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BS, if you can't buy a 2 million dollar home and make 250k you make bad decisions in life with your money. If you have lets say a 500k place, with 350k in mortgage you have about a $1800 mortgage, approximately $500 in housing expenses per month, lets say $600 in car expenses per month, a generous $1500 for children costs specifically, and another $1500 for family cost/miscellaneous/food. Hell lets throw in another 500 just for S's and G's. Thats a total of $7400 in cost, and on average lets say $900 of that goes towards equity.
You make approximately 160,000 after tax (prolly more since I have assumed 3 children above in expense but lets play it safe), thats 13,300 per month in income, and $6500 per month in sunk expenses. That leaves you saving $6800 per month in savings and equity. Let's assume you make 0% on this month (man you suck at investing).
After 1 year you have $81600 saved up + your original 150k in equity. After 5 years you have 558,000 saved up in pure cash. After 10 years you have just south of 1 million in the bank, after 10 years. Plenty to buy a smaller unit in great falls with cash and enough to buy a normal unit in great falls with 50% down.
Just saying, thats 10 years at that rate and you are in the most expensive part of this county which is one of those most expensive parts of the country. No one can deny that Great Falls IS the 1%
Are you super rich? No. But I don't think anyone can argue that this represents the upper class, not the middle class in this area.
Your numbers are WAY too low on the expense side:
$1800 mortgage -> $500k doesn't go very far in a lot of areas around here where people make that kind of money, more like $600k+ in any of the close in suburbs. So the mortgage is probably more like $3000 after you factor in taxes and insurance
$500 for house maintenace seems reasonable
$600 for car expenses -> that covers a car payment. At least double that to $1200 to include insurance and gas for two cars
$2000 for family, misc, S&G -> I think $3000 is more realistic, but I'll and spare everyone an itemized list and split the difference with you and call it $2500
$1500 for children costs -> this might cover child care if your kids are in school all day. It could easily be double if you need coverage outside of normal business hours
Plus, you left out:
$2833 -> 2 x 401K contributions
$1667 -> 529/college savings
$500 -> Student loans. A lot of people in that income range are paying even more than this
Total: $13,700/mo or $164,400/yr after tax. Not much, if any, room to save for that downpayment on a $2M house!
This is so true. Another aspect that I sometimes fail to consider is student loans. College these days is so expensive. And many of the people making the $100+ income are also paying back big student loans. My husband and I were both very blessed to have had our college tuition paid for by our parents (of course it was only $8K back then!), so we weren't saddled with that debt right out of college. That can make a huge difference in monthly expenses.
Yes, and another aspect is that children of higher-income parents will get less, or more likely no, financial aid. Two students going to the same college are likely to be paying vastly differing amounts, depending on their family's income. So a higher income couple who wants, like your parents, to pay for their children's education, to pay for their children's college expenses, will be more able to do so but will also have to save a lot more than a lower-income couple. And there goes some of the supposedly disposable income.
What about age as a factor of income? Let's see how many 20-somethings will vote to increase their own taxes when they are in their 40s and 50s and hopefully earning more. It does feel like a public lashing and punishing those who make over $250K, that they are now among the 1% who need to do more and pay their fair share, as if they aren't. However, it's possible they are only just now reaching that earnings bracket after years of struggle. And younger people now have lower rates on mortgages and lower housing prices.
I don't think it's healthy to penalize people for their success. If I were a two income family making over $250K a year, I would suggest one quit working and stay home instead of paying the extra taxes.
One roof replacement would wipe out an entire year's (or more) maintenance--replacing old windows would likely double that. So, on the typical older home around here, maintenance would be much higher on average--to say nothing of things like new curtains/blinds, new furniture, replacing dead or damaged landscaping, etc. Middle class (and above) families expect to upgrade/update their houses modestly.
And most of us do not have employers who cover all their health care costs, parking, etc.? These would typically be several hundred $ per month. If anyone has a health emergency, or has to quit work to care for a parent, etc., that's another major blow. And where are utilities, gifts, phone, and charitable contributions? Pretty soon that "miscellaneous" is gone.
I think this supports the point you are making.
I think the problem is that the politician was mixing several points, and the message was not delivered effectively. "Is $250000 rich in the DC metro area?" is a very different question from "would you struggle to live on $250000?", and both are different from "how many luxuries could you afford on the same income if the cost of living is 40% higher in one city than in another?"
