Is Six Figures Really That Much?

By Catherine Shaffer on 13 February 2008 117 comments
Photo: Toni V.

There's a fascinating discussion going on over at Free Money Finance about families who are struggling to get by on six figure incomes. The overall tone of the discussion is wincingly critical. And I can understand why. For a very long time, the term "six figure" income was used to indicate that someone was very well-off. But the buying power of a six figure income has been eroded quite a bit by inflation, since my childhood, when only basketball stars and corporate CEO's made six figure incomes. Nowadays, six figures is still above average, but its buying power in terms of lifestyle may have eroded even more than the value of a dollar, as those of us within striking distance of six figures have learned to our regret.

My husband and I earned $96,000 from our respective jobs last year. This is our best year, yet. But this year, like every year, we are looking at that number and wondering where it all went. We aren't profligate spenders. We're both lifelong tightwads who live in a modest 1300 square foot home and drive two older vehicles. One is ten years old, the other five years old. We send our child (he's in the "middle" between the two cars in age) to public schools, and we buy most of our clothes either on extreme clearance or at resale shops. When we make a major purchase, we do research and look for great deals.

Are we struggling? Far from it. We contribute to retirement accounts, give to charity, enjoy one or two modest vacations per year, and have made good progress paying down some debts from previous, leaner years. We are not living paycheck to paycheck. But barely...

See, this six figure lifestyle isn't all it's cracked up to be. My minivan has a rust hole all the way through one of its doors. And right now I am wearing a sweater that is fraying at the cuff. Where is my Mercedes Benz? And why can't I afford to shop at The Gap or Eddie Bauer for all our clothes?

If the American dream is living in a nice house in the suburbs (3 bedrooms, 2 baths, finished basement rec room with "man cave," swimming pool in the back yard), driving two newer cars, taking family vacations to the Grand Canyon, having a "date night" once per week, cell phones for each family member, flat screen TVs, buying your clothes, furniture, and appliances brand new--well, I'm sorry but $100,000 year doesn't cover it. Not even close.

If I have to shop garage sales, clip coupons, and rinse out ziploc bags to afford my modest, working-class lifestyle on just under 100 grand, how the heck would I be able to send two children to college? This is the stuff of nightmares. We are working hard right now to pay off old debts (we are almost done), to build up emergency savings, and try to get a tiny bit ahead. But it's hard. Every time we think we're making progress, we get knocked back by something like a major car repair, a leaky roof, a sidewalk assessment, or a $4000 veterinary bill (yes, that actually happened to us). I'm just hoping that between whatever we can scrape together for a college fund, and what we can earn when the time comes, that we can keep up with those bills. Maybe by 2018, colleges and the government will no longer consider families that earn $100,000 to be "rich," and will make some financial aid available. I'm not betting on it.

Here are some amusing suggestions from FMF's comment thread:

Move to the inner city for less expensive housing.

Get rid of your cable TV and/or premium channels.

Move to another area of the country.

Drive cheaper cars.

These are all perfectly reasonable suggestions for cutting your costs, but why should someone who is making six figures have to live in the ghetto and drive old cars? And if premium cable television is not intended for six figure households, then who is it for--those who make $1,000,000/year or more? If new cars aren't for middle class Americans with average or above average incomes, then why are all those commercials showing up on my favorite TV shows?

Something has changed since the 1970's when Mike Brady was able to support his wife, six kids, the dog and the housekeeper on a single income in relative style and comfort. Instead of criticizing people in the upper income brackets because they can't afford their lifestyles, maybe we should take another look at our expectations. Why are we all getting poorer? What is a realistic middle class lifestyle? Do we even know anymore?

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Guest's picture

Where do you live? My husband and I have all that (minus a kid, true)on less than 50,000, with no debt. But we live in Iowa.

Guest's picture

Well I don't know how the hell you live on that. I have student loans, rent, car payment, entertainment, electric, cable, cell phone, and it's really hard for a single person making $60,000 to live on that.

Guest's picture

I find the fact that you are "not living paycheck to paycheck. But barely..." on 96k a year laughable. My wife and I live 60K a year (pre-tax)and are doing just fine. We have two vehicles, give generously to charity (10-15%, have date nights once a week, and are contributing to our retirement funds. Something is wrong with your spending. Instead of being so defensive, why don't you realistically look at your monthly spending and ask what you could cut. Account for every dollar. Every dollar. And you will be amazed at how you spend. It's not that there are big items, it's the little nickel and dime purchases that rack up. Shore up the little pleasures (like buying Starbucks every day) and you will find yourself flush with cash. The question is, are you willing to change your lifestyle in order to have more income in your bank account. Once you change your spending habits, it will be easy to live on 96K a year!

Guest's picture

Oh come on Lou, you didn't include details such as the number of kids you have (even if you make lunch for your kid EVERY day, it's still going to cost you, probably more than the 1.25 they charge for school lunch daily) or where you live. Get off your high horse and understand that every family's situation is different - where you can do well with you and your wife on 60K in Podunk, USA, a family of four making 100K in a higher rent are will struggle. I hope your smugness keeps you warm at night.

Guest's picture

Try Ventura, CA in Southern California. And try spending less. Quit being a consumer and then complaining about barely making it on 100k/year. We have one kid, make lunch every day, cook at home most nights, eat healthy food blah blah blah. There is no high horse I'm on, just a commitment to living on less.

Guest's picture

I love your comments. I make 80k, and that's not including my husband's salary of 30k .. and we are struggling, in a larger city with high rent. But ... I do have excesses, and I'm currently in the process of listing what I've got to live without, so I'll have 3 to 4 months of a paycheck in immediate Savings Account, and not just in the 401k. Thanks for your honesty. I have to get back to the basics.

rstlne's picture

That's the reason why flame wars in the personal finance blogosphere are going to get ugly. There'll always be people who struggle on $X per year and there'll always be other people who live on two shoestrings and a can of beans and are envious of the $X per year people. The latter are going to tell everyone who makes above a certain level of income to stop whining, even without knowing the specifics.

Guest's picture

I agree, there will always be disagreement on this subject. Frankly, I am envious of those who make so much- after all, my family (myself, my husband, and my three children) survive just fine on $35K a year with three cars (one paid off) and a mortgage in a popular suburb of Nashville, TN.

But I think that people who make that little and live on it really can't comprehend how people making three times as much as them - and twice the national average of 40K - can't survive. They know they can live decently on very little- so why can't people making several times that amount live on the same? And it's true that certain areas are more expensive, food and rent can be much more costly in other areas - but I truly believe that if it came down to it, a lot of the wealthier people aren't willing to give up luxuries like eating out, babysitters, and clothes shopping. Or perhaps some can't see that if they give up the expensive cars or toys, the money saved would not just be in the car or toy payment, but in insurance premiums and maintenance fees.

Anyway, all I'm trying to say is that specifics or not, it's hard to comprehend how a single person making $60K a year (see below) can't "make it" - even if they are in NYC or CA - when 5 of us live well on half that.

Guest's picture

It's not just about lifestyle, as another commenter pointed out. It's about inflation. I look to my own family as an example: My parents, who live well within their means, have been making roughly the same level of income (between $80k to $90k) for the past 15 years, and it's getting harder and harder for them to get ahead, even with both of their children grown up and out of the house. Everyone is feeling the crunch, you are not alone.

Middle class Americans are taxed to the hilt, and inflation is the "invisible tax" that devalues our currency over time while the rich stay rich, and the poor get poorer. The middle class is disappearing, and this post is just one more shred of evidence of our government's thievery in action. Six-figure incomes no longer buy what they once did because our government keeps printing more money that devalues the supply, then they tax us all and redistribute the wealth. It's a huge scam led by the Federal Reserve and it's leading our nation into ruin.

Guest's picture

I highly recommend living in the inner city. We have a 2 bedroom in a newly renovated building for the same price we were paying in a nicer neighborhood. We have young hip multi-cultural neighbors. From the single mom upstairs to the rock star next door, we love it. Living in the "burbs" is my nightmare. Don't knock it until you've explored the option. My husband and I are "making it" on around 72K with no children. Paid off most of our debt. We drive a 96 Nissan Sentra, and are "upgrading" this week to a 2000 Taurus. We don't have a TV. We watch our favorite shows online, and have a subscription to Netflix (we can watch DVDs on our computer). We only have cell phones, no landlines. We give away more of our income than we ever have. We're funding our pension and retirement plans. As well as saving a little for a house. If it takes us a while longer to get what we want instead of getting it now and paying interest, so be it. We're also constantly looking for ways to save money. We pack our lunches, eat in most nights. We travel a lot, but always try and fly during off seasons or find esavers. Our "American" dream is living debt free and contributing to our city. I'm not on a high horse, just starting to learn to be vocal about a different way of life.

