Six Figures Ain’t $%#@

Stop drafting hate email to me. That title’s mean to be provocative because it’s in response to the general conclusion that this article draws:

One hundred thousand dollars. Since the 1980s, the magical “six-figure”  salary has been a benchmark for financial success. Not too long ago, that income  often meant two nice cars in the garage of a large house, fun family vacations  and plenty of money left over to save for retirement and college tuition.

But times have changed. Not only has standard inflation steadily eroded the  real value of a $100,000 income, but the costs of housing, health insurance and  college tuition have risen dramatically in recent years. Consider the rising  costs of food, energy and the necessities of a middle class life, and that  six-figure luxury quickly turns to six-figure mediocrity.

I came across this article awhile ago, but I didn’t have the  right opportunity to talk about it until today when I was at happy hour with my buddies and the topic of salaries came up. There I was, sitting at the bar, tipping back a cold one after a run at Gold’s Gym, looking pretty classy in my running shoes and sweaty shirt and shorts, when my buddy, Navneet, remarked how he feels like it’s going to take forever to save up for retirement. I put my beer down and replied that I was envious that his wife and he, who are both making about $125k each and have no kids (classic DINKs) were able to share a lot of their living expenses, like a mortgage, whereas I was not, and that they’d be there in no time if they lived frugally. And then I said something he took exception to: “After all, you’re upper-middle class.”

His reply: “Are you sure? I really I don’t feel like it! I feel like I’m just barely making ends meet. And then when kids come, it’s game over–there goes all my money for retirement. We’re going to need a bigger house and we’re going to have to save for college–it’s going to be expensive for those guys!”

I think my jaw dropped. After the momentary shock, I blurted out, “Dude, you drive a BMW 335i! What are you talking about,  ‘barely making ends meet?'” And not only that, Navneet also has a good-sized three-bedroom house in Round Rock, dresses well, and travels on the regular. Barely making ends meet? My buddy Sunil and I exchange glances, and Sunil brought up the fact that a household income of $250k is the 3% of household incomes. 3%! “If that’s not upper-middle class,” Sunil said, “then I don’t know what is.”  Navneet didn’t believe it, so I had to Google it and present him with the entire table for his edification.


Amen, Sunil. Amen. A household earning $250k is a prosperous household indeed. And Navneet has even less to complain about given that he’s living in Austin where the cost of living index is a low 90.6 out of 100. If he feels like money’s tight here in Austin, homeboy would never survive on the coasts where the cost of living index is greatly inflated.

The Bankrate article says that the effective value of $100k today is $381k in 1976, and that’s just looking at inflation–it doesn’t take into account expenses that have grown at a greater rate than many things found in the Consumer Price Index such as student loans, housing, healthcare. Fair enough. Peace. A $100k salary doesn’t make you a baller. But barely making ends meet? I mean, if that’s the case, then what about the 50% of households that are making $50k per year? If a $250k household feels like they’re not making ends meet, then how on Earth do the guys making $50k survive, to say nothing of the people at the lower end of the spectrum?

It comes down to how we spend the money. Travel and BMWs are expensive. If Navneet traveled less and had a cheaper car, he wouldn’t feel so stretched, and he might be a little more excited about welcoming some little ones into this world. And how is a 3-bedroom house not sufficient for a small family?

I’m not saying anything brilliant here–I’m basically echoing what the article says much more eloquently than I:

[B]uying too much house, spending too much on automobiles and having too much debt is commonplace with families in the $100,000 income level and largely  responsible for the six-figure pinch. [A typical $100k household] owns a $375,000 home, leases 2 vehicles for $450  each per month and pays $250 per month on credit cards. After that household  pays the mortgage, car notes, debt and takes out Social Security and federal  income taxes, it has spent 75 percent of its income.

Here’s where the real concern lies: The table depicting household income percentile above hasn’t changed much over the years, but the purchasing power of a $100k salary has definitely eroded since 1976. This is cause for concern because as inflation and expenses like housing, education, and healthcare continue to rise, but the percentage of people earning above a certain dollar amount doesn’t, then we’re all effectively getting poorer. And that’s a problem.

Saving for Corvettes over College

I participated in a filmed segment for the Huffington Post this morning regarding student loans that you can watch here. The discussion was rich. 12:27-12:30 is BEGGING to be auto-tuned–absolutely begging for it. Also, I let my dogs off the leash at 13:30 when one of the guests doesn’t let me get a word in edge-wise. I guess I get a little cranky with only four or five hours of sleep under my belt.

