The basics, some extras, savings: You need $150,000 a year

[merrijoy]

Do you agree with this article? Thoughts? How much is reasonable for the basics, some extras, savings?

www.usatoday.com/money/perfi/basics/story/2012-03-18/cnbc-150-thousand-a-year-to-live-comfortably/53548702/1

 

[Haven]

Re: The basics, some extras, savings: You need $150,000 a ye

No, I don't agree with this.

I think if we took the time to define "the basics" we'd learn that people have very different ideas about what that means. Same thing for comfortable.

My guess is that even though we are all here together on a diamond forum, there would be huge variation amongst PSers as to what the basics really are.

I've found that regardless of how much money I've earned throughout the years, I've always settled into a lifestyle that felt comfortable at every level. I know people who have been UNcomfortable throughout their lives, they feel they've never earned enough money, even though they've always earned more than I have. And vice versa, of course.

It's all about perspective.

 

[mary poppins]

Re: The basics, some extras, savings: You need $150,000 a ye

The article is lacking information. $150,000 for an individual? A family of three, four, five? It also doesn't account for location and cost of living. And what are the basics? What people consider "basics" can vary a lot.

 

[Tacori E-ring]

Re: The basics, some extras, savings: You need $150,000 a ye

The article is lacking information. $150,000 for an individual? A family of three, four, five? It also doesn't account for location and cost of living. And what are the basics? What people consider "basics" can vary a lot.

I agree. If you have three kids in daycare where I live that can be $36,000+ a year just for childcare. Plus is it $150,000 after taxes or before? Not only what are the basics but what are the extras?

 

[kenny]

Re: The basics, some extras, savings: You need $150,000 a ye

Insidiously, wants become needs.

 

[lyra]

Re: The basics, some extras, savings: You need $150,000 a ye

Wants become needs.

Yes, that's very true.

My DH has been unemployed for 9 months now. It's scary out there. We didn't think it would last nearly this long. But I think this is the new "norm". The idea of having a secure full time job is becoming a foreign concept to me. We are going to be in our 50's this year, and this isn't something I ever expected obviously, but neither did I plan for it. You need a contigency fund these days. I cringe when I see people taking on debt now. You just never know when you'll be unemployed, or for how long.

 

[rubybeth]

Re: The basics, some extras, savings: You need $150,000 a ye

I think people take on entirely too much debt, and for pretty silly reasons. If you have 2 car payments, a huge mortgage that's eating 30% or more of your take home pay, student loans, credit card debt, and have hobbies that cost money, in addition to life's regular expenses, you probably would want $150k a year to feel 'comfortable.' But honestly, DH and I live on far less than $150k a year and we are very comfortable. We would NOT be comfortable taking on a car payment (we have 3 paid-for cars, 1 we need to sell), and we won't take on a mortgage until our student loans are paid off. And I'm very glad that living frugally is becoming more 'the norm' than living lavishly. That is what millionaires do (read anything by Thomas J. Stanley) and that's generally how people become self-made millionaires.

 

[JewelFreak]

Re: The basics, some extras, savings: You need $150,000 a ye

Good to hear from somebody wise, Rubybeth. You'll be okay.

Location determines whether this idea is true or not. In NYC & close environs, for a family of 4, say, yeah, I'll buy it. Where i live now, not.

Kenny's right: wants so easily turn into "needs." Surprising, but you can live quite easily without a cell phone. Or a flat-screen tube w/deluxe cable plan. Video games. Lawn-mowing service: put the kids to work, let 'em contribute. Car for the teenager. Most people are very far from living with only the basics. I'm sure many definitions of them would get us belly-laughing.

 

[Bella_mezzo]

Re: The basics, some extras, savings: You need $150,000 a ye

I think a lot depends on the size of your family, where you live, health insurance and childcare situations, and pre-post tax...etc.

We are a family of 3 (me, DH, and our 3 year old son B), we live in NYC, in a modest 2 bedroom co-op apartment, in a slowly gentrifying middle class neighborhood. We hope to have more children in the future. Overall, I think that we are living a pretty standard "middle-class" life in NYC.

By far our three biggest expenses are our mortgage/maintenance for our co-op apartment, our family health insurance premium through my employer (we have to pay $1000/month), and daycare for our son 3 days a week ($700-$800/month for the three day a week option). In fact, currently those three expenses represent 60% of our pretax income and nearly 80% of our post-tax income .

Anyone know an NY/NJ/CT employer who is looking to hire a newly minted EMT who aced the state certification exam? Once DH gets a job things won't be quite so tight!

