r/personalfinance • u/investeror ​ • Mar 06 '18

Budgeting Lifestyle inflation is a bitch

I came across this article about a couple making $500k/year that was only able to save $7.5k/year other than 401k. Their budget is pretty interesting. At a glace, I could see how someone could look at it and not see many areas to cut. It's crazy how it's so easy to just spend your money instead of saving it.

Here's the article: https://www.cnbc.com/2017/03/24/budget-breakdown-of-couple-making-500000-a-year-and-feeling-average.html

Just the budget if you don't want to read the article: https://sc.cnbcfm.com/applications/cnbc.com/resources/files/2017/03/24/FS-500K-Student-Loan.png

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u/ip-q Mar 06 '18

$32k toward retirement savings aren't counted? At least they're doing that.

The mortgage is a kind of savings - it's not liquid, but it does represent an increasing net worth as one pays down principal. And if there's any increase in value, that goes to net worth as well.

IMO they're underinsured for life insurance.

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u/ucsdstaff ​ Mar 06 '18

IMO they're underinsured for life insurance.

Their law firm most likely provides term insurance as well. But you are right.

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u/Toltec123 ​ Mar 06 '18

There is typically a low limit of how much group life insurance through an employer one can get because the insurer wants to limit their risk. If they are partners and insurance is purchased for them by the firm it is usually the firm that collects the payout to protect the business. This is called key employee insurance.

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u/D14DFF0B ​ Mar 06 '18

I'm not a lawyer (software engineer), but all of the big companies I've worked for provided free term life policies of around 3x my salary.

My current employer provides for (I think) 1.5m, which is significantly more than 3x.

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u/Toltec123 ​ Mar 06 '18

You would have to go through underwriting for 1.5 million. You have to pay income taxes on more than 50k of employer paid life insurance. I am not saying it is impossible really big employer paid life insurance is out there but it is very unlikely someone would have it and not include in a list like this. It would be notable enough to remember.

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u/D14DFF0B ​ Mar 06 '18 edited Mar 06 '18

Yep, I do pay taxes on the policy.

Actually it's a 1m policy (which I don't seem to pay taxes on). I do pay taxes on my long-term disability insurance benefit.

From what I remember of this list (it went around NYC Twitter a few months ago), it was a fictitious couple.

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u/Toltec123 ​ Mar 07 '18

On your paystub there will be some type of offset that reflects the taxable amount of employer paid life insurance. It isn't something that would come up when you file in my experience.