What It Costs for Avg Family to Live United States 2019
In order to comfortably raise a family in an expensive coastal city like San Francisco or New York, you've probably got to make at to the lowest degree $300,000 a twelvemonth. Cheers to inflation, $300,000 or more than may exist required for you to live a centre-form lifestyle today.
You lot can certainly raise a family unit earning less. Nigh practice. However, it won't exist easy if your goal is to save for retirement, save for your child's education, own your ain home instead of rent, and actually retire by a reasonable age.
Although $300,000 is a lot compared to the median household income in the United States of ~$68,000 in 2021, it's not an outrageous sum of money once you look at the realistic income statement I've put together for this article. After all, the cost of living is quite unlike across the United States.
A Middle Form Lifestyle Is All We Really Want
All expenses in my example use current prices. I've also cross-checked the expenses with my family's monthly expenses now that we have a son to make sure they are inside reason. I've also cantankerous-checked the expenses with over a dozen other households who make around $300,000 a year.
I use $300,000 in this post because I also believe it is shut to the ideal income for up to a family of four to feel maximum happiness.
At $300,000, you lot aren't paying an egregious amount in taxes. You probably aren't killing yourself at piece of work if both parents are working. At the same fourth dimension, you're nevertheless earning enough to live a comfortable lifestyle anywhere in the world. A middle-class lifestyle is all we really want.
Nearly one-half the United states of america population lives on the coasts, therefore, this post is directly targeted at folks who need to live on the coasts because of their jobs, schools, or families. If y'all don't live on the coasts, you might live in a metropolis similar Denver or Austin, where the cost of living is ascent rapidly as well.
Finally, this post should also provide insights to non-littoral metropolis residents on how practiced you've got it if yous enjoy living where you are. $100,000 – $150,000 is a rough non-littoral city household income equivalent to $300,000.
Who Makes $300,000 A Year?
Earlier we look at the income statement, let's become through a list of diverse $300,000 income households. To no surprise, many of these $300,000+ household income earners live in more expensive areas around the country.
- A Bay Expanse Rapid Transit janitor who makes $234,000 + $36,000 in benefits who gets together with a Bay Expanse Rapid Transit elevator technician who makes $235,814 + $48,429 in benefits.
- Starting total bounty packages for 22 year quondam employees at Facebook, Google, Airnbnb and Apple range from $120,000 – $150,000. By the fourth dimension they are xxx years erstwhile, they are making $300,000+ a year.
- thirty-year-sometime outset-year Associate in banking earns $150,000 in base salary + ($0 – $120,000) in bonus. In a couple years, she is making over $300,000 a year.
- A 26-year-sometime first year law associate at a large law house like Cravath makes $190,000 base + $30,000 sign on bonus. By the stop of his 6th year his is making over $330,000.
- A 29-year-erstwhile Director of Marketing at a startup makes betwixt $150,000 – $180,000. She's married to a pro blogger who makes $350,000.
- A 42-year-onetime college professor at Berkeley makes $235,000 and $279,000 at Columbia and NYU.
- The average specialist md finishing his or her fellowship at 32 makes $300,000. The average salary for a main care doc is $200,000.
- A 26-year-old middle schoolhouse teacher making $60,000 a year plus her $250,000 a twelvemonth VP of Marketing wife.
- My 60 year old high school able-bodied director colleague makes well-nigh $180,000 a year plus his married woman who makes about $200,000 working for the city.
- Thousands of employees at tech companies like Google, Apple, Facebook, Google, Slack, Zoom and more.
The permutations of people making $300,000 goes on and on. If they aren't there now, they will go to such a level of income eventually.
Related postal service: The Height 1% Income Levels By Historic period
Living A Eye Class Lifestyle On $300,000 A Year (I Kid)
Please written report the eye class lifestyle upkeep nautical chart below closely. Every expense has been carefully vetted past hundreds of people who live in expensive metropolitan areas like NYC, LA, and SF and who diligently rails their cash menstruation to requite you lot the almost realistic budget possible.
