Save. Spend. Splurge.

Earning $1.5 million doesn’t necessarily mean more savings

I was reading a Money Diary the other day — Executive Director with a joint income of $1.5 million, and when I read their savings and other such notes, a light bulb went off in my head.

Okay to be clear.


I think it is #%(*#%’ing awesome she and he make so much money together, and have an annual income of $1.5 million and they are my age. This is very cool.

(By the way, I don’t have time to read all these Money Diaries so I skim the headline first. They take a long time and Refinery29 busts out like 3 – 5 a day so it seems. It is overwhelming for a busy parent who has a full-time job, a full-time blog and full-time family.)

I just want to use this as an example for everyone of all income levels to stop bellyaching about how they need to make a ton of money to get ahead.

You do not need to make a massive, huge fortune every year, to save a significant amount of money.

Yes, you do need an income.

Yes, it does need to be a decent size but not insane

…but the main driver of how much you save is a good part, dependent on YOU.

YOU are in charge of this saving, fortune-wielding destiny (and some external factors like where you live, cost of living of course play a part. Will touch on that later).

So really, this post is about not having an excuse any more, and to start budgeting & saving your money…..

I am going to use these folks as an example to show you what I mean because I can compare them to our income (although we earn farrrr less than they do).

Money Diarists: Living in Los Angeles, CA  on a joint income: $1.5 million

You can click on this link to read what they spend their money on (expenses-wise that is), but the main line I want to point out is are these ones:

Total Savings: ~$646,000 (Half is liquid and half is in retirement accounts.)
Rental Property: We own a small rental property in addition to our home. We bought this property before we bought out house — something I think everyone who lives in an expensive housing area should do.
Mortgage: $800,000
Total Student Loans: $100,000
Mortgage On Investment Property: $400,000


They don’t mention how much this property is worth but if we assume they plonked down 20% and took the rest in debt:

Principal House

  • $800,000 = Debt
  • $1,000,000 = House Cost

Rental Property

  • $400,000 = Debt
  • $500,000 = House Cost

We can now reverse engineer their net worth:


  • Cash = $646,000
  • House = $1,000,000
  • Rental = $500,000


  • House Mortgage = $800,000
  • Rental Mortgage = $400,000
  • Student loans = $100,000

Net Worth = ~ $846,000

Let’s round it up to $900,000 to give them a break.

Maybe even $1,000,000. Or even $2,000,000.


Refinery29 posted an update entitled: My husband and I make $1.5 million and everyone thinks we should be happy all the time

In it, she states that:

  • 40% of their income goes to taxes – I wasn’t so far off with my 50% guess
  • She spends about $1500 – $2000 on a purse, MAX
  • She spends $15,000 on her family annually to be generous
  • Their income was $600,000 only doubled in the past 3-4 years

Good to know. I like these kinds of details.


On paper, my partner and I earn a third (or less… if we are honest) of what they do when we actually work.

That is to say, if we worked full-time in a year and did not take a single vacation or break, we earn around $500,000 between the two of us give or take a hundred grand or so.

If we don’t work, we don’t make money and this is why I generally do not take vacations while I am on a contract.

Our combined net worth however, is already well past the $1,000,000 mark.

I alone as of July, have $742,697, and my partner is at an estimated $1,100,000 (I do not want to reveal his actual numbers).

Update: I now am nearing in on $1M myself, with $840K as of September 2019.

Together, we have an approximate $1,850,000 saved including our home.

If I have to be honest with you, my average working rate is 60% meaning I have only worked about 60% of my possible working career. The rest (40%) I haven’t worked at all.

This means if I assume that my income is actually $138,000 ($230,000 x 60%), this means that my average income has been $138,000 and I have saved $742,697.

Then if you take into account that these folks DEFINITELY put in more than 40 hours a week, the savings versus income (and hours put in) ratio, becomes even more unbalanced.

So really, I earn less than a third of what they do and for some rough calculations let’s leave it at that.

$1.5 million divided by 2 = $750,000 income each person

$138,000 / $750,000 = Individually on average, they make 5.43 times what I do

Then if I take my average calculated career income at $138,000….

MY PERSONAL NET WORTH RATE = 5.318 X my income

$742,697 / $138,000 = 5.318 times my average income (I am not even counting my starting years where I only earned $65,000 either! I am considering it to be a wash… but to be more accurate, my savings rate is closer to 6X my average income, probably..)




They are doing VERY well for their age, and saving a #%#(&%-ton of money and are enjoying it. I am not a fan of hoarding money like some Scrooge, and saving money for me, in any level, shape or form is awesome.

I love that they are generous with their family, she sets limits on what she can buy (‘$5000 for a bag? no thanks’, is what she said), and they see the downside of what they are doing as well.

I just want to really point out that they earn about 5 times more than I do individually ($750,000 versus $138,000), and yet I have about 5-6 times more saved than they do, relative to my income.

