Barely Getting by on $250K/year

[dfeucht]

Found this article. It points out that $250K/yr is not necessairly rich. I don't really disagree with that, but they laid out budgets that showed how easy it was to get in the hole budget wise in certain parts of the country. I went through their estimates and just laughed at the absurdity of some of their annual costs ($10/day for lunch EVERY day for two workers was the funniest to me - especially with the alternative food costs included as well). Admittedly I am probably more left leaning so I get irritated by these articles, but my wife and I will be raising 3 kids and have no trouble saving and making ends meet while also finding entertainment and the occasional vacation for the entire family so I think this stuff is disingenous in making their point.

Down and Out on $250,000 a Year

Please take a look - critique the budget like you would someone on this site and share your thoughts.

If this article has already been discussed, I missed it so please point me to the discussion - I would be interested in reading it.

[bennkar]

I discussed this in a blog entry a month or two ago. You could check that out. (It was on 12/13)

[moneybags]

Interesting article.

Quick glance - I'd get rid of the dog (sorry animal lovers) $1600, cleaning $5000 (do it yourself), lunches - reduce to $1000 at most, car loan -drive a cheaper car save $3000 - just saved $13,600/year.

Few other comments:

* with income of $250k, their investment income should be much higher than $3000

* dental $4k/year is a bit high except for years that you're paying for braces

* cable/phone/internet actually looks low to me at $2400

[LivingAlmostLarge]

The budget is out of whack. First off no way in cities other than NY, Boston, SF, DC do people pay $15k in childcare. If it's a lower cost of living it's cheaper. Nor do they spend $5k on cleaning. Also I know that gas and electric in Glendale doesn't cost $5200/yr compared to NY. Sorry there are no heating bills and the A/C isn't run as much. the budgets don't reflect the true differences in cost of living like eating out, etc.

[disneysteve]

This article is inane. To suggest that a family making 250K could have a 27K deficit in a year (or any deficit) is ridiculous. If you can't make ends meet on 250K, you've got a serious spending problem.

I see lots of stuff to cut in that budget. I agree with the cuts already mentioned like the dog, the house cleaning, the lunches, the clothes, the dry cleaning, the gift and entertainment budgets, etc.

I don't see where this article accomplishes anything at all except to illustrate that lack of financial management skills can exist at any income level.

[Snodog]

We make 75k and if my calculations are correct we actually pay a higher percentage of our income to taxes than some of the hypothetical families. Social Security, property tax, and gas taxes are all regressive. And some want to institute a flat income tax.

[moneybags]

We make 75k and if my calculations are correct we actually pay a higher percentage of our income to taxes than some of the hypothetical families. Social Security, property tax, and gas taxes are all regressive. And some want to institute a flat income tax.

I'm pretty sure the federal income tax number on the budget is at least $10,000 too low.

[Snodog]

I'm pretty sure the federal income tax number on the budget is at least $10,000 too low.

I thought so also until I plugged their numbers into Taxcaster. I had to make educated guesses on a few things like mortgage interest but the numbers came out similar to theirs.

[DancinFool]

I'm new here but this was exactly the topic I wanted to post on myself - I make about $125K, but my take home is just $5400 a month after benefits and taxes are taken out. That's with just 4% into the 401K to get the match. I can't save much, single mom, and rent is the biggest issue, at $2700 a month. while I quality for a mortgage, I don't have the DP and closing costs available, and rents are just sky high in my school district. I have cut everywhere I can think of, even drive a paid for crappy old car, but I can't get my rent below $2100. I think I probably need to more to a less affluent location, but don't want to pull my kid out of school (it's the anchor for him at this point after dad left etc. ).

It's frustrating, but I really don't spend a lot of money, and have no other real debt beside student loans. I don't use daycare or cleaning service, son is in 6th grade. But I do spend on groceries and sometimes small vacations, I have to save up in cash b/c no credit cards.

I think it's where more affluent earners live that is one of the biggest issues.

[moneybags]

I thought so also until I plugged their numbers into Taxcaster. I had to make educated guesses on a few things like mortgage interest but the numbers came out similar to theirs.

What numbers did you use? I used income of $220,000, deductions of $21,600, family of 4, and I get $40,000 of federal tax.

[disneysteve]

I'm new here but this was exactly the topic I wanted to post on myself - I make about $125K, but my take home is just $5400 a month after benefits and taxes are taken out. That's with just 4% into the 401K to get the match. I can't save much, single mom, and rent is the biggest issue, at $2700 a month. while I quality for a mortgage, I don't have the DP and closing costs available, and rents are just sky high in my school district. I have cut everywhere I can think of, even drive a paid for crappy old car, but I can't get my rent below $2100. I think I probably need to more to a less affluent location, but don't want to pull my kid out of school (it's the anchor for him at this point after dad left etc. ).

It's frustrating, but I really don't spend a lot of money, and have no other real debt beside student loans. I don't use daycare or cleaning service, son is in 6th grade. But I do spend on groceries and sometimes small vacations, I have to save up in cash b/c no credit cards.

I think it's where more affluent earners live that is one of the biggest issues.

Welcome. I'd love for you to post this as a new thread in the Personal Finance forum. I think it would make for an interesting discussion.

