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Early Retirement Extreme Forums » Money Questions

1. 

   MrsKensington
   

   Novice
   Joined: Dec '11
   Posts: 11

   Hi folks.
   I've read numerous people here describe their income a few ways that seem to indicate they are happy with it, especially relative to the fact that they are not yet "retired."
   "I make a good salary" or "I'm well-paid" or "The pay is so good..." are fairly common phrases.
   What exactly constitutes a good salary?
   I remember thinking in my 20s that making double my current age would be amazing. At the time I was making $16,000/year. I still haven't hit that 'double-my-age' target yet, 20 years later, but I'm OK with where my salary is. I also remember seeing one of my dad's paychecks as a teenager and it was just over $2,000 and I thought that was GOOD MONEY. I have finally, this year, hit that number.
   What do you consider well-paid? Is it a target number? $100,000?
   Or is it "enough to live as I am now while saving 75% of my income"? "More than my spouse/dad/sibling/friend." "Enough to retire now."

   Thoughts?

   Posted 1 year ago #
2. 

   Mirwen
   

   Journeyman
   Joined: Jun '11
   Posts: 169

   Hmm,
   That's an interesting question. My family's take home pay is currently about $35k and I consider that enough. It's enough to have everything we need, most of what we want, and still be able to save. I'm mostly a SAHM and feel no pressure to return to work soon for financial reasons.

   I'd consider a "good" salary certainly above average, somewhere around $70k, above 100k is excellent (top 10%). What I find amusing about this number for me is that I believe Jacob has covered this elsewhere. He said something about us being able to relate to people one or two tiers above or below us in income and spending. Someone please post a link if you know what I'm talking about.

   Posted 1 year ago #
3. 

   m741
   

   Master
   Joined: Jan '11
   Posts: 734

   I would consider over $100k well-paid. It's above average even in very expensive areas of the country. If you really wanted to normalize I would consider $80k well-paid in Bumblefuck, Iowa, but $110k well-paid in NYC.

   That's not to say that less is poorly-paid. Getting $40k to do nothing and sit joking around with friends is also a good deal!

   Posted 1 year ago #
4. 

   m741
   

   Master
   Joined: Jan '11
   Posts: 734

   @Mirwen: I remember that. Don't know the source. The basic idea was that in almost everything you can imagine a series of tiers.

   You consider your own tier 'normal'. One or two tiers better is 'admirable' and three+ tiers better is 'a little crazy/stupid'. Jacob applied it to expenses. Someone spending $40k/year would consider $30k admirable and $20k crazy. Meanwhile someone spending $20k would consider someone spending $12k admirable and $6k insane.

   Posted 1 year ago #
5. 

   george
   

   Journeyman
   Joined: Mar '11
   Posts: 212

   Personally salary has nothing to do with it.

   I just look at whether my income from assets etc is enough to cover expenditure, saving goals, etc

   I've met people on very high salaries (well over $100k) who struggle to make ends meet, and they opened my eyes.

   I also know someone who earns a very large salary. It's interesting how other peoples reaction towards him has changed. I think men respect him more for it. I know him as a fallible human being, no different from the people who help me at the supermarket etc.

   I also know him as someone who has an ERE lifestyle, but unless you know him well, you'd never guess.

   Posted 1 year ago #
6. 

   frugalcoconut
   

   Novice
   Joined: Feb '12
   Posts: 4

   Last year was my highest grossing ever at 55k. I consider it quite a respectable salary for a SINK without any specialized skills (e.g. not an engineer or anything, just office work). This allows me to max out my Roth 401k, Roth IRA, and HSA ... with just enough left over for some discretionary spending or additional saving, but I wish it didn't feel like I'm barely making ends meet from my reduced paychecks ... so in that sense I wish I was bringing home a little more. Maybe it gets easier with time due to gradual salary increases but living expenses staying fairly flat? It never seems as if it's enough, and there are always different goals competing for my attention. I can't yet see the light at the end of the tunnel where I can yell "FREEDOM!!!" because the concept of a satisfactory final "number" is so vague that I don't know where the end game lies.

   Posted 1 year ago #
7. 