Anyway, the parents of one of the guests, Lauren, decided to buy a lake house instead of paying for her undergrad degree. I ask her what she did to tick them off so badly. I mean, seriously, her parents are definitely selfish if not downright irresponsible. It’s one thing if her parents couldn’t afford to pay for college, but to buy a lake house instead of setting their daughter up for success in such a brutal economy is just cruel. During the interview, you can actually sense the trepidation she has about paying off her loans. And it only gets worse: Lauren remarks that she’s lucky her parents co-signed for her–they have so many loans out right now that they can’t even co-sign for her two siblings. Outrageous!


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30 responses to “Six Figures Ain’t $%#@

  1. Enrique

    Great point-someone can be making $500,000 and be broke. I read an article about two high school teachers making $100,000 together and they have accumulated $1,500,000.00 for retirement.

  2. Abbie

    I definitely got choked up with you shared Lauren’s story. That is EXACTLY what happened to me, and I thought I was alone in that.

    My family only made a combined $60K or so, so I accepted when they told me that if I wanted to go to college, I was on my own. I am incredibly proud of my alma mater, an excellent, highly-rated public school in my homestate, but it’s still really emotionally challenging to describe for people what it is like to work full time (and overtime) to pay for school while attending school. I came home for that first Thanksgiving in 2005, so wiped that I slept for the better part of two days, and so full of anxiety from not having enough money to buy groceries after tuition costs and a plummeting GPA because I was unable to afford books or the time to study, and my mother had an exciting announcement: she had just closed on a lake house. Out of state.

    We don’t even KNOW any Jones’s. To this day, I don’t understand what compels my mother to hold two mortgages, four car loans, and to travel maybe four times a year to this lake house. My conversations with my dad have become less about life and more about which bills are going unpaid and how retirement is a dream he has sometimes.

    To be fair, I wouldn’t trade the experience, lessons learned, and the pride I have being the only person responsible for the many, many successes I’ve had since successfully putting myself through college (and graduate school, and my new job!). It meant a lot to hear Lauren’s story (at least she had cosigners!), and a lot to hear your response, though. It did seem cruel at the time, but at least taught me a lot about what I value and what I am capable of.

  3. Terrell

    Love the article bro!

  4. Dee

    You’re right, Joe. It’s not only what you make, it”s how you manage what you make. Everyone needs a certain amount to pay basic expenses, but after that, it becomes a question of how you manage your money.

    A married friend of mine borrows money from family and friends because she and her husband don’t have a clue about money. He buys an expensive new car every two years and every new toy electronic toy that comes out. They have every cable channel available. She doesn’t realize why some of her family members avoid her and It has almost ruined our friendship, because I don;t like to lend money and absolutely hate to chase people down to get it back (or course, you can get rid of some people by lending them money, LOL).

  5. Awesome checking him in the interview. Baby boomers are too quick in my opinion to attack Generation X and Millennials for trying to make ends meet in an economy they had no part in wrecking. The grand irony is the fact that the boomers had the largest hand in creating the financial crisis we’re currently in.

    Neil Howe (author of the Fourth Turning) makes some great points along the same lines in his post “Dear Graduating Class of 2012: You Are So Not Special”:

    “At some level, I guess I’m baffled by the sudden popularity of this trope. Here we are at a time of historically high youth unemployment during the longest and most severe economic bust since the Great Depression. Why would anyone think Millennials need to be reminded by graybeards that history won’t give them a free pass? Just about everyone knows, moreover, that in the decades to come Millennials are eventually going to have save more and bear higher taxes (in just about any fiscal scenario) to pay for their parents’ unfunded retirement liabilities. And, if those programs go bust, Millennials are conveniently situating themselves in or near their parents’ households so they can help out in person. Shouldn’t these older people want to be nicer to these kids in anticipation of what’s ahead? Shouldn’t they be at least hoping that this rising generation is indeed special enough to handle the challenges being handed to them?

    So it’s a weird and one-sided conflict. If Millennials wanted to attack, of course, it would be easy enough to find targets to strike–starting perhaps with their elders’ greed, short-sightedness, and blind partisanship, which have recently brought the global economy to its knees and rendered the nation’s capital ungovernable. Yet Millennials do not strike. They bear perhaps the heaviest burden from their elders’ malfeasance.”