I've tracked every line particular with my own upkeep when I had simply ane kid. All figures are pretty spot on. Today, with 2 children, I'1000 thinking $350,000 a year might exist more than apt.
Gross Income Review
With a $300,000 household income, this dual income household of three puts abroad $38,000 a year in their 401(k)s. The maximum 401(k) contribution is now $20,500 in 2022.
With the passage of the Tax Cuts And Jobs Human activity, they've lost their power to deduct more than $ten,000 worth of land income, sales, and holding taxes. As a issue, I've used the $24,000 standard deduction for married couples to keep things simple. The standard deduction for married couples increases to $25,900 for 2022 or $12,950 per individual.
For 2022, the FICA taxation rate for employers is 7.65% — half dozen.two% for OASDI and 1.45% for Medicare tax. For example, an employee will pay a 6.2% Social Security tax on the offset $147,000 of wages (maximum tax is $ix,114 [6.ii% of $147,000]), plus i.4% of all income earned. Since both parents work, both parents pay the tax. At least both parents somewhen gain when they collect Social Security, if it's still around.
They take a marginal federal income tax rate of 24% and a marginal California income tax rate of 9%. Most of their income besides faces a 7.65% FICA tax since both piece of work. Their combined effective tax rate is roughly 32%, for a tax bill of ~$76,160. In other words, their full revenue enhancement bill is ~$12,000 more a yr than today'south median household income. Therefore, hopefully folks who earn less tin give them some slack.
The family besides gets a $2,000 child tax credit to help back up their centre class lifestyle.
In the past, the credit began to disappear for married couples who earned more than $110,000 and for unmarried filers with AGI higher up $75,000. Now, singles and married couples tin earn upwards to $200,000 and $400,000 respectively, earlier their kid tax credit begins to disappear.
Lesser line: their $300,000 gross income gets reduced past roughly 38% later on taxes and retirement contributions to $187,840.
Expenses Review
Childcare ($24,000):
A middle course lifestyle often includes kids. There's no getting around this expense if both parents are working. Babysitting and childcare for $20/hr is the standard charge per unit I've found in San Francisco. Some prices go upward to $35/hour.
If the parents determine to send their child to individual school, this $24,000 annual expense will increase to $35,000 a twelvemonth for Thousand-8. Come up loftier school, the cost volition increase to $45,000 – $55,000 a year. I coached varsity tennis at a boy's private high school for three years. Its annual tuition is now $49,000 a year. It's a shame that so many expensive coastal cities take troubled public school systems.
In San Francisco, there's a lottery system for the sake of social engineering science. In other words, even if you buy a $1.5M median dwelling house and pay $20,000 a twelvemonth in property tax, you are not guaranteed to have your kid get into the public school down the street.
Of course, if you take a 2nd child, childcare expenses will increase, but probably not double due to synergies. That is unless you want find some 4th trimester childcare relief. Then we're talking $40,000 and up for three months.
Food ($25,200):
When you are a dual task household with a babe, there'due south little fourth dimension to cook. Farther, given the family unit is living in a city like New York or San Francisco, nutrient is world course, and on demand food delivery is ubiquitous.
It makes little sense to spend hours cooking when you lot're already tired. You desire to reserve your remaining energy for taking care of your babe. All the same, food is where this family tin cutting expenses if they first feeling a little tight.
Mortgage ($46,800):
A eye form lifestyle should include owning yous ain median-priced home. Although the payment is $three,900 a month for a $900,000 mortgage at iii.25%, $ii,000 of information technology goes towards paying downwards chief and building net worth. Therefore, you tin can add $24,000 a year in forced savings to their $37,000 a year in 401(1000) savings.
Their $1.5M assessed house is a standard ane,750 sqft, three bedroom, two bathroom home on a ii,500 sqft lot. For new homebuyers, only interest on up to a $750,000 is taxable.
