Is Six Figures Really That Much?
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?