Guest's picture

Wait until you have kids and those "vibrant" communities start to look a bit more realistic. Do you enjoy not being able to go outside at night because of drug dealers on the corner. Not being able to let your children play outside because of the "vibrant" neighbours hanging out and doing god knows what. Here's a test for your multi-cultural community. Walk around your neighbourhood late at night for a few weeks and see how you fare. Your post is pure ignorance of life in the inner city and you're asking folks to commit cultural genocide to save on rent. Oh wait, if white folks want to preserve their culture that's called racism, but if others want to it is "diversity" and "vibrant"


Guest's picture

I forgot to put in that we have a 2 bedroom for the same price as a 1 bedroom in a nicer neighborhood. :)

Guest's picture

I think a lot of this has to do with people's sense of entitlement. Basic food, shelter, and clothing are necessities, but living the so-called "American dream," whatever that means, is something you have to earn. If you are priced out of your dream, the options are to earn more income or manage your expectations.

For example, if you find owning a house is taking up too much of your budget, you might consider moving into a condo. The purchase price will probably be lower than a single-family home, and building maintenance will be shared with the other condo owners. Also, don't pass on your expectations to your children. It's nice if you can afford to help with your kids' college expenses, but they will manage on their own if you can't.

Guest's picture

I think many people missed the point. For so long the ideal had been to get that six figure income and they you can have "all that" or at least quit stressing about everything financial. We were told for so long that if you do the right things and achieve a stated level life will then suddenly get easier.

Sure there are people who live WAY beyond their means and spend large sums of money on things they don't need to be. But the reality is that the cost of everything has gone up while wages have been stagnant for about the last 10 years. Work benefits and insurance benefits have also eroded. You used to get two weeks vacation and 1-2 weeks of sick leave. Now many people get only 2 weeks of PTO. This means if you have a family emergency or young kids who get sick frequently your not getting a vacation for about four years. Health insurance has eroded too. I remember the days of no copays and full coverage with no co-insurance. I didn't even have to pay for my health insurance a couple of places. Now it is our second largest expense, just for our insurance, that doesn't even include out of pocket.

The cost of everything has gone up. In the last 10 years where we currently are the cost of a basic starter home has gone up about $50,000 more. Gas is double, electricity is double, groceries are easily double and have gone up about 20% or more in the last year.

People were given an illusion that we were not losing relative wealth for the last decade. General consumables like TVs, small appliances and gadgets have come down in price by tossing out quality and places like Walmart squeezing manufacturers. Sure you can get a $6 toaster but it is a piece of junk. You might be able to still get a pair of $20 jeans but they might be junk too. Credit was everywhere so as your wages were whithering you could still feel financially ok.

Well now all of this is coming together and coming home to roost. Wages are starting to show their real relative worth and credit is drying up.

Guest's picture

You know, it's all relative. We 'struggle' to maintain our self-imposed budget of $250,000 a year ... yet our $2m home is paid off, I paid cash for my car (a very nice one indeed).

Yet, only a few short years ago we were living off my wife's salary and were actually $30k in debt. On my blog I talk about this, and what to do about it, but the point here is that it's NEVER enough until you actually know what it is that you want out of life and save/spend accordingly.

Guest's picture

With obvious exceptions, (medical things come quickly to mind), we all make our own choices. My family of six is just squeaking into six figures and while we obviously don't enjoy the same standard of living as the same income would have provided 20 years ago, we are doing pretty well. That said, we pay the big mortgage to live in an outstanding public school district and on a cul-de-sac so that my kids can safely play outside without my constant fear of the ball running into the street. We don't drink expensive coffee, but we do spent on decent wine. We don't drive new cars, but they are not terribly old either. I do splurge on brand names for certain things, such as warm winter coats, but we also do a lot of our shopping at consignment shops and thrift stores. We give and save generously, but occasionally we might shift that money temporarily if it suits the big picture. I could go back to work full-time or even add more hours to our part-time, but that creates other costs, both real financial costs and general household happiness costs. These are the choices that my family makes, and one of the privileges of living in a free country is that you get to make those choices yourself. I find it incredibly frustrating for anyone to belittle other peoples' choices unless they are just flagrantly wrong. One of the things that I like about Wise Bread is that people usually are able to enjoy a healthy and educational discussion without attacking each other. Please try to keep it that way.

Guest's picture

Honestly, doesn't it depend on where you live? I live in a nice suburb of New York City. Where you live directly affects the quality of the school district you send your kids to (assuming public school). Our town is certainly nice, but is nowhere near the upper levels in this general area (it's somewhere in the middle).

Starter homes here go for $450k and up. My home, which has 3 bedrooms and two bathrooms, 1400 square feet, on 4800 square feet of land, with no separate dining room, no garage, no basement and no family room, costs in excess of $500k. The taxes are over $8k per year as well. So, how is a family of 4, where the in-laws come to stay frequently, supposed to get by on less than $100k per year when the house itself is costing well over $3k per month? In addition, I usually work at home and this house isn't really big enough in that scenario. I don't have a private area to work, which is a problem. To get a house "the next level up" would probably cost over $700k.

That said, yes, we could move to a less expensive area and trade in our house for a mansion (or just get an equivalent house and lower our expenses dramatically). But our family and friends are here. Our children's friends are here. Our jobs are here. Our roots are here.

So, moving is not an option that we are interested in. It just means we need to make more money and that a low-six-figure salary, in this area, isn't putting you in the upper class.

Xin Lu's picture
Xin Lu

When people make more money they tend to spend more.  I think the keys is to keep your spending at a certain percentage of your income.  My husband and I try to always spend less than 50% of our take home income.  We live in Northern California and it is pretty expensive here, as I stated in a forum thread, a family of 4 earning 90k a year here is low income because the median for a family of 4 is 100k.  However, it is definitely possible for people to spend 50% of their take home even here. 

Guest's picture
Joe A

Albert Einstein was correct ... everything is relative, and six figure incomes is no different. At a point when six figures reaches critical mass, and there is enough experience and expectations set for what is "normal", we begin to see things like this. Six figure incomes may be challenging for a variety of reasons, just like fix figure incomes are and seven incomes. We are what we eat ... in the case of our financial condition, we are what we spend.

Guest's picture

I bet if you didn't have kids you'd be driving that Benz and wearing that freshly pressed shirt.

Guest's picture

I have written extensive comments in the FreeMoneyFinance entry this one refers to (under the name gtFMF) and I was almost shunned for stating that our $160k pre-tax income only goes so far.

I wholeheartedly agree with the writer of this entry, let's see if the rest of the readers do too.

Guest's picture

It's all in how you live...

Guest's picture

"it's NEVER enough until you actually know what it is that you want out of life and save/spend accordingly."

I have figured out what I want from life, and it isn't "stuff." In a few months my car will be 20 years old and the only car my four children have ever known. Ninety-five percent of our clothing, bedding and household goods have come from the Salvation Army. Even before my husband died, I told him that even if I was a millionnaire I would shop at SA. When we must buy, it's second hand when possible.

We recycle and compost so much that we put out garbage every other week, thereby lowering that expense. We conserve water, lowering that expense. I read the newspaper on-line, eliminating that expense. We do not watch television and get movies from the library--no expense there. We get books and magazines from the library. We use everything to the last drop. I give away all that I can. Our drawers and closets shut because they are not crammed full. Our basement has only a freezer and some empty boxes kept for future use.

Our annual income for five is less than $40,000. People can't figure out how we can live on so little income and yet not "seem" poor. It's all about choices. I choose to want little. It leaves more time and space for relationships to grow and flourish, which is something I do want.

Guest's picture

Just a side note: after hearing about a friend hit with a $1500 pet medical bill, we got both our cats health insurance. It's about $20 a month, but means we probably wont ever have to put a price tag on our pet's life.


Guest's picture

100 grand is a lot. and making six figures is still a lot of money.

you are talking about making half that each. that is why it doesnt feel all benzes and dinner out.

Guest's picture

I wouldn't be expecting a great deal of sympathy in regards to your six income figure.

In 2006, the median annual household income according to the US Census Bureau was determined to be around $48,000. The median income per household member (including all working and non-working members above the age of 14) in the year 2006 was roughly $26,000.

You are double that.

If you want to whine about how tough you have it at $100,000 a year you might want to first think about how everyone else is doing and decide you have it easy compared to the average working American family.


Guest's picture

The point of the article is that we make twice as much as the average person and everything still sucks. I still live paycheck to paycheck. I still have to worry if my car is going to get me to and from work. I haven't bought myself any clothes in three years. My dad made one third the money I make now at the same age and yet we had two new cars and he put both kids through private school. I drive a POS and send my kid to public school.

What is the point of working harder, of doing the things that the average person can't, if not to have the "easy" life. This country is raping its middle class. It would be better if I lost my job, divorced my wife, and committed a crime. That way I would be in jail (not working) getting free room and board and my wife and kids would be getting handouts from the government.

By the way. I saw my neighbor on TV the other day. He was picking food up at the local shelter. Maybe that is the point. Maybe the point is that the middle class is now poor and you have to be a millionaire to enjoy that "easy" life.

Guest's picture

There's some discussion on my site that a $100k family with one parent working is better off than a $100k family with both parents working. Certainly there are less costs if one parent is at home (lower daycare, transportation, clothing, etc. expenses.)

