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Living on $500K a Year, With Hardly a Penny to Spare: One Couple's Story

You might be putting off saving until some future time when you make more money. But is that really realistic or is it just wishful thinking? 

CNBC ran a story recently about an anonymous couple in New York City who, though they bring in a combined $500,000 a year, haven't been able to set money aside for savings.  So where is all that money going? 


The couple in the story graciously provided a financial breakdown, so we actually know exactly where their money is going. They're not buying $30,000 bottles of wine. Instead, their expenses seem relatively average: a mortgage, a couple car payments, groceries, violin lessons for the kids, a few vacations, donating to charity, funding a 401K, and paying down student loans

The issue is not with the types of things they're spending money on —we all need a place to live, clothes on our backs, and possibly a vehicle. And they're putting dollars toward some important (and noble) things like retirement savings and charitable contributions. 

But even beyond the cost of living in your area, not all mortgages are the same. Neither are all car payments or even all groceries.

When you make more money, you spend more money

Let us explain with an analogy: did you know that people eat less when they eat from a smaller plate than from a larger one? It's proven scienceA smaller plate looks full with less food, so the visual effect essentially tricks your brain into feeling full from eating less. 

And the converse: the bigger the plate, the more we eat. 

So why are we talking about food?

Let's translate that concept to money: the bigger the bank account, the more we spend.

We buy a BMW (as the anonymous couple did) instead of a Hyundai. We fly to Hawaii for vacation instead of driving to a national park. We shop at the fancy health food store instead of the local supermarket. 

See also: Student Loans Delaying Your Retirement Savings? Why That's a Problem — And What You Can Do About It.

Imagine Life Without a Student Loan Payment... Start Saving Now!

How to save more when you make more

If making more means spending more, how do we ever get ahead? 

Of course you can make a commitment to save, but being disciplined about spending is hard. That's why we're sharing three ways to save money that don't require you to be a stoic. Follow these, and you'll make sure your savings account fills up with actual cash, not just good intentions. 

1. Refinance your student loans

Paying high interest rates on your student loans is basically giving dollars away every month. Refinancing for a lower interest rate saves you money — up to $253 per month on average, meaning you'll have more money to save.

Or you could opt to pay your loans off faster at a lower interest rate, allowing you to save more over the life of your loan — potentially up to $20,000, or even more if you have higher loan balances from grad school.

2. Automate your savings 

If you never see the money, you can't spend it. That's why financial advisers recommend setting up automatic transfers into your savings account. Some employers even allow you to split your direct deposit into multiple accounts.

However you can work it, try to make sure some portion of your paycheck never sees your checking account.

3. Divert windfalls

If you find yourself in the happy position of holding some cash you weren't expecting — from a raise, a gift, or a bonus — put it immediately in your savings account. You weren't anticipating it, so you won't miss it. 

Unfortunately, more income doesn't always equal more savings. Set yourself up for success by creating easy wins, like automated savings and lower student loan payments without having to use an ounce of willpower. 

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