Wealth of people in their 30s has 'halved in a decade'

[honeybbq]

I was born in the late 70's. Interesting discussion.

I'm not sure I agree about the materialism, but I do think maybe older people are more willing to toss things and find them more disposable. I actually see a lot of younger people reusing, repurposing, and fixing things that might otherwise get thrown away. But I live in the pacNW where it's cool to wear vintage and grunge. :)

I'd just like to point out for the calculating people that the amount you could contribute to your 401k was not 18k but closer to 12k in the early 2000's. So it's not quite 18k x 15 or what have you.

Still, no excuse to not have accrued.

I have about 7 figures in my retirement accounts; I've been maxing since day I got out of grad school and that includes the 2 recessions - one which took around 40% of my savings. 

[moof]

Amazing how statistics can be used to say almost anything.  I will say that timing makes a huge difference to luck.  Looking for jobs during a down period while companies are purging can wipe out your savings and stunt your long term earnings in big ways.

Wife and I were born in 77.  We missed out on most of the go-go 90's, and I got caught up in the dotcom crash with a layoff, but did just fine thanks to having at least a couple years of experience to get my foot in the door.  I was mostly unaffected by the 2008 crash thanks to having about 10 years experience at that point.  My wife tried to change careers by going back to school in 2006, getting her masters in education in 2008, which wiped out hiring for new teachers for a few years.  She become stay-at-home with the new kid instead.  Early in my career I constantly heard just how great it used to be (bonuses, beer bashes, free snacks, meaningful stock options, etc), most of the perks and wild times had been rung out and only lived on in nostalgia.

Our good friends were both born in 86.  Upon graduating with the same degree as me the husband was out of school just in time for the 2008 crash, and could not get a job for a couple years.  No prior job, so no unemployment either.  He is on his feet now, but they started major wealth accumulation several years later than we did due to the big hole they dug just surviving (and building a good frugal muscle).  The wife got a teaching certificate in 2012 when things were on an upswing, so she got a decent teaching position right away without going up the substitute ladder.  In fact they are now saving at a higher rate than we are, but they have a good bit of catch up left to do.

Young folks who hit the job scene in 2008 or the following few years had to weather particularly tough odds to get a good job, and often locked in lower salaries for years to come.  Many locked in lower paying jobs instead of the career they trained for just to make ends meet.  Once your resume has a mediocre position listed you are setup to stay in that track without amazing luck and determination.  Our safety net in the USA is weak and cruel, yet still under attack.  Simple bad timing luck can result in very different outcomes when all else is equal.

[neil]

This difference is significantly overblown.  On some level, less is less and I won't argue about that.  But a nominal difference of ~25K is really only 1-2 years of employment.  Considering individuals create expenses regardless of whether or not they are employed, the simple choice of consuming more education (in place of working) may very well account for the difference - and we all know that more education does not necessarily mean more pay.  I graduated with a BS in 2002 and chose to find work (which was tough, but I did it) rather than pursue a masters (which many of my peers chose).

There's a lot more newer concepts to career paths that are anti-FIRE but would affect these numbers.  Gap years, sabbaticals, flexible employment.  People in their 30s today overall prefer these options and they are more available than in the past.  People are making these choices even if they aren't the best idea for their financial situation and I would expect that to reflect in the data somewhat.

It's pretty easy to find data on expected lifetime earnings by degree and current median salaries, but not a lot on how much people of different age groups earned today.  It still wouldn't explain why but it would better illustrate whether the difference is a spending problem or an income problem.  Median income is a snapshot (and theoretically high employment may not factor into a median significantly) while median net worth is a measurement of a person's financial path.

[SwordGuy]

I entered the workforce in the early 80s.  Economy in the area I moved to (to be with the woman I loved) had double-digit unemployment.    We lived on 1/3 the median family income for 5 years and paid child support.   We were frugal and our health held out so we didn't end up in debt. 

I was 30 when I first got a job making median family income.  My wife, who was 40, went to college at that time.  She wasn't employed full time until over a decade later when she earned her PhD.

We could easily have just inflated our lifestyle from 33% median income to 50% median income instead of 94% median income.   We would have felt like pigs in clover at our newfound affluence.

We didn't (because we pissed away a lot of money before we learned better), but let's explore what would have happened to our finances if we did.  We'll ignore raises.  Median family income was about $30,000 at that time.   Saving $12,500 a year for 10 years, at a 7% return, we would have just shy of $173,000.

I can only tell you that, at that point in my life, the thought of having that much wealth in 10 years was beyond belief.
At that point in time, let's pretend my wife got a horribly paying job that only brought in $10,000 above job expenses.
And, being frugal, we invested it.

We would, in 10 years, have $650,000 in wealth.

That would be $650,000 more than about 23% of Americans have saved at retirement age.  And half a million more than most.

Ask Americans at retirement age if they would consider themselves well off if they had half a million dollars in the bank.   

If people can get to median family income and don't live in a crazy high cost of living area like Manhattan or San Francisco, they can easily amass wealth if that's what they choose to do.

But they have to:

a) know that it is possible,
b) want to do it,
c) want to do it more than they want to spend on wasteful consumer goods,
d) want to do it more than they dislike getting snarky comments about being cheap from "friends",
e) take the time to learn how to do it,
f) do it.

Lots of reasons to give up or never try.

I try to do my part to make sure that people I know are aware that it is possible.

[Cathy]

The level of complaining in this thread is off the charts.

You have to be fucking kidding me!   That's 10 yrs after college.  You'd have to be making an average of 100K per year with a savings rate of near 100% after tax. ...

It turns out that $100,000 per year is not a mystical income ceiling. It's open to you to earn more than that. In fact, the great thing about the United States is that you can earn as much as you want. If you want to earn $300,000 per year instead, nothing is stopping you. If that's not enough, and you want to earn $1 million per year instead, you can make that happen if you so choose. There is no limit in the USA.

You do realize how much of an outlier even reaching a $100k income by age 34 is ..., right?

Luckily, income level is within your control. If your income level were determined by the roll of a die, you might have a point, but it's not. It's up to you. You, Jack, could be earning $250,000 per year within 5 years if that is something you want. I could give you specific instructions on how to achieve that (*). But I bet you wouldn't do it because it would involve a lot of hard work and would completely uproot your life. It really comes down to choices.

