I Make $150,000 in Southern California But It Feel Like I’m Drowning Financially

It should go without saying that no matter how much money you make, it’s perfectly reasonable to feel stressed out about finances these days. This is especially true if you feel like you make a good living but also live in a high-cost-of-living area that leaves you feeling house-poor. 

This level of stress over bills is exactly what one Redditor is feeling, according to their post in r/MiddleClassFinance. Living in Southern California is already expensive, but they are worried about how they will continue to earn $150,000 and barely make everything work. 

$150,000 in Southern California

For this Redditor with a family of four, earning $150,000 was already a struggle to live on, but adding a child in college has made everything significantly worse. Unfortunately, their child wasn’t eligible for any kind of financial aid due to the family’s household income, as per FAFSA rules, which means the already struggling budget is even more challenging. 

As for their overall budget breakdown, the family is paying $2,150 for their mortgage and utility bills, $180 for cell phones, $1,400 for both health and car insurance, spending an average of $800 per month on groceries, and approximately $200 per month on dining out. Now add to this $850 in car loans, $250 for gas every month, plus another $2,200 across 401(k), kids’ college expenses, property taxes, and sports activities, and it’s clear that this family is barely able to survive. 

Admittedly, the Redditor states that they don’t have a method for tracking spending, which is clearly an issue that needs to be addressed. However, their $1,800 mortgage is manageable, so there is some positive news here. Out of their $7,700 in monthly expenses, they are likely taking home around $8,400 after taxes.

This means that their financial buffer after all expenses and savings is just $700, or around 5% of their gross income, so it’s understandable that the family is feeling stressed. 

Lifestyle Inflation At Work

Here’s the thing for this Redditor, and what is likely making them feel stressed, and it’s something called “lifestyle inflation.” Taking on the responsibility of paying for the kids’ college apartment at $800 for both rent and utilities, as well as other kids’ private lessons and two vehicle payments, all means this family has an inflated sense of what is affordable. If you subtract just some of these things, such as college rent, two vehicle payments, and kids’ activities, they would be at a far more comfortable 46% in fixed costs compared to 67%. Not only would this provide them with a greater financial buffer, but they would also be able to contribute more to a retirement fund. 

Start With Some Important Steps

In the case of this family and the Redditor, it’s pretty clear what needs to be done first, as the Redditor has already acknowledged: tracking their expenses. Whether it’s through an app on the computer or phone or on a piece of paper every month, this family needs to visualize every dollar coming in and going out to see where they stand. 

From here, cutting discretionary spending is the next move, but they won’t be able to do this, at least not smartly, without a budget in place. They already have a fairly reasonable mortgage payment, so refinancing isn’t feasible; however, additional financial aid options should be explored for the college student. 

Is there anything else available from the school that might be helpful? This Redditor’s child isn’t the only one in this position, as $150,000 in Southern California isn’t a huge salary, so someone else has likely explored other financial aid options. 

Perhaps most importantly, it is to try to figure out a way to lower the vehicle costs. At this point, this family should have two vehicles they own outright and are just paying insurance for each month. Being able to add 11% of their after-tax budget to the financial pot for retirement or an emergency fund will go a long way. 

Separately, has the family explored combining both home and vehicle insurance, and if so, is there a discount available that might bring down the cost? All of these things are worth exploring, and it still leaves the door open to look at alternatives like finding a less expensive cell phone carrier, like a prepaid brand, where 4 lines are only $100 instead of $180 for two years locked in. 

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