America's High-Earning "Poor"

[dude]

Interesting numbers regarding assets and debt-asset ratio for people earning $50k-$75k and $75k-$100k.

http://qz.com/520414/the-high-earning-poor/?utm_source=YPL

[TheAnonOne]

I've seen this everywhere.

I have also noted that people THINK they are high-earning and thus spend accordingly.

75k a year is nothing, why are you shopping at all the pricy boutique stores?

Hell, I am on track to make 200k this year (more once you count my wife), and I still don't think it's that much. I feel this mindset works well.

[thd7t]

Let's start queuing up all the high-income earners who don't think that $75k-$100k is upper middle class, then look at how the article specifies LCOL areas.

[Norioch]

75k is high. 200k is crazy high.

[MVal]

75k is high. 200k is crazy high.

Uh, yeah. I feel triumphant at my apparently paltry $40K/yr. It is the most I've ever made and I'm 33. I'd be thrilled with more, but I'm already excited by the fact I am saving $1000+ per month for my 'stache.

I personally don't understand why anyone who makes 6 figures would ever work more than a few years since you could easily FIRE in less than a decade.

[starguru]

I think the more salient point is that regardless of whether you consider 75k-100k "high" income, it should be enough to consistently save something.  The balances mentioned in the article are downright pathetic.

[Giro]

I do agree that 75k definitely goes quickly and a 75k household should not be spending as if they are upper-middle class.  I liked the definition awhile ago that upper middle class is not how much income you earn, it's your net worth.  If you are earning 75k a year and not saving a dime and not increasing your net worth, you are not upper middle class, you aren't even middle class, you are just as poor as someone making 10k and not saving a dime.  Actually, you may be worse off because the 10k household probably has no debt. 

[AlanStache]

...
I personally don't understand why anyone who makes 6 figures would ever work more than a few years since you could easily FIRE in less than a decade.

:-)

If you get in the right mind set from the start, maybe.  But some life style inflation is very hard to ovoid and higher paying jobs may have higher costs of living.  Then toss in kids or aging parents and things get less clear.  Then even with the MMM mind set some might choose to work a bit longer to live in a bit nicer house or travel a bit more or to let the spouse go back to school.  Making 6 figures gives one options and many people take them despite them delaying FIRE.  I would say the simple math behind early retirement starts to break down when the savings rates get really high or just life can be a bit more complicated and a one dimensional excel table can predict.  Clearly Pete did this and it can be done. 

[marty998]

I personally don't understand why anyone who makes 6 figures would ever work more than a few years since you could easily FIRE in less than a decade.

When you have to pay $26,000 a year in tax on that income you may think differently :)

It's never that simple however. Everyone has different motivations and different expense totals and types that they feel comfortable with.

[thd7t]

I think the more salient point is that regardless of whether you consider 75k-100k "high" income, it should be enough to consistently save something.  The balances mentioned in the article are downright pathetic.

An odd thing about the balances in the article is that the lowest balance group is "outside of retirement".  People earning $75k could max a 401k and have a respectable after-tax savings rate.  If their expenses were low, they probably wouldn't need much emergency fund and would be saving well in only retirement accounts.  However, I know that's not the norm in the study.  I also think that this study shows how weird it is that so many people think of their homes as a driver of wealth.  I'm sure a lot of these people own (or partially own) homes and feel that it makes them prosperous.

[Yankuba]

I personally don't understand why anyone who makes 6 figures would ever work more than a few years since you could easily FIRE in less than a decade.

Because people don't want to live on $10K, $20K or even $30K per year. There are people on these boards who pay $12K per year in property taxes.

[zephyr911]

I personally don't understand why anyone who makes 6 figures would ever work more than a few years since you could easily FIRE in less than a decade.

When you have to pay $26,000 a year in tax on that income you may think differently :)

It's never that simple however. Everyone has different motivations and different expense totals and types that they feel comfortable with.

Paying that much on low six figures is embarrassing. DW and I combine for 130+ this year and will probably pay <4k in fed/state taxes after all our investment deductions. We have a few advantages that not all do, but not that much...