((*) Note: The fact that I could give you specific instructions does not mean that I will actually give them to you. It is merely a rhetorical device. See also the message below about how this post contains only general information, etc.)

[boarder42]

The level of complaining in this thread is off the charts.

You have to be fucking kidding me!   That's 10 yrs after college.  You'd have to be making an average of 100K per year with a savings rate of near 100% after tax. ...

It turns out that $100,000 per year is not a mystical income ceiling. It's open to you to earn more than that. In fact, the great thing about the United States is that you can earn as much as you want. If you want to earn $300,000 per year instead, nothing is stopping you. If that's not enough, and you want to earn $1 million per year instead, you can make that happen if you so choose. There is no limit in the USA.

You do realize how much of an outlier even reaching a $100k income by age 34 is ..., right?

Luckily, income level is within your control. If your income level were determined by the roll of a die, you might have a point, but it's not. It's up to you. You, Jack, could be earning $250,000 per year within 5 years if that is something you want. I could give you specific instructions on how to achieve that (*). But I bet you wouldn't do it because it would involve a lot of hard work and would completely uproot your life. It really comes down to choices.

((*) Note: The fact that I could give you specific instructions does not mean that I will actually give them to you. See the message below about how this post contains only general information, etc.)

Almost as if my generation thought they were entitled to earn a billion a day doing what they loved. Skateboarding in the park.

That's been my issue with this whole thread. You were lucky. Yeah I had some things going my way.

But get the fuck over it. You are allowed to do whatever you want to make as much money as you want and live how you want. The previous generations paved the way for all of this.

It's a lack of drive. I make 100k a year at my job I side hustle another 20-30k. My job is demanding. And takes a lot of my life energy yet I still ha e time to side hustle other shit. Get over it millenials. You were born into a world make the most of it. So annoyed at the complaint pants posts here.

Posts about doing what you love vs fire.  Fire gives you the ability to do whatever you want whenever you want with in the laws of society. If what you love you want to do forever and are confident that'd the case go fucking do it. If you hate what you do and its not lucrative enough for you to save and do something different change it.

Every thing in your life in a first world free country was mostly of a choice you made.

[Luck12]

It turns out that $100,000 per year is not a mystical income ceiling. It's open to you to earn more than that. In fact, the great thing about the United States is that you can earn as much as you want. If you want to earn $300,000 per year instead, nothing is stopping you. If that's not enough, and you want to earn $1 million per year instead, you can make that happen if you so choose. There is no limit in the USA.

This is absolutely nothing but simplistic, Republican type thinking.  Fact is half of people have below average IQ, you really think most of these people can earn 100K by late 20's?  I don't think so.  For the most part, it takes a high level of intelligence (and often in the right areas), luck, and hard work.   Not to mention the economy can't support more than a certain % of people making that much by late 20's. 

If someone as hard working, smart, lucky, and enterprising as MMM didn't clear 1M by age 30 by much if at all, you really think it's that simple? 

Lack of logic in this thread by some is astounding. 

[boarder42]

It turns out that $100,000 per year is not a mystical income ceiling. It's open to you to earn more than that. In fact, the great thing about the United States is that you can earn as much as you want. If you want to earn $300,000 per year instead, nothing is stopping you. If that's not enough, and you want to earn $1 million per year instead, you can make that happen if you so choose. There is no limit in the USA.

This is absolutely nothing but simplistic, Republican type thinking.  Fact is half of people have below average IQ, you really think most of these people can earn 100K by late 20's?  I don't think so.  For the most part, it takes a high level of intelligence (and often in the right areas), luck, and hard work.   Not to mention the economy can't support more than a certain % of people making that much by late 20's. 

If someone as hard working, smart, lucky, and enterprising as MMM didn't clear 1M by age 30 by much if at all, you really think it's that simple? 

Lack of logic in this thread by some is astounding.

1. He did if you look at CPI compared to today

2. Survival of the fittest

[boarder42]

I mean really explain that to me why does society owe a debt to those who don't understand. If we eliminate the bottom half thru poverty and dumb spending and raise the overall intelligence of society. The humans lost how?   

Most of this was meant in semi hyperbole.
But it's the exact opposite of the point the previous poster stated. 

We weren't meant to propagate idiots.  Idiots died in early times  now we keep diseased and mentally unable alive and some procreate. How does that help our civilization advance.

[boognish]

eugenics baby!

[chesebert]

It turns out that $100,000 per year is not a mystical income ceiling. It's open to you to earn more than that. In fact, the great thing about the United States is that you can earn as much as you want. If you want to earn $300,000 per year instead, nothing is stopping you. If that's not enough, and you want to earn $1 million per year instead, you can make that happen if you so choose. There is no limit in the USA.

This is absolutely nothing but simplistic, Republican type thinking.  Fact is half of people have below average IQ, you really think most of these people can earn 100K by late 20's?  I don't think so.  For the most part, it takes a high level of intelligence (and often in the right areas), luck, and hard work.   Not to mention the economy can't support more than a certain % of people making that much by late 20's. 

If someone as hard working, smart, lucky, and enterprising as MMM didn't clear 1M by age 30 by much if at all, you really think it's that simple? 

Lack of logic in this thread by some is astounding.

Wild guess that Cathy is a law student and has been running spreadsheets on how much he/she  (you never know) is going to make after graduation. I do not disagree with Cathy completely, but clearing 100K in your 20s and sustain that level of income for the next 10 years requires a lot of hard work and above average IQ.

@Cathy, you should try to work for 16+ hour days for a few weeks straight before talking about if you work hard blah blah blah. Not everyone can handle that kind of work.... You also have no idea what it takes to make $1M a year...the pain, suffering and sacrifice you would have to make before that is reality, assuming you don't come from money/power

MOD EDIT: Personal attacks are not allowed.

[arebelspy]

Holy *.  The amount of complainypants in this thread is ridiculous. Yes, Border's two people making 50k each out of college is maybe not the NORM, but it's certainly not an extreme outlier.

As far as the actual topic from the OP, the idea of "wealth" being halved in a decade, let's stop talking anecdotes, and move to hard data.  The OP was hard data: "Those born in the early 1980s have an average wealth of £27,000 each, against the £53,000 those born in the 1970s had by the same age"

Alright, cool.