Catherine Shaffer's picture

There are a couple of things going on here. One is that it is human nature to always feel that if only you had 110% of your current income, you'd be doing fine. Another is that the cost of living is different in different parts of the country.  These are very valid observations regarding the relationship between lifestyle and income. But they are not the reason I wrote this post.

The reason I put my  personal information out there on the web is to put a real life face and voice to the straw man argument of the latte drinking middle class family who can't seem to hold onto the riches that are pouring through their fingers. My credentials on this are impeccable. My husband and I started contributing the maximum to our retirement accounts in our early twenties. We saved up for a down payment on our first home, which we bought in one of the richest markets in the state, while we were still in graduate school, living on grad student stipends. I was 24. Between our retirement savings and real estate investments we have built up a very respectable net worth since then, which I am not going to share here, but some people retire with no more savings than what we have in the bank. All of that while making considerably less than we have in 2007. We are not going to draw down our savings to buy a mercedes, so the discussion is really about what we can afford while living within our budget.

And we are very frugal. We currently record every purchase we make, even a buck in a vending machine, so I can say confidently that there is no magical vortex down which our money is disappearing. Just the usual, housing, utilities, repairs, gas, food, clothing, a little bit of entertainment, but there are no unusually bloated categories. If we wanted to save more money, yes, we could move. That's not the point. The point is that when we are in roughly the 80 percentile of income in the nation, we still can't really afford the things that people think middle class familes are supposed to have. There's something very strange about that.

Thanks for the discussion, and keep it coming. I would be happy to answer questions about what our expenses are in individual categories. To answer one person's question, I live in Ann Arbor Michigan, which I would guess is probably a nice median in terms of cost of living. Nowhere near as expensive as the coasts, but much more than other communities in the midwest.

FMF, yes that is a good observation about single income vs. dual income. I expect the reason for it is that a homemaker adds a great deal of value to the family that otherwise would be spent on child care, cleaning services, housekeeping, and general chaos. 

Catherine Shaffer

Wise Bread Contributor

Guest's picture

Where you live and how many peeps you have to support definitely makes a big difference in how six figures "feels" in terms of the sort of lifestyle you can afford. A childless couple in Iowa is totally apples-n-oranges to a 3-4 person family in one of the coastal cities. There's also a big difference between being a single-income family where one person makes 100K, and a family that needs two FT workers making 50K to get to that figure.

Another thing that's misleading is that higher taxes and other factors (EIC, access to social benefits) mean that 100K won't give you twice as much to spend at 50K, and 50K won't give you twice as much spending money as 25K.

That said, we're in kind of a similar boat, in that our household income is upper-middle class but we still need to practice a lot of money discipline in order to save for retirement, avoid the debt trap, and be able to afford the things that matter to us. I wouldn't say we're "struggling," and I'll smack anyone who implies I'm "whining," but no--it's not the grand and glorious lifestyle that you imagine it to be when you're on the underside of the household income average. Comfortable, but no luxurious.

I see on the other blog how they're going after the couple for not saving for college. It wouldn't be hard to save some money for college if you were making "six figures" the whole 18 years leading up to that point. But a lot of people who do wind up disqualified from financial aid by the time their kids are in college were making minimum wage or not much better at the time they were born.

Guest's picture
Buffalo gal

Definitely it depends on where you are living. In upstate NY, we have two cars (including one brand-new one as of 2006), one of us is a full-time student, we give away 10% of our income, we have a 1200-square-foot apartment, have two large-breed dogs, and save at least 25% of our income for retirement, future kids college fund and savings for cars and future house. No debt except for the credit card which is paid off every month. We are diligent about not eating out and unnecessary expenses, but other than that we live an awesome and I daresay luxurious life.

This is on one income, $35k pretax. But we live in a neighborhood with a median income of $13k so we are RELATIVELY RICH.

I have relatives in other cities like Chicago and Atlanta, and their expenses seem sky-high to me.

Guest's picture

I'm from NYC and my wife and I have over 100k combined. It doesn't get us as far as we'd like. We have a modest car, own our co-op, and don't have a flat-screen tv. We don't live in Manhattan. We don't have premium cable (basic plus a Netfix plan). Can we save and contribute to our IRA's and 401(k)'s - yes, though not maxed out. Are we living the good life? Well, we can't quite afford to go out and buy a house right now. I know we're privileged compared to many in the country and even in NYC but the point of this post was what 100k meant in life and the truth is it's not worth what you might think. We have two kids and would love to get a mini-van but it ain't gonna happen right now. Hell, we spend around $13k for child care for our baby! With 100k, if you are in a high cost city, you are not set up for the good life! It's still a lot of work to make ends meet. That may sound strange to some, it makes us scratch our heads, but it's true.

Guest's picture

A question like this is very subjective because each person or family is dealing with different circumstances. I don't think Catherine was implying that you can't live making six figures, but making that amount should not be perceived as you are well off or considered rich.

If you live in big cities like New York, Los Angeles, Washington DC, Chicago, Boston, or any of the surrounding suburbs, I can tell you personally it is very hard to maintaining a decent lifestyle making 100k. If you have wife and kids you have to be on a very strict budget to make it work. I’m not saying making 100k is nothing to sneeze at, and those of us who make that should be fortunate and thankful, but it’s not what it’s crap up to be.

Guest's picture

It depends on where you live, a lot - the poster who mentioned "relatively" rich made a great point. Feeling rich has more to do with comparing to the people around you, and some days it certainly seems like "everyone" has nicer houses and bigger, newer cars than mine.
I think it also depends on some major expenses - I put myself through college and ended up with a modest student loan (now paid off). My parents never gave me a car, never helped with any down payments, didn't help with college, etc. So that's a lot of capital-type stuff that many of my peers had given to them, that I never did.
So, even though I make a nice living, it's not a huge surprise that I feel like many of my peers have more than I do. They had more to start with and less to pay off.

Guest's picture
S. Carvalho

This is a really interesting discussion. I grew up in Dubai and visited India very often before I moved here at 18, and I was amazed at the standard of living out here. It's incredible how much Americans consume and what they consider to be basic necessities. I don't hold it against anyone, it's always harder to do with less than what you are used to, but in many other countries, paper towels are not basic necessities, you use and wash rags. Ziploc bags/containers/clingwrap/aluminun foil are not necessities, you use and wash non-disposable pots with lids. Basic cable, juice and soda, giant tvs - not a necessity.

So why should americans have to compare with living standards in the rest of the world? Because globalization was practically invented here, and now we're competing with the rest of the world. Those wages that are stagnating here? They're rising in all those countries that for decades were completely stuck. America, and the west in general, has had an amazing amount of prosperity in the last century, and now the rest of the world is catching up.

I live here now, and with the decline in average standard of living, it affects me too. I certainly don't want to see my wages stagnate or fall. But in the global economy that America has created and taken advantage of for years, I have to learn to accept that my competition is not just the guy next door, it's the guy the next continent over, struggling to feed his family too.

Guest's picture
Iowa Girl

Our situation is close to Buffalo Gal"s, in that we give to charity, save for future kids and have animals (two large breed dogs and two cats, but still under 50K

Guest's picture

My wife and I are raising four boys on just under $40,000 a year. I think it would be VERY interesting to compare our two families' typical monthy expenses - not for the sake of who's better than who - but it might be enlightening to see what we consider needs and what we consider wants.

Guest's picture

The self-righteous indignation here is exactly why this problem isn’t going to be fixed in the near future. Folks, stop looking down, look up. Why middle-income wages are stagnating is the question, when wages in the top tier have risen enormously? Yes, the author is correct if she says she is worried about the future; if you aren’t then you are not paying attention. You are to busy patting your self on the back for making sacrifices. Her point is on her income, sacrifices should not have to be so severe. Before you criticize, do you know what she pays on her mortgage/rent, auto insurance, health care, commute, or property taxes?

Guest's picture

Just do what I did: trade in the kids for a Mercedes. It's totally worth it. In much of America, you can't have all the luxuries AND the big family at the same time on $100,000 a year. That's just inflation at work. $100,000 in the Brady 70's would be $300,000 or more today, which should be enough for MOST families to live that luxury lifestyle.

Guest's picture

A few people have cited Chicago as an expensive city. I live in Chicago and have found it to be really reasonable. Some big factors are: low state income tax (flat 3%, although if you're a big consumer, sales taxes will sting at 9.25%), low real estate taxes (I pay $1400/year in taxes on a $220,000 condo in the city), and an extensive public transportation system which means you can get by easily without a car.

I live very well in Chicago on $3,000/month, which is about 15% of my gross income.

Guest's picture

For those of you who are successfully navigating the choppy waters of 21st century personal finance: kudos. But Catherine's point is a good one. Many of us are working a lot harder, scrimping to a reasonable degree, and still feel as though we have to get by with less than people did even 20 years ago. There are several things wrong with our lifestyle and the cost of living. It's expensive to live today and most peoples' materialistic priorities are somewhat bent. I think everybody gets that.

