What if you made $500,000 year?

Discussion in 'Business, Investing & Finance' started by divits, Mar 28, 2019.

  1. divits

    divits A Muffin of the Studly Variety
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    I saw this article and thought it was interesting. It's kind of fun being a voyeur into how other people spend their money.

    Here's a budget breakdown of a couple that makes $500,000 a year and still feels average

    [​IMG]


    These people were getting dinged pretty hard by people who were angry at them for some reason. I'm not sure why. If they were crying about their situation and claiming poverty I could see why. But as far as I know they weren't.

    People On Twitter Shred Tone Deaf Budget Breakdown Of Couple Making $500,000

    I certainly would do things differently than these folks but I'm not sure they are doing things too outlandishly considering they live in New York. How would you spend $500,000/year?
     
  2. bradgator2

    bradgator2 Internet Bully
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    I would relax on the vacation budget. I would have not put myself in a 1.5M mortgage. I would have done something different with the vehicles. It's great they are saving $36,000 a year in a 401k... but I would make every attempt possible to put away WAY more than "just" that.
     
    • ChiefGator

      ChiefGator A Chief and a Gator, Master of the Ignore list!!!!

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      They are upper middle class folks who live in a high tax state with children they insist need a lot.

      If I made that 500K today, I would be doing a lot of charity work with the excess. Keep the taxes, about 50K for expenses, the rest for either some more investments or charity. I might start a small consulting business to help others to success.
       
      • Bushmaster

        Bushmaster Well-Known Member
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        That is very pie in the sky type numbers. Without getting specific, 40% tax rate is way too high. They are off about $60,000 on their tax bill.

        Car payments are BS. Works out to $400 per month per vehicle. Not buying those vehicles for that.

        $200 per month per person on clothes?? Is your name kardashian?

        $42,000 for childcare??? You can hire your own teacher and home school for less than that!!

        $60000 mortgage for a $1.5m house? You can't pay the interest on that.

        These are some BS numbers.
         
        • Concrete Helmet

          Concrete Helmet Hook, Line, and Sinker
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          I'd be.....pissed....
           
        • Gator By Marriage

          Gator By Marriage A convert to Gatorism
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          Agreed. In addition, several of their expenses are tax deductible, which would lower that tax payment quite a bit. Also approx $450/week on food seems pretty high; I know it's New York, but jeez. However, let's assume for a sec, that these numbers are all precise and accurate. If these two are halfway competent attorneys they are fairly marketable and should move. I guarantee you that if Mrs. G and I were pulling in 500K/year, we would be saving a lot more than they are and having more luxuries than this family (despite the fact we have two kids starting college this fall). My house cost less than half of what theirs' did and yet I suspect, given our location in the south, it's probably as nice or even nicer. People who continue live in the NE, but have the skills and means to move south, but don't, are idiots. If for nothing else do it for the weather.
           
          • Politigator

            Politigator L-boy's Cousin
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            Say $425k federal taxable income:

            Federal income tax: $125k
            State income tax (approx 6.5% effective) $28K
            NYC income Tax (approx 3.5% effective) $12k
            Employee FICA max times 2: $16.5k
            Medicare: 1.45 * 475k = $8300
            ACA Medicare 0.9 * $225k = $2k

            125
            28
            12
            16.5
            8.3
            2

            Total 192k total tax

            That is actually higher than their $185k estimate.
             
            • Bushmaster

              Bushmaster Well-Known Member
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              Yeah, except you suck at math and taxes. I plugged that in my tax software and the numbers I posted were straight from there.

              I sorta do this **** for a living.
               
            • ChiefGator

              ChiefGator A Chief and a Gator, Master of the Ignore list!!!!

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              He assumed that the income was self employment, perhaps that is some of the difference? And he is thought to be an accountant as well, not a tax one though.
               
            • Politigator

              Politigator L-boy's Cousin
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              I tried to be polite about it, but apparently you want a pissing contest.

              I spelled it out for you. I used actual tax tables. I showed you step by step.

              My numbers could have been off plus or minus $10k as I don't have all the exact info but they are close enough. Prove where my numbers are materially off. You can't and you won't. You'll just crawl in a hole and throw out insults.

