of what is disposable income"

I hate the phrase "disposable income."  That's the antithesis of mustachianism.  Yes, you should document all income and expenses, but then NOT waste what is left after expenses.  It's discretionary, not disposable.  You choose to spend it or save it, but this mentality lets big spenders pretend like it's not their fault for hemorrhaging money instead of holding on to it.

Bill Gates can literally set fire to piles of money every day and not even notice it in his net worth.  THAT'S disposable.

This makes me truly sad:
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"...clients who got into financial trouble soon after losing their jobs often weren't willing to scale back their lifestyle.

"They wanted to keep impressing their neighbors and they didn't want their spouse or kids to have to sacrifice," he says."

I can't imagine making that kind of judgement call.

LalsConstant

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Re: Six figure incomes and facing financial ruin
« Reply #2 on: September 08, 2014, 08:35:49 AM »
You know as much as I beat myself up over past mistakes sometimes the fact is I was never worse off than 45 grand in the hole.

Without a medical debt situation it baffles me people get into the hundreds of thousands.  Even if I had financed my entire education that would have been at most another 30 grand for a total of 75 thousand in the hole.

The point is I was an idiot for many years and couldn't dig deeper than 50 grand despite conscious efforts to do so.

I guess having uncovered options go south on you could do it or buying a house and having it burn without any insurance could do it too, but my mind boggles at 300 grand on credit cards.

dude

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Re: Six figure incomes and facing financial ruin
« Reply #3 on: September 08, 2014, 08:55:56 AM »
The hypothetical spending for the $400K family is pretty astounding.  But at least they're putting $12k/year into retirement . . .  doh!

vivophoenix

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Re: Six figure incomes and facing financial ruin
« Reply #4 on: September 08, 2014, 10:48:54 AM »
this makes me stop beating myself up over my student loans.
 i panic over the fact that i live on under of half of my take home ( tbh i do not include my student loan payment as part of the money i live off of)

pom

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Re: Six figure incomes and facing financial ruin
« Reply #5 on: September 08, 2014, 10:58:37 AM »
The hypothetical spending for the $400K family is pretty astounding.  But at least they're putting $12k/year into retirement . . .  doh!

Yeah, awesome 3% savings rate!

Should be enough to retire in less than 75 years.

Helvegen

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Re: Six figure incomes and facing financial ruin
« Reply #6 on: September 08, 2014, 12:01:54 PM »
Quote
It wasn't her first brush with borrowing woes—Ms. Flores declared bankruptcy in 2005 after amassing about $500,000 in debt.

I just can't.

MgoSam

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Re: Six figure incomes and facing financial ruin
« Reply #7 on: September 08, 2014, 12:11:37 PM »
All those dollars and no sense!

vivophoenix

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Re: Six figure incomes and facing financial ruin
« Reply #8 on: September 08, 2014, 12:55:46 PM »
Quote
It wasn't her first brush with borrowing woes—Ms. Flores declared bankruptcy in 2005 after amassing about $500,000 in debt.

I just can't.

i wonder if she decided to finally get her house in order, was because it was too soon to file another one

Daniel

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Re: Six figure incomes and facing financial ruin
« Reply #9 on: September 08, 2014, 05:16:19 PM »
There are times when I wish my food budget was $525 a month, but a week! That's crazy.

4alpacas

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Re: Six figure incomes and facing financial ruin
« Reply #10 on: September 08, 2014, 05:45:15 PM »
The comments are crazy too.

"The Laffer Curve is real, it is just human ego preventing recognition of the fact that making $200k per year is not worth it these days.  You are better off earning $75k and becoming a taker. You will have less stress, more free time, and the government will ensure your safety should you fall."

"Hmmm. Maybe I should stop spending close to $300 dollars to subscribe to the Wall Street Journal."

"Now I want to see a story about how a couple makes it with two kids that makes a combined  income of $65,000 to $70,000, spending $13,000 a year on a mortgage or rent, $5,200 hundred a year on food, insurance, utilities, property taxes, municipal fees, school supplies, clothes, health insurance and so on. I suspect that most Americans in this income bracket can save very little, which is a great worry."

