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We lived in the Bay Area at just a little more than that with three young children, and we found it comfortable. We weren't extravagant spenders by any stretch, and I was a SAHM, so we had minimal childcare costs, but we weren't scraping by either. Life was good!
For a married couple with two (or more) kids? How are you getting a 28% effective tax rate?
Let's use 2014 numbers. I'll take FICA at a flat 7.65%, that's $7,650 of tax. For Federal, if we're just assuming standard deduction (and if you're a homeowner you're likely itemizing under your scenario, but I'll take the "worst case" federal tax situation) and personal exemptions, you're subtracting 12,400 and 15,800 from that 100K to get to taxable income of 71,800. For MFJ, that doesn't even get out of the 15% bracket. Your federal tax liability on that is 9,862.50 (10% of your first 18,150, 15% on the amount above that). BUT, you'll also get the child tax credit at 1K per child, so that's another 2K gone for an actual federal tax liability of 7,862.50. That's a combined FICA and Federal Income Tax hit of 15,512.50, or about 15.5%.
Now, depending on the state there will be some income tax hit much of the time. In New Jersey the MARGINAL bracket at 80K to 150K TAXABLE income is 5.525%. Below 80K the brackets go between 1.4% and 3.5%. I'm not about to get into the guts of NJ state income tax, but in general terms your total State+Federal+FICA tax hit is going to be about 20% at 100K income in NJ, at MOST, not 28%. If I ran the numbers with itemized deductions and such then you could probably shave a point or two off of that.
And I'll say that an extra 8K in take home is a decent chunk of change if we're talking about the difference between 6K and ~6.7 K of take home a month.
Now, I'm well aware that NJ is terrible in regards to property taxes, not as much in rate (which is high to be sure but I believe some other states are higher), but moreso because NJ housing is generally expensive, so the combo of high rate plus high home value makes that bad, but that gets rolled into overall housing cost. I've lived (and currently live) in places with very high property tax rates.
I'm not saying that 100K with a couple kids in a high COL area is living the life of Riley. It's not "easy" and it means budgeting and prioritizing and all that. I'm just saying that hearing "OMG, on 100K you're BARELY GETTING BY" is a bit silly when I know people who live in high COL areas who get half that, with a kid, and they could tell you what "barely getting by" really means. Again, I understand it (having just had convos along these lines in our household last week), you reach a certain point and you look around and you think "we're earning X, why are things still so difficult?", but you forget that there are things Back Then that you could only dream about having that now you take for granted.
100K's not bad. It may not be quite as good as some people might imagine, but even in a demanding situation, it's pretty OK, ya know?
My point isn't living on 6K a month or 7K. My point is either way, that's about 20K you're losing just to taxes right off the bat. I don't know the exact numbers as my household was always making over 100K a year. Right off the bat, you're down to 80K. My whole point, as I've stated before, it's easy to live on if you're single or your family lives in an area where you can get a home for under 1000 a month. Of course you have taxes, insurances, food, and all sorts of other bills. I think it's easy to say, you got "7K a month coming in. Your mortage is only 2k. What are you doing with the other 5k?". When you're not factoring in the other bills. You have to have savings. I can see someone easily living in a modest home in NJ (or any other high cost of living area) on 100K and say not being able to take a vacation or getting a big hit if the kids need braces or something along those lines.
For a married couple with two (or more) kids? How are you getting a 28% effective tax rate?
Let's use 2014 numbers. I'll take FICA at a flat 7.65%, that's $7,650 of tax. For Federal, if we're just assuming standard deduction (and if you're a homeowner you're likely itemizing under your scenario, but I'll take the "worst case" federal tax situation) and personal exemptions, you're subtracting 12,400 and 15,800 from that 100K to get to taxable income of 71,800. For MFJ, that doesn't even get out of the 15% bracket. Your federal tax liability on that is 9,862.50 (10% of your first 18,150, 15% on the amount above that). BUT, you'll also get the child tax credit at 1K per child, so that's another 2K gone for an actual federal tax liability of 7,862.50. That's a combined FICA and Federal Income Tax hit of 15,512.50, or about 15.5%.
Now, depending on the state there will be some income tax hit much of the time. In New Jersey the MARGINAL bracket at 80K to 150K TAXABLE income is 5.525%. Below 80K the brackets go between 1.4% and 3.5%. I'm not about to get into the guts of NJ state income tax, but in general terms your total State+Federal+FICA tax hit is going to be about 20% at 100K income in NJ, at MOST, not 28%. If I ran the numbers with itemized deductions and such then you could probably shave a point or two off of that.
