Upper and UMC Ppl: Do you Actually Know Anyone Living Beyond their Means?

[Anonymous]

Anonymous wrote:

Anonymous wrote:There definitely are people like this, but the problem is that it becomes a lot less obvious when people who have high incomes are living beyond their means.

I grew up in a lower middle class neighborhood. You'd hear about a friend's family having to move because of eviction, but then they'd show up to school in a new pair of Jordans.

High income people still live in the fancy house and still drive the german cars even though they might have debt out the wazoo. They're not living on the razor's edge like a poorer family.

If you grew up in a lower middle Class neighborhood how many UMC friends did you have who got evicted?

That's what the pp is saying: you know when LMC people are in trouble because they get evicted, UMC people may be in financial trouble but they have more of a margin to hide their problems.

[Anonymous]

No idea. Friends don't show me their balance sheets.

[Anonymous]

Most of the Biglaw attorneys that I know work too much to be able to burn through their money. They don't have enough time for shopping or vacations. That was certainly true for me in Biglaw. The money just kept piling up. Biglaw even paid for my take out dinners and my uber home as long as I was working late, which I pretty much always was. Most months I spent almost nothing except for my mortgage.

Now I have kids and have left Biglaw. It's far easier to burn through a paycheck. I have more time, less money and more obligations.

[Anonymous]

No. Everyone I know can comfortably afford their lifestyle.

[Anonymous]

I have absolutely ZERO purview into peoples personal financial situation. I suppose if I were a CPA with a career in Personal Financial Planning, or a mortgage underwriter, I would have an answer to your question.

[Anonymous]

Honestly no.

In general, people who spend a lot make a lot and are saving a lot.

Poorer people like to think to otherwise make themselves feel better for missing out ("So and so went on an exotic vacation but I bet they have no savings") but that doesn't make it true.

[Anonymous]

I think it's not that people with UMC incomes can't afford their lifestyles on their current income NOW, but that many save a shockingly low proportion of their income that could secure for themselves financial security, perhaps at an earlier age, or start to generate savings that could benefit future generations (pay for schooling, etc.). WSJ ran an article a few years back titled "Six Figure Income - and Facing Financial Ruin" - a fascinating part of this article included a study of a Typical UMC Family in Chicago making $400K+ that were clients of Northern Trust (private banking with extensive research on their clients of course) - disposable income was somewhere near $275K and they contributed about $12K to retirement - the rest going to lifestyle.

I think many people spend large amounts before their retirement is secure. Yes, they can afford it now, but assuming the high income will always be there is risky - for most, job security is lowest when they hit their 50's.

[Anonymous]

Anonymous wrote:I think it's not that people with UMC incomes can't afford their lifestyles on their current income NOW, but that many save a shockingly low proportion of their income that could secure for themselves financial security, perhaps at an earlier age, or start to generate savings that could benefit future generations (pay for schooling, etc.). WSJ ran an article a few years back titled "Six Figure Income - and Facing Financial Ruin" - a fascinating part of this article included a study of a Typical UMC Family in Chicago making $400K+ that were clients of Northern Trust (private banking with extensive research on their clients of course) - disposable income was somewhere near $275K and they contributed about $12K to retirement - the rest going to lifestyle.

I think many people spend large amounts before their retirement is secure. Yes, they can afford it now, but assuming the high income will always be there is risky - for most, job security is lowest when they hit their 50's.

I agree with this. It's not very common that people making $300k+ are going into the red every month, but it's very surprising how many people at that level are only saving 10% or less of their income. If you make $100k, when you imagine making $300k you picture a nicer lifestyle and a very good nest egg in the bank to give you financial security and possibly enable early retirement. Then you see people making $300k and what they actually have is a similar 401k balance to the $100k person, a nicer car and a house 2 neighborhoods over with an additional bedroom. They're not on the verge of bankruptcy but they're also not a single step closer to financial independence or actual wealth, and that's the part that feels wasteful.

[Anonymous]

Anonymous wrote:I ask this coming from a low-income background. I grew up in a high-crime, poor area. However, people would splurge on second-hand Benzes and Polo shirts (which was huge in the 80's, remember?). Now comfortable at top 2% of income range in DC.

A theme on this board and in the news is that people in this top range also spend too much. Event those making high six-figures may be spending way too much on cars, private schools and homes. Hmm. Do these people really exist? While I saw people spend foolishly at the bottom, I don't see it as much where I am now.

