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Is It Hard To Get By On A Six Figure Income?

I feel like I've been reading a lot of stories lately about how one family or another is having a hard time getting by, on incomes that are a bit above the average. Why are they having such a hard time making ends meet? There could be any number of reasons – from gross overspending to not keeping a budget of any kind.

One particular story that I read about this week sounded interesting in that the author was talking about how she and her family felt poor despite earning a six figure income. Not only that, she asked if six figures was the “new minimum wage”. I thought that sounded a bit ridiculous, but wanted to examine why she thought those things.

six figure income

Six Figures Equals The New Minimum Wage?

Laura Cone, a contributor on Yahoo.com, talks about how despite their family income recently topping six figures, they still can't seem to find any money left over every month.

Our family income recently topped $100,000, but we aren't spending as though we make six figures. We don't sip Mai Tai cocktails at resorts or buy pricey tech toys.According to recent data, incomes are rising and consumers have more money to spend. They are also taking on more debt for the first time in three years. Financial experts say the increase in borrowing can be attributed to buying cars and paying for college . We bought a new car this past year so our son could earn money for college delivering pizzas. He may need to borrow money for grad school.

Although I admire people who live on fixed incomes or minimum wage, I have no idea how they do it. When I was younger, I got by on a salary of just $19,000 a year. At that time, I did not have a mortgage or two sons attending college. Back then, the high cost of childcare took a big chunk out of my pitiful paycheck . Still, I never thought we would have trouble living on $100,000.

The author relates how sometimes no matter what income you're at, you just don't feel secure. She then goes on to talk about what expenses the family has. Among them expenses are housing, cars, insurance and food:

Our fixed expenses include $350 a month for utilities, $300 for car insurance, $175 for Internet, cable and phone. We owe $1,222.02 a month on our mortgage and $300 on a car loan. We have no other debt. We save 10 percent of our income for retirement. We spend at least $500 a month on gasoline and an astounding $1,000 a month on food. I’d feel rich if I was eating at upscale restaurants or buying gourmet foods, but our food budget just provides the basics for four people.

Among her expenses are a few things that aren't necessarily a necessity. For example, the internet/cable/phone. I'm sure they could cut back on that expense in if they wanted to. They also in the article talk about their cars which they have loans on and the car that they bought for their son. Two more expenses that could at least be cut back – if not cut out all together (make the son buy his own car!).

A commenter on the site pointed out that the author also was spending quite a bit more on food than she was for the same family size – more than twice the amount.

Breaking Down Where Her Income Is Going

Let's make some assumptions about what Laura's family is making, and figure out where their money is going. For argument's sake, let's assume they're making exactly $100,000.

$100,000 salary – $8333.33/month:

So what fixed expenses do they have every month according to the author?

$2083.33/month federal taxes (assuming 25% 2011 tax rate for married filing joint.)
$554.17/month state taxes (assuming 6.65% NY state tax rate)
$1250/month tuition
$1222.02/month on mortgage
$1000/month food
$833.33/month on retirement
$500/month gasoline
$350/month utilities
$300/month car loan
$250/month extra on mortgage
$175/month internet

So the expenses that she mentions above by themselves come out to about $8517.85/month, more than their income. That's not even including other incidental expenses they most likely have every month like clothes, doctor visits, etc. So I'm assuming the things she's telling us aren't 100% correct, our assumptions are a bit off or something.

Looking at the expenses some of them do seem a bit high like food, phone/internet and they bought their kid a car to deliver pizzas – why not have them pay for their own car?

On the other hand this family is also paying more than their mortgage in tuition costs every month, in addition to saving 10% for their retirement and adding extra to their mortgage payment every month. So it's not exactly like they're in awful shape here. If push came to shove they could reduce contributions to retirement, and/or ask their child to pay for more of their own education (like mine did) and they'll instantly have well over a thousand dollars more in their monthly cushion.

Just Getting By, Or Doing OK?