[Zikoris]

I'm always amazed at people's comfort level for spending vs their income. We know several couples who make similar incomes to us and have no problem paying double our rent, doing daily coffee and restaurants, buying new clothes and shoes every month, and having cars (that they "need", despite having normal office jobs in a city with excellent public transit, and bike paths/sidewalks everywhere). I don't know how much money I'd need to make before any of those things seemed reasonable, but it would be a lot.

[runningthroughFIRE]

I personally don't understand why anyone who makes 6 figures would ever work more than a few years since you could easily FIRE in less than a decade.

When you have to pay $26,000 a year in tax on that income you may think differently :)

It's never that simple however. Everyone has different motivations and different expense totals and types that they feel comfortable with.

Paying that much on low six figures is embarrassing. DW and I combine for 130+ this year and will probably pay <4k in fed/state taxes after all our investment deductions. We have a few advantages that not all do, but not that much...

Are you assuming that these people are married filing jointly?  26K can easily be done if you are filing single or, for some unholy reason, married filing separately.  I also think that the 26K refers to total tax paid, not just federal.  I'm pretty impressed if you can get 130K Gross Income down to ~35K Taxable Income.

[rpr]

Paying that much on low six figures is embarrassing. DW and I combine for 130+ this year and will probably pay <4k in fed/state taxes after all our investment deductions. We have a few advantages that not all do, but not that much...

Would you mind showing your calculations? I'm curious how you do this.

[BarkyardBQ]

2 state employees MFJ, with multiple retirement accounts could do something like...

36k (457b)
36k (403b)
11k (T/IRA)
6650 (Family HSA)

[2Birds1Stone]

I'm always amazed at people's comfort level for spending vs their income. We know several couples who make similar incomes to us and have no problem paying double our rent, doing daily coffee and restaurants, buying new clothes and shoes every month, and having cars (that they "need", despite having normal office jobs in a city with excellent public transit, and bike paths/sidewalks everywhere). I don't know how much money I'd need to make before any of those things seemed reasonable, but it would be a lot.

This is a very common theme here as well! My SO and I don't make much for our HCOL area but we have many friends earning way less who spend waaaaaay more. It's sad to see!

I don't think that $100k/yr gross for a family is a ton of money in many parts of the country. I'm not saying it's little. But it's not wealthy by any means, especially when you add kids to the equation.

[rpr]

2 state employees MFJ, with multiple retirement accounts could do something like...

36k (457b)
36k (403b)
11k (T/IRA)
6650 (Family HSA)

That is some serious tax advantaged space. I don't think that having two tax deferred accounts per individual is very common. 

[BarkyardBQ]

2 state employees MFJ, with multiple retirement accounts could do something like...

36k (457b)
36k (403b)
11k (T/IRA)
6650 (Family HSA)

That is some serious tax advantaged space. I don't think that having two tax deferred accounts per individual is very common.

Never mind the fact that these same employees usually have a state pension as well.

Also Standard Deduction and Personal Exemptions
-20600

[powskier]

I personally don't understand why anyone who makes 6 figures would ever work more than a few years since you could easily FIRE in less than a decade.

When you have to pay $26,000 a year in tax on that income you may think differently :)

It's never that simple however. Everyone has different motivations and different expense totals and types that they feel comfortable with.

Paying that much on low six figures is embarrassing. DW and I combine for 130+ this year and will probably pay <4k in fed/state taxes after all our investment deductions. We have a few advantages that not all do, but not that much...

Some of us do not have access to 401k's. The most we can do is max our IRA's. 140k together, about 30k in taxes and 10k in property taxes.

[Squirrel away]

about 25% of upper-middle-class 40- to 55-year-olds have less than $17,500 in financial assets

Wow.

[Malum Prohibitum]

I personally don't understand why anyone who makes 6 figures would ever work more than a few years since you could easily FIRE in less than a decade.

When you have to pay $26,000 a year in tax on that income you may think differently :)

It's never that simple however. Everyone has different motivations and different expense totals and types that they feel comfortable with.

Paying that much on low six figures is embarrassing. DW and I combine for 130+ this year and will probably pay <4k in fed/state taxes after all our investment deductions. We have a few advantages that not all do, but not that much...

Some of us do not have access to 401k's. The most we can do is max our IRA's. 140k together, about 30k in taxes and 10k in property taxes.