We contribute the max to our ROTH IRAs each year but other than that are struggling to save/pay down debt and don't have much money for extras (my recent bling purchases were a very big deal to us), but overall we feel quite blessed.

On $150,000 pre tax we would be VERY comfortable--that would be a SUBSTANTIAL increase in our income (we would be easily able to afford our current life in NYC, tithe and make charitable donations at the level we'd like, pay off debt, take a nice annual vacation, aggressively save/pay off student loans, and even pay for full-time childcare for multiple children).

On $150,000 post-tax, we could live like kings.

But, we are quite frugal, never pay retail, (often don't buy new--ebay and goodwill are our best friends, are very strategic grocery shoppers, rarely go out to eat, use some of the least expensive quality childcare options, plan to enroll B in public school, do not travel often, and made choices to live in one of the least expensive neighborhoods in Manhattan.

Our current salary is tight but do-able in Manhattan, would be HUGE in the small towns we grew up in, and wouldn't stretch far at all in more affluent towns/downtown Manhattan.

We are more concerned with living our life and making things work where we are (physically, financially, and out of necessity for work/school) than comparing what we have with our friends or others. This is our life, we are trying to be good stewards of what we have, spend as much time together as a family, and are figuring it out as we go along...I agree that you tend to spend more as your income increases and more items that were luxuries become "essentials".

Our housing cost is high b/c we live in NYC. We bought our place and although we got a good price, it was a stretch for us. Sometimes I wish that we had not bought and just found a 2 br rent stabilized unit...but, there are issues with that and when you factor in the principal we pay and the mortgage tax deduction, we are paying only about $100/month more than we would in a rent stabilized unit.

Truthfully, health insurance and to a lesser degree childcare are the two most pressing issues for us. If America had universal government free care or more reasonably priced, effective health insurance options, it would be a whole 'nother ball game for us!

 

[Imdanny]

Re: The basics, some extras, savings: You need $150,000 a ye

The cost of living has become exorbitant compared with my grandparents' and parents' generations.

 

[Imdanny]

Re: The basics, some extras, savings: You need $150,000 a ye

Insidiously, wants become needs.

Yes. I'll agree with this too.

 

[Mara]

Re: The basics, some extras, savings: You need $150,000 a ye

My first job many moons ago, I made $28k a year and I was able to live comfortably in a rather expensive (COL-wise) area ..meaning I wasn't eating ramen for dinner 7 days a week (tho I do love ramen!), and was able to pay my half of the rent, etc.

I find that the more you make, the more you spend. Your level of what is comfortable inches up along with your income.

There are lots of families in the US and world that make less than many other people and would probably still term themselves as comfortable. What is that anyway? Does it mean you get to buy what you want? Or rather that you can just pay for the basics. And what are the basics? Does organic food count? Probably not. But to some people it would be a basic staple.

Generalizations.

 

[MichelleCarmen]

Re: The basics, some extras, savings: You need $150,000 a ye

My first job many moons ago, I made $28k a year and I was able to live comfortably in a rather expensive (COL-wise) area ..meaning I wasn't eating ramen for dinner 7 days a week (tho I do love ramen!), and was able to pay my half of the rent, etc.

I find that the more you make, the more you spend. Your level of what is comfortable inches up along with your income.

There are lots of families in the US and world that make less than many other people and would probably still term themselves as comfortable. What is that anyway? Does it mean you get to buy what you want? Or rather that you can just pay for the basics. And what are the basics? Does organic food count? Probably not. But to some people it would be a basic staple.

Generalizations.

Yep, this is so much true. Our income fluctuates quite a bit each month and due to that, I could draw up a line graph of how our spending goes up when our income goes up and it goes downs when the income goes down. I watch it happen each month and then walk into the grocery store looking to see which organic cereals are ON SALE that week! (For my older son, organic is a "basic," which makes me keel over when leaving the grocery store!)

 

[rosetta]

Re: The basics, some extras, savings: You need $150,000 a ye

Ha ha. No way. We live very comfortably on less than that post-tax. We eat out a lot, we travel abroad at least 3-4 times a year. Mind you, we don't have kids yet!

 

[April20]

Re: The basics, some extras, savings: You need $150,000 a ye

I definitely disagree with this. We have lived comfortably on far less than this for a long time. Granted, we dont have car payments nor do we have children. BUT, we have a regulat savings plan, we eat out too much, we vacation nicely at least once a year and we arent on such a tight budget that we have to really think before we purchase items (within reason). And we do this on less than $100k a year. We do live in a very affordable city and we have always purchased property wisely and done well when we sold.

