This article makes me... well, angry.
"Analysis examines what it's like to be a 'rich' family in America"
This is one of those articles that gets me steamed up. It examines what the costs/spending habits of the typical family making 250k would be, more or less an effort to say, "I'm not really rich-- I have all these expenses, you see!"
So I'm going to pick it apart, bit by bit.
First:
"It is six times the national average household income, and just 2.9 percent of couples earn that much or more."
There's the usual statistical shuffle here; if we're looking at everyone earning more than 250k, then we should be looking at the average or median of that 2.9%, not it's bottom.
Second, the basis of the study:
"BDO USA, a national tax accounting firm, computed the total state, local and federal tax burden of a hypothetical two-career couple with two children, earning $250,000. To factor in varying state and local taxes, as well as drastically different costs of living, BDO placed the couple in eight locales across the country - including the District, Alexandria and Bethesda - with top-notch public school districts using national data on spending. "
Ok, first off-- Alexandria and Bethesda are some of the most expensive places in the country to live, and that according to Forbes. The District, depending on where in the District you choose, can be as well. Choosing to live in Bethesda, or Alexandria, or other cities like them (and the study is heavy on swanky Burroughs of the well to do) is a choice in and of itself. It's like trying to live in Manhattan when you move to New York City. That is a luxury choice, not some must have. If you live int he DC area, you could choose to live in slightly less well-heeled areas-- like Rockville, or Silver Spring. You could even be daring and choose-- now I know this is scandalous-- to live someplace like College Park or Laurel. On the Virginia side-- Woodbridge, for example, or lots of other towns that are less recognizable as the place where rich people live.
So in the first place, we're supposed to feel sorry for the Joneses because they bought the $750k house in the fancy part of town, rather than a similar house for less than that in a more middle-class neighborhood. Bullshit.
So what are these hypothetical Jonses doing with all that income-- here's where this starts to get ridiculous:
"They are maximizing contributions to two 401(k)s and all flexible spending accounts available to them, and they are squirreling away $8,000 a year into college funds."
First off, the only people I know maximizing contributions to their 401(k)s are people near retirement age; same to do with saving for college. The study is assuming that the couple is planning to cover 100% of their children's college expenses, and maintain their 250k income post-retirement. Ok, you say, isn't that financially prudent? Sure. But compared to those making less than this, this is still luxury saving. Most people making less than 250k couldn't dream of a stable 250k post-retirement income; most people couldn't dream of fully financing a complete college education for two children on their incomes on top of that.
So we are supposed to feel sorry for the Joneses because they are saving for a future most of us will never have in the first place, and to completely finance their kids education to boot, something beyond the reach of most parents regardless of retirement income. Plus they're paying the mortgage on the $750k house in the swanky part of town, which, regardless of whether or not they for whatever reason have-have-have to live in the swanky part of town for work, they can sell when they retire to move to someplace with more reasonable property rates when they retire, to boost their retirement wealth. So, in effect, we should feel sorry for the Joneses because they are planning to retire wealthy. Sure...
But now we get to the real part of the shell-game:
"In Alexandria, the couple would be in positive territory with $15,313; in Bethesda, they would be up by $14,187 and in Washington, by $12,036. In Plano, Tex., the best-case scenario of all the locales in the analysis, they would have $27,556 to spare.
"But factor in common additional expenses for a working couple with two children - music lessons, day camp costs and after-school sports, entertainment, cleaning services, gifts and an annual week-long vacation - the Joneses get deeper in the red in Huntington to the tune of - $24,380. In Alexandria, they would be down by $7,280. In Bethesda, by $8,406, and in Washington, by $10,557. In Plano, the best-case scenario, they would have $4,963 to spare.
Some of the expenses incurred by couples like the Joneses might seem lavish - such as $5,000 on a housecleaner, a $1,200 annual dry-cleaning tab and $4,000 on kids' activities. But those are the sort of expenses that households with two working parents might juggle as they try to maintain the home, care for the kids and dress for their professional jobs."
Really? $5000 on a house cleaner is a necessary expense? A "must?" For a four-person household living in a 4-bedroom home? No, not really. In a middle class household, kids are responsible for some of the chores, and the adults split them too.
More: music lessons, day camp costs, and after-school sports-- all three? Ok, so day-camp costs for when school's out of session if both parents are working, but private music lessons, plus after-school sports? For a family where one child isn't school aged yet, and the other is? Something is being double counted here, and that's child-care costs. The study assumes one pre-schooler and one school-aged kid. Reality check; in a middle class family, kids usually do one or the other, not both. More, usually that after-school activity is more for pre-teens and teenagers, when child-care costs are lower-- the money you were spending on child-care you now spend on after-school activities.
