Making $500k and not feeling wealthy in NW

[Anonymous]

What single-income minimum wage worker is renting a 2 bedroom and expecting it to cost 1/3 of their income? The only group this picture speaks to is single parents with at least two kids who earn minimum wage and don't have other financial support. Otherwise, if you're renting a 2 bedroom apt, then you probably have at least two income earners. Kind of misleading to plop a picture of the entire US in the middle of the page and then only speak to a situation that makes sense for this very specific group. Most people on minimum wage are not renting a 2 bedroom as a solo breadwinner and they're certainly not expecting it to cost them 1/3 of their income.

Well perhaps people who would like to have enough money leftover to, you know, eat, pay for bus fare, and buy medicine when they or their kids get sick, and keep the heat on. Minimum wage in Texas is 7.25 an hour, so excluding FICA, two working parents working 40 hours a week would make 27K. Even in the cheapest part of Texas, it is not easy to live a decent lifestyle as a single person, not to mention someone with kids.

[Anonymous]

I really can't fathom how $500k would be hard.

We make a modest $290ish and have a nanny, private school, nw DC house (bought recently not ages ago), etc and I still max our 401k and save about $3,000 a month on top of that.

Shit lady what are you spending money on?

[Anonymous]

Anonymous wrote:OP here. Everyone from politicians on down wants to pile on and they don't understand. They fail to realize that with our income level we have have an obligation to save more. And it's not just retirement at work, but it's also investment accounts etc. It's hard to explain to people who will never experience this sort of income.

I know what OP is saying sounds crazy, but... to make that kind of money you are probably big law or big medicine --- no retirement. So with the upkeep of the lifestyle -- expensive real estate, nanny, private school ect ect, you can find yourself broke. And after a life of not being broke it is a shock. Also you feel like a moron b/c where did it all go? It takes a lot of money to equal a pension for life. Especially if it comes with health care benefits.

[Anonymous]

300k is the new 100k , 1 million is the new 500k, inflation is a bitch

[Anonymous]

I know what OP is saying sounds crazy, but... to make that kind of money you are probably big law or big medicine --- no retirement. So with the upkeep of the lifestyle -- expensive real estate, nanny, private school ect ect, you can find yourself broke. And after a life of not being broke it is a shock. Also you feel like a moron b/c where did it all go? It takes a lot of money to equal a pension for life. Especially if it comes with health care benefits.

I suppose there is some truth to that, but in general the lifestyle standards for people who have made that money their whole life are vastly different from the average Joe. There are plenty of American couples who can live on 30-40K a year without children or a mortgage and be extremely comfortable. I doubt that that's the lifestyle OP wants. But the fact that you are in a position to save for retirement so that you don't live like that is a huge luxury.

[Anonymous]

The lifestyle standards? Whose standards? Someone else's or your own? If living on someone else's on $500K leaves you feeling broke, you need to change your own standards and start living by them not someone else's. Or stop complaining because you create the situation you are complaining about.

[Anonymous]

Anonymous wrote:The lifestyle standards? Whose standards? Someone else's or your own? If living on someone else's on $500K leaves you feeling broke, you need to change your own standards and start living by them not someone else's. Or stop complaining because you create the situation you are complaining about.

The standard of wealthy. The OP says does not feel wealthy. The expenses posted earlier said he had 175K left over, not counting mortgage, retirement, savings, investments or car. So he does not feel wealthy. Because if he was truly wealthy, he/she would not be worrying about that.

[Anonymous]

The biggest challenge is the incremental pay increase. When you get the BIG BUMP in pay you are really smart with the money. Getting a $10k raise when you make $50k a year is huge! Getting a $10k per year raise when you make $150k isn't that much, you can 'eat it up' pretty quickly with slight lifestyle changes, then it just builds from there. Not to mention getting used to that income that includes a 'in a better economy' bonus that only happens a couple of times - you start to feel like you're scrimping in the lean years.

It's stupid and irresponsible, but it definitely happens - even to the best of us.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

What single-income minimum wage worker is renting a 2 bedroom and expecting it to cost 1/3 of their income? The only group this picture speaks to is single parents with at least two kids who earn minimum wage and don't have other financial support. Otherwise, if you're renting a 2 bedroom apt, then you probably have at least two income earners. Kind of misleading to plop a picture of the entire US in the middle of the page and then only speak to a situation that makes sense for this very specific group. Most people on minimum wage are not renting a 2 bedroom as a solo breadwinner and they're certainly not expecting it to cost them 1/3 of their income.

And you know this how?

Because I lived off minimum wage in New York. You don't rent out a two bedroom apartment when you're working minimum wage. No one I knew at my income level was doing that - people with kids who qualified for subsidized housing definitely applied for the biggest apt they could, along with other forms of assistance, but those of us single min wage people were renting small rooms out of larger apartments in not so posh neighborhoods and rent was definitely more than 1/3 of my monthly budget. At the time, I never got the memo that it was somehow inhumane that I had to have roommates or eat oatmeal and beans for most meals. When people try to sell it as inhumane now, I think people have forgotten what real hardship is.

So yeah, if you're renting your own apartment - and it's larger than a 1 bedroom - and you're a minimum wage worker, then you're either doing that because you're part of a dual-income household (ie - married or long term relationship so HHI is 2xminimum wage) or you're a single parent qualifying for housing assistance. Otherwise, you make do with what you have and rent something smaller.

[Anonymous]

There's an answer, but you might not like it. $500,000 or ordinary income after taxes leaves you with what, maybe, $300k? So, figure you could make some sacrifices and maybe get by spending about, let's say hypothetically, $240k a year to be comfortable in DC. Now, figure that you could enjoy a comparable lifestyle in a lower cost jurisdiction for half that amount - I'm thinking places like Panama City, perhaps Barcelona, Spain, or if you don't care to go that far afield, maybe Omaha, Nebraska. You'll have to search around for a jurisdiction you like, but that's cheaper than DC. Say you can cut your costs down to $120,000 a year, after tax, without sacrificing lifestyle, but yes sacrificing living in DC.