"Those folks are contributing between $9,945 and $10,710 a year toward their future pension and medical via their employee and employer payroll taxes.  In addition they are reducing their future housing costs via their $13,000 in mortgage payments.  They wouldn't really need to save very much more...but they would need to save something...to maintain the same standard of living in their senior years."

Elderwood17

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Re: Six figure incomes and facing financial ruin
« Reply #11 on: September 08, 2014, 07:29:49 PM »
There are times when I wish my food budget was $525 a month, but a week! That's crazy.
.

I can't imagine spending over two grand a month on food!

rubor

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Re: Six figure incomes and facing financial ruin
« Reply #12 on: September 08, 2014, 07:36:30 PM »
Yeah, the $525 per week for food for a family of four was the most astounding part of the ridiculous hypothetical family's spending. I don't think my family could physically eat $525 worth of food every week.

TreeTired

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Re: Six figure incomes and facing financial ruin
« Reply #13 on: September 08, 2014, 08:42:17 PM »
How can you write an article like that -  for the Wall Street Journal no less  -  without acknowledging Sherman McCoy from "Bonfire of the Vanities."   He was not quite making ends meet on over $600k per year, and that was quite a few years ago. 

Wait!! Here is the best part!  The hypothetical family with the expenditures that exceed income was created by............
Quote
  Northern Trust Wealth Management  NTRS -0.72%   at the request of The Wall Street Journal, to illustrate how high earners can end up in the red.

remember Northern Trust ??  They wrote the book on overspending!!  LOL!

http://www.tmz.com/2009/02/24/northern-trust-bank-bailout/

« Last Edit: September 08, 2014, 08:56:50 PM by NC_MJ »

MgoSam

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Re: Six figure incomes and facing financial ruin
« Reply #14 on: September 09, 2014, 07:20:52 AM »
How can you write an article like that -  for the Wall Street Journal no less  -  without acknowledging Sherman McCoy from "Bonfire of the Vanities."   He was not quite making ends meet on over $600k per year, and that was quite a few years ago. 

Wait!! Here is the best part!  The hypothetical family with the expenditures that exceed income was created by............
Quote
  Northern Trust Wealth Management  NTRS -0.72%   at the request of The Wall Street Journal, to illustrate how high earners can end up in the red.

remember Northern Trust ??  They wrote the book on overspending!!  LOL!

http://www.tmz.com/2009/02/24/northern-trust-bank-bailout/


It should be noted (unless I am mistaken), that Northern Trust was largely solvent during the crisis and did not request a bailout.

brooklynmoney

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Re: Six figure incomes and facing financial ruin
« Reply #15 on: September 09, 2014, 08:49:00 PM »
The woman in the article if I'm not mistaken made 200k yet had a personal chef lol. I don't even have a cleaning person (which makes me an anomaly among my peers)

horsepoor

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Re: Six figure incomes and facing financial ruin
« Reply #16 on: September 09, 2014, 09:50:13 PM »
Yeah, the $525 per week for food for a family of four was the most astounding part of the ridiculous hypothetical family's spending. I don't think my family could physically eat $525 worth of food every week.

While also spending $21K/yr on dining out and entertainment. 

Basically, cut one category from that stupid and ridiculous budget and they're not in the hole.

Scandium

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Re: Six figure incomes and facing financial ruin
« Reply #17 on: September 11, 2014, 07:09:04 AM »
holy.shit. I love the example

"reasonable examples of what such a family might spend, "
"live comfortably"
Which means:
  • $25,000 on home maintenance! How do you do this? I could buy new set of Dewalt tools every year for that..
  • $15,000 on utilities, cellphones and other household bills
  • and of course $30,000 a year on groceries
  • $9,000 annually on car insurance. eh? This is not real..?

The $60k car every four years is actually the most realistic item in my opinion, based on the cars I see around. The other things just sounds absurd.

