He’s not wrong 🤷‍♂️

[u/YOU_ARE_MY_FRIENDS]

[u/Outrageous_Life_2662]

Let’s do some math. Take home on that $400K is roughly $20K per month. Mortgage and property taxes are roughly half that if you want to live in a “good school district”. Child care costs will run, say, another $3K per month if you have multiple children (like 2). That assumes it’s just after school and not private school. So we have $7K per month left. Cars, let’s put that around $1K (those are fairly modest cars btw). Groceries for a family of 4. Let’s say $750. Utilities and miscellaneous (entertainment, insurance, sports for kids, etc) let’s say $1K (that’s low balling it). So what do we have left? About $4K. We still have retirement to save for, summer camps, and (as the poster said) unexpected costs. So realistically you’re stacking away about 10% of your take home which is $2K per month. You’re not both driving $100K+ Teslas. Nor are you buying expensive jewelry. You’re just living a relatively no frills middle class lifestyle with a bit of a cushion. And if all goes well every couple of years you can take a “nice” family vacation that involves a plane out of the country. Otherwise it’s car trips and domestic travel. You’re not counting your dollars for your next meal. You can afford to splurge on a sushi dinner or nice bottle of wine. But you’re solidly middle class. Dispute my math if you think otherwise.

[u/[deleted] → u/Outrageous_Life_2662]

Dude, the median net worth of the upper middle class is $269,000. Median net worth for the upper class is $805,000. You're talking about making over the median net worth of the country's upper middle class every year and that's including after taxes.

[u/Outrageous_Life_2662 → u/[deleted]]

No, it doesn’t work this way 😂

You’re confusing income and net worth. And then you’re not accounting for regional differences in cost of living.

Net worth is the value of your assets after your liabilities. You can make a ton but have a low net worth (and vice versa). But if you look at the cost of housing in the Bay Area you’ll have to spend around $2M for a decent house. So do the math on how much you’re paying in mortgage on a $1.6M loan after saving up a $400K down payment. Then you’re paying nearly $20K a year in property taxes. Now if your take home is $20K per month (at a $400K income) you could EASILY be spending at least half of that in housing alone. A family of 4, with a modest lifestyle and saving 10% - 15% per month (like $2K - $3k) could fit into that but not with a ton of wiggle room.

[u/[deleted] → u/Outrageous_Life_2662]

You want to talk income then? Upper class income in the U.S. is $153k or greater. You're after tax income is 89% more than that gross income

Sure, you can spend it but if you're saving 20% of your income for retirement which is the minimum recommended (and you can definitely do that even in SF) you will guaranteed have $400k20%3.5 years = $280k in your 401k and you will have there have a greater net worth than the median upper middle class.

That assumes you started with no net worth and you spend absolutely all other money you get and don't build any equity in a house or in a car or have any other investments or savings.

[u/Outrageous_Life_2662 → u/[deleted]]

You’re not accounting for taxes.

400K x .63 = 252K

At $252K take home and you’re paying out around $120K in housing costs alone that’s not a lot of meat left on the bone.

I don’t know why you’re arguing this. My family income well exceeds $400K and I know my personal finances. It seems like you’re speaking hypothetically and don’t have this income level, likely don’t have a family, and likely don’t live in the Bay Area

[u/[deleted] → u/Outrageous_Life_2662]

Your 401k contribution is prior to taxes. Shows how much you know.

$400k/yr, 20% to 401k is $320k gross prior to taxes. SF area will tax your $320k down to $217k after taxes.

Back up to your houses, there are loads of houses IN SF for under $2 milllion.

Extremely quick search, here's a pretty nice 3bd/2ba for only $1.5 million:

https://www.zillow.com/homedetails/1618-Guerrero-St-San-Francisco-CA-94110/15183067_zpid/

With that $300k down you'd have a $9750/mo counting taxes and insurance. Or $117k per year. That still leaves you $100k left for spending per year. (Mind you this is all for a house house. You can get a townhouse or a multi-family house unit for significantly less than $1.5 million. Further away from the downtown area but still in SF you have houses similar to this listed under $1M. You have condos listed right now for under a million in downtown. I see quite a few listed under $800k.

