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June 06, 2007


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Interesting. If my household made $250k, I think we could save, oh, maybe 70% and retire in about 10-15 years.

To play devil's advocate, it is much easier to live off $250K in the midwest, then say, downtown New York. Not to say its possible to survive well on less then 250K in New York, because many people, including myself do it with much much less. But still, $250K should be plenty to survive on. Good lord.

This is hard to sympathize with, and I'm generally pretty compassionate to money problems.

But really, look at the rest of the world, people!

CNN Money ran a similar article a few months back, but they used a family living in the MidWest as an example.

They had a rental property sitting vacant for months, were paying for horse riding lessons, gymnastics/dance class, eating out often, using credit cards for everything, full-cable package, netflix, etc.

They had no idea how much they had coming or going. They were set up with a financial advisor who basically told them what you did: trim the fat and spend less than you take in.

Maybe it's a lack of discipline, maybe a lack of education. Some people just don't know how to handle money.

I think that we imagine that we wouldn't be in their position partly because that level of income would be a large step-up.

With a slow creep up the income ladder I can see how if you've always spent more than you earned and you then added in a little more spending with every paycheque you could get into this position.

Having said that, I'm sure the readers of FMF have enough awareness of the basics of personal finance that they don't spend more than they make regardless of how large their income gets.

The FairTax would save us all by allowing us to save instead of have our hard earned dollars confiscated by the government!

This is the kind of sob story New York Magazine runs periodically. It's true that the things people in the midwest might be able to take for granted cost a lot more here, you can't count on free public education, etc, but still... $250k is a lot of money and anyone making that much should still be able to prioritize things so they can save money!

"I think that we imagine that we wouldn't be in their position partly because that level of income would be a large step-up."

I'm single and currently make half as much as the listed amount. I don't think it's that big of a step up.

Having said that, I don't have a family of my own. I am not sure how difficult it is to cut spendings when it's not in your complete control.

This article is very disingenuous. If you read the text carefully, it's all about people's responses to a subjective survey about how "easy" or "hard" it is to save "consistently" and whether things "get in the way." No word from MarketWatch about what any of that means, but they'll be glad to let you assume you know.

In fact, every response to the survey is according to the standard of the person filling it out, so all the article's references to high income people saying it's "hard" to save "consistently" don't really mean anything unless we're given the standards that these people hold themselves to. Maybe they'd like to save $100k per year but bills "get in the way." Maybe they don't save "consistently" because they save their six-figure bonus every year and nothing the rest of the time. Instead of addressing such matters, the article gives us a bunch of fuzzy adjectives and an incredulous tone and leaves us to fend for ourselves. The first paragraph of the "Control and Awareness" section is about why high-income earners don't save "more." More than what? The article won't tell you.

The only piece of information that would have some meaning if the number weren't so small is the statistic about people finding it difficult to make ends meet. That number was 1 in 10. But even that isn't surprising. I would think that at least 1 in 10 people from every income level everywhere in the world are unwise with their money.

Let's also not forget the sponsor of the survey: HSBC. This is an institution that makes more money when people save more and less money when people save less. It is clearly in their interest to portray things in a way that will increase savings rates.

MarketWatch, of course, knows all this and published the article anyway. I wonder if journalists will ever start treating audiences with a little respect.

Kevin --

I wouldn't dispute the fact that the media often stretches the truth to make a story sensational, but your example above of saving the $100k is just about as much of a stretch as the examples you give about MarketWatch.


In my experience it isn't.

It's not how much you make, but how much you keep. Most people earning $100k are living at $110. Bad math in any book. It's best to just live below your means: spend only $75k of that salary and save the rest.

Kevin --

A few more specifics:

1. People are asked to give subjective opinions all the time in market research (I know, I've been doing it for almost 20 years.) THink of it this way -- have you ever been asked to rate a product on some scale (like 1 to 5?) That's subjective (your "1" could be someone else's "5".) It doesn't mean the information is useless.

