I find this thread pretty amusing because I'm ~40, have two kids, have made good money over the years in a good field (not consulting) and there's just no way I'm retiring now, and I have more money "saved" (in my world a lot is tied up in carry) than some of the examples above. Like @CorpFinHopeful and @Tred1 have said basically, life is expensive and much more expensive than you think when you're either in school still or young and don't have kids and all of the costs that come with them.
A couple hundred grand a year sounds like a lot to a 21 year old still in school, but it's just not that much money after taxes unless you're living in Iowa. Even if you don't go crazy and buy multi-million dollar homes or insane cars, a nicer but basic house near a major city is easily $1MM. A million dollar home sounds like it's going to be a mansion but that's a 4-5 bed in a somewhat closer suburb to a major city, especially in the northeast or California (SF/LA).
If you live near NYC in Jersey or CT, property taxes are going to top $30k p.a. on that house and that's not in Greenwich (and entry level houses in Greenwich are $2MM+) or even Summit, that's more like Montclair. If you live in the San Fran area anwhere you'd be lucky to not spend 2x that on the house price alone. Just go on www.realtor.com and look at home prices and property taxes. $25k p.a. for kid's private school-that's more like kindergarten in a less expensive suburb. If you're in NYC, bump that to $40k for kindergarten, $50k+ for upper school. And that's just school: kids are actually a lot more expensive than that and it's all nickels and dimes but they add up. And forget about saving for college-lord knows what that expense will be in 13-18 years.
$55-60k in living expenses? I don't know what that includes, if you're counting a mortgage or not but let's leave a mortgage and property taxes out of the equation, that's $5k/month. You can easily eat up half of that just on utilities, food, gas and the other basics, not including two cars and insurance. That doesn't include anything "extravagant" like nice dinners out, which you will want to do because you work hard and your wife will want you to take her out because you work and travel a lot and you enjoy spending time together away from screaming children. Hell, a babysitter for 2 kids is $20/hour.
Go out for 4 hours once per week and a babysitter eats up more than 6% of your post tax budgeted living expenses. That doesn't include the $200 you blew on dinner and drinks or some other entertainment (that's in the burbs and not going over the top, not in NYC, Boston, SF, etc where you can easily blow 2x that) . And when you go out with friends you're no longer splitting the bill like you did when you were younger so you'll end up with a $400 tab far more than half the time because you work in a high paying job and people look to you to pay.
Regarding family vacations: a week long trip to Disney World for 4 will cost upwards of $10k with hotels, food and park tickets. That's not going to Bora Bora or Portofino on a private jet, that's Disney using miles for the flight. Before my wife and I had kids we'd travel for less (or more) but with a family it's really difficult to wing it and believe it or not, seeing my two young sons having the time of their lives at Disney was completely worth the money. Your second vacation of the year when you rent a modest house at the Jersey Shore (not meathead Shore), the Cape or the Vineyard for 2 weeks (and I'm leaving the Hamptons out of this) will cost you $10k in the rental alone. And you're going to get a place large enough for the grandparents and maybe other family members to come down and guess what? Because you're a consultant at Bain (or in IB/PE), no one will offer to pay you for anything: the rental cost, the thousands in food and drink you buy for everyone who's staying for free at your place, etc.
When you have a holiday dinner (Christmas, Thanksgiving) for your extended family and you spend >a thousand on food and booze, Aunt Mary will think it's all equal because she brought over the green bean casserole and guess what again? No one will offer to pay because you're the successful consultant, banker etc. I'm in no way bitter about this and I enjoy doing this for my family, but I'm just trying to illustrate how little things add up over the years.
You don't have to be chasing the Jones' or the Gates' to spend more than you think. For what I have made in PE and what I continue to make I live a pretty low key lifestyle but unless you want to be clipping coupons and skimping on everything possible, life in general will cost more than you think. If you can make consulting, IB/PE or big law partner type of money that you make in NYC, Boston, SF, etc and live in Des Moines, then it's a completely different picture but very few people make that type of money in Des Moines because those jobs don't exist in great numbers, if at all.