Hither's an case of a typical $ane.855M home in Golden Gate Heights, one of San Francisco's best kept secret neighborhoods. Every bit you can meet from the movie, the house only has one,288 square anxiety of living space. It is a simple two bedchamber and one bathroom dwelling. At to the lowest degree it has ocean views from the living room.
This buyer needs to spend another $l,000 – $80,000 remodeling the house because everything is about 25 years sometime.
The $10,000 SALT cap deduction for individuals and married couples actually hurts homeowners in expensive existent manor markets. Property tax on a $1.5M assessed house lone is roughly $nineteen,200. Then the couple is paying ~$18,000 in state income taxes.
Now if we await at home prices in 2022+, prices are still elevated in big cities. I've been keeping track of a number of home sales during the pandemic, and I'm impressed.
Bought Their Home Earlier
Further, this couple is lucky considering they bought their home several years ago for $ane.2M. Now imagine renting a firm for $6,000 a month and trying to relieve upwardly $300,000 for a downpayment on a median priced home. Difficult to practise with less than a $300,000 household income. Probably impossible without living in a one bedchamber for "simply" $3,200 a month or getting assistance from their parents.
In 2022, this Gilt Gate Heights abode is likely worth over $two,100,000. Farther, mortgage rates are still low. Homeowners tin now refinance to a lower rates and save money as a upshot.
I recommend checking out rates on Apparent, one of the largest online lending platforms today for free. Qualified lenders compete for your business so you can become the everyman charge per unit possible.
I was able to refinance my loan for free to a 7/1 colossal ARM at 2.625%. But I've seen rates that are even lower. Everybody needs to take advantage of record-low mortgage rates to refinance and maybe purchase if yous are gear up to settle downwards.
Holiday ($seven,800):
A middle form lifestyle includes vacationing several weeks a twelvemonth. Some volition say that spending iii weeks of vacation is a luxury. However, I say spending three weeks of vacation is normal for two working parents who want to continue their sanity.
By law, every country in the European union has at least 4 weeks of paid vacation days. Meanwhile, Brazil gets 41 paid vacations days a year. Yeah, their respective economies might be a mess compared to ours, but at least they are enjoying life!
Car Payment ($7,400):
When you have a baby, all you want to do is protect him or her from harm. Fifty-fifty if y'all are the best commuter in the world, one reckless drunk driver might t-bone you one evening.
No longer do y'all feel comfortable driving a meaty city car while transporting your family. Instead, you want a larger vehicle that has the highest safe rating.
Baby/Toddler Things ($6,000):
You lot tin can spend as picayune or as much every bit y'all desire on your baby. But this family buys dispensable diapers, not washable diapers. They purchase tons of babe proofing material. They paid up for the all-time car seat and have 2 strollers. It's funny, but one of the best toys for our son is a tissue box.
Amusement ($7,200):
A heart class lifestyle includes general entertainment and null lavish. During the good one-time days pre-pandemic, date night could easily price $200+ an outing for two once you include tickets to a brawl game or a show and transportation.
Amusement also includes the price of sporting equipment, memberships, Netflix, cable, internet, and more. If your friends invite y'all to a weekend getaway, a bachelor or bachelorette party, or a function or 2, your entertainment budget will exist blown to smithereens.
What'due south Missing From The Budget? This couple is lucky in that they accept no educatee loans. They paid their loans off by the time they were 35. They are 39 years old today.
Catastrophe Greenbacks Menstruation Analysis
To live this heart class lifestyle, the end issue is annual greenbacks menstruation of merely ~$2,920. $2,920 is not a great buffer because something always pops up.
Simply overall, this middle grade family unit is building roughly $54,000 in cyberspace worth each year through main pay down and 401(k) savings. Plus, they growth wealth with any appreciation in their investments and primary residence.
Afterwards 22 years of piece of work with no change in income or expenses, this household will likely amass a net worth of over $2,000,000. They volition have the ability for at least i spouse to retire since their son will have graduated higher.
