Disclaimer: Read all the way to the end before coming at me with a pitchfork, thanks.
I’ll admit it.
I’m one of those annoying 3-percenters who don’t feel rich or feel like they are THAT wealthy and yet when you look at a snapshot of my finances, I’m definitely in the wealthy range.
I mean, I’m not an Ultra-High Net Worth individual but I’m no slouch in my stats:
- $300,000 half of my house paid in cash
- $100,000+ car paid in cash – In full
- $250,000 invested in tax-sheltered & outside accounts
- $200,000 in free cash sitting in high interest savings accounts*
*I have this much because I need to cover the next 5 years for myself and my business expenses because I’m crazy conservative like that and want to choose the contract rather than take anything out of desperation. I don’t want to sell any investments to pay for living either.
And yet I still feel like I spend like a normal person. Just that I have nicer things and definitely don’t worry as much about money.
That’s the gist of it.
I’m not going to lie and say it is the same as living in the middle of nowhere and driving a tiny car feels the same — it doesn’t AT ALL and I know it for a fact because I have done it; I have lived in a trailer with an outside john and driven a crappy car that had no heat, no locks and where the battery would die every week for no reason.
I am privileged now, and I know it which is exactly why I live where I live and drive what I drive, because I made the choice to spend X amount of money more to reach that level of comfort — I traded my savings for that extra comfort because I deemed it necessary for me..
(But if I couldn’t afford it or had to go into debt for it, no thanks.)
So even though I am in the “wealthy folk” category based on my working income, I realized that I do not have their recurring expenses….
Wealthy Folk Expenses
So, I guess I am ‘wealthy’, but I don’t have the other “wealthy folk” expenses I’m reading about in these articles:
- Almost Rich: Earning $160K – $200K and barely making it
- You try living on $500K in this town
- Earnings of more than $250,000 but this professor laments just getting by
- In some Bay Area cities, $200K a year means you’re middle class
- …and aside from my link, all these links were from Invincible Summer’s thoughtful and always well curated posts
In these expenses, I seeing that they have:
- A driver and/or bodyguard
- A nanny
- A gardener
- Events/Galas where I need $10K dresses
- A second home
- Private school tuition (granted, I only have 1 child)
… so I can ABSOLUTELY see the outrage directed towards people who whine about how they have expenses like staff to pay for to make their lives run smoothly, when they are in a certain pay range.
I myself, am also shocked they cannot make it on $250,000 up to $500,000 a year.
The ONLY thing I can say in their tiniest of defenses is that $250,000 in an eye-wateringly expensive city like NYC or Bay City areas versus a mid-sized town, does not go very far.
Then again, people live on far FARRRRR less than that in the same city, so the leg they have to stand on is pretty wobbly.
I am in that group, but .. not really
See, there is a key difference between me and these folks:
We only earn like they do …. When. We. Work.
And therein I think, lies the source of why I don’t feel wealthy even though I have a lot saved especially for my age.
I don’t make that salary ($250K) on average.
My average salary over the years is something like $87,000. A young professional but not in the sphere of $250,000 a year.
In exchange, I don’t work half the time (we just take off for the summer and go and visit folks), and I have to conserve my money very carefully (see the note on the $200K stash of cash I’m sitting on to see me through 5 projected years of unemployment).
I suspect that this is why I don’t feel rich.
I have to still budget and watch my expenses like everyone else but the difference is that I can absorb bigger hits of unexpected expenses than the average Jane.
So why are these rich people all so stressed if they have all this money?
The real problem with why rich people can’t save their money is actually quite simple — their social circle and lifestyle won’t allow them to.
I mean, aside from the fact that the ones making that kind of dough are usually guys who work 100+ hour weeks and have ZERO time to clean, watch their kids, etc, and their wives even if they are stay-at-home aren’t really interested in doing that either for image reasons (“why don’t you just get a cleaner?“) or just simply don’t think they have to (“why do we have all of this money if I have to scrub the toilets weekly?“), paying for hired help is a hassle-free option that makes everyone happy.
The truth of the matter is that to be part of that glitterati…
You NEED to run into other movers and shakers in the Hamptons who are there in their summer homes, to be in your own summer home to invite them over for catered dinners and drinks
You NEED to be at these $$$$$ charity galas and look successful to get more business
Your kids NEED to be in the same schools as seen in Gossip Girl
You NEED to live on a certain street with a certain type of house to not always feel like the loser in your group of winner friends (again, could be lies but it is all perception)
If you decide to opt out of all of this (let’s be real here, no one is forcing them to do this), it means you are consciously cutting yourself and your family out of the social network and circle which let’s face it, could affect your work deals and subsequently your job if you need a lot of high power broker interactions.
You turn yourselves into social pariahs.
I am not defending them to be sure, but I am trying to see it from their perspective — they don’t want to be social pariahs, they just want to be accepted and it is their lifestyle that is doing it to them.
Their friends and colleagues whom they live with, are all expecting a certain level of participation in a lifestyle they all deem to be appropriate to their social class and status.
If you don’t opt in, it is a different world.
I remember a few friends of mine saying they wanted to live on some street because they thought it was cool and interesting, and when the husband told his boss, his boss was HORRIFIED and told him under no circumstances was he to ever live there, and he would lend him his personal real estate agent to find a better apartment to live in, because no one in that company (big management consulting firm) could ever be socially allowed to live there.