I only know one guy who retired at around 40. Formerly an MBB consultant who was recruited by a big hedge fund family because his industry specialty and his education were suited to the sub-fund's strategy. After a few years as an analyst he became a PM, and his direct fund ran something like $3B. Start doing your 2/20's on that amount of money and splitting the 20% with the firm (I think the team got to keep about half of the 20, maybe less but still a good % of it), making 20-30% annual returns and he took home a lot of money. Not just a million p.a. more like 10's of millions. And he lives a very moderate lifestyle for the money he's made because a massive house and fancy cars don't do it for him.
That's about the only way people who work in IB, PE, consulting or other high paying fields retire from what I've seen. Not when you have $3, $5 or $7MM, but when you have $30MM+. If you get to the point where you're ~40 and hitting the top of the game it means you've busted you butt since high school so it's very difficult to give it up when you're finally making the money you've worked most of your life to make. Plus, being 40 myself, I don't know what the hell I'd do if I retired in 3-6 years. There's only so much golf you can play and wine you can drink for a 30-40 year retirement.
If you're talking about retiring mid-50's I'd say that's more realistic. I applaud anyone who can save and not live an over the top lifestyle, but life in general will cost more than you think.
Mod Note (Andy): Throwback Thursday - this comment from April 2014 was originally posted in the thread What are exit opps really like for MBB Partners?
Great post, spot-on. Maybe this makes me an asshole but it definitely makes me hesitant to even think about having a family any time soon. Wasn't in the cards at all anyway but still...many of those expenses come from having a family, and you're right, it does add up quite a bit.
Why pay extravagant prices for a SEX DUNGEON in Manhattan or San Francisco when you can get a dungeon just as good for half the price in HOUSTON or ATLANTA?
If you can't save when making 300-400k per year then you have serious lifestyle creep and need to get your shit in order. Send your fucking kids to a good public school. I'd imagine the public schools where houses cost 1MM+ are pretty decent. You need to spend 400+$ on date night. I can easily get a decent dinner in Manhattan with drinks for around $70-100. If I cut the drinks it's even cheaper. No it's not a 5 star steakhouse, but Manhattan has some amazing restaurants for a cheap price. Plus steak is easy as fuck to cook so I'll just cook myself a steak on the grill at my 1MM+ house. Also your vacation costs a insane. And no one takes their kids to Disney every year. That's a special trip that you maybe do 2x during their childhood. And you can do it for less than 10k easily. Yes park tickets will run about $1100-1200 total, but you can stay at a decent 3-4star hotel in Orlando for like $160 per night. Additionally, flights to Orlando are only about 250-300$ per person so not that bad. And if you stay at a Disney hotel you don't need to rent a car. Just take the bus or Uber. You're insane if you think you need to spend 10k on a Disney vacation to have a good time. Maybe it's because I grew up lower middle class. My parents took me to Disney twice when I was a kid. Our yearly vacations were going to the Jersey shore and renting a condo for less than 1k for the week. The condo would have a small kitchen and my mom would cook a few of the meals. We would also eat out a couple times. And for lunch we would pack sandwiches and picnic on the beach and we had a great fucking time. Honestly you don't need to spend a lot of money to enjoy life.
I wholeheartedly agree with you. Preach Brother Preach!
Nothing but facts. You can tell when people have a sense of false entitlement due to their economic advantages. If you can't save money while earning over 300k annually then honestly you shouldn't be working in finance because you obviously have 0 financial literacy.