And I'll say that an extra 8K in take home is a decent chunk of change if we're talking about the difference between 6K and ~6.7 K of take home a month.
Now, I'm well aware that NJ is terrible in regards to property taxes, not as much in rate (which is high to be sure but I believe some other states are higher), but moreso because NJ housing is generally expensive, so the combo of high rate plus high home value makes that bad, but that gets rolled into overall housing cost. I've lived (and currently live) in places with very high property tax rates.
I'm not saying that 100K with a couple kids in a high COL area is living the life of Riley. It's not "easy" and it means budgeting and prioritizing and all that. I'm just saying that hearing "OMG, on 100K you're BARELY GETTING BY" is a bit silly when I know people who live in high COL areas who get half that, with a kid, and they could tell you what "barely getting by" really means. Again, I understand it (having just had convos along these lines in our household last week), you reach a certain point and you look around and you think "we're earning X, why are things still so difficult?", but you forget that there are things Back Then that you could only dream about having that now you take for granted.
100K's not bad. It may not be quite as good as some people might imagine, but even in a demanding situation, it's pretty OK, ya know?
As I said before, who told them to have children? Maybe they should have moved to a lower of costing of living or did something to improve their situation. No one here is complaining. We're telling the OP our opinion.
As I said before, who told them to have children? Maybe they should have moved to a lower of costing of living or did something to improve their situation. No one here is complaining. We're telling the OP our opinion.
Well, given that MEDIAN household income in the US is 50K and that 100K for HOUSEHOLD income is around the upper 20% or so nationally and the upper third for New Jersey, and given that THEY'RE not "complaining" either, but somehow they're able to raise children and have a family on a bunch less than 100K, I'm making the point that although YOU might feel it's not very much, for most people it's darn good indeed. Even if they're living in New Jersey.
Or are you saying that hey, if you don't earn "enough" by whatever the heck "your" standards are, that people shouldn't have kids? I'm just wondering here...
My point isn't living on 6K a month or 7K. My point is either way, that's about 20K you're losing just to taxes right off the bat. I don't know the exact numbers as my household was always making over 100K a year. Right off the bat, you're down to 80K. My whole point, as I've stated before, it's easy to live on if you're single or your family lives in an area where you can get a home for under 1000 a month. Of course you have taxes, insurances, food, and all sorts of other bills. I think it's easy to say, you got "7K a month coming in. Your mortage is only 2k. What are you doing with the other 5k?". When you're not factoring in the other bills. You have to have savings. I can see someone easily living in a modest home in NJ (or any other high cost of living area) on 100K and say not being able to take a vacation or getting a big hit if the kids need braces or something along those lines.
Yes, and if one is single, they're losing even more money to taxes. So? What's your point? Everyone loses some money to income or FICA taxes, assuming they're actually earning much of anything. (At the federal level if you're married with kids you can earn a decent amount [well, "decent" by my standards, apparently "incredibly low" by yours] before taxes kick in, but there's still FICA and usually some measure of state, especially in high COL states).
As for "savings", well, if you're using a 401K or IRA then you can reduce your tax hit even more, so there's a bit if a tradeoff there.
And I can assure you that I can, in fact, "factor in other bills". I'm extremely well aware of every single expense in my household and have helped out a number of friends and acquaintances at various levels of the socioeconomic spectrum with theirs. My point is that there are necessities, and then there are things that aren't always necessities. And define "vacation". Take a family of 5 to Disneyworld, or road trip to upstate New York?
I'm guessing that what you consider to be "normal" expenses are those that a large segment of the populace would consider to be above normal. But then, I'm still excited that I can afford to buy soda in cans these days rather than 2 liter bottles on sale. That said, I still buy it in 2 liter bottles on sale most of the time. When I do buy it, because really, soda is a guilty pleasure that's not very good for me, so ice water with some lemon is a preferable (and cheaper) choice. And our thermostat is at 78 in the summer and 68 in the winter (I've tried to move it lower in winter but my wife complains). Our last car was purchased ten years ago for $2,500. For some people that would be an unbearable burden that bespeaks abject poverty, for us it's been fine.
