Rich Budget, Poor Budget

Now that $250,000 is the official definition of a "rich" family, let's compare budgets.

The Washington Post reports that "$250,000 is etched in the minds of policymakers and pundits as the number that separates the middle class from the wealthy."

To see how the other 2.9% of couples live, the Post got an accounting firm to calculate a budget for a two-earner, professional couple with two kids (one toddler, one in school), assuming $250,000 of earned income. (They did it for 8 cities, which I just averaged here.)

Here's how they might spend their money:

The total is actually about $260,000, but it's likely a family with that kind of earned income has some investment income coming in, so they're probably still in the black.

On the other hand, here's a basic budget, from the Economic Policy Institute, which has a calculator of basic-needs costs for cities across the country. Their estimated necessities for a family of four in Akron, Ohio is about $52,000, broken down like this:

To scale with the "rich" budget, it would look more like this:

 

Cross posted from the Family Inequality blog.

 

Comments

[martman1]

10:37 AM on 12/13/2010

And the gap gets wider.

From the charts in the article it's interesting to extrapolate that the $250,000 household, after saving $41,000 per year over the previous 10 years could afford to pay now pay cash for a $410,000 house and henceforth be able to save $85,000 per year ($41,000 + previous $44,000 housing expense) or become a millionaires over the next seven years ($410,000 value of house + $85,000 saved X 7years) = $1.005 million.

Assuming both families started out with nothing 10 years ago, the family earning $52,000 per year (not bad?) will still have nothing after the next 7 years and will continue to live paycheck-to-paycheck. The other family will be millionaires.

[tacevad]

10:37 AM on 12/13/2010

it is obvious in the view of many that the only reason the masses have no excess income is that they are just lazy good for nothings looking for a government handout. Maybe they are riding around in Cadillacs on the government checks they clamor for. Welfare Queens? yes we have so many of those these days!
The lack of compassion shown from the Right may never have been this disgusting in the History of America. Merry Christmas America The Bankers are getting a record bonus again

[propitiousmoment]

10:18 AM on 12/13/2010

Everybody keeps leaving out the crucial fact that the $250k number is TAXABLE income - at that level, they probably have a zillion deductions and credits that make their actual income much, much higher. Whereas the lower-income couple probably does not have that many or the same kinds or dollar amount of deductions and exemptions, which makes their actual income much closer to the taxable income. IOW, $250k is more than $250k, which means they will have money left over to save/invest for passive earnings, while the lower income family does not.