A Tuesday Rant – The Six Figure Problem

A Tuesday Rant – The Six Figure Problem

I had different plans for today’s post, but then yesterday something happened. Liz from ChiefMomOfficer.com shared this article on twitter. I stated there that I don’t want to be rude so I will not go on a rant. But the topic did not let me rest so I decided to do so but try to keep myself from being rude. I really like the Thursday Rant series by Mr.1500 and how he handles this kind of topics so gave it a shot.

My reactions went like this:

Six Figure Problem Anger

Six Figure Problem Confusion

Six Figure Problem Math

At first, I felt angry, then realized that everybody has the right to live his/her life as he/she wants to. So, in the end, it left me with confusion, like “How come?” and started to think about the backgrounds.

Investigating the math

I started with some assumptions. First that these people are human beings just like me, thus they have the same basic needs. The rest is really just personal preference, so let’s go with the averages. Oh, and please don’t tell me that this struggle is caused by huge medical bills (or something similar). That can be the cause in some cases (which is totally understandable), but it seems a lot of six-figure earners have this problem and I bet most of them does not have this special circumstance.

I thought that this should be caused by the dark side of geoarbitrage. If living in the US is simply that much more expensive then riddle solved. At least I would have been able to think this if I was not following the FIRE community for a while. If Jacob from http://earlyretirementextreme.com/ is able to live on $14k, Mr.MoneyMustache on $25k and many other bloggers on $25k-$50k per year in the US then this cannot be the real cause. So I started to search for data. It turned out there is a cool website called Numbeo which have living cost data from both Serbia and the US. You can check the data for Serbia here and for the US here.

Cost of living in Serbia is 48.42% lower than in United States (aggregate data for all cities, rent is not taken into account). Rent in Serbia is 79.23% lower than in United States (average data for all cities).

If you compare the two tables you can see that depending on the type of expense the multipliers vary heavily. Housing is the biggest difference I think, it is much cheaper here (that’s why real estate investment is not so tempting). On the other hand, there are some equalities like basic utilities and clothing. Most of the things fell in the 2x-4x cheaper range and there are even things which are more expensive than in the states. Gasoline, electronics, and cars fell definitely into this category.

If I do a rough summary and estimation my guess is that the living costs for my American doppelganger should be no more than 2-3 times more than my expenses. In terms of annual expenses, I am similar to Jacob, it is around $14k per year for our family of four (but note that I have an above the average salary). Saying this that should fall in the range of $30k-$45k. Which is very far from that magical six-figure barrier. According to the expense reports from other bloggers, this number is kind of realistic.

Then if you check the whole bunch of data you can come to the last lines. If you look close enough you can see that the average US after-taxes income is roughly 8 times higher. You wonder how can people live on $400 a month? Well, to be honest, I am curious about that too, but I know that it has to be possible because a lot of people participating in that quest around here. And despite a lot of people leaves the country these days there are still millions living there an average life. Yes, even with American standards.

I can go on for ages with the comparison, but who can see the numbers and get what I want to say I think this is enough.


So back to these poor fellows who struggling to live on a six-figure income. After looking into the numbers I had to come to the same conclusion as my initial thought was. These people have serious problems and it is not that 100k is not enough…

6 thoughts on “A Tuesday Rant – The Six Figure Problem

  1. Hello there HCF! Long time no see. Well you do have a point here. But I think that its quite difficult to compare between countries and people. If we add to that some human psychology I think you get a recipe for lots of people complaining and others being frustrated 🙂 like my friend HCF.

    Now I think the whole argument is a bit weird. Who am I to say how things should work in someone else’s life. But for the sake of your post here, lets consider some numbers.

    Let’s say that you are a family making $100,000. Now this is pre-tax which is something people often ignore. Then after tax you might bring home about $80,000. Now we probably need to live somewhere so lets say saw we need another $2,500 a month. I’m sure people could argue with me here, but from my point of view that actually low for one of the metro areas where you can actually get a $100,000 job. Now that brings me down to $50,000. Things are still looking pretty good. Now you’re supposed to save at least 10% of your pre-tax income for retirement (not enough) – you are now at $40,000. Things still look ok.