So this really drives home that…

Savings is a completely separate matter from Income.

If they saved like us, they should have a net worth of about $7.5 million.

Okay, let’s be reasonable and say $3 million.

But hey, maybe they do have $3 million saved!

What do I know? They don’t really go into detail in these diaries the way we PF geeks do, breaking down assets and liabilities.

THEN AGAIN, also remember, they are young (like we are), and did not make that kind of money at the start of their careers (only around $600,000.. then their income doubled in 3-4 years).


I am just making assumptions (rightly or wrongly) here, but am only using them as an example of how a high income doesn’t automatically mean high savings or a high net worth.


Some major factors come into play here from what I can see:

1. They like to enjoy their money (like I do)

I am a huge fan of spending money. I love buying new things, going “nuts” on eating out, and so on, but I am not at the level where I can casually walk into a store like Hermes unless in my dreams (LOL) and buy a bracelet to treat myself. I have my own spending limits too.

Jewellery? Meh. I can go up to $500 for a piece but it better be spectacular.

Purses – I can max out at $2000 like her, but I’d really rather not, and I’d rather buy secondhand.

I am just not there at her spending level, and I sort of hope I will never reach that level to be honest. I cannot handle any more lifestyle inflation versus the level I am already at.

I would say that my maximum “free spend” limit is about $500 to $2000 for a conscious shopping spree like the one I spent at MM Lafleur detailed here.  I’m as of late, really into secondhand deluxe / designer goods, and am really unable to pay retail unless the piece is stunning.

2. They live in a VERY expensive area, cost of living is insane

Los Angeles? OMG. I live in a far less expensive area, so I am not paying through the nose for the same things.

Montreal is 35% CHEAPER than L.A.

This is big savings especially if you are spending money that is net (e.g. what you get in your pocket after taxes), and every dollar you spend, took about $1.50 – $2 working gross dollars to make it.

3. They are salaried employees, and I have my own business

This is also a big thing too. They are salaried employees. Here, this means the government snatches 50% of your income.

$1.5 million becomes $750,000 which by the way, is not an amount to sneeze at, but it is not exactly $1.5 million NET.

$750,000 means $62,500 a month.

We earn approximately $40,000 a month between the two of us, but the difference is that we are freelancers. We get to keep a good chunk of that money because we are smart about it.

But How!?!?“, you may be asking right now, and the answer is that we take a small salary to live on, and leave the rest in our company.

We also invest the money in our company, under our company to grow, and leave the earnings there and withdraw only what we need.

When retirement comes along, we’ll stop generating income and continue to withdraw what we need to live by selling off investments annually until the company resources are drained.

For instance, I drained my company’s resources to pay out a net amount (and net taxes!!) to pay for my home in full, but I put my 6-figure car under the company.

We put reasonable working expenses under the company (e.g. computers) and even though it may not seem like a big deal, it saves about 20% each time (the cost of company corporate tax rate), and it also saves on the net amount we withdraw into our bank accounts and then have to pay personal tax on which is let’s say another 30%.

These little expenses add up over time and over the years.

4. They work a lot of hours and have a lot of pressure on them

She states in the update that she wishes she could just work a 9-5 job sometimes, and not have all this pressure and stress on them to perform.

This comes with the territory — the higher up you go, the more valuable you are, the more money you get (for sure), but the hours become far longer than 40 hours, and the pressure is immense.

I can completely understand their need to release that pressure valve with hired help, retail therapy, etc. I am all for it, because if they have made the decision to do so, they deserve to exchange their hard earned money for some well earned rest and help.

This is why I don’t want to really rise anywhere. I am certain that with my skills I could have been a Director or higher by now. Actually, I am a President, but you know what I mean.

The thing is, I don’t want to be in a higher position.

I don’t want to manage people.

I don’t want added hours, added pressure, added stress….no thank you.

For more money though? Sounds like a raw deal to me. Golden handcuffs, and whatnot.

I want to keep my job at 40 hours (yes there are stressful times like now, as they have no clue how to plan and run a real project and everything falls on me), but I would not want to trade my job for anything else or climb the corporate ladder.

The balance I have of hours worked versus money is the right, sweet, perfect mix for me.


Even with a high income, your savings rate matters a lot more for saving

Sound stupid right?

Your savings rate matters for savings“.

Duh. Thanks Sherry….. *eye roll*

But really, the nuance here is that not everyone who is smart and earns a high income, necessarily wants to, or knows how to save it (not referring to them, they seem to have a decent savings rate all things considered).

But I know people, freelancers who make what I do, and are living paycheque to paycheque.

I cannot count the times I have been told by various folks that they absolutely CANNOT take time off from working.

Vacation? Sure.

Actual 6 months to a year with zero income? NO WAY.

They do NOT have the freedom that comes with their income the way that we do, because they spend every single penny.