If you are one of those folks who are patting yourself on the back, I'm happy for you. But there are a lot of people who have done their best and are still just getting along. I meet good people who are overwhelmed everyday. Many of them have done everything they knew how to do to be financially responsible and frugal. But all kinds of stuff happens in life.

Personal examples are never very reliable indicators of the state of the world. There are always exceptions on both sides of any argument. The national trend seems to be that people are working harder and feeling poorer. Why that is is worth discussing. Why you have managed might be a helpful example or a helpful suggestion but really tells us little from a global perspective. It might be a long way from the average experience.

Good for you. But give others a little slack. Walking in other' mocassins...yada yada.

Guest's picture

I understand what you're saying. That a six figure salary isn't really considered wealthy anymore. Judging by your posts I can tell you are very frugal, you allready send your children to public schools, drive older cars, and live in a house. The truth is you CAN afford to shop at the GAP and Eddie Bauer its just that your judgement prevents you from it. If you reward yourself just once in a while it may give you that little extra pep in your step, and make it feel worthwhile for living frugal. :)

Guest's picture

If you see multiple comments from bad. My computer was not very responsive.

I apologize.

Guest's picture

I thought the comment, "Who is premium cable for?" was interesting. The fact that these things are marketed to us, that it looks like everyone has them, is completely irrelevant in the hard, cold world of dollars and cents. I bought a house last year SIMPLY BECAUSE I don't own or maintain a car. (Good employer, corporate vehicle.) There is nothing in the world wrong with owning or wanting to own a new car, but if I did, I couldn't afford the house. End of story.

Marketing is a way to encourage people to choose premium cable over movies in the theater, or shiny new car instead of trip to the Carribean. By implying that everyone, or everyone you know, has A, they encourage you to sacrifice B to get A. It sucks, yes, but we will all always have to choose between the good school district and the beautiful patio, the easy commute and the large acreage, the flat-screen TV and the fast new computer.

I think Catherine's point is that, at $100,000, you still have to make these choices. I wish it weren't so, but she's right. It is. There are a few people with incomes that make choices like this irrelevant (Bill Gates, do you want the small South American country or the moonport?), but $100,000 isn't a magic bullet.

Guest's picture

These two statements are contradictory:

We are not living paycheck to paycheck. But barely...

some people retire with no more savings than what we have in the bank.

People living paycheck to paycheck have no emergency fund let alone enough to retire on at any age. They have no liquid assets. The truly struggling have hardly any assets at all. Some are lucky to have roofs over their heads; some are not that lucky.

Yes, it's true that $100k doesn't go as far as it once did, but as you are contributing heavily to your already significant retirement funds and own a house and two cars, I think it is really disingenuous to say that you are "barely" above living paycheck to paycheck. You're doing just fine.

Guest's picture

Looks like you hit a nerve. I think there are some great points being made on both sides -- so it's interesting to follow the debate.

For my part, I'm on the 'relativity' side of the argument. I'll admit we're very lucky (ok maybe even spoiled). I make six figures...not bragging just mentioning for context. We live in Ohio. We have one teenage daughter and two dogs. And our house payment is only $1300/mo. So, on the surface you'd think we'd have tons of cash socked away in the bank. I don't consider our lifestyle extravagant, but i know our disposable income is greater than normal. i also know we dispose of it more freely.

At the end of the year my wife and I were both shaking our heads at where it all went. We're not *satisfied* with how we spent our cash. We're not *satisfied* with how much debt we have. BUT at the same time -- i know our saving % is greater than the average household. I also know our debt to income is significantly less.

At same time, I look around at some of the cars people are driving and the houses they live in and I think to myself....what am i doing wrong?

So what are my conclusions:
*Relatively speaking, we make a lot of money
*Relatively, we expect we should be able to save more, have more, do more with what we made than we have
*Relativity, we saved more & spent less than others in our tax bracket

The only absolute truth I know when considering our finances?
We're embarrassed by some of our extravagances and wish we'd made different decisions. We plan on working to be more conscientious in our spending.

But isn't that how it should be? Shouldn't we always be looking to improve our situation?

Guest's picture

I currently make 5 figures, and I really think 6 figures is the perfect american dream.

Guest's picture

heres a great idea.....dont have any kids. Oh wait, you already made that mistake. That is the one universal mistake that people should have to live with - no medicare, no medicaid, no SSI, no help of any kind. When people start dying off because of their drive to breed, them maybe, perhaps, people will stop breeding themselves into debt.

I made 137k last year, I'm single, no degree, no crumbsnatchers, under 35....hmmm.....looks like I'm not doing so bad. But all these people you mention, (including yourself), they are all married with kids. There might possibly be a pattern.

Oh yea..and I only work for a year...every other year, that is.

Will Chen's picture
Will Chen

"Middle class Americans are taxed to the hilt, and inflation is the "invisible tax" that devalues our currency over time while the rich stay rich, and the poor get poorer."

That's something most people don't realize in this country.

Guest's picture

Well I figured I'd chime in with how we sit in this. Six figures and savings vs stuff seems to be the key. It's not that 6F goes less far, but that 6F with savings isn't going to go nearly as far for "stuff". The savings is the key. You're making the choice of stuff now vs savings. If you want to live like the perceived 6F income, AND have savings, you need to bump up the income another 30-50K a year to compensate for the fact you're saving (which is very much not part of the 6F perceived lifestyle). I think you're making the better choice to limit consumption.

I live in an area a smidge more expensive than Ann Arbor (according to some on-line calculator), the suburbs of Atlanta, GA, and my wife is a homeschooler with some PT income and we're pretty close to paycheck to paycheck at around 70K a year... with 3 kids. We also started very young as parents (19 and 21), and started off in debt. We've gotten out of debt, and back into it. We live in a decent house, but not a huge one. We drive used mini-vans, I carpool to work, I take left-overs for lunch, and type this on my 4 year-old iBook (our most advanced computer... bought used).

We could hit the six-figures if my wife worked, but we'd lose the benefits of her (a certified teacher) teaching our kids (one of which is too far advanced to stick in public school, and one of which has some special needs), and all that goes with her being at home most days of the week (cleaning, cooking, childcare, etc).

The thing I've tried to remember in regards to debt and finances is that while we're not rolling in it, we're not too bad off in the net worth department and for US, the time with our kids while they're still young is more important than getting the head-start on our savings. THAT SAID, I'd love to save more, and we're constantly working to be able to save more, I'm just trying to keep it in perspective. In 10 years we could have an extra 250K in the bank, or a nicer house and cars, or a decade of all the extra-memories shared with our kids from one of us being home with them all the time. I'll take the memories every time.

Guest's picture

I am a single male, and I make 45 K a year. i am 26 yo and live in Boston metro area. Now 45 k a year isnt cutting it for me. I live in an apartment with 2 roomates, we each pay 433 a month plus utilities. I have no car and no dependants. Now I am sure as hell that this is not enough money for me to live on. At times im down to my last 10 bucks for days and have to buy pasta and sauce to eat. I mean 45 k a year after taxes leaves little. I have 1 laptop an old tv and a good mp3 player. So whats the deal? Can I live? And i dont think I will bring children into the world on my budget. I feel that I cant even help with the rest of my family. My mom my little sister. I buy them things but I would like to provide more. I want to be well enough off to help my mother retire comfortably. so I will work harder and progress faster so I dont fall behind.

Guest's picture
Amy K.

I lived in Ann Arbor 2000-2003, and can vouch that it's pricier than where I grew up (Traverse City, MI) but cheaper than where I live now (Chelmsford, MA). Housing is a huge factor - The last time I looked, a 3 bed 2 bath house near my parents in northern Michigan was $155K. In Ann Arbor, I lived in a house split into 2 apartments that roughly fit that bill, and I think it sold for $300K. We bought our house here, in the far suburbs of Boston, for $350K. It's a 1500 square foot, 3 bed, 1 bath house.

I think fully funding the retirement accounts is also a huge factor. If each adult is socking away $15.5K in a 401k and $4K in an IRA, that's $39K/year off the table right away. Admittedly your taxes are lower, but you'll still have far less "fun money" than a couple putting nothing into retirement accounts, or even the standard 10%.

Guest's picture

How good it is that people like contractor are so happy to remove themselves from gene pool by not having any kids. It will be nice when this sort of logic is finally extinct. It may come as a surprise to contractor, but most people still consider family, rather than the accumulation of wealth, the central point of life.

As far as the article goes, I think the problem is that we've always viewed six figures as "the goal". Inflation changed all that, but we're still having some trouble adjusting. Much of the discussion seems to center around phrases like "you might think that a family with a six-figure income would be able to afford...". We just have to redefine what a six-figure income is in today's society.

It might also be true that our expectations of a six-figure income were never all that real to begin with. We may have imagined a person making $100,000/year driving a mercedes-benz and wearing designer clothing and living in a huge house with lots of kids, when the reality all along may have been driving a mercedes-benz OR wearing designer clothing OR living in a huge house, etc.

At any rate, I think you are doing very well if you can see your debts being paid off any time soon, and if you're managing to save something. To me, there's no-one wealthier than that. Any amount of stuff you can accumulate beyond that is pointless.

