Living paycheck to paycheck while making a combined $500,000 a year is considered “normal.”

No Seriously.

Financial Samurai ran an article not long ago titled “Scraping by on $500,000 A Year.”

It was a good start in defining “wealth” against “expenses” in big cities.

Here’s the aforementioned article:

http://www.financialsamurai.com/scraping-by-on-500000-a-year-high-income-earners-struggling/

~~~

In any major metro area of the United States, a reasonably priced older home in a reasonably nice neighborhood [read: reasonably nice, not top of the line] starts at around $1,000,000.

Anything less is either a small condo or a tear-down.

I know, right.

In order to qualify to purchase one of these homes, you’ll need an income of approximately $300,000 no matter what anybody tells you to the contrary, including yourself.

It also warrants noting that 6000 ft. lots are priced somewhere in the $850,000 range, and with construction costs for a custom home on the same lot running about $1,200,000, you have to double your earnings.

You’ve now in over 2.1 million and haven’t forked over a single electricity bill, not to mention property taxes that will run in the $55,000 range…and I haven’t even started calculating the cost of a gold-digger.

This is why so many homes around here [and in places like, say, Beverly Hills] are held in family estates, and then gifted to offspring in the form of nest eggs.

All the kids have to do then is cover are property taxes and upkeep, which means they can get by on $250,000, as long as they don’t have kids, own $100,000 cars, or take vacations.

Hell, private school education alone rivals property taxes, so you can see where this is going.

No wonder people who earn $500,000 consider themselves upper middle class.

Of course, if they earned $500,000 in income and had 5 million in a diversified investment portfolio, then they’d most likely consider themselves upper, upper middle class.

Doing the math, they’d be looking at a yield around $400,000 on the 5 mil taxed as capital gains, and $500,000 taxed at 39%.

Now they could take three vacations and still save the $7300.00 at the end of the year.

As for Financial Samurai‘s breakdown…

Interesting breakdown, but that “$7300” left over wouldn’t have a shot in hell of making it to the savings account for most people I know.

Why?

Because 3 vacations a year for a total of “$18,000 a year” is a joke. It’s easily twice that amount.

Round trip business class tickets alone from Houston to Los Angeles are in the $1500 range per person.

Hotel rooms in the “One king bed, no sitting area” will run $685.00 per night, with small suites starting in the $1700.00/night range at places like the Beverly Wilshire in Los Angeles.

You also must accept the fact that miscellaneous expenses are going to fall in the $1500.00 range even if you don’t happen to wander into Barney’s.

You can see where this is going.

HOW THE “AFFLUENT” SEE REAL WEALTH

The following is a letter copied verbatim from the web from a very successful couple.

While some of it may shock you, it’s representative of how many in my general demographic see real wealth.

“I have no idea how anyone could live on $500,000 a year. I make $1.0 million a year as an equity partner in a large international law firm and through real estate investing. My wife makes $1.5 million as a cosmetic surgeon. We live in DC. We have 2 kids. After all of the taxes, childcare, mortgage payments, car payments, etc., we are literally living paycheck to paycheck. Our house is about 2.5 million, nice but not exorbitant. We each drive 911s and we have a farm in the country and a house at the Eastern Shore. Again- nice, but hardly movie-star living and there are many people who have much nicer farms and shore houses than we do. I think that to live comfortably in a high priced area like DC, you really need $4 million a year. This will allow you to save some money and live an extremely comfortable life style. Fortunately, we are relatively early in our careers– early 40’s. Within the next 3-5 years, we will be at $4 million. There really is not a moment to lose in this game if you want to live comfortably without worrying about money.”

You can’t make this shit up.

Now you know why $500,000 a year is chicken scratch.

LESSONS LEARNED

1] Be an equity partner in a large international law firm or investment house.

2] Be a successful plastic surgeon.

3] Be an a-list celebrity.

4] Be a world-class pro athlete.

5] Be a member of the lucky sperm bank.