    The full post (and his entire blog) makes for great reading:

  6. Good post. And I really agree with the part about locations. I live in Bucks County, PA, where the standard of living seems higher than other places. Just housing alone is unreal. I watch TV shows like House Hunters and I’m amazed at what people get for their money in other parts of the country. Here the average two or three bedroom condo is around 400,000. And I’m talking 2,000 Sq. Ft. or less. Plus HOA fees that run upward from 400.00 per month. The good thing is we haven’t been hit as hard as other parts of the country with real estate values dipping.

    I sold a condo and bought a private home in 2002 during the real estate boom. I did very well with the condo…sold it for twice as much after only living there for three years. And ten years later the home I bought is still worth more than I paid for it in 2002, which is a *huge* relief. But everything else around here is highly inflated. I would never shop for a car around here. I literally drive to Delaware, or other sections of Pennsylvania, where the same cars retail for much less. And like you said, it’s how you spend your money that matters. As a writer, I never have a set salary I can depend on. I also started two small businesses and sold them for profit, and even then I never had a set salary to depend on. And being a small business owner teaches you how to deal with money fast, trust me 🙂

    I agree with the reasons why “3” hit the wall, too. And it’s a shame, because it really was a nice show in the sense that we got to see more about the characters and find out who they are. Hope someone picks it up.

  7. Christopher Rodriguez

    Loved the post! It seems living within your means sounds worse than it really is. My wife and I together bring in just under 100K and live comfortably. We have a 3 bedroom/2bath home in a great neighborhood in San Antonio, two vehicles (only one auto loan) Consolidated all of credit card debt (cut up cards with high interest rates, kept only 1 credit card each with a zero balance), and have not taken on any additional debt. If we want to make a major purchase such as new TV we usually wait unitl the bigger sales in the area and buy cash instead of credit, and we have only had to do that twice to replace our old school TVs that had gone out. The key for us is only spend what we need, don’t take on additional debt and as for college, we have two kids (2yrs old and 9 weeks old) and we have savings accounts for both. Every month we add $50 to each account (less than filling up my Dodge 1500), We have also started a college fund for both (Gerber/USAA) and maintain several retirement funds for ourselves. With all of this we are still able to travel twice a year, keep up with bills and still have money left over. So, I think its a matter of planning, and not trying to keep up with the Jones! As we elimate debt, we will consider in the longer run getting a slightly bigger house (more square footage we have a 1500 square foot home). As for new vehicles, not so much, we are looking at places like carmax and we are only willing to have one auto loan out at one time, meaning we pay off one before we think about replacing the other. Right now my truck is paid off and running great (maintenance is the key!), and paying on her jeep, once we pay hers off, we may consider (not set in stone) getting a relatively newer truck for me. Lastly we set a 4 year plan to be as close to debt free as possible, meaing all of our credit card debt, most of our student loans and all of our auto loans, the only one remaining on our books should be the mortgage, which we will have well under 100k. So far we have elimated half our debt in less than 2 years, pending any fiscal desasters in our economy we should be on track. I strongly believe its up to us to spend and save responsibly and not wait for some one else to do it for us.

    • Way to go, Chris. It sounds like you weren’t always frugal, which makes your story that much more remarkable. Keep it up.