   Hoplite
   

   Master
   Joined: Dec '10
   Posts: 489

   @Mirwen,
   I think you mean what Jacob referred to as the Wheaton Eco Scale,
   http://forum.earlyretirementextreme.com/topic.php?id=1482

   Below is Jacob's comment:

   http://www.permies.com/permaculture-forums/1588_0/intentional-community/eco-witch-hunt

   Also see the Wheaton Eco Scale. Those 1-2 levels above your present level is something you aspire to or is inspired by, those more levels ahead are considered crazy. Those 1-2 levels behind you are somehow perceived lacking in skills or ambition and those which are further behind are downright evil.

   Something like this operates in every area: frugality, vegetarianism, sports, etc.

   Posted 1 year ago #
8. 

   LiquidSapphire
   

   Master
   Joined: Jul '11
   Posts: 434

   I feel I make pretty good money, I make 91K. If I were more typical in terms of spending I could easily afford what I think would be the high life! But it's just not that fulfilling to me so I don't go there.

   There was a recent job opportunity that came up that, had I gone for it and had I been selected, would have been a $15K raise. To me, the only use for that money would have been to expedite ERE, and that is all.

   Studies show that happiness due to money peaks about $40K per year, and any financial gains after that don't materially contribute to happiness. That sounds pretty good to me. It would be about $33000 take home, save 10-15% and you could live quite well on the rest.

   Posted 1 year ago #
9. 

   mikenotspam
   

   Apprentice
   Joined: Oct '11
   Posts: 55

   I've always thought of $70k as above average, though I think I learned that from conventional widsom. I feel incredibly rich saving a couple grand a month at least with my $50-55k pay. If I had the consumer desires of most, they could easily be fulfilled at my pay. In fact, I feel I could live a life of "luxury" making $40k, which I could do with little stress (20 hours a week of work) and summers off. Obviously ERE would be pushed back, but do you need ERE with 20 hours a week of enjoyable work? Hmm, why don't I do that, then? :-)

   However, Mrs. Kensington, to answer your question, I would say that, in the mind of a given person in question, good pay is always $10k more than what they currently make :-)

   Posted 1 year ago #
10. 

    jacob
    

    Expert
    Joined: Jul '10
    Posts: 3,300

    Yeah, I think anchoring plays a large role in what's considered good. You can anchor in your own salary or you can anchor in other people's salary.

    E.g. 40k might sound pretty good because it's 10k more than then 30k you made in your last job, but once you find out that your coworker makes 50k for the same job, 40k doesn't sound all that great anymore.

    [I might form my opinion based on making more than what I spend at pretty much any salary level.]

    Posted 1 year ago #
11. 

    chenda
    

    Master
    Joined: Jun '11
    Posts: 371

    I would consider a good salary any amount which would allow someone to maintain a very high savings rate (e.g. 70%+) with limited frugality - frugality as they themselves define it.

    From a consumption point of view, I agree with Liquid Sapphire about the $40000 gross figure; your going to get rapidly diminishing utility spending more than that every year. Plenty of people like to put this to the test though!

    Posted 1 year ago #
12. 

    MrsKensington
    

    Novice
    Joined: Dec '11
    Posts: 11

    Very interesting responses. For one of my friends in the SNOBurbs where I just left, anything less than $250K salary and 4,000 sq. foot house, a beach house, a basically all-white public school, and a full-time brown nanny means you have not yet "made it". This attitude was annoying at best. Where we are now, goals are more like being able to ski or raft at least a few days a week, drink beer a few days a week, go to a play or movie once a week, and ride your mountain bike to one of your jobs from your rental room in town. It's not cheap living, but priorities are very different, and $40,000 could easily get you there and beyond.

    Posted 1 year ago #
13. 

    dragoncar
    

    Expert
    Joined: Oct '10
    Posts: 1,289

    Liquid: All the studies I've heard reference around $75k as the household income above which happiness does not increase (it was never clear if that was net or gross, or how that translates into per capita income). As someone who made around $70k before law school and over twice that after law school, I'd completely agree. My only increased happiness is the knowledge that I'm saving towards financial independence (I spend less now, even though I make more).

    To me, the 75k studies imply that an upper target for retirement savings is about $2 million.