We're supposed to feel sorry for the Joneses because they have the money to pay for their pre-schooler to take ballarina classes AND piano lessons. Really? For a pre-schooler? Also, their other kid is doing both a sport and music; I know as a kid, I had to pick one, and when I reached high school, I had to get a job to pay for my after-school activities. That's middle class-- mommy and daddy paying for everything, including music lessons and sports stuff, that's well-- a benefit of being wealthy. Most families have to budget a single after-school activity for their kids carefully, not do all of them and pay for all of them. We should feel sorry for the Joneses because they spend lavishly on their kids? Understandable, but tear inducing? Not really.
So all the things we're supposed to feel sorry for the Joneses about: they're retiring wealthy, maintaining their current wealthy income into retirement. They've got a house in the swanky part of town, and they're paying all their kid's college expenses-- Johnny and Sue won't have to get a real job until they're in their 20's, everything will be paid for by mommy and daddy, and they'll never have to choose between playing football or taking violin lessons-- mommy and daddy will pay for that too. They've got a freakin' housekeeper. Come on, really? I don't really feel that bad for them. Move someplace more affordable, cut out the housekeeper, and make Johnny and Sue pick a single after-school activity, and you can pay for everything, retire fairly ridiculously wealthy, and have plenty of discretionary spending money. In other words, have a reasonable budget, live within your means-- like, you know, you're middle class or something.
And that's the extreme LOW end of the $250+k plus spectrum. Add just 20k to that income, and they're getting by with cash to spare even in the greater majority of the swanky neighborhoods the study focuses on. The greater majority of people in the 250k+ range make much, much more than that, to boot. Further, this is the most sympathetic of the extreme low-end case. I suppose there are double income families with more kids, but that gets into the question of how many kids is it reasonable to have? We're not talking about the single-income family where one earner earns the more than $250k and the other stays home and takes care of the kids (and saves on all those child-care costs). Or the double-income, no kids household, where all the college savings, child-care, and after-school activities are gone, plus the grocery bill is lower and probably living expenses too (no need for a 4 bedroom house with just two people).
What makes me angry about this article is the 'let them eat cake' aspect of it all. It's the way that the article has this sense of entitlement for the Joneses, that they should be able to retire with their out-sized income intact, give a free ride to college for their kids, generally spoil the hell out of said kids before they get to college, and have a housekeeper before they could be reasonably expected to pay more in taxes. That is the bloated sense of entitlement that Republicans are fighting for.
There are two-income families where both parents work full-time that make due with much less, mostly by having reasonable budgets, and by, you know, making their kids make some choices instead of giving them everything they want. And yet the logic we're supposed to accept is that the families with less should take on more of the burden-- so that people like the Joneses can keep their housekeeper with the swanky house in the swanky part of town.
This is one of those articles that gets me steamed up. It examines what the costs/spending habits of the typical family making 250k would be, more or less an effort to say, "I'm not really rich-- I have all these expenses, you see!"
So I'm going to pick it apart, bit by bit.
First:
"It is six times the national average household income, and just 2.9 percent of couples earn that much or more."
There's the usual statistical shuffle here; if we're looking at everyone earning more than 250k, then we should be looking at the average or median of that 2.9%, not it's bottom.
Second, the basis of the study:
"BDO USA, a national tax accounting firm, computed the total state, local and federal tax burden of a hypothetical two-career couple with two children, earning $250,000. To factor in varying state and local taxes, as well as drastically different costs of living, BDO placed the couple in eight locales across the country - including the District, Alexandria and Bethesda - with top-notch public school districts using national data on spending. "
Ok, first off-- Alexandria and Bethesda are some of the most expensive places in the country to live, and that according to Forbes. The District, depending on where in the District you choose, can be as well. Choosing to live in Bethesda, or Alexandria, or other cities like them (and the study is heavy on swanky Burroughs of the well to do) is a choice in and of itself. It's like trying to live in Manhattan when you move to New York City. That is a luxury choice, not some must have. If you live int he DC area, you could choose to live in slightly less well-heeled areas-- like Rockville, or Silver Spring. You could even be daring and choose-- now I know this is scandalous-- to live someplace like College Park or Laurel. On the Virginia side-- Woodbridge, for example, or lots of other towns that are less recognizable as the place where rich people live.
So in the first place, we're supposed to feel sorry for the Joneses because they bought the $750k house in the fancy part of town, rather than a similar house for less than that in a more middle-class neighborhood. Bullshit.
So what are these hypothetical Jonses doing with all that income-- here's where this starts to get ridiculous:
"They are maximizing contributions to two 401(k)s and all flexible spending accounts available to them, and they are squirreling away $8,000 a year into college funds."
First off, the only people I know maximizing contributions to their 401(k)s are people near retirement age; same to do with saving for college. The study is assuming that the couple is planning to cover 100% of their children's college expenses, and maintain their 250k income post-retirement. Ok, you say, isn't that financially prudent? Sure. But compared to those making less than this, this is still luxury saving. Most people making less than 250k couldn't dream of a stable 250k post-retirement income; most people couldn't dream of fully financing a complete college education for two children on their incomes on top of that.
