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

[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.

He's a doctor without health insurance? Find that hard to believe. They more than anyone else knows the risks of being uninsured and how costly care is. And plus why wouldn't his hospital/private practice group provide coverage like all other employers??

[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.

I don't know if we are considered Lower Middle Class Middle Class or Upper Middle Class for DC metro but our HHI is $188k.

If interested in this subject, I highly recommend reading 'The Millionaire Next Door' It's a great book on this topic.

[Anonymous]

I know some people living beyond their means. One is a sporadically employed 45-year-old single woman who is renting a room in a group house and makes dumb decision when it comes to things like financing brand new cars she can't afford. Another is a 40-something single mom who makes an ok living but spends a ton of money on clothes, salon services and expensive concert tickets and sporting events while not always paying her rent. Another friend makes a good living but still expects her retired mom to pay for her cell phone and some other bills. And there are a couple of people who have done GoFundMes for things they should really be able to pay for themselves, given that they have college degrees and white-collar jobs. (not medical expenses.)

Not judging, just answering the question.

[Anonymous]

Anonymous wrote:

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.

This makes me feel better about our own situation. We went from $100k to $200k in HHI overnight with a job change but we are still living like we make $100k and have just increased our savings. In the day to day it doesn't feel like my salary tripled, but then I check out my retirement and other savings accounts.

[Anonymous]

Anonymous wrote: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.

OP here. I agree with you. As I mentioned in my post, I really don't know anyone professional-type UMC-UC who truly lives beyond their means. Non-professional type friends, a totally different story. Second hand, I've heard about friends back home who made it big-ish and blow it. Like a second cousin making close to 1mm as a mortgage broker with some college education. She spent it assuming she'd make that forever, then was shocked when the market collapsed and figured out no one was clamoring to pay her even 10% of that.

I think people with good educations who pursue professional careers tend to be more anxious and forward thinking. What other kind of person goes 200k in debt and study for a decade to be a lawyer or doctor?!

[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.

+1. You also see people with golden handcuffs--they make a great living, but they set their spending at that level. Not only are they not saving more, they are locked into mortgages and car payments and private school tuition that make downsizing really daunting. So, not beyond their means, but right up against them.

Also, I grew up in the construction industry, and there were a lot of developers who were making big money who were absolutely one bad deal away from bankruptcy. One of the people my family worked with had a huge custom house, expensive cars, horses, travel, etc....when he died (suddenly) it turned out that his estate was nearly worthless because of the amount of debt he was carrying. Not uncommon at all in that field.

And we have one good friend from really old money who lives off of a trust fund (big enough to pay for multiple homes, lots of travel, etc.)...her brother, with the same amount in trust, ended up flat broke because of his spending. So it's not just "new money" at risk of losing it all.

[Anonymous]

One way to look at this - how many people do you know in their late 50’s/60’s who are still working high-stress jobs with kids already graduated from college? I know young people always say they love their work but I don’t know anyone in their late 50’s/60’s who is not looking forward to retirement or at least slowing down. If you are already making a high salary in your late 20’s/30’s, you should be able to plan well enough to have more options when you are older.

[Anonymous]

A non-equity partner at my spouse's law firm drives a Tesla X, has his tailor come to the office to measure new bespoke suits twice a year, and whose stay-at-home wife has more than one Berkin bag. Their two kids go to the same independent school as ours. I would guess they spend more than 3x what our family does at less than 1/3 the income. All that conspicuous consumption is about looking like he's a full partner and being taken seriously at the firm and with clients. I doubt that he feels like he has a choice about it.

[Anonymous]

Anonymous wrote:One way to look at this - how many people do you know in their late 50’s/60’s who are still working high-stress jobs with kids already graduated from college? I know young people always say they love their work but I don’t know anyone in their late 50’s/60’s who is not looking forward to retirement or at least slowing down. If you are already making a high salary in your late 20’s/30’s, you should be able to plan well enough to have more options when you are older.

Every large law firm has many, many partners who fit that description.

[Anonymous]

Anonymous wrote:

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.

I don't know if we are considered Lower Middle Class Middle Class or Upper Middle Class for DC metro but our HHI is $188k.

If interested in this subject, I highly recommend reading 'The Millionaire Next Door' It's a great book on this topic.

+1

It's a bit dated, but the principles and information it contains are timeless.

[Anonymous]

Anonymous wrote:

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.

He's a doctor without health insurance? Find that hard to believe. They more than anyone else knows the risks of being uninsured and how costly care is. And plus why wouldn't his hospital/private practice group provide coverage like all other employers??

My BIL is also an anesthesiologist. He has some major health issues and they are contracts not employees. So private insurance would be very expensive. They have insurance through my sister's job.

[Anonymous]

Anonymous wrote:A non-equity partner at my spouse's law firm drives a Tesla X, has his tailor come to the office to measure new bespoke suits twice a year, and whose stay-at-home wife has more than one Berkin bag. Their two kids go to the same independent school as ours. I would guess they spend more than 3x what our family does at less than 1/3 the income. All that conspicuous consumption is about looking like he's a full partner and being taken seriously at the firm and with clients. I doubt that he feels like he has a choice about it.

Sounds like they may have some family money.

[Anonymous]

Anonymous wrote:I know some people living beyond their means. One is a sporadically employed 45-year-old single woman who is renting a room in a group house and makes dumb decision when it comes to things like financing brand new cars she can't afford. Another is a 40-something single mom who makes an ok living but spends a ton of money on clothes, salon services and expensive concert tickets and sporting events while not always paying her rent. Another friend makes a good living but still expects her retired mom to pay for her cell phone and some other bills. And there are a couple of people who have done GoFundMes for things they should really be able to pay for themselves, given that they have college degrees and white-collar jobs. (not medical expenses.)

Not judging, just answering the question.

These mostly don't sound like upper or UMC people, at least as OP meant it which is based on income.

[Anonymous]

Anonymous wrote:

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.

He's a doctor without health insurance? Find that hard to believe. They more than anyone else knows the risks of being uninsured and how costly care is. And plus why wouldn't his hospital/private practice group provide coverage like all other employers??

He is a tele-radiologist. They are considered IC by his employer. He does not believe he needs it, and prefers to self insure. In case you can't tell by the above, he does not have a great grasp on financial health. He is, however, a very good radiologist.

[Anonymous]

Anonymous wrote:A non-equity partner at my spouse's law firm drives a Tesla X, has his tailor come to the office to measure new bespoke suits twice a year, and whose stay-at-home wife has more than one Berkin bag. Their two kids go to the same independent school as ours. I would guess they spend more than 3x what our family does at less than 1/3 the income. All that conspicuous consumption is about looking like he's a full partner and being taken seriously at the firm and with clients. I doubt that he feels like he has a choice about it.

You sound very insecure.