Chris's current salary is more than double what his starting salary was. Eight years ago, I knew that an extra $10-15K would make life a whole lot easier, but would have thought that doubling our income would remove all possible financial pressures on us. Now, I know this to be false -- we still can't fix our topologically interesting basement floor without carefully considering where the money's coming from, and I'm still driving an 18-year-old van until we can save up the cash to replace it, just for two random examples. Life is far more expensive, in general, than we tend to think it is, and the activities involved in making $1.8MIL are likely not cheap.
There are three points I can think of to contribute to this discussion. The first is that, while gaining a luxury is merely nice, giving up that luxury is often very difficult. I read ukelele's description of a staggeringly expensive lifestyle and am almost struck dumb at the extravegance. But can you imagine sitting down with a kid who's grown used to that lifestyle -- excuse me, five such kids -- and telling them that they'll be staying home for all of summer vacation? Or that they will no longer have a nanny? Or that they will be attending the local public school next year? It would be a difficult adjustment. And if you're going to make all those adjustments, you might as well pick up and move to some small Central American country or some such where you can keep all those things, and take your money and earning potential out of the United States altogether.
The second point is the work it takes to earn that last $200K. Chris and I have some experience with overtime and earning extra money, albeit on a much smaller scale. Chris is salaried; our regular, predictable needs are covered. However, he sometimes gets paid overtime under certain conditions; since this money is recorded separately on his paycheck, it's pretty easy to see the effect that the marginal tax rate has on it. When an entire evening gets taken up with work, when that translates into lost sleep, a family supper missed, an evening at the park missed, and kids getting tucked into bed without Daddy there, we notice. In order for that evening to feel remotely worth it, the monetary compensation for it -- the takehome compensation, after taxes, 401(k) withholdings, etc. -- needs to also be something we notice. For us, that doesn't take $200K -- but if it were a regular pattern and we were already making $1.6MIL, on an annual basis, it very well might. And I can tell you that at our current marginal tax rate, it's getting rather borderline, and we're not that high on the tax rates.
The third point is that not all things that rich people spend money on are necessarily materialistic gadgets and luxuries. There are indeed people living rediculously opulent lifestyles -- but many rich people are living fairly reasonable lifestyles in houses that are simply very nice, but not ostentascious. Many of these people, instead of spending that extra money, would invest it or donate it. I have way more business ideas than I have the resources to implement; if I were to be presented with an extra $200K, one or more of them would likely get implemented. Similarly, I know of way more worthy charitable organizations than I am able to support currently; just for one random example, I read recently that the cost to provide clean drinking water for a refugee camp is around $175K. (That includes manufacture, shipping, installation, and maintenance, I believe, for a device specially developed for use in such circumstances.) Having to throw away requests for aid from worthy organizations trying to do worthwhile things that save lives is one of the drawbacks for us of making a fairly reasonable salary.
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There are three points I can think of to contribute to this discussion. The first is that, while gaining a luxury is merely nice, giving up that luxury is often very difficult. I read
The second point is the work it takes to earn that last $200K. Chris and I have some experience with overtime and earning extra money, albeit on a much smaller scale. Chris is salaried; our regular, predictable needs are covered. However, he sometimes gets paid overtime under certain conditions; since this money is recorded separately on his paycheck, it's pretty easy to see the effect that the marginal tax rate has on it. When an entire evening gets taken up with work, when that translates into lost sleep, a family supper missed, an evening at the park missed, and kids getting tucked into bed without Daddy there, we notice. In order for that evening to feel remotely worth it, the monetary compensation for it -- the takehome compensation, after taxes, 401(k) withholdings, etc. -- needs to also be something we notice. For us, that doesn't take $200K -- but if it were a regular pattern and we were already making $1.6MIL, on an annual basis, it very well might. And I can tell you that at our current marginal tax rate, it's getting rather borderline, and we're not that high on the tax rates.
The third point is that not all things that rich people spend money on are necessarily materialistic gadgets and luxuries. There are indeed people living rediculously opulent lifestyles -- but many rich people are living fairly reasonable lifestyles in houses that are simply very nice, but not ostentascious. Many of these people, instead of spending that extra money, would invest it or donate it. I have way more business ideas than I have the resources to implement; if I were to be presented with an extra $200K, one or more of them would likely get implemented. Similarly, I know of way more worthy charitable organizations than I am able to support currently; just for one random example, I read recently that the cost to provide clean drinking water for a refugee camp is around $175K. (That includes manufacture, shipping, installation, and maintenance, I believe, for a device specially developed for use in such circumstances.) Having to throw away requests for aid from worthy organizations trying to do worthwhile things that save lives is one of the drawbacks for us of making a fairly reasonable salary.
Newt