
Why a Six-Figure Salary No Longer Means You’re Rich - outdooricon
https://blog.personalcapital.com/investing/six-figure-salary/
======
jawns
As dual-income households have become more the norm, it's really the household
income, rather than an individual's income, that's a better measure of
(material) richness.

For instance, you might have a family with a sole breadwinner who has a low
six-figure salary, but that has to cover all the family's expenses. Meanwhile,
even if his neighbors, a dual-income household, both earn less than him, their
household income could be considerably more.

By the way, the rising percentage of dual-income households has been suggested
as an exacerbating factor in the growing income inequality in the U.S.

If you figure that people tend to marry others of the same educational level
(more so now than in generations past), and if educational level is roughly
correlated with income, then you can see how the gulf widens.

Whereas 50 years ago, when single-income households were the norm, a lower-
educated fellow might bring in SALARY and a higher-educated fellow might bring
in SALARY * 2. But now, with dual-income households, a lower-educated couple
might bring in (SALARY * 2) and a higher-educated couple might bring in
(SALARY * 2) * 2.

So, 50 years ago, there was one SALARY worth of difference between the lower-
educated household and the higher-educated household. Nowadays, there is
(SALARY * 2) worth of difference.

~~~
antihero
Surely requiring two incomes in a household is extraordinarily problematic?

Before, one partner could sustain the household and the other could stay at
home and raise kids.

Now, if both partners are expected to earn and have careers, who looks after
the home life? Who looks after the kids? Surely this is really really
damaging?

And doesn't that mean that in real terms we're earning half as much?

~~~
specialp
Two incomes in a home is not required, it is just that our lifestyles have
evolved to "require" that. Home prices over last 40 years adjusted for
inflation have not changed very much (besides in the bubble in mid 2000's).

Previously on that one income a reasonable 40 years ago family could have a
home, a TV, a car, and take inexpensive road trip vacations. Now the typical
family has multiple cars, homes much larger than in the past, a vacation could
be flying to some destination, $100 cable bill, $150 phone bill...

So if one wanted to live like in the past it is certainly attainable on a
single reasonable income. That may mean "only" having a 1700 sf house with one
bathroom and one car.

Even since I was a child things have changed a lot. The typical new home today
would be something I would have considered luxury as a child. I think that
things changed a lot in the dot-com -> Real estate bubble era that gave
Americans a taste for luxury that is now the normal.

~~~
nilkn
> Home prices over last 40 years adjusted for inflation have not changed very
> much (besides in the bubble in mid 2000's).

This might be true as a national average, but it is definitely not true in
areas where there has been consistent competition for housing. It's that
competition which will push housing prices up to levels that require two
middle-class incomes.

This includes most major cities. Even excluding bubbles, desirable urban real
estate in the US has skyrocketed much faster than inflation. There are a lot
of factors in that, but one of them is that the market has now priced in the
fact that most homeowners in these areas are now dual income.

> So if one wanted to live like in the past it is certainly attainable on a
> single reasonable income.

I'm not sure that's true. Take Houston, for example. Some of the most
expensive neighborhoods were originally suburbs in the 1950s filled with
workers who commuted downtown. Now those neighborhoods are considered urban
and there is an entirely new ring of suburbs beyond them (in fact two such
rings). The homes in these now-urban neighborhoods are now all $1M+.

A family with a reasonable income of $100k will be completely priced out of
all those homes. They'll be forced to either live much further out (meaning
very long commutes) or to live in an apartment/condo or, maybe, a townhouse.
If they had lived in the 50s, they'd have been living in a neighborhood that
is now reserved for surgeons, corporate attorneys, and even CEOs.

------
ccallebs
Consumerism. It convinces people that once they make $100k/year, they require
a vehicle that befits someone who makes that much money. It convinces people
that they require a place to live that compares to their other 6-figure
earning peers. More, bigger, better -- the importance of those three things
outweighs most everything else.

I grew up (and now live) in rural Appalachia. The "American dream" is defined
much differently here. The American dream is owning a trailer and not having
to live off of food stamps.

Let's ignore the absurdity of comparing a 1980 $100k/year salary to a 2014
$100k/year salary. In most areas of the United States, six figures is enough
to qualify as well-off. Compared against the backdrop of abject poverty, six
figures is certainly rich.

My wife's cousin was talking to her about a new job he landed. He was giddy
with excitement, as he told her he was going to be "making bank." The salary
was $22k/year.

My point is that "rich" is relative to your geography and your upbringing. In
most areas of the U.S., a six-figure household income is enough to have a warm
place to live and healthy food to eat, with enough left over to provide
security during times of famine

