Where does their money go?
https://finance.yahoo.com/news/one-couple-feels-like-theyre-scraping-500k-year-144630331.html
Spoiler alert, their tax bill is 3x bigger than their mortgage. At least childcare should decrease once their kids are in school full-time.
Yahoo is useless media
Another example of corrupted liberal media.
Scottie Pippen and mike tyson makes way more and they’re scraping by. It’s that educated idiots doesn’t know how to manage their own finance. Period.
A non-Bart janitor makes 270k. They make over 500k as couple of janitor and elevator technician
Their main problems are student loan, high childcare cost and travel expense.
I don’t think many double income couples in SV with similar income spend $18,000 per year for vacation.
As for student loan, my takeaway is “making sure that I pay tuition for my kids (for college only) then discourage them to go to graduate school with high tuition (unless there is financial grant)”.
As author said, if they can consistently make $500k/yr or more until mid 60, they should be in good shape at the end of the day. However, most likely, that won’t be the case. Thus, they really need to give up luxury life style and realize that they are not that rich until they build enough asset for retirement.
If you can save only $7300/yr, doesn’t it make sense to give up $18,000/yr vacation spending first?
Even charity spending is too high given the saving they can make.
Childcare costs way more in the bay area 
having kids is expensive.
Effective tax rate is 40%. This is effective average tax rate, right? Is 40% a reasonable number at $500k income level? They contribute $36k to 401k and have mortgage deductions. They AGI will be more like $400k.
Oh, NYC has city income tax?
Yeah, it’s 40% effective which doesn’t even include property tax. They hit AMT, state, and city income tax. They hit the medicare surcharge tax.
That’s why having a high income doesn’t really mean that much. You need to have a high net worth. Once your net worth reaches $5M you can just sit back and do nothing and still make $500k per year assuming your investments go up 10% per year.
10% per year might be optimistic. Even 5% a year could not be hit in some years.
Net worth is from savings first and investment second. This half mission couple is far away from a millionaire and they are a working/spending poor and live paycheck to paycheck.
They still think of themselves as middle class, or even poor people with no savings. And they are right, they are poor people eligible for section 8 once they lose their jobs and can’t pay the mortgage
yup, i know quite a few of engineers make a lot of money but living paycheck to paycheck, these people just don’t have a sense of finance. eating out expensive, whole food , tesla , latest tech toy etc…those never experience downturn in tech. But you know everything goes in a cycle, just a matter of time.
Well it’s a trade off. They enjoy a better qaulity of life.
We need to live a balanced life. Enjoy life with your money but still save/invest for future. You don’t want a personal financial crisis, also you don’t want to live a bad life with a lot of money sitting or being invested.
We are the master, money is the slave. Money is for us to use, we are not the tool for the money
At the end of the day it doesn’t matter. The more of such people exist the more renters there are, ultimately benefiting the people on this forum. If everybody saves diligently and buys houses then landlords won’t be happy.
yup, i love these people. When economy goes down, they gonna sell all their stuff to pay bill and i can pick them up for cheap =)
5% is low ! 10% nominal expected return for wise investor.
SPY runs appx 7% for last 15 years and ONEQ gives 10% for the last 10 years. These are invest and sleep type growth, we do not need to do any ground work at all.
If you do proper ground work, you reap bigger benefits in stocks. Bay Area real estate gives almost 9% return like 3% cap rate and 5% to 6% growth over many years
I think @BAGB wants to make sure to have a guarantee income of $500k per year. Period. No stock market/real estate fluctuations and negative returns to deal with.
However I think that’s pretty much impossible to achieve because you could get fired if that income is job based, and banks only FDIC insure you up to $250k. If you are going to split your nest egg to a hundred different banks to get the guarantee, what’s going to prevent the US government from going bankrupt and unable to pay you even a nickel?
Technically FDIC insurance covers individual, not account, so if account has two tax responsible individuals (from IRS perspective) - for example husband and wife, then each is covered up to 250K with FDIC insurance. If you add kids on deposit account, you can spread your risk further. With capital requirements for banks elevated significantly since financial crisis - I would not worry about government liquidity either.
Here is FDIC diagram illustrating who is covered:
https://www.fdic.gov/deposit/covered/categories.html
With the stock market and real estate market bottomed out during the Great Recession, now is the optimal time to keep acquiring assets. One should ideally leverage to the hilt rather than hiding all their money under the mattress.
Now we know you’ve $5mil in net worth 
All in AAPLs would yield $100k per year in dividend and grow at near 30% p.a. capital gain i.e. doubling net worth every 3-4 years.
Well, I am going to talk to the no believers here. I know there will be negative people berating me, but I don’t care.
This is the type of policies we open in my office. This is nothing, we have people with premiums of $10K a month, $200K a year and so on. Basically, they use their money as a temporary bank. Then they loan it out.
Why? Because they only leave the cost of their premiums and pull the rest to invest. Still, their $200K or whatever their payments are will be there earning from 0 to 12.5%.
Assuming this couple can get rid of their 401K, and instead they use money after paying taxes on an indexed universal life policy, their retirement would be generous. They can also loan out about 75-80% of their premiums and never pay back the loans.
$3K a month which is nothing (with a cost of insurance of $760 a month) will give them the peace and tranquility to know that if anything happens to the wife, which I used as an example because women pay less on their premiums, the spouse would be covered for any future expenses the absence of his wife provoques. $3,122,831 death benefit. This can happen a month or less after they paid their first $3K.
So, the premiums for the entire year would be $36K.
From this amount they can loan $26K year after year and their $36K yearly premium would be earning from 0 in scenarios like 2008, or 9% as of last year. History of this type of policies tell that in 10 years or so, depending on the returns, you put $36K, you loan $36K. Look at Cash surrender value column, year 10, age 44.
Prior history tells it’s been 8% return from the S&P 500 in the last 20 years.
She would stop paying premiums at age 65. From there, she starts pulling income.
Income would be $189,121 a year. Until age 120.
Loans are tax free, anything within a life insurance is tax free.
Death benefit, which is increased by an option within this policy pays for the loans at the end of the life of the insured.
So, look at the illustration.
8 years after bottom, is still the right time?
