The New York Times recently published You Try to Live on 500K in This Town in an attempt to explain why half a million dollars a year may not be adequate to live on in New York City.
You: Why half a million?
That’s the new proposed salary limit from President Obama for executives working for companies that receive significant governmental assistance.
You: Why New York City?
Many potentially affected executives work in New York.
You: Half a million a year seems like a lot, even in New York.
It is. While it’s clear to me that half a million doesn’t go nearly as far in New York City or even the close exclusive suburbs of New Jersey, Long Island, Westchester, or New Jersey, as it does in the rest of the America, earning $500,000 a year is more than survivable.
Yet the article paints a very different picture:
A modest three-bedroom apartment . . . which was purchased for $1.5 million, not the top of the market at all, carries a monthly mortgage of about $8,000 and a co-op maintenance fee of $8,000 a month. Total cost: $192,000. A summer house in Southampton that cost $4 million, again not the top of the market, carries annual mortgage payments of $240,000.
Hello? Who says you’re entitled to a second home valued at eight times your annual income? Does it matter if it isn’t “top of the market.” Are you implying this is frugal or even modest living? And who is defining “top of the market” in the first place? Of course you’re going to struggle on annual mortgage payments of $240,000. But this isn’t poverty. This isn’t even struggling. Let’s be clear: we’re talking about a second home in one of the world’s most exclusive neighborhoods, (even if their neighbor’s house (owned by Mr. and Mrs. Jones) is worth $6 million.)
It gets worse:
A chauffeur’s pay is between $75,000 and $125,000 a year.
Oh please. Take a taxi. At one point in your life, a taxi was a luxury over taking the subway (as most mortals do proudly.) A taxi is point to point transportation and (absent the rain), there’s little waiting.
Truth be known, in the early part of the article, the problem was well stated:
As hard as it is to believe, bankers who are living on the Upper East Side making $2 or $3 million a year have set up a life for themselves in which they are also at zero at the end of the year with credit cards and mortgage bills that are inescapable,” said Holly Peterson, the author of an Upper East Side novel of manners, “The Manny,” . . .
So there you have it. Proof positive of what I’ve been telling everyone for many years: if you spend everything you make, you’re living paycheck to paycheck. With a slight hiccup, you’ll struggle to maintain your lifestyle – especially on a measly $500,000 a year.
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What do you think about this? See it differently? While we can even discuss whether the $500,000 limit will be remotely effective or is appropriate, I’m curious as to those New Yorkers and non New Yorkers agree or disagree with the premise of the NY Times article that we should feel the potential pain of others going from what I imagine is the top 0.1% of the world to merely the top 0.5%.
This doesn’t seem like the pain most of the rest of America is feeling.
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Excuse me while I shed a tear for all those struggling to make ends meet on a poor budget of half a million dollars a year.
I feel for you…I truly feel for you.
(END SARCASM!)
That article is sad…
I agree with your comments, Michael.
Speaking as someone who moved from New York City to Austin, Texas, it certainly is true that your dollars stretch much farther outside the NY area, even for someone earning significantly less than an executive salary in either city.
While dollars do stretch farther out of NYC, keeping up with the Joneses and who has the best toys is what gets people into trouble in NY and its suburbs in the first place. It is a sign of the times a la Gordon Gekko when you think you cannot live without a driver, nanny, cook and other amenities that have come to define you. As you have always stated paycheck to paycheck applies to millionaires too.
It does not really matter what your income is – if you spend it all you will be faced with some difficult choices if your income falls (or stops completely) – as many previously high income earners are learning. Given that this happens everytime there is a downturn in the economy (even if this time is more severe than the tech bust and the 1987 crash), there really is not excuse for not being aware of the need to live well within your means.
I understand that NYC is much more expensive than most cities in the world but you don’t have to live a lavish lifestyle and having a second home is in my opinion lavish unless you can truly afford it. I think you can live quite comfortably on that half a million even in NYC and you could live extremely well in most of the US.