  You can't set up a 401(k) or a SEP IRA for your rental business?  Maybe check out this:  http://www.financialsamurai.com/how-to-save-more-than-100000-a-year-pre-tax-open-a-sep-ira-or-solo-401k/

Contribution limits are $53,000, depending upon your income, in addition to the tax advantaged saving you are already doing.

[former player]

I'm not sure I'm getting much useful information out of the article figures, given that they ignore retirement accounts and home equity.  While I was still stashing, nearly all of my capital was in retirement accounts and in home equity.  That was a deliberate choice: I had excellent pension arrangements available and a house in London that is returning 5 times what I've put into it.  Through most of the period 40 - 50 I would have been "financial asset poor" in the terms of that article, but I'm retired at 50 with a comfortable income and financial assets that now put me off the top of those graphs.  Related to the me of 5 or 10 years ago the chosen criteria would have given you a wholly misleading view of my financial position.

[kite]

about 25% of upper-middle-class 40- to 55-year-olds have less than $17,500 in financial assets

Wow.

By what yardstick do they define "upper" I  wonder?

I'm thinking of that checklist with the parquet floors and the certain kinds of drapes & reading materials. 

[honeybbq]

I personally don't understand why anyone who makes 6 figures would ever work more than a few years since you could easily FIRE in less than a decade.

Because people don't want to live on $10K, $20K or even $30K per year. There are people on these boards who pay $12K per year in property taxes.

Exactly. And 2k a month on daycare. The high cost/high income living is not just make 200k and bank 190k of it. It's way more complex most of the time.

[Noodle]

I'm not sure I'm getting much useful information out of the article figures, given that they ignore retirement accounts and home equity.  While I was still stashing, nearly all of my capital was in retirement accounts and in home equity.  That was a deliberate choice: I had excellent pension arrangements available and a house in London that is returning 5 times what I've put into it.  Through most of the period 40 - 50 I would have been "financial asset poor" in the terms of that article, but I'm retired at 50 with a comfortable income and financial assets that now put me off the top of those graphs.  Related to the me of 5 or 10 years ago the chosen criteria would have given you a wholly misleading view of my financial position.

The first chart does count retirement savings; the second does not. I think what they were trying to establish is a) if people are saving for retirement and b) if they have enough liquid funds outside retirement for an emergency. This article really resonated with me given that it is closer to my personal experience...a lot of these studies either include people with a huge range of incomes, or with a wider age of ranges (how much information can you get out numbers that includes 22 year olds and 65 y.o.s?) In my circle of acquaintance I tend to be on the poorer end--everyone I know well enough to discuss money with has much higher household incomes and pretty good financial habits, so lots stashed away--so it was interesting to see where I fell in comparison to people in my actual income band.

I was surprised by how little people with more choices have put away (I mean, if you make 30K, there are limits to how low you can go with housing, utilities etc without living in a hovel). My unscientific hypothesis is that once you have a range of things you could afford (travel OR a smartphone OR a fancy purse OR regular dining out) it is tempting to indulge in more of them than you should.

[bacchi]

about 25% of upper-middle-class 40- to 55-year-olds have less than $17,500 in financial assets

Wow.

By what yardstick do they define "upper" I  wonder?

I'm thinking of that checklist with the parquet floors and the certain kinds of drapes & reading materials.

Considering that 75% of Americans make less than $50k, earning above that looks about right for "upper middle class."

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

[charis]

2 state employees MFJ, with multiple retirement accounts could do something like...

36k (457b)
36k (403b)
11k (T/IRA)
6650 (Family HSA)

That is some serious tax advantaged space. I don't think that having two tax deferred accounts per individual is very common.

Never mind the fact that these same employees usually have a state pension as well.

Also Standard Deduction and Personal Exemptions
-20600

When I was state employee, I only has access to a 457, now I don't have access to any.  My husband is currently a state employee and has only a 403b.

[zephyr911]

By what yardstick do they define "upper" I  wonder?

I don't know why we in the US have become so afraid of that word that we all feel compelled to avoid it so desperately. "Upper middle" means somewhere between slightly above average and substantially above average - let's say 60th-80th percentile. Median family income in the US is $51K and change, so if your household is much above that, you're upper-middle class or maybe even an unqualified upper. OH NO NOT RICH PEOPLEZ!!11 ;)

The interesting thing is that the historical lack of any concept of high savings rates in the collective unconscious means that income and spending/lifestyle have always been conflated. So living on less than the median income while making more, possibly many times more, puts many MMM types in a gray area.

