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Ick! Imagine having to live off $50k for discretionary expenses. Peasants
I didn't ever claim they were peasants, just that it could definitely feel like you're paycheck to paycheck. I didn't include, clothing, utilities, cable/internet, health insurance and/or life insurance, any hobbies or activities for the kids, vacations, eating out, car gas, car insurance, etc.
We spend about $85k/yr (excluding all taxes outside of sales taxes) for a family of 4 in a LCOL area and I feel like we're pretty frugal.
I didn't ever claim they were peasants, just that it could definitely feel like you're paycheck to paycheck. I didn't include, clothing, utilities, cable/internet, health insurance and/or life insurance, any hobbies or activities for the kids, vacations, eating out, car gas, car insurance, etc.
We spend about $85k/yr (excluding all taxes outside of sales taxes) for a family of 4 in a LCOL area and I feel like we're pretty frugal.
They don't know how to live within their means and budget. Or they live in an area where $250k/yr is low-income, so they need to get another job or move.
not saying this family does not have budgeting problems BUT I think a lot of people fail to consider just how much the US taxes income. Taxes start getting absolutely killer after a certain point.
For example, a solo person in California, making $220K/yr income has a marginal rate of:
Federal : 32%
California : 9.3%
Social Security : 6.2%
Medicare : 1.45%
That's 48.95%, at the marginal rate they are earning only 50 cents on the dollar. And those are the hardest dollars to earn in terms of effort and skill.
Someone making $220K/yr in California (or thanks to inflation most US states now since rents in even cheaper metros has doubled or tripled) isn't rich by any means but is taxed like they are rolling in money.
not saying this family does not have budgeting problems BUT I think a lot of people fail to consider just how much the US taxes income. Taxes start getting absolutely killer after a certain point.
For example, a solo person in California, making $220K/yr income has a marginal rate of:
Federal : 32%
California : 9.3%
Social Security : 6.2%
Medicare : 1.45%
That's 48.95%, at the marginal rate they are earning only 50 cents on the dollar. And those are the hardest dollars to earn in terms of effort and skill.
Someone making $220K/yr in California (or thanks to inflation most US states now since rents in even cheaper metros has doubled or tripled) isn't rich by any means but is taxed like they are rolling in money.
Who cares about their marginal rate, the relevant metric is their effective rate.
Ha. My husband says if he won the lottery, the next month he would be broke and in debt.
Why? Because he is horrible with money.
ANYONE can end up living paycheck to paycheck if they are poor money managers.
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not saying this family does not have budgeting problems BUT I think a lot of people fail to consider just how much the US taxes income. Taxes start getting absolutely killer after a certain point.
For example, a solo person in California, making $220K/yr income has a marginal rate of:
Federal : 32%
California : 9.3%
Social Security : 6.2%
Medicare : 1.45%
That's 48.95%, at the marginal rate they are earning only 50 cents on the dollar. And those are the hardest dollars to earn in terms of effort and skill.
Someone making $220K/yr in California (or thanks to inflation most US states now since rents in even cheaper metros has doubled or tripled) isn't rich by any means but is taxed like they are rolling in money.
This is simply wrong. The wage cap for social security is $147,000. So, if you are going to talk about the marginal rate paid by a $220k earner, you need to subtract that from your figure, bringing a more accurate marginal tax rate of 42.75
Lets be fair though. The first $4803 you earned you only had to pay 6.65% in SS/Medicare, just like any other worker. After that, CA hit you for 1%, so you paid 7.65% for the next $7,000 or so, again, like any other worker.
Don't forget that earning that much money allows you to fully max out a number of tax shelters. Contributions to 401k will reduce your top marginal tax liability, as well itemized deductions if you qualify. Are you paying back student loans? That is deductible too. There are solar energy credits, etc. Then, CA is pretty friendly on property taxes if you have lived there for a while, so you can pay lower rates for those.
not saying this family does not have budgeting problems BUT I think a lot of people fail to consider just how much the US taxes income. Taxes start getting absolutely killer after a certain point.
For example, a solo person in California, making $220K/yr income has a marginal rate of:
Federal : 32%
California : 9.3%
Social Security : 6.2%
Medicare : 1.45%
That's 48.95%, at the marginal rate they are earning only 50 cents on the dollar. And those are the hardest dollars to earn in terms of effort and skill.
Someone making $220K/yr in California (or thanks to inflation most US states now since rents in even cheaper metros has doubled or tripled) isn't rich by any means but is taxed like they are rolling in money.
You don't understand the meaning of "marginal".
Yes, the 221,000th dollar will be taxed at 48.95%. But Federal income tax, and probably CA as well, are progressive taxes, also with exemptions and personal deductions. So that person earning $220k/year gross probably pays more like 28-35% total income tax.
I'm sorry, but if you have $143,000 take home pay - anywhere in the US - and you haven't managed to accumulate at least six months' reserves, you're an idiot, plain and simple. If your living expenses are so high that you can't manage to max out your 401k or equivalent, Roth, HSA, and still be saving cash as well, you need to chop your living expenses till you can. There are plenty of people earning a third of that for take-home who manage to have their savings INCREASE every month, even in California, I guarantee it.
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