Guest's picture

My family of 3 would kill for make that income. We average 45 grand as a whole, yet we manage to live in a decent neighborhood (In MIAMI), 500,000 house, Two average cars from 2000+. We all wear nice clothes and eat well. The difference is theres no healthcare, no retirement, no giving to charity, no vacations. A vacation for me is a day off and going to the movies.

Guest's picture

I am a single mother of one and I bring home just over 96K a year, gross. I find that taking one or two "modest" vacations a year is ridiculous. My idea of a vacation is taking 5 days off and watching television, sleeping in and going to a matinee. Also, if one of my animals (I have 3 cats and 1 dog) were so sick it would cost me a $4K vet bill, well then it's good-bye Fido!

You are living outside your income...period.

I don't have credit cards. I have a 6 month emergency fund. I don't have payments on my two vehicles (they were both bought new in 2007) or any other debt besides my home. The vehicles, although brand new, are quite modest (stick shift, no remote key entry...air conditioning and power steering is about it - the truck doesn't even have carpet - it has the commerical flooring).

I can pay all my bills and have my retirement in place, and send my daughter to college. And, I do not live in a cheap place. My modest home was purchased for almost $300K.

I grew up on welfare and know what it is like to go without. You are spending way beyond your means, period. I consider myself lucky, and if you cut back on your spending instead of being "entitled", you'd be lucky too!

Catherine Shaffer's picture

I'm a big girl. I can take criticism. But do NOT diss the dog. LOL. :-)

Seriously, though, it was a much more complicated situation than you think. Sometimes they don't give you a bill up front. We did end up euthanizing her, and I wish to God we'd done it before we ran up that kind of bill, but sometimes you have to make decisions on the fly. (The whole story would make a good post, actually.) You can second guess any expense in life, but the bottom line is that these things happen. If it's not the dog, it's the sidewalk assessment, the roof, your transmission, a natural disaster, an act of God, a messy family situation that explodes expensively, a tax time surprise, a lawsuit, etc. These things, too, are part of everyone's budget, but are much harder to predict or control.

Catherine Shaffer


Guest's picture
The Bum

My partner and I made $110,000 last year and while we have made some gains, we have a long way to go. We live on Miami Beach and have not even owned a car in almost 13 years. He walks to work and my employer pays for my monthly bus pass. But my partner is a survivor of both AIDS and throat cancer and staying alive is and has been very, very expensive. Additionally, when he was given the AIDS diagnosis thirteen years ago, we were told that the "best possible outcome" was that he would live another 18 months. So, yes, we went a little nuts spending money and doing things like traveling and, yes, we took on debt. We're both very healthy right now and very thankful for it. The other part of the equation is that, even though we made that much last year, the year before that we made maybe $85,000 between the two of us and for many years before that $45,000 to $65,000. During those leaner years, his health insurance was dismal and the co-pays on his medications along with his premiums took up a disproporionate share of his income, so he had to rely on me. There are simply too many variables out there to judge and blame anyone who is struggling financially. And it's simply not helpful. I think any constructive advice is wonderful and any judging and blaming is simply cruel and lacking in humility. If you're lucky enough to be financially stable, terrific, but you shouldn't assume someone who is not is simply an irresponsible spendthrift. Life can be very expensive.

Guest's picture

What is the next level of income worth to you? Are you willing to trade off time with loved ones to move up the ladder or spend more time in your own business?

Some of us have decided the rat race is meant for just that- rats.

We are instead just looking to live at the level where peace can be found.

My dad is a public speaker and he does some motivational speaking on finances and levels of income. He talks to mainly middle class, cubicle rangers. He discusses how those at the upper echelon really live- sacrifices that are commonly made of time, integrity, belief systems, etc-- then discusses how those in the truly "poverty culture" see the same impossibility at moving up from their level to middle class.Its fascinating.

Guest's picture

Catherine: You state "If it's not the dog, it's the sidewalk assessment, the roof, your transmission, a natural disaster, an act of God, a messy family situation that explodes expensively, a tax time surprise, a lawsuit, etc. These things, too, are part of everyone's budget, but are much harder to predict or control."

Let me point out to you that your family already makes twice the average in the USA and...

1. Animals get sick, especially as they get older. Pet insurance is a good thing. It's to be "Expected" that they need some care. If you don't have pet insurance, look into it, or having a "sinking" fund (retained earnings fund for those of you out there that are accountants). Put a budget line item in your budget of $50 per month, $100 per month (whatever you think is appropriate), AND DON'T SPEND IT, to cover this "Expectation". When the times comes, you'll have it or at least most of it.

2. The roof...and other household maintenance things like water heaters, air conditioners, etc. This is "Expected". All things wear out! Again, another line item in your budget THAT IS NOT TO BE SPENT EXCEPT FOR THIS, to take care of this when Murphy strikes. It is "Expected" that things around the house wear out. I've been there and done this with the roof and the airconditioner in a 3 year time span. I paid cash when Murphy came to visit me on this issue. When my 5 year old stove went out one day, I bought a new one at a scratch-n-dent for 1/3rd the cost. FYI: Roof and AC exceeded 12K. I had a $500 per month sinking fund for over 2 years when this hit.

3. Natural Disaster and Acts of covers this for the most part. In my state, I pay about $200 extra a year for earthquake insurance. I live on the largest fault in the USA. Many of the readers here don't know that Missouri is more at risk than Southern California. Again, cheap insurance for another "Expectation". I have a 10% deductible for earthquake. I have the $30K set aside for this "Expectation". As for Acts of God, my dad died in 2002 with no insurance. It was "Expected" that he'd die one day, and my brother and I had saved up for it and handled it.

4. Messy Family Situation that Explodes Unexpectedly and Lawsuits...been there done that also. I spent $8K last year in legal fees. But, I expected it and put $500 a month (and continue to do so) into another sinking fund for those damned lawyers. I do not help relatives monetarily who can help themselves or who make bad decisions and expect me to bail them out.

5. Transmission...I gave up on automatic transmissions a long time ago. Not only do they do not last, they are also expensive to maintain. I drive a stick and it's nice to know I'll probably never see a transmission break down on me, and when my battery goes out (twice in the last 4 years), I can always get my auto rolling, pop it in second gear, and go buy a battery.

6. Tax "Surpises". There are no tax surprises. I earned $20K extra in 2004 that I knew no tax was being taken out of. I put 1/4 of it away in another sinking fund. When tax time came and I had to write a check for 4K, I just wrote it! Paying taxes is like death, it's "Expected".

7. Sidewalk knew this was coming in advance, didn't you? My dad had something similar happen to him before he died. Start another sinking fund to handle it and things like it. It was not "totally unexpected"! Fortuantely for dad, my brother was able to do most of the work for him - yeah for a brother that works in construction! I am sure you had months of notice before your government told you that your sidewalk was going to be installed....

I've met a millionnaire who is broker than I am. He's just broker at a higher level! If you don't have a budget and don't plan for life, then life takes you to the cleaners. I think you need to create a realistic budget and cut back on your spending. I make the same as you, so I know what you're bringing in..

I guess because I am a single mother and I have no one but my brother to lean on (we're the only 2 left alive in the immediate family) that I have had to learn to plan, plan, plan. I tell you what, I practically got money rolling out of my ears, and so should YOU!

Guest's picture

Yep, I was poor and didn't know that until I was about 45 or more. I was looking at pictures of my family when we were all young kids living at home with Mom and Dad. It hit me like a ton of bricks. I WAS BORN POOR!

The other day I was filling out an online survey and saw all the breakpoints for income. I clicked the $100,000 catagory which was an honest response. I remember thinking I know what it feels like to live at all of those other income levels and the only real difference today is the size of our home and the fact that we have a swimming pool in the back yard. Even at that, we purchased this house for a song and got it roughly 1/2 price. It isn't even a fixer upper or anything. It isn't a mansion, but it is 4000 square feet. Did we need the house? Not especially but we sure do enjoy it. It is our home, our summer home, our vacation home, our getaway home all rolled into one. More than that, it is an investment and we expect to double our money or more when we sell it with only a few enhancements and modifications.

I still bargain shop, clip coupons, eat leftovers, do my own ironing, do a variety of things online to earn a buck. I am a stay at home wife and haven't worked a traditional job in about 6 years.

We live in the mid-south. We have one in college and 2 more will follow in the next 2 years. We drive a new 07 Tahoe and have 2 other cars in the driveway -- a 1994 and a 1999. The 94 will be given away soon to someone who needs a car to get to work and back - a step up for them if you know what I mean. One child will be getting married this year and weddings are not cheap no matter how much you do to control it.

In my life everything has gone up in price. The more you make the more you need to spend. I remember gasoline being about 50 cents a gallon. I remember sugar being as cheap as salt. Bread was once about 30 cents a loaf. So my point is that if wages had gone up as fast as goods, services, etc we'd all have tons more cash lying around. Taxes have gone up etc, etc.