Fuck the labels though, I say. I just say DW and I are high-earning professionals who save a lot for the future (and/or because we're too lazy to work till our 60s).

[MayDay]

^^^ So true Zephyr!

People love to trot out "BUT BUT BUT I live in a HCOL area, my 1 million dollar a year income doesn't go very far when housing costs 1 billion dollars in my city!".

To which I say:  bullshit.  If you make 1 million dollars a year (ok, actually lets say 75K a year or more, which is what this article is calling UMC) you have choices.  You are choosing to live in the HCOL area.  Thats fine- but own the fact that your high income gives you that choice. 

We have a HHI of about 110K a year.  We are firmly UMC.  Maybe even straight Upper.  Doesn't mean we spend like the stereotypical upper class (yachts and whatnot, lol) but in no way shape or form are we middle class. 

[TheAnonOne]

^^^ So true Zephyr!

People love to trot out "BUT BUT BUT I live in a HCOL area, my 1 million dollar a year income doesn't go very far when housing costs 1 billion dollars in my city!".

To which I say:  bullshit.  If you make 1 million dollars a year (ok, actually lets say 75K a year or more, which is what this article is calling UMC) you have choices.  You are choosing to live in the HCOL area.  Thats fine- but own the fact that your high income gives you that choice. 

We have a HHI of about 110K a year.  We are firmly UMC.  Maybe even straight Upper.  Doesn't mean we spend like the stereotypical upper class (yachts and whatnot, lol) but in no way shape or form are we middle class.

The reason some people MAKE 75k is because they are in a HCOL area. You cannot simply say, "Hey I make 100k here, but houses are a lot, lets move to Alabama!"

[TheAnonOne]

75k is high. 200k is crazy high.

Uh, yeah. I feel triumphant at my apparently paltry $40K/yr. It is the most I've ever made and I'm 33. I'd be thrilled with more, but I'm already excited by the fact I am saving $1000+ per month for my 'stache.

I personally don't understand why anyone who makes 6 figures would ever work more than a few years since you could easily FIRE in less than a decade.

Guys, I simply was saying. People need to take the mindset that what they make is simply not that much.

People hear, SEVENTY FIVE THOUSAND DOLLARS, and look at a $5 latte and it looks cheap.

200k is a lot of money, and it's hard to do NOTHING stupid with it (I am looking at you, sports car...) but if I went out to eat daily and generally followed the budget of your average 75k owner. I would have nothing left, but luckily I had been semi-MMM before finding this site.

Also, 40k in taxes just for me, after taking full advantage of the 401k and IRA(don't get to deduct this at this income level). Plus you lose out on a pile of other things, like the obamacare subsidies, student loan interest(I have none) deduction, etc...

[zephyr911]

The reason some people MAKE 75k is because they are in a HCOL area. You cannot simply say, "Hey I make 100k here, but houses are a lot, lets move to Alabama!"

Sure, adjust the benchmark for your area. Doesn't that go without saying? The article is clear about the "relative to COL" part.

But, as an aside, sometimes you can do what you described. That's why I'm here. They pay almost northern-VA wages for most jobs because they're still trying to attract enough skilled, security-cleared (or eligible) labor for all the relocated or newly founded organizations. Come join in the fun... I'll even help you find a house. No, I'm not joking.

By the time this disparity is overcome, I'll be gone, or a millionaire, or both, so I don't mind telling people the secret.

[JLee]

The reason some people MAKE 75k is because they are in a HCOL area. You cannot simply say, "Hey I make 100k here, but houses are a lot, lets move to Alabama!"

Sure, adjust the benchmark for your area. Doesn't that go without saying? The article is clear about the "relative to COL" part.

But, as an aside, sometimes you can do what you described. That's why I'm here. They pay almost northern-VA wages for most jobs because they're still trying to attract enough skilled, security-cleared (or eligible) labor for all the relocated or newly founded organizations. Come join in the fun... I'll even help you find a house. No, I'm not joking.

By the time this disparity is overcome, I'll be gone, or a millionaire, or both, so I don't mind telling people the secret.

