This doesn't make sense to me. Cities are the most expensive place to live, no? I would have thought that living in some small town and making 500k would give you even more buying power than it does in the city.
Where does your friend live that $500k does not pay for rent or a mortgage on a nice house, dinner at restaurants on a regular basis, and still money in the savings account?
You are severely underestimating how much it costs to put multiple kids through expensive colleges. Also, they don't live in "some small town", it's just not the city; it's still seriously expensive compared to the national home value.
But I'm not here to debate this other person's life choices, nor could I. The point is that even $500K/year is not enough for a decent number of people, whereas, say, $1M would be.
Where does your friend live that $500k does not pay for rent or a mortgage on a nice house, dinner at restaurants on a regular basis, and still money in the savings account?