I don't ask this to be rude or a general jackass but are you over the age of 60 by chance? You say that it's not difficult to separate life and work (and you are of course more than welcome to your opinion) but for reasons best discussed in a different conversation, you do grasp that many folks are seriously struggling right now to make ends meet even if they did the 'right' thing and were wise watching their spending, got an education, what have you?
I find that using math illustrations typically don't go over well because they require the other party to have both an open mind as the attention span/interest to process it but I'll give you the benefit of the doubt and try anyway.
Let's say we have a 30 year old accountant that is 100% debt free and they've collected the initials/certifications and have a few years under their belt and are pulling in a $100K (keeps the numbers easy) salary which, while it doesn't go nearly as far as it used to, it's still in the upper quartile of earnings (and that's important to understand we need to look at this from a macro level)
As I'm sure you're aware, our tax system is progressive so their effective Federal Tax rate is likely about 25%. So they're down to $75K off the bat. Then Social Security is going to take 6.2%, again off of the gross income but let's just call it 6% to make things easy. so we're now down to $69K net. Medicare is.. 2.9% (let's call it 3% since we've still got .1% leeway) so we're now down to $66K. But wait there's more.
We still need to factor in State & local income taxes... of course this varies by location/locality. You're more than welcome to argue with me but let's be conservative and just say the State & Local taxes add up to... 4%. So in our example we're now down to... what is it, $62K?
There's still more payroll taxes of course but let's just stop those deductions there for the sake of argument. So far we've effectively lost
38% of our income and are left with $62K which works out to... say $5K a month. Notice that there's still a few more income taxes we just chose to ignore
AND that's not accounting for frivolous deductions for things like paying for health insurance or god forbid contributing to their IRA/401K retirement accounts but again for the sake of simplicity, here's our well educated/by all other measures high earning employee yielding $5k (again with no retirement savings or health insurance to speak of, just what's left after the major payroll taxes come in.
I don't know what you'd consider to be a reasonable savings rate, I'd say around the 10-15% ballpark but I'll go crazy here and say why not- let's say they're absolute studs and can save 25% (even though they're saving for a house and the average rent is... well we're talking nationally so we'll call it $1,500 which is... 30% of their take home so that's... 18K per year (we're down to $44K) and $15.5K going to savings each year because they're a super stud at saving and are actually debt free so we're now at... $28.5K or $2.3K a month to live off of or.. what $550 a week?
So that's $550 a week/less than $80 a day that they have to 'play' with to pay for their insurance, their utilities, their
groceries, put gas in their car, buy a hooker or two for a BJ. AND this is without a single cent going to their retirement, health insurance, blow, an emergency fund or putting money towards their next car etc. Ya know, stupid redneck type of things.
BUT our fella is a stud and is saving 25% or $15.5K so they're actually killing it and doing better both in income and financial smarts than the vast majority of the nation. Only problem is the average cost of a home is...$420k. Ignoring the 20% recommendation and let's just say they save up a 10% downpayment towards a house (ignoring rent increases along with pesky things like inflation on all the other goods they actually have to buy... That's about 3 years to put towards a downpayment, of course the banks want to see some reserves so we'll call that an additional 2 years (up to five now).
But our 'little engine that could' has his $42K after giving up every possible luxury for a half decade. Has zero health insurance (hopefully they didn't have anything happen to them during this timeframe), zero retirement savings, zero vacations or wasteful spending, and a $420K mortgage, with $42K down, they can sign up for a 30 year loan @ 6.6% which is... $2.4K a month (and this is important NOT counting property tax or homeowner insurance which likely would be required if carrying a mortgage). So after all that sacrificing and saving and beating the odds and settling for an 'average' house despite the above average salary and savings effort well over 50% of what's left of their high income is now going towards the most average of houses. And we didn't factor in other things in this equation such as... oh say moving expenses, furniture purchases, a silly little thing called closing costs... so yeah it's actually a bit more dire AND keep in mind this is a professional accountant with years of experience and certifications. And we've ignored quite a number of other things that'd drastically shift the timeline
Let's hope they don't have any children because that's easily another $300 a week/$1,200 a month for bottom level daycare costs (just so they can go to work to continue to participate in this rat race). Even though retirement savings are exponentially more important in the early years, maybe/just maybe, they'll be able to start putting a few bucks away while they're middle-aged and god forbid they have to see a DR for the next 20 years. If they do, that'd make them pussies anyway and unworthy of our company.
Now none of the economics here is your or my fault, nor is it the fault of present company either. But that's the reality that we're in at the moment, that's why people are angry and giving up (let's be honest, being on the 'dole' is a lot more attractive and faster than working towards this end result). But hey, maybe these folks should just pull themselves up by their proverbial bootstraps and stop being lazy am I right? The other thing to note in this story is we're talking the top quartile of incomes... what about the 75% of the population (remember I said earlier it's important to keep a macro focus) making far less than $100K?
Again, I'm not trying to be a jerk towards you by any means, rather I'm just trying to elaborate my position and why I so strongly disagree with you. I'll include a generally accepted diagram called Maslow's Hierarchy of Needs and do so to illustrate that until the bottom two rungs are able to be met, there is no personal life outside of work. The catch-22 is many, and I do mean many of our countrymen are struggling to get those basic needs met each month and it's my position that life and work are intimately connected for the vast majority of Americans.
-LD
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*SOURCE: Me- I'm the fellow who for years put away in excess of 25% of my net income towards a house but also contributed to my retirement (I couldn't see how I could afford not to understand how compound interest worked) and also saved an emergency fund, car fund, wedding fund, paid for health insurance etc. Thankfully I did because I had a lot of life thrown at me- a (now) wife that went through two layoffs I was supporting, a hospitalization for me, a furlough for me, a totaled car, and god only knows how much else. Not counting the constant and aggressive goal post moving on us on what we needed to afford a house, the pandemic and rampant inflation that followed, etc- we finally got into our first house this year and went on a real (but modest) vacation. Prior to that I lived in an apartment you wouldn't accept, I had drug dealers out back, had someone OD on my stoop, had the neighbor two apartments down OD at least 3x requiring an ambulance, at least twice had someone high on drugs get into an argument with a woodpile across from my apartment (no I'm not making that up) and one time couldn't even get into my apartment after work because the local and state police had cordon off that area because the building adjacent to ours had a hostage situation while my wife was sleeping in the living room. So (respectfully) I don't feel like I have a single thing to apologize for/a sacrifice I haven't made to get to this point and for the life of me, I don't see how one can say life & work are separate unless they have a robust safety net either personally built or by family/friends that were willing to act as that proxy.