It doesn't really go without saying when in most cases, living in a HCOL area is what gives you the high income potential.  I didn't move to a HCOL area because I made a decent wage - I moved there to get a decent wage.

[slugline]

about 25% of upper-middle-class 40- to 55-year-olds have less than $17,500 in financial assets

Wow.

Remember how they define "financial assets." I wonder how many in this group could have their wealth heavily invested in rental real estate or their own business operation.

[Vilgan]

This article rings very true for me. Their boundary for UMC sounds low, but the significant majority (80%+) of people I talk to pulling in 200k by themselves do not save anything beyond automatic 401k contributions. Many of them cannot even comprehend hitting 18k/year in deferrals. These are all smart individuals, but the "don't spend it all" message is drowned out almost completely by the infinite amounts of advertising/marketing encouraging people to spend every dime.

[zephyr911]

It doesn't really go without saying when in most cases, living in a HCOL area is what gives you the high income potential.

Can't it at least go without saying here? I mean, we're smart people, we can figure out that being rich is pointless if your COL negates it.

I didn't move to a HCOL area because I made a decent wage - I moved there to get a decent wage.

I hope you actually have more disposable income as a result. (See: reasons I never moved to DC despite being lifelong DoD)

[JLee]

It doesn't really go without saying when in most cases, living in a HCOL area is what gives you the high income potential.

Can't it at least go without saying here? I mean, we're smart people, we can figure out that being rich is pointless if your COL negates it.

I didn't move to a HCOL area because I made a decent wage - I moved there to get a decent wage.

I hope you actually have more disposable income as a result. (See: reasons I never moved to DC despite being lifelong DoD)

The way it was phrased read (to me) that you were stating a high earner could choose where to live:

To which I say:  bullshit.  If you make 1 million dollars a year (ok, actually lets say 75K a year or more, which is what this article is calling UMC) you have choices.  You are choosing to live in the HCOL area.  Thats fine- but own the fact that your high income gives you that choice. 

In my case, the only way to have a substantially higher income was to move to a HCOL area. I didn't have pre-existing income that let me move to a HCOL area for teh lulz.

Semantics and/or misinterpretation - have your pick. ;)

I landed a $36k raise, so yeah it was worth it.

[zephyr911]

The way it was phrased read (to me) that you were stating a high earner could choose where to live

LMAO.... noooo, it goes without saying that the thresholds for standards of living (i.e., what's middle class, upper-middle) vary with COL.

[Landlord2015]

about 25% of upper-middle-class 40- to 55-year-olds have less than $17,500 in financial assets

Wow.

Remember how they define "financial assets." I wonder how many in this group could have their wealth heavily invested in rental real estate or their own business operation.

"
The figure below plots financial assets held by the upper middle class (household income from $50,000 to $75,000, and $75,000 to $100,000) aged 40 to 55. Financial assets are any assets a household owns that isn’t a house, car, or business, which means it includes all retirement funds.
"
What?! 0k lession number 1 an asset is something that gives you income i.e money more then it has expenses.

The apartment you live in is not an asset unless you partly rent it.
Stocks, rental apartments and yeah a firm that gives money is asset.

I believe they mean asset as money that you immediately can use... yes of course some kind of emergency fund is good to have and actually David Ramsey while he has critics does give some good basic advice to people who tend to spent to much money.

The problem is yes that to many spend to much money but this measurement is flawed if they don't count other apartments that you rent to other people as not assets.

[kite]

about 25% of upper-middle-class 40- to 55-year-olds have less than $17,500 in financial assets

Wow.

By what yardstick do they define "upper" I  wonder?

I'm thinking of that checklist with the parquet floors and the certain kinds of drapes & reading materials.

Considering that 75% of Americans make less than $50k, earning above that looks about right for "upper middle class."

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

I was referring to

http://www.washingtonmonthly.com/ten-miles-square/2012/05/begin_with_a_base_score037567.php

People are so serious around here, should have made clear that when it comes to class, I don't give a fig. 

[MayDay]

The COL things makes the people living in HCOL areas lose their minds on every message board I have ever been on (ok, thats only 3.)

