Can you afford the basics? What are the basics, anyway? According to a recent article in USA Today, it takes about $150,000 a year in order to cover the basics, set aside money in savings, and enjoy a few extras. If you make less than $150,000 a year, the implication is that you are going to be just scraping by.
The results come from a WSL/Strategic Retail survey that looked at shopping habits in America, and found that those with incomes of between $100,000 and $150,000 a year were experience higher rates of financial struggle. I found this interesting, since it comes less than two years after a study pinpointed $75,000 a year as the ideal salary for happiness.
Photo via Wikimedia Commons
All of this begs the question: Do you really need that much money to live comfortably?
What is Comfortable?
What are you buying that $150,000 is the bare minimum for comfortable living? While there are some places where the cost of living is high enough that $150,000 wouldn’t go very far, for many people it seems as though a comfortable life should be available for much less than $150,000 a year. Part of the problem might be what we consider “comfortable” these days:
- Home with a room for each of the kids
- At least two cars
- Big screen TV
- Pre-packaged foods
- Going out to eat for multiple meals in a week
- Cable/satellite TV
- High speed Internet
- A profusion of gadgets, including smart phones, tablets, laptops, game consoles, and more
- Vacations to expensive destinations every year or two
- Involvement in kids’ extracurricular activities
Expectations that Come with Income
Many people feel that a higher income also comes with higher spending expectations. If you are making six figures, you are “supposed” to have a bigger house, nicer car, more expensive clothes, and spend money on various other items. In some cases, expectations (either those you put on yourself, or those you feel others place on you) might include private school, or expensive gym memberships.
When you do a break down of expenses, suddenly it seems as though a six-figure income might not really be enough to live on. $100,000 doesn’t go very far if you live in an area with a high cost of living, or if you feel as though you “need” a number of higher-priced amenities. Because a six-figure income has such a psychological impact on those of us in the middle class, it seems as though you should be able to “afford” — or even that you “deserve” — certain things.
Lifestyle inflation is reality as you earn more money. You earn more, so you spend more. That’s probably why the survey showed that financial stress was higher than average for those with incomes between $100,000 and $150,000 (although it would also be interesting to see where they live, since that could also be a factor). It’s hard to say what, exactly, constitutes “rich,” but it looks like, increasingly, what we used to think of as rich is now being viewed as only enough to cover the basics.
Living on Less than $150,000 a Year
I’m not a penny-pincher by any stretch of the imagination, but we live on less than $150,000 a year, and count ourselves comfortable. We have savings, and contribute to retirement each month. We still have some debt (mostly student loans and cars), and we like to spend money. However, we are careful about what we spend our money on. Our home is modest, and we have a garden, and try to eat at home.
In order to live within our means, we prioritize our spending so that the things we find most important are taken care of first. We don’t spend money on things that aren’t important to us. We forgo a lot of “normal” things that our neighbors have because we want to have the money to do what we like. So we’re comfortable, even though we have less than $150,00 a year.
What about you? Can you live comfortably on less than $150,000 a year?
Miranda is a professional personal finance journalist. She is a contributor for several personal finance web sites. Her work has been mentioned in and linked to from, USA Today, The Huffington Post, The San Francisco Chronicle, The New York Times, The Wall Street Journal, and other publications. She also has her own personal finance blog: Planting Money Seeds.