    Posted 1 year ago #
14. 

    putski
    

    Novice
    Joined: Apr '11
    Posts: 25

    I was thinking about this question the other night at work while listening in on a conversation people were having about salaries and what is 'enough.' I work at a country club where the memebers aren't super rich, but certainly make way above average. I overheard one guy say, "you have to make 200K just to get by in this county, and that's just barely scraping by..." I make somewhere between 35-40K, and I'm positive that my lifestyle (working part-time, having a lot of free time to do things I enjoy, the freedom to take off from work to travel, not having the stress of taking work home with me at night, etc) gives me much more happiness than his (driving fancy cars, having a nice house in a club with all the expenses involved with that, the high taxes, the long hours at work, the appearances to keep up). Now, if I made his salary, I'd be ERE in a year :)

    Posted 1 year ago #
15. 

    ffj
    

    Master
    Joined: Aug '10
    Posts: 342

    Do any of you guys know of or read Money magazine? I used to read it and I don't know if they still do this but they would highlight a family and describe this family's saving goals and financial future. Almost always, they would highlight a young family that was making well over 100,000 a year and many times much more than this. I would always shake my head and think of how much of a disconnect that was with most people, at least the ones I was around. That and how easy it would be to save that kind of money if I made a quarter of a million a year. It's all relative I think. The happiest I have ever been was during a time I didn't have two nickels to rub together, and now that I am comparitively "rich", I haven't experienced any greater joy, just perhaps greater comfort.

    Posted 1 year ago #
16. 

    dot_com_vet
    

    Master
    Joined: Jan '11
    Posts: 379

    I stumbled upon an article about Trump continuing to fight to allow members to be buried on his golf course. This seems the pinnacle of tacky to me, but if you have money to burn...

    I'm pretty sure that > $75k making no difference correct. The happier times in my life was when I was making the least, but had a ton of time.

    Posted 1 year ago #
17. 

    OTCW
    

    Apprentice
    Joined: Mar '11
    Posts: 39

    A truly good salary is one that I don't need. Beyond that, I have always felt best when I am compensated as much or more than what my professional peers make. Less than them always made me unhappy.

    Posted 1 year ago #
18. 

    GandK
    

    Journeyman
    Joined: Sep '11
    Posts: 271

    I agree that simplicity makes for the happiest existence. I remember the peace I felt when I was an Airman and everything I owned fit into one of those big ugly standard-issue duffles. Very low salary, very few needs and all of them met. I felt like I had the world at my feet rather than on my shoulders. :-)

    Posted 1 year ago #
19. 

    bigato
    

    Master
    Joined: Mar '11
    Posts: 922

    When I be able to save a year of expenses in the savings of each
    month, I will feel like I'm making a lot.

    Posted 1 year ago #
20. 

    C40
    

    Master
    Joined: Feb '11
    Posts: 576

    It depends on what you mean by "Good"

    Median appears to be a bit under $50,000** So if good for you is to make as much as most people do, there you go. The top 3rd looks like $75,000 or so. The top 5th is around $100,000.

    ** According to some graphs that I looked at just now... But I see other data saying the Median is around $27,000.... So if you're interested in comparing to the masses, investigate more than I did

    http://en.wikipedia.org/wiki/Household_income_in_the_United_States

    http://visualecon.wpengine.netdna-cdn.com/wp-content/uploads/2005_income_distribution.gif

    http://lasttechage.files.wordpress.com/2011/11/us-income-distribution-2010-1210x7201.gif

    Posted 1 year ago #
21. 

    George the original one
    

    Expert
    Joined: Jul '10
    Posts: 1,942

    @C40 - remember that household income is different from individual income is different from individual wages.

    As I recall, median wage (often misquoted as income) is slightly below $50k. Median household income is also a touch under $50k. Median individual income would be lower, since most people are a member of a household and not all members of households have an income... $27k is probably that figure.

    ***

    In terms of Americans, $75k-80k is a "good wage" in most of the country. A household can easily have two incomes at that level and earn $150k.

    Posted 1 year ago #
22. 

    dragoncar
    

    Expert
    Joined: Oct '10
    Posts: 1,289

    This is always good to keep things in perspective: http://www.globalrichlist.com/

    Posted 1 year ago #
23. 

    LiquidSapphire
    

    Master
    Joined: Jul '11
    Posts: 434

    I got the $40,000 figure from here:
    http://blog.penelopetrunk.com/2004/08/01/you-only-need-40000-to-be-happy/
    She claims a Harvard researcher into happiness came up with the number but I haven't investigated the guy's research or anything, perhaps the $75000 figure has been more rigorously tested and confirmed.

