Monday, December 3, 2007

Is 97k rich?

An interesting discussion is ongoing at WSJ's Wealth Report, regarding a recent campaign dispute over the future of the social security cap.

The article is good, but what really fascinated me was the comments. Do people who make 97k feel rich? Are they rich?

As a few pointed out, feeling rich on 97k has much to do with your location. An apartment in NYC eats up far more of your income than in Dallas. We make around $40k a year and our mortgage is $900. This is living in one of the largest cities in America, albeit about 10 minutes in the suburbs. I feel like I'm doing pretty good, but others making much more are barely scraping by. How can this be? Here's what some people had to say.

My base salary is exactly 97,500 wtih 30% upside as performance bonus. I support a wife and 3 young kids. I rent in the Bay Area a home SF home for 2,400
This guy takes home $5,200 a month. Minus his mortgage, he has $2,800 left over. He has no child care expenses, since his wife doesn't work. How does that compare to the average income of $45k a month? His $3k after his residence is more than the average American lives on.
I live in SouthEastern PA in a median priced home for my area ($375K) My wife and I make $132K anuually. I commute to work in a 14 year old car and she has a new SUV. Other then my mortgage ($250K) and my interest free car note I have no other debt. However, the cost of living here is so outrageous I am lucky to save $500/ month.
$7k a month in his pocket each month. He consumes $6,500 of his income every single month. He doesn't feel rich because he's barely making it. But how do people making minimum wage make it where he lives? Obviously they are living somewhere.
People I know in this boat are not living large by a long shot. Older cars, no private schools, modest savings rate, no time or money to play golf…much less join a club.
Very interesting here is the qualifications for being "rich". Private schools. New cars. Playing golf and joining a club. Do you need these things to feel rich?

They don't feel rich, but does that really have anything to do with how much they make? They in the top 6% of the earners in America, which means that they earn more than 94% of their neighbors. The top 6%! What must "upper class" be? 4%? 1%? .05%?

Then, if that makes you middle class, what is lower class? Are 80% of Americans lower class? Are 50% of them poor?

Maybe feeling rich has nothing to do with your income? Maybe people making $130k don't feel rich because, just like their $40k brethren, they max out their lifestyle.

1 comment:

Mike said...

To me, a rich life involves money, but it also involves so much more. Having a wife and child who love and support me (and I them) makes me feel rich. Feeling secure in my home and work life during the current market downturn helps me feel rich. Being blessed with good health, good friends, and occasional free time for myself make me feel rich.

In regards to financial wealth, I don't think high incomes qualifies a person as rich, per se. As you mentioned, a high income paired with high expenses doesn't improve one's situation. A high net worth (regardless of income) could help. Personally, I don't need or want new cars, country club memberships, etc, so I don't need those to feel wealthy.

Do I have a high net worth for my age group? No - it's probably fairly average. Do I have a high income for my age/profession/experience? Nope, completely average.

Do I consider my life to be rich? Very much so.