              If I had to guess you forgot about FICA and Medicare and ACA. Because as employees these are straight withholding and normally don't show up in a tax return. But nonetheless they are a tax that should be deducted from their income. If they were self employed that would be different.

              I don't care if you do it for a living. A lot of CPAs suck and **** up all the time.

              Chief, I actually am a CPA. But I don't practice and don't profess to be an expert. But this is pretty basic stuff and I'm scared for bushmasters clients that he doesn't get it. I did not assume they were self employed. I only included employee share.

              Edit: one thing I did assume was a $25k standard deduction, but assuming they itemize it would be higher. We don't know mortgage interest, but let's say $40k+$18k charity+$10k state local max = $58 vs $25k. But I assumed between $14k to $25k medical insurance employee contribution income reduction which is not listed at all. So those 2 mostly offset.

              Again, the numbers are materially correct.
               
              #10 Politigator, Mar 30, 2019
              Last edited: Mar 30, 2019
            • Politigator

              Politigator L-boy's Cousin
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              I get the point of the article. You can have a high nominal income in a HCOL place but don't feel rich due to taxes and high cost of living. I think most "upper middle class" people probably get this. But to middle class and below these numbers are unimaginable.

              Personally I see these expense as irresponsible Given they are saving less than 10% of their income and have student debt.

              - vacations - that is absurd amount. They are living like they think they are richer than they are
              - autos- until at the income level you are saving over 30% of your income you don't need $50k cars.
              - child care - I get good child care is expensive but this is higher than most national public school colleges.
              - child lessons - seems excessive
              - clothes - they could make due on half of that.
              - house - seems high, but it is HCOL area so I'll reserve judgement on that one.
              - charity - you shouldnt be throwing gobs of money to your college until you've gotten your own **** together. Paying student debt and at the same time making big donations to your alumni is dumb.

              You could easily cut $50k out of that an apply it to savings or student debt reduction, depending on the rate.
               
            • divits

              divits A Muffin of the Studly Variety
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              I agree on most. I'm not sure about the vacations though. If I lived in NY I'd want to get the hell out of there as often as I could.
               
              • Politigator

                Politigator L-boy's Cousin
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                I would not have an issue with that amount of vacations if you were saving more and had student debt paid off. You can take family vacations for a lot less than that.
                 
              • Bushmaster

                Bushmaster Well-Known Member
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                I used my actual tax program, not some tax table. Your health insurance contribution would be deductible because of 7.5% floor lmitation, but then you would claim "I was aumuning SE taxpayers." Before starting my own form, I was a tax manager for a top 20 firm. I am licensed in multiple states and was also a peer reviewer.

                But you can keep wanting to argue the tax piece when there 5-6 other points in the post I made. Makes no difference to me.
                 
                #14 Bushmaster, Mar 31, 2019
                Last edited: Mar 31, 2019
              • Politigator

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                I wasnt trying to start an argument. Only demonstrating that 40% effective was plausible given the assumptions, if you include all forms of taxes.

                Actually no health insurance or medical coats are even mentioned, which seems unlikely. I originally assumed they were employees and had health insurance costs coming straight out of income, which is excludable from income, but in actuality no health insurance is even mentioned.

                Yes, I did miss those itemized deductible items.
                 
              • ChiefGator

                ChiefGator A Chief and a Gator, Master of the Ignore list!!!!

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                Not every CPA is a tax expert. I know someone who passed the CPA exam on the first try, yet is not a tax expert. Sorry to disappoint you.
                 
              • Politigator

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              • 78

                78 Dazed and Confused
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                The assumed 40% effective rate is an attempt to account for payroll taxes.
                 
                • MidwestChomp

                  MidwestChomp Fun was the goal and we hit the bullseye
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                  They are obviously not good with money.
                   
                  • Bushmaster

                    Bushmaster Well-Known Member
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                    This fact should be discussed more in this thread. They flat out suck with money.

                    I have a married couple client with over 300k gross income. NO savings, no interest income, no dividend income, put less than 5k a year in retirement, and always worried about how much they will owe. CC maxed out, house at beach, over paid for the one they live in, kids in college having to borrow money for student loans.
                     

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