A reader asks:
I need Ben to address the viral NYT story about the “middle class” couple making $500k in New York. As a flyover state employee, I don’t know exactly what it’s like to live as coastal elitists, but these people can’t be serious, can they?
The story in this story New York Times This angered a lot of people on the internet:
Typically when you see a story like this you should assume it is an anger trap. News publications, blogs, and newsletters have learned that one of the best ways to get attention is to piss people off.
$400k a year is enough to live paycheck to paycheck in San Francisco!
Here’s how AI will lead to a major recession and 20% unemployment!
60% of the population cannot find $400 for emergency expenses!
Stories like this are widely shared because they confirm some people’s priorities, outrage others, and then get dunked on by people who like to debunk outlandish claims. Rage baiting actually works.
But The New York Times is producing a series about what it’s like to live in New York City at various income levels:
I actually thought this article about the family making $500,000 a year living in New York was interesting because people don’t often talk about their budgets out in the open like that.
They spend $4,200 a month on day care. They rent a one-bedroom apartment for $3,900 per month. They live just across the street from Central Park, but it’s only 800 square feet, they share a bedroom with their son and have a cramped kitchen with no sunlight.
But they enjoy living in the city and are happy to make these concessions:
“When we talk about the possibility of moving to the suburbs, we both really dread it,” Mr. O’Leary said. “I don’t like driving. Anala doesn’t drive. I feel like we’re stuck. We really value being able to walk everywhere.”
These kinds of decisions excite me.
Some people look at these numbers and think these people are crazy. Others understand that if you want to live in a big city like New York, it costs a lot of money and you don’t have a lot of space.
This is the part that gets people up:
They earn half a million dollars a year and consider themselves middle class. When rich people describe themselves as middle class, it’s bound to make people uncomfortable, and for good reason. This family is not middle class. They are rich.
Their income places them in the top 2% of income earners in America. they can save That’s $120,000 a year, which is more than the median income for all of New York City (about $80,000).1
So why don’t they? to feel rich?
They live in an area with a high cost of living. But it’s a choice. They don’t want to live in the suburbs.
The biggest reason they feel middle class is because they are surrounded by people who are richer or richer than themselves.
Upper West Side It has a much higher average income than the rest of the city:
About a third of residents earn $250,000 or more.
It is estimated that it currently exists 400,000 millionaires More in New York City than any other city in the world. This number has increased by 45% in the last decade.
My favorite line of the series Fleishman is in trouble This is when Jesse Eisenberg tells Claire Danes: “Excuse me, I make almost $300,000 a year. I’m a rich man from every culture except the 40 stupid blocks (of Manhattan) that you insist we live in.”
Almost no one thinks of wealth in absolute terms these days. Wealth is relative to your peers, your neighbors, and the people you see living lavishly on social media.
If you make a lot of money but choose to live in the same neighborhood as other rich people, that doesn’t make you middle class.
Some people buy boats. Some people go on expensive trips. Some send their children to private school. Some people get country club memberships. Some people want to live in walkable cities with lots to do.
These are all luxury decisions.
Therefore, being rich is not a number; It’s a mentality.
We touched on this question in this week’s new Compound Ask program:
We’ve also covered questions about how much you should save for retirement in your 30s, the reasons you should or shouldn’t own bonds, how military veterans should save their money, and how to make up for lost time if you started saving for retirement late.
Further Reading:
Millionaires and Delusions
1And I’m guessing they save more than that in their retirement accounts. Also, a good rule of thumb for the middle class is that average income doubles around two-thirds. Let’s say it’s $160,000 in New York.
