Consider what happens if you lose that job. How much money do you need saved up to live the next 6 months in both scenarios?
If I pay $750K/yr, I need $325K saved up to pay rent for 6 months. That will take me 1.3 years of saving to get to that threshold (assuming I pay for nothing else - food, etc).
If I pay $50K/yr, I need $25K saved up to pay rent for 6 months. It will take me 4 months.
Depending on how long you live, etc, I suppose there is a point where the former is better. But not in the short term.
That's assuming you're paying mortgage and not rent. What if this is pure rent?
Then you have to pay that much even in retirement. That means you have to save up a lot more in the first scenario before you can retire, and may have to work longer, despite the higher pay, and the higher savings.
Of course, you can always retire in a cheaper place, but that's a matter of preference. I would rather retire in the place I lived much of my life in - not in some strange city.
You're assuming that people would have to live in the same place after their employment ends (you do bring this up later, though). This definitely isn't the case for me; I've moved every single time I've changed jobs.
The point remains, in the first scenario the person has $250,000 worth of disposable income. In the latter it's only $150,00. The former is in a much better position to build up saving. Heck, even one year's worth of post-rent income in savings is enough to spend as much money as the average American annual income (~35k) for the next 7 years.
> Then you have to pay that much even in retirement. That means you have to save up a lot more in the first scenario before you can retire, and may have to work longer, despite the higher pay, and the higher savings. Of course, you can always retire in a cheaper place, but that's a matter of preference. I would rather retire in the place I lived much of my life in - not in some strange city.
Sure, but now you're talking about a drastically different scenario if the resident has concluded they will live the rest of their life in their apartment. In that scenario, optimizing for post-employment living is a more important factor. But until unless you've decided to retire in your current apartment, the first choice is strictly better.
I stand by the notion that the first scenario (making $1M and spending $750k in rent) is strictly better than the second. Of course I also agree that making zero dollars and spending $750k in rent is considerably worse than spending $50K rent. But that wasn't part of the original comment.
Essentially, I claimed that Scenario X is better than scenario Y, but now you're saying "but! What if scenario X suddenly becomes scenario Z?".
Consider what happens if you lose that job. How much money do you need saved up to live the next 6 months in both scenarios?
If I pay $750K/yr, I need $325K saved up to pay rent for 6 months. That will take me 1.3 years of saving to get to that threshold (assuming I pay for nothing else - food, etc).
If I pay $50K/yr, I need $25K saved up to pay rent for 6 months. It will take me 4 months.
Depending on how long you live, etc, I suppose there is a point where the former is better. But not in the short term. That's assuming you're paying mortgage and not rent. What if this is pure rent?
Then you have to pay that much even in retirement. That means you have to save up a lot more in the first scenario before you can retire, and may have to work longer, despite the higher pay, and the higher savings.
Of course, you can always retire in a cheaper place, but that's a matter of preference. I would rather retire in the place I lived much of my life in - not in some strange city.