Now let's use some data to explain why.  Is it lower income?  Is it higher unemployment?  Is it lower home ownership rate?

The explanation put forth by nereo makes some sense to me.

There's a lot of data to back this up too: single-family homes are larger today than in the 1980s. The percentage of people who take overseas vacations has gone way up. The amount spent on restaurants is much higher today.

The bottom line is that real-median income of people in their 30s is slightly higher today compared to where it was in the 1980s.  The money is simply being spent and not saved.  Not surprisingl given the personal savings rate went from 9-10% in the 80s to around 4% today (and current 30-somethings saving at/around 0% of their income).

If the median income of people in their 30s is HIGHER in real dollars, yet they have less net worth to show for it (while at the same time overseas vacations are up, restaurant spending is up, etc.) since the 80s (let alone a decade ago), this doesn't seem to be a fault of the economy, but a matter of fact based on the choices people are making.  Savings rates are down from 8-10% to 3-5% or so, and compounded over a decade, that's real value in net worth.  That savings rate (when wages are the same or higher in real terms) is a choice, as it's done with discretionary income.

No, I'm not hating on Millennials; had any other generation been in the same position, I think they'd have acted the same way.  Millenials get more consumeristic messages.  Remember the concept of "keeping up with the Jonses?"  We have that today, fiercer than ever.  A decade ago, Facebook was barely launched.  Instagram didn't exist.  Etc.

Now they see peers taking pictures of food from fancy restaurants, of their fancy vacations, etc. and posting these to social media, and there's enormous pressure to keep up.  It's not due to a character flaw with Millennials, but rather due to the circumstances.

I think those circumstances, though, are marketing and social media based.  Not economy based.  With real wages being HIGHER, I think the higher spending (and corresponding lower net worth) is a choice (though somewhat of a forced one--they may not know any other option, like MMM presents).

I think, despite real wages being the same or slightly higher over the last few decades, net worth, and savings rate, has continued to decline.  That's not a problem with Millennials; same thing happened to Gen X.  It's a problem with our consumer society.

That's what it seems like to me, based on the data, rather than anecdotes.  Anyone want to put out an alternate theory, based on data as well?

[UKMustache]

Holy *.  The amount of complainypants in this thread is ridiculous. Yes, Border's two people making 50k each out of college is maybe not the NORM, but it's certainly not an extreme outlier.

As far as the actual topic from the OP, the idea of "wealth" being halved in a decade, let's stop talking anecdotes, and move to hard data.  The OP was hard data: "Those born in the early 1980s have an average wealth of £27,000 each, against the £53,000 those born in the 1970s had by the same age"

Alright, cool.

Now let's use some data to explain why.  Is it lower income?  Is it higher unemployment?  Is it lower home ownership rate?

The explanation put forth by nereo makes some sense to me.

There's a lot of data to back this up too: single-family homes are larger today than in the 1980s. The percentage of people who take overseas vacations has gone way up. The amount spent on restaurants is much higher today.

The bottom line is that real-median income of people in their 30s is slightly higher today compared to where it was in the 1980s.  The money is simply being spent and not saved.  Not surprisingl given the personal savings rate went from 9-10% in the 80s to around 4% today (and current 30-somethings saving at/around 0% of their income).

If the median income of people in their 30s is HIGHER in real dollars, yet they have less net worth to show for it (while at the same time overseas vacations are up, restaurant spending is up, etc.) since the 80s (let alone a decade ago), this doesn't seem to be a fault of the economy, but a matter of fact based on the choices people are making.  Savings rates are down from 8-10% to 3-5% or so, and compounded over a decade, that's real value in net worth.  That savings rate (when wages are the same or higher in real terms) is a choice, as it's done with discretionary income.

No, I'm not hating on Millennials; had any other generation been in the same position, I think they'd have acted the same way.  Millenials get more consumeristic messages.  Remember the concept of "keeping up with the Jonses?"  We have that today, fiercer than ever.  A decade ago, Facebook was barely launched.  Instagram didn't exist.  Etc.

Now they see peers taking pictures of food from fancy restaurants, of their fancy vacations, etc. and posting these to social media, and there's enormous pressure to keep up.  It's not due to a character flaw with Millennials, but rather due to the circumstances.

I think those circumstances, though, are marketing and social media based.  Not economy based.  With real wages being HIGHER, I think the higher spending (and corresponding lower net worth) is a choice (though somewhat of a forced one--they may not know any other option, like MMM presents).

I think, despite real wages being the same or slightly higher over the last few decades, net worth, and savings rate, has continued to decline.  That's not a problem with Millennials; same thing happened to Gen X.  It's a problem with our consumer society.

That's what it seems like to me, based on the data, rather than anecdotes.  Anyone want to put out an alternate theory, based on data as well?

I agree with much of what you have said.

I would add though that in the UK (which is where the article is from) houses are actually getting much smaller over time and not bigger.  There's a number of factors influencing this and I'm not saying it's positive or negative, but it is the case.

[Cathy]

... you should try to work for 16+ hour days for a few weeks straight before talking about if you work hard blah blah blah. Not everyone can handle that kind of work.... You also have no idea what it takes to make $1M a year...the pain, suffering and sacrifice you would have to make before that is reality, assuming you don't come from money/power

Readers might like this previous post of mine (from May 31, 2015), which discusses some related issues (you'll need to read the entire thread for the context, but the gist of it is that I discuss the tradeoffs involved in achieving higher income and why maximum happiness might be achieved at less than $1 million per year).

As I've noted before, I don't usually go into my personal circumstances, and I won't really do so here either, but I can safely say that I am familiar with hard work. In fact, my experiences with work are a big part of the reason that I advocate taking whatever measures are necessary to minimise the length of one's working career, a goal that I would think would resonate with more posters here than it actually does.

[former player]

I would add though that in the UK (which is where the article is from) houses are actually getting much smaller over time and not bigger.  There's a number of factors influencing this and I'm not saying it's positive or negative, but it is the case.

Do you have a source for this?

I'm involved in a neighbourhood planning group, and one of the main issues we deal with is smaller older houses being massively extended, or knocked down and rebuilt much bigger.  Over time it means that the average size of houses here is getting bigger, and the availability of smaller, cheaper houses at entry level and for downsizing is disappearing.  (This is in an AONB so the supply of new building sites is limited.)