One roof replacement would wipe out an entire year's (or more) maintenance--replacing old windows would likely double that. So, on the typical older home around here, maintenance would be much higher on average--to say nothing of things like new curtains/blinds, new furniture, replacing dead or damaged landscaping, etc. Middle class (and above) families expect to upgrade/update their houses modestly.
And most of us do not have employers who cover all their health care costs, parking, etc.? These would typically be several hundred $ per month. If anyone has a health emergency, or has to quit work to care for a parent, etc., that's another major blow. And where are utilities, gifts, phone, and charitable contributions? Pretty soon that "miscellaneous" is gone.
I think this supports the point you are making.
I think the problem is that the politician was mixing several points, and the message was not delivered effectively. "Is $250000 rich in the DC metro area?" is a very different question from "would you struggle to live on $250000?", and both are different from "how many luxuries could you afford on the same income if the cost of living is 40% higher in one city than in another?"
500 dollars for house maintenance means 6000 per year in upkeep. That is plenty. Roofs don't fall apart every year you know.
If you make 250k, own a 600,000 house and have a 3000 mortgage you need to refinance that or you bought too big. I dont want to be overtly rude about this, but some people are good with their money, and some people arent. Some people go after that high end dream first and find out it was too much for them to handle, and others step up their growth slowly which leverage the power of on hand capital. (I re-read this, and I come off as a heartless ******* on this one. I'm not gonna delete it because I really do think it's true. I do feel bad for people who are upside down but a person who makes 250k can fix that very quickly, another reason why they are rich.)
401K plan is moot, in my example that was 10 years of your life and you earn 1 million in capital on hand. You still have 30 years of a career in which you could have been paying to the 401k etc either before or after. Lets say for instance you arent a jerk who needs a 2 million dollar mansion (sorry to you jerks out there I know I have been yelled at for mocking you before).
After 5 years you can buy your mortgage outright at that income rate. And effectively drop your monthy house payments to just the taxes of 500 or 600 per month. Now you are saving an extra 15000 per year from that alone and again hold a very large equity.
College plan is part of the 1500 per month on "child expenses" if you are spending more for that per month on your kids, you need to re-evaluate what you are spending on. I understand child care easily exceeds this, but to imply that the years between 1-4 should be the ones considered for a long term budget analysis is foolish. They could just as easily be between the age of 6-10 which would be far less expensive.
On the health care front, I agree 1500 will be dug into very badly if you are much older. But then again you can't do a full analysis on the worst case. Average health care cost in this region is just under 300 per person. So thats 600 of that 1500, leaving 900 for food/miscellaneous. Seeing as children costs are already split out, and that I threw in another 500 in for fun money, this should be an appropriate amount to live a comfortable, going out, enjoying yourself life style.
As far as the car, if you are making 250k per year and can't afford to buy a car outright you are in need of a serious financial consultation on the power of interest rates or you need to perhaps reconsider the type of car you are purchasing. With that car being purchased outright, the effective cost per year for the cars ownership (sub gas which comes out of expenses) should be about 300 per month or 3600 per year if average driving of 10,000 miles per year.
Again, are these people the yacht club super rich? No. Are they very well off and never have to worry about money, can put their money to work, and all it takes is 5 years of living within your means? Yes
I understand I am saying this to a bunch of NOVA people, and I am gonna get a HUGE backlash, but we live outrageously expensive lives compared to what most American's do. What you call "necessities of life" others in this country call the spoils of the rich. These aren't necessities, they are wants. Which is fine, I want stuff too, I know the longer I can fight that urge to buy something, the more likely the purchase of it will be easier to absorb.
BTW for anyone who thinks I am some, give me money lower middle class anything, my household will likely break the 250k mark in the next two years and my brothers family has been doing so for years. And yes, when that happens, even in this area, I will consider myself rich and I believe that it was because of this great country that it happened and will be more than happy to pay my fair share back to the country that i love, and the region I love (for real estate taxes)
On a side note: I find it interesting the dichotomy of thoughts on taxes for the rich. The austerity of reigning in spending doesn't appear to come into place for personal accountability... perhaps because it is easier to point to an entity that holds the world together in the US Government, point out a large number, and say FIX THAT! THATS TOO EXPENSIVE! But Give me my money so I can afford a luxury vehicle that serves no function and burns double the gas and operation cost for miscellaneous parts.
What about age as a factor of income? Let's see how many 20-somethings will vote to increase their own taxes when they are in their 40s and 50s and hopefully earning more. It does feel like a public lashing and punishing those who make over $250K, that they are now among the 1% who need to do more and pay their fair share, as if they aren't. However, it's possible they are only just now reaching that earnings bracket after years of struggle. And younger people now have lower rates on mortgages and lower housing prices.
