I was talking more along lines of the OP’s question than the actual “poverty level”. The “Middle Class Manual”(invented by me) says that for a family of three, you need a minimum of:
Own your own house. Let’s say minimum 350K in any decent town near Boston for a livable home. Homeowners insurance, property taxes, and repairs (approximate minimum $2600 a month)
Two decent cars (don’t have to be new) cost varies
Both parents may have to work so young child may have to go to day car for a few years at $650 - $1100 a month.
Save for retirement - 10% of income
Save for college - $100,000+ per newborn child over 18 years.
Everything else like food, clothes, medical bills etc.
I included no vacations or other optional expenses in that. To actually be “comfortable” and build other savings, investments, and buy any "toys), you need a lot more than 100K to do that responsibly. I was unemployed recently and my family and I briefly fell below the 100K mark. I never want to do that again. We are very good with money and it would be very hard to maintain a responsible middle class lifestyle on less than that for us.
To the extent that the OP’s factual question has been answered with some of the statistics presented, above, the rest of this thread is drifting into a discussion of where people would draw the lines for wealth and poverty (along with some side comment on the improbability of the misuse of statistics).
I forgot to add, that 100K is before taxes. When you start getting into those tax brackets, it is a little shocking when you look at your first paycheck and see that combined, your take home less than 66K with all withholdings combined (exactly how much depends on your deductions and 66K was generous). This applies to every wageearner but it gets worse as you make more. There are also hidden taxes that will kill you in Massachusetts. My wife and I spend over $500 month on tolls on top of the $200 in gas. That is all part of the cost of working. You make it, but you also give it straight back just for the priveledge of driving to work dressed every day to earn a paycheck.
Well, let me give you a counter example of a three person family in the Boston area I am very familiar with.
We…I mean, this family…pay a mortgage on their own house. It is a nice house by anyone’s standards but is not in what is usually considered a very desirable town (schools don’t have great reputation).
The family owns two cars, one bought new for cash several years back (stock options during the market boom) and the other a used Geo Prizm.
Mother doesn’t work so no income there, but then no day care either. Works out to pretty much a wash.
Father is saving for retirement through 401K, at least 10%, with a company match of a few percent.
No savings for college…this was planned for but things fell through when wife had to quit work unexpectedly when child was rather ill after being born several years ago. In fact, the family pays tuition at a private school (half a day, but still) :eek:
There are no other savings aside from some stock and mutual funds held from previous years, and the equity in the house which has appreciated quite a bit in the last eight years. One vacation a year, at best, usually in the New England area. No toys (RV, boat, motorcycle, big screen TV). Not even cable TV beyond the most basic of basic packages.
This family’s yearly income is well below 100K a year.
I have it on good authority, though, that this family considers themselves comfortably middle class and is in fact probably better off than most of the people in their town.
Their friends that live one street over, with the five kids where the father runs his own business installing hardwood floors?..THEY aren’t middle class and indeed are literally just squeaking by. My guess is their situation is much more typical for people in this area, and that the father nets significantly less than $75K a year through his business.
I did have a point here…what was it again? Oh, yes…that a family of three making 75-100K in the greater Boston Area is (or should be) middle class. $150K (the figure you gave in your earlier post) for three people around here is definitely upper middle class, or again, it should be.
I understand dude, really I do. Seriously, a big consideration when we bought our house was doing so in an area where we could commute into town without paying tolls. So west of Boston (Turnpike) and North Shore (Tobin Bridge) were immediately eliminated from consideration. That leaves north (93), south (Expressway) and northwest (Rtes. 2 and 3). Also I am lucky to work in biotech where casual clothes are the norm…no need to shell out for a special work wardrobe.
I congratulate you (seriously). It sounds like you are doing better than most people. However, you helped make my point. Your situation is not that ideal in that you don’t have savings (very important for anyone but obviously necessary to build wealth). I doubt you can realistally cut expenses much more without a huge change in lifestyle just as I cannot. Boston is just too freaking expensive all around. More money would allow you to build savings and contribute to other such things that many people on the brink consider optional but really aren’t. The things that I listed really are part of what I consider to be a responsible part of a middle-class budget. I didn’t come up with that on my own, it is from reading tons of articles and books from financial advisors. 100K only consists of two people making 50K a year. That should be very easy for a couple of college graduates at least after a few years of work. Many new grads make more than that. Two people at 75k obviously puts them a 150K which doesn’t seem that much of a stretch for a couple as long as they work in one of the many fields that pay that much.
