How much money you have to earn to be considered rich in DFW? (Dallas: sales, daycare)

[justsomeguy]

Originally Posted by pipsters

My household has made $24k and $240k (and above).

I can tell you without a single doubt, we did NOT struggle on $240k. I mean, that's not even close to reality. We are just W2 wage slaves...

At that point it's really a question of how much you save and/or invest a month. I don't remember what we put away back then but it was probably in the $8k-$10k range. Nowadays we are around $18k a month into investments and various savings if I were to average it out on a monthly basis.

If a household is actually struggling to make ends meet in Dallas on $240k a year they have made some decisions way above their pay grade. No, you can't afford that private jet membership lol...

I agree you definitely shouldn't be struggling to make ends meet, but are you factoring in the recent run-up in home prices (e.g. a young couple making $240k/yr buying their first home will have significantly higher mortgage payments/taxes eating into their take-home pay vs if you bought your home 20 years ago, or even 7 years ago).

[Treasurevalley92]

Originally Posted by justsomeguy

I agree you definitely shouldn't be struggling to make ends meet, but are you factoring in the recent run-up in home prices (e.g. a young couple making $240k/yr buying their first home will have significantly higher mortgage payments/taxes eating into their take-home pay vs if you bought your home 20 years ago, or even 7 years ago).

Unless you live in San Francisco or NYC you should have no problem buying a home on 240K.

You don't buy your home based on what your salary could afford 10 years ago, you do it based on what you can get for your money now.

On 240K you should have no issue at all living in a nice home in a good area. Just because you can't afford the size of house you want in highland park, doesn't mean you are "Middle Class"

[pipsters]

Originally Posted by justsomeguy

I agree you definitely shouldn't be struggling to make ends meet, but are you factoring in the recent run-up in home prices (e.g. a young couple making $240k/yr buying their first home will have significantly higher mortgage payments/taxes eating into their take-home pay vs if you bought your home 20 years ago, or even 7 years ago).

There is little appreciable difference in a $150k mortgage and a $300k mortgage in the big scheme of things when earning that sort of income.

Even a ridiculous $600k house will only run another $1,500 a month above the $360k house, but there is nothing saying you must spend that sort of money on a house in Dallas.

My wife and I are casual lookers at the $350k price point despite our income and assets, a $300k mortgage is around $2100/month give or take.

With an after tax income of $16k a month, spending more a month to buy a house vs a decade ago is not really what would make that household "struggle".

It would be a cumulative mix of country club memberships, leased luxury cars, eating most meals out, extravagant vacations, etc.

[justsomeguy]

Originally Posted by Treasurevalley92

Unless you live in San Francisco or NYC you should have no problem buying a home on 240K.

You don't buy your home based on what your salary could afford 10 years ago, you do it based on what you can get for your money now.

On 240K you should have no issue at all living in a nice home in a good area. Just because you can't afford the size of house you want in highland park, doesn't mean you are "Middle Class"

Well - let's do the math of a married couple with 2 young children making $240k/yr that is maxing out all available retirement accounts (401k, HSA, insurance premiums, life insurance, backdoor Roth IRA) and purchasing a modest but nice 4br/2ba home bought for, let's say, $550k ($450k financed):

Net Monthly Take Home Pay: ~+$10,900
Mortgage/Taxes/Insurance: ~-$3500 ($7400 left)
Childcare for 2: ~-$2800 ($4600 left)
Utilities/Food/Clothes/Healthcare/Personal Care Items/Car Registration & Insurance/Tolls/Pet care/Cell Phone/Internet/Home Maintenance/Gas/Misc Expenditures/Travel: ~-$3000 ($1600 left)

So $1600 left over is pretty good, so presumably then I agree you shouldn't be struggling to make ends meet with a $240k/salary - at the same time I probably would say they are not quite in the "upper class" or wealthy bucket either. But definitely doing pretty well.

[pipsters]

Originally Posted by justsomeguy

Well - let's do the math of a married couple with 2 young children making $240k/yr that is maxing out all available retirement accounts (401k, HSA, insurance premiums, life insurance, backdoor Roth IRA) and purchasing a modest but nice 4br/2ba home bought for, let's say, $550k ($450k financed):

Net Monthly Take Home Pay: ~+$10,900
Mortgage/Taxes/Insurance: ~-$3500 ($7400 left)
Childcare for 2: ~-$2800 ($4600 left)
Utilities/Food/Clothes/Healthcare/Personal Care Items/Car Registration & Insurance/Tolls/Pet care/Cell Phone/Internet/Home Maintenance/Gas/Misc Expenditures/Travel: ~-$3000 ($1600 left)

So $1600 left over is pretty good, so presumably then I agree you shouldn't be struggling to make ends meet with a $240k/salary - at the same time I probably would say they are not quite in the "upper class" or wealthy bucket either. But definitely doing pretty well.

This fictitious couple has waaaay more than $1600 left over.

Using your numbers they are saving $38k into their 401k, $12k into IRAs, $7k into their HSA plus $19k additional. That doesn't include any employer match which is probably over $10k. We'll exclude that.

So $76,000 a year into savings which will increase to $110k if they have family that can watch their kids or when their kids go off to school in a few years.

They will be millionaires in their early 30's and multimillionaires before 40.

[justsomeguy]

Originally Posted by pipsters

This fictitious couple has waaaay more than $1600 left over.