I am not familiar with every professional salary out there, obviously.  But of those that I am, yes you make more in a HCOL.  But not *that* much more.  36K a year raise for HCOL area?  Great except that 30%+ is gone to taxes, plus maybe more to high city taxes in expensive cities, and you might be paying 5-10K more a year in property taxes for a similar sized house, your day to day expenses might be considerably higher for groceries and car insurance and daycare and ...  Plus the mortgage or rent itself is higher.  So are you really better off than your salary before the move?   

If you made 75K before moving to a HCOL area, and now make 106K, you are UMC in both locations.  Gold star for you.

If you made 39K before, and now make 75K in a HCOL, I find that amazing, and I am genuinely curious what job almost doubles your salary by moving LCOL---> HCOL.  Because I have not seen that in online anecdotes or IRL.  So please tell me about it so I can learn.

[JLee]

The COL things makes the people living in HCOL areas lose their minds on every message board I have ever been on (ok, thats only 3.)

I am not familiar with every professional salary out there, obviously.  But of those that I am, yes you make more in a HCOL.  But not *that* much more.  36K a year raise for HCOL area?  Great except that 30%+ is gone to taxes, plus maybe more to high city taxes in expensive cities, and you might be paying 5-10K more a year in property taxes for a similar sized house, your day to day expenses might be considerably higher for groceries and car insurance and daycare and ...  Plus the mortgage or rent itself is higher.  So are you really better off than your salary before the move?   

If you made 75K before moving to a HCOL area, and now make 106K, you are UMC in both locations.  Gold star for you.

If you made 39K before, and now make 75K in a HCOL, I find that amazing, and I am genuinely curious what job almost doubles your salary by moving LCOL---> HCOL.  Because I have not seen that in online anecdotes or IRL.  So please tell me about it so I can learn.

I went from 61k to 97k+bonus (likely ~105k in my first full year, given prorated raise/COL/bonus over 14-15mo instead of 12).

My AZ house is getting rented, so no worries there.  I'm renting a room from a friend for $750/mo all-inclusive. Food costs are similar here. Gas is cheaper. I'm not paying property taxes because I'm renting a room, not buying a house. Car insurance is a lot higher (~$74/mo increase, given I am insured on my friends' cars and I bought a car here as well, since I'm kind of a car snob and refuse to bring my nice rust-free desert cars into road salt).

New job:
Slightly higher 401k match, but since base salary is higher it ends up being an extra $1562/yr.
$500/yr free HSA money
$910/yr cell phone reimbursement (no receipts required, so I can have any plan I want)
Extra holidays (day after Thanksgiving and Christmas Eve are days off)
4 weeks vacation (I had two weeks before)
Better insurance rates (I pay $338/yr now, prior was ~$864)
Paid short term / long term disability (was a couple bucks before)
Paid vision (was a couple bucks before)

So ~$36k plus ~$4k in other extras/reduced fees, not to mention doubling my vacation time and intangible upsides (I have a huge learning opportunity here and a massive reduction in stress).

So yes, I really am better off than my salary before the move. If you're making enough that $36k makes little difference to you, congratulations - I hope to be there someday.

[Vilgan]

If you made 39K before, and now make 75K in a HCOL, I find that amazing, and I am genuinely curious what job almost doubles your salary by moving LCOL---> HCOL.  Because I have not seen that in online anecdotes or IRL.  So please tell me about it so I can learn.

Type these things into google:
How much do software engineers make in okc
How much do software engineers make in silicon valley

65k to 130k isn't bad, and also reflects personal experience. I make more than double in Seattle what I would make in most LCOL areas.

[runningthroughFIRE]

about 25% of upper-middle-class 40- to 55-year-olds have less than $17,500 in financial assets

Wow.

Remember how they define "financial assets." I wonder how many in this group could have their wealth heavily invested in rental real estate or their own business operation.

"
The figure below plots financial assets held by the upper middle class (household income from $50,000 to $75,000, and $75,000 to $100,000) aged 40 to 55. Financial assets are any assets a household owns that isn’t a house, car, or business, which means it includes all retirement funds.
"
What?! 0k lession number 1 an asset is something that gives you income i.e money more then it has expenses.

The apartment you live in is not an asset unless you partly rent it.
Stocks, rental apartments and yeah a firm that gives money is asset.

