How a family spends away $500K per year

[ch33zw1z]

Ok, not sure how government clearance matters. Lol

And yes, it's sarcasm.

The fact is people can pay less than 21000 or more, it varies greatly and factors like your location, the location of the facility in relation to you and the work place, what quality of care you want, etc... it's not just point and shoot. You're paying someone 10 bucks an hour at that point....better make sure you're paying attention

 

[MagnusTheBrewer]

Ok, not sure how government clearance matters. Lol

And yes, it's sarcasm.

The fact is people can pay less than 21000 or more, it varies greatly and factors like your location, the location of the facility in relation to you and the work place, what quality of care you want, etc... it's not just point and shoot. You're paying someone 10 bucks an hour at that point....better make sure you're paying attention

My whole point is that unless you are a single parent, paying obscene amounts for childcare is like paying someone to "power level" you in a game only it has real world consequences.

 

[ch33zw1z]

My whole point is that unless you are a single parent, paying obscene amounts for childcare is like paying someone to "power level" you in a game only it has real world consequences.

500k, family of four, very likely 2 working parents.

You say $10/hour is obscene, I disagree. It can be much more.

And there's definitely a desire to give your child a leg up, I'd say even more so if one of the parents can't stay home to raise the kids, which is most of the time now.

 

[purbeast0]

Family doesn't have good priorities if they are barely saving 7K a year:

+ Too many Vacations, cut it down to once a year (save 12K/year)
+ 20K/year in donations? I'm not saying no to Charity, but build a financial cushion first and get rid of your debt before you put in 20K/year on Charity. Some Charity yes, but 20K/year is huge and could probably pay off those cars. (SAVE 20k/year)
+ 10K/year in clothing? Even if it isn't fancy, do they seriously need to replace wardrobes year in and year out? Children maybe, but Kids clothes shouldn't be running more than 1K/year even if you replace everything! (save 9K)

Cutting down on some easy money (42k/year), and putting it to their debts, they can easily start collecting 50K+ year in savings. Then go and donate 10-20K after that.

They are saving a lot more than $7k, they are both maxing their 401k's and I'm sure their companies are also matching at least some of that.

 

[Schfifty Five]

This article is pretty dumb. The thread title is somewhat inaccurate as well, since the 401k contributions aren't spending at all. It's savings.

And let's not forget there could be an employer match involved in which they'd be getting more "free" money.

Also, are they getting a tax refund?

Also, why is this article just taking 40% off the top of the taxable income of $464K? Don't they know that effective tax rate is the total taxes paid as a percentage of earned income? The current highest tax bracket % is 39.6%, so there's no way the effective tax rate can be 40%, since about half of their income should be taxed at a lower rate.

 

[shortylickens]

With all that money in charity, they are DEFINITELY getting a tax refund.

Personally, I would get two efficient cars use those until my college debt was paid off.
Do Hybrids still get a credit from the government?

 

[Sonikku]

If you think that's bad, try being a single parent living on only $260,000. Or worse! A retired couple living on only $180,000.

The struggle is real.

 

[dave_the_nerd]

This article is pretty dumb. The thread title is somewhat inaccurate as well, since the 401k contributions aren't spending at all. It's savings.

And let's not forget there could be an employer match involved in which they'd be getting more "free" money.

Also, are they getting a tax refund?

Also, why is this article just taking 40% off the top of the taxable income of $464K? Don't they know that effective tax rate is the total taxes paid as a percentage of earned income? The current highest tax bracket % is 39.6%, so there's no way the effective tax rate can be 40%, since about half of their income should be taxed at a lower rate.

Federal taxes, state income taxes, SSI, etc.

 

[dave_the_nerd]

With all that money in charity, they are DEFINITELY getting a tax refund.

Personally, I would get two efficient cars use those until my college debt was paid off.
Do Hybrids still get a credit from the government?

It seems like a lot of the spending here is because they think they deserve ____, not because it's a good idea.

I also don't see any college savings plans or health care costs, which doesn't make any sense at all.

 

[Sheep221]

I have always said some people are morons and regardless of how much they make, they will never gonna have any money. No money = no problem.

 

[MtnMan]

42K for child care, and then 12K for music lessons, sports and academics?

I call BS

 

[CLite]

To reach the 40% they must be including FICA as well, although FICA applies to 401k contributions, and they have no mention of medical plan contributions so the table is kind of screwed up. Living in NYC they are guaranteed to be AMT (mortgage Interest, state tax, property tax, city tax >>> deduction limit). At 500k they would have an effective AMT tax of ~22%, plus another ~10% for NYstate/NYC lands them around 32% effective, FICA will bring that up to the ~40%. Regardless, it's a really odd way to show a budget. I also don't see how 35 year olds are still blowing 32k/yr on student loans with another 10-20 years projected, just no way.