2. If someone would "like to save $100k per year but bills get in the way," isn't that just the point the piece is making (in other words -- people would like to save money, but instead they spend it.)

3. If I saved my bonus every year and had done so for years, personally I would answer that I do save consistently.

4. Just because your personal experience says one thing doesn't mean that it's an experience that's common to all or most or many or even some others. It could be unique to you. Then again, it may not be, but you nevr know. You can't just say that because you do it one way so do many others.

5. Other pieces of information (such as the posts I've done on "it's not what you make, it's what you spend" and even the link to the "smart people" post above point to the same thing going on as what this article is saying. In short, people of all incomes simply spend up to (or more than) their income on a regular basis.

6. Simply because a survey is sponsored by a company that would like the results to be true doesn't mean the information is false. I've worked for several Fortune 500 companies and we'd do research all the time. When we found something that was both true and helped us, we'd release it to the press (like was done here.) If we found something true but didn't benefit us, we wouldn't release it (why do so?) But we wouldn't lie simply to make our point. Besides, if people making $250k start to save, how much of that do you think will go to HSBC? Probably not much. Most will go to Vanguard, Fidelity and the like.

7. Journalists will get away with whatever they can get away with, so it's good to question their motives and facts. But you've taken it to an extreme that seems just as biased to me (for the reasons noted above.)

The horrible truth is that most people live to their income. If you were to take someone who makes $50k per year and give them a salary of $250k per year, it would not be long before that person was living high on the hog and having trouble saving money.

Discipline is the only answer to growing your savings and networth and most people with financial trouble don't have enough of it (yours truly included - that's why I read this blog).


I hear ya! And yup, financial discipline is what it's all about.


I really didn't think I was getting into a back-and-forth with my criticism of the article, and it's your blog so just let me know if this starts sounding too much like a forum, but since you address some specifics I'll offer my thoughts. I should reiterate by way of preamble that the point of my original post was a criticism of manipulative journalism and not a speculation that all or most high-income earners are good savers.

Having said all that, to your points:

1) I actually do think the information is useless if it isn't compared with other opinions offered by the same people. In the product rating example, a "4" on a scale of 1 to 5 really doesn't mean anything unless you know something about the kinds of products that get 1's 2's 3's and 5's or about the history of the survey. Here, the article depends on the prejudices of the readers.

2) Yes, and that's why it's disingenuous. Someone wants to save $100k, but bills got in the way and they only saved $90k. The article implies that "get in the way" means "precludes entirely." This is apparently effective rhetoric, but it is not correct.

3) You probably would. Others might. We have no idea whether the survey respondents would, but the article would have us assume that they do.

4) What I meant was that I have experience with many such individuals and have observed behavior that is not consistent with the prejudices that the article panders to. You said my examples are "a stretch." I say they are not speculative and I have found them to be common.

5) I agree with this completely. My point was about the MarketWatch article and not your blog post (which, IMHO is entirely appropriate taken as a whole).

6) I'd agree that we shouldn't discard the survey simply because HSBC is conflicted. But "savings" as described in the article refers to short-term liquidity that would go to a commercial bank like HSBC. And I'm not saying they'd lie. But would they define "consistently" "more" "get in the way" "hard" and other weasel words in a way that would potentially not conform with their audience's expectations?

7) I really don't see what was biased in my analysis. I point out some possibilities that, by their existence, expose the weakness and dishonesty of the journalism. Remember, I am not making a case about the quality of savings rates among high-income earners. I really have no idea. Maybe I'm not giving the writer a fair shake, but I'm not the one tickling populist illusions about how the other half lives.

I can see Kevin's point. If I saved a 100K bonus just once a year, even if it was consistently every year, I wouldn't say that I save money consistently. It's a vague term that carries a good deal of margin of error with it.