It was just NOT. DONE. and if clients ever found out where he was living, they could potentially decide to stop working with the company.
So, their rent went up $2000 a month because of this social perception of living on the “right street” in the “right neighbourhood” in the city, and they sort of had no choice in the matter, so to speak.
They could have lied for sure, but it is hard to keep up a lie that big, you know? It stresses you to have to remember to lie and to keep up the façade.
So what am I getting at?
It is all about social networks, really…
And .. it really isn’t different if we look at our own lives, just scaled down.
Let’s say you’re a single guy who loves Burning Man and has gone for every year since it started and also does monthly meet-ups with these friends. Imagine if you couldn’t shell out to go to it any more because you need that money to save for .. whatever.
Do you think you’d continue to keep those same ties with all of your friends who go to Burning Man annually?
They’re going to have shared memories created without you, while on these annual trips that they fondly refer back to as they get together. And maybe, eventually, they just don’t call you any more because — what’s the point?
You can’t go to Burning Man, so maybe you also can’t go out and hang any more, which is awkward and not as fun.
Or what if you’re a middle-aged couple who has friends who have cottages (like you do) up north? If you didn’t go every summer for a month, would that social network still be as strong?
Would you still get invited to cottage-y things, like clambake every start of the summer? Probably not. You’re not even at that cottage any more, so the invitations stop.
Or if you didn’t go out for beer and wings every Friday to your favourite sports bar because you need to save up for a new car? Wouldn’t you feel like you’re missing out on the new stories, the camaraderie and your network?
It is the same for the rich — it is just with nicer things and fancier events, but at the core of it all, it is all about socializing and fitting in.
Something we as a species prize quite highly.
And am I any different?
I thought about this a lot.
I feel strange about the whole situation because I am slightly defensive about the income (long hours, I worked for this, I took a risk, it didn’t happen over night, bla bla bla), and yet I am a bit judgemental about what people consider to be a necessary expense (I try hard not to be biased but it is difficult not to roll my eyes when I read that a driver or a gardener is a necessity — what, we can’t take cabs any more or plant things that don’t need to be maintained?)..
Amongst my colleagues and those earning the same as we do, we do not have hired help which are apparently at our social class and status, considered to be standard expenses (even readers have written in asking me where my nanny is in all of my Week of Money diaries, to which I replied — What nanny? I’m the effing nanny…), to my colleagues often expressing surprise at my not having a cleaner come in at least once a month (Again, what cleaner? I’m the effing cleaner…), we just don’t socialize with people who have such lifestyles.
Not by choice of course, but just .. that’s how it panned out.
We didn’t go to private schools as kids, grew up poor and middle-class, and I never clicked with more than a handful of my school friends at any given time; in fact, we have all lost touch with each other because we have grown so far apart due to distance (I live 7 hours away), and due to lack of shared interests outside of having been friends at school.
I suspect we as a couple we have also managed to avoid this kind of social pressure to buy a second home and so on because we have very few close friends whom we trust and treat like our family, and your true family (blood or not) doesn’t care what you have or don’t have.
For the friends we do have, I wouldn’t judge any of my friends if they had nannies and cleaners (almost all of them have one or both), but it wasn’t a choice we made for ourselves, and while I can see it being as a great solution to all my complaining sometimes about how much it takes to run a household, I guess in some small way, we are also trying to limit our lifestyle creep and inflation by not allowing ourselves to see it as a necessity or an option.
They don’t care whether or not our kids will be in the same private school. And frankly, if they don’t want to be friends with us or talk to us because we refuse to pay gobs of money on education where we don’t see a net benefit and have differing views, then so be it.
Our REAL friends are still friends with us even if we don’t have any money and don’t or aren’t able to go out and spend money on our shared interests.
They don’t care about being outdone or outdoing us — why would they?
I am confident that if I told my friends — Hey, I have to cut back on eating out. Can you just come over and we’ll cook something together? — they would be even more excited to do something more personal and cheaper than going to a restaurant.
What we care about is raising up our friends to be the best they can be (helping them with negotiations, giving them tips, even considering business proposals together), and being… FRIENDS.
So I think the real message here, is yes, those annoying stories about folks who make more than a quarter of a mil a year complaining about how they are barely getting by — they are just trying to fit in to their social class and circle.
They’re keeping up with their own version of the Joneses, just as we do.
They of course have a choice, like we do, to opt in, or out of doing so, but how many of us, would choose to willingly opt OUT of our social networks and downgrade, so to speak?
Would you want your friends to stop sending out invites to regular gatherings for old car shows because you no longer have a car to get to said car shows? Or to not hang out because they’re sensitive (and feeling awkward) that you are in another financial headspace right now and cannot afford it?
It can get awkward. So people just avoid you. And it hurts.
I know a lot about being excluded and being avoided (lived through it most of my young life starting as a young kid in school up until college years), and it can hurt if you aren’t used to it (I was hurt the first few times I experienced it, but now I’m blasé about it.)
Well, it’s the same for rich people — they don’t want to opt out either but their pond is far more expensive than yours or mine.
(Again NOT defending anyone here, you make your own choices about how to spend your money and that’s it.)