 

[dave_the_nerd]

To reach the 40% they must be including FICA as well, although FICA applies to 401k contributions, and they have no mention of medical plan contributions so the table is kind of screwed up. Living in NYC they are guaranteed to be AMT (mortgage Interest, state tax, property tax, city tax >>> deduction limit). At 500k they would have an effective AMT tax of ~22%, plus another ~10% for NYstate/NYC lands them around 32% effective, FICA will bring that up to the ~40%. Regardless, it's a really odd way to show a budget. I also don't see how 35 year olds are still blowing 32k/yr on student loans with another 10-20 years projected, just no way.

Minimum payments on $200k+ (each) of Law School or Med School loans, after a 30 year refi/consolidation.

42K for child care, and then 12K for music lessons, sports and academics?

I call BS

I can definitely see $12k a year of sports, music lessons, and academics.

Sports can be crazy pricey if you're unfortunate enough to have a kid who is talented and wants to compete with others at their skill level. Music lessons and academic tutoring aren't exactly cheap, either. (Up to $40 per half hour session, depending on the instructor, x40 per year.)

Even Chess Club is going to cost a couple hundred bucks in fees, a copy of ChessMaster 3000 and after-school transportation costs.

 

[madoka]

42K for child care, and then 12K for music lessons, sports and academics?

I call BS

It's certainly high, but I know people who pay that kind of money for their kids. It's crazy.

 

[madoka]

My wife is friends with a local rich family. The amount of money they waste would blow your minds.

Their teenage daughter once dropped one of her diamond earrings down the sink, so SHE THREW THE OTHER ONE AWAY! Those earrings cost about as much as the average ATOTer's weekly salary.

 

[dave_the_nerd]

My wife is friends with a local rich family. The amount of money they waste would blow your minds.

Their teenage daughter once dropped one of her diamond earrings down the sink, so SHE THREW THE OTHER ONE AWAY! Those earrings cost about as much as the average ATOTer's weekly salary.

b-b-b-but... u-traps...

 

[madoka]

b-b-b-but... u-traps...

That's what I said!

But she thought it would too yucky to wear again.

 

[dawheat]

easy to feel poor when you buy a 1.5m house I guess.

Honestly that doesn't get you much in Manhattan. A decent 2br apartment in a good neighborhood.

Why live in the city at all? Fair question but then you're looking at least an hour each way to commute.

 

[Red Squirrel]

I think what a lot of people don't consider when buying a big ticket item is that, you still need to actually have that kind of money over your life time to pay for it or you'll just be in debt forever. Most people are not going to make 1.5 million in their life let alone the interest, and all the other bills and costs of living. Same with a car, people just look at the payments. No, look at the full price of the car, that is how much of your money is going to go towards it, and then some. If you don't think you can actually spare that chunk of money within the next few years then don't buy it. A house is perhaps a slight exception since you need a place to live and it's still better than an apartment, but I would shop in the 200k range not 1.5 mil lol unless you're a 1%er. Then again if you want to live in the GTA or Vacouver or NYC or other expensive place then you have to be ready to pay for it. With 1.5mil here you can buy enough property to open a golf course lol. It's only going to be usable for 2 months of the year but that's another story.

 

[rh71]

They are feeling average after spending a reasonable max on everything. Yes daycare can be a second mortgage ($3500/mo.) and yes you can spend $800/mo. leasing 2 cars and yes you can spend $1916/mo. on groceries, and give to charity. But you don't have to. For instance, our family of 4 only spends $1000 on eating out + groceries every month. We don't lease cars and keep on paying perpetually. We found cheaper daycare and cheaper summer camps. They are just not careful (or don't give a shit because they make over $200k/year) and feel they can do whatever they want.

I feel more like spending habits are not dependent on what you currently make but what you're used to. It's likely the family came from money and has always spent this much and don't know how to be frugal. Even though our family income is a lot now compared to when we were 27-30, we're still finding ways to save on purpose.

 

[Exterous]

It's likely the family came from money and has always spent this much and don't know how to be frugal. Even though our family income is a lot now compared to when we were 27-30, we're still finding ways to save on purpose.

I don't know if I would necessarily make that assumption. It's reasonably common for people to go into fields like medicine or law with the expectation of 'making it' shortly after they graduate. Spending explodes as a result and can often be fueled by daydreams during long residency or intern shifts and spending time around those who have already 'made it' as evidenced by their fancy cars, pictures of vacations and talk about the children's private schooling. To some extent certain professions like lawyers face pressure to portray themselves a certain way. "Dress like a lawyer" as it were. While it can vary by firm its not uncommon for it to include an expensive and varied wardrobe and expectations in regards to what car should be driven and for how long. Surely if you are a successful lawyer you can afford these things so if you don't wear them or drive it then perhaps you are not that good of a lawyer? Not everyone will see if that way (and I imagine many on here are in that camp) but many do - enough that I see this mantra start in law school

 

[alcoholbob]

They are saving a lot more than $7k, they are both maxing their 401k's and I'm sure their companies are also matching at least some of that.

