Early Retirement Extreme Forums

$250,000 a year is like....50 Jacobs.
http://www.thefiscaltimes.com/Issues/Th ... 000-a-Year
"And their spending is conservative, based on national averages for professional couples with two kids. Not included are those hefty run-of-the-mill payouts for charitable deductions, life insurance premiums, disability insurance, legal fees – or monthly sessions at the hair colorist, or membership at a gym."
How do we sympathize with those still chained in the cave? It's hard when our definitions are no longer the same. "Conservative." It's like they're speaking a different language.

I think that's the same data from this site: http://www.washingtonpost.com/wp-dyn/co ... 00050.html which was mentioned in another post on this forum.
Articles like this make me cringe. It's funny because I grew up in Plano, TX, one of the cities cited in that article so I can relate (well, not really).
One glaring point, which i think is particularly funny, is that they budget in $5,000/year for home 'cleaning'. I just want to scream "clean your own damn house, if you are in the red with that kind of salary!".
Property taxes are high in Texas but you would have to live in an effin' mansion to pay 11k in property taxes in my area. In my city, that would be 450k house.
And $2900 a year in car insurance? Maybe for a BMW and a Hummer.
Personally, I would find it very hard to sympathize with a person in this situation. Indeed, I would be envious: not of their situation but of their potential...

The car payment is $7600/year, or $633 per month-- in the text the author indicates that this hypothetical family has two cars, but that one is paid off.
The article seems silly to me. The supposed hardships faced by this family are painted out in detail: "take a pass on a new suit, skip an annual vacation, and drop some kids activities. Unfortunately, the family would also probably save less, at the expense of their retirement or their kids’ educations." The sacrifice and hardship! It's too much to read...
Who would have thought that ALL you get for $250k these days is a big house with heat,AC, and electricity, two expensive cars, almost limitless medical care, unlimited food and drink, a clean unlimited reliable water supply, suitable clothing, military and police protection, dental care, an annual family trip, gifts, various forms of entertainment, someone to clean your house, meals out at restaurants, a few retirement plans, a couple of college savings plans for the kids, and a dog. I really would have thought you'd get more than that-- like daily fireworks.

@Mo I laughed out loud when I read that. We should petition our congress for daily fireworks!

First off wow they're spending a lot in... everything.

Also the article is a bit disingenuous it claims that they family is 'in the red' in some cases, yet they're squirreling away over $40k in college and retirement accounts. So they're actually doing better than the 'typical' American family that spends what 104% of their income?
Some calculations and assumptions:

at 6% interest rate, 30yr term, their home loan is ~$500k

at 6%, 5yr their car is ~$40k

I never saw the 5k for cleaning, until you mentioned it Halcyon. Mo, that was pretty hilarious.
I thought I was a pretty big spender, but wow. 20k for cars; 20k for food, 15k for leisure; 5k for cleaning. A total of 60k that could easily be trimmed. Also, 4k/yr for dentist visits. I understand that braces for two kids can be expensive. However, the costs are not indefinite.
Well, strangely enough, this article does motivate me to reduce my own spending.

Just when I look at my own budget and think how far I still have to go to hit ERE....I read an article like that realize just how far ahead of the curve I really am.

These (and a lot of others) need to stop, sit down, and get a CLUE! Oh, I forgot, their living the "American Dream", AKA--"90 miles per hour, down a dead end street".

I agree with investnoob, the dental costs seem high, too-- considering 2 kids in the scenario.
As a word of well intentioned advice to those who don't have the roughly $1k per year dental costs-- take care of your teeth. I didn't regularly get dental care for about 15 years. I brushed regularly, but didn't floss often.
The result is that I probably will average close to $100 per month for dental care for the rest of my life. It comes in waves-- some years it's just a few cleanings, other years a few fillings, a root canal, crown, etc... I anticipate I'll probably end up getting dental implants at some point. Some of the money is pre-tax; even so, in my experience, this is a lot like the health care issues we have discussed on this forum before: exercise some discipline and take care of your body on the front end, and you won't become a perpetual income stream for someone else.