So we are supposed to feel sorry for the Joneses because they are saving for a future most of us will never have in the first place, and to completely finance their kids education to boot, something beyond the reach of most parents regardless of retirement income. Plus they're paying the mortgage on the $750k house in the swanky part of town, which, regardless of whether or not they for whatever reason have-have-have to live in the swanky part of town for work, they can sell when they retire to move to someplace with more reasonable property rates when they retire, to boost their retirement wealth. So, in effect, we should feel sorry for the Joneses because they are planning to retire wealthy. Sure...
But now we get to the real part of the shell-game:
"In Alexandria, the couple would be in positive territory with $15,313; in Bethesda, they would be up by $14,187 and in Washington, by $12,036. In Plano, Tex., the best-case scenario of all the locales in the analysis, they would have $27,556 to spare.
"But factor in common additional expenses for a working couple with two children - music lessons, day camp costs and after-school sports, entertainment, cleaning services, gifts and an annual week-long vacation - the Joneses get deeper in the red in Huntington to the tune of - $24,380. In Alexandria, they would be down by $7,280. In Bethesda, by $8,406, and in Washington, by $10,557. In Plano, the best-case scenario, they would have $4,963 to spare.
Some of the expenses incurred by couples like the Joneses might seem lavish - such as $5,000 on a housecleaner, a $1,200 annual dry-cleaning tab and $4,000 on kids' activities. But those are the sort of expenses that households with two working parents might juggle as they try to maintain the home, care for the kids and dress for their professional jobs."
Really? $5000 on a house cleaner is a necessary expense? A "must?" For a four-person household living in a 4-bedroom home? No, not really. In a middle class household, kids are responsible for some of the chores, and the adults split them too.
More: music lessons, day camp costs, and after-school sports-- all three? Ok, so day-camp costs for when school's out of session if both parents are working, but private music lessons, plus after-school sports? For a family where one child isn't school aged yet, and the other is? Something is being double counted here, and that's child-care costs. The study assumes one pre-schooler and one school-aged kid. Reality check; in a middle class family, kids usually do one or the other, not both. More, usually that after-school activity is more for pre-teens and teenagers, when child-care costs are lower-- the money you were spending on child-care you now spend on after-school activities.
We're supposed to feel sorry for the Joneses because they have the money to pay for their pre-schooler to take ballarina classes AND piano lessons. Really? For a pre-schooler? Also, their other kid is doing both a sport and music; I know as a kid, I had to pick one, and when I reached high school, I had to get a job to pay for my after-school activities. That's middle class-- mommy and daddy paying for everything, including music lessons and sports stuff, that's well-- a benefit of being wealthy. Most families have to budget a single after-school activity for their kids carefully, not do all of them and pay for all of them. We should feel sorry for the Joneses because they spend lavishly on their kids? Understandable, but tear inducing? Not really.
So all the things we're supposed to feel sorry for the Joneses about: they're retiring wealthy, maintaining their current wealthy income into retirement. They've got a house in the swanky part of town, and they're paying all their kid's college expenses-- Johnny and Sue won't have to get a real job until they're in their 20's, everything will be paid for by mommy and daddy, and they'll never have to choose between playing football or taking violin lessons-- mommy and daddy will pay for that too. They've got a freakin' housekeeper. Come on, really? I don't really feel that bad for them. Move someplace more affordable, cut out the housekeeper, and make Johnny and Sue pick a single after-school activity, and you can pay for everything, retire fairly ridiculously wealthy, and have plenty of discretionary spending money. In other words, have a reasonable budget, live within your means-- like, you know, you're middle class or something.
And that's the extreme LOW end of the $250+k plus spectrum. Add just 20k to that income, and they're getting by with cash to spare even in the greater majority of the swanky neighborhoods the study focuses on. The greater majority of people in the 250k+ range make much, much more than that, to boot. Further, this is the most sympathetic of the extreme low-end case. I suppose there are double income families with more kids, but that gets into the question of how many kids is it reasonable to have? We're not talking about the single-income family where one earner earns the more than $250k and the other stays home and takes care of the kids (and saves on all those child-care costs). Or the double-income, no kids household, where all the college savings, child-care, and after-school activities are gone, plus the grocery bill is lower and probably living expenses too (no need for a 4 bedroom house with just two people).
What makes me angry about this article is the 'let them eat cake' aspect of it all. It's the way that the article has this sense of entitlement for the Joneses, that they should be able to retire with their out-sized income intact, give a free ride to college for their kids, generally spoil the hell out of said kids before they get to college, and have a housekeeper before they could be reasonably expected to pay more in taxes. That is the bloated sense of entitlement that Republicans are fighting for.
There are two-income families where both parents work full-time that make due with much less, mostly by having reasonable budgets, and by, you know, making their kids make some choices instead of giving them everything they want. And yet the logic we're supposed to accept is that the families with less should take on more of the burden-- so that people like the Joneses can keep their housekeeper with the swanky house in the swanky part of town.