Living on $500,000 a Year

[mrvlad0]

Living on $500,000 a Year

What F. Scott Fitzgerald's tax returns reveal about his life and times

 

http://theamericanscholar.org/living-on-500000-a-year/#.UaoQQGQ1Y0p

[ERICOPOLY]

That article makes the important point that tax rate was only 5.5%.

 

More importantly though, servants were cheap.  The inflation for labor has far exceeded the CPI.

 

The $500,000 income is adjusted for the CPI to make it "today's dollars".  I think they need to adjust it for the cost of hiring a servant, and then we'd be talking about a number well into the millions.

[manualofideas]

Eric, you're pointing out an adjustment that may or may not be true. If you can get some of your administrative tasks done by a remote worker, you can hire someone in the Philippines pretty cheaply today.

 

 

The tendency to adjust should also not be viewed only from one side of the coin.  There are many things to which Fitzgerald did not have access but which would have greatly increased his quality of life. For example, there was no advanced healthcare available -- at any price -- back then. So, you could say his income was below today's poverty line in terms of access to good healthcare. Or, he was unable to enjoy the Internet -- again, at any price. He did not have modern cars, modern travel opportunities, the list goes on.  In a way, everyone who lived before WWII was a pauper compared to any middle-income person today.  It all depends on the vantage point.

[Guest]

how much would a servant cost now, like $30,000 a year or something?

[ERICOPOLY]

Eric, you're pointing out an adjustment that may or may not be true. If you can get some of your administrative tasks done by a remote worker, you can hire someone in the Philippines pretty cheaply today.

 

 

The tendency to adjust should also not be viewed only from one side of the coin.  There are many things to which Fitzgerald did not have access but which would have greatly increased his quality of life. For example, there was no advanced healthcare available -- at any price -- back then. So, you could say his income was below today's poverty line in terms of access to good healthcare. Or, he was unable to enjoy the Internet -- again, at any price. He did not have modern cars, modern travel opportunities, the list goes on.  In a way, everyone who lived before WWII was a pauper compared to any middle-income person today.  It all depends on the vantage point.

 

I hear what you are saying.

 

But wealth is more of a social status thing.  The farther ahead of the crowd you are on a relative basis, the wealthier you are.

 

So if everyone has exactly the same thing (first class healthcare, first class internet), then nobody will feel wealthy.  And nobody will have the social power/status of the wealthy person.

 

Take away Buffett's money and he's not a household name, doesn't get invited to the white house, nobody will want his opinion on TV, etc...

 

Wealth is a relative thing.  Like it or not, a lot of people are impressed by money.  But money doesn't impress anyone unless somebody is obviously head and shoulders richer than the average.

[manualofideas]

Eric, great point.  It really comes down to whether you look at relative wealth or absolute wealth.  Each of us on this board is much wealthier than people 100 years ago in absolute terms, but not necessarily in relative terms.  It's probably a worthwhile goal to strive more toward the absolute end of things, because we will be quite a bit happier if we keep things in that perspective.  Unfortunately, it's not always easy to ignore what others have.

[Olmsted]

Wealth buys you many things.  Probably the most important of which is time - to spend with family, helping others, doing things that fulfill you, etc.  In that sense hiring others to help you with mundane tasks that do not fulfill you is absolutely a valid metric of well-being.  I don't view relative wealth as an end in itself, but it does allow you to trade money for more free time.

 

By the way, in that sense, the middle class of today is absolutely worse off than 50 or 100 years ago.

 

And while we're on the topic, I am going to start a new thread looking for advice along these lines.

 

[ERICOPOLY]

By servants, I was referring to a full-time housekeeper, plus a nanny, plus yard workers.  People who basically are your full-time employees (the maid and the nanny).

 

$500,000 a year...  well, let's say this is in California.  Your effective tax rate is probably at least 40%, so you only have $300,000 to spend.

 

Next up, rent is $150,000 in Montecit0 for the house that big enough to include maid's quarters.

 

So you have $150,000 left to spend on your wife, your kids, your servants health care for all, your kids' educations, cars, groceries, vacations.

 

Good friggin' luck!