The author of the article seems to think they're barely getting by on their six figure income, but if you really look at it they are doing things that other families can only dream of like fully paying for college costs for their child – as well as funding retirement and paying extra on the mortgage. To me, while they're not getting ahead as fast as some, there are certainly things they can do to improve their situation and save more.

So no, I don't think that six figures is the new minimum wage, and I think it is entirely possible to get by on much less than 100k. As income goes up, so do expenses in many cases, and lifestyles become inflated. If you look close at where the money is going, and cut back on the un-needed costs, you'll be doing just fine.

What do you think? Is the author of the linked article just hyperventilating, or are they correct to be worried about not making enough?

Should You Move For A Better Paying Job?

By Miranda Marquit 7 Comments

Recently, Kiplinger released a list of cities with the best paying job opportunities. It is no surprise there there are a number of people hiring movers and trying to get to these areas.

The site also has an interactive map that shows where the best paying jobs are — and the worst. I'm not surprised that the major cities in my state of residence, Utah, are among the worst paying in the nation. I've seen first hand how much people can expect to make here. Some of the cities with the better paying jobs include Washington, D.C. and Manchester, New Hampshire.

The rankings were based on the number of job openings available that pay more than $50,000 a year. The idea is that you can look at some of those cities with higher paying jobs, and consider whether or not to move to any of them. It doesn't seem like a bad plan, as long as you actually do plan.

move for a better paying job

Do You Have the Skills to Land One of Those High Paying Jobs?

One of the first things you have to do is honestly evaluate yourself and your skills. Are you qualified for a higher paying job? In many cases, higher paying jobs require some sort of certification, or education. If you aren't qualified for the better paying jobs, it might not do you any good to make the move, since you won't be any better off. Before you pick and move cities, check to see what kinds of job openings are available, and make sure that you are qualified to work them.

Have You Considered Cost of Living?

It's great that Washington, D.C. has a relatively high number of $50K+ jobs available. But, stop and think for a minute: How far would $50K go in D.C.? I mean, if you wanted to have a high quality of life. One of the things you need to take into account when figuring out where to live is what things cost. How much is housing? Food? Transportation?

You also need to decide what kind of neighborhood you want to live in. If you want a higher quality of life, you have to pay more for it. Many people can't afford to live the good life on $50K a year in some of the cities that have high paying jobs.

Disposable Income

As you consider the cost of living, contemplate what it would do to your disposable income. After you pay all your obligations, and take care of your needs, what's left over? Sure, you're not going to receive good pay here in Utah. However, $35,000 a year will go further here than $50,000 would go in D.C.

With my current annual income, I live pretty nice here in Utah. I have a home that I can afford — with a mortgage payment that is less than 1/5 my monthly income. Food prices are mostly lower than what I paid when I lived in New York, as are utilities, gas prices and other expenses. If I were to move somewhere else, my money wouldn't go nearly as far, and I wouldn't be able to enjoy a lot of things that I get to do now.

Before you become too excited about the prospect of making more money by moving, consider the factors involved. You might be better off staying where you are and earning a little less.

Dress For Success: Find Business Attire For Less

By Miranda Marquit 3 Comments

After I graduated college and began looking for my first job, I realized that I didn't have much in the way of business-friendly clothing. I wanted a skirt suit for interviews, as well as a few pieces that could be worn to work in a professional environment.

The first thing I bought was the suit. We went to Nordstrom, and bought a suit off the clearance rack. It was a simple, classic black affair of decent quality. We got it for close to 70% off. The suit was perfect for job interviews, and it could also be mixed and matched, since I could wear the skirt, sans jacket, with different shoes and blouses.

As I built the rest of my professional wardrobe, here are some things I kept in mind, since funds were limited at the time:

Look For Versatile Items

Versatility is one of the best ways to avoid spending a great deal of money on business attire. Look for solid colors, and try not to buy too much that can only be worn with one other piece. My husband has a few different slacks, in black, brown and dark blue, that he can mix and match with button down shirts.