Self-employed-swami

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Re: Six figure incomes and facing financial ruin
« Reply #18 on: September 11, 2014, 10:13:42 AM »
I can't find the article anywhere, that isn't behind the paywall.

4alpacas

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Re: Six figure incomes and facing financial ruin
« Reply #19 on: September 11, 2014, 10:23:58 AM »
I can't find the article anywhere, that isn't behind the paywall.
Google the title of the article.  It will pop up in the search results, and you can read it for free.

Self-employed-swami

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Re: Six figure incomes and facing financial ruin
« Reply #20 on: September 11, 2014, 10:30:40 AM »
I can't find the article anywhere, that isn't behind the paywall.
Google the title of the article.  It will pop up in the search results, and you can read it for free.

They all direct back to WSJ for me.

Hugerat

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Re: Six figure incomes and facing financial ruin
« Reply #21 on: September 11, 2014, 10:43:34 AM »
This article is hilarious! Wait, I can do it too. I mean, just look at how little of my $53,000 salary is left when I spend Eleventy Bazillion of it on cocaine and hookers!

Jellyfish

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Re: Six figure incomes and facing financial ruin
« Reply #22 on: September 11, 2014, 10:43:47 AM »
I can't find the article anywhere, that isn't behind the paywall.
Google the title of the article.  It will pop up in the search results, and you can read it for free.

They all direct back to WSJ for me.

I hit the pay wall too, but when I put the entire title of the article in the google search box it worked.  I think it still links to the WSJ site, but when I clicked through I could access the entire article.

BTW I work in executive recruiting for a major consulting firm. The number of people I deal with who are offered high six figure salaries or seven figure salaries who "need" six figure signing bonuses due to cash flow constraints is mind blowing.  We run a credit check on our partner candidates (they have to buy into the firm) and the debt some carry is shocking.  Bankruptcies, tax liens, I've seen it all.  Very few Mustachians among the lot.

dude

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Re: Six figure incomes and facing financial ruin
« Reply #23 on: September 11, 2014, 10:56:16 AM »
I can't find the article anywhere, that isn't behind the paywall.
Google the title of the article.  It will pop up in the search results, and you can read it for free.

They all direct back to WSJ for me.

I hit the pay wall too, but when I put the entire title of the article in the google search box it worked.  I think it still links to the WSJ site, but when I clicked through I could access the entire article.

BTW I work in executive recruiting for a major consulting firm. The number of people I deal with who are offered high six figure salaries or seven figure salaries who "need" six figure signing bonuses due to cash flow constraints is mind blowing.  We run a credit check on our partner candidates (they have to buy into the firm) and the debt some carry is shocking.  Bankruptcies, tax liens, I've seen it all.  Very few Mustachians among the lot.

I've been in the area where you live -- for sure there are a lot of high-six and seven-figure earners around there!

This comment below that 4alpacas quoted is pretty amazing -- I'd love to see this guy's retirement calculations!

"Those folks are contributing between $9,945 and $10,710 a year toward their future pension and medical via their employee and employer payroll taxes.  In addition they are reducing their future housing costs via their $13,000 in mortgage payments.  They wouldn't really need to save very much more...but they would need to save something...to maintain the same standard of living in their senior years."

For sure if you were a low earner this might apply (as SS alone will replace up to 60% of low earners' incomes), but if you're at the SS max ($117,000/year) AND contribute up to the date of your full retirement age, you're on track to replace 24%.  Make anything over that, and that percentage drops precipitously.


Jellyfish

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Re: Six figure incomes and facing financial ruin
« Reply #24 on: September 12, 2014, 06:28:10 AM »
Nice piece on Jezebel about the WSJ article, I particularly enjoyed the comments at the bottom.

http://jezebel.com/wsj-attempts-to-drum-up-sympathy-for-paupers-making-40-1632130424/all


4alpacas

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Re: Six figure incomes and facing financial ruin
« Reply #25 on: September 12, 2014, 10:46:36 AM »
Nice piece on Jezebel about the WSJ article, I particularly enjoyed the comments at the bottom.

http://jezebel.com/wsj-attempts-to-drum-up-sympathy-for-paupers-making-40-1632130424/all

The comments are priceless! Some of my favorites:

"You cant even fly to europe on $2000..."  This person was harassed in the comments sections. 