So while the average size for new builds in the country as a whole is small, the net effect of extensions and rebuilds is that on average houses are probably bigger.   And it's not unusual to see extensions on those smaller new builds (conservatories at the back, for instance) if there is room to do so.

[Paul der Krake]

To me, one of the key messages of MMM is that the way people live their lives by default is grossly inefficient. Therefore, median numbers for anything should be regarded as little more than a vague starting point- the point that someone who vaguely gives a shit should be able to reach with minimal fuss. That is true whether it is job income, saving rates, fitness levels (medals for finishing a 5K, are you kidding me?!), educational attainment, vehicle size, or virtually any other metric that gets touted as the new normal.

Just because many people do something doesn't mean it's a good idea.

[arebelspy]

I would add though that in the UK (which is where the article is from) houses are actually getting much smaller over time and not bigger.  There's a number of factors influencing this and I'm not saying it's positive or negative, but it is the case.

Do you have a source for this?

UKM might have other sources for his claim, but I just did a quick Google search for you.

BBC and DailyMail Articles from 2011 and 2013:
http://www.bbc.com/news/uk-14916580
http://www.dailymail.co.uk/news/article-2398714/The-incredible-shrinking-houses-British-homes-built-just-HALF-size-1920s.html

They do talk about new homes though, and do not address your point of rebuilds and add-ons.

Still going from 1,647 sq ft with 4 bedrooms 90 years ago to today’s equivalent of three bedrooms and 925 sq ft is a big enough difference that I'd doubt add-ons and rebuilds would fully cover the difference; it seems more likely than not that the new builds reflect the overall trend.

[UKMustache]

I would add though that in the UK (which is where the article is from) houses are actually getting much smaller over time and not bigger.  There's a number of factors influencing this and I'm not saying it's positive or negative, but it is the case.

Do you have a source for this?

UKM might have other sources for his claim, but I just did a quick Google search for you.

BBC and DailyMail Articles from 2011 and 2013:
http://www.bbc.com/news/uk-14916580
http://www.dailymail.co.uk/news/article-2398714/The-incredible-shrinking-houses-British-homes-built-just-HALF-size-1920s.html

They do talk about new homes though, and do not address your point of rebuilds and add-ons.

Still going from 1,647 sq ft with 4 bedrooms 90 years ago to today’s equivalent of three bedrooms and 925 sq ft is a big enough difference that I'd doubt add-ons and rebuilds would fully cover the difference; it seems more likely than not that the new builds reflect the overall trend.

You've literally typed a post which explains and references my point completely.  Cheers :D

[arebelspy]

You've literally typed a post which explains and references my point completely.  Cheers :D

haha, no worries.   :)

I don't think it negates former player's point though, that new construction isn't the only thing to look at.

Still, like I said, based on the amount of drop in size of new construction, I'd still bet on smaller being the trend, even with the add ons and rebuilds being bigger than the current new construction.

[MrRealEstate]

 Fact is half of people have below average IQ

well.... duh... half also have an above average IQ.

[arebelspy]

 Fact is half of people have below average IQ

well.... duh... half also have an above average IQ.

And the third half are exactly average!

[Paul der Krake]

Posts like Franklin's truly make me wonder what life was like in the United States before the recession. I first visited in 2010, in the middle of what people called a national economic meltdown. It sure didn't look like one to me. Coming from the United Kingdom, apparently a second rate country, I saw US cities bustling with life, new companies cropping up, college dorms that looked nicer than anything I had ever seen before.

Were the streets in America paved with gold before that time or what?

[gggggg]

I work with and manage alot of millennials (as most people do). I see several problems leading to their lower net worth. I think marketing has done it's job with younger folks, and they buy into more things than previous generations. Younger folks in general, aren't buying houses like we did, they are missing out on the forced savings. Peer pressure is greater than ever, to keep up with their social circle. They tend to job hop more than older generations. It seems if they aren't promoted in six months, they hop to another job, starting at the bottom again; they tend not to have patience to stick with a company, and work their way up. This isn't a bash, it's just things I've noticed. 

[Jack]

The level of complaining in this thread is off the charts.

You have to be fucking kidding me!   That's 10 yrs after college.  You'd have to be making an average of 100K per year with a savings rate of near 100% after tax. ...

It turns out that $100,000 per year is not a mystical income ceiling. It's open to you to earn more than that. In fact, the great thing about the United States is that you can earn as much as you want. If you want to earn $300,000 per year instead, nothing is stopping you. If that's not enough, and you want to earn $1 million per year instead, you can make that happen if you so choose. There is no limit in the USA.

You have twisted the argument. Nobody (not even Luck12) is arguing that earning that much money is impossible for anyone; we're arguing that it's impossible for most people.

And if you disagree with that, then you need to explain this: if earning $300K in Silicon Valley is so easy, why isn't everyone doing it? And if you think it only comes down to intelligence or "drive" or something, then I guarantee that for every entrepreneur in Silicon Valley who is earning $300K, I can find another one who is equally intelligent and equally driven but isn't making that much money because the VCs flipped a coin and decided to fund the first person's idea even though the other one was equally good!

The income a person makes does not depend just on that person, it depends on supply and demand. It is literally impossible for everyone to make an above-average income (by definition!), regardless of how capable they are.

You do realize how much of an outlier even reaching a $100k income by age 34 is ..., right?

Luckily, income level is within your control. If your income level were determined by the roll of a die, you might have a point, but it's not. It's up to you. You, Jack, could be earning $250,000 per year within 5 years if that is something you want. I could give you specific instructions on how to achieve that (*). But I bet you wouldn't do it because it would involve a lot of hard work and would completely uproot your life. It really comes down to choices.

((*) Note: The fact that I could give you specific instructions does not mean that I will actually give them to you. It is merely a rhetorical device. See also the message below about how this post contains only general information, etc.)

Uh huh. Nice way to make a claim and then immediately backtrack from any responsibility for it. You can't do that and expect us to do anything but disregard it entirely!

Anyway: prove it.

(You're right: I probably wouldn't follow your instructions, because (a) the first instruction is almost certainly going to be "move to Silicon Valley" and $250K there translates to a much smaller difference in standard of living than the nominal difference would imply, and (b) I like my low-stress lifestyle. But I still want you to post them, because you claimed you could. I also want to see how many logical holes and implausible assumptions you end up packing into them! Besides, if you do somehow manage to exceed my plausibility expectations, they might help somebody else.)

