Gone are the days when people were running after jobs and money because the primary criterion for most citizens now is quality of life.
Everyone is looking to improve their standard of living and fulfill their passion without aimlessly working a 9-5 job. That’s why a common question on everyone’s lips is how much money they might need to live comfortably.
If you currently earn 55K a year, you are not doing too bad, but heading into 2023 will this income be enough, considering the cost of entertainment or mortgage? We try to answer this question in today’s guide, looking at various expenditures for a better understanding.
How Costly Is The USA Compared To Other Countries?
To determine whether you can survive on an average salary of 55K in the USA, it’s important to know how expensive the country is. One of the worrying factors heading into 2023 is the global recession and rising inflation rates, which could increase the monthly budget even more.
The USA is one of the largest and most crucial economies, and a stuttering market would spell danger the world over. So, for starters, we recommend keeping cash in hand because it might prove useful. But how much?
1. Value Of Money
If you have always celebrated the strength of the US dollar compared to the Australian dollar or British pound, this is a rare instance where it could be a hindrance. Going by the current exchange rate, 1 USD = 0.84 GBP and 1 USD = 1.50 AUD.
While the change may seem nominal to most people, factoring in take-home pay and expenses will reveal the stark difference between living in the USA and elsewhere. Take New York, for instance – “The city that never sleeps,” and given increasing housing costs in the region, you might not be able to sleep either. In 2022, renting a one-bedroom flat in New York would come to a monthly living wage of $3,336.
2. Cost Of Living
Spending increases further when you consider the cost of transportation ($81) and daily meals ($100).
Now, transportation costs in Australia ($152) and London ($196) are pretty steep, although people save money on food, not needing more than $50-$70. However, the game changer is the housing costs, which are around $2,100 in London and $1,800 in Australia.
What Can We Concur?
From the above data, it’s clear you need to pay more money to live comfortably in the USA and partake in entertainment activities than in other parts of the world. And the monthly budget shoots up even more for students or people migrating to the United States because of the currency exchange rate.
So, one thing’s for certain – a person’s annual income needs to be higher to balance spending and income. But just how high a median salary are we talking about? Again, it’s a tricky question since the salary needed to survive in Florida will be different from the cost of living in Oklahoma.
Data suggests that the average household in America ends up paying $61,334 per year for various expenses, with the major contributor being household costs. We estimate that household payments account for roughly $1,800, depending on where you live, but San Francisco, Boston, New York, and Los Angeles are the most expensive cities.
Thankfully, Cincinnati and Oklahoma are more affordable options, especially for people who don’t have a high income, while Mississippi is the cheapest state to live in. The bottom line is if you are willing to live outside the main cities, it’s possible to save more on rent and even have money for discretionary spending.
To understand whether a 55K salary is suitable for supporting a family or a single person in 2023, we have considered the average income of people in New York. Why New York? Because it’s one of the costliest cities in the world, home to the top scientists, engineers, web developers, etc.
For example, the average annual income of a store cashier in the USA is $26,780, which might make it challenging to make ends meet. You must factor in the cost of debt, mortgage, and what percentage of the income goes toward paying taxes to find the total annual savings.
Things are also tough for a receptionist, earning around $32,910, but as we venture up the pay scale, things change quite a bit. Under the 55K income bracket come graphic designers who earn close to $59,970, allowing them to afford car insurance.
But on the flip side, it might be difficult to create an emergency fund with this income when you have a family to support and are the only earning member. In contrast, the annual salary of a secondary school teacher is $69,490, which means they have a higher take-home pay, allowing them to invest in retirement plans.
The situation improves further for mobile and web developers, with both groups earning in the 81k bracket. And the highest-earning professions include software analyst ($113,720) and financial analyst ($106,340), who earn the salary needed to live comfortably. Hence