People take their funds and prioritize them. If one is really "struggling to get by" on 100K then they're not prioritizing very well or they have a skewed notion of what "struggling" really means.
If you believe that an amount that is more than over half of all married families with kids in your general area are earning is not enough to keep one out of a "shady area", then maybe you're seeing more shade than is really there.
I'm sorry, are people saying that 5k per month takehome AFTER paying for a large mortgage or rent on a darned nice place in 95% of localities (everywhere outside New York metro and the Bay Area) is not enough to live comfortably on?
Let's say you really want to retire and save 1k per month. Good for you!
Let's assume you are a one earner family and you are married and have two kids, just to make it a bit more daunting.
Now you have 4k and all you need to provide for is food, electricity, cable/internet, gas, insurance, and some prorated amount for a car (depending on if you buy or lease), plus some spending money for that "comfortable" life.
Car insurance for two cars, assuming adults of modest driving ability, should be roughly $100 per month. Maybe $200 if you get comprehensive with the lowest deductibles (plus collision).
Electricity should run a max of $200 per month on a yearly basis, unless you are an eskimo living in Phoenix.
Cable and internet, because you want the best package, will run you $100 per month on a combo deal.
Gas is pricey and maybe you have to commute (because you wanted a McMansion in a swank area, perhaps), so we'll say the household drives 2000 miles per month total, with cars averaging 25mpg (about average city/highway for most cars made since 2000), so you use 80 gallons of gas, at $3.50, that comes out to $270 for gas.
Now, you can be comfortable driving a 5 year old Chevy I would think, but maybe you demand a new and fancydancy car for you AND the spouse. So we'll alot a whopping $600 per month for the cost of the cars themselves. (Side note: I drive a well-maintained Lincoln LS and I bought it for about $2k including some accessories I sold. A more fuel efficient but comfortable car or perhaps a 3.8L reliable Buick from 2004 would still run you way less than $5k and probably last for years. Anyway, car costs are one thing I find crazy).
Now food. You are far too well-off to shop at prole stores like Aldi or even Safeway, right? You want to live comfortably, so you pay $2 per pound for organic bananas at Whole Foods or $1.50 for the same bananas at Sprouts. So, it costs you about $250 per month per person for groceries. You spend $1k per month on groceries because you are a hungry people and only eat the best!
Oh, lets not forget about health insurance. Sure, it came out before taxes (and thus shifts tax calculus), but for a family of 4, even with your employer subsidizing part of the plan, you are still paying $600 per month in health insurance costs. Maybe far more or less, depending upon the company. But it's a decent plan.
Finally, you need some walkin' around money. You take $400, give your husband $400, and even allot $100 per month to each of your kids.
So, we have $1000 for disposable income, $200 for electricity, $600 for a car, $270 for gas, $200 for the best car insurance, $600 for health insurance, $1000 for very good groceries.
That is $3870. Hey, you've got $130. Put it into an account for your kids' college.
Now, I get it. Your kids will go to PUBLIC SCHOOL (gasp *horror*) and maybe even a PUBLIC UNIVERSITY (*faint*) and you will have to stay at Doubletrees on vacation instead of Hiltons. But, to be frank, there's no place in the country where you can't live pretty darn comfortably on 100k. If you are on your own, you can live like a Queen for that much before tax pay. Hell, when I lived in Orange County (2006-2008, when prices were also high), I made 60k before taxes and had enough extra income to buy a vacation house in a rural area (cheap house tbh), an older-but-clean RV, a restored classic car from the movie L.A. Confidential, and still have enough to eat out and entertain friends.
My parents never (never!) made more than about 50k combined before taxes in the 90s or early Oughts, and yet we never really went without anything. Yes, we shopped at cheap grocery stores and everybody drove 10 year old cars. But there was even enough to save a small bit. And there were years where it was leaner than 50k by far.
100k... It's never enough, is it? Before you hit the 6 figure mark, you think all your financial problems will go away once you reach that level. Then you reach it and find that it really doesn't seem to go as far as you thought it would.
This year, I'm going to make about 20k more than I did last year. But at the end of the year, my wife is probably going to quit her job to be a SAHM, so we lose $60k there. I suppose we'll be saving more in gas and tolls since she has a long commute, so it's probably more like $55k. But still, that's 35k less than what we're doing right now.
It's hard to go back to living on less once you've had a higher income. Not sure what adjustments we will have to make to compensate, but I'm not looking forward to it.
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