    Posted 1 year ago #
24. 

    Phayen
    

    Apprentice
    Joined: Jul '11
    Posts: 93

    I Agree with m741 in that it depends on your situation. I'm around $80K, but nobody would consider that very good in my city. Especially with a child and SAHM. We still manager to save more than most though, so it's good enough for us. Just wouldn't be a "good" salary.

    Posted 1 year ago #
25. 

    Mirwen
    

    Journeyman
    Joined: Jun '11
    Posts: 169

    There are many different studies on happiness and income. There certainly is a relationship. The most notable is on the low end of the curve. Not having "enough," whatever that is, has a very negative impact on happiness. Somewhere around $40k, you don't have any more negative impact on happiness from money and start gaining happiness from money. Somewhere around $75k/year you start seeing diminishing returns. Somewhere around $100k you get no additional benefit from having a higher salary. The studies I've seen all studied individual income. I sometimes wonder how much these people's spouses were making and how much they had in assets. I think these thing should be considered too.

    Note: I think my first comment may be confusing. I meant to say that a good salary would be somewhere above average. In my estimation about $70k. As stated by others, average salary is about $50k depending on what measure you look at. I did not mean to say that average is $70k.

    Posted 1 year ago #
26. 

    cls
    

    Novice
    Joined: Dec '11
    Posts: 8

    I also wonder what people mean when they say "good salary". A few years ago I calculated how much I'd need to earn to have what I considered at the time to be a decent, not too extravagant lifestyle. It was twice what I am earning now and I'm actually better off now than I ever thought I'd be if I were earning the amount I calculated.

    I finally came to the realization that it's not how much you make, but how much you spend.

    The thing is that I know that by most measures my salary is "good" and "enough" etc, but I look around and see people who I know have to make less than me yet they have all the things I don't. It took a really long time for me to realize that 1. they're probably all in debt and 2. none of those things were making me happy.

    My salary is around $125k depending on the year. I live in a HCOL area, am married and am the sole breadwinner. Our major expenses are medical and housing (my DH has a lot of bills not covered by insurance). For many years we were living pay check to pay check and were in massive amounts of credit card debt. I have reached a point where I am easily able to save 50% of my take home pay and am working toward increasing that number. I've gone from thinking that I don't earn nearly enough to finally accepting that I have a "good" salary that affords me many opportunities (no pun intended). However, I still think that whenever someone says they earn a "good" salary, that they must be earning significantly more than I am.

    Posted 1 year ago #
27. 

    m741
    

    Master
    Joined: Jan '11
    Posts: 734

    I can say without a doubt that I am happier earning $130k/year than $70k/year. I've maintained the same college/bachelor lifestyle but the retirement date is approaching much more rapidly.

    I'm not getting joy out of how much I spend, but how much I save.

    Posted 1 year ago #
28. 

    GandK
    

    Journeyman
    Joined: Sep '11
    Posts: 271

    "I'm not getting joy out of how much I spend, but how much I save."

    I agree 100%. The only lifestyle advantage I gain from having an higher-than-average income is the joy that comes from knowing I'm making speedy progress on my financial goals. Also, a lot of people just see the amount on the paycheck and don't realize/care that high incomes generally require years of sacrifice to get there, and come with long hours and high expectations.

    Posted 1 year ago #
29. 

    S
    

    Journeyman
    Joined: Jul '10
    Posts: 288

    I don't feel any happier making $100k now vs a few years ago when I made $60k. Both numbers cover all my needs and many of my wants. Even when I made $24k just starting out on my own I was still able to provide for all my needs, though very few of my wants. I remember being pretty happy then too.

    Like m741 said, how much more I can save is really the only difference.

    Posted 1 year ago #
30. 

    Scott 2
    

    Journeyman
    Joined: Feb '12
    Posts: 189

    A good salary is:

    1. More than your parents make
    2. More than your brother in law makes

    I think how happy a person is has nothing to do with their salary. It is simply a property of who they are as a person. Some people are naturally happier than others. Barring dramatic life events, it doesn't seem to change much over time.

    Posted 1 year ago #

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