To say you have to have at least $150k/yr to be comfortable makes me think we're comparing apples to oranges or that we dont have the same definition of a "need".

 

[icekid]

Re: The basics, some extras, savings: You need $150,000 a ye

Truthfully, health insurance and to a lesser degree childcare are the two most pressing issues for us. If America had universal government free care or more reasonably priced, effective health insurance options, it would be a whole 'nother ball game for us!

But don't forget these things are not truly "free" and you would have to pay much higher taxes, so it might mot really put you ahead of the game afterall.

For us, 150k and paying off my school loans simultaneously would not fit my definiton of comfortable. We are "comfortable" now, easily, but not paying on the majority of my school loans while I am in residency.

 

[justginger]

Re: The basics, some extras, savings: You need $150,000 a ye

These are boggling stats and must be completely inaccurate. We live in a city that is consistently in the top 10 most expensive places to live in the world based on cost of living index, often only behind a couple (such as Hong Kong and London). And with income around that figure you can cover a lot more than NEEDS - double mortgage repayments, overseas holidays every year, fancy meals out, a sailing club membership, and diamonds easily fit on that income here, with 20% still going to investments. I'd love to see a list of what people consider necessities!

 

[Lotus99]

Re: The basics, some extras, savings: You need $150,000 a ye

I think it costs us around $70K to $80K a year for "basics plus comforts." That would include mortgage, car payment, bills and all that stuff, along with not worrying too much about what groceries to buy, having cell phones and cable TV, etc.

 

[Jenjen]

Re: The basics, some extras, savings: You need $150,000 a ye

I would say around here, the DC metro area, that figure is accurate, especially if you bought a home in the last 5 years anywhere close to the city and have more than one kid in daycare.

 

[chemgirl]

Re: The basics, some extras, savings: You need $150,000 a ye

Truthfully, health insurance and to a lesser degree childcare are the two most pressing issues for us. If America had universal government free care or more reasonably priced, effective health insurance options, it would be a whole 'nother ball game for us!

But don't forget these things are not truly "free" and you would have to pay much higher taxes, so it might mot really put you ahead of the game afterall.

For us, 150k and paying off my school loans simultaneously would not fit my definiton of comfortable. We are "comfortable" now, easily, but not paying on the majority of my school loans while I am in residency.

Exactly, we're making more than this, but we're aggressively paying off student loans. Between the $4000 per month in loan payments and the nearly 40% income tax rate for our tax bracket, we don't have much room for extras. I mean we don't need everything we have, but we're reasonable for the most part. We don't have cable and we eat out maybe once per month. We do spend on things like camping trips though.

I do understand that paying that much towards student loans per month is a luxury that we can afford due to our income (not a necessity). I also realize that our income will go a lot further once we have the students loans payed off (soon I hope!).

I guess I'm just saying that the amount of money that you "need" to feel comfortable depends on you and your situation. Debt repayment can eat up a lot of money and make a large income seem small. On the other hand, things that I feel I need, like my car and my house, are really more wants than anything.

 

[diamondringlover]

Re: The basics, some extras, savings: You need $150,000 a ye

Hmmm these are very interesting replies...I make under 100,000 per year and I struggle to pay the bills on most months...I have a mortage, 1 car payment (gets paid off this year ) 1 regular credit card and I am currently making payments on new living room furniture, new braces for my teenager and oh yea I just purchased a new RHR that I have to make payments on...but I still struggle and I have very little in savings...I must be doing something wrong!!! anyway at $150,000 I would be quite comfortable...I am hoping once my SUV is paid off then we will have no car payments for awhile!

 

[Missy]

Re: The basics, some extras, savings: You need $150,000 a ye

No, I don't agree with this.

I think if we took the time to define "the basics" we'd learn that people have very different ideas about what that means. Same thing for comfortable.

My guess is that even though we are all here together on a diamond forum, there would be huge variation amongst PSers as to what the basics really are.

I've found that regardless of how much money I've earned throughout the years, I've always settled into a lifestyle that felt comfortable at every level. I know people who have been UNcomfortable throughout their lives, they feel they've never earned enough money, even though they've always earned more than I have. And vice versa, of course.

It's all about perspective.

Insidiously, wants become needs.

Yes, I 100% agree with these statements.