    Now here is where things start to go astray. Lets say that you need a car, or two – because frankly, in the US, you do. then add 3-400/mo. So our total is $35,000. Then you should probably eat some food – even Frugal Asian Finance estimates her food bill to be $750 or so, which comes out to be $9,000 per year. (not unreasonable actually) Ok, so we are down to $26,000. Add in a conservative $250 in other bills – this is really conservative, the cellphone alone could be $100, dont forget gas and insurance for your cars. So now we are at 23,000.

    Ok fine, so things look great right? Now lets say that like you, you want to have 2 kids? Great! Congratulations! But in order to stay earning $100,000 you need to keep your job and probably that of your wife. So lets say you do the math and stay with one kid. Day care is $2,000+ where I live. So now thats $24,000. Now you are at -$1,000.

    Now have for you is here is actually a pretty low budget experience in my area. Can you tweak it? Sure. Is it doable? Yes! But I think the most important point is that this is not what people saw growing up. And falling standards of living make people very unhappy.

    1. Hello my friend!

      Your argument is valid. Cannot agree more that it is difficult to compare between countries and people, but it is a fact that most people (and most of the information) in the FIRE community is from the states, so I don’t really have an option if I want to evaluate the actualities with my mindset. Can not have exact equations for the comparison, thats why I said that I had assumptions and estimations. I am pretty much familiar with complaining, actually if that would be an olympic sport we, Hungarians would probably win a lot of medals… Psychology is a hard thing itself, so don’t blame me when I get frustrated 🙂

      Maybe the argument is weird, but until we are not fighting like testosterone pumped bulls it can be a source of wisdom and revelations so lets go on. And while I agree with ” Who am I to say how things should work in someone else’s life.” aren’t we, financial bloggers constantly doing this? Ok, I know we are just offering suggestions…

      I can accept your calculations, but I think there was not mentioned if that amount is after or before tax money. I am not familiar with your tax brackets so I just assumed it is after tax money. Interesting psychological phenomenon here: we never care about the gross when we are looking for a job. We have relatively simple tax rules, so my contract contains the net amount I should receive, the rest is something the company should handle. I know different thinking, deal with it 🙂

      As I mentioned in the post, housing over there is extremely expensive, however I have two points on this. From what I have read in metro areas where the rent is very expensive the job opportunities could offer even higher salaries than $100k combined. Also, this amount can be reached with two average incomes, which means it can be reached in not so expensive areas too, am I wrong?

      I will not argument with child related expenses, it is just insane. That daycare expense you mentioned is more than my annual take home pay alone.

      Again I agree with the last statement about falling standards, but I think you can understand my rage when I read about six-figure earners who are complaining the same way the people here who try to run a family on $400 per month. It is just surreal.

      I don’t wanted to be judgmental, by the term “they have serious problems” I did not want to degrade them. I really think they serious problems are low financial intelligence, bad decision making, false influence of the media and chasing a lifestyle which is not for them. If I had the same issues I would probably thinking very hard about the tweaks you mentioned, but statements like “we haven’t been able to do Christmas in 10 years” tells me a different story.

  2. I don’t know these people or their financial situation, but the article also blew my mind!

    I don’t want to be judgmental, but I’m really curious to see their itemized budgets to see what they should cut to keep their heads above water.

    1. Totally agree, I would be very curious about that. And if they ever considered asking for help as it seems, they are not totally able to handle their own financial situation. Thanks for reading Ms.FAF

  3. Good rant, HCF! The GIF with the hair on fire resonates. Probably why I personally have so little hair left?

    Six figures should be more than sufficient on paper, but to HM’s point, sooo many variables play into it. Are you surrounded by a tribe that “needs” to spend their money X, Y, or Z (e.g., day care, Ford F150 pick-ups, and 3,000 sq ft homes?) OR, are you living in a low cost of living town like Flint Michigan, where a six figure income would have you living like a king, albeit required to drink bottled water and supplement your kids’ education at home.

    1. As I stated the argument is valid and those variables exist. BUT if you “need” to spend your money exactly as your tribe and that makes your financial situation worse then maybe you came to the wrong neighborhood. I see two scenarios here.
      1) Your income is lower than theirs. In this case, adopting their standards is a financial suicide.
      2) Their income is low too, but they are pretending while they struggle too. In this case, marching towards bankruptcy hand in hand is not a valid plan for me.
      I believe the truth lies somewhere in between, as always.
      Once a wise man told me: “Don’t do stupid things or don’t complain.”
      I think I was laughing more than appropriate at your hair question. Sorry for that and thanks for reading 😉

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