You already know the answer here, I'm sure. It is not sustainable for you to spend 50% of your disposable income on housing. You say you could decrease your rent to $2,100. That would be about 39% which is still too high but is a lot better. That would free up 11% of your income to be used for other purposes.

Unfortunately, a great many parents, usually moms, wreck their finances after a divorce in order to not uproot the kids from familiar surroundings. In the short term, it seems like the right thing to do, but it puts such a tremendous strain on everyone that it really isn't beneficial.

I'm also curious about the rents. Is it really true that the cheapest apartment you can find is $2,100/month? And what are the benefits that are sucking up 52% of your income. That's pretty high.

Again, I'd suggest you start a new thread for folks to review your situation and try and make suggestions to help you out.

[MonkeyMama]

I'm new here but this was exactly the topic I wanted to post on myself - I make about $125K, but my take home is just $5400 a month after benefits and taxes are taken out. That's with just 4% into the 401K to get the match. I can't save much, single mom, and rent is the biggest issue, at $2700 a month. while I quality for a mortgage, I don't have the DP and closing costs available, and rents are just sky high in my school district. I have cut everywhere I can think of, even drive a paid for crappy old car, but I can't get my rent below $2100. I think I probably need to more to a less affluent location, but don't want to pull my kid out of school (it's the anchor for him at this point after dad left etc. ).

It's frustrating, but I really don't spend a lot of money, and have no other real debt beside student loans. I don't use daycare or cleaning service, son is in 6th grade. But I do spend on groceries and sometimes small vacations, I have to save up in cash b/c no credit cards.

I think it's where more affluent earners live that is one of the biggest issues.

Having lived in a VERY expensive area, I am usually a little more sympathetic to the plight of how little money is left after taxes and basic living expenses to people in the $100k-$250k income range (in highest cost areas of the U.S.). That said, the article was ridiculous and weren't the kind of numbers I was thinking of. The first thing I'd point out is 50% income could easily go to taxes (in the state I live in) and after rent/housing, there really isn't a ton left over. I wouldn't say *barely getting by* though. Just, *it isn't NEAR as rich as it sounds.* Most people I know have little money left over after they pay their rent/mortgage - there really is no luxuries being purchased. In fact, people tend to live VERY frugally in these cases because housing/taxes are so expensive. When I moved to a far more cheaper/low wage area it was a complete culture shock because with so much less money being put to homes and income taxes, there was a lot more luxury being bought on far lower incomes. IT was just really odd to me. I wasn't used to people buying newer cars, living in lavish homes, buying jewelry?, etc., etc. These were household incomes 1/3 of what I Was used to - living FAR more lavishly. They had more disposable income at the end of the day, is all. A lavish home here cost as much as a crappy CONDO where I am from.

Anyway, I have no idea where you live - DancinFool - but I believe there might be no better renting options - I have been there.

The question that comes up to me in this situation is where is your paycheck going??? I think at face value you are the perfect example I was thinking of. Being single you will be taxed about twice as much as a married couple with the same income. After taxes and rents, the income isn't as cushy as it sounds, huh? Very common scenario where I am from.

All that said, I find it hard to believe you only take home $5,400 from a $10,400 monthly income. (Is some of that an annual bonus?) How long have you been single? Do you get huge income tax refunds? How necessary are the benefits you pay for out of your check? Leaves me with a lot of questions. That said, I think taxes are hitting you HARD. There isn't much you can do about that. Moving somewhere cheaper may be an option to consider (but if you take a huge wage hit, it might not help much?).

[jpg7n16]

Move to a $500k home - save $12,000/year (plus savings on property tax of 1/3 - save $5,074)
Cut out cleaning - $5000/year (clean your own home)
Pay off car loan - $7,596/year
Cut food expense to $750/month (pref lower) - 13,309/year
Cut clothing expense in half (at least) - 2,077.50/year
Cut entertainment in half (at least) - 1346.50/year
Save $46,403 a year. Problems solved.


Plus they really shouldn't include maxing two 401k's and 8000 to an educational savings fund, and claim that they're barely making ends meet. People that can barely make ends meet cannot afford to save $41k/year.

SO that (27k) is entirely misleading, even with the numbers they gave. It should have said +14k. Then with the suggested cuts above, it'd be +$60k. (24% surplus)

[jpg7n16]

I'm new here but this was exactly the topic I wanted to post on myself - I make about $125K, but my take home is just $5400 a month after benefits and taxes are taken out. That's with just 4% into the 401K to get the match. I can't save much...

It's frustrating, but I really don't spend a lot of money, and have no other real debt beside student loans. I don't use daycare or cleaning service, son is in 6th grade. But I do spend on groceries and sometimes small vacations, I have to save up in cash b/c no credit cards.

I'd also like to see you create a thread for your own budget evaluation.

[Snodog]

What numbers did you use? I used income of $220,000, deductions of $21,600, family of 4, and I get $40,000 of federal tax.

For Huntington NY

250,000 gross income
- 33,000 401k's contributions
- 4,213 health insurance
=
212,787 total income
- 27,000 mort. interest payments(guess)
- 15,222 property tax
- 14,600 total exemptions(3,650*4)
=
155,965 taxable income
31,914 total income tax

Now they have 29,344 for income tax plus you add the AMT of 2,710 and I get a total of 32,054 which is close.