~~~
geebee
This comes up a lot. Sometimes they talk about a car, for a while there it was
always a "plasma tv". Financial advisors, talking about middle class debt and
financial struggles, would ask you, do you really need that "plasma tv".

San Francisco is probably an outlier, but with the median house price at 1.1
mil, and full time child care costs for two preschool kids at $40-50k a year,
a plasma tv is a minor rounding error in the cost of living.

So while I agree with you about the TV, and the car, and the consumerism in
general, I do think it may be a way to blame the middle class for not paddling
hard enough toward shore as the ocean current carries them out around the
rocks.

~~~
ccallebs
San Francisco, Manhattan, D.C. -- they're all outliers. My great-aunt runs a
day-care facility in Kentucky. They charge $200/month/child. (This is
definitely an outlier on the other end of the spectrum)

It's very difficult to talk about wealth, as wealth means different things in
different places. My argument for a $100k/year salary being "rich" falls apart
in expensive cities.

~~~
geebee
True, but keep in mind, 100k is a lot easier to achieve in those cities.
Registered nurses and dental hygienists (and software developers), who all
earn about 110k a year (median) in SF, tend to fall well below that threshold
outside these centers.

~~~
turnip1979
Hygienists make 110K in SF? Do you have data to support this? These seem like
outlier numbers to me even in a place like SF.

~~~
geebee
it surprised me too.

[http://money.usnews.com/careers/best-jobs/dental-
hygienist/s...](http://money.usnews.com/careers/best-jobs/dental-
hygienist/salary)

Personally, I'm glad dental hygienists make enough money that, with two
incomes, they can live a middle class life where they work. But it really does
put that "critical shortage of software developers" at an average of $110k a
year in SF in perspective.

------
shawabawa3
I'm not sure why the article is so obsessed with this "six-figure salary"
thing (which seems to mean exactly $100,000).

$100k 30 years ago after inflation is $288k now. Anyone earning $288k now is
definitely rich enough to "live the american dream" (in the article they price
that at $130k).

It would have been a much more interesting article if it had just focused on
cost of living increasing faster than inflation

~~~
adventured
You're confident that the problem isn't that inflation is being intentionally
understated via the government having altered the CPI to mask inflation? (ie
that the cost of living is showing the true rate of inflation)

~~~
steveax
So pick another index. How about the Billion Prices Project [1] from MIT.
Oops, that pretty much tracks the CPI. Guess maybe the CPI isn't intentionally
understated.

[1] [http://bpp.mit.edu](http://bpp.mit.edu)

------
chasing
It sure as hell does mean you're rich.

Median household income in the US is about $50k/yr. The average global income
is about $10k/yr.

~~~
lnanek2
What if your job is in Manhattan where that means you are making negative
income vs. your rent? And a good meal is ten times more than a beef soup shop
in Taiwan? Or spending 2 hours every morning commuting into the city and back
out on a bus to somewhere you can afford on $50k/yr? Is that still rich?

~~~
reustle
I've lived / worked in midtown Manhattan on both $35k/year and $90k/year (and
between) within the past 3 years, and they are both doable. At 30k, I wasn't
rich for sure, but I wasn't poor either. Still going out to eat mostly, and
not missing out much with friends.