The other thing that isn't mentioned, is what constitutes a "bill." If it's a 15-year mortgage on a 870K house (the median where I am in San Mateo County California) where they are building up tons of equity, I could see going through 250K of income a year. This is especially true if it's 250K is gross income and not net income.

It's still a lot of money to live off of even in this scenario, but I'm guessing that most of the households with 250K incomes don't have an "average" home.

Factoring all this in, I'm betting that half of the 34% is really in any kind of financial difficulty due to lack of saving. In fact, it might turn out that the homes appreciate more and it becomes a form of "savings" as it has for many baby boomers.

Kevin --

I'll leave it to the readers who read this post to determine what they think the truth is.

I know we are talking about shades of gray here, but there has got to be an annual dollar figure that you can say (in any given city) will cover the average person's living expenses. Regardless of what that figure is, it should be a baseline that everyone can know I CAN survive as long as I make $XX,XXX per year. Anything over and above that is a LUXURY, it is NOT needed for survival.

I am sure that figure is quite a bit less than $250K.

Putting on my Millionaire Next Door hat, I could argue this isn't really all that surprising. A lot of the people surveyed are probably high level executives or other professionals that are in jobs that come with an expectation that you "show off" your high income. You are expected to drive a luxury car when you entertain customers/clients/colleagues, wear expensive clothes, live in a nicer-than-average house in a posh neighborhood, throw expensive parties, contribute to political/charitable causes, etc. etc. In many professions you would be looked at strangely if you lived a frugal life, people would say you don't "fit in"--in some cases you really wouldn't be as successful in maintaining and raising that income level if you didn't spend accordingly.

Think about it--who is likely to be making $250K/year in income? Lawyers, doctors, CEOs and other C-level executives, top salespeople. Picture this: your colleagues and superiors are all driving brand new high end BMWs, they're all wearing high end suits, they live in the nicest neighborhoods and throw regular parties to network with customers, suppliers, and business partners, they have their kids in the best private schools and activities. Most are probably dual-income households who work so much they need nannies to take care of the kids, eat out on a regular basis, and take vacations to reduce the stress (and talk about all the great vacations they take with colleagues). To "fit in" with this crowd and succeed--to get promotions and raises and make sales and be considered "one of them"--you're expected to live that kind of lifestyle.

If you drive up in your 10-year-old Honda Accord, wear discount off-the-rack clothes, live in an modest house in a modest neighborhood, you don't throw lavish parties, your kids are in public school, you take modest vacations, etc.--you're going to look "weird" to your colleagues, and it's quite possible you won't be given that promotion, you won't be given the key account, you won't might not even last very long at the company.

Their standards for what is "enough" are also different--they might be saving $20,000/year, and think they're not saving enough. To keep their lifestyle in retirement, their "retirement number" is pretty darn big.

Contrast that with a business owner in a "low glamour" industry, say one where you drive a pickup truck and wear boots and jeans to work, but who also makes $250K/year in income--that person is probably going to have a lot less trouble saving and getting wealthy.

Is it really that surprising that 1/3 of the people in that income bracket say they can't always save as much as they might like to? I'm not saying you should pity all the high income people--certainly that kind of income gives you a lot of choice, and they should be able to live within their means. But I'm not surprised.

I tend to agree with Kevin. As someone who has earned above the target income for the past 10 years, I would have probably answered the question negatively - as in I find it hard to save consistently. That's because my savings are not consistent.

Last year I saved (and invested) over $300K. But the year before it was only $50K.

Is that consistent? No.

Am I satisfied? Actually, no.

Do I feel I am on target for retirement? No, not for the standard of living I want to maintain.

But none of this makes me a poster child for bad personal finance behavior.

Trust me, I'm still better off than 99% of the population.

If you ask me, that article was intentionally misleading and worthless. Only intended to make everyone feel self-righteous about how the other half does nothing but spend money and keep up with the Jones.

Wake up folks.