Asking out of morbid curiosity. And to be honest, out of jealously. I sometimes wish I had a nicer house and could send my kids to Sidwell. But I remind myself that while I could technically afford it, that lifestyle would totally own us.

How much do you make OP? You say that you could technically afford sending your kids to fancy private and a nicer house, and everyone’s definition of affordability is different. I’m guessing the people who do all these things make 7 figures at minimum, so they are probably spending a lot but saving a boatload too...or they are subsidized by family. Either way, they can more than afford their fancy lifestyle.

[Anonymous]

My BIL, 45 years old, single (live-in GF with her own (relatively low-paying, but more than enough to live on as a single person job with benefits), no kids, no intention of having kids, makes $350-$400K/yr.. He has told all of us (family) that he lives paycheck to paycheck, and even takes on OT work (he's a radiologist).

Why?

He bought a 2.5 million dollar home on the water on LI. It should be easily affordable on his income, but he knew nothing about real estate and is not the most common sensical person in the world. The house is 30+ years old, so of course has maintenance involved + a pool to be maintained year-round + landscaping to be maintained. He was completely shocked by the home upkeep costs. On top of that, he is embroiled in a battle with the city over the placement of a pool house on his property, an issue the previous owners even disclosed to him, but got him to agree to a tiny amount of money in escrow to wash their hands of it. He has paid a legion of realtors, consultants, and lawyers to deal with this, some of the same ones who gave him poor advice to begin with.

Does his house still look gorgeous? Yes. Did he just buy a 10K+ custom-made bed his GF really wanted? Yes. Does he still eat at expensive restaurants? Yes. Does he have any health insurance? No. Could he maintain any part of this lifestyle if he stopped working tomorrow? No.

So, he is constantly stressed about money, but he makes more than enough to cover the day-to-day. He keeps hoping the situation will improve, but every time it looks like one crisis is over, another seems to pop up.

Now, if he did lose his job, he does have a $2.5 million property he could borrow against, or sell. He would probably find a new job quickly. I agree with the poster who says most UMC/UC people have more ways to cushion a true crisis.

[Anonymous]

Anonymous wrote:I have a friend who I think lives outside her means.. but I don't know.

What I know is that within a year or two she went from living a modest but comfortable life to owning a massive, beautiful home decorated straight out of a Pottery Barn catalog. She never wears the same designer clothes, has fancy cars and a fancy boat, vacations regularly to Bermuda, and became a stay at home mom. Her kids go to private school, and wear designer/trendy clothes, plus she has a part time nanny available whenever she needs a sitter, and just seems to have a lot of additional wealth. Her husband has a good job- but the instant change in a short period of time makes me wonder.

That being said, my gut instinct with them is that the additional funds are coming from a trust/inheritance that I am unaware of. I still think they went from zero to 180 on the spending... way too fast... but I have to believe their is a source of income beyond the husbands salary.

Definitely trust fund or inheritance -- or maybe they won the lottery!

[Anonymous]

Anonymous wrote:My BIL, 45 years old, single (live-in GF with her own (relatively low-paying, but more than enough to live on as a single person job with benefits), no kids, no intention of having kids, makes $350-$400K/yr.. He has told all of us (family) that he lives paycheck to paycheck, and even takes on OT work (he's a radiologist).

Why?

He bought a 2.5 million dollar home on the water on LI. It should be easily affordable on his income, but he knew nothing about real estate and is not the most common sensical person in the world. The house is 30+ years old, so of course has maintenance involved + a pool to be maintained year-round + landscaping to be maintained. He was completely shocked by the home upkeep costs. On top of that, he is embroiled in a battle with the city over the placement of a pool house on his property, an issue the previous owners even disclosed to him, but got him to agree to a tiny amount of money in escrow to wash their hands of it. He has paid a legion of realtors, consultants, and lawyers to deal with this, some of the same ones who gave him poor advice to begin with.

Does his house still look gorgeous? Yes. Did he just buy a 10K+ custom-made bed his GF really wanted? Yes. Does he still eat at expensive restaurants? Yes. Does he have any health insurance? No. Could he maintain any part of this lifestyle if he stopped working tomorrow? No.

So, he is constantly stressed about money, but he makes more than enough to cover the day-to-day. He keeps hoping the situation will improve, but every time it looks like one crisis is over, another seems to pop up.

Now, if he did lose his job, he does have a $2.5 million property he could borrow against, or sell. He would probably find a new job quickly. I agree with the poster who says most UMC/UC people have more ways to cushion a true crisis.

