Living in “poverty” on $500,000 a year

I know I’m a little late with this, but I haven’t had a chance to write about it until now. As part of the stimulus bill, banking executives won’t be able to make more than $500,000 a year. The New York Times ran a sympathetic article on Feb. 6 explaining the hardship executives will face due to this pay cut.

Among the “necessities” that bankers will struggle to afford on their lowered salaries:

  • $45,000 a year for a nanny
  • $16,000 a year for two vacations
  • $240,000 a year for a summer house
  • $75,000 – $125,000 for a chauffeur
  • $65,000 for private school tuition

Not to mention the inflated yearly costs of housing and lifestyle, as well as other “necessities,” like a few designer gowns a year for charity galas. (Side note: there is, of course, no mention of a yearly allowance for charitable donations.)

I’d like to say the reporter was being facetious. Unfortunately, that doesn’t seem to be the case:

“As hard as it is to believe, bankers who are living on the Upper East Side making $2 or $3 million a year have set up a life for themselves in which they are also at zero at the end of the year with credit cards and mortgage bills that are inescapable,” said Holly Peterson, the author of an Upper East Side novel of manners, ‘The Manny,’ and the daughter of Peter G. Peterson, a founder of the equity firm the Blackstone Group. “Five hundred thousand dollars means taking their kids out of private school and selling their home in a fire sale.”

Sure, the solution may seem simple: move to Brooklyn or Hoboken, put the children in public schools and buy a MetroCard. But more than a few of the New York-based financial executives who would have their pay limited are men (and they are almost invariably men) whose identities are entwined with living a certain way in a certain neighborhood west of Third Avenue: a life of private schools, summer houses and charity galas that only a seven-figure income can stretch to cover.

So, you see, even the absurdly wealthy are living paycheck-to-paycheck, and we’re supposed to be feel sorry for them because they’ve gotten so used to the luxurious life that they’ll no longer be able to afford on a half million dollar salary. Give me a break.

Many of the people facing lay-offs are worried about whether they’ll be able to feed their children and keep their modest homes. They were already living on $50,000 a year or less, but now their yearly income is half that. You’re telling me I’m supposed to view these bankers as victims because they might have to give up their bi-annual vacations?

To me, this is a prime example of people with too much money and no ability to look outside their own sheltered bubbles. Give. me. a. break.

Just for fun, I’ll also share this post from the Consumerist — their suggestions for how CEOs can cut costs and survive at $500,000 a year.

6 thoughts on “Living in “poverty” on $500,000 a year”

  2. anne

    It does seem absurd to most of us… but even these cuts affect “average” Americans. Just think, the nanny is now unemployed, the chaffeur loses his job, the travel industry goes down, etc, etc. I’m not saying these executives are victims, but it could create a negative trickle-down effect??

  3. Kelly

    Honestly, I feel sorry for some of these “executives.” I would much rather be living below my means on my family’s comparatively meager income, than be making a ton of money but living above my means as they are. Over spending is such a sickness. I just hope this might be a first step for some of them toward making better financial decisions.

    Kelly’s last blog post..did you know that February is national hot breakfast month?

  5. Margot

    Glad you mentioned this article. I was amazed when I read it, because I kept waiting for the irony and the satire, but it never came. While I feel no sympathy about it, I can see how it might be hard on kids to have to move out of private school. But, I was amazed that they wrote in all seriousness that it would be a hardship for someone to give up spending $240,000 (half their theoretical income!) on a summer home. I’m sure they would suffer a lot staying in their fancy Manhattan home and just taking normal weekend trips! This article is such a reflection on how much our country’s economic mindset needs to change. It’s like people think they are entitled to forever maintain privileged lifestyles once they initially obtain them.

  6. Nikki

    I think the lifestyle change will be very though for the execs. Americans spend 98% of their income as a whole (that doesn’t give you alot of wiggle room when you see an income drop). And most people have a hard time reducing there expenses once they see a downward change.

    Nikki’s last blog post..Save $93.08 – Drink Less Soda

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