[Gronnie]

 Fact is half of people have below average IQ

well.... duh... half also have an above average IQ.

There might be significantly more than half of people above/below average IQ. Average != median...

[boarder42]

The level of complaining in this thread is off the charts.

You have to be fucking kidding me!   That's 10 yrs after college.  You'd have to be making an average of 100K per year with a savings rate of near 100% after tax. ...

It turns out that $100,000 per year is not a mystical income ceiling. It's open to you to earn more than that. In fact, the great thing about the United States is that you can earn as much as you want. If you want to earn $300,000 per year instead, nothing is stopping you. If that's not enough, and you want to earn $1 million per year instead, you can make that happen if you so choose. There is no limit in the USA.

You have twisted the argument. Nobody (not even Luck12) is arguing that earning that much money is impossible for anyone; we're arguing that it's impossible for most people.

And if you disagree with that, then you need to explain this: if earning $300K in Silicon Valley is so easy, why isn't everyone doing it? And if you think it only comes down to intelligence or "drive" or something, then I guarantee that for every entrepreneur in Silicon Valley who is earning $300K, I can find another one who is equally intelligent and equally driven but isn't making that much money because the VCs flipped a coin and decided to fund the first person's idea even though the other one was equally good!

The income a person makes does not depend just on that person, it depends on supply and demand. It is literally impossible for everyone to make an above-average income (by definition!), regardless of how capable they are.

You do realize how much of an outlier even reaching a $100k income by age 34 is ..., right?

Luckily, income level is within your control. If your income level were determined by the roll of a die, you might have a point, but it's not. It's up to you. You, Jack, could be earning $250,000 per year within 5 years if that is something you want. I could give you specific instructions on how to achieve that (*). But I bet you wouldn't do it because it would involve a lot of hard work and would completely uproot your life. It really comes down to choices.

((*) Note: The fact that I could give you specific instructions does not mean that I will actually give them to you. It is merely a rhetorical device. See also the message below about how this post contains only general information, etc.)

Uh huh. Nice way to make a claim and then immediately backtrack from any responsibility for it. You can't do that and expect us to do anything but disregard it entirely!

Anyway: prove it.

(You're right: I probably wouldn't follow your instructions, because (a) the first instruction is almost certainly going to be "move to Silicon Valley" and $250K there translates to a much smaller difference in standard of living than the nominal difference would imply, and (b) I like my low-stress lifestyle. But I still want you to post them, because you claimed you could. I also want to see how many logical holes and implausible assumptions you end up packing into them! Besides, if you do somehow manage to exceed my plausibility expectations, they might help somebody else.)

The amount of money you earn annually when speaking of 100k is not impossible for most. Most choose not to figure out how to make that much. Using the word impossible is awful.  And complainypants. Even if you aren't intelligent with the right drive and work ethic you can make that much money.

Don't have to move to silicone valley. I live in the heart of america and pull that in and I'm 29. It's not 100% from my job. I side hustle the fuck out of lots of things.

I'm pretty sure I could figure out how to make 100k without even having my base job. Just side hustling things.  Currently make 10k on tickets not trying. Another 15k buying and reselling things and this is about 5% of my time dedicated to these considering a 40 hour work week.

[Gronnie]

I live in a town in MN barely over 100,000 people. I got my degree in Computer Science from a local, public university a little less than 2 years ago when I was 28.

First year out of school made over 80k.

Set to make over 90k this year.

My wife has a BS in Nursing and makes between 70 and 80k.

It is possible to make not just 50k each right out of school, but much more -- with no graduate degree or fancy private school education needed. If making a good living is your goal, then you need to go into the correct fields and get the correct skills.

Those that think it is not possible are complainypants.

[ender]

I'm just saying what I see from working with many clients. Most hire Indians for bottom dollar. You can get high salaries like you are describing but they are usually in HCOL areas. And usually it makes more sense financially to take a lower paid position in a LCOL area.

Every company has to lose at least a few million on oursourcing "cheap" labor fiascos.

Eventually, all of them will have experienced this and some of that "bottom dollar" myth will be over.

[Doubleh]

I think the root of most of the disagreement here is the difference between what applies to the majority of the population, and what is possible of you set your mind to it. I don't think there is any contradiction in saying the majority of people are less wealthy, but at the same time it is possibly easier than ever to build wealth if you make an intentional decision to do so. And as other posters have pointed out the difference between 50k and 25k meet worth in your 30's is approximately zero in terms of badass mustachians like the fine folk here.

What has changed generationally, I would argue is that it is now both easier than ever to build wealth intentionally, and much less easy than ever to build wealth accidentally.

The former is due to factors like better information via the Internet, availability of much better cheaper index funds - in 2001  here in the uk you could choose ftse100 or ftse all share (uk total market) and easily pay 1% fees for a tracker ; now it is easy to buy an all world tracker with fees in the 0.1-0.3 range. Isa allowances have grown from 7k in 2007 to 20k in 2017.

The latter is driven by three main factors  - cost of university, falling house price ownership and the death of final salary pensions. Health care cost is not a factor here in the uk, as referenced by the original article, as we are lucky to have a fantastic (albeit not perfect) system of socialised medicine.

1. I started university in 1997, the last year to pay no tuition fees. The following year they were 1k per year, rising to 9k since 2012. The additional debt resulting from that is enough to explain the difference in net worth all by itself, although it is actually less of a burden than that would imply because they are government backed and interest and repayments are not on normal commercial terms.

2. In my parents generation and even those a few years older than me the predominant way to build wealth was to buy a house and wait a few years. People would move to London and work 10 years without needing to save a penny, then after that time sell their flat and buy a family house in the countryside outright with the tax free gains. This spawned several "move to the country" TV shows. Now this is no longer so easy due to rising prices, falling availability of mortgages and rising rental. Pre 2007, 100% mortgages were easily available and one bank, the now government owned Northern Rock came up with the stellar idea of 115% mortgages - instant negative equity! For years since 2007 you needed a minimum 20% deposit, that has started to relax now but only for the best prospects. And you now need to be able to prove your income unlike the older days when you could just make up whatever number you need (Google "self cert mortgage"). Property prices in London especially are now beyond the reach of most, leaving people renting for years at increasing rents.

