“People are stuck on this treadmill, working, working, working. They make $250,000, $500,000 a year and they don’t know where their money is going. They don’t have any savings. It is true but ridiculous.”
So the latest main stream media article that I read was all about how high-income earners in the Washington D.C. area aren't saving anything.
Boo hoo.
There is nowhere on this planet that a family making half a million dollars a year can't be maxing out their retirement accounts.
(Not to mention that all this excess is fueled by the theft of the American public through taxation.)
It just goes to show you that it is never about how much you MAKE, it is about how much you KEEP. Of course, those high earners can right their ship and quickly save a fortune – but almost all of them won't.
They are firmly entrenched in the “lifestyle” that living high on the hog will addict them to. Hardly anyone has the willpower to break free of it once they have had a taste.
While this whole article is light on details and seems like a paid advertisement, let's take a look at a few tidbits and see what is going on.
Food Expenses
Atwood said a family of four should spend about $1,200 a month — or $300 per person — on groceries. She has families of three or four members spending $2,000 and more each month.
I know grocery costs can vary a bit between the country, but this is just ridiculous. In my recent post, I stated that my family spends about $450 per month for two adults and two small children. I thought that this amount was still a bit too high and could do with a deeper look to try to save a bit more every month.
This “financial advisor” is saying that it's ok to spend 3X as much!
Not only that, but there was an example given of a family that spends $500 per month at McDonald's. “But when you have a husband and wife with high-powered jobs working 10 or 12 hours a day, who feels like cooking?” Was the excuse.
Come on. Do they think they are the only people who are busy? They think they are the most busy people in the whole world thus cannot make ends meet? Oh, I'm sorry you are so tired fucking over regular Americans to advance your special interests.
Please.
Life Expenses
“If the mortgage is $5,000 a month and day care is $3,000, and they have significant student loan payments, and they bring in $13,000, $14,000, $15,000 take-home, that leaves very little left over for the electric bill.”
So let's do the math. 5000 + 3000 = 8000.
That still leaves 5-8,000 per month for everything else. Based off these numbers, this is a family earning low 200,000s.
To pay $5,000 per month in a mortgage means the house was purchased for a cool million or so. I am guessing these people haven't heard about the rule to not buy a house that costs more than 3X your annual salary?
To have a very easy payment, you can follow my rule which is no more than 1.5X your yearly income. That way you can take out a 15-year mortgage and have it paid off quicker.
But back to the numbers, that is still up to 8,000 per month to pay the bills. You can't find a way to pay back your student loans, pay your utilities, cars, food, invest, and all the rest?
I call bullshit.
Plus daycare doesn't last forever.
My Takeaway
This reads like a field guide for "The Millionaire Next Door."
Let me point out to you some choice quotes from this excellent book.
“Many people who live in expensive homes and drive luxury cars do not actually have much wealth. Then, we discovered something even odder: Many people who have a great deal of wealth do not even live in upscale neighborhoods.”
“It’s easier to accumulate wealth if you don’t live in a high-status neighborhood.”
“Great offense and poor defense translate into under accumulation of wealth.”
“How can well-educated, high-income people be so naive about money? Because being a well-educated, high-income earner does not automatically translate into financial independence. It takes planning and sacrificing.”
“Wealth is not the same as income. If you make a good income each year and spend it all, you are not getting wealthier. You are just living high. Wealth is what you accumulate, not what you spend.”
I could go on, but let's just say that if you want to understand this mindset then read that book.
So it really makes no sense to chase just a high salary. You have to account for what you will spend. You have to take into account the cost of living. Places with high taxes and high housing costs will just eat most of what you make if you don't think about the day to day stuff.
Plus, with those high-income jobs there is the push to “look the part” and that means flashy cars, suits, nights out, and more. All this will add up.
$50K per year in Iowa might get you the same lifestyle level as $80k in California. I know where I live in Arizona life is pretty cheap – that's why I am perfectly content here.
Also, this whole article smells like an ad posing as an article. It's pretty fishy.
The financial planner they interview charges $185 per hour and sells a budgeting software for $63 per year. She expects to gross over $200K this year.
Wow, $185 per hour! Where do I sign up to be a financial planner? I mean finances is easy-peasy to me. Does anyone want to hire me as a non-official money guy?
Here are some of her “top tips.”
- Prioritize. Try not to live each month to the very last dollar you earn.
- Spend less than you earn each month.
- Never say “might as well” when it comes to a purchase if you don’t have the money on hand.
- Make trade-offs for discretionary expenses. “Should we eat out? No, let’s use the money instead for Susie’s soccer camp.”
What sort of basic weak shit is this? And people are paying her $185 per hour to sort out their finances? No wonder they are broke and part of the 1%.
Guys, it doesn't cost that much. Here is a simple tip to save money every day.
Don't buy shit you can't afford.
Boom! Simple.
Here, they even made a video about it:
Let's end this on a nice note, here's another one for you.