As for living from paycheck to paycheck making that much money requires effort and a lifestyle that is quite lavish.
Those poor indigent bankers. Of course, the outrageous salaries are part of the reason NYC is so expensive. So, maybe a mass pay-cut may bring the prices down. Look on the bright side bankers!
Bloody hell…
What, take 10% of that and you’ll find the average New Yorker’s income.
Rich people are morons. I could live off 500,000 a year, in fact, I could live lavishly off 500,000 a year with plenty to spare and save.
Hell, I’d take one year of that, and I could last a decade easy.
Come on people, learn some economics! If these executives can\’t make more than $500k, many will move to a country where they can. The net loss of talent and money would stunt growth indefinitely. If you don\’t have the education or dedication to make $500k a year, then you have no reason to be jealous of people who do.
Last week, I was standing at a bus stop as a man next to me started speaking to me. Not too far from the bus stop, within view, was an outdoor trapeze school. People (most likely tourists) paid $20 for a brief lesson. The man complained how stupid those people are for spending $20 for a couple of swings, while he can get by with $20 for two weeks! (It was then that I realized the man is homeless.) He took out a small plastic box and showed me some things he’s been stowing away in there; cigarettes (down to the filter), some seeds, gum, etc. This is what he lived on.
To the folks complaining about how stupid these execs are, saying moronic things like “Oh, puh-lease, I could live lavishly with a $500k salary! These guys are spoiled idiots!”, you are just like the homeless man. You are taking the figure *out of context*, i.e., imagining having someone else’s salary in the context of *your* lifestyle.
The rational thing to do would be to move to a less affluent neighborhood (e.g., Brooklyn) where you won’t feel pressured to keep up with your UES neighbors (who are probably struggling just as much but try really hard to hide it).
However, once you’ve had the taste of UES living, it’s difficult to downgrade. From your perspective, it seems like an easy and obvious choice, and you make fun of these people for not making that choice.
Before you cry and moan about these execs, keep in mind that there are plenty of people who earn less than you that would say the same thing about you.
I was fine until I got to the comments toward the end. There are several issues being discussed here, but all in a mish-mash. One issue is: How much can you live on? This is addressed to the individual, and out of the context of one\’s lifestyle. Another issue is: What can/would you give up? What is excessive to one may not be to another. I think that Mike\’s point here is that, if you are living paycheck to paycheck, no matter what your salary, that is a mistake. Yet another issue is: How do we value certain skills? One comment above suggests that making $500K per year requires only dedication and education. It also involves doing something that people value that much. Making money for other people happens to be one of those things. Making movies too. And there are some things that require more dediation and education than banking, yet pay much less.
Thanks for the post, great information. People forget that making small changes can make a huge difference in their overall financial status.
In the old wild west gunslingers came to an untimely end because there was ALWAYS somebody faster than them. It was a zero-sum game to aim to be the ‘fastest gun in the west’.
Then in the Greed Is Good days, I saw the same thing happening with the Major Money Makers: it too became a zero sum game as there always was (and, still is) somebody with more money than you.
Now, I am seeing the same thing with frugality: “live off $500k a year … pooey! … I cna live off $50k a year”, but there’s always somebody who can live off less … all the way down to jacob at Early Retirement Extreme who lives on $6k a year.
And, if the measure is happiness … they will all claim to be happy with what they are living on.
So, I am at the $250k+ end. Why? Because I can … but I won’t whinge about it, and if I need to move to NY, well, I’ll sell the second home, fire the chauffer – actually, I don’t have one of these – and, give up my least favored mistress – actually, I don’t have one of them either
But, I DO have the money to comfortably live my chosen lifestyle
It just goes to show how NY Bankers and Corporate Types are out of touch with the rest of the country.
Plenty of chauffeurs make more than $125,000.The going rate for a chauffeur who is licensed to carry a weapon is about $150,000.