3. My folks generation didn't need to understand about investing, their final salary pensions took care of that. Now the only jobs I ever see with one of these are in the public sector. Default saving rates in employer pensions (similar to 401k) are way too low to make up the gap - typically say 6% with match.

All of this means that the days of people getting rich without trying are over, and that will be a shock to many people. It is still possible to build wealth - maybe even easier than ever - but only if you educate yourself and make it a priority, and there is little in the way of public information to inform people of this. I do foresee this as a source of real tension in the years to come.

[JrDoctor]

Alot are making comparisons between the UK and US as though it were identical, which it isnt wholly.
The housing market and geographical spread of jobs has meant wealth has been hard to generate in the UK.  Rents are dear and we are watching a structural shift towards an economy where more and more will perpetually rent.  Mortgages also protect the foolish in this country by tricking them into saving money in the form of housing equity.  When you look at young people my age saving, it is either for a house or some consumerist purchase, people are not 'investing' an awful lot, much like previous generations, but previous generations had the benefit of buying houses with comparable ease to today.

[arebelspy]

I think the root of most of the disagreement here is the difference between what applies to the majority of the population, and what is possible of you set your mind to it.  I don't think there is any contradiction in saying the majority of people are less wealthy, but at the same time it is possibly easier than ever to build wealth if you make an intentional decision to do so.

Yes, definitely. I think that's the crux of it.

I think the data shows people are less well off.  The complainypants use that to say we're worse off than ever.  I think data also shows its easier to save than ever (see: MMM article I linked earlier). I'd use that to say we're better off than ever.

What has changed generationally, I would argue is that it is now both easier than ever to build wealth intentionally, and much less easy than ever to build wealth accidentally.

Interesting. I think you're right, and I think this might be a very interesting/important insight.

Thank you!

[former player]

Alot are making comparisons between the UK and US as though it were identical, which it isnt wholly.
The housing market and geographical spread of jobs has meant wealth has been hard to generate in the UK.  Rents are dear and we are watching a structural shift towards an economy where more and more will perpetually rent.  Mortgages also protect the foolish in this country by tricking them into saving money in the form of housing equity.  When you look at young people my age saving, it is either for a house or some consumerist purchase, people are not 'investing' an awful lot, much like previous generations, but previous generations had the benefit of buying houses with comparable ease to today.

The geographical arbitrage in the UK has also shifted.  As Doubleh points out, in the past a move to London to grow equity by taking advantage of rising housing demand there worked well to "create" wealth.  These days London is an much more international city with the associated pressures, and a much more difficult place to live in and in which to make those sorts of gains.  Someone interested in building wealth in the UK now should probably go either to an expanding but cheaper city (Birmingham would be my choice) or to a poorer area of the country where housing is cheap compared to a professional/entrepreneurial income, and invest in the stock market.

[boarder42]

I think the root of most of the disagreement here is the difference between what applies to the majority of the population, and what is possible of you set your mind to it. I don't think there is any contradiction in saying the majority of people are less wealthy, but at the same time it is possibly easier than ever to build wealth if you make an intentional decision to do so. And as other posters have pointed out the difference between 50k and 25k meet worth in your 30's is approximately zero in terms of badass mustachians like the fine folk here.

What has changed generationally, I would argue is that it is now both easier than ever to build wealth intentionally, and much less easy than ever to build wealth accidentally.

The former is due to factors like better information via the Internet, availability of much better cheaper index funds - in 2001  here in the uk you could choose ftse100 or ftse all share (uk total market) and easily pay 1% fees for a tracker ; now it is easy to buy an all world tracker with fees in the 0.1-0.3 range. Isa allowances have grown from 7k in 2007 to 20k in 2017.

The latter is driven by three main factors  - cost of university, falling house price ownership and the death of final salary pensions. Health care cost is not a factor here in the uk, as referenced by the original article, as we are lucky to have a fantastic (albeit not perfect) system of socialised medicine.

1. I started university in 1997, the last year to pay no tuition fees. The following year they were 1k per year, rising to 9k since 2012. The additional debt resulting from that is enough to explain the difference in net worth all by itself, although it is actually less of a burden than that would imply because they are government backed and interest and repayments are not on normal commercial terms.

2. In my parents generation and even those a few years older than me the predominant way to build wealth was to buy a house and wait a few years. People would move to London and work 10 years without needing to save a penny, then after that time sell their flat and buy a family house in the countryside outright with the tax free gains. This spawned several "move to the country" TV shows. Now this is no longer so easy due to rising prices, falling availability of mortgages and rising rental. Pre 2007, 100% mortgages were easily available and one bank, the now government owned Northern Rock came up with the stellar idea of 115% mortgages - instant negative equity! For years since 2007 you needed a minimum 20% deposit, that has started to relax now but only for the best prospects. And you now need to be able to prove your income unlike the older days when you could just make up whatever number you need (Google "self cert mortgage"). Property prices in London especially are now beyond the reach of most, leaving people renting for years at increasing rents.

3. My folks generation didn't need to understand about investing, their final salary pensions took care of that. Now the only jobs I ever see with one of these are in the public sector. Default saving rates in employer pensions (similar to 401k) are way too low to make up the gap - typically say 6% with match.

All of this means that the days of people getting rich without trying are over, and that will be a shock to many people. It is still possible to build wealth - maybe even easier than ever - but only if you educate yourself and make it a priority, and there is little in the way of public information to inform people of this. I do foresee this as a source of real tension in the years to come.

Excellent analysis

[Gronnie]

I think the root of most of the disagreement here is the difference between what applies to the majority of the population, and what is possible of you set your mind to it. I don't think there is any contradiction in saying the majority of people are less wealthy, but at the same time it is possibly easier than ever to build wealth if you make an intentional decision to do so. And as other posters have pointed out the difference between 50k and 25k meet worth in your 30's is approximately zero in terms of badass mustachians like the fine folk here.

What has changed generationally, I would argue is that it is now both easier than ever to build wealth intentionally, and much less easy than ever to build wealth accidentally.

The former is due to factors like better information via the Internet, availability of much better cheaper index funds - in 2001  here in the uk you could choose ftse100 or ftse all share (uk total market) and easily pay 1% fees for a tracker ; now it is easy to buy an all world tracker with fees in the 0.1-0.3 range. Isa allowances have grown from 7k in 2007 to 20k in 2017.