Miguel --

If this was the only case of this information being presented, I'd agree with you. But based on what I said above as well as Mike's comments, I think it's more the norm that people spend up to their level of income than not. I think the same principles that made The Millionaire Next Door so shocking are at work today too (if not more so.)

"To keep their lifestyle in retirement, their "retirement number" is pretty darn big."

Mike, You bet it's a big number. But if I don't meet that target number for some reason, then I have the option of scaling back to a more "regular" retirement.

And FYI, most of the people I know in the +$250K income category (including myself) are not the conspicous consumers you think they are. Do they sometimes drive BMW's and buy expensive houses - yes. But, they also save money for their children's educations, and invest for retirement too. The ones I know are fairly prudent about planning for the future, even as they seek to live well for today. Seven-figure net worths are not uncommon.

I don't think you all have to lose too much sleep over how the nation's to earners are going to fair in the future.


I have some real problems with the Millionaire Next Door stuff. For one thing, their methodology is highly flawed, not that there isn't some good advice. Live below your means no matter how much you make - as if I couldn't figure that one out.

I think, like the article, the MND books pander to a vision of how Americans would like to think of our society: The folks living large will get their comeupance, while the modest will always prevail.

Unfortunately, things just don't fit so neatly into these stereotypes.

Miguel --

Not that this is the case, but just because you and your friends fall into the upper level of income and don't have these issues doesn't mean it isn't the case for the group as a whole.

As a marketing professional for almost 20 years now the thing I see over and over again is that most people are unable to separate their personal situation and thoughts from the situation and thoughts of the target group. They generally assume that whatever holds true for them is also the case for the larger group. Oftentimes, this is not the case when true research is done.

Of course there is a portion of upper income individuals that save a great amount of money. But as we've seen in past posts, there is a disconnect between income and net worth (higher income doesn't mean higher net worth), so my guess is that there's a substantial amount of them that spend as much as they earn and more.

Point taken. I guess, we're both guessing, or at least relating to our personal observations, which may differ.

I just get sick of the media exploitation of the big-spender stereotype when its not backed up with some hard numbers. I know and work with a lot of high-earning people and the amazing thing is how most of them do in fact live below their means. These are intelligent people who do invest in the future and have done so quite effectively. Just because they drive a certain make of luxury car or live in a certain neighborhood that you might see as over-consumption does not make them irresponsible. They have a right to enjoy their earnings in whatever way they see fit - and most that I know do so quite judiciously.

BTW, where I really see people stretching their standard of living is where they've topped out in the $100K - $150K range. That seems to be the range where they are making six-figures and feel entitled to live the "six-figure lifestyle" yet amazed there isn't much leftover after house, cars, kids, etc. Once you get beyond the $200K - $250K mark, PF budgets seems to have a lot more flexibility.

Stay tuned. I have a post coming up in a week or so (yes, sometimes I write ahead if I'm traveling, expecting to be busy, etc.) on how the media and businesses twist the facts for their own benefit. You should enjoy it. ;-)

Hello. This report, the Pew report that I covered, and many other "alarms" are "non-information" "non-news" because all the unanswered questions make it impossible to walk away with anything useful.

Thank you.

Hi, I'm new to your blog and just wanted to say how much I enjoyed reading this post and all the comments from your readers.

As my husband I try to get our finances in better shape I find the PF bloggers to be a great source of inspiration. I appreciate how honest everyone is about their financial situations, which isn't the case in real life. Per the string above it's hard to know the real facts about how people are living within a target demographic. We life in LA and I make a low six figure salary. There are plenty of families I know who bought their homes 10 yrs ago for 260K that are now worth a million or more. I suspect these families make salaries between 100-200K and their kids are able to get financial aid at private schools. In cities like LA and NYC many private schools offer tuition assistance if your family makes less than 200K. If you think about families who make 250K with two children at schools that cost 20-25K each a year (sick but true) you can start to see how some families who make that much have trouble saving.

