
Frugality is a necessity for some, and a choice for others. There are many opportunities to spend carelessly – the Starbucks around the corner, that new gym membership, or going out to eat all the time. It takes serious effort to save money and spend less.
It’s far harder to find ways to lower your bills and balance a budget. At some point the desire to be frugal can fade when wealth, affluence, and income increases. How much money would you need to make per year to relax or throw away your budget, and say goodbye to the frugal life? Would you?

A dictionary definition of being rich
For many, becoming wealthy entails a certain level of privilege, posh, and the ability to spend wherever you want – without much care or a budget. Riches generally come from a combination of income and savings. Without any savings and a hearty salary, you’re likely vulnerable to economic turmoil. Without an income a moderate savings, you could be in trouble, too.
Here’s Dictionary.com’s definition of bring rich:
having wealth or great possessions; abundantly supplied with resources, means, or funds; wealthy (Dictionary.com)
Pondering whether you’re rich? You may want to ask these questions:
- How much liquidity is in your checking accounts?
- How much is invested?
- How much do you make per year (and what tax bracket does that put you in)?
- What kind of liabilities do you have (e.g., loans, debt, future payments)?
- Have you ever compromised your lifestyle due to economic turmoil?
The New Rich and middle class
Only 2.9% of earners make more than $250,000 a year (CNBC). On a nationwide and worldwide scale, many consider this to be wealthy. But some people within this income level hesitate to call themselves rich – identifying more in the upper middle class.
A recent article by Associated Press (AP) writer Hope Yen interviewed some of those people:
“I definitely don’t see myself as rich,” says Lott, who is saving to purchase a downtown luxury condominium. That will be the case, he says, “the day I don’t have to go to work every single day.”
…Sponder says she doesn’t consider her income of $250,000 as upper class, noting that she is paying college tuition for her three children. “Between rent, schooling and everything — it comes in and goes out.” (AP)

The new rich still get to decide which elite private schools to send their children, live in high cost of living areas, and have more job security. On an international scale, these riches are incomprehensible to abject poverty.
Compare this to Kibera, Nairobi, where you’ll find residents without running water, electricity, proper sewage, or waste disposal. Here’s a little information about the conditions:
The slum is contaminated with human and animal feces, due to the open sewage system and the frequent use of “flying toilets” (defecation inside plastic bags that is thrown elsewhere). (Wikipedia)
Nobody should have to live like this. Unfortunately, as the world economy has largely recovered from the disastrous housing bubble and mortgage crisis, many lower and middle income families have missed out on income gains. It’s no longer a dream to have more than you need – it’s an expectation. People in lower and middle class incomes don’t think they have it – they probably don’t – and those in the top percentages for earners seem to be denying their wealthy status.
The $250k a year tax bracket and government intervention

There’s a complicated interplay between this income status and the federal government. Those filing individually at the $200k or married at the $250k levels have their marginal tax rates increased significantly. A marginal rate suggests that you get taxed at the traditional rate up until the income limit ($250k in this example).
In recent years, President Obama focused on the $250k income line and greater for increased taxes. Part of the proposal for tax reform included breaking down income brackets and increasing the marginal rates for those in the highest levels.
Regardless of where tax reform goes from here, there has been a target on the back of the $200k/$250k level. This campaign to define the wealthiest class and tax them more has bred a hearty argument on a variety of news sites.
A long-running article on Debate.org asks, “Is a couple making $250,000 a year considered rich anymore considering how fast costs are rising?” Many people have commented to say “no” – that $250k is not rich:
Try supporting a family of 5 on $250,000/year in the SF bay area. The cost of living here is so high and I’ve got 3 kids. It does not seem fair to tax me the same as someone making $250,000 per year in, say, South Carolina where housing is less than 1/5th the cost. The potential tax should be more thoughtful and consider local cost of living.
People that make $250,000 already pay close to half of their income in taxes. Federal, State, Local, Social Security, Medical…leaves you with $125,000. Family of 5 automatically puts you in a “no financial aid” status for your kids in college.
However – people earning $250k/year are most likely in a high cost of living area – so expect $3k/month housing expenses, $2k/month other expenses (food, transport, etc.)
