Securing both financial success and career opportunities comes at a cost — one that is growing each year. Overall, Americans need an average post-tax income of $68,499 to live comfortably in the U.S., according to recent data from SmartAsset.
SmartAsset's study analyzed the after-tax income needed to live in the nation's 25 largest metro areas comfortably. To determine the required salary for a single individual with no kids in each city, SmartAsset employed the 50/30/20 rule, which defines a comfortable lifestyle as one in which 50% of after-tax income is applied to basic living expenses (needs), 30% to discretionary income (wants) and 20% to savings and debt.
The MIT Living Wage Calculator was used to calculate basic living expenses for each city.
The post-tax salary needed in these 25 areas increased by around 20% throughout 2022, while inflation grew about 8%.
Persistent inflation has led Americans to think more consciously about the cost of living throughout the country, Susannah Snider, a certified financial planner and managing editor at SmartAsset, tells CNBC Make It.
"Inflation is taking a bigger bite out of their paychecks and the cost of living is rising. What does it take in these cities to really feel not just like you're surviving financially, but like you're comfortable? Like you're thriving?" Snider says.
How much Americans need to live comfortably
For the second year in a row, St. Louis is the most affordable city on the list, with a required after-tax salary of $57,446. In contrast, San Francisco requires the highest take-home pay to maintain a comfortable lifestyle at an after-tax salary of over $84,000.
Income demands in Southern California rose nearly 30% this year; the Riverside metro area, for example, had the most acute one-year increase in required income, up 27.28% from 2022.
Here are the salaries needed to live comfortably in 15 major U.S. cities:
- San Francisco metro area: $84,026
- San Diego metro area: $79,324
- Boston metro area: $78,752
- New York metro area: $78,524
- Seattle metro area: $77,634
- Los Angeles metro area: $76,710
- Washington, D.C. metro area: $76,194
- Miami metro area: $67,056
- Atlanta metro area: $66,580
- Phoenix metro area: $65,670
- Chicago metro area: $65,500
- Dallas metro area: $64,742
- Houston metro area: $62,260
- Philadelphia metro area: $61,678
- St. Louis metro area: $57,446
Why does San Francisco top the list?
In cities like San Francisco, the cost of living comfortably exponentially increased over the past year, from roughly $74,000 in 2022 to about $84,000 in 2023, Snider says.
California cities' elevated cost of living can be explained, in part, by the state's high income, gas and sales taxes. In San Francisco, for example, residents face a statewide gas tax rate of $0.539 per gallon and a sales tax of 8.625%.
San Francisco's $10,000 increase "really highlights just how much the rising cost of living might be making [residents] feel like maybe that salary last year, that allowed them to feel like they were living comfortably, isn't really going as far this year," Snider says.
DON'T MISS: Want to be smarter and more successful with your money, work & life?Sign up for our new newsletter!
Take this survey and tell us how you want to take your money and career to the next level.
VIDEO5:2005:20
How a 26-year-old making $130,000 a year in Philadelphia spends his money
Certainly! Based on the article, it delves into the evolving financial landscape and the income needed to live comfortably in various U.S. cities. It uses data from SmartAsset's study, employing the 50/30/20 rule to define a comfortable lifestyle and MIT's Living Wage Calculator to determine basic living expenses. The analysis discusses the increasing post-tax income required for a comfortable life, which has grown about 20% in 2022, surpassing the 8% inflation rate.
Susannah Snider, a certified financial planner and managing editor at SmartAsset, sheds light on the impact of inflation on Americans' financial stability, emphasizing the need to not only survive but thrive economically in different cities. The article lists the post-tax salaries required for a comfortable life in 15 major U.S. cities, with San Francisco topping the list at over $84,000 and St. Louis being the most affordable at $57,446.
The rising cost of living in cities like San Francisco is attributed to various factors, including high state taxes (income, gas, and sales taxes). The article highlights the significant increase in the cost of living from around $74,000 in 2022 to over $84,000 in 2023, emphasizing how residents might feel financially strained despite previously adequate salaries.
San Francisco's high living costs are affected by the state's elevated taxes, including a $0.539 per gallon gas tax and an 8.625% sales tax. The article provides insights into how the increasing cost of living impacts individuals' perception of financial comfort and the changing dynamics of affordability in different regions.
Now, let's break down the concepts involved in the article:
-
Cost of Living: Refers to the amount of money needed to sustain a certain standard of living, considering expenses like housing, food, healthcare, taxes, etc., which vary across regions.
-
50/30/20 Rule: A financial guideline allocating 50% of after-tax income to needs (basic living expenses), 30% to wants (discretionary spending), and 20% to savings and debt repayment.
-
MIT Living Wage Calculator: Tool used to calculate the basic living expenses required for a certain standard of living in different areas.
-
Inflation: The increase in the prices of goods and services, leading to a decrease in the purchasing power of money over time.
-
Post-tax Salary: Income remaining after taxes have been deducted.
-
Income Taxes: Money levied by the government on individuals' income, which varies across states and can significantly impact the cost of living.
-
Sales Tax: A consumption tax imposed on the sale of goods and services, which varies by state and can affect the overall cost of living.
-
Financial Planning: The process of managing finances to achieve specific goals, considering income, expenses, taxes, savings, and investments to secure a comfortable lifestyle.
Understanding these concepts is crucial in comprehending the nuances of the changing financial landscape and the varying costs associated with living in different cities.