My family does have savings in several buckets including thousands (that were) in an emergency fund. When I lost my job, there wasn’t that much that we could meaningfully cut out without packing up and moving to a two-family rental in Dorchester or moving to Nebraska. Instead, we used that money for what it was rightfully designed for and what would have been a foreclosure and bankruptcy for many people was just an inconvienence.
That’s about what Ivylad and I make. I’m a professional working in broadcasting, Ivylad is retired military.
Well, I have a BA, and I make pretty good money. And with all due respect, if the best job you can get is working at Wal-Mart, maybe you should rethink starting a family. Kids ain’t cheap.
I will agree with this. But wealth is accumulated over time. I’m better off than I was five or ten years ago, and I will be better of five to ten years from now. We own our own home, invest in a 401(k), and are looking to purchase an investment property. Lotteries are a joke. There’s virtually no way to win. People who depend on them to retire are short-sighted.
Someone can drop a windfall in your lap, but unless you know how to manage it, you will go through it in about a year and be right back where you started from.
Having a comfortable retirement takes years. You can’t go through life, buying expensive cars and home entertainment systems, and expect to stop working when you’re 65. Like anything else worthwhile, it takes work and sacrifice.
My uncle worked as a city firefighter. He didn’t get paid much but worked 24-hours-on, 48-hours-off. GED, no college, 2 kids. They lived in a horrible neighborhood and a house on the next street was sold at a foreclosure auction. He bought it for $250, which was all their savings. He then fixed the house on his days off and sold it and paid off his own mortgage. Lather-rinse-repeat for 30 years… He is now retired from the fire department and is a millionaire. His son is 37 years on and is also a millionaire. Not from Uncle giving him a cent, but from working on houses with his dad (earning minimum wage) during high school and turning around and buying, fixing, and selling houses on his own.
If you want to spend time, effort, and work hard, you can be a millionaire.
I highly recommend the books The Millionaire Next Door, The Millionaire Mind, and The Millionaire Woman Next Door to anyone seriously interested in fighting their ignorance on this topic. The author is an economist who researches self-made millionaires and how they get there.
His research does not support them starting out as “couple hundred thousandaires.”
His research does support self-employment, often in a non-glamourous industry, as a key path to building wealth. Since a lot of people he profiles start out with very little, it’s not necessarily a huge risk to be self-employed. But those who become wealthy almost invariably work very hard and put in long hours, well above the 40 hours many people put into a typical office job.
These books, at least the first one, are keys to taking this book out of IMHO territory and getting some GQ-style information on the topic.
I don’t think it’s fair to call this an “investment.” Once the lottery is over, that $10 isn’t invested, it’s gone.
The big question: How much money does it take to invest in something (e.g. stocks) that has a nontrivial chance of making the investor wealthy? And is this comparable to the kind of money that people typically spend on lottery tickets?
But what’s the difference between your “essentially ‘zero’ chance” and the probability of winning the lottery jackpot? The probability of that is “essentially zero” by some interpretations of “essentially zero.”
Off the top of my head, I would estimate that a poor person would have a much better chance of becoming wealthy through some sort of criminal activity than through playing the lottery—though, of course, with much greater risks.
Well I think this can be answered statistically. Here are the key parameters:
What are the probabilities of winning the lottery in a given week with one ticket.
What are the probabilities with say five or ten tickets.
What are the probabilities of winning with five or ten tickets played weekly for say twenty years.
What are the probabilities of a non self employed, lower educated person with no outstanding abilities of becoming “wealthy” before retirement (this would be hard to calculate since involves a population over time). Before retirment is key since who cares once your old? Hell I’m thirty five and consider myself over the hill. I really don’t care what life is like at sixty or seventy it will just be survival (until it’s not). Someone said that a person like my cousin shouldn’t have kids. This is perhaps good advice however it is also moot for the vast majority of those in their situation since the ship has sailed. Usually, by the time people in this “class” realize the wisdom of that perspective they already have several (or more) kids.
I would wager a great deal of money that among lower educated, lower income individuals that the lottery is the primary way that they become millionaires. If you exclude self employed, and those who engage in illegal activities I am almost certain that this is the case. I personally know two people that have hit the Hoosier Lotto for 1.5 and 4 million respectively (granted it’s a point estimate and of little value in terms of extrapolation).