Your next step is to make it your absolute number one priority to build a portfolio that will deliver an after tax yield of $120,000 a year, and that will keep up with inflation. There are plenty of tax-advantaged investments that trade on the New York Stock Exchange and that will pay 6% a year in dividends, and that will grow dividends by over the rate of inflation over time. So, you're talking about a portfolio of maybe $2m - but the net worth of the portfolio is not the main point. The point is YIELD.

Your third step is to become a cheapskate and plow every single penny you can into your portfolio of income producing assets. I assume you own a nice home somewhere in NW. Rent it out, move to a cheaper place in a crummy but not too dangerous part of town, or find the smallest ugliest house you can in a nice part of town. Maybe claim depreciation deductions on your larger house. Pocket the difference between your rental income and whatever you end up paying to subsist like a cheapskate, and plow it into other income producing assets. Look into master limited partnerships, real estate investment trusts and dividend paying stocks. Or, if it works out to rent your house out, take out another mortgage and buy another house or apartment in DC to rent out to someone else. Or maybe diversify a bit - you can buy cheap apartments in Miami and rent them out for a bundle as vacation rentals. Pick up three or four of those, maybe. There are plenty of opportunities to get assets that will pay you cash money each month or quarter, and that will pay you more each year. Do the research, and get comfortable taking calculated risks.

Drop private school, and send the kids to a decent public school. Explain the reason why is to save money and become financially independent. They'll get it. If not, teach them.

Never vacation, or eat in a restaurants. Buy food in bulk, and get free clothes and supplies whenever you can - think freecycle, and thrift shops. Plow every last cent into your investment portfolio.

Earning law firm money is fabulous - if you are obsessed to the point of mental sickness with the idea of saving and investing, you'll hit the $2m mark in a few years - or I should say, you'll be able to build a portfolio that kicks off $120,000 a year after taxes.

Once you finally do have that portfolio in place, quit the rat race, and move somewhere cheap and pleasant. You can pursue other hobbies instead of law - open coffee shop, whatever.

I am not making this up. I slaved for years at two of the largest law firms in NYC, and lived in a room above a nightclub with one window facing the garbage can storage area. I ate all my meals at the firm cafeteria because food was subsidized there. If I found $20 on the street, I'd pick it up and walk up to my brokerage firm, deposit the cash, and invest it in whatever I could invest in that wouldn't cost me commissions and that had a steady and growing income stream associated with it. On average, I lived on roughly $1,525.00 a month, even though I was earning $700,000 a year. I only wanted one thing - get out of working at an office. Especially law firms, which I hated from my second week as a first year associate. It was easy for me to save because I hated the rat race more than I loved eating in restaurants or buying new shoes. I bought stocks and mutual funds virtually every few days - whenever I got my monthly draw, or a dividend check came in. I retired a few years ago at age 41 and have never been happier. I still save a lot, but now I'll eat in a restaurant from time to time (no appetizers or drinks or deserts), and we take vacations whenever our son's school schedule permits (but only to places where the dollar is strong and airfare reasonable).

Getting rich is no picnic, but if you guys are really earning $500k a year, you could be in my position easily if you're willing to live fantastically below your means, take some serious investment risk, and master the art of dividend growth investing.

Hope this helps.

[Anonymous]

^^this sounds utterly unappealing to me. I make nowhere near 500K, but there has to be a balance between enjoying the fruits of ones labors in the present and planning for the future. You could die any day! Mostly it is a matter of being grateful for what you do have. Your expenses can always expand if you let them--but there is certainly a happy medium between living like a miser and retiring at 41 and being broke for retirement.

[Anonymous]

Not sure why my comment was deleted but my point about the saver above was he is 41 and bey old to start a family. What joy is there of you are solo for so long.

[Anonymous]

^ Who would want to marry someone like them and have kids with them?

[Anonymous]

Anonymous wrote:^^this sounds utterly unappealing to me. I make nowhere near 500K, but there has to be a balance between enjoying the fruits of ones labors in the present and planning for the future. You could die any day! Mostly it is a matter of being grateful for what you do have. Your expenses can always expand if you let them--but there is certainly a happy medium between living like a miser and retiring at 41 and being broke for retirement.

+1

[Anonymous]

Anonymous wrote:

What single-income minimum wage worker is renting a 2 bedroom and expecting it to cost 1/3 of their income? The only group this picture speaks to is single parents with at least two kids who earn minimum wage and don't have other financial support. Otherwise, if you're renting a 2 bedroom apt, then you probably have at least two income earners. Kind of misleading to plop a picture of the entire US in the middle of the page and then only speak to a situation that makes sense for this very specific group. Most people on minimum wage are not renting a 2 bedroom as a solo breadwinner and they're certainly not expecting it to cost them 1/3 of their income.

Well perhaps people who would like to have enough money leftover to, you know, eat, pay for bus fare, and buy medicine when they or their kids get sick, and keep the heat on. Minimum wage in Texas is 7.25 an hour, so excluding FICA, two working parents working 40 hours a week would make 27K. Even in the cheapest part of Texas, it is not easy to live a decent lifestyle as a single person, not to mention someone with kids.

One person making minimum wage at $7.25/hour working 40 hours a week for 52 weeks of the year would make $15,080 before taxes. Virginia follows the federal minimum wage. Please show me where in Northern Virginia you can find a 1 bedroom apartment or even a studio/efficiency for $418 per month or less, which would be 1/3 of their monthly income. Also keep in mind those calculations are still before taxes.