    • Greg

      I used to have an expensive hobby of snowmobiling. It was fun. I found that it was very expensive and of course we’d find poor people riding trails up north with older sleds, and also business owners riding really nice sleds with huge trucks and large trailers. My friend and I were middle class computer geeks working computer geek jobs. We had a small enclosed trailer that we purchased and realized that the expense of housing at motels was a lot. We converted our enclosed trailer into a stealth hotel room, with two fold down futons temporarily attached to the walls during travel. We had a RV furnace installed (not fully code safe) into the trailer to “heat it up while we were working on a sled. It was on a cheap pedestal we made out of wood, so the sled could not hit the RV furnace. We could park our truck and trailer and pull the sleds and chain them to the trailer at night. We could sleep anywhere for about $7 a night, including motel parking lots that were large. We rented a place to store the trailer and truck up north and drove an economy car up there to save gas money, which we would waste on riding the sled. We could go anywhere from our storage point with our motel on wheels and didn’t have to pay large fees. Now later, that hobby was a waste of money, obviously. I saved about $7,000 in motel bills paying for propane. We would at times pay a fee to use a swimming pool and sauna at a motel which non guests can do, and take a shower in our swim trucks and enjoy the whirlpool at the end of the day with $100 a night guests, and then dress in a public bathroom in the motel and head out to our trailer. So we saved a ton of money and it paid off the trailer. 1/3 was motel expenses. Some places allowed overnight parking as well on public parking lots, or you could park and camp in a casino lot up north in Michigan. But later the hobby was expensive and I had to cut it to reduce expenses. It was fun while it lasted. I saw guys buying expensive trucks and trailers for their motorcycle hobby. They’d spend $25k or more on the truck and the same on the trailer and motorcycle. Then they would brag about getting 45 miles per gallon riding the bike in good weather. That’s a lot like snowmobiling a rich mans freedom and hobby. I didn’t want that expense, so I sold my truck and bought a Prius which gets 45 miles per gallon. I saved so much money compared to my F150 truck, that my Prius payments (on a 12k loan) was about $14 a month when deducting the gas savings. The Prius was safe, I could drive it year round and saved me money. I can sleep in the back of it and boondock vacation getting 45 miles per gallon. It costs me about $120 to go from Michigan to Florida with the Prius. I can sleep on pillows in the back and the AC can remain on and cycle on and off all night while I sleep in the back of an all night fast food place on a long trip if need be. I can live and vacation fairly cheaply as a single adult. If you can get a high miles per gallon car and stick with it and don’t need the truck consider ditching the truck. I actually have an old F150 still which is parked in a driveway and paid off. It’s used mostly as a storage vehicle and I rarely drive it. I don’t like the insurance however and may ditch it. I use it very rarely and could rent a U Haul van and be far ahead of the game.

      Stuff is nice to own, but it owns you. You have to pay to store it. As an example I have a cheap hobby of astronomy, that can be cheap and fun, but also expensive. I pay for example $800 a year to store a bunch of stuff. One thing being a rare telescope that is large that I bought cheaply for $550. But the storage rent i pay for that storage place with other crap costs me $800 a year and I’m retired. I still live to large. I’d be better off buying a $600 smaller telescope like a Celestron C-8 without the storage unit, use it a year, and then give it away to some young college student or other interested student and buy another new C-8 each year. I could be giving away ten telescopde a decade to some young person who would love to get a free gift and have a new item for less than the cost to store an old vintage telescope that is rare, but expensive when you figure in the cost of storage. And even through my F150 is parked, I still pay over $500 a year to insure a second vehicle. And I live frugally in some ways with my parents, helping them out and running a ton of errands. We have three cars and rarely use more than one at a time. So we pay for three times more vehicles than we typically need, all to be “free.” Cars and things are not freedom, they own a part of you as the cost of ownership.

      • Greg

        Correction. The $7000 we saved over three years in motel bills didn’t pay for propane, but paid the trailer off. So the trailer was free. The propane was our expense. $7 a night vs $50 to $100 a night is quite a bit of savings for a 3 or 4 day long weekend or for a two week snowmobile vacation. It was a lot of fun while it lasted and when gas was $1.70 a gallon. At $4 a gallon, it would really be an expensive hobby.

  8. UFAshley

    I had to stop spending a lot of time with a couple like your friend, Navneet. They have no concept that their combined income is 3 times mine, which affords them nicer cars and their own pretty sweet house.Their incessant complaining about being too poor for kids and philanthropy events definitely dampened our friendship, because our different priorities and the gauche money talk just made me sick. (Sidenote: I appreciate how you write about a sensitive topic in a way that doesn’t make me think you’re tacky…your blog has an excellent tone).

    People live up to and beyond their means, no doubt. But have some perspective, people! I almost wish it wouldn’t be so socially awkward to send my friend that chart and bankrate article, ha!

    Too bad about 3. I hope you can let us know what happened. How long do the tv people expect you to keep quiet if you ended up together? It seems like an undefined period where they decide what they want to do is unreasonable.

  9. Totally agree –

    My in-laws complain that we live like paupers even though we are making about 200k. They don’t understand that we are happy without lots of ‘stuff’ and our focus is on spending time with our children. A walk in the local park is free while a trip to the local amusement park is $45 a person.