"I have 3 kids and a husband. Our vacations do not typically exceed about $5,000. Well, except when we spent an entire week in a family suite on-property at Disney World for our 5 year anniversary- with the kids. That probably came in around $7,500 after food, souvenirs, and upgrading to annual passes. We planned it the entire year- and did not take any other vacations." 
I enjoy the "thriftiness" of this couple. 

"Having gone on a $10000 vacation with my parents and two siblings, I can say it's easy to spend that much. We spent 2 weeks at an all-inclusive resort in Jamaica. For 5 people, $10000 is actually not bad ($2000 per person, about $1350 red-eye round-trip airline tickets). We didn't spend any additional money on food or alcohol. There was tons of live entertainment, a private beach, swim-up bar, scuba lessons. It was a really good time. And that was on a discount.

On the other hand, I have spent $750 on driving up to Edmonton for a weekend. About $150 for gas, and $600 on hotel rooms (for 4 nights because we got snowed in) (including room service). Sure, we spent about $1500 at WEM, but it was a good vacation and definitely the cheapest I've been on sans parents."
What?!

"Hawaii, any of the South Pacific islands, the airfare alone is $1,500-$3,000 per person. A nice oceanfront room can be close to $1k per night."
MUST BE A TROLL!

lolzmonster

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Re: Six figure incomes and facing financial ruin
« Reply #26 on: September 12, 2014, 11:18:03 AM »
I guess Common sense has an inversely proportional relationship for some of these people?

The more the earnings go up, the more common sense goes down :)

Scandium

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Re: Six figure incomes and facing financial ruin
« Reply #27 on: September 12, 2014, 05:44:16 PM »
I don't know, travel I'm torn on. We spent over $15,000 on a 3 week safari in africa. Probably set back FIRE by years.. But likely a once in a lifetime thing. Might not want to do that once we retire at 50. We slept in tents most nights etc. Hell, some of the animals we saw might be extinct by then!


ps; yes this is justification for luxuries
pps: does not apply to Disney world vacations (IMO)
« Last Edit: September 12, 2014, 06:24:58 PM by Scandium »

NumberJohnny5

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Re: Six figure incomes and facing financial ruin
« Reply #28 on: September 13, 2014, 12:36:58 AM »
So, putting ~$10k/yr into retirement is what "rich" people do?

We're below the (Australian) poverty line, and we put more than that in retirement savings (even if you don't count employer super contributions).

I just don't understand. And I should, since we were firmly in the same "make more spend more" camp these people are in. In some ways, knowledge is a good thing. But sometimes, it just makes me less compassionate (hard to feel sympathy for people who are "poor" but have more than we do, or for people who have incomes so high we could retire in two years).

UnleashHell

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Re: Six figure incomes and facing financial ruin
« Reply #29 on: September 13, 2014, 02:03:24 PM »


pps: does not apply to Disney world vacations (IMO)

Disney is 90 minutes down the road from me. I use the threat of a trip to Disney as a warning for my kids. It works.

the boy is 18 this year and hasn't stepping inside Disney yet...

Albert

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Re: Six figure incomes and facing financial ruin
« Reply #30 on: September 14, 2014, 09:01:12 AM »
A two week vacation for a family of four half way across the planet could easily cost 10k and without too much luxury.* One only needs to consider whether it's affordable or not. People making as much as they do clearly could if only they spent a bit less on some other nonsense.

*airfare 1,200$ x 4 + 2 hotel rooms x 14 x 100$ =7,600$. Add another 50$ a day for food, the same for a rental car/gas and again the same for any random entertainment and we are more or less at 10k. Of course much cheaper travel is possible even if far away, just wanted to show that it's not necessary to spend like a drunken sailor to have a vacation that expensive.