I'd also add to this that there is a fairly common psychological phenomena where almost everyone, even the extremely wealthy, don't consider themselves wealthy at all. If my memory serves me right its for two main reasons:
(1) as your income rises, as does your social circles and view of what is essential and what is a luxury. I'd venture to say that if you're making over $300-400k in a major metro area, you're probably also spending something like $10-30k per kid on private school. Second, I'd also venture to say that your vacations which you take semi-annually probably cost in the neighborhood of $10k or more each (i.e., your vacations cost a little less than the average american post-tax household income). You also may have a summer house, a nanny, a club membership, a non-earning spouse, high end gym membership, maybe a trainer, premium clothes etc. Obviously you'd need an income substantially above $300-400k to afford ALL of the above, but at the least a few of the above can definitely be afforded. I'm not disagreeing with you that life is expensive, but I feel like its more of a function of your standard of living increasing substantially. If you have the tastes of someone living on a school teacher's salary, what we make on Wall Street is indeed a lot of money. What invariably ends up happening is that even the biggest simpleton ends up developing increasingly expensive habits.
(2) almost everyone aspires to be richer than they actually are, so as long as you're looking at the guy 2 notches above you, you forever feel just slightly above average; as even as you attain that next level of income/wealth, you're sense of what is "adequate" rises along with it, so you now set your eyes at the guy 2 notches above your newly allotted station.
Completely agree with point number 2. It reminds me of this article and the "game mechanics" at play when dealing with pay: http://www.fastcompany.com/3006318/creative-conversations/jonah-berger-…
Enjoyed the OP as well.
Thank you for the great comment. You said what I wanted to say.
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Retarded politicians in New York or SF come up with BULLSHIT communist ideas like RENT-CONTROL and then everyone wonders why the real estate prices there are fucked up...
I think this post provides some good perspective; however, I tend to side more with Marcus on this discussion. A lot of what was described was a fairly extravagant lifestyle. It makes it sound as though making 300-500k merely facilitates a decent lifestyle with more limited opportunities. This couldn't be further from the truth. A lot comes down to wants/needs and personal lifestyle choices. Private school is by no means mandatory, especially if you live in a good community. 20-30k a year in vacations again is a major luxury. Thousand dollar holiday dinners, 400 dollar date nights, again, these are all extremely high end lifestyle choices. Etc.
I do agree that life is expensive; however the picture painted is a little more about a the type of lifestyle than what is realistic to have an great life with less spending. Having grown up in what would be considered an upper class community and having very few friends families live the life outlined above is where I establish my frame of reference.
Basically if you are in that income range those spending levels are much more choices than anything else. It's significantly more money than is needed. I'm not saying there is anything wrong with those choices if that is what one chooses; however I just don't think it should be considered the baseline.
I think your mileage may vary on these sorts of things, and I offer an alternative side of these because I feel like you guys might fall on the other side of the spectrum. My dad is an MD at a BB. Sure, life is expensive and especially so when you have kids, but a lot of these things that you're mentioning are not even close to being necessity.
For instance, private school from kindergarten on? That's a bit extravagant don't you think? Perhaps things are different on the east coast, but on the west coast and in California, there are tons of quality public schools in the wealthier neighborhoods that provide comparable (if not superior) educations to private schools. If you live in Orange County or Marin County or any of these places where there is a high concentration of wealthy people, the property taxes that go towards funding the local school district make these sorts of schools really pretty incredible. These public high schools are consistently sending dozens of kids to the Ivy leagues/Stanford/Duke/etc., and you don't have to pay for private school education.
It might be different since it seems like your kids are younger (I think?), but I've been on three family vacations in the past two years with my family + significant others (7-8 people) to islands in the Caribbean. We've rented a house (read: mansion) on the island for 10 days and it's $3k for the entire time. Airfare is free since it's covered by frequent flyer miles. Food/drink/alcohol/car rental is probably around $1.5k if I had to guess, doing shit like SCUBA and snorkeling is probably another $1k, so all in it's closer $5k, and that's for 8 adults in the Caribbean for 10 days. That would be an incredibly nice vacation for anyone, regardless of their income level.
If you flaunt your wealth and consistently pick up the tab, then of course people are going to expect you to always pay and will likely be offended when you don't. But in that case I'd say you're hanging out with the wrong people.
However, your comment on vacation makes me cringe.