Using your numbers they are saving $38k into their 401k, $12k into IRAs, $7k into their HSA plus $19k additional. That doesn't include any employer match which is probably over $10k. We'll exclude that.

So $76,000 a year into savings which will increase to $110k if they have family that can watch their kids or when their kids go off to school in a few years.

They will be millionaires in their early 30's and multimillionaires before 40.

1. Those savimgs are mostly illiquid if in retirement accounts until they reach retirement age.

2. You are assuning this behavior is a couple in their 20s, most people won't hit that earning potential until mid 30s or later (obviously there are exceptions depending on profession, school, etc. but you get my point). More likely they would be millionaires by their 50s (but cant access most of the money until 59.5).

3. Many Dallasites are tranaplants/economic migrsnts and likely won't have fsmily to watch kids. Additionally, what I LEFT OUT in the expenses was the cost of college and other life events for the kids as they get older (e.g. vehicle, weddings, financial assistance until career starts etc.).

4. Factoring all that in I think it is easy to see how a household in Dallas making $240k/yr may feel only marginally ahove middle class

[pipsters]

Originally Posted by justsomeguy

1. Those savimgs are mostly illiquid if in retirement accounts until they reach retirement age.

2. You are assuning this behavior is a couple in their 20s, most people won't hit that earning potential until mid 30s or later (obviously there are exceptions depending on profession, school, etc. but you get my point). More likely they would be millionaires by their 50s (but cant access most of the money until 59.5).

3. Many Dallasites are tranaplants/economic migrsnts and likely won't have fsmily to watch kids. Additionally, what I LEFT OUT in the expenses was the cost of college and other life events for the kids as they get older (e.g. vehicle, weddings, financial assistance until career starts etc.).

4. Factoring all that in I think it is easy to see how a household in Dallas making $240k/yr may feel only marginally ahove middle class

1. Retirement savings are not illiquid. You can access them at any age without penalty via rule 72t when ready to retire.

2. My wife and I hit seven figures at age 35 with an average household income under $100k. Two years later we hit $2m (this year). Average income at that point was higher, roughly 130k. That's essentially two college grads nowadays. Age 59.5 is irrelevant to access those funds as discussed above.

3. College costs are not costs parents need to pay. My wife and I both paid for our education, wedding, cars (did you seriously include costs for parents to buy cars? Lol) save for a $2,500 gift from my wife's estranged father. And you forgot that daycare costs are a onetime cost that goes away early in the child's life.

4. You can factor anything in but your viewpoints don't match with reality.

[cordata]

Originally Posted by pipsters

1. Retirement savings are not illiquid. You can access them at any age without penalty via rule 72t when ready to retire.

2. My wife and I hit seven figures at age 35 with an average household income under $100k. Two years later we hit $2m (this year). Average income at that point was higher, roughly 130k. That's essentially two college grads nowadays. Age 59.5 is irrelevant to access those funds as discussed above.

3. College costs are not costs parents need to pay. My wife and I both paid for our education, wedding, cars (did you seriously include costs for parents to buy cars? Lol) save for a $2,500 gift from my wife's estranged father. And you forgot that daycare costs are a onetime cost that goes away early in the child's life.

4. You can factor anything in but your viewpoints don't match with reality.

On the bolded part, can you give some more detail on how you achieved this ? Pretty remarkable.


I do agree that there is a huge difference between "needs" and "wants" .. you're pointing out that things like paying for college are really wants.

[NP78]

Originally Posted by pipsters

1. Retirement savings are not illiquid. You can access them at any age without penalty via rule 72t when ready to retire.

2. My wife and I hit seven figures at age 35 with an average household income under $100k. Two years later we hit $2m (this year). Average income at that point was higher, roughly 130k. That's essentially two college grads nowadays. Age 59.5 is irrelevant to access those funds as discussed above.

3. College costs are not costs parents need to pay. My wife and I both paid for our education, wedding, cars (did you seriously include costs for parents to buy cars? Lol) save for a $2,500 gift from my wife's estranged father. And you forgot that daycare costs are a onetime cost that goes away early in the child's life.

4. You can factor anything in but your viewpoints don't match with reality.

My understanding (perhaps incorrect) of 72t is that you can only take small, equal payments as distribution. So it isn’t really liquid if I understand it correctly.

In terms of increasing net worth from $1M to $2M in 2 years with a 130k income, that’s great for you but it means you achieved a rate of return SIGNIFICANTLY above the return of a stock index fund. That’s not realistic to assume for the average college grad couple.

[justsomeguy]

Originally Posted by pipsters

1. Retirement savings are not illiquid. You can access them at any age without penalty via rule 72t when ready to retire.

2. My wife and I hit seven figures at age 35 with an average household income under $100k. Two years later we hit $2m (this year). Average income at that point was higher, roughly 130k. That's essentially two college grads nowadays. Age 59.5 is irrelevant to access those funds as discussed above.

3. College costs are not costs parents need to pay. My wife and I both paid for our education, wedding, cars (did you seriously include costs for parents to buy cars? Lol) save for a $2,500 gift from my wife's estranged father. And you forgot that daycare costs are a onetime cost that goes away early in the child's life.

4. You can factor anything in but your viewpoints don't match with reality.

How did you go from $1M to $2M in 2 years with an annual income of $130k??