There have been about four diaries recently aimed at Tony Snow's alleged financial problems, cited as a reason for leaving his $168,000 job as the White House press secretary. See here, here, here, and here.
Now let's say for the sake of argument that you or I, fellow Kossack, are accustomed to make $250,000 annually. I know, it's a stretch, but we need to talk in nice round figures here. One day we wake up and find out that we're only going to be making $168,000. We've just lost 1/3 of our income for some reason.
How might we scale back our budget and lifestyle to make ends meet?
How, indeed, might we scale back our budget and lifestyle to make ends meet?
In all seriousness, it might be worth considering. When we imagine someone making roughly 2X six figures, how do we imagine that they live? What are their extravagances? What does it mean to downsize into a $168,000 lifestyle?
Let's examine our assumptions and prejudices and indulge in a little bit of fantasizing about how we would structure our family budget if we had the problem of living on $168,000 annually, and considered it to be downsizing.
To get things started, I'll throw out some quick-and-dirty calculations based on California state tax withholdings. Assuming a modest 6% contribution to your 401(k), your net take-home pay after taxes and other typical deductions has just gone from about $9200 to about $5800 monthly.
I'll imagine that being in a big city in California, where real estate is crazy expensive, that we just bought a median single-family home in the SF Bay area for $750,000 and we put down a responsible 20% on our jumbo loan ($600,000 at 8%, 30 years fixed) and so our house payment is only $4,400 a month. So after our housing expense, our discretionary income just went from $4,800 a month to $1,400 a month.
Tough adjustment, or not?
Try to forget for a moment that this might be Tony Snow's dilemma. What if it were yours?