Maybe like 5 NYC public schools aren’t a fucking joke. And you have to apply to those anyways…good luck. And even if you’re there, you have to work your dick—or vagina—(woke af 🫃💪) off to get into HYP. I went to a large suburban public HS (one of the best schools in the state and still less than 0.5% get into ivies). I had the best time of my life there and wouldn’t trade it for anything, but I’m 100% sending my kids in Collegiate/Spence/Friends/Trinity because (relatively speaking) it’s way easier and less competitive considering that 20-30% of those kids go to HYP. Maybe going to International or Harker in SF isn’t as justifiable, I don’t know, but thanks to the lovely people that have been running NYC for the past half century, private school is more of a requirement than you’d initially think.
This is very true. Things cost money. I've said this before and attracted a lot of shit, but I don't think you're "rich" or even close if you make a million dollars a year in NYC and have 3 kids. You're clearly way, way better off than the vast majority of people across the entire world and no one should ever feel sorry for you or your family, but you're not rich.
I'm willing to bet that everyone who disagrees with the OP in this thread neither has children nor makes 250k+. Also mostly young posters.
I don't know that I'm disagreeing as much as I'm just making the point that (a) you never feel rich, no matter how much money you make and (b) your life is only as expensive as you make it, and human nature generally causes people to make their spend on essentially 100% variable to their income.
The key takeaway of the OPs post is that (1) the lifestyle of a high earning professional is very expensive; (2) and its not as opulent a lifestyle as us young-ins might think; and (3) the people with fuck-you money are few and far between even among private equity / MBB / IBD partners. Although I'd bifurcate that last point as I think that PE partners at well established firms generally do make enough money to live pretty extravagant lifestyles.
I think the point is that your expenses reflect your lifestyle and your "nest egg" will have to be consistent with that lifestyle. While a sub-urban high school teach may retire with $800k (I'm making that number up)... for an MD at Blackstone, that barely enough to get by on before the next president is elected, and that's if he's living on a shoestring.
Exactly this. Lifestyle creep is a real problem with people. Also if you want to get rich the best way to do it is take chances and start your company or firm.
I’m 18 and it’s refreshing to see this post. All my buddies think IB pays a shitload like it did pre 08 (which in all fairness it kinda does ig). But if you’re not a group head or don’t have global in your title don’t think about the ten million dollar easthampton house (unless you’re involved in some shady shit, which if you are, PM me I’d love to hop on board)
I actually feel like life costs less than what most people think, or at least among high paid professionals, they make a lot but also have so much more money related anxiety than ppl who make way less. Even my MD cuts coupons and I'm pretty sure she takes home more than $300k..
I'm a 1st gen immigrant and my parents raised my sister and I on $30k combined income. We lived in Chicago then Atlanta so not as high cost as northeast but wasn't that cheap either.. Although back then gas was $1.50 which helped transportation costs a great deal. Anyway, we ate out at $5 all you can eat Chinese buffets, Cici's pizza ($5 pizza buffet), and we drove to disney land twice, both times spent less than $500 excluding the tickets (slept in the car, budget motels, packed a lot of food). And I never even realized our family was that poor as a kid. I mean as long as you love them kids will be happy, they don't need very much. My mom used to just drop me off at the public library during the summer and I'd just read all day, that's free day care + tutoring.
And both my sister and I went to private high school but we got scholarships so it was free. I had to pay my way through college but honestly if you don't buy into "study what you love" rhetoric and just follow the finance/consulting/law/tech/pre-med/well-paying industry pipeline, student loans are very manageable. I took out $40k in loans for college after scholarships and financial aid and I paid that off in 2 years with a analyst gig at a consulting firm which paid ~$90k including bonus, and that's not even that high in WSO terms..
Not to mention where I live in Brooklyn I regularly see 22yr olds with minimum wage gigs still somehow raising a kid.
I say being generous with your money and building a community pays off big time, like babysitting would be free if you have ppl close to you willing to do it. And the peace of mind of not worrying about money all the time is definitely a luxury OP can enjoy, I mean to make that much money and still feel constrained just seems unnecessary
Good job. Can always appreciate someone who lives frugally and with great appreciation of simpler life.
"babysitting would be free if you have ppl close to you willing to do it."