    Someday we’ll save for a house, after the loans are closer to paid off. I promise that it will NOT have a more bedrooms than people, an extra office, a theater room, a guestroom, a playroom and a mancave . . .

  10. JFlegal


    Great blog. Incredibly impressed with your focuss on paying down debt. I have 70k left on my loans from the third tier law school I graduated from in 06. For better or worse that is what I owed when I graduated but deferred them so I can travel, buy a house, nicer car…all things I couldn’t really afford but thought I deserved after putting myself through undergrad debt free and then going to law school. With a kid on the way my wife and I have decided to sell our second car and I will be cycling to work. We are hoping to be completely out of debt within 24 months! Thanks for the blog and keep up the good work!

  11. Sean

    “This is cause for concern because as inflation and expenses like housing, education, and healthcare continue to rise, but the percentage of people earning above a certain dollar amount doesn’t, then we’re all effectively getting poorer.”

    This is a great insight that too few people acknowledge, and even fewer people adjust their finances for it. That’s why it’s so great you created this blog and continue to update it! Your perspective is needed!

    For an even better understanding of the differences between families in the 1970’s and today, I highly recommend you watch this presentation by Elizabeth Warren: She presents a ton of data that show why modern family finances are riskier than they were in the past. An example: “More kids live in homes that will file for bankruptcy this year than live in homes that will file for divorce.”

    • Excellent presentation by Ms. Warren. Ominous note at the end about our three-class society likely becoming a two-class one due to our “newly weakened” middle class. Yikes 😦

  12. Associette

    Oh no – I cannot believe 3 was pulled! Between seeing the first two shows (the second episode I had to watch online because the changed day confused me – you have a good point there), and reading your blog, I need to know what happens now!

    On a positive note, the show led me here and has caused me to create a budget to pay off my loans. My loans are much higher than yours (stupid law school), and my income is slightly less I think, from what I can gather from your budgets, but I already feel better getting my snowball rolling. Thank you again for the inspiration.

  13. Back in the day, when I was super broke and still in school, I used to clean/nanny/organize for people whom I’d call “new rich.” They talked about money incessantly, almost as much as they spent it. I will never forget going to organize a closet and finding bags and bags of shit from Wal-mart, tags still on. It was unreal.

    Sad to hear about 3. As someone who writes about dating/relationships (and probably obsesses about these things more than the average person), it was great to finally see a show that a) wasn’t terrible for women and b) didn’t make me want to yell swear words at the screen. Hopefully they’ll air it somewhere/sometime/somehow.

  14. Sara Quarnberg

    Love your blog and loved the show, sorry to hear it was cancelled. I found your blog after listening to you on Dave Ramsey and am so proud of you! My husband and I have 4 kids and are listed in the top 6% according to your graph, we are on target to being debt free in 18 months – just before our oldest start college 🙂 and just in time to cash flow the expenses….

    I would love for your friends to look outside your own city and see what the rest of the world exists on. According to the book that changed my life – The Hole in Our Gospel by Richard Stearns, President of World Vision – if you make more than $50k you are in the top 1% if the WORLD…. maybe a mission trip to a 3rd world country to meet orphans trying to care for their younger siblings or having a mother try to GIVE you her children because she can’t feed them or see children die because of the lack of health care or parents would bring a new appreciation for our middle class lifestyle here in the states.

    I just got back from Sierra Leone, West Africa where what I described above happened to my 16 year old daughter and I. Rocked my world and I will NEVER complain about my 4 bedroom home or the daily grind again. It just made me more intentional about paying off our debt so we can give more and make the world a little bit better for those who can’t do it for themselves.

    In the mean time, I’m loving my kids and trying to teach them that our relationships with each other are worth more than all the money in the world.

    Keep the blogs coming, you inspire me!!

  15. mark

    Great points. I make ~50k in a similar cost of living, midwest, city. I spend about $1600-$1700 a month, and I am looking at a cheaper apartment/house once my lease ends to lower this cost even more.

  16. Mark

    I agree with most of this. However, I don’t agree that Laura or you feel that the parents owe them a free education instead of enjoying themselves. How much of the parent’s income and assets do you think is not theirs but their child’s?
    To me this is the same idea as progressive taxation. The rich should pay more, but some people don’t seem to have limits on how much more

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