The latter is driven by three main factors  - cost of university, falling house price ownership and the death of final salary pensions. Health care cost is not a factor here in the uk, as referenced by the original article, as we are lucky to have a fantastic (albeit not perfect) system of socialised medicine.

1. I started university in 1997, the last year to pay no tuition fees. The following year they were 1k per year, rising to 9k since 2012. The additional debt resulting from that is enough to explain the difference in net worth all by itself, although it is actually less of a burden than that would imply because they are government backed and interest and repayments are not on normal commercial terms.

2. In my parents generation and even those a few years older than me the predominant way to build wealth was to buy a house and wait a few years. People would move to London and work 10 years without needing to save a penny, then after that time sell their flat and buy a family house in the countryside outright with the tax free gains. This spawned several "move to the country" TV shows. Now this is no longer so easy due to rising prices, falling availability of mortgages and rising rental. Pre 2007, 100% mortgages were easily available and one bank, the now government owned Northern Rock came up with the stellar idea of 115% mortgages - instant negative equity! For years since 2007 you needed a minimum 20% deposit, that has started to relax now but only for the best prospects. And you now need to be able to prove your income unlike the older days when you could just make up whatever number you need (Google "self cert mortgage"). Property prices in London especially are now beyond the reach of most, leaving people renting for years at increasing rents.

3. My folks generation didn't need to understand about investing, their final salary pensions took care of that. Now the only jobs I ever see with one of these are in the public sector. Default saving rates in employer pensions (similar to 401k) are way too low to make up the gap - typically say 6% with match.

All of this means that the days of people getting rich without trying are over, and that will be a shock to many people. It is still possible to build wealth - maybe even easier than ever - but only if you educate yourself and make it a priority, and there is little in the way of public information to inform people of this. I do foresee this as a source of real tension in the years to come.

Great analysis. The bolded part at the end worries me. There's no telling what the masses of people that failed to save will do/try-to-do to those of us that have. It will somehow get explained away as luck or privilege instead of hard work and sacrifice, and they will want a big piece of our homemade pie for themselves (for free of course).

[Papa Mustache]

only takes a 65% savings rate to reach 1MM in 10 years.  at 7% interest.  on a 100k income.

No you're wrong.   If you make 1M gross in 10 years, after tax that's like say 750K.  You are telling me .65*750K=488K invested over a median of 5 years (10/2) is enough to amass 1M?  I don't think so.  Not to mention how ludicrous it is to expect most people to gross 1M in 10 years.  Come on people, let's get real!   

Even MMM himself and his wife didn't reach 1M in 10 years.

65k compounded at 7% is worth right around 1MM in 10 years.

also what country are you in that you pay 25% tax on all your income?

grossing IMM isnt hard with 2 engineers. we will hit it in 10 years quite easily

If that math didn't work, our plan would be screwed LOL! (Thankfully, it does, and we're right on schedule).

Hey, clue me in. I'm doing something wrong. When I throw the $65K into the Bankrate.com compound interest calculator I get $136K at the end of 10 years.

[boarder42]

only takes a 65% savings rate to reach 1MM in 10 years.  at 7% interest.  on a 100k income.

No you're wrong.   If you make 1M gross in 10 years, after tax that's like say 750K.  You are telling me .65*750K=488K invested over a median of 5 years (10/2) is enough to amass 1M?  I don't think so.  Not to mention how ludicrous it is to expect most people to gross 1M in 10 years.  Come on people, let's get real!   

Even MMM himself and his wife didn't reach 1M in 10 years.

65k compounded at 7% is worth right around 1MM in 10 years.

also what country are you in that you pay 25% tax on all your income?

grossing IMM isnt hard with 2 engineers. we will hit it in 10 years quite easily

If that math didn't work, our plan would be screwed LOL! (Thankfully, it does, and we're right on schedule).

Hey, clue me in. I'm doing something wrong. When I throw the $65K into the Bankrate.com compound interest calculator I get $136K at the end of 10 years.

its 65k invested annually and compounded at 7%. 

[Paul der Krake]

65k per year, ever year over 10 years.

[Papa Mustache]

Yep, that's it. That's the problem with sneaking a glance at MMM during the work day. Can't ever really concentrate on it, just read quickly. Thanks...

[Guses]

Ok I am not disagreeing with the fact that it is relatively easy to do better than the average. I even think it might be easier to do better than average now than for previous generations. But then I see this:

 If you want to earn $300,000 per year instead, nothing is stopping you. If that's not enough, and you want to earn $1 million per year instead, you can make that happen if you so choose. There is no limit in the USA.

HAHhahahahHAHAHAhahahaHAHAHAhahahaHAhahahahAHahahah Hahah HahahaAhaha AHAHahahahAhahah Ahahahahahahahah! When we are all making $1 million per year, can we all win at the Olympics too?

As you have likely realized by now, there is a deep chasm between each of wanting, doing and succeeding.

The salaried earning market is practically a zero-sum game. Whatever you earn, someone else does not.

Same goes for the ideas market. You can't invent something that already exists.

Luckily, income level is within your control. If your income level were determined by the roll of a die, you might have a point, but it's not. It's up to you. You, Jack, could be earning $250,000 per year within 5 years if that is something you want. I could give you specific instructions on how to achieve that (*). But I bet you wouldn't do it because it would involve a lot of hard work and would completely uproot your life. It really comes down to choices.

Counter points:
First example: Cathy is born as a Native American in 1766. How does Cathy become a millionaire?

Second example: Cathy's parents think that education is worthless and don't send her to school. They are also poor. How does Cathy become a millionaire?

Third example: Cathy develops cancer and has to undergo life altering chemo that stops her from working. How does Cathy become a millionaire?

The common denominator is that circumstances matter.

[Paul der Krake]

The salaried earning market is practically a zero-sum game. Whatever you earn, someone else does not.

Same goes for the ideas market. You can't invent something that already exists.

Those are extraordinary claims.

[Guses]

The salaried earning market is practically a zero-sum game. Whatever you earn, someone else does not.

Same goes for the ideas market. You can't invent something that already exists.

Those are extraordinary claims.