I'm calling BS. I've never met anyone who was happy and willing to babysit except for maybe a first time grandmother.
you've never spent a night at your friend's place cuse your parents were out? and idk why grandparents don't count, old ppl love looking after their grandchildren. My parents were Christian and had a lot of church friends they could rely on also. I don't know this doesn't seem that outlandish to me, and after I was about 10-11 I would just baby sit my sister, we didn't really need babysitters.
We trade off with my wife’s sister a couple of times a month. Our daughters are a few months apart. We also recruited both of our parents to move to our state and within a couple of hours, and they jump to come babysit whenever we need it. My sister also lives a couple of hours away and will take our daughter for entire weekends. Randoms might not like babysitting, but family doesn’t mind. We watch our nieces all the time as well so ther is a quid pro quo aspect to it too.
Also, having neighbors with kids is huge. Our next door neighbor has a 13 yo daughter who is more or less available on-demand. She charges like $8/hr because she's not old enough to travel around, but we are good with her babysitting because her dad is like 50 feet away.
Keeping up with the Joneses in this post.
I don't what the cost of living here in the UK is like compared to the US, but I grew up on $20,000 a year with two siblings. Yeh we received benefits from the government (which weren't a great deal) but I couldn't imagine what it would be like to grow up on even $100k+ a year. We still managed - I guess people will have different definitions for "extravagant" and "necessary".
First lesson: kids are fucking expensive. Second lesson: Property in/near a large city is expensive. Third lesson: Property/income taxes are expensive.
As for the stuff that's wrong here, you don't have to pay for others' dinner, you're doing that to show off. If you're doing this with "friends" who expect this of you, your "friends" are leeches.
Second, family vacations don't need to cost $10,000. My parents easily took our family of four to all three Disney parks on a week long trip for $2000-3000 all in. And you don't need to rent an entire fucking house for a vacation, wtf is that shit. Like I'd totally do it if I could afford it, but to whine about it as if it's a necessity is silly.
All my holiday dinners are pot luck style. Again, sounds like you're just trying to show off. Seriously who the fuck spends $1000 just for their stupid relatives to come over?
Silly article. I'm sure if you posted a monthly budget we could tear it apart pretty easily. Not ragging on you, but when you write an article talking about how living is "more expensive than you think" then talk about all of the stuff you chose to spend your money on, that aren't in any way essential living items, is just dumb.
I personally think the whole "private education" thing for kids is batshit crazy.
Parents send their kids to private school for the image, not for getting a better education.
Parents that send their kids to $50k a year kindergarten for the image. A basic private education however makes a HUGE difference. The biggest difference is that your kids are surrounded by a much lower proportion of fuck ups. Private schools have a much higher graduation rate, continuation to higher education, lower teen pregnancy, drugs, etc. Does it have more to do with socio-economics than the curriculum? Of course. But bottom line is that you're surrounding your kids with peers that are less likely to get into trouble. Sure, upper-middle class families/schools have their own set of problems and pressures... but its the lesser of two evils.
Not to mention that your average public school teacher is either your typical slacker who just happened to muster enough effort to graduate college or a housewife trying to keep busy / make a few extra bucks. (I'm not talking about the relatively small contingent of US school districts that actually have very good public school system)
Meh, totally depends on the school. In nicer neighborhoods the public schools are usually pretty good. Exposing your kids to fuck ups isn't necessarily a bad thing, either, anyways. Then again, I obviously don't have kids and don't have a ton of money, so...
Totally agree. Luckily, I am able to get the benefits of private school for my kids at a much lower rate (my parish Catholic school), while the parents interested in image pay much more $25k plus, a lot in Chicago) for an adjacent Catholic school that sends its students to the same colleges, avoids the same riff raff, etc.
I love that people are willing to fork over 40-50k, I wish I ran one of these schools.
A lot of small towns have perfectly fine public education. These teachers do not need to teach rocket science.
Anything a kid can’t learn in those sort of schools can be covered by 500-1000 in other educational spending a year....maybe even just a library card and an internet connection.
Plenty of fuck-ups at elite private schools. You would be surprised how many super successful guys have retards for kids. Or no ambition and float thru life. Picking up a coke habit at those institutions is extremely common.
Good post OP and I think there have been some helpful comments as well. On one hand, it's good for young people to have realistic expectations of the lifestyle they might achieve if they enter these industries. College kids thinking they'll work for 20 years then retire at 40 and live like Saudi princes should disabuse themselves of that view. On the other hand, from a material standpoint, the lifestyle you descibe is amazing. It's far better than the vast majority of people could ever hope to live. Being abitious is great, but it's also important to step back occasionally and appreciate just how much you actually have. I'm not even talking relative to someone living in a third world country. I mean compared to your middleclass household in America (a wealthy country).
Don't read this article out of context.. It was written as someone who made MBB partner and wanted to retire within 4-5 years. The whole discussion was on the continual cost of living for someone making that much money and maintaining the lifestyle. Obviously, your lifestyle will scale with your income. If you're only making 100-200k then it probably doesn't make sense to send kids to 50k kindergarden or take $20k vacations.
Even if I was making over 300k, I still wouldn't send my kids to private grade school. Plenty of people go to public schools and succeed. The truth is, your performance is mostly a factor of your determination, IQ, and ability to score high on standardized tests like the SAT. A private school isn't going to magically raise a kid's IQ. And it's also not going to guarantee the kid is dedicated to work hard and succeed. I've met plenty of people who attended private school and came from rich families who were either: 1. Lazy, 2. not very intelligent. Sure the private school education probably got them slightly further in life than going to no name suburb school, but these kids still won't achieve shit in their lives. And once you're in the real world, it's all about your performance and abilities. I know a guy who dropped out of college Freshman year. Lived at home for a year and taught himself IOS development, now he has a top at a top tech company making over 150k per year at the age of 22. This guy went to a public school. I know because I went to school with him. Also look at the rise in programming bootcamps. Truth is, tech isn't as elitist as fucking bankers and consultants are. They care more about ability and skill than having a dick measuring contest about weather Wharton or Harvard is the better Ivy.
There is one near universal truth about money: The more you make, the more you spend. It always starts out small and those expenses become the new normal and you build from there. The incremental expenses usually don't seem that much at the time, but together they all add up. When you get a bigger house, you fill it up with more stuff. Of course more stuff = more money. You get a little help around the house and you like the convenience...eventually you get live-in nannies. You get the idea...more begets more; what once seemed extravagant becomes normal and the cycle repeats.
You're not going to have a college kid budget when you make $200K per year. You're not going to have the budget of a $200K per year family when you make $5 million per year. Yes, you should be able to save proportionately more money, but if you think your spending habits will stay the same throughout your life, you are clinically insane.
Also, many of you have wealth targets you will never hit. Do you know the proportion of people that start with nothing and end up with a $5 million net worth by the time they're 30? I don't either, but it is a microscopic amount, especially for those that aren't in sports or entertainment.
Stopped reading at "people expect you to pay at the restaurant" part.
Glad I don't have garbage friends who expect that. Maybe time to re-assess who you should be hanging out with blowing $400. Save that time and money for your family.
lolz
Totally agree. Are they even real friends when they pull shit like this?
On the griping comments about paying for other people's dinners - I have full empathy and understanding for @Dingdong08 's position.
I do this not infrequently, largely because a lot of my friends aren't working in finance or other high paying professions and I like to take them out for great food sometimes. When I take them out for expensive food, I feel morally obliged to cover the bill because I've made them eat at a place that charges a lot without regard to their ability to pay.
It's not like I whip out the credit card in front of everyone or run a whole big man on campus show and this is not about making me look magnanimous etc. To the extent people want to contribute, I usually tell them to give me an amount which is some fraction of the actual bill. There is no basking in gratitude afterwards, no resentment from friends, no negativity.
It's not like this happens every single time I'm eating with them (I don't have exclusively expensive food tastes), but it happens not irregularly.
As for eating with family, I always pay. With my parents, they already put a lot into raising me and invested heavily in my education which got me into my job, so I'll never be able to buy them enough dinners to cover for that. I never see my extended family, so that issue doesn't come up. However, I don't see Dingdong08's scenario as outlandish.
For posters who are at university still or in their earlier years of their career, this may seem staged, showy and a completely foreign way of thinking. But when you're in your 30s, this sort of stuff is par for the course.
Damn, 10 k on a vacation though? get a all inclusive package to DR for 600$
You peasant.
lol doggy, whats wrong with a 1000$ vacation
one word: geoarbitrage
plan on living abroad while earning dollars for a long long time
Doesn't sound very riskless to me. But does sounds awesome.
oh there's definitely risk involved, that's all part of the fun ;-)
Great post. A key takeaway from the OP's post is that purchasing power parity matters a great deal. $1m in NY/SF metro area entails very different sets of lifestyle and consumption possibilities than $1m in Houston or Las Vegas. Not only is the price of everything in general and RE in particular much higher in the former, but also the state income taxes make a big difference--if you are earning $1m+ a year then the amount of money you save a year in state income tax alone is more than enough for the down payment of a nice big house in a master planned community.
Also re the OP's point of having much of his net worth tied up in carry, the fact that so much money is locked up long term means that even if you want to retire, you still have to stay put at least until profit distribution (assuming that something didn't happen beforehand to make the paper gains disappear). This is also one reason why the more senior PE people usually stick around the same shop for longer periods of time, compared to the HF PMs and analysts who tend to hop around from one shop to another every few years.
Re private/boarding schools for kids, I think this is more of a regional cultural thing. In the Northeast/New England social customs pretty much dictates that upper/upper middle class people have to send their kids to prestigious private schools, regardless of the fact that the public schools in their districts are top notch with great facilities (funded by the exorbitant property taxes they paid for in the first place), else their spouses would be looked down like second class citizens in front of the Hamptons/Greenwich Country Club socialites. In NYC in particular admission to elite preparatory schools and even pre-schools are so fierce that well to do parents (i.e. MBB/PE/Law firm partners and the like) are shell out tens of thousands of dollars on admission coaches and $100/hour private tutors to help their kids secure a spot. All these expenses add up quickly.
Out west people tend to be less class conscious and many Silicon Valley executives don't have qualm about sending their kids to the (excellent) public schools in Palo Alto, Los Altos, Los Gatos etc. In fact the socio-economic profiles of the student body of some of these public high schools don't look all that different than the East Coast boarding schools. But then, the same tech executives also go to work dressed in t-shirts and jeans. It is an old money vs new money mentality thing I guess.
On to your housing point...with the fundamental shifts going on (demographics, student debt burden, etc.)...residential is going to have to correct eventually. Even then, we are heading to Germany style housing where the home ownership percentage is in the low 20's compared to the high 60's in the US of A. Ahhh...mortgage interest deduction.
Soon, you'll be able to go to the BX web site to find your new shitty studio to rent.
Key takeaways from this thread:
None of these points surprise me, really.
I am constantly reminded of #s 3 and 4 with all the 20-somethings are ridiculously and unnecessarily frugal. Even as rising PE Associates with $250k+ income locked up for two years, 2nd year Analysts are bewildered by a peer spending a totally-affordable $2,500/month on rent. These are the same individuals who will someday be in categories #1 and 2.
Talk to the senior guys at any bank, and they would have you believe that people making $60-80k/year are living in abject squalor.
People's expectations change. The best you can do is try to fall into the cracks between #s 1 and 2 & #s 3 and 4.
I make 85k/year and will go up pretty fast working in Big 4 accounting. I can tell you that I live in a luxury building in Brooklyn only 20 min train commute from NYC. I think I have a great life. I save some money. Max my 401k. Company has pension. And I'm really happy with my life. I know if I made 200+ I would increase spending a little bit, but I don't think I'd go crazy. I came from lower middle class upbringing.
The takeaway from this is to not have children. You could easily cut your expenses by at least a half without children.