Sure, $250,000 per yr continues to be some huge cash
I just lately wrote about the darkish facet of storytelling.
Persons are extra prone to consider a compelling story — even when with no foundation in actuality — than chilly laborious information.
One story that will get recycled each 6–7 months is {that a} shockingly excessive variety of high-income earners reside “paycheck to paycheck.”
In 2022, I wrote about this text in Bloomberg with the headline “One-Third of Individuals Making $250,000 Reside Paycheck-to-Paycheck, Survey Finds.” The primary time I learn that headline, my Bull$hit detector lit up like a Christmas tree.
Why?
First, I’m skeptical of numbers pulled from surveys — they’re typically taken out of context and used to spin a compelling however false narrative. Certain sufficient, once I learn by way of the article, I discovered this passage buried close to the tip:
“Residing paycheck-to-paycheck doesn’t essentially imply hardship, and LendingClub makes the excellence between those that will pay their payments simply and people who can’t. Solely a fraction of excessive earners — roughly one in ten — reported points masking all their family bills in April, in line with the survey.”
This brings me to my second level, which is that “residing paycheck to paycheck” is extra of a sense than a tangible monetary benchmark.
Your web price is a concrete monetary benchmark; we will quantify it as your property minus your money owed. Residing paycheck to paycheck is a time period we use to explain when somebody can barely cowl their residing bills with their present revenue.
For individuals with a low revenue, residing paycheck to paycheck may imply getting telephone calls from the electrical firm threatening to close off their energy.
Most individuals making $250,000 per yr who declare to be residing “paycheck to paycheck” aren’t truly — it simply feels that manner as a result of nearly all of their wealth is in illiquid property. They could not have tons of money left over on the finish of the month, however their wealth continues to compound.