CNBC, the financial/market show known for rampant support of free-market economic principles, says:
For folks like the Joneses who live in high-tax, high-cost areas, who save for retirement and college, pay for child care to enable two incomes, and pay higher prices for housing in top school districts, $250,000 does not a rich family make. (CNBC)
Overwhelmingly, the comments suggest that this income level is on the precipice of riches. Many feel vulnerable, as if they could lose this status. While they can live healthy lives, they are taxed heavily, the target of much tax reform, and generally live in high cost of living areas. Then, there are the government subsidies, kickbacks, and write-offs that the $250k level cannot easily attain. These cost savings that lower income classes can receive effectively make living even more expensive. The government proposes that people at this level don’t need as much help paying for college and saving.
As lower and middle income classes have seen social support and welfare programs devastated by government bureaucracy and cutbacks, the $250k group has actually become more vulnerable – in a sort of middle-ground that gets the least support, protection, and understanding. They’re economically unprotected, and this leads to a fear of losing this income level.
Finding frugality and a healthy budget, despite vast wealth
When I first started writing this article, I wanted to make it clear that this income tax bracket is very rich. Honestly, they have an incredible privilege of choice that is granted to very few. But with the collapse of social welfare, support, and market troubles, this bracket is in an economic no-mans-land – you either go up or get out. A family with a combined income around $250,000 a year may not feel rich. When the international economic world is studied, they are the richest of the rich. The average salary here in the States is still around $50,000. But in America, there is a well-warranted fear about the future status for those earning this much.
This is why frugality spans vast demographics. Most everyone can find reasons to save for tomorrow. When you are trying to earn and invest, but feel vulnerable to economic shifts, finding a budget and healthy spending habits can save you. Somewhere along the way we were duped into thinking that everyone needs more stuff, and that success is measured by how much we’ve amassed before our inevitable demise. We can’t buy ourselves out of death (yet), but we can provide help, support, and hope to those truly in need.
Have you ever wondered how much you need to make/amass to stop working, consider yourself rich, and/or feel financially secure?
Further reading: Too Poor To Protest: How Income Inequality…
Rich to me would be ~ my husband and I would never have to work again. We would have a sizable, passive income. We’d travel around in a really nice RV. We’d sell our house. No responsibilities. Everything we own, we would have in the RV. Our son would be settled somewhere with a wonderful wife and kids that we could blow into town and spoil the dickens out of. That life wouldn’t be for everyone, but it would be the perfect one for us. Life’s a beach and we would be spending a LOT of time enjoying as many as possible.
Why does rich always have to be defined by just money? Many people consider themselves rich by the knowledge they carry, the possessions they have, and many other things. I would consider myself very rich at $250k. I could easily live off of that and not have a care in the world. It is usually the people that live in high cost areas that think they are not making enough. We still have control on what we spend on things. That is just a mentality issue.
What an interesting read… AGAIN! I believe that I will feel rich when I can safely put a kid through college (or private schools here in Chicago) without losing all of my income. To be honest, 150k seems to be my base for this.
Michelle,
Glad you’ve thought a lot about what would be your needed income to help raise a family and put them through college. It’s a tough equation that many cannot quite figure out.
Sam
Great post frugaling, I think the 250K debate is interesting. The people making that much money earn 5X the average American. But housing in the areas they live in are not 5 times the costs. So it really is a matter of watching where you spend. For me an annual income around 150K is sufficient and would probably make anyone feel wealthier. I believe 1.5 million in paper assets is enough to stop working for me.
Of course housing is 5x the cost, sometimes even more
The average home price where I live – NYC metro area is $1.8 million. You can’t buy a house on $250k income in this town. Twenty percent down payment on $1.8m is $360,000. Then the mortgage payment is north of $6000. Add to that the ridiculous federal and state income rates we are subjected to and all of a sudden I have the same disposable income as the guy making $50K living in Kentucky. No, $250,000 a year is not rich when you have to pay to live in an area where it’s possible to make $250,000 a year.
It is really interesting when you cross into the income range of 250k and you see people who make that much don’t consider themselves rich. You wonder if that’s because there are always people higher up the income scale. I can’t be rich, there are people who make X amount more than me. That and since most people go through lifestyle inflation, the income games are automatically spent. Therefore no matter how much money they make, they never truly feel wealthy.
Micro,
It’s really hard to say, but I think you bring up some good points. When you get above middle class, but are still within this atmosphere for income, you can easily point out those that have it better. There are a lot of names and families to pull from as bad examples or those that make way more. Wealth and riches seem to be an inherently individual mindset, which many seem to deny because they aren’t or because they’re in denial.