As it got closer to 90k, things got easier for sure. I'm not married, so no
dual income, but my total monthly expenses come out around 2k (rent, good food
(never eating at home), utilities, misc stuff) which leaves about 3k/mo left
over. I would consider this materially wealthy, at least.

~~~
humanrebar
> I'm not married So having roommates was an option. And you didn't need
> another bedroom for the kids. Your housing costs were _far_ below those of
> an average family. Which is sort of the point of all the comments about dual
> incomes being required.

------
DanAndersen
As the article mentions at the end, a big part of living within your means is
reducing your spending -- and a lot of that has to do with recognizing what
things are actually necessities. The chart of price increases mentions things
like movie tickets, new cars, and private college tuition, which are certainly
not necessities. Even high gas prices can be mitigated if you recognize the
hidden costs of driving a fuel-inefficient vehicle long distances to and from
work every day -- and that in many cases you're not forced to live so far
away.

I recommend the Mr Money Mustache blog as a source of some decent advice about
how to think more frugally and focus on early retirement:
[http://www.mrmoneymustache.com/](http://www.mrmoneymustache.com/)

------
smackfu
Investing more is certainly not a way to "stretch a six-figure salary." Not
sure why they included that part. Investing in your own retirement (vs. a
pension) is probably a big reason why salary money doesn't go as far.

------
vittore
Because we have to start with definition of what IS rich.

I want to think about it of as how many months/years I can live the life I'm
living right now If out of a sudden I loose a job.

So being rich should be more about balance between earning and savings. And
looking at those places like SF, how one can claim himself rich if 100k a year
can barely cover cost of living there ( if can at all)

~~~
chrishallquist
As someone who recently quit a six-figure tech job in SF... 100k/year does not
"barely" cover cost of living. When I first got the job, I decided I wanted to
live close to where I was working in SOMA, which meant paying quite a bit more
in rent, but I never had any illusions that what I was paying for was a
necessity of life.

Though I mainly picked it out for the location, it was easy to tell the
building was built explicitly to cater to the wealthy (because that's the kind
of building that's getting built in SF right now). When I first moved in, I
felt everything about the place was conspiring to tell me, "Yup, you're a rich
asshole now."

Even with that expense, I still had plenty of money. Even if you feel like
you're too good to pack a lunch, and need to eat at a hip restaurant for every
single meal, I have no idea where this "barely covering living expenses" is
coming from.

~~~
twelve40
That's sounds awesome until you factor in a family with several kids and some
retirement goals. Not everyone lives in their 20's forever.

~~~
chrishallquist
I'm friends with a married couple who's got one kid, planning on having more.
Husband works in tech, wife doesn't work. Their finances end up looking a lot
like mine, except they live in an area of Palo Alto where my rent gets them a
decent-sized apartment. (Both I and they are saving for retirement.)

~~~
twelve40
ok, so let's try to see how this works out

making $100k/household in Palo Alto:

$30k goes to taxes $30k goes to family housing, unless it's a trailer park
probably about $10k goes/will go eventually to things like soccer, music,
other misc kids stuff, unless you decide to punt on after-school development

the remaining $2.5k/month goes to food and clothing for 3 and I guess
retirement savings? We also leave out cars, gas, vacations, cellphones, saving
for college, etc etc.

There is not a chance to ever buy any housing in this area on that. I also
don't see much room for more kids. Sounds like barely covering living
expenses.

~~~
chrishallquist
We live in a world where a lot of people are still living on $2 a day or less.
And you consider $10k/year on soccer and music lessons a necessary living
expense? Gimmie a break.

------
davidf18
A major cause of the increased cost of living in NYC, SF, Boston, SV is the
"rent seeking" activity increasing cost of renting or purchasing a house
through restricting housing density through zoning and through overuse of
historic buildings designations.

Harvard Economist Edward Glaeser speaks of this. In these cities, the cost of
housing is far higher than the cost of construction because politics is used
to make wealthy landowners even wealthier at the cost to others.

