Why I Have Debt With A Six Figure Income

MoneyMonk left a comment on my latest Monthly Net worth Statement post asking how I have debt with a six-figure salary. Coincidentally, MSN just posted a nice piece on a couple who just gets by with an annual salary of $400,000 (tip: don’t have kids). It’s the same with anyone who has debt in any income bracket. We have (or had in my case) more expenses than income and either voluntarily or not, we had to compensate with credit cards or loans.

I didn’t always have a six-figure income. It’s only been a couple of years. In the 10 years prior, my average income was $47,000 or so. This takes into account three periods of unemployment in those 10 years, so my net worth statement back then looked really sad. To survive and keep my modest house, I did have to rely heavily on credit cards and a home equity loan. I amassed the bulk of  my credit card debt during this period. While my income is much higher now, my expenses have not remained the same level.

I work on Wall Street which is two hours away from my house depending on traffic. With the amount of hours I work (60-83 hours a week), I need to stay near the city or risk driving off the road snoozing during my 2 hour commute home. So I rent a small 12′ x 10′ room in New Jersey during the week. So along with my mortgage payment every month, my living expenses (excluding utilities) are now more than 43% of my net monthly income. I did have someone renting out half my home, but he moved out last month after being unemployed for 3 months. There went 15% of my monthly net income out the door. I don’t feel like selling my house in the current environment and losing the equity (excluding my original down payment) I have left. All other expenses have been cut down to the bone. I even cancelled Comcast cable completely on Friday.

FreeMoneyFinance suggests that we (those only getting by with large incomes) move to a lower cost-of-living city. Uh, I live in a small farming town on the border of a suburban area of Philadelphia. Any lower and I’d live in Valley Forge National Park among the deer and foxes. He suggests finding a job in the lower cost-of-living area with a 50% reduction in pay. If I could find a job here, it would have a starting salary of about $45,000 (even with over 13 years experience). That amounts to a 64% reduction in pay, but I would save some money from not needing to rent a room during the week. From my earlier statement, the job market here is not stable and very limited, so unemployment would have to be factored into the $45,000, not to mention it would be mathematically impossible to contribute to a 401(k) plan given my expenses and aggressively paying off my debt.

Accepting the offer for my Wall Street job was a no-brainer. I’m sacrificing my happiness and probably my short-term health, but it is the best chance I have to attack my debt load in the timeline I set. Sure, if I had a six-figure income nearby my low cost-of-living area home, I’d be clicking my heels while whistling Dixie, but I’m afraid even if the economy recovers, this won’t be likely. So I hope I answered your question MoneyMonk.