A chart posted by Financial Samurai outlined the finances of a family living in New York that consists of two lawyers in their early 30s who both make $250,000 annually and have two children, ages three and five. While it appears that a family making over six times the national average should be sitting pretty as it pertains to savings, at the end of the day, after all of the family’s expenses, they are left with a paltry $7,300, as you can see on the chart below. But after taking a closer look into the family’s expenses, it is easy to see how this family can end up with almost no money after their expenses. The most obvious “expense” is taxes, which, at $185,600, eats up almost half of their income. Then we have the mortgage, which is at $5,000 per month, totaling $60,000 for the year. Childcare is the third-highest expense, at $42,000. It breaks down like this: Gross Salary: $500,000 401K contribution Wife: $18,000 401K contribution Husband: $18,000 Salary after 401K contribution: $464,000 40% Tax Rate: $185,600 Net Salary: $278,400 Expenses Childcare for two children: $42,000 Food for four (including date nights every two weeks): $23,000 Mortgage (P&I): $60,000 Home Maintenance: $5,000 Property Taxes on $1.5 million home: $20,000 Property Insurance $2,500 Three vacations a year: $18,000 Car Payment on BMW 5 Series and Toyota Land Cruiser: $9,600 Gas: $5,000 Car Insurance: $2,000 Life Insurance ($3 million): $2,500 Clothes for four people (no designer clothes, bags, shoes): $9,500 Children’s Lessons (sports, music, academics): $12,000 Charity: $18,000 Student Loan Debt: $32,000 Miscellaneous: $10,000 Total Costs: $271,100 Left over: $7,300 While all of the aforementioned expenses are “necessary evils,” there are a number of expenses that could likely be curtailed in order to help the family add more money to their savings. For example, they spend $18,000 on three vacations annually, according to the chart. While vacations are definitely needed, especially for those who work in the notoriously stressful field of law, three vacations may not be completely necessary. Let’s say each vacation cost $6,000 for the family. If the family decided to go on just one vacation, they could have saved $12,000 – more than doubling their actual savings for the year. Perhaps another expense that could be curtailed is the family’s charity expenses. According to the chart, the family spent $18,000 on charitable expenses. While being charitable is definitely something to be commended, cutting the family’s charitable expenses in half would add another $9,000 to the family’s savings. Lastly, in New York City, a car isn’t necessarily a necessity. Even if they decided to keep just one car (the BMW of course), they would likely save somewhere in the neighborhood of $4,000. So, by just putting forth a few simple adjustments in their lives, that family could save an additional $25,000. Either way, we doubt that this family is struggling to make ends meet.
