The Wall Street Journal posted a video of an imaginary couple making $400,000 and how they would still only ‘just get by’. The Huffington Post and other media outlets were quick to ridicule the video and even call it the “a deliberately unsympathetic joke designed to agitate the stirrings of an American class war”.
For me this story is is not about getting by with $400,000. The article highlights how many people don’t understand the real economic impact of their Lifestyle Cash Flow, which is the amount of after-tax money you need each year to maintain your lifestyle.
In the example of the WSJ the Lifestyle Cash Flow totaled $283,000 per year, which seems like a lot. The creator of the video clearly does not understand the real cost of living with kids in a city, so she exaggerated showy expenses while ignoring the real costs of raising a family in America. I am going to detach from the pretentiousness of the video to show how easily 2 spouses each earning $200,000 per year can be feel broke.
Nothing I listed here is extravagant by any stretch of the imagination. So do they stop the 401(k)? Stop the college savings? Stop giving to charity? Stop the kids’ activities like soccer or the band? Stop taking family vacations? Or just stop eating? This couple is experiencing the hump, usually between age 30 and 50, which is the period of most people’s lives where after-tax spending peaks. It is also the hardest part on your journey to your Point of Independence.
While the Wall Street Journal utilized very poor examples of Lifestyle Cash Flow, the struggle is real. Building wealth requires sacrifice. This couple will likely have to curtail their retirement savings, and wait on college planning until they create the safety net today to ensure they make it over the hump. This is why we are hyper-focused on our client’s Lifestyle Cash Flow – your success (or failure) depends on it.
Are you feeling the struggle? Maybe it’s time to review your Blue Pages. Don’t have Blue Pages? Give us a call at 404.257.3317 to find out how you can get yours today.