Thanks for the comment,
Sam
Sam, have you read Juliet Schor’s book, The Overspent American? The numbers are a little dated, but Schor describes the “upscaling” of the American Dream and the phenomenon of high-income households thinking of themselves as “scraping by” really well.
I blogged about it: http://hopebordeaux.com/2015/03/12/mini-review-the-overspent-american-by-juliet-b-schor/
I think that feeling “rich” would involve more than just a certain income level- it would involve having no debt too. Having a $250K income would be awesome if you had no debt and lived in a low cost area. But if you have a huge amount of mortgage debt from buying a home in an expensive area or a huge amount of student loan debt from spending years in school working toward an advanced degree then I could understand how a high income doesn’t go as far because of all the debt repayments.
Dee,
I would tend to agree with you; although, to receive a mortgage for a home in a high cost of living areas, you’d likely be in a strong financial position. A bank would likely hesitate/or not give you money if you did not make a certain amount per month – based on various life situations. There’s certainly some level of wealth to those who can explore high cost of living mortgages, and they would likely be even better suited in a renting scenario.
The biggest part that I resonate with is on student loans. If you’re paying back loans, your income is significantly stunted. Thankfully, the 1098-E form helps people receive a tax deduction for paying off interest on student loans. 🙂
All the best,
Sam
To give some further color on the student loan issue, it’s helpful to consider that the student loan deduction is not available to taxpayers with a modified adjusted gross income of $75k or more ($155k if filing jointly). I paid $12k in student loan interest my first year out of law school and not a cent of it was deductible.
Jenny,
Thanks for your comment! This is a really good point. At the $75k level you no longer can deduct your student loan interest from income. The tax code is a seriously complex piece of legalese that goes beyond me and this site.
I’m really glad you’re sharing your story, as this is an important part of understanding the problem of student loan debt.
All the best,
Sam
Yeah, at some point the United States government decided that earning $250,000 a year makes you rich.
I have never really thought of someone going off to work everyday and earning a 250k salary as being rich. Sure they are well off but, half of them are actually living paycheck to paycheck and would be hurting if they lost their job.
Coming from Africa, it is ridiculous to even consider that $250k per year is not rich. It crazy rich. Extremely rich. You are a very lucky person if you earn anywhere close to this!
Y can’t call this luck .there is nothing come because of luck . Everyone reach to this point worked hard and lost and canceled many years of his life devoting it to work and study to get to that point .
I CANT IMAGINE, THAT, MUCH MONEY WOW, IM SPEECHLESS,THANK YOU JESUS,AND PCH.
$250K is rich…. But if you start deciding that private school, 2 cars, a huge mansion and a vacation yearly are “necessities”, then it doesn’t seem like a lot of money.
People make do with what they have. The more you make the more you spend, the less you make, the less you consider “necessities”.
You clearly don’t realize how expensive it is to live in some parts of the country. I live in northern New Jersey. I don’t live in NYC but have to commute there in order to keep my earning potential. Even an hour and a half commute outside of NYC puts you in a neighborhood where you can’t afford a house unless you drop 750k (at a minimum). A 250k salary just allows you to reach the level where you can afford housing here. By the way, that 750k house is 1400 square feet, outdated, and only accommodates a family of 4 at the most. It doesn’t help that NJ also charges you about 18k a year in property taxes on top of your already paid income and sales tax. The tax brackets in this country and very poorly assigned. They don’t account for the disparity created between cost of living in different areas.
Thanks for the article. Certainly 250k is a lot of money compared to most people. The difference between the 1960s, for example, and now that demonstrates that 250k isn’t the same as 25k (if 5k was the average salary) is the destruction of private pensions. Whereas in the 1960s both the rich and poorer workers in many large organizations had pensions meaning that they both could live ‘better’ in the moment because they theoretically had retirement settled. Now it is likely that neither would have a pension. This means that a rich (based on income) person has to save significantly more to retire in a relatively similar lifestyle. Unfortunately the person or family only earning 50k doesn’t necessairly have the same ability to save, particularly in high cost areas. Both are hurt today but the lower middle class are particularly hurt by the pension bust. This is why today, more than ever, it is important to practice a more minimalist lifestyle both to reduce stress and be able to truly save for a comfortable retirement.