Before anyone asks, no one is asking him to borrow money. He literally cannot stop talking about his woes.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I think it's not that people with UMC incomes can't afford their lifestyles on their current income NOW, but that many save a shockingly low proportion of their income that could secure for themselves financial security, perhaps at an earlier age, or start to generate savings that could benefit future generations (pay for schooling, etc.). WSJ ran an article a few years back titled "Six Figure Income - and Facing Financial Ruin" - a fascinating part of this article included a study of a Typical UMC Family in Chicago making $400K+ that were clients of Northern Trust (private banking with extensive research on their clients of course) - disposable income was somewhere near $275K and they contributed about $12K to retirement - the rest going to lifestyle.

I think many people spend large amounts before their retirement is secure. Yes, they can afford it now, but assuming the high income will always be there is risky - for most, job security is lowest when they hit their 50's.

I agree with this. It's not very common that people making $300k+ are going into the red every month, but it's very surprising how many people at that level are only saving 10% or less of their income. If you make $100k, when you imagine making $300k you picture a nicer lifestyle and a very good nest egg in the bank to give you financial security and possibly enable early retirement. Then you see people making $300k and what they actually have is a similar 401k balance to the $100k person, a nicer car and a house 2 neighborhoods over with an additional bedroom. They're not on the verge of bankruptcy but they're also not a single step closer to financial independence or actual wealth, and that's the part that feels wasteful.

I think this is the more common scenario.

[Anonymous]

I had one friend, in the dot com era, was worth 100 mil on paper in stock options (unvested). He was able to borrow against the options, and bought a multimillion dollar house in Great Falls, and a 200K car.

Before his options vested, the market collapsed and his company closed.

He ended up bankrupt; he was able to find another job, and the base salary was actually higher, but is 1999 paper earnings (not taxable earning) was about 92 mil, whereas his 2000 paper earning was -99.9 mil

[Anonymous]

Anonymous wrote:

Anonymous wrote:I think it's not that people with UMC incomes can't afford their lifestyles on their current income NOW, but that many save a shockingly low proportion of their income that could secure for themselves financial security, perhaps at an earlier age, or start to generate savings that could benefit future generations (pay for schooling, etc.). WSJ ran an article a few years back titled "Six Figure Income - and Facing Financial Ruin" - a fascinating part of this article included a study of a Typical UMC Family in Chicago making $400K+ that were clients of Northern Trust (private banking with extensive research on their clients of course) - disposable income was somewhere near $275K and they contributed about $12K to retirement - the rest going to lifestyle.

I think many people spend large amounts before their retirement is secure. Yes, they can afford it now, but assuming the high income will always be there is risky - for most, job security is lowest when they hit their 50's.

I agree with this. It's not very common that people making $300k+ are going into the red every month, but it's very surprising how many people at that level are only saving 10% or less of their income. If you make $100k, when you imagine making $300k you picture a nicer lifestyle and a very good nest egg in the bank to give you financial security and possibly enable early retirement. Then you see people making $300k and what they actually have is a similar 401k balance to the $100k person, a nicer car and a house 2 neighborhoods over with an additional bedroom. They're not on the verge of bankruptcy but they're also not a single step closer to financial independence or actual wealth, and that's the part that feels wasteful.

This. Exactly. Day to day -- I think most people I know can afford their houses, fancy cars, vacations etc. And I think when others say -- oh they must in debt up to their eyeballs, they're just being petty and jealous; salaries for white collar professions have gone up a lot over the years and most people make more than you think they make.

BUT I am always surprised by how little those same folks focus on saving. It came up in biglaw ALL THE TIME esp. when an associate got the sense in his/her 6th yr that he'd be pushed out and then suddenly it was like -- wow in house and gov't jobs would pay me like 150k, I should start socking some money into my 401k in the next yr or 2 before I have to leave and take a pay cut. And invariably these were always the people who graduated with little or no debt so it's not like their first 6 yrs was spent paying $2000/month to the lender. Saw the same thing in the government too. People (lawyers -on a non GS scale) FREAK out every time there is a risk of a shutdown bc paychecks would be delayed or with this administration maybe there would be no pay for that timeframe. They start freaking out about how they'd pay 2 weeks or 1 months bills. Some of these people are single and making 150k?! They also balk re retirement contributions -- ugh contributing 8% is soooo much. Um - we match up to 8% and you're complaining about that??!

So while I don't think people are taking on massive CC debt to buy designer clothes, I do think they structure their lives such that they have the best of everything they can afford -- so much of what comes in, goes right back out. Living below your means isn't a concept for most people I know.