Feeling poor on $100,000 a year

Last Updated on April 15, 2017 by Dave Farquhar

Yahoo! Finance! has! a! first-person! story! about! struggling! on! six! figures!

Silliness aside, you might be surprised to hear I–an infamous stingy Scottish miser–am at least a little sympathetic.

Here’s the thing: A hundred grand isn’t always created equal. The author lives in Tampa, where the cost of living is higher than in some other parts of the country. I have first-hand experience with this. I took a $10,000 pay raise to move to St. Louis from central Missouri in 1998, and I quickly learned that the cost of living chewed up a good chunk of that raise. My job used to send me to Tampa on business once a year, and I’m well aware that things cost more there than they do in St. Louis.

The author speaks of having an 1,800 square foot home, and, quoting from the article, “I’d feel a lot richer if I could take the $183,000 we spent seven years ago and buy a home twice the size today in a better neighborhood.”

But here’s the thing. That bigger home would make them look wealthier, but the higher utility cost and other expenses associated with a bigger house would take a bigger dent out of their budget. They’re better off where they are. Although the house probably isn’t worth what they paid for it now, $183,000 for an 1,800 square-foot home isn’t terribly unreasonable. There are people in my neighborhood–and just about every neighborhood in this country–who overpaid for houses, got in over their heads, walked away, and now have nothing at all to show for those years of mortgage payments they made.

I could tear apart that budget, but their budget actually isn’t bad. There are places they could cut back, and probably a number of little things they could do to save a hundred here and there, but they’re paying extra on their house and putting away 10 percent for retirement. Sure, that new car so their son could deliver pizzas is a questionable purchase, but I know people whose budgets are in worse shape than that, and those people honestly don’t believe they have a problem.

The important thing is they’re making it work, saving 10% for retirement, they’re paying a little extra on the mortgage, there’s no mention of credit card debt, and so far they haven’t taken out any student loans for their two kids.

It doesn’t sound like they’re on any repo man’s target list, and something catastrophic is going to have to happen for them to lose that 1,800-square foot house.

There’s only one big problem. The phrase feel rich or something similar appears throughout the piece.

They feel bad that now their $183,000 would buy twice as much house. But it wasn’t a catastrophic mistake, and a bigger house would hurt their budget even more. They’d feel richer until that first round of utility bills came in.

They’d feel richer if they were eating more extravagantly. So would a lot of people. Have you been to an Aldi lately? The place is always crowded.

I suspect that questionable car purchase was driven by that desire to feel rich. My 2002 Honda Civic would be perfectly fine for pizza delivery. I don’t deliver pizzas in it though. I drive it to my regular job. Most of the teenagers in my neighborhood drive newer cars than me. That doesn’t bother me.

Some of their neighbors probably have nicer cars, are making nicer home improvements, and taking nicer vacations. It’s easy to find more money for that. Stop saving for retirement and borrow as much money as you can, and you’ll have all kinds of money to play with. But you won’t retire on time, either. And if you’re honest with yourself, you won’t feel rich around the 15th of the month when all those bills are coming in and the best you can do is pay the minimum.

Buying more stuff won’t make you feel rich, because there will always be someone bringing home something bigger or nicer. OK, maybe not always— just every Saturday.

Here’s my prescription.

This family lives in Tampa. Belle Glade is 3 1/2 hours away. On the way to Belle Glade, they’ll see people with collections of vintage Rolls-Royces and other signs of extreme extravagance. But once they get to Belle Glade, they’ll see people living in one-bedroom apartments made of cinder blocks with one bathroom per floor. The whole floor shares a bathroom that isn’t as nice as the smaller bathroom in my 1960s ranch house.

Spend a weekend volunteering at a soup kitchen in Belle Glade, and then that 1,800-square foot house in Tampa starts looking mighty, mighty nice.