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:

 

2 Comments

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2 responses to “Rich budget, poor budget

  1. Stephanie

    This is interesting. I look at things through a health-lens, which is the field in which I work.

    I think your estimate of health care costs for the “rich” family is inaccurate. That is assuming that the family pays for the entire cost of their health insurance. The Kaiser Family Foundation did a survey and found that the average employer contribution in 2009 for a family plan was around $4,000 (pretax). http://facts.kff.org/chart.aspx?ch=1545 The entire cost of the premium is $13,000, but most employers pick up a good chunk. This is assuming that someone with a well-paying job would have good employer-based health insurance, which I think is a good assumption. I would highly doubt that a good plan would have out-of-pocket expenses totalling $9,000. Most plans have a total out-of-pocket expense at about $4,000.

    And I’m assuming that the poor family at least has the children qualifying for the Children’s Health Insurance Program, the premiums of which total usually nor more than $50 per family. That of course still leaves the parents, whose expenses could very well be much higher.

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  2. That health cost includes $4,000 for insurance premiums, $5,000 out-of-pocket, and $4,000 dental. The Washington Post’s accounting firm says those are national averages for a family in their income bracket. Presumably it’s not just doctors but also OTC medicines, supplies, as well as co-pays, etc. I don’t know how it was arrived at in more detail. I assume the same applies to the Akron estimate — all medical costs, not just premiums. Thanks for your comment. -PNC

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