Commentary: Making $150,000 a year and still struggling

A family earning $150,000 in the United States would be considered very comfortable for people from many areas of the country, including lower New York, which has some of the highest costs of living in the nation. 

How is it that a family bringing $150,000 into their annual budget cannot survive at this income level? People who think an annual income of $150,000 is not livable have likely not experienced true poverty and probably never experienced needing to live frugally. Yet, a 2006 article published by Money Magazine (courtesy CNN) titled, “Scraping by on $150,000 a year,” outlines a family that had problems living on this income level after one spouse lost an $82,000+ income.

Struggling on $150,000 a year

It sounded as if this family is having a difficult time identifying exactly where their money is going and they’ve become accustomed to living a bit more on the extravagant side. They have three properties; the one they live in sits on three acres of land. How large is their home? A large house carries higher expenses in taxes, utilities, insurance and the more rooms, the more there are to furnish, not to mention maintenance of the land. Who cares for the acreage? Do they mow the grass themselves or do they have professional landscapers?

Living beyond means?

Unfortunately, a problem is that many people have embraced the philosophy that it is “normal” to live beyond their means because creditors and incomes say we can. Many lenders offer revolving doors of credit and give the impression that just because credit has been approved, it implies there are the funds to pay for “extras” or more extravagant “necessities.” The family does say they don’t carry monthly credit card debt, which is admirable, but have they examined what their monthly purchases are that they pay in full? They obviously became accustomed to higher standards of living with a $150,000 and $82,000+commission salary. However, without the $82,000 coming in, this seems to have caused some problems.

Ways this family could eliminate debt

Examine all expenses. Start with necessities and then work up to luxuries. Electricity is a necessity, but explore if the company charges different rates at different times of the day. Turn lights and appliances that aren’t being used off. Take a look at what big ticket appliances were purchased on the higher income? What are they driving? Is it a luxury SUV or are they driving a basic vehicle (with a large family, they do need a larger vehicle), but how extravagant is it?

What are their extras? Do Friday night rituals involve ordering a pizza? Expenditures like these quickly add up. Instead of take-out, they could start making their own pizzas; the kids will love this fun family activity and over the course of a month they’ll probably save $50-$100.

Re-examine definition of “fun.” According to the article, the wife stated, “We live from one paycheck to the next, we’re struggling to save and we never seem to have enough money to do anything fun.” Having fun doesn’t necessarily equate to having to spend tons of money. They live on three acres of land, there are probably a number of creative ways to entertain. On the weekends, they can plan camp-outs, hikes and scavenger hunts. There are numerous things this family can probably find to do in their own back yard, literally!

Sell off rental properties. If the family can’t rent them, it may be worthwhile to sell, even at a loss. Being the extra properties are sitting empty, the mortgage holder is still going to want its monthly payment and it appears the family cannot maintain two properties without an additional source of revenue.

The impression after reading this family’s dilemma, is that budgets are probably a challenging endeavor and they’ll need guidance in understanding this concept. Living on $150,000 is certainly doable. However, it will take realistic cut-backs. The $3.00 saved on an unlisted number that was noted will add up over the course of time, but it isn’t going to get to the root of their issues. With an annual income of $150,000, this family should have enough to save without struggling to find ways to feed themselves and care for their daily needs.