Pity the Poor Couple Who Make $450,000 Per Year: Housing Costs Are Too Damn High

It has been a while since we’ve seen a remake of the ‘Pity the Poor Couple Who Make Hundreds of Thousands Per Year‘ column, but a couple of weeks ago, CNBC decided to bring sexy it back! This graphic explains what I mean:

how a family ...1566489111131

There’s a lot that’s absurd about this, so I just want to get it out of the way:

      The $50,000/year in child care costs will vanish after a few years.
      This couple is saving eleven percent of their income for retirement.
      They are saving 3.5% of their income for college tuition.
      Their budget includes two traveling vacations per year and weekend getaways.
      They could save a couple of thousand dollars per year with a cheaper car.
      They only donate one percent of their income to charity.

As I noted, it’s a silly genre. But onto housing.

Many moons ago (let’s say the 1980s), people who were in a similar income bracket–which to be clear is neither middle-class nor upper-middle class, but gentry classdid have significant money left over, even after these expenses. What was different? Housing costs.

While I think in some of the cities this graphic purports to represent, a ‘good house’ (or apartment) doesn’t cost $1.8 million (I would argue in D.C., you can find one, depending on what you want, for ‘only’ $1-1.2 million), it probably isn’t far off, especially for San Francisco or NYC. But once inflation is factored in, I would argue many of these ‘nice houses’ (or apartments!) cost triple what they would, had housing costs only kept pace with inflation.

If they had, then, using the article’s numbers, the family would have around $46,000/year extra. That could be put into savings, used to buy lots things, throw cocaine-fueled sex parties, and so on. While they probably won’t lose money on the house, it doesn’t seem likely that their housing values also will triple in real dollars, like it did for older Boomers and Silents. I won’t go so far as to claim they’re being ‘hurt’ by housing costs, but nearly everyone, including the gentry class, is being screwed by housing prices, if they’re not elderly* and they live in many metro areas.

Build more housing–and remove tax breaks for communities that make that difficult.

*Plenty of not-well off Boomers and Silents are being screwed too, but there is a generational effect here, based on the incomprehensible belief that housing can simultaneously be affordable and an investment vehicle with a good rate of return.

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12 Responses to Pity the Poor Couple Who Make $450,000 Per Year: Housing Costs Are Too Damn High

  1. netlog111 says:

    The principal on the house is also savings, so total savings is $38k + $24k + $12k = 21% of income. With 5% return on investments, in 10 years, they will have saved $1M. In 20 years, they will have saved $2.6M.

    If this family stops paying child care after 6 years and sends the kids to public school, they would have 3.7M saved in 20 years!

  2. Ron Zoscak says:

    Those poor dears could try taking the “food stamp challenge” and save around $44 a day!

  3. Mr grumpy says:

    Their baby items, food, clothes, car, entertainment and vacation expenses are just stupid. Way more than any sensible person would spend (esp for baby, food, clothes & entertainment). They could also buy a used car for 15 to 20k cash, drive it for 15 years and have monthly maintenance costs averaging $50 Or less over that time (I’ve done it repeatedly with even less expensive cars). And their childcare and preschool costs are insane. My advice: get off the status symbol train, live next to more common folk, and save a boatload of money. But they’re obviously fools…..

  4. Sigmund says:

    I don’t get the anger here. When I read the article in the question I didn’t get the impression the author meant for us to feel “sorry” for the poor schmucks on350k.
    The point as I saw it was just to underscore, that after, housing, child and education costs commensurate with maintaining a job that probably means working 70h per week, and wishing to get your kids the “same” education they themselves got there probably aren’t much left for traditional luxuries. There is also not enough left over for saving up enough money that your lifestyle will tank if and when your currrent job is downsized.

    The point as i see it is that not even the rich are particularly well served by how the American society is working these days.

    • Mr grumpy says:

      My main point is that they are overpaying for everything, or buying more than they really need, most likely due to status pressures. I live in a much less expensive place, but see it all the time. They’re getting the luxury version of evetything, but the quality upgrade is very often negligible. They are spending a lot on housing, kids, education, clothes, etc. and not really getting anything extra out of it except for less money.

      • Sigmund says:

        As this income puts the household in question at about the 99th percentile it is certainly true that they re getting the luxury version of most things and, as by definition about 99 percent of the population makes less, 99 percent also need to spend less. Thus no one needs to spend this much to live.

        But, I dont think it is difficult to undertand how this spending would not neccessarily feel extravagant to a household living in San Francisco or New York.

  5. Sigmund Aas says:

    On a different note, singling in on the holiday expenditures is just so typically American. The holiday budget and travel schedule would probably be a little less than the average spent by a family in Scandinavia.

  6. David says:

    They listed the standard deduction as an expense.

  7. JDM says:

    Looking at only one thing here, “ocassional” babysitting. Assuming they’re paying $25/hr (anyone ready to actually bet on that?) they’re talking about a 20-hour a week job for a babysitter. Bullshit.

    And it continues on down the line(s). One other example: Food for the month is twice too high.

  8. Karen says:

    $70/day for food seems high, even if it includes weekly “date night.” That’s $2,100/month!

    I guess if they never cook at home.

  9. coloncancercommunity says:

    A hill I’m willing to die on is that I am calling B$ to where they claim they have merely $121 a month leftover. They need to differentiate between DISCRETIONARY expenses and fixed expenses. They also need to come down to earth about what they truly need rather than what they WANT.

    1. Maxing out your 401k is a good idea – however, maxing that out assumes a lot of discretionary money. Most of us don’t have anything close to $38k to sock away for retirement.
    2. No one is holding a gun to their heads making them spend $7800 for vacations and $6000 for home entertainment. This is discretionary money.

    Othe issues I have:

    Yes, childcare is expensive, but do they have to be spending over $53,000 a year on it? SERIOUSLY????

    Did they HAVE to buy a $1.8 million house? Really? Yes, housing has risen faster than inflation. But I live in New York just 20 miles north of midtown Manhattan. You can get a 4 BR house with a yard in a good (but not the top 5%) school district for about $750,000. These are in nice but not tony areas. The homes aren’t new and may need some reno over time. But they are perfectly livable with good transportation and taxes ranging from about $15k-$20k/year. A percentage of these expenses should be considered discretionary because they WANTED what they wanted.

    I think the problem here lies with the fact that the upper crust needs to be judged at the same level as poor Americans. When people analyze how livable LOW wages are – NO ONE includes 401K contributions, vacations, home entertainment, and 7-figure homes as necessary expenses. If these people chose to live more modestly, they would have thousands at the end of each month. This is ridiculous.

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