I believe they mean asset as money that you immediately can use... yes of course some kind of emergency fund is good to have and actually David Ramsey while he has critics does give some good basic advice to people who tend to spent to much money.

The problem is yes that to many spend to much money but this measurement is flawed if they don't count other apartments that you rent to other people as not assets.

Not quite. An asset is defined as something that has current or future value that is owned.  The apartment you mentioned (assuming you own it) is an asset because you could sell it or rent it out.  The fact that you choose not to sell it or use it for rents is irrelevant to it being an asset.  By your definition, anything with returns lower than the rate of inflation could be considered a liability, since they are actually losing you money over time.  If we were talking about productive assets, that's all well and good, but productivity is not required for something to be an asset.  If the authors had intended to consider only liquid (immediately usable) money, they wouldn't have included retirement funds. I suppose retirement funds are technically liquid, but almost no one classifies them that way because of the penalty of early withdrawl.

I do agree with you that there is something flawed in thinking of the home you live in as building wealth outside of the benefit of not having rental payments.

[boarder42]

This article is sad and is wall of shame and comedy worthy.  I found mmm around 2 years ago or so. I was a good saver before. But after just 5 years of work my wife and I have saved over 2x our income.  Not counting house.  Just sad

[honeybbq]

The COL things makes the people living in HCOL areas lose their minds on every message board I have ever been on (ok, thats only 3.)

I am not familiar with every professional salary out there, obviously.  But of those that I am, yes you make more in a HCOL.  But not *that* much more.  36K a year raise for HCOL area?  Great except that 30%+ is gone to taxes, plus maybe more to high city taxes in expensive cities, and you might be paying 5-10K more a year in property taxes for a similar sized house, your day to day expenses might be considerably higher for groceries and car insurance and daycare and ...  Plus the mortgage or rent itself is higher.  So are you really better off than your salary before the move?   

If you made 75K before moving to a HCOL area, and now make 106K, you are UMC in both locations.  Gold star for you.

If you made 39K before, and now make 75K in a HCOL, I find that amazing, and I am genuinely curious what job almost doubles your salary by moving LCOL---> HCOL.  Because I have not seen that in online anecdotes or IRL.  So please tell me about it so I can learn.

I got about a 35% salary bump plus I moved from a state with income tax to a state without, saving me another 8%. It was quite significant. Now, the house I bought ended up costing 2x as much...... *sigh*

So they do get you one way or another. Luckily we have two incomes and just one house.

[2lazy2retire]

^^^ So true Zephyr!

People love to trot out "BUT BUT BUT I live in a HCOL area, my 1 million dollar a year income doesn't go very far when housing costs 1 billion dollars in my city!".

To which I say:  bullshit.  If you make 1 million dollars a year (ok, actually lets say 75K a year or more, which is what this article is calling UMC) you have choices.  You are choosing to live in the HCOL area.  Thats fine- but own the fact that your high income gives you that choice. 

We have a HHI of about 110K a year.  We are firmly UMC.  Maybe even straight Upper.  Doesn't mean we spend like the stereotypical upper class (yachts and whatnot, lol) but in no way shape or form are we middle class.

You are still working (both) - I'm sorry but you are no way upper class,  straigth or otherwise

[TheAnonOne]

^^^ So true Zephyr!

People love to trot out "BUT BUT BUT I live in a HCOL area, my 1 million dollar a year income doesn't go very far when housing costs 1 billion dollars in my city!".

To which I say:  bullshit.  If you make 1 million dollars a year (ok, actually lets say 75K a year or more, which is what this article is calling UMC) you have choices.  You are choosing to live in the HCOL area.  Thats fine- but own the fact that your high income gives you that choice. 

We have a HHI of about 110K a year.  We are firmly UMC.  Maybe even straight Upper.  Doesn't mean we spend like the stereotypical upper class (yachts and whatnot, lol) but in no way shape or form are we middle class.

You are still working (both) - I'm sorry but you are no way upper class,  straigth or otherwise

Bill and Melinda Gates both work.....

Are couples who both work but make over 250k combined not UMC/UC??

[zephyr911]

You are still working (both) - I'm sorry but you are no way upper class,  straigth or otherwise

Wait. How does employment status determine class?
By this rationale, I could be a billionaire, and if DW and I both work, we're middle class...?