Versatility can also include buying classic pieces. While one or two trendy items can be fun to have (and cheap to pick up if you get them on clearance just as the trend is on the way out), you will always be replenishing your wardrobe to keep up with the latest. Classic clothing items can be used for years, giving you more bang for the buck, and saving you money.

Buy On Discount

There are a number of ways to buy on discount. The Internet is full of discounted clothing. Additionally, you can look for clearance items and big seasonal sales from department stores in town. And, of course, don't forget stores like Marshalls, Ross and TJ Maxx. You can find a number of quality name brand clothing items (and accessories to go with them) for low prices. However, if you do end up with flawed clothing, make sure that the flaws aren't noticeable. Buying clothing for less, especially if it's versatile, can ensure that your wardrobe budget stretches that much further.

Second Hand

Search for high quality second hand clothing. Ask your friends and family for hand me downs. You can also head to consignment shops. Some thrift stores also have high quality clothing, gently used, at low prices. However, if you do buy at a thrift store, try to identify the day of the week on which new items are set out. Many thrift stores have a regular schedule, so if you are there on the day new merchandise is displayed, you have best pick of what's available.

Sometimes, you can also find good deals on second hand clothing at yard sales, but you are likely to have more success at an estate sale if you are looking for something a little more high end.

Of course, I no longer worry too much about a professional business wardrobe, since I work from home. But if I ever need to rejoin the professional workforce, I'll have a strategy ready.

What Constitutes A Worthwhile Expenditure?

By Miranda Marquit 9 Comments

My husband is finishing up his Ph.D. this month. His defense is scheduled, and everything should be wrapped up by the beginning of May. This means, of course, that he will be looking for a job. He has already applied for a few jobs, and has been looking for openings, but many potential employers (mostly universities) want to see that he already has the Ph.D. Even though reports are that the job market is improving, things are still tough out there. Which is why we're looking for advantages. One of these advantages is going to conferences.

Projects my husband has been involved in have been accepted for presentation and exhibition at various conferences, although he doesn't always present it himself. Conferences add something to your CV, and they offer chances to network. One of these conferences is taking place in less than two months, in Madison, Wisconsin. My husband isn't sure he wants to go, since it will cost about $600. He's already been accepted to present, but he's thinking that if he doesn't go, he can use that money to buy an iPad. Here's how our conversation on the subject went:

Him: “I want to buy a nice laptop and iPad more than going to that stuff.” (His current laptop actually belongs to the school and he has to give it back at the end of the month. He can't use mine for personal reasons because it has already been deducted as a business expense.)

Me: “We've already budgeted in a laptop for you. We've been saving up for it.”

Him: “It would be nice to have an iPad. I doubt I'll get a job by going to the conference.”

Me: “Well, a presentation at ISSRM looks better on your resume than an iPad.”

Him: “True.”

Me: “If we're going to spend $600 on something, I'd rather have it be something that could potentially advance your career, rather than something we're pretty sure won't.”

Does Your Spending Help You Reach Your Goals?

When deciding whether an expenditure is worthwhile, I like to consider whether or not it will help our family reach a goal. It's true that one of our goals is to have a tablet computer with a low-end data plan so that we can access the Internet from anywhere, comparing prices while shopping, or looking for restaurants while traveling. However, this goal has a lower priority than helping my husband get a job.

At the conference, he will have the chance to meet other people and network. This could, potentially, help him find a job. On top of that, the date of the presentation shows that he was doing something after finishing his degree. In a world where you are practically unemployable if you have been out of school and jobless for more than six months, an international conference presentation can buy you a little time. In my mind, the chance that something will help my husband's career is more important than a fun gadget. After our conversation, my husband admitted that my argument had merit. So he's going to Wisconsin.

When you are making similar decisions, it's important to weigh the pros and cons. Consider what is more likely to help you in the long term. Consider your financial priorities and goals, and choose to use your money in a way that helps you move forward on the path to financial freedom.

What process do you go through when trying to make spending decisions? Tell us about it in the comments!

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