What I mean is that if you earn a salary, someone else is not earning it. Fact, when companies outsource positions to India, the people whose jobs are outsourced lose said jobs. Besides, I said practically. There exists some jobs where you create value.

I don't know how you can disagree with the second paragraph. Maybe you have a time traveling machine?

[boarder42]

The salaried earning market is practically a zero-sum game. Whatever you earn, someone else does not.

Same goes for the ideas market. You can't invent something that already exists.

Those are extraordinary claims.

those were likely said in hyperbole.  but the whole claim of i've got it rough i cant earn more isnt really true you can earn as much as you like in our country ... you just have to be willing to do whatever it is or figure out how to do it. i have to work to the ripe old age of 47 for my investments to pay me 300k a year.  so its not that much of a hyperbole. ... and if i work til 50 i will be increasing my networth at around 1MM per year ... effectively "earning" 1MM dollars thru salary and earnings on investments ... doesnt seem too outlandish to me to get to either of those figures.

[ender]

The salaried earning market is practically a zero-sum game. Whatever you earn, someone else does not.

Same goes for the ideas market. You can't invent something that already exists.

Those are extraordinary claims.

What I mean is that if you earn a salary, someone else is not earning it. Fact, when companies outsource positions to India, the people whose jobs are outsourced lose said jobs. Besides, I said practically. There exists some jobs where you create value.

I don't know how you can disagree with the second paragraph. Maybe you have a time traveling machine?

This is a common fallacy.

The fallacy is wealth creation is effectively a zero sum game. If someone creates wealth in one area, then someone else is losing wealth elsewhere. This is not true.

You only need to look at any number of metrics (real GDP/capita is a decent one) to see this is not true.

[Guses]

The salaried earning market is practically a zero-sum game. Whatever you earn, someone else does not.

Same goes for the ideas market. You can't invent something that already exists.

Those are extraordinary claims.

What I mean is that if you earn a salary, someone else is not earning it. Fact, when companies outsource positions to India, the people whose jobs are outsourced lose said jobs. Besides, I said practically. There exists some jobs where you create value.

I don't know how you can disagree with the second paragraph. Maybe you have a time traveling machine?

This is a common fallacy.

The fallacy is wealth creation is effectively a zero sum game. If someone creates wealth in one area, then someone else is losing wealth elsewhere. This is not true.

You only need to look at any number of metrics (real GDP/capita is a decent one) to see this is not true.

Maybe I should have refrained from using zero-sum as I did not mean to comment on wealth/gdp. I was commenting on the number and quality of jobs from the perspective of the individual.

If two people apply for a job, only one person can get it. If one person leaves a position, it creates a vacancy to be filled.

The total number of positions/jobs can increase or decrease but, at any given moment it is a set number.

[boarder42]

The salaried earning market is practically a zero-sum game. Whatever you earn, someone else does not.

Same goes for the ideas market. You can't invent something that already exists.

Those are extraordinary claims.

What I mean is that if you earn a salary, someone else is not earning it. Fact, when companies outsource positions to India, the people whose jobs are outsourced lose said jobs. Besides, I said practically. There exists some jobs where you create value.

I don't know how you can disagree with the second paragraph. Maybe you have a time traveling machine?

This is a common fallacy.

The fallacy is wealth creation is effectively a zero sum game. If someone creates wealth in one area, then someone else is losing wealth elsewhere. This is not true.

You only need to look at any number of metrics (real GDP/capita is a decent one) to see this is not true.

Maybe I should have refrained from using zero-sum as I did not mean to comment on wealth/gdp. I was commenting on the number and quality of jobs from the perspective of the individual.

If two people apply for a job, only one person can get it. If one person leaves a position, it creates a vacancy to be filled.

The total number of positions/jobs can increase or decrease but, at any given moment it is a set number.

you have to put on your thinking cap and move outside of the box of traditional salaried income jobs to get to the point of 300k or 1MM in income. - which doesnt have to be from one stream of income either.

[ender]

Maybe I should have refrained from using zero-sum as I did not mean to comment on wealth/gdp. I was commenting on the number and quality of jobs from the perspective of the individual.

If two people apply for a job, only one person can get it. If one person leaves a position, it creates a vacancy to be filled.

The total number of positions/jobs can increase or decrease but, at any given moment it is a set number.

... so? Obviously at a given snapshot the number is constant.

[bacchi]

you have to put on your thinking cap and move outside of the box of traditional salaried income jobs to get to the point of 300k or 1MM in income. - which doesnt have to be from one stream of income either.

We can all start ER and travel blogs!

[Guses]

Maybe I should have refrained from using zero-sum as I did not mean to comment on wealth/gdp. I was commenting on the number and quality of jobs from the perspective of the individual.

If two people apply for a job, only one person can get it. If one person leaves a position, it creates a vacancy to be filled.

The total number of positions/jobs can increase or decrease but, at any given moment it is a set number.

... so? Obviously at a given snapshot the number is constant.

Yeah and that's my point. If the number is constant, you can't simply pluck a salaried 300,000$/year position out of thin air. You have to displace someone to get it. Not as simple as willing it to be.

[GuitarStv]

It's hard to amass wealth when you miss the boom times of the 90s because you were too young, then start working after 9/11. Though if you were able to ride out the last recession, you could be just fine. I wasn't.

I was born in '81.  Missed the boom times of the 90s, and started working after 9/11.  No problems with wealth here.  That said, I was just starting to invest during 2007 - 2008, so benefited from the drop and rebound.

[MishMash]

only takes a 65% savings rate to reach 1MM in 10 years.  at 7% interest.  on a 100k income.

You do realize how much of an outlier even reaching a $100k income by age 34 is, let alone having $100k every year for the 10 preceding years (or a salary progression that would allow similar wealth accumulation), right?

life has been a cake walk ... smart parents who were boomers who taught me how to save alot ... then found this site and my dad is crazy impressed with how this is all possible.

i'm not a come from nothing to something but my parents were.  i'm not gonna say i didnt have it way easier than some i probably did

Even with that attempt at acknowledging your advantage, you are way, way underestimating it.

Jack, DH and I both reached 100k income within 4 years of graduation.  We've also socked away 100k plus per year for many years now.  It's about college major choices, mobility and willingness to move around for income mainly.  At 34 currently almost everyone I am friends with earns 6 figures except the teachers and liberal arts majors.