I don't think most would consider me poor at this stage in my life. We own 2 homes (rent one out). We have autos, insurance on everything, great health care etc. Could I live without it? Oh you bet I could and fully expect that within 10 years we'll have to sell our homes and downsize to be able to care for ourselves in our rocking chair years. BUT, I live as if I were poor when it comes to being thrifty, managing the budget etc. We went without a job for either of us for around a year and didn't lose a thing because we had a plan in place to sustain us.

I asked myself this morning if $100k was poor when I read this. The answer is no for me but I can clearly see how it could be. Thanks for the conversation. I am off to make my lunch from leftovers and open a few blinds to allow the sun to heat my home rather than turning up the heat. I'll be preparing a nice Valentine's Day dinner rather than going out. Tonight I will be cutting my husband's hair (I have for 12 years). We don't take for granted that which is supplied to us. Nothing is forever.

Guest's picture
Other Half

I am glad some people are doing so well on less money than we. I don't understand all the vitriol and judgemental attitudes though. For one thing, we're not complaining. We're saying "I'm finally upper middleclass and all I got was this T-shirt".

Yes, what you do with your money really is about choices:

I frequently choose to pay more for local and organic food, I could shave my budget some, but it's a choice.

I also choose to live where I work. I used to commute and it chewed up far too much time and expense. I can even bike in favorable weather.

As for "unexpected" things, yes we have had lead time and been able to save for many of them. However, doing simple maintenance on a roof that uncovers decades old structual damage is "unexpected". I already know that the rest of my house roof has 4-5 more years, that I can save for.

Having your city decide to transfer sidewalk maintenance to homeowners and immediately assess your neighborhood is not completely predictable though.

Life is a learning process, you don't know until you know. First time through self-employment taxes can be a bit of a surprise.

For the record we are doing well, we do not live beyond our means despite complaints about expenses, and I would hardly categorize ours as a consumerist lifestyle.

I am enjoying the different perspectives from the posters. The regional perspectives, plus the urban/rural/small-city differences are especially interesting.

Guest's picture

I think that a lot of this argument revolves around who's defining "the American Dream". If you set someone else define it for you, you're most likely doomed to be unhappy with your financial situation.

For some people, "the American Dream" means being out of debt so that they can start accumulating wealth. For other people, "the American Dream" means having a happy home and a big family that works and struggles together. For other people, "the American Dream" means traveling all over the world. For other people, "the American Dream" means going out and seeing how many people they can help that day. For some people, "the American Dream" means having enough money saved away that they will never be a burden to their children. For other people, "the American Dream" means learning everything they can. For some people, "the American Dream" means hiking every day of the year.

My point is that "the American Dream" should be _your_ dream, not what anyone else -- particularly a marketer -- thinks your dream should be. My wife often talks about a class that she took in college where the professor made the point that the purpose of advertising is to make you dissatisfied with your life. Think about what you spend your money on. Does it leave you content? It should -- and more stuff often doesn't mean more content.

"The American Dream:" I'm living mine; how about you?

Catherine Shaffer's picture

Spedie, I am glad your life is so perfectly predictable, and you are absolutely right about saving up for those "unexpected" expenses. The thing is, you have to get a little bit ahead in order to start doing that. If you are still paying off last month's unexpected expense, and this month your water heater explodes, you are going to have trouble squirreling that money away for future expenses. What you can do with your money today is a reflection of where you've been, and that includes past mistakes, bad luck, and simply where you started out in life, etc.

Also, there is such a thing as a tax surprise. You should have seen the look on our very experienced accountant's face as he broke the news. He had never seen anything like it and he ran the numbers over and over hoping he could get something different for us. The tax code is complex and sometimes it throws you for a loop.

I looked into pet insurance, and I found when I read the fine print that they all have limits not only on the maximum payout, but on the payout per "incident" and also on payouts for individual illnesses. Pet insurance would have covered about $200 of that $4000. Not worth it. Not to mention that our dog was already too old to qualify when it started to become available.

Catherine Shaffer

Wise Bread Contributor

Guest's picture

Sometimes, the little things include those expenses necessary to have the job to get that income, such as transportation, clothing required by the particular job culture, child care, and equipment. They can be very hard to reduce or eliminate, without needing to find a different job. There are lots of articles out there about if you could afford to shift from a two-income family to a one-income family, and the ones I have read ask you to consider those job-directed expenses too.

It's also hard to dismiss the cost of things. I won't forget my aunt telling me about her sister-in-law stocking up on bread, it was down to $2 a loaf - and this was fifteen years ago. Plain old white bread; when you have to ship it to Northern Ontario the cost goes way up. A 2L bottle of Coke was $5.

It is all relative, and there are so many perspectives to consider... but it's probably fair to say that $100,000 in one place with one situation isn't the same as $100,000 in another place and situation. The 'ideal amount' - who knows how much that really is? :)

Guest's picture
Minimum Wage

Six figures really IS that much when you are making minimum wage.

Guest's picture

In my opinion, if you can't live on 96 grand a year you need to re-evaluate your priorities. Up until recently I was the sole breadwinner in a family of four, making less than $45K. We were able to take vacations, eat out once in a while, live in a comfortable home, and enjoy a good life. I think that if I were making 96K then, I'd have felt like a millionaire!

A budget and methodological examination of where every dollar is being spent is the only way to understand why you're struggling to have a better lifestyle.

Maybe you need to move; we moved from a major city to a mid-sized one and were able to buy a bigger house for the same money, paid less in auto insurance, house insurance, gas (shorter commutes), and improved our overall quality of life.

Maybe you need to look at your expenses (groceries, clothing, jewelery, gifts, etc). Learning to follow a budget and to be frugal are so important.I suspect that you are trying to live a lifestyle that is above your means. You ask where your Mercedes Benz is, but do you really need a Benz? Not really.

Guest's picture

I completely "got" your point.
My husband and I, according to our 2006 tax forms, made $84,000 that year. I believed I was frugal (and by most peoples' standards, I really was). I shopped second-hand, we ate at home, did not have premium cable, etc. When we saw that number, though, we both looked at each other because "where in the heck did it all go?" And you know what, if you do what all of the "experts" tell you to do--put aside 10% for retirement, buy life insurance, set aside some for the kid's future, etc., well, that's what you get, I guess.

What happened to us was, my husband became ill and suddenly was not able to work any more. Our income went from $84,000 to about $40,000, with me working two jobs. I thought I had been frugal. But there are so many ways you can cut back when you have to. We are getting by, in no danger of losing the house, car, etc., but absolutely no wiggle room, because even though our income went way down, our bills didn't. That $40,000 a year is hard to come by in my area, and very hard to hang on to. We have a very modest 2-bedroom house, we pay $950/month for our mortgage on that, which was tiny when we were both working, but when there's just one of us, it seems huge. Our grocery bill (family of 3) is supplemented by venison and fish, our chickens and ducks, and our garden. Sometimes I think about that $84,000 a year and how frugal I've become now, and I think about how rich I would feel with that extra money now....when I thought things were tight then!

The really sad thing is, and this is what ties into your post, my dad worked for the same company for 25 years before he passed away. When he passed, I saw his last paycheck (in 1988), he made $49,000 a year. On that money, he supported my mom, me, my brother, a cat and a dog, in a house that was much nicer than what I live in now. We had cable TV, we had a new car. We never shopped second-hand. We didn't buy "generic" groceries, because my mom didn't really like them. But we weren't hurting at all. There was no struggle from paycheck to paycheck, like there is right now with my family. And people look at a family of 4 that makes $49,000 as nearly poverty-level these days. But back then, it was plenty of money for everything that a family needed, without having to make tough choices. When you put things into this kind of perspective, it's easy to see why a 6-figure income doesn't go as far as you would think.

Guest's picture

Um, $49k is the top 50% of American families. Meaning -- no one looks at that salary for a family of 4 as nearly poverty level except you wealthy friends. I assume they were wealthy because 84k household income puts you nearly in the top 20% of household incomes.

Also, $49k/year adjusted for inflation of 4% after 20 years is equivalent to making $88k/year in 2008. So, were in the top 20% of household incomes back then. Congrats!

Unsolicited advice: start counting your blessings more and stop buying into the consumer society.

Guest's picture


First off, I write this from a family of two, living happily but without savings on less than $17K a year after tax.

From my point of view this article is both correct and very ignorant. I understand completely the feeling of your lifestyle not being on par with the lifestyle expected of a six figure income. I do not understand this from personal experience, but I do understand it from knowledge of the human psyche.

Now, as have already been pointed out in a previous comment, you are seeing this from the completely wrong perspective. The expected six figure lifestyle does NOT include savings, pension fund, emergency funds, and so on. And it especially does not include charity. Instead it includes spending as much money as possible on appearances, big tv, fancy clothes, new cars.

Your six figure lifestyle centers around saving for the future, for the unexpected, and giving to charity. Ironically this means you live less today. Simply put, your choices have put you where you are, and if you want the six figure lifestyle of popular belief then it is as easy as just re-prioritizing.

I just found this blog today, and I thought I would look around because it talks about 'living large on a small budget', and 'frugal living'. You on the other hand speak about 'living small on a large budget'. I can understand your problem, but I laugh at the concept of finding this article on this site.