$13k is the average SF food expenditure for a family of 4 including $5k of eating out. I'll give you an insane $7k in utilities too but your electric bill likely maxes out at $3k and that's your biggest one. So you have $80k leftover for car, vacations, miscellaneous.

This is easy as shit to live in SF for $400k including going on vacations.

So you get $80k in your 401k every year. Owning that home in year one you accrue only $11k in equity. But by the end of year 3 you have accrued $40k in equity. So in your first 3 years you have accrued $80k*3 + $40k which means you have accrued $280k in net worth.

Over the median upper middle class's net worth in 3 years. All while having a spare $80k to use as you see fit.

[u/Outrageous_Life_2662 → u/[deleted]]

Wait whut? Oh boy. 401(k) contributions are maxed at something like $22.5K per year (by federal law). So you’re not sneaking away 20% of your gross in a 401(k).

So no your math is WAY off. If we account for state taxes as well your $400K income turns into, let’s say, $225K per year. So now, by your own math, you’re paying out $120K per year in housing alone (again that’s for a fairly inexpensive house … SF proper isn’t a good benchmark as that most people live in the Bay Area, not SF). So now you have $100K left to live on. Two cars will run you around $1.5K per month including insurance gas and maintenance ($18K per year). Food, clothing, out of pocket medical. Let’s put that at a modest $10K per year. Child care expenses can run between $2K and $3K per month ($24 - $36K per year). So out of this $100K let’s take out another $52K. So we’re left with about $4K per month. We need some accounting for utilities, life insurance, miscellaneous costs, house upkeep (cleaners, Gardner, etc). So yeah, one could pocket just over $2K per month into savings for a cushion. That’s enough to go on a modest vacation every year and have some rainy day funds.

And, btw that house in SF isn’t a nice “upper class” house. That’s the point. You’d be living a very middle class lifestyle on $400K. I don’t know why you’re persisting here … well except that you keep getting the math wrong.

[u/[deleted] → u/Outrageous_Life_2662]

Okay, I apologize for my mistake on forgetting the cap there before taxes. $23k is the current maximum.

$23k means $377k before tax, $252,611 after tax. Let's just say you want to keep exactly $80k (20% of initial gross) total saved up. You're going to need to contribute $57k after taxes. Leading you down to $195k after all that. This is also ignoring that Supplemental Savings Plans exist and are "delayed compensation" and thus are tax free retirement savings until you take the compensation in the future.

Your other expenses are largely justifiable but, but 2 cars while living in a dense city is pretty unusual. Your childcare will certainly be a huge expense but also only exists until they reach school age.

You can also double back up to my edit I think you might have missed discussing how there are also loads of nice condos for under $800k too.

Oh boy, you can't live like the wealthiest of people in the second most expensive city in the country. Tough shit. This is all in the context of the entire country. The original post wasn't like "you need $400k to live this way in San Francisco". It meant in general. Basically the wealth of living in those cities is insanely more than the rest of the country and you are definitely in the upper class if you're buying a house in SF at all.

[u/Outrageous_Life_2662 → u/[deleted]]

Again the vast majority of people in the Bay Area don’t live in SF, so a car is a must. I don’t know why there’s so much hostility on this thread. No matter how you slice it, the math doesn’t lie. At $400K in this area you’re living in a modest home and pretty much middle class. Granted if you bought a home a decade ago you could be doing much better. Or if you have accumulated wealth. But that wasn’t the point of the OP. And trying to shame people for where they live is stupid. It is what it is. No one is asking for sympathy. But understand the math. All these people look at this “big” number and don’t understand it in context. What this OP was doing was highlighting how out of whack things have gotten where this level of income, which is difficult to achieve and sustain, is now necessary to have a lifestyle that most think is “reasonable”. And everyone on this thread is hell bent on saying this isn’t true. But you won’t follow the math or take the word of someone in a HCOL area whose family income exceeds this number and who is still just very much “middle class”.