Seth,
Very well said. You’re right that the slow erosion of private-industry pensions and retirement savings help has hindered people’s ability to trust their paycheck day to day. It means that saving for retirement and living presently are wholly up to their current salary. That can be a scary dilemma and problem to solve. Great point. Appreciate your comment. Sam
My husband and I are about to hit the $250K mark and to be honest, I don’t feel rich, per say. We live in a high cost of living area, I work 9-10 hours a day, my husband has two jobs and if either of use were to lose our primary jobs – our income would drop by almost half. That being said, we ARE incredibly fortunate. We have no debt beyond our mortgage (altho I do commute an two hours one way to live in a house we can afford), we have savings, we’re able to travel and eat out on a whim. Our cars are paid off (nothing fancy, a Honda and a Ford) and while we don’t have much designer anything, we want for very little. We also tithe 10% to Church, charity and friends/family in need. However, I do worry about how this new tax bracket will affect us. In my mind, being rich means not having to worry about job security and knowing that your savings will outlive you. $250K this reality does not make but, I do recognize that I live a blessed life and I’m not complaining about it.
Agree wholeheartedly with your comment. I’m in the exact boat.
I was watching CNBC one time and they interviewed people that had 5-10 million that considered themselves to be “middle-class millionaires” it’s so interesting how people can think they’re not rich when they are.
I just found this blog and this was a great read! I am VERY frugal out of necessity. I am a divorced single parent of two still at home and we are living on only my one income. I “only” make about 50K a year, but luckily live in an area where we live okay on this. Rich to me would be 100K or so. I would then be able to actually provide health insurance for us and more experiences for my sons and travel more. To me that is more important then stuff. We are minimalists and I guess it is a good thing because with my income we certainly can’t buy a lot of stuff. Our life is great though. It blows my mind to think that someone making 250K a year doesn’t see that they are rich, but I guess I can see it when viewed through the lens of living in somewhere like NY city or SF and having a large family to support. In my area that amount of money would go very far.
When you reach the 100k you will be shocked becAuse you are going to be behind and afford the same of the 50k . U will be paying 15k more income taxes and u will be required to buy your insurance and u will be out of the government assistance. And that means at least another 5-10k a year depends of how big is your family .and then if your kids going to apply for schools loan they will not get much assistance…… and and U will buy a house if you don’t have it , then another 10-15k school and town tax . Then another 10k intreat on the loan and then this and that .
I making close to the that and now I can’t pay my bills that comes . Even though me and my family we don’t eat outside .we are b carful on how we spend our money . But trust me when u was making 50 . It was smoother .
My husband and I earn $250k. Here’s what that breakdown looks like, we have 2 kids and a dog:
Monthly after taxes and benefits income: $12200
Rent of 1700 sqft townhome (2 beds 2.5 bths) 8 miles from work about a 25 mins commute for me and 45 for my husband in a horrible school district: $5000
Retirement savings $2000
Power $300
Water/trash $100
Gas $100
Tutor for our son: $250
Ballet for our daughter: $250
Cell phones: $300
Internet: $100
One car payment (we have 2 others we paid cash for): $600
Car insurance: $400
Helping support my parents $600
Groceries: $1200
Eating out: $800
Student loans: $1200
Childcare: $2400
Net budget: $15600
That leaves us with $0 for gifts, clothing, school supplies, vacations, car maintenance, childcare.
Realistically we do still give our kids Xmas and bday gifts and clothing and our cars do get maintained, so including those
$100 gifts
$200 clothing
$50 dog food/grooming/toys
$50 kids toys and school supplies
$100 car maintenance
$100 haircuts
$2400 childcare for both kids so we can work
$500 vacations
$200 medical deductibles and expenses
$300 gas for cars
Total: $3700
Grand total $19,500
We’re in the hole over $7k per month. We can only afford to do this because we sold our old house when we moved for work. But it’s not sustainable. $250k and this labor day weekend I couldn’t afford to drive to a nearby lake or beach. I can’t get my hair highlighted anymore. And I can’t afford to shop at whole foods or get Starbucks. To be honest I don’t know what we’re going to do. This doesn’t include saving for either kids college. And none of the above is extravagant. We’re living 4 people and a dog in a 2 Br townhome. Our paid off cars are crappy each worth less than $10k with over $100k miles. We can’t save to buy a home. Our kids need to get scholarships elsewise we can’t afford college. And they currently go to some of the worst schools in the country because we can’t afford a home in the “nice” area.