I just got back from the grocery store (the big Xmas day here in Finland is actually tomorrow - Christmas Eve). The guy ahead of me at the checkout had a bunch of stuff I'd never buy - flavored bottled waters, fancy cheeses, a huge chunk of ham, etc. His total bill came to €166 or USD 218. More than I spend in a month!
I guess he's one of these poor top-earners.

Keep on driving ... don't stop to gawk at the crash at the side of the road.

In this whole fantasy scenario, few people seem to notice that this couple is banking $41,000 per year (approximately 21% of takehome pay). Yes, this family will be fine.

Those poor people. Maybe we should take up a collection?

Not only are they banking $41k/year, they are putting around $18k/year toward principal on their mortgage (estimate based on $36k annual mortgage payments). I do not fall into the camp that you "can't count your primary residence" towards net worth. Once they are empty nesters, they can sell that $1 million house (estimate based on a 30 year loan), move to a $100k house and pocket the difference (estimate based on no taxes
Of course, just because they are "making ends meet" does not mean they aren't overspending. I'm just trying to put things into perspective. They will likely have a comfortable traditional retirement.

Am I wrong in figuring that in 7 out of 8 scenarios the family couldn't bank $41k without cutting other expenses? Of the $41k, $8k is for the kids college funds, $33k is for the parents retirement.
The scenario family will be fine if: neither of the 2 workers faces prolonged unemployment, they earn a pretty good real return (net of taxes and inflation) on their investments, and they're willing to cut their expenses in the future, etc...
One of the things I expect families who earn in the top 3% to "buy" first is financial security-- not $40k cars, and $400/mo maids.
If the argument becomes that the scenario family will be fine by drastically cutting expenses in the future, it seems at least equally valid to suggest that moderately reducing expenses now might prevent the need for a drastic cut in expenses in the future.

I think that the point of this article is that even with a very generous salary, the pursuit of the "American Dream" is elusive. The point that most of you make is being soundly being made there.
Most of you live a spartan life (the rest of us are doing some variation that works for us). The people in this article, as most Westerners are, unaware that there is another way.
In this Orwelian world of 24 hour media, it is dificult to see another path to happiness. If you don't know, you don't...
I am sure that most of you didn't know what you know now before. It is often hardship that is the tuition of the education of life.
It is easy, through snobbery, or perhaps jealousy? to ridicule, as is often done here, those not enlightened. I, as a clinician, teach better health habits to those with asymetric knowledge of the consequences. Sarcasm and snobbery seldom help (it didn't teach my child to speak or read either). Also pursuit of any lifestyle can be an addictive opiate.
The arrogance here often parallels those that "have too much". The article, I believe, demonstrates the obvious: the treadmill to more is an illusion. Where is your treadmill headed?
Hang the rich
JP

@jampit3: Thanks for the contrarian point of view. You make some good points (and a couple of lousy ones).
I for one disagree that this, You vs. Us divide you portray, is as black and white.
I think many of us here have had (may currently have or could still have in future) spending patterns similar to those of the family in the article. What this community drives home for me is that it is very possible to live an interesting life with expenses far less than what society around us consider a minimum.
I wish I had come across all this "sarcasm and snobbery" when I did have $100k+ earnings and was among the top 5% top-earners in USA.

@jampit3: You make one fatal error. You assume that the way the members on this forum talk ABOUT someone is the same way that they would talk TO someone. I see people asking questions of others on this forum, and the advice is never snarky or arrogant.

Vegan and KTN-- you are both right. I was being contrarian and a little sarcastic myself. The views here are largely positive and instructive.
Just don't forget that its about living a good life, that doing without for its own sake is not neccesarily the goal.
Its easy to get caught up in the means and not the end.
And some entries on some sights have been a little snotty, but hey, these are really intelligent people.
PS: learning a ton of stuff here.

Re last few posts -- remember the linked article is not even about real people, just a hypothetical family. What the ulterior motive is, I have no interest in guessing.