Ok that’s uncalled for, Alabama doesn’t smell like garbage.
Fine, i will bite. When i lived in Brooklyn day care cost the same, around 14k a year, but i guess unless it is UES it is not NYC amirite?
Getting a match doesn’t mean more money out of your pocket. You can still only contribute the max amount.
And please add muni interest income.
Are they counting homes towards NPV though?
yea what their net worth and age!
I think the author purposely padded that example to show how you could spend most of your income. A lot of people do spend most of their budget - however, the allocation tends to lean towards housing, education and child care. Even people who claim to be “frugal” will often splurge when it comes to a house (an “investment”), or their kids’ school.
One important thing that is often unmentioned in this sort of analyses is how much assets the family has. If you already have say $5 million saved and make $500k, is it really necessary to save any more?
I came here for the references to muni interest and homes in net worth and I was not disappointed. Good work lads
BUFFETT QUOTE when he was 25 yo:
The thing is, when I got out of college, I had $9,800, but by the end of 1955, I was up to $127,000. I thought, I’ll go back to Omaha, take some college classes, and read a lot— I was going to retire! I figured we could live on $12,000 a year, and off my $127,000 asset base, I could easily make that. I told my wife, “Compound interest guarantees I’m going to get rich.” […]
I had no plans to start a partnership, or even have a job. I had no worries as long as I could operate on my own. I certainly did not want to sell securities to other people again.
Adjusting for inflation using CPI, $127,000 in 1955 would be about $1,100,000 in 2012 dollars. Spending $12,000 a year in 1955 would be just about $100,000 a year today. A 9% portfolio withdrawal rate is pretty high, but then again he’s Warren Buffett.
Variable vs fixed cost. They can cut down a lot of expenses if they want to which I believe not a whole lot of people can say or do. Obviously these are smart folks because they are 1) capable of earning $500k 2) maxing out their 401k. They are spending more than enough because they value an above average lifestyle which may or may not help them to elevate their social life - leads to even higher earnings in future. The amount of envy here is unimaginable.
^ yeah! who needs to save when you have enough human capital to make $500,000 at one point in time!
$5 million won’t support their 300k per year lifestyle for 30 years retirement. That’s assuming they can’t make that much until 60 yo which is too optimistic to begin with.
And it’s not so easy to reduce expenses once you are used to the lifestyle. Private school gets switched to golf club membership etc…
lol a couple makes 500K, manages to save only a miniscule amount and when some people find that strange, you take it as a sign of envy?
I actually agree with StreetFighter on this. Also people have no background on balance sheet, source/type/potential of earnings etc.
From a risk management perspective, I think it’s irresponsible to voluntarily put yourself into a situation where you save only 1.5% of your income.
This doesn’t really hold up, kids inflate expenses, particularly for two working parents and then you just make a blanket assumption they’ll always spend at this level. Basic personal finance common sense says the $272k you rounded to $300k isn’t even remotely accurate as a retirement cost level.
So lets break this down, expenses from $279.4k net salary ($272.1k net of remainder) that will not persist into retirement: $42k Childcare
$13k Food for two kids
$60k Mortgage
$5k Clothes for two kids
$12k Children lessons
$32k Student loan debt
$164k Subtotal
Remaining non-child / perpetual lifestyle expenses: ~$108K
Why, they have life insurance and who knows what the source of income is (Is it stable? Is this guy flying up the ladder? Does he have a major stake in a company (stock in a tech firm or small business with hard assets)? Are the families loaded?) or what their balance sheet looks like (Maybe they have a nice rainy day fund and are taking a few years to enjoy with the family). Beyond that you have a high variable cost component.
Well, it’s really a $200k/year lifestyle after you consider the house will be paid off after a while and some expenses, like child care, will expire. Anyway, the example does not show any investment income. If you have $5 million (arbitrary number) at 35 years old, and let’s say it grows at a relatively conservative 5% rate after inflation for 30 years, that becomes $21.6 million when they are 65. If you can’t retire lavishly with that much money, then something is wrong. Consider also that yuppie people usually have somewhat wealthy parents to inherit money from. Hence, it could be ok to live paycheck to paycheck if you already have some substantial savings.
I’m sorry this is just wrong you don’t even need $5M. Assume you have $150k net worth mostly tied up in your kids which are investments and assume a basic 40% IRR into perpetuity on your cuck friend’s wedding venue and you make another $200k off of your wedding broken out $100k gifts, $50k friends making it rain during the traditional first grind and $50k miscellaneous. Obvi makes IRR sense to spend the rest on models and bottles it’s basically an investment with your friends who are your network.
What you are saying is definitely doable and rational. The key word is rational which I dare to say doesn’t apply to the couple described above. Saving so little on 500k income?!? It is a certain type of people and I wouldn’t bet a dollar on them voluntarily reduce their expenses in future.
I’d love to know the size of their portfolio. If they don’t have massive portfolio and barely save from their current income, they could get absolutely wiped out if something unexpected happened.
This seems to be living from paycheck to check kind of situation but in high-income bracket.