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Not only are you above average, but you are 85% above average.

Here is how to live on $40k/year.

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I am not sure of the ages of all the posters, as that will change the perception of the individual post.
When I was growing up in the 70's and 80's, 100k+ a year meant that you didn't have to make sacrifices in your budget. It meant that you could afford pretty much what you wanted when you wanted it. Rich, in the upper crust.
Now, in 2008 in the D.C. area, you need a combined family income of 280k+ to be considered "affluent middle-class", not quite the upper crust but close enough to use it as a comparison.
I, personally, make a little more than 100k. Life isn't hard, but it isn't a piece of cake either. In order to own a home, you need to be able to afford a minimum of 700k+ (and this is with the current housing slump in mind) in this area. Since I am fortunate to have a salary like this and I am the single source of income (my wife is a full time voluteer and student), I cannot qualify to own a home because of the single source of income. Not for a traditional loan anyways.
Can I make it on this salary? Yes, absolutely. Do I feel blessed to have this kind of a salary? Of course. Does this kind of salary buy you the kind of freedom that it did in the 80's? No, no where near close.

I think that the idea of 100k in the 80's would require 400~500k today to even begin to compare.


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I am not sure of the ages of all the posters, as that will change the perception of the individual post.
When I was growing up in the 70's and 80's, 100k+ a year meant that you didn't have to make sacrifices in your budget. It meant that you could afford pretty much what you wanted when you wanted it. Rich, in the upper crust.
Now, in 2008 in the D.C. area, you need a combined family income of 280k+ to be considered "affluent middle-class", not quite the upper crust but close enough to use it as a comparison.
I, personally, make a little more than 100k. Life isn't hard, but it isn't a piece of cake either. In order to own a home, you need to be able to afford a minimum of 700k+ (and this is with the current housing slump in mind) in this area. Since I am fortunate to have a salary like this and I am the single source of income (my wife is a full time voluteer and student), I cannot qualify to own a home because of the single source of income. Not for a traditional loan anyways.
Can I make it on this salary? Yes, absolutely. Do I feel blessed to have this kind of a salary? Of course. Does this kind of salary buy you the kind of freedom that it did in the 80's? No, no where near close.

I think that the idea of 100k in the 80's would require 400~500k today to even begin to compare.


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With Frank. "Your six figure lifestyle centers around saving for the future, for the unexpected, and giving to charity. Ironically this means you live less today. Simply put, your choices have put you where you are, and if you want the six figure lifestyle of popular belief then it is as easy as just re-prioritizing."

Exactly. My parents make less then 30K a year (my dad is retired, and on social security, but that's factored it). This is the most affluent we've ever been. However, we have a house, two USED but well working vehicles, and everyone (but me) has health insurance. Granted, my parents only have about $500 in savings, but they're so far away from six figures. See, we don't go on vacations (other then camping.. in a tent.. in a state park), nor do we buy big ticket items. They didn't save money for my sister and I to go to school, but we go to the best community college in the nation- and will go to state schools on scholarships, or loans if need be.

But, I would like to add, in Upstate NY 70K allows you to live the 'american dream' mentioned in the article.

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Um, contractor? See, there's a hole in your theory. While I'm relieved that you're not having kids, if everyone did the same, no amount of earnings now would enable you to pay for care as you age. I mean, I'm not even talking doctors. I'm talking getting your diapers changed.

So the really important part of this genius financial plan would have to be suicide before debility. How many good years would you voluntarily cut short in order to avoid being caught flat-footed by a stroke, say?

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My father worked in the rust belt for his whole life at one factory after another as they were shut down or moved south. I watched too much TV and as a result I knew how deprived I was. Yeah, I had an Atari and a bunch of hand held games; my mom was home to take care of me and drive me to my sporting events (YMCA membership), and I had a good bike. However, there was always something on the horizon, something I needed but didn't really know why. My father often wondered if I was secretly swapped for a Rockefeller's kid at the hospital maternity ward.

After high school, I joined the Army for college money. After 3 degrees, I think that I am finally done. But, what about the "dream", and where was that for my parents?

I don't make 6 figures a year. My wife doesn't work. We don't have cable. We live in an urban area close to work, and try to live a responsible life style.

I guess what I'm trying to say, like others here, is "live your dreams and not those sold to you". I have a great job doing what I love. My daughter has a great mother, who has time to be with her. We live in a comfortable house with adequate transportation and sufficient time off from work to enjoy the world around us.

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"You can never get enough of what you don't really need to make you happy." - Eric Hoffer

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“Money never made a man happy yet, nor will it. The more a man has, the more he wants. Instead of filling a vacuum, it makes one.”
- Benjamin Franklin

Homer Simpson:
Wow, Mr. Burns, you're the richest man in the world! You own everything!

Mr. Burns:
Ah, yes, but I'd give it all away to have just a little bit more.
- The Simpsons

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Great post and great discussion. I understand that this site concentrates on living frugally -- "living large on a small budget" -- but I'm just not seeing why that has to mean the same thing for different people.

First of all, the many suggestions that one should pick up and move to a less expensive area assume that the same job or the same salary will be available after the move. That won't always be the case.

But even if it were the case in an individual situation, I agree with the comments that you should be able to make the choice to live near your family, your friends, or your community. As a few other commenters noted, your financial goals shouldn't be a goal in and of themselves -- they should be a means to an end. I have a six-figure income, and I could move to a less expensive area. But for it to be a meaningful difference in expenses, I would have to move pretty far. Is it worth it to me to lose a few extra hours a day commuting so that I can save on my mortgage? Not even close. I have lofty financial goals, but I have no doubt that I would pay MORE if it meant I could get more time with my wife and kids. These are and should be individual choices, in my opinion.

Finally, we all have two ways of pursuing financial goals: cutting expenses and increasing income. I think it's a mistake to focus solely on cutting expenses.

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Track every penny you spend for a month or two. Then you'll know where it all goes.

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Zeitgeist watch this movie and alot of things will make sense i just left a six figure job in new york city. had no kids paid expensive rent lived an average lifestyle. then i moved to sweden had 3 children with my wife over the past 5 years. now my and my wifes income combined is no more than 60k we pay 2000usd in rent and utilities and each have our own car we take vacations twice and were happy wish we had more money but were doing ok

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Relative? Think this term is overrated. It's called inflation.

The dollar is worth less and less everyday. Essentially instead of getting a raise your getting paid less everyday. Simple economics.

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Hi I live in Southern Ca. In the suurbs and it can get pretty expensive with gas prices, mortgage,etc and the only debt that we have is our mortgage( no credit cards, no school bills) and we give 15% of our money to church and charity. My family of 5 lives off of approx.30k a year and sometimes we are strapped but we always have what we need and the majority of the things that we want. i believe that it all comes down to living within ones means and just doing what you gotta do. the more money one has the more they spend, but when the moeny is low one learns to live with what they have not what they don't.

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I grew up in a working poor family. I was able to attend Northwestern University on scholarships, grants and student loans, in addition to working two jobs the entire four years. My husband was mostly the same, though his family was more middle class than mine, and he also went to NU. Then I went to graduate school, earned a fellowship, and finished a master's degree. My husband has been underemployed at times and was out of work for 6 months last year when his company was bought out. We both work for state government as public servents, so our salary is in the low range for our occupations. We have one child and live in the city limits of Columbus, OH in an average house in an average neighborhood with city (not suburb) school district and taxes.

That said, it does require living frugally in order to "get ahead". We mostly live on one income (which helped when he lost his job). Until this very month, we did not have internet service at home and we had just one, 10-year old car. We just bought a 2006 Toyota and paid cash because we saved LONG AND HARD for that car. As it turns out, my husband will no longer be able to take public transportation to work because his office is moving well out of range of the bus service here starting next month, so we will need to use both of the cars, unfortunately.

We fully fund our Roth IRAs because we don't get 401(k)s being government employees, so we don't get any matching funds or anything. We pay 10% into our public pension funds, which is more than what is taken out of people's checks for Social Security. I am a union member, so I get union dues deducted. I take the bus to work and have my bus pass deducted pretax. I pay daycare pretax.

I am a coupon queen. I curb shop. I dumpster dive. I go to yard sales, rummage sales, thrift stores, I freecycle, use craigslist, and we reuse/reduce/repurpose everything possible. It's good stewardship and it's good on the pocketbook.

However, to do all this, no, we can't take vacations. We have had one vacation in the 6 years of marriage (and no honeymoon either). That was to Florida for 5 days. We've had some MAJOR house repairs (foundation, roof, sump pump, water heater, electrical). Major medical bills (I had to have two bones removed from my feet due to avascular necrosis).

I too wonder where we went wrong. It seems like we should be able to vacation to Florida or somewhere once a year, not once a decade. It seems we should be able to afford a house in a better school district or that has a foundation that isn't falling apart. I should be able to afford organic produce and dairy if I so desire. But to save for emergencies, pay cash for a car, fund my retirement- I can't. So I don't.

