I feel like there must be more to this story. At one point he says he was making $300K from his main job + $650K from a side job in a year. Even assuming that his average year was only half this money, we're talking $475K. If he did this for 10 years, he'd have brought in almost $5M, or about $6.5M in 2012 dollars. If he invested and got a 5% return on his money (easy back in those days), he's over $7.5M in 2012 dollars. Sure, taxes, but even if a third of his money were gone for that, he's still left with $5M in 2012 dollars.
I understand living is not free, nor is raising kids. But, even if he spent $10,000/month on mortgage payments (which should be building him equity) and $120K on raising each child (prorated over this 10 year period), we're looking at $1.7M in expenses.
He states that he saved well and lived below his means, but yet states that his savings when he quit was $500K. Something doesn't add up.
The author's story is a great one for a variety of reasons, but the disconnect between his comments ("I had carefully saved and we had lived well below our means", "I had prudently saved and invested during my years in television") and the reality (his $500,000 "nest egg" and ultimate financial collapse) do seem at odds with each other.
I don't, however, think that there's more to the story. A lot of people, perhaps the majority, pay more attention to what they earn than what they keep. They mistakenly believe that their savings rate must be higher than it actually is, and they make questionable assumptions about future earnings.
Ironically, I think this is often easier to do the more you gross. When you don't have to worry about paying the bills, have enough left over to live comfortably and feel that your position in the economy is secure, it's easy to ignore the fact that you're not taking full advantage of your opportunity to save. I guarantee you there are a lot of folks riding today's tech boom who are making the same fundamental financial mistakes as the author, and most of them aren't grossing anywhere near what he was at his peak.
Indeed, my parents saved over twice that amount, paid off a mortgage, and put two kids through university, and made maybe $70,000 combined in their best years.
3. Taxes - his take home salary was probably not 975,000 or even 475,000.
4. Living within means and saving well meant something different back then. Even if he had the foresight to realize the bubble would burst, which most educated people did, no one realized how bad it would get.
Los Angeles is a big place, but I don't think San Marino was ever cheap:
"In 2010, Forbes Magazine ranked the city as the 63rd most expensive area to live in the United States, with the median list price of a single family home at US$1,987,500."
You don't have any equity when your house is repossessed, never mind if you have remortgaged it umpteen times.
Based on the article, it looks like he made good money 1997-2002 or so, then took a couple of years off, tried to go back in 2004, and spent out his $500k by 2008 while trying and failing to find work.
Assume an average of 500K, assume total taxes are 50%, assume living expenses grow with income (i.e. once you've "made it", you live a little bit more in the now, rather than for a tomorrow that never comes); having a nest egg of 500K isn't too bad.
He lost the house; meaning a lot of money went to the trashcan because he couldn't afford keeping a house for 10 people (the common ones with 4 rooms are already very expensive)
I understand living is not free, nor is raising kids. But, even if he spent $10,000/month on mortgage payments (which should be building him equity) and $120K on raising each child (prorated over this 10 year period), we're looking at $1.7M in expenses.
He states that he saved well and lived below his means, but yet states that his savings when he quit was $500K. Something doesn't add up.