Let's see......I'll start this by saying that I am wife and I live on less than 75K, have a nice home and two paid for cars and NO DEBT! (other than our mortgage)

1) Do they drive two fancy cars?
Answer....YES, even though the article doesn't state that, I guarantee it's called "Keeping up with the Jones"

2) Do they live in MORE house than they need?
Answer...YES, I mean let's get real, do we really need 8000 sq ft and a pool and a poolhouse and an 8 car garage?

3) Are they eating out daily?
Answer...yes, it's probably laziness...rather than fixing food at home...going out every once in a while is fine...everyday is WRONG.

4) How about SAVING for college before the kids are college age...DUH!

The article was a big ZERO..not enough real world examples..just a bunch of writer mumbo-jumbo...must've been a slow day

Kevin's analysis is spot on. If you can't see the obvious flaws in this article you really need to educate yourself better. There's this incessant need on this board and a few other PF blogs to bring down the "rich" and try to laughably convince yourselves that the average middle class earner who is diligently saving is somehow in a better financial position than the average high income earner. I'm one of those people that earn over $250k and I can tell you that my idea of saving is much much different than that of my friends who earn typical "middle class" salaries. My average salary over my career of the last 8 years was around $200k, my average savings per year (not including 401k) has been around $70k per year (obviously it was lower in the beginning and grew each year). That is much less than I would have hoped to have saved per year but still well in excess of what the "average person" saves per year. So yes, in answering questions like those posed in the article I would of course say similar things - that I've had a hard time saving and that my expenses have been larger than I would have originally expected. But nonetheless its all relative. My closest childhood friend makes something like $40k, I remember some years back when he got engaged he was telling me about how he and his wife were working to save $20k for the wedding and expected it to take at least a couple years. Its all relative, to me that was a shocking reminder of how money is so different to so many people. If I saved only $20k in even 1 year I would feel I was essentially "broke" that year in terms of financial management. I'd would feel I spent everything, the $20k is meaningless - but for a lot of people that is a lot of money. At the same time I have colleagues who earn several hundred thousand or millions and to them they would consider saving $100k a serious failure. When there's an idea about a good stock to buy or something like that, I've seen these guys put a few hundred grand into it like it was nothing! It's all relative. To read this article and presume that the guy earning $250k per year has similar savings goals and a similar outlook on money as someone earning $50k per year is naive.

Jorge --

I don't think anyone's trying to "bring down the rich."

If this was the only time we'd seen large income adults have problems spending too much and saving too little, I might agree with you. But read the other posts I've written on the subject -- the issue comes up again and again.

Sure the issue comes up again and again because its people like you that bring it up! The articles that talk about this never provide hard numbers - there is never anything like "this % of earners over $250k save this % of their salary" ....or so forth. It's always anecdotal. And who says they are spending too much and saving too little? Its just the people they are profiling who are saying that. But again, their savings goals are in all likelihood VERY different from your savings goal. Like Frank has argued, people with high incomes also look to build high net worths. And "high" is relative. For someone making $250k a year, a $1 million net worth is not high, they may be shooting for $5 million and finding they're getting there slower than they hoped. My parents were blue collar workers, for them saving $10k a year would be great, for the $250k earner that is ONE bi-weekly paycheck. having a "hard time saving" is completely relative. To presume they are just spending all their money is plain wrong.

Jorge --

You and I are discussing the same thing on two different posts. See my thoughts on this issue here:

Really amazing! My income is much lower than $ 250k, but for now I am saving 50% of my income every month!

Dani Edson - From Brazil

I am always amazed at how easy it is to point the finger or make standard suggestions when observing someone elses habits. The majority of Americans and individuals posting on this page have no savings at all. Even if you were making millions, the majority of you would be as you are today, broke and making excuses. I have a savings, emergency fund, money market, and several retirement investments because I am disciplined.

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