I'm not complaining about some things- I don't mind buying used and doing without some things. But I would like to be able to vacation more and have a home in a better location and in better condition. Unfortunately, the public (me included) doesn't want to pay higher taxes so us government employees can earn a moderate salary for our occupations.

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It all comes down to options, if you have to live on 30k a year you will find a way to cut costs and if you move up in salary and dont keep those principles then its your fault for indulging and ignoring past experiences. My parents went from 40k to 100k and instead of making that a way of giving themselves breathing room they just made it a way of having the same stress just at a higher income level. Too much spending I think older people enjoy seeing a
new package on the front porch from shopping online and they go nuts with golf equipment.

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six figures is such a joke. come here to manhattan, the average 22 year old fresh out of an ivy league university is making six-figures their first year working in banking or consulting. living in manhattan will change your views about income big time because of all the young people who are making a lot of money. most people wouldn't believe how many people here in their 20s are making half a million or more per year. six figures as in just needing to make over $100K is a joke, you can make that much just working in IT, but odds are you'll live outside Manhattan.

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Great article Catherine!

I can't believe how many people missed the point.

I also can't believe how much people want to 'play the martyr' and diss Catherine for writing the article. Why is 'I can get by on $15.000 and not complain' a noble thing? I am sure Catherine as well as many of us have busted our behinds to get the six figure salary range only to see inflation erode our gains. Is it bad to talk about this? Maybe the people who think it is haven't really been trying that hard is all that I can think...

Heck, just to get in the spirit of things, lets all take paycuts and give it 'back to the man'. After all, a good employee just takes a bad salary and is happy about it....

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Money matters sour the heart, taint the jealous with even more selfishness. I enjoyed Catherine's article and took it in-the-balance. We each have our own lives and relative perspectives which aren't universal truths. We stand much to learn from each other.

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You wrote:

The point is that when we are in roughly the 80 percentile of income in the nation, we still can't really afford the things that people think middle class families are supposed to have. There's something very strange about that.

Not so strange. The expectations are based on TV, which is fiction.

You seem to regard the Brady Bunch as an accurate representation of raising 6 kids in the 70's. My grandmother, who actually raised 6 kids in the 50's, 60's, and into the 70's, always commented that Alice would cook 3 pork chops for dinner to feed that crowd. It's fiction.

I understand that children have a hard time distinguishing fantasy from reality (an excellent argument for not letting them watch network TV), but adults are supposed to have mastered that distinction.

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I really liked Catherine's post. We (I, my friends) busted 10-12 years on post HS education (undergrad, masters, PhD etc.), and right now we all feel pretty happy that we make 6 figures and are in a profession (univ. profs) that is less prone to see layoffs. But Catherine's post made me pause and think more about what exactly 6 figures buys someone ... I agree with some of the posts here that perhaps developing/ continuing with some frugal habits may be very very useful, and that the mindset, that 6 figures means one is way past needing frugal habits, is outdated ... I think the big issue is location. A 6 figure salary in Detroit / Lansing etc seems a lot more than the same salary in Boston, Washington DC etc.... Many of us are rooted to an area (for very good reasons - family, spouse etc.) and hate to move ... I know many univ. profs will often relocate to a rural university just to improve cost of living (e.g. move from a Boston-based university to a Chapel-Hill based university). This seems a good strategy if one can get past moving, which is easy for some, difficult for others...

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See, if you didnt have that premium cable that you shouldnt have then you wouldnt see those commercials during your favorite tv show for fancy new cars and how to get car insurance on them

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It completely, completely, completely depends on the location. Sry. That's just how economies function. I live in Arkansas. 6 figures is still pretty much all you can need here. In Malibu, California, it's gonna be different.

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Why is everybody hating on Catherine, or people making six-figures for that matter? That kind of income doesn't just happen to someone. It's hard earned for most people.

Good for you if you're family lives on $35k a year. Just a thought, what do you think is going to happen to the economy and your job when everybody cancels their cable, only buys the cheapest stuff at Walmart or 2nd hand stores, and nobody buys a car anymore.

And do you really think your parents had such an easy time raising you and your 5 siblings on $30k a year? Sure, you never missed anything, but in reality your parents where struggling to pay their bills just like everybody else. Parents usually protect their kids from harsh realities like not being able the bills or not being able to afford anything.

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I can't imagine living on 100k
my step father brings in 159k and my mother 86k
they both work full time, we have an 07 cadillac cts, 02 ford f-150 super duty, and my suv the 04 ford explorer. new computers, new TVs, 4000 sq ft home, with imported wood, granite, and tile. a pool, hot tub, fire pit etc. we have lots of clothes to choose from from casual everyday, to formal wear for going to horse races and theaters. i get 100 dollars a month for lunch/breakfast at school, and i get about 50 dollars a weekend for "fun money" to spend on movies, food, clubs etc. my parents go out to nice restaurants, dinner clubs and jazz clubs most weekends where she can sport her 2.5 karat diamond ring. i am allowed to be in sports all seasons which cost about 200 dollars each, and i do specific training in the summer for about 400 dollars. speaking of summer, we just got two new four wheelers, for our renovated cabin on the lake. i also just got back from a school trip that involved going to new york for $1600 plus the extra $1000 in cash I was alowed for meals and shopping. i am also leaving for mexico in two days to enjoy some much desired heat haha. anyways we live in one of the wealthiest suburbs of Minneapolis. But then again I spose things could be more costly outside of Minnesota, but we seem to be doing just fine. i certainly wish the best for all of you who are struggling, and am giving kudos to those of you who are managing everything just fine! good luck to all of you (:

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I found your article very interesting as it confirms largely what we've been experiencing. We are a french family with 3 kids of 15,14,14. My wife and I used to work in France with good wages although not six figures in US$. We decided to leave for an extended trip around the world, selling the house, the cars, the.... everything!
We left in November 2005 and have found so far that we travel with much less than our monthly spending in France.
Of course we usually do not pay for a house and rarely go to campsites but our kids attend a corresponding school and plan to go to university in France afterwards. We have a full coverage for health problems (although not for a pet we do not have).
America for us is not a very expensive country. Europe and New Zealand are the most expensive on our trip. Food is cheap in the US, gazoline too. Clothes are all made in China and are also reasonably cheap.
I think we find america cheap because we do not have the room to store what we buy. We cannot afford, volumewise and weightwise, any 'toy' like quads or guns or boats or whatever.
When we need it we rent it. We spend altogether 4200US$ per month. This includes everything from shipping the car from one continent to another to fuel, maintenance costs, school, food, lodging when necessary, museums, fairs, movies, books, airplane tickets, everything.
This means that a six figure income is not a lot when you live in a certain surrounding and can be a lot when you live in another without really feeling the difference in quality of life.
Only the very very very rich avoid the fact that the middle class is growing in numbers. Our society demands that low wages are not so low now as they were 30 years ago. This is good but not enough yet. Your wages pay hours of work in the US, in China, elsewhere. The low paid workers are still underpaid but better paid than they were. The very very very rich do not feel the difference and perhaps do not really have such a difference because they got richer than in the past. But the middle class certainly feels it bad.
You are right what was the relative standard of living with a six figure income is now secured only for a seven figure income and barely.
Still do we have to regret it. Certainly not. We just have to find a way to make the best out of any figure we have, like you try to do I'am sure.
Thank you for writing about your situation and trying to make us realize how things have changed. This helps getting a larger picture than the one the society wants to show us. It always helps even if it hurts some people's feeling.


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This blows my mind. No insulting, just how expensive certain regions can be. My wife and I have two children, and we do very well on 40K a year. It is crazy how expensive some parts of the country. In our parts, a six figure income is still doing very well

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A $100K can go a long way in the South unless you're trying to keep up with the Joneses. It's tough in big metro cities without $100K. That's why I left DC. It's difficult to enjoy the city without money. It's fun for a while. And even that money comes at a cost. The stress associated with working some jobs that pay more is simply not worth it. I rather live more simply than be miserable for a 401K that I won't enjoy for over 30 years.

If you aren't making $70K in DC then you are living check to check because the cost of living is so high. That's assuming you have your own place in a decent neighborhood. Personally, I don't want to be 30 years old with multiple roommates. Also, I value safety. In some of these cities, if you're paying less than a $1,000 in rent then you could be living in a shady neighborhood.

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I live on $40,000 a year, I am 30 years old, and I have $192,000 in savings, a new mustang and I am 31 years old.

If you can't make it on $96,000 then you have issues.

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"wondering where it all went"

That is the problem in a nutshell. If you don't know where it went, you did not start with a plan. If you just spend as you want without a goal, you will never be able to make ends meet on any amount.

Somewhere along the way we became a nation that has to have it all. That's fine, but if you can't pay for it, it will catch up to you.

People can't see that things have changed. We have to adjust. Your house may not be a cash cow, you salary may not increase each year, prices will go up and your spending power will probably go down. Live on less! Be realistic on what you really need, instead of buying everything you want.

BTW I make less then $45K a year. 10 years ago I made over $55k a year. I adjusted and do not live paycheck to paycheck. I did not have to make major changes, just little ones.