Paycheck-to-Paycheck on a Six-Figure Salary
“A long, long time ago
I can still remember how that music used to make me smile
And I knew if I had my chance
That I could make those people dance
And maybe they’d be happy for a while”
— American Pie, by Don McLean
Why is the easy life so difficult to achieve?
It should be simple enough, right?
To have the freedom to live how and where you choose. To be your own boss. To spend your time doing the things you want to do…instead of the work you need to do, just to make ends meet.
To wake up when you want…not when the alarm tells you it’s time to get out of bed. To finish a task when you feel you’ve accomplished your goal…not when someone gives you permission to leave your desk.
Is that really so unreasonable?
You’d think not. But observation suggests attaining the easy life mustn’t be as easy as it sounds. Otherwise, everyone would be doing it, right?
Only, they’re not. Clearly.
Part of the reason appears to be financial.
Research suggests that more than half of Americans (56%) have less than $1,000 in their checking and savings accounts…combined. Almost a quarter (24.8%) have less than $100 between themselves and a zero balance.
It’s tough to be free and easy if you’re struggling just to keep your head above water.
And without a bit of “fall back” money, taking risks—however small—becomes hard too. Just moving from one job to another turns into a chancy and stressful undertaking.
Never mind taking a year off to write that novel…or start a business…or to travel to the other side of the world to pursue a long-shot romantic impulse. When strapped for cash, these ideas, and plenty more besides, become complete non-starters.
And yet, that’s the case for most ordinary folk…
Data from Bankrate.com reveals three quarters (76%) of Americans live “paycheck-to-paycheck,” with little or no cushion to fall back on in the event of an unforeseen disruption to their income.
And it’s not just people at the lower end of the wage distribution tables, either.
Similar surveys from SunTrust Bank say one in three people in households making $75,000 or more per year live paycheck to paycheck. So do one in four people in households making over $100,000.
But wait a minute…$100,000 per year for a household…the magical “6-figure” club…didn’t that used to be a sign of affluence? Or at least, modest comfort?
Depends on where you live. Depends on your spending habits. Depends on your family setup. Depends on your tax structure. Depends on…a lot.
One “budget calculator” we saw suggested a family of four—two parents, two kids—living in New York City, would need an annual salary of $94,676 to pay for “basic living expenses like housing, food, and transportation.”
In Washington D.C., the same family would need $89,643…
In St. Louis, they could swing it on roughly $64,000…
The budget calculator we reviewed—from the Economic Policy Institute—took into account “average” costs…paid by “average” people…probably thinking “average” thoughts…
The figures do not include savings. Nor, we hasten to digress, do they appear to include much imagination!
Your Australian-born editor lived in New York City for a spell during his early twenties. Home was a shared apartment in the South Street Seaport area of Lower Manhattan.
The “aroma” around the old fishing port area may have been sub-optimal…but we did have a fantastic view of the Brooklyn Bridge from the rooftop.
Still, we had no car…no gym membership…practically no furniture…
…and no worries.
True, we were perennially, hopelessly single. And—on a not unrelated note—had no children. Times were more…”streamlined.”
Being a young and impressionable foreigner in a big city, we surely paid more than necessary for some things…but, owing to that very same background, we probably finagled a few cheap, “mates’ rates” deals on others.
From what we can remember, we didn’t need a sky-high income to enjoy our stint in the Big Apple. Which was lucky enough, since we didn’t have one at the time anyway.
Of course, we weren’t sipping Grey Goose martinis in the Algonquin lobby or putting the knife to sublime Kobe cuts at the Old Homestead either.
Instead, we invested in what our late grandfather would probably call “real world” experience…and emerged feeling all the richer for it.
(Oddly enough, when we did return to the city many years later, we were only a little surprised to discover that some of the pricier restaurants and cocktail lounges were nothing on the seedy dive bars and late night beaneries recalled from our misspent youth. Ah…nostalgia!)
But back to our story…
There’s nothing particularly surprising about America’s paycheck-to-paycheck narrative…except that people are surprised by it at all.
In real terms—that is, after adjusting for inflation—household incomes in the U.S. have remained stagnant for an entire generation.
Back in 1972, the same year Don McLean released a little song called American Pie, the average American income was “only” $11,859 per year. Now, that might not seem like a lot of pie…
But consider that a new car cost only $3,853 back then. Rent averaged $165 per month. And a year’s tuition to Harvard University could be yours for $2,800.
Today, the average car (according to the Kelley Blue Book) will set you back $33,560…
Rent, even in mid-sized cities, is often north of $1,500 a month… (In New York, NY, the average monthly rent for a one-bedroom apartment within 10 miles of the city is $3,490!)
And what was once an affordable tuition to the nation’s top-ranked college will now set the aspiring student back more than $45,200.
Throw in room, board and “fees,” and you’re looking at over $60,000 per student…far more than most people even earn in a single year.
So, despite seemingly “higher” wages, the average American family today struggles just to stay in the same spot…never mind actually “getting ahead.”
But it’s important to understand that this is no accident. Quite the contrary…
More on the system you’re up against, and how to gain real independence, when we return.
Image ©iStock.com/Peeter Viisimaa
Fairytale of New York
In the hazy days of Joel’s youth, many a young dreamer descended on the Big Apple, content to slum it in a one-bedroom Brooklyn apartment until they finally made it. In 2016—with the median rent of a one-bedroom apartment about $3,490—it would take the earning power of two well-paid professionals to “slum it” in New York City.
According to Zumper.com’s National Rent Report: January 2016—an index of median rental prices in the top 50 highest-populated U.S. cities—San Francisco, New York City, Boston, and Oakland are practically impregnable to young people trying to start-up. Below are the top 10 cheapest cities to rent a one-bedroom apartment on Zumper’s index.—Ed
1. Wichita, KS $460
2. Detroit, MI $550
3. Tucson, AZ $560
4. Indianapolis, IN $560
5. Albuquerque, NM $570
6. Tulsa, OK $590
7. Memphis, TN $600
8. Cleveland, OH $600
9. El Paso, TX $610
10. Oklahoma City, OK $640