A stock market crash can wipe out half or more of that 401k, hell the only reason your 401k doesn't get completely wiped out is because of government bailouts.

I think what a lot of people don't consider when buying a big ticket item is that, you still need to actually have that kind of money over your life time to pay for it or you'll just be in debt forever. Most people are not going to make 1.5 million in their life let alone the interest, and all the other bills and costs of living. Same with a car, people just look at the payments. No, look at the full price of the car, that is how much of your money is going to go towards it, and then some. If you don't think you can actually spare that chunk of money within the next few years then don't buy it. A house is perhaps a slight exception since you need a place to live and it's still better than an apartment, but I would shop in the 200k range not 1.5 mil lol unless you're a 1%er. Then again if you want to live in the GTA or Vacouver or NYC or other expensive place then you have to be ready to pay for it. With 1.5mil here you can buy enough property to open a golf course lol. It's only going to be usable for 2 months of the year but that's another story.

Thing is, because of government incentives, taking out a mortagage on 1.5 million house is actually cheaper than renting a 2 bedroom apartment in major metro areas, because of low mortgage interest rates suppressed by the government, the mortgage payment is cheaper than monthly rent. If you don't want to commute 3-4 hours a day, the most economical option is to take the mortgage on the house. And a 1.5 million house isn't even that big in many places in California or New York.

I have a friend who owns some 1 bedroom apartments in Menlo Park...he rents them out for $6500/month to Apple employees. Rent prices are insane in these metro areas.

 

[Red Squirrel]

A stock market crash can wipe out half or more of that 401k, hell the only reason your 401k doesn't get completely wiped out is because of government bailouts.



Thing is, because of government incentives, taking out a mortagage on 1.5 million house is actually cheaper than renting a 2 bedroom apartment in major metro areas, because of low mortgage interest rates suppressed by the government, the mortgage payment is cheaper than monthly rent. If you don't want to commute 3-4 hours a day, the most economical option is to take the mortgage on the house. And a 1.5 million house isn't even that big in many places in California or New York.

I have a friend who owns some 1 bedroom apartments in Menlo Park...he rents them out for $6500/month to Apple employees. Rent prices are insane in these metro areas.

Yeah in a situation where it's cheaper to own then it definitely make sense even if the end price is something you'll never be able to afford. On the other hand, what happens when these government programs end? Rather live in a place where I don't need to depend on government programs that could end at some point.

Personally I'd hate living in an apartment though, as I can't do anything to it, and I don't own it and never will. It's like living out of a hotel permanently, in a way. It's not a place that is truly your own. So if I HAD to live in one of those places where houses are so expensive it would be a delima as to what I want to do. But wow 6k per month to rent that is insane. I don't even MAKE that much. I guess you pretty much need to be rich either way if you want to live in a metro area.

 

[rh71]

I don't know if I would necessarily make that assumption. It's reasonably common for people to go into fields like medicine or law with the expectation of 'making it' shortly after they graduate. Spending explodes as a result and can often be fueled by daydreams during long residency or intern shifts and spending time around those who have already 'made it' as evidenced by their fancy cars, pictures of vacations and talk about the children's private schooling. To some extent certain professions like lawyers face pressure to portray themselves a certain way. "Dress like a lawyer" as it were. While it can vary by firm its not uncommon for it to include an expensive and varied wardrobe and expectations in regards to what car should be driven and for how long. Surely if you are a successful lawyer you can afford these things so if you don't wear them or drive it then perhaps you are not that good of a lawyer? Not everyone will see if that way (and I imagine many on here are in that camp) but many do - enough that I see this mantra start in law school

That can be the case initially, but within reasonable time, those people come to their senses after a few purchases. Those who don't and continue to spend, for example on a lease for 2 luxury cars, have been used to overspending IMO. $500k spent in a year including charity, etc. doesn't sound like they are newbies with money.

 

[Sheep221]

Yeah in a situation where it's cheaper to own then it definitely make sense even if the end price is something you'll never be able to afford. On the other hand, what happens when these government programs end? Rather live in a place where I don't need to depend on government programs that could end at some point.

Personally I'd hate living in an apartment though, as I can't do anything to it, and I don't own it and never will. It's like living out of a hotel permanently, in a way. It's not a place that is truly your own. So if I HAD to live in one of those places where houses are so expensive it would be a delima as to what I want to do. But wow 6k per month to rent that is insane. I don't even MAKE that much. I guess you pretty much need to be rich either way if you want to live in a metro area.

I never lived in a house, just in apartment but can tell you this, if you don't really do gardening or similar, it's just much cheaper and easier to maintain, my country does exempt apartments from annual estate tax, so only house owners are taxed, and you can own your apartment, you pay it with mortgage just like house although prices are half lower. What sucks big time are neighbors, they just live way too close and everything they are doing will irritate you to certain degree. If I would argue why not to live in apartment it would be impossibility to escape from your neighbors, they are just behind the wall.