Crazy is Common

One of my wife's friends has been struggling financially for years even though her household income is at least $400,000 per year, well, at least they did make that much money until she got laid off from her most recent job making well over $250k/yr. A couple making $400k income is top 2-3% of household incomes if I remember the stats correctly, so it's rare for a couple to make so much money. However it's very common for them to be totally broke. They're typically as broke as people making way less money.

Back in the early 2000's I was fortunate to get a financial windfall. It was not enough money to retire on, but it was enough to solve a bunch of small financial problems. For example, I paid off my credit cards and auto loan. Once I paid my taxes on the windfall and paid off all the loans not all that much was left over. It was basically just a rainy day fund.

Also, I was able to move to a zero consumer debt lifestyle. That whole scenario showed me I was actually "poor". I really couldn't buy anything too impressive without almost totally wiping out my savings in one shot, like I could go buy a Lexus car with cash, but I'd be mostly broke after that.

That was really a great financial education. I started to understand that most of the people who were living a high consumption life style were just in debt and making payments. There are super wealthy people with very high incomes who can actually afford expensive cars and huge houses, but it's a tiny fraction of the overall population. The typical person you see at the grocery store with a $50k car is broke like my wife's friend in spite of a high income.

People are groomed to fall into that trap mainly by entertainment and advertising. Movies like "The Matrix" or "They Live" do a disservice to the audience by depicting the enslavement of humanity as a supernatural phenomenon. The reality is it's totally low brow and stupid. People are groomed into it from childhood and are too embarrassed to admit their daily desperation as adults. Also, people can't see all the traps laid for them.

The home improvement industry is one great example. My wife and I live in a kind of dumpy house on a large property. The house is clean, dry, warm in the winter and cool in the summer. The house is super plain and has no style or curb appeal. Some of my neighbors live in $800,000 houses. Now million dollar properties are not all that uncommon in my county as inflation is nuking the value of the US dollar. The typical mode of thinking about a house would lead me to conclude almost any home upgrade is "worth doing" on our house. I could invest a fairly modest amount into our property and double the house's value, but I'm not going to do that.

The taxes and upkeep cost for our small dumpy house are well under $10,000/yr. Almost any home improvement we might do would ultimately drive up "the value" of our home, so our property taxes would increase as would the cost to maintain it.