When I was single I was living very comfortably on way less than 150K. Now that we are married we need way more than this amount to live "comfortably" or in the lifestyle to which I (we) have become accustomed LOL. It is stressful because a "simpler" lifestyle is less stress inducing IMO. I had a nice life (when I was single) albeit without the "luxuries" that have now become somewhat of a necessity. I agree with Haven in that I think no matter the lifestyle though I would be able to adapt and be happy as would my dh. And we have proven that over the years. Through lean times as well as not as lean times. It is somewhat easier for me though to live way below our means than my dh so though we are of the same mindset we have slightly different ideas on how to carry that out.

What is more scary to me is the amount of money my dh calculated that we need per year when we are retired. It sort of seems out of reach right now and that is more of a concern to me than the here and now. But that is a bad habit of mine-projecting into the future so I am trying to live in the moment while planning for the future without worrying about it. Good luck to me on that one.

 

[ksinger]

Re: The basics, some extras, savings: You need $150,000 a ye

The basics according to me:

Being able to afford basic housing. I live in an 1100 square foot house. I would call it pretty basic by McMansion standards.

Being able to pay my basic bills, which in Oklahoma in summer, includes A/C. People lived without it for a long long time, but they did die of heatstroke more often too. So I consider electricity enough for A/C and heat and lights and to run a stove to be pretty basic.

Being able to afford a healthy diet. This means enough to buy whole foods and high quality proteins.

Oklahoma is NOT a walking state,. So, being able to afford to purchase reliable transportation, and the money to run it - which gives me access to jobs and food. It doesn't have to be new, but it shouldn't be breaking down once a month. And again, in Oklahoma, that means transportation that has A/C. That works. When the temps go over 100 on a regular basis, and the interior of your vehicle gets into the 130's, working A/C is basic.

Highspeed internet. I work in IT, so this is a necessity for my work. Not optional.

Money enough for access to communication via phone, either land line or cell.

Being able to afford decent clothing of moderate price. Not Saks, but not Wal-Mart either.

Being able to afford health care. In my case at present that means copays and med copays. This is an entire subject. For another thread(s).


I'm sure there may be others, but that covers the basics in my book. Everything else is gravy.

We make considerably less than 150,000, and yet, are able to enjoy many little extras, and are under 2 years away from paying off our house and are still managing to save money. I'm not sure why 150,000 was chosen but it sounds pretty outrageously high to me, considering that last I checked, the median income in the US is somewhere in the mid to upper 40 thousands. The vast majority of people are doing at least OK, on far far less.

 

[partgypsy]

Re: The basics, some extras, savings: You need $150,000 a ye

I would be very curious to see how the original survey was constructed. One thing is telling is that it is a "shopping" survey. Maybe people who are targeted for a shopping survey (including those who shop more, or have more disposable income) are different than the average American.

I think the bottom line is not to let other people, corporations, surveys etc tell or lead you into thinking that unless you make alot of money, or have the freedom to spend alot on disposable items, you are behind or not where you should be. It was very illuminating this past week having a friend visit who supports himself with his art. He lives a very focused minimal life, but because he can spend his time in his art, he is fulfilled and at peace with himself, much more so when he was juggling both working a job and doing his life. Not that I'm about to do that, but the most fulfilled people I've known, are people who are engaged and have a purpose, versus their monetary earnings.

 

[MichelleCarmen]

Re: The basics, some extras, savings: You need $150,000 a ye

Hmmm these are very interesting replies...I make under 100,000 per year and I struggle to pay the bills on most months...I have a mortage, 1 car payment (gets paid off this year ) 1 regular credit card and I am currently making payments on new living room furniture, new braces for my teenager and oh yea I just purchased a new RHR that I have to make payments on...but I still struggle and I have very little in savings...I must be doing something wrong!!! anyway at $150,000 I would be quite comfortable...I am hoping once my SUV is paid off then we will have no car payments for awhile!

It depends upon where you live and what kind of insurance. Insurance may not be "free," but our dental is $14 per month for a family of four and to get braces for my son will be $1,500. A friend of mine is paying $4,000 for braces for her child and I doubt she's paying less than what we're paying (and she does have insurance). Also, vehicles make a huge difference. We traded in my husband's truck for a car that gets better gas milage and I was surprised that our insurance rates went down, so we're now saving at least $200 a month. Not much, but little things add up...making small changes can suddenly result in a person having an additional $10,000 a year to have to save or allocate to what would be other things previously sacrificed (like extra movies/more organic foods), etc.