All the same, based on my recommended net worth goal for financial liberty equal to 20X annual gross income, this couple needs to accumulate closer to $3,500,000 to really feel comfortable for both to retire.
A Middle Class Lifestyle On $300,000 A Yr With 2 Children
To be comprehensive, here is some other budget I put together for a $300,000 household with two children. I've updated the 401(1000) contribution amounts to $41,000, given the maximum contribution limit is $twenty,500 per worker in 2022. Further, you'll come across more childcare expenses and fewer leisure expenses.
With inflation and then strong, families may now need to earn $350,000 a year in a big urban center to live a middle-class lifestyle!
Earn Just A Little More
After analyzing all the numbers to a higher place, the ideal household income to enhance a family is around a MAGI of $340,100 (after deductions). Any income over $340,100 is taxed at a 32% marginal income tax rate, or an viii% increase. This marginal federal income tax bound is big compared to the 2% jump from 22% to 24%.
Beneath is a chart that shows the marginal income tax rates and the long-term upper-case letter gains tax rates for 2022 for married couples, filing jointly.
For individuals, a Modified Adjusted Gross Income of $170,050 is likely ideal, from a taxation optimization and lifestyle situation. Yous can see the marginal income tax rates and long-term capital gains tax rates for singles in the chart below for 2022.
Based on my experience, happiness did not increase for me when I began making over $200,000 as an private. Happiness did not increase for us when we began making over $300,000 either. Therefore, due to the increment taxes and increase stress, it seems pointless to put yourself through the ringer but to attempt and make more from a day chore.
Save Aggressively And so Motion
In order for this household to achieve financial independence, they've got to either up their 17% gross savings rate, figure out a style to reduce expenses, or heave income. Their middle grade lifestyle might have to take a striking for a while.
Since boosting income probably hurts their quality of life due to more piece of work and stress, the all-time way is to reduce expenses and diligently keep track of their finances online for gratuitous with Personal Capital in order to continuously optimize their net worth.
If yous still don't believe $300,000 for a family with two kids is required to live a middle class lifestyle, take a await at this chart below.
For San Mateo County, which is equally as expensive as San Francisco County, a family unit of 4 with a $146,350 is consider low income. With rising domicile prices, it just takes a lot more income for families to live comfy lifestyles in big cities.
Relocating To A Lower Cost Area Of The Country Works
If y'all feel the cost of living is too high, so consider moving to a lower toll area. In this new decade, it has get much more adequate to work from domicile thanks to the pandemic.
In that location's a moving truck shortage in places like San Francisco because so many people are moving out of this expensive city and other expensive coastal cities. The trend is towards relocating to the heartland, where valuations are cheaper and cyberspace rental yields are much higher.
The best way to exercise so is by investing in real manor through Fundrise and CrowdStreet. You tin can sign up for free and review their pre-vetted properties. These properties were once only reserved for institutional investors or high net worth individuals. Fundrise offers diversified eREITs, which is likely most appropriate for most investors looking for real manor exposure.
CrowdStreet offers private commercial real estate deals, by and large in 18-hour cities, where you tin can build your ain select portfolio. xviii-hr cities are very enticing due to lower valuations and college cap rates. Both platforms are costless to sign up and explore.
Personally, I've invested $810,000 in real estate crowdfunding to diversify my holdings and earn income 100% passively.
Thanks to technology, there's no need to grind so hard in cities where the median dwelling price is over $1M. You tin can earn a similar amount of income working remotely while spending a fraction of big city living costs.
Life is and so much easier when housing is affordable. The land is large. Go explore it!
With the bull market in everything post-pandemic, costs are likely going to keep to rise. Therefore, earning a household income of $300,000 to live a middle-class lifestyle is not far-fetched at all. Politicians need the middle form to stay in power. And President Biden has said he won't raise taxes for anyone making under $400,000. Therefore, President Biden would certainly agree that $300,000 for a family of four is a middle-form income.
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Source: https://www.financialsamurai.com/living-a-middle-class-lifestyle-on-300000-year-expensive-city/
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