I don't think it's healthy to penalize people for their success. If I were a two income family making over $250K a year, I would suggest one quit working and stay home instead of paying the extra taxes.
That's like suggesting to a person who just saw an astronomical rise in a stock price, to not sell and take profits because they would have to pay capital gains taxes. You are cutting your nose to spite your face. Removal of your income does nothing except for giving you even less money, unless you are talking about the very precise moment of going from 249k to 251k, in which case if you talk to a tax advisor there are plenty of way you can fall into the 249k bracket.
OH OH OH
In the previous analysis I forgot to point out that in fact to "fall into the 250k bracket" in the situations you are talking about you really need to be making closer to 270k because of the deductions for all those kids, your interest payments on your house are deducted, any savings towards a college fund of course, medical expenses are deductible, etc. And if you own a small business and make "250k" then you likely have to make even more than this to actually fall into the 250k bracket. So actually theres an extra 15 or 20k in fluff in there too just in case you like buying a sedan every year.
Your numbers are WAY too low on the expense side:
$1800 mortgage -> $500k doesn't go very far in a lot of areas around here where people make that kind of money, more like $600k+ in any of the close in suburbs. So the mortgage is probably more like $3000 after you factor in taxes and insurance
$500 for house maintenace seems reasonable
$600 for car expenses -> that covers a car payment. At least double that to $1200 to include insurance and gas for two cars
$2000 for family, misc, S&G -> I think $3000 is more realistic, but I'll and spare everyone an itemized list and split the difference with you and call it $2500
$1500 for children costs -> this might cover child care if your kids are in school all day. It could easily be double if you need coverage outside of normal business hours
Plus, you left out:
$2833 -> 2 x 401K contributions
$1667 -> 529/college savings
$500 -> Student loans. A lot of people in that income range are paying even more than this
Total: $13,700/mo or $164,400/yr after tax. Not much, if any, room to save for that downpayment on a $2M house!
These are much more realistic numbers for this area.
No one is saying that the tax rates should be raised. The only thing being said is the one time bush era "stimulus, one time" tax cuts should stop being permanent, because in an era where our country is facing massive deficit, and where that stimulus proved to create no new jobs, we need all hands on deck.
No one wants to grab all our money, this is a matter of returning to a rate 3% higher than we currently have. For a family making 250k this accounts for 600 dollars per family per month, out of an income of 21000 dollars per month.
All of the discussion above is about how expensive this area is. I agree we are turning into Palo Alto and we need to consider WHY the cost is going up here and stop living the status quo of "prohibitive expense planning" which is a whole other discussion and that I have debated on this site with everyone calling me a crack pot. Regardless of all those costs, the $600 per month is not going to make or break anything. You can't on one hand say the government has a spending not a revenue problem, but then for yourself say you have a revenue not a spending problem.
The truth lies in between, both need some austerity, both need some revenue, and both need COMPROMISE AND LESS RHETORIC, and the Norquists and the Reeds of the world need to leave and live in whatever Utopian extremist lands in the world that follow their idealogy and see if their standard of living is better there or here.
I think it's bull, personally. We have the 3 kids that she alludes to in her interview. We do soccer, piano lessons, and save for college. We did it on exactly half of that figure. Yes, we had to be frugal as far as activities or any kind of vacation went. But that was with HALF that income. And even then, I'd say, overall, we were living a pretty good life.
Ok, but *when* were you doing it? Because when you bought your house determines how much you paid, which determines your mortgage, which determines how much disposable income you have. Buying even a modest-sized house in the DC area in the last 8-10 years has meant spending at least 500K (and more like 600-650 inside the Beltway)--which means a huge chunk of income goes to the mortgage.
I can see how if you bought your house prior to 2003 or so, yeah, 250K would be a very comfortable income. Likewise, if you live outside the DC area (other than a few other high-COL cities).
Quote:
Originally Posted by spencgr
I don't want to turn this into a political discussion; but Comstock was referring to the Obama plan when talking about the $250K. There is no one out there who makes $250K who will say they are poor, but in this (and other) extremely expensive areas, this does not qualify you as "wealthy", where you should be singled out to pay more.
Amen! If we lived in Syracuse or Abilene, we'd be wealthy. In N. Arlington, we're comfortable but average. (Though our income isn't quite that high.)
Last edited by Carlingtonian; 09-01-2012 at 08:17 AM..
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