Why 1/3 of Americans are Living Month to Month Making $250,000 Per Year
You can be broke at any income level
There’s a story making the rounds that has made a lot of people do a double-take. Look at this headline and you’ll understand why:
More than a third of Americans making an annual salary of $250,000 say they are living paycheck to paycheck, according to a recent breakdown of surveys on Bloomberg.com.
Bloomberg.com reports that some 36% of households taking in nearly four times the median US salary must use nearly all of their income to household expenses, citing a survey by industry publication Pymnts.com and LendingClub Corp.
The data shows it’s particularly true among millennials in their mid-20s to early 40s. More than half of top earners in that generation report having little left at the end of the month.
According to US Census Bureau data, the $250,000-plus income bracket roughly represents the top 5% of earners in the country.
...Out of all the consumers surveyed, 61.3% reported living paycheck-to-paycheck in April, a 9% increase from a year earlier, LendingClub said in its report.
You might be wondering how 1/3 of Americans making 250k per year could possibly be living month-to-month. At first glance, it makes no sense at all.
However, the unfortunate reality is that you can be broke at any income level.
One classic example of that out of many is Mike Tyson. How much did Mike Tyson make at his peak? An almost unimaginable amount:
Mike Tyson, at his peak, reportedly made more than $700 million from his boxing fights alone. However, his highest net worth has been estimated to be just above $300 million.
You might think that a human being would have trouble spending that much money in one lifetime. However, Tyson managed to pull it off and had to file for bankruptcy in 2003:
Mike Tyson fell deeply into debt despite his immense earnings and was forced to file Chapter 11 bankruptcy in 2003, according to Benjamin Law. The law firm reported he owed $38.4 million to creditors, including the Internal Revenue Service and his ex-wife, Monica Turner. His bankruptcy filing indicated he had $23 million in debts specified in the Chapter 11 petitions, which were filed with the United States Bankruptcy Court in Manhattan, New York.
...The New York Times reported he viewed his “record earnings in the boxing ring became a license to spend — on jewelry, mansions, cars, limousines, cellphones, parties, clothing, motorcycles and Siberian tigers.” He “picked up a $173,706 gold chain lined with 80 carats in diamonds” from a Las Vegas jewelry store and failed to pay for it, the article said.
...“A camp aide named Crocodile – whose sole function was to dress in fatigues and repeatedly shout “guerrilla warfare” at Tyson news conferences – was paid $300,000 in 1996,” the Associated Press reported.
...Tyson gave lavish gifts, and among them was a $2 million gold bathtub he bought for Givens, according to Celebrity Net Worth. The news outlet also referenced unconfirmed reports that he would give out gifts to strangers including $100,000 watches.
Tyson’s divorce settlement with Monica Turner included a payment of $6.5 million and the keys to their 61-room Connecticut mansion
Don’t feel too bad for Tyson. He’s an incredible athlete and making millions after coming out of retirement. However, he’s showing one of the two ways that the ultra-rich tend to go broke. They act as if they have “infinite money” and think nothing about spending more than the average person makes in a year on trivialities. For the most part, it’s a waste of time. I always think about something I once heard the late, great Amway guru Bill Britt say on that front. It was something very much like:
No matter how much money you make, you can only get a steak that’s so thick, a bed that’s so soft, and a car that’s so quiet.
If you’re wealthy and careless with that wealth, you can find yourself paying staggering sums for things that add only a very trivial amount of value to your life.
The other way people who make that kind of money go broke is by getting overextended in risky business ventures. Then, next thing you know the business environment changes, money becomes much harder to come by and their immense fortunes collapse. Although he’s a particularly shady example, that’s what happened to Bernie Madoff, who ran the biggest Ponzi scheme in history. Bernie Madoff operated successfully for 17 years and the only reason he was caught was that the economic crash in 2008 made it impossible to bring in a new wave of “investors.” This kind of thing can happen to more reputable businessmen as well when the money dries up, they can’t keep floating their ventures and they find that can’t afford the new demands on their cash flow.
Of course, that’s the ultra-wealthy. What about the poor?