Rent seeking is a sign of market inefficiency.

------
rdudek
How much of this is just personal perspective? What exactly defines being
rich? $100k a year? $1m a year? More? Why go after being rich when you can go
after being wealthy? If you have enough money generating assets that cover all
your expenses, you're pretty much set. It's all about the cashflow.

------
dkitchen
You're rich because existence itself is shockingly improbable. Beyond that,
you even got to be human, with a human mind, which as far as we know is the
most expensive thing the universe has ever produced. Lucky you!

You're poor because one day you will lose everything and everyone you've ever
deeply cared for. That's a shame.

Enjoy the few moments you have left. You will have a better chance at this if
you stop comparing yourself to others in terms of the milliliters of 'comfort'
you can or cannot afford within an OCEAN, a absolute carnival of delight
available to all.

~~~
lilsunnybee
Does a homeless person have a carnival of delight available to them?

~~~
dkitchen
No. A completely demoralized person (I think that's a better descriptor than
'homeless') would not experience much delight in life. Demoralization is
genuine poverty. It's our duty to reduce and eliminate demoralization in all
its forms to the greatest extent possible. You cannot do that with money,
houses, or guns (aka govt. force). The character traits that prevent
demoralization are courage, forgiveness, gratitude, authenticity and
willpower.

But even so... finally, we all die a tragic, senseless, and humiliating death,
the ultimate demoralization. So the only reasonable posture we can take
towards a demoralized person (or any person for that matter) is empathy and
compassion.

------
NoMoreNicksLeft
Because inflation?

~~~
adventured
Yep. Since the year 2000:

Median and average price of a home nationally is up about 50% (even worse in
hot markets)

US Dollar is down about 50% against the Swiss Franc

US Dollar is down about 40% against the Canadian Dollar

US Dollar is down about 30% vs. the Euro

Gasoline is up over 200%

Oil is up ~350%

Gold is up 300%

Silver is up 300%

Cotton is up between 60% and 100%

Corn is up 100%

Average cost of a new car is up 40% to 50%

And so on

A $30k salary in 1990, is now roughly equivalent to $60k to $75k today. Six
figures just doesn't buy anywhere near what it used to.

------
holri
because money does not make you rich

~~~
brightsize
One of my favorite quotes below, attributed to Bob Dylan:

“A man is a success if he gets up in the morning and gets to bed at night, and
in between he does what he wants to do.”

------
knackers
Inflation.

------
jdimov
When has this EVER meant that you're rich? It doesn't, never has, and never
will. Even a 7-figure salary doesn't by itself make you rich. You are only
rich when you've learned how to make money work for you and when you have the
freedom to do with your time as you please. This automatically excludes any
kind of salary making you rich. Salary and riches do not mix. It's the wrong
mindset altogether. A high salary CAN be a good initial catalyst on your way
to riches, but by itself will never get you there.

------
dpeterson
Is everyone on here a communist? Christ. The article is simple. The government
uses it's hidden tax of inflation to steal the wealth of everyone and the
media continues to (apparently successfully) fool people into thinking hard
working wage slaves that make slightly over 100,000 are "rich". They are not.
To make the equivalent of a 100k salary from 1980, you have to make 288k
today. The government continues to print more money and this trend will
continue until creating value instead of consuming it becomes what most
americans strive to do. We have not reached utopia where everything is
automated and work is an outdated concept. Yet, the "ism" of jealousy and
envy, and perhaps more than a dash of laziness, prevents people from seeing
the truth. Hating and taxing everyone that makes a living wage will not lead
to prosperity. Yes I am talking about socialism. Although, most of the people
on this site seem to lean more toward wanting full blown communism. Let the
down votes commence.

~~~
dkitchen
Yes! It's about creation vs. consumption. We appear to be the only thing in
the universe that has a choice about which of those two activities we want to
be primarily engaged in moment to moment. It's a heady responsibility.