With $150K we'd be comfortable too...I read once about a couple who graduated from college, but decided to keep living off the small amount they did while in college, even though they were now making large salaries, and paid off their house in less than 10 years! Their thought was just because you make more, doesn't mean you should go nuts and buy the best and most of everything you can. It would take a lot of self control to do that...I know I would spend more, but would love to have that kind of mentality and at least try and save rather than go on a huge shopping spree with my first paycheck!

 

[radiantquest]

Re: The basics, some extras, savings: You need $150,000 a ye

Both DH and I are in fields that fluctuate. We have made that much and then the following year made considerably less. I am currently starting a new enterprise within my career that will double my highest income by the end of summer and doesn't stop there.

That being said we have debt, not a lot, but it is still there. DH and I have already started spending my new income in our heads. Our biggest plan is to build a home. Our current home is not satisfactory in any way, but we have dealt with it due to income levels. We are planning our forever home that will accomodate our needs that our current home does not.

I very much want to pay off all of our debt first. I wonder though how it will work when there is so much more $ coming in. Will we all of a sudden need a bigger, better TV. Will we all of a sudden need another car. I have expressed that I want to live like we currently do for around 5 years so that we will have a fat nest egg, but like everyone has pointed out the more you make the more you spend and the wants you have with one income instantly become needs with another larger income.

I live comfortably, but do not have all the things that I feel is a need (like a master bathroom)

 

[TooPatient]

Re: The basics, some extras, savings: You need $150,000 a ye

I think it all depends on your location and your individual situation.

Right now, for us, $150,000/year would be what we'd need to be "comfortable" with basic needs met plus minimal extras.


BUT that is because we have a $3,000/month mortgage + $2,400/month mandatory expense + $500/month car payment + student loans + tuition/books + 2 cats & 2 dogs (just did $1,200 to the vet for one dog in the last 6 weeks; food for the 4 comes in around $200/month)

By the time you add insurance, house maintenance (have to replace the fence next month and have a retaining wall re-built before the yard collapses any further), fuel ($4.33/gal -- about $350/month), groceries.... there isn't much left to set aside in savings let alone hobbies or extras.


It is interesting to hear my grandparents talk about how they bought their house for $20,000 and their mortgage payment was $50/month...

 

[fleur-de-lis]

Re: The basics, some extras, savings: You need $150,000 a ye

If the $150,000 is post-tax, your employer provides healthcare, and you have no student loans, you would probably say it's more than one needs.

If it's $150,000 gross--which turns into ~$75,000 after taxes/SSI/401k only to matchpoint--and with that smaller sum you pay:
--$2,000/month on student loans, and
--$1,000/month on health insurance for a family of four,
you'd probably find it's not enough, especially in a city with a high cost of living.




One interpretation gives a family $12,500/month to play with, the other scrapes by only $3,250/month.

Both "make $150,000 a year," but the result is two VERY different lifestyle scenarios.

 

[Rhea]

Re: The basics, some extras, savings: You need $150,000 a ye

Truthfully, health insurance and to a lesser degree childcare are the two most pressing issues for us. If America had universal government free care or more reasonably priced, effective health insurance options, it would be a whole 'nother ball game for us!

But don't forget these things are not truly "free" and you would have to pay much higher taxes, so it might mot really put you ahead of the game afterall.

I couldn't tell you accurate percentages now, but when I moved from the States to Britain years ago I was in the lucky position to immediately compare my taxes right before I left the States to my taxes once I worked in the UK about 5 months later. The amount I paid in income tax was very close, within 1-2%. The UK does have higher sales tax, VAT, so in general our goods cost more, but income tax wise, it was about the same.

 

[Phoenix]

Re: The basics, some extras, savings: You need $150,000 a ye

We live comfortably witbin this $150k "threshold' (shall we say?) with a decent amount left over for savings. We eat out about 2-3 times a week, spend quite a bit on groceries, go on holiday 2-3 times a year and I buy whatever clothes, shoes and handbags whenever I feel like - within reason of course (my bling purchases come out of our invesment gains btw).

We live in Singapore where housing and cars are *extremely* expensive compared to the US and Europe (think a few mil's for a house and at least a hundred thousand dollars for a "cheap" car - in SG, it's not just the cost of the car alone, we have to pay for a "certificate of entitlement" as well). We were lucky to have been able to buy our house not so long after SARS and we used to have a car but sold it off when we moved to Shanghai. There's no way we could afford to buy our current home if we were looking right now; and we're not planning to buy a car (at least not any time soon).