Perhaps the most out-of-touch video ever

[DC Al Fine]

I'm confused as to what exactly is triggering the feeling of 'being broke' though?

Is it that you run out of money for food?  No, that cost is in here.
Is it that you run out of money for entertainment? No, that cost is in here.
etc...

What else do you possibly need that isn't already calculated in here?  Honestly it sounds like you're getting the maximum out of your money without going into debt.

Precisely. Families like this have no breathing room and massive commitments. The knowledge that one hiccup would be a financial disaster is what leads to feeling broke.

[DC Al Fine]

One thing I don't understand is the logic of having a 30 year mortgage on a home and filling up savings accounts for kids college and retirement with that kind of dough. If I had all that income, I'd try to pay off my house ASAP. In the end, it would leave you with a lot more wealth and savings on interest.

If your 30-year mortgage is at 4.5% and you make a decent living, with tax deductions you are paying only 3% to 3.5% interest on that loan. Investments should be able to beat that most years.

That's the rational thing to do, but I'm with King on this one. The interest savings aren't that big given their incomes and there's a lot of pleasure derived from being debt free.

Of course they shouldn't have a massive mortgage either.

[DC Al Fine]

My personal version of this phenomenon...

One of my accounting professors this year was the CFO of a small publicly traded company. I looked up her compensation and she made about $500k in 2013. 2013 was an unusually good year, but she never made less than $300k for all the years she was CFO. This person could not comprehend paying cash for her car.

It goes to show that fiscal competence and high income are only somewhat correlated.

[DC Al Fine]

Thinking about this topic I want to make it clear how expensive it is to raise a child in an neighborhood where a family that makes $400K might reside once we take discretionary spending in to account.  Looking at my own case, I did an analysis of what it would cost in discretionary spending for my three year old child from birth to him finishing graduate school.  In 2014 dollars I worked it out to a bit more than $1 million.  This does not include cost of food clothing etc etc which I consider mandatory spending.  The $1 million include the cost of nannies, nursery school, various classes, taxi to take the child to nursery school/classes, summer camp, a car for him when he is old enough, cost of private university and graduate school.  Note since we live in a good school district we do not have to pay for elementary school and up.  Note that classes of various sorts will add up.  Our son goes to swimming, soccer, and martial arts classes on top of nursery school which works out to about $6K a year.  This will only go up from here.  $1 million could be even worse if it was not the fact that we plan to retire early so there will be no need for nannies once our child is ten or so.  If it was not for that the bill will be even higher.  Note that this family in Chicago has two children so you can imagine this financial burden.  Of course as I pointed out, this is completely discretionary, but around where I live what we are doing for our child is pretty standard.

None of the boldface items are necessities and you may be shocked to find that the majority of children in this country, to say nothing of the rest of the world, must manage without them.

Number of f#$%s given about your situation: Zero.

He actually called all the boldface items "discretionary".