If the lottery were instead a “death lottery” a la Shirley Jackson or Stephen Kings “Running Man” and the “winner” had 24 hours to run (with some possibility of escape) before the “death squads” attempted to hunt them and their family down how many would sleep well at night? Do you think that many who now ignore lottery results might not at least give them a once over before bed (everyone would be included in my hypothetical lottery so the odds would be much less than with the current lottery system).
Speaking of this I always thought that Publishers Clearinghouse should notify those who would have won had they returned their information (they were picked but disqualified since they had not returned the appropriate information). I think the shock of finding out you “would have been rich” (or seeing others experience the shock and horror of discovering this for themselves on TV) would be enough to make more people participate (and probably drive a few over the age unfortunately).
I would take that bet in two seconds. You would to make it say $10,000? True, you created an artificial scenario where there is no choice, creativity, or just plain good fortune of any other nature and it would be almost impossible for the person to build that much wealth on their own. That being said, allmost anything can beat the lottery statistics. With so many millionaires being created every year, I would bet that many of them have children that fit the scenario that you describe. All of those millionaires will die at some point leaving their children with a portion or all of that money (after taxes). Many of those children will end up wealthy as a result. I know two people that it has happened to (and they obviously blew it extremely rapidly but that is a given).
Ten lottery tickets per week for twenty years would cost $10,400. If you dollar-cost averaged that money into high-risk stocks, you could lose it all, or you could get fabulous returns.
Let’s just take a shot in the dark and say there are 10,000 possible high-risk stocks out there at any given point in time, and only one of them will be a phenomenal skyrocket, turning your $10.4K into millions. That’s a one in 10,000 chance.
With the lottery, let’s say you’re buying 6/52 tickets (pick six numbers between one and 52). Your odds of picking the winning numbers on any one ticket are about one in 15 billion. If you buy 10,400 tickets, your odds are still less than one in a million.
So, just based on some rough estimates here, your odds of becoming a millionaire by dropping money randomly on high-risk stocks are at least 100 times better than doing it by buying lottery tickets.
This part makes it seem like you are defining “middle class” as “That lifestyle affordable by a married couple who both have college degrees and both work”. I think a family of three can live comfortably on less, as long as they have their priorities straight (meaning they don’t worry about living in the “right” town, with the cool toys and cars and such). And just looking around me a lot of families do get by on less.
As to my own situation…I am lucky in that even though my wife isn’t working outside the house right now she makes managing the family budget and finances one of her full time jobs. Her career experience in financial services helps her out a lot here. In addition she does various volunteer activities (fundraising for the school and various community charities) that she will be able to put on her resume in a year or two when our son will be in school all day and she can look for a more formal job…we have ruled out having any more kids (for financial reasons!). Hopefully this will finally take the pressure off.
You seem to think there is only one way to become wealthy, having a huge windfall land in your lap.
What about making smart choices, investing wisely, and becoming wealthy over time? Everyone has that opportunity. Whether or not they choose to exercise it is another matter.
well if you have 50k and 4 people to support that is 12.5k per person. A single person can live comfortably (by my standards) on 20k a year in the midwest. But 4 people means health insurance, food, utilities and housing for 4 people, two cars instead of one, saving for college tuition and bail money, etc.
For many famalies that I know its a good month when ALL the bills get paid and they get to eat out a couple of times per month (forget saving for the kids college or health insurance that’s almost the exception in the lower “working class not middle class” that I am alluding to). Giving up one of those dinners out buys at least five lottery tickets a week and a way out (that doesn’t involve many years of investing which may or may not yield fruit, and even if it does you are still old when you see success).
My guess is that you’re more likely to make a fortune by starring on a hit televsion series than you are to win the same amount of money in a lottery. There’s probably over a hundred television star a year making $1,000,000 but I doubt there’s that many lottery winners who actually made a million.
In case you don’t believe that I live what I preach, I offermy house.. We paid less than 300k three years ago for this house with 2 1/2 acres in the greater Boston area which is remarkable. It was built in 1760 and had good “bones” but the property had nearly 100 years of neglect and needed just about everything. It is now completely restored. We invested 100K in it over the course of two years. My wife and I worked day and night, sweated our asses off, and sustained injuries for two years to restore the property to its full glory. The result is a 170K profit based on our efforts. We intend to repeat related feats for life. It will easily end up as several million dollars based on our efforts. Ignorant people do not know how to handle money. Middle class people can all choose to be millionaires if that is their priority but most people have no idea how to do it nor the discipline.