In today’s global economy, it is a common habit to think that a person earning $150,000 (around Rs 1.25 crore) per year must be living a comfortable, stress-free and secure life. But the reality is completely different. In many developed countries, including the US, even households with such high incomes are facing increasing debt burdens day by day. People are not able to pay credit card dues, car installments on time, and financial stress is also affecting their mental health.
In this article, we will try to understand this paradox in detail – how income is proving to be insufficient even when it is so high. Along with this, we will examine the social, economic and behavioral reasons behind it.
Annual income of $150,000 – sounds like a lot, but the reality of expenses is something else
If you are sitting in a country like India, then hearing the amount of $150,000, you will feel that with this income any person can easily live a luxurious life. But in countries like America, where the standard of living, tax system and lifestyle expectations are different, even this much income often falls short.
Credit card burden and interest burden
According to recent reports, on an average every person in America has a credit card debt of more than $6,000. And this interest rate is running at over 20%. When a person is unable to pay off his credit card in full every month, he falls into the ‘minimum payment trap’ – that is, he pays a little bit every month, but the principal keeps increasing.
Many people earning $150,000 a year are also caught in this trap. The main reason for this is that they spend more in an attempt to maintain a high lifestyle, but are not able to balance their budget and income properly.
Car EMIs – Another Big Responsibility
Cars have become a necessity in today’s time, especially in a country like the US, where public transport is not that efficient. But the prices of new cars are skyrocketing. Even a middle class SUV can cost $40,000–$50,000, and its monthly EMI goes up to $700–$900.
In such a case, if a person has two cars (both husband and wife are working), then their monthly expenditure on the vehicle alone can reach $1,500. If fuel, maintenance, insurance and parking charges are added to this, then the figure can be even more shocking.
Tax system – eats up a large part of the income
An income of $150,000 does not mean that the entire money comes in hand. In America tax rates are progressive, which means that the more incomes you are making the more taxes you will pay. Adding up federal tax, state tax, social security tax, and Medicare tax, a man making 150,000 dollars will be forced to pay almost 35,000-45000 dollars to the government.
This means that actually about $105,000–$115,000 remains in hand every year. Now if we divide this amount into 12 months, then the amount available for monthly expenses is about $9,000–$10,000 – which may fall short considering the expenses mentioned above.
Social pressure and ‘lifestyle inflation’
Another big reason is that when people earn more, they also try to raise their standard of living. Expensive cars, big houses, luxury holidays, children’s education in private schools – all these become ‘status symbols’. But these facilities are purchased by taking loans, which increases financial pressure even more.
This is called – lifestyle inflation. That is, as the income increases, the spending habits also become expensive. But savings and investments are not given much attention, due to which financial security is endangered in the future.
Health and emergencies – an invisible danger
Healthcare in America is very expensive. If one person in a family gets sick and insurance doesn’t fully cover the expenses, bills can run into thousands of dollars. Credit cards or personal loans are the only recourse at this time — and this debt slowly becomes permanent.
Besides, most individuals are ill equipped to cope with uncertainties such as the loss of job or economic downturn or natural calamity.
Lack of investment and retirement crisis
Most families earning $150,000 are focused on day-to-day expenses and don’t invest in long-term investments, such as 401(k) retirement funds, mutual funds or real estate. As a result, when retirement time comes, they don’t have enough capital.
This situation is even worse when student loans, credit card debt, home loans, etc. are on board.
Conclusion
Makin $150,000 per year is fantastic but, it doesn’t ensures a lucky and secure life. It needs the correct personal budgeting, frugality, opportunities to invest in everyday spending and the ongoing frugal lifestyle.
It would be a big mistake to assume that ‘more money = worry-free life’. True financial freedom is where there is a balance between your income, expenses and savings — whether you earn $50,000 or $150,000.
FAQs
Q1. Why is a $150,000 annual salary considered not enough in some parts of the U.S.?
A: In high-cost-of-living areas like New York, San Francisco, and Los Angeles, rent, taxes, education, insurance, and transportation costs can consume most of a $150,000 salary. After taxes and basic expenses, little remains for savings or debt repayment.
Q2. How much is left after taxes on a $150,000 income?
A: Depending on the state and deductions, individuals earning $150,000 may take home between $105,000 to $115,000 annually after federal and state taxes.
Q3. What are the main expenses that eat into this salary?
A: Major expenses include housing, car payments, childcare, student loans, credit card debt, healthcare premiums, groceries, and insurance.
Q4. Why are credit card debts rising even among high-income earners?
A: Many high earners maintain a lifestyle that matches or exceeds their income. Unexpected expenses, high interest rates, and living beyond their means often lead to increasing credit card debt.
Q5. How do car loans affect families earning $150K?
A: With rising vehicle prices and high auto loan interest rates, even two-car households may pay $1,200–$1,500 monthly just for vehicle financing, not including fuel or maintenance.