That’s right — I know at least 3 people who make over $200,000 a year, and have near to zero in savings.

There are people who freak out at having to sit at home for a week without earning an income. This sort of attitude scares the bejeezus out of me because I cannot believe that as a freelancer, we would not take into account not working about 50% of the time, and save accordingly.

What does this mean for everyone?

This means that even earning a lower income, you can still do things like cut on your expenses and save more than someone who makes more than you.

Obviously if you make $50,000 a year, you are not going to be able to bank $200,000 a year, but you know what I mean.

You can always make more money if you work more…

But do you want to?

Think of it this way: most people work 40 hours a week. They could easily pick up a night and/or weekend job to tack on another 40 hours.

You’d get more money for sure, but at what cost?

This is the same thing for these folks — they work at least 80 hours a week (I am almost certain he or she is in investment banking or management consulting), upwards to 100 hours a week.

This is a life I CHOSE not to have, out of school. I could have easily entered investment banking as a woman and made bank (hardee har har …) but it sounded like a horrible, long, stressful journey to wealth to me.

Work more hours, have more pressure on your shoulders, be more stressed, put in the time and YES you can earn more money.

The only thing is that you have to consider what it means for you.

What does it take away from your life to put in those hours?

Also, the poor woman in the diary is also pregnant by the way (OMFG) and she is still putting in time at her job and working hard to keep her salary up and her bonus huge.

This is something I could not have done, I think, when I was pregnant in the first 3 months. For my entire pregnancy I didn’t work and I was basically at home, sitting around, waiting for The Bun to grow in the oven.

Then I didn’t work for about 7 months after Baby Bun was born, and it was a bit stressful to have taken 19 months off with ZERO INCOME and ZERO PAY, while having to still cover your half of the bills…. but in the end, it all worked out.

I can’t imagine having to work AND lug around a massive belly, going to the washroom at least 10 times a day, and being so damn tired all the time.

You shouldn’t just save but also invest your money.

This is a side discussion, but my July net worth bumped up by $66,000 in one month alone because I saved, but I also invested my money.

Savings alone won’t cut it. Inflation, stock market dips (BUY BUY BUY BUY MORE!) and rises (KEEP KEEP KEEP!), are important factors to growing your net worth as well.

The money I have invested at the start of my career (around $10K) has already more than doubled about 10 years later. If that $20K doubles again to $40K in another 10 years, and doubles again to $80K in 20 years, you can see how investing and compounding interest play a huge role in wealth building and generation.



  • raluca

    I love money, but the American way of making it – working insane hours in order to make that money – does not appeal to me.
    Me, I’m going to be frugal so I don’t need a lot of money and also invest my savings so that somebody else works for me. I’m either really lazy or an excellent engineer (they hate waste and like to optimize everything), or both. I think both.

  • Revanche @ A Gai Shan Life

    “only around $600,000” – this made me laugh out loud.

    “She states in the update that she wishes she could just work a 9-5 job sometimes, and not have all this pressure and stress on them to perform.” – I think that’s the very real flip side that people are not aware of when thinking of people making huge money. I wouldn’t give up that money if I went into it but I would absolutely be hoarding it as much as I could (investing) so that I could have the freedom to walk away and do something that doesn’t require 100% of my being. Heck, I worked like that when I was only making $60k (after all the OT paid out).

    My friend did go into investment banking and lived the high life for a long time but she also banked a lot of those earnings and was able to retire early when she got seriously sick so that she could focus 100% on recovery. I want that kind of freedom, whatever income we make.

  • liteadventurer

    I agree. After a certain threshold, the ratio of saving to total income is much more important than the specific amount of total income itself. If a person makes 2 million a year but spends 2.1 million, they’re always going to be broke.

    This is quite common in my profession. There are many in my field who make double or triple what I do, but they’re still working full time at age 70 because they either spent too much, got greedy and chased dumb investments, or have most of their net worth tied to a business or real estate that they cannot sell. I wouldn’t be surprised if I end up retiring before some of my much older colleagues.

    Out of curiosity, do you take into account your house when considering net worth as it related to financial independence? I do not include my house in my net worth because it is illiquid and I have to live somewhere even if I were to sell it. Everyone does this differently, and I wanted to see what your thoughts were.

    • Sherry of Save. Spend. Splurge.

      You know that is a good point. I guess I should remove the house when I consider it as part of FI, but I do it as net worth only.

      FI-related, it would mean I only have $400-ish K… but in my calculations above, I also included their house, so it was apples to apples.

      That said, I could always technically sell the place and rent something far cheaper if I really had no money…

  • Sense

    OY!! They make more, after tax, in *two weeks* than I MAKE IN A WHOLE YEAR, PRE-TAX. And my work is super stressful and has long hours (PhD + project manager, each part-time).

    That is utterly insane to me.

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