This article is a few years old, but you should read it before you read any of my comments.
The entire articles read as, “Well when you are pulling in lots of money you have to spend all or almost all of it on frivolous stuff, so it’s hard to live on a salary as small as $500K.”
Let’s look at what’s listed as “living expenses,” shall we?
Not one, but two vacations per year. And not camping trip vacations or even carefully budgeted special trips to Disneyworld or whatever:
Barbara Corcoran, a real estate executive, said that most well-to-do families take at least two vacations a year, a winter trip to the sun and a spring trip to the ski slopes.
Total minimum cost: $16,000.
How are two $8,000 vacations a year “living expenses”? They are entirely not necessary to live.*
A summer house? I’ll freely allow the apartment expenses to be considered part of living expenses since rent or mortgage and property taxes are usually a large portion of everyone’s cost of living, but a summer house? I don’t freaking care how much your summer house in Southampton that’s “not the top of the market” costs, it’s not part of your living expenses. And why didn’t you go to the house that you own for vacation instead of going to far away places two times a year?
A car and driver? Or a driver that doubles as a bodyguard? Okay, I can’t say I know the culture in this case very well, but is a bodyguard really necessary? I can hardly say that I think a driver is by any means a real living expense unless you maybe physically cannot drive yourself.**
A personal trainer. Isn’t that quaint? Er, except not. Personal trainers are luxuries. Counting them as living expenses is like counting the cost of renting a private jet as a living expense. It’s not. You are perfectly capable of working out without a trainer. Us little people, when we want the benefit of a trainer, buy workout dvds or pay for the occasional session with a trainer.
Then we get to the parties.
The work in the gym pays off when one must don a formal gown for a charity gala. “Going to those parties,” said David Patrick Columbia, who is the editor of the New York Social Diary (newyorksocialdiary.com), “a woman can spend $10,000 or $15,000 on a dress. If she goes to three or four of those a year, she’s not going to wear the same dress.”
Total cost for three gowns: about $35,000.
Or, she could not spend $15,000 on a dress. I understand that fashion is an important part of the culture, but there’s a pretty low threshold at which all dresses begin to look the same. After a certain point all each additional dollar will get you is closer to an even more famous designer label. Don’t complain about spending this much on gowns. This is not a living expense. It’s a luxury. Other people have to buy $100 or $200 gowns when we need to wear something nice. And most of us consider that gown purchase a luxury.
Then the writer talks about tutoring their kids. They’re already sending them to cushy private school, why exactly do they need tutors?
In addition to paying tuition, “You’re not going to get through private school without tutoring a kid,” said Sandy Bass, the editor of Private School Insider, a newsletter that covers private schools in the New York City area
Seriously? If the private schools aren’t doing a good enough job teaching your students at $32,000 a kid, then why are you sending them there? If everyone needs tutoring to get through school, there’s something wrong with the school. I hate to attack any child-related costs, but this one is just unreasonable even if it is a relatively small expense (they allow for $3750 for tutoring).
Nanny. Right. Did you know some people actually raise their own children? No, seriously. They do. When they’re lucky enough that only one spouse has to work, the other spouse often spends much of their time raising their children. Go figure. Who knew. Nannies in one-earner households provide a luxury service.
To recap, living expenses are: food, regular clothing, housing expenses, education expenses. Luxury expenses are: vacations, summer homes, private tutoring, nannies, $10,000 dresses, driver/bodyguards.
I’m not saying it doesn’t cost a lot to live on that level in New York City. It clearly does, but this article is really out of touch with reality.
Sure, the solution may seem simple: move to Brooklyn or Hoboken, put the children in public schools and buy a MetroCard. But more than a few of the New York-based financial executives who would have their pay limited are men (and they are almost invariably men) whose identities are entwined with living a certain way in a certain neighborhood west of Third Avenue: a life of private schools, summer houses and charity galas that only a seven-figure income can stretch to cover.
The solution isn’t necessarily to move to a different neighborhood. It’s to learn how to live within your income. To learn how to save for the future and to understand that sometimes that means limiting what you purchase and budgeting properly so you can comfortably spend money on actual living expenses (mortgage payments, co-op fees, school expenses for children, food, day-to-day clothing, you know, stuff you need to actually live comfortably?). Skip a charity gala or two or go somewhere close or inexpensive for vacation.
And when it comes to this:
“Five hundred thousand dollars means taking their kids out of private school and selling their home in a fire sale.”
No. Five hundred thousand dollars means learning to budget your after-tax earnings and seriously curtailing much of your frivolous luxury spending. Re-wearing outfits. Learning to raise your kids without a nanny and help them with their homework yourself. Maybe then you may have to consider selling a home. Maybe then they’d learn some financial responsibility and not get our country into financial messes in their attempts to make money in quick but unsubstantial ways.
Wonder if anyone’s considered that if these kids did end up in public school (gasp!…?), the public schools systems might benefit from having wealthy adults who invest in their children***?
*You can argue that vacations are necessary for healthy living all you want. The fact remains that you need not spend $8,000 twice a year on vacation just to stay healthy.
**Blind people, for example, could reasonably say they need a driver. Or people without limbs.
***I don’t know a lot about NYC schools, and I am not trying to suggest the parents of kids in public schools are not invested in their children’s lives. I’m just trying to point out that this group of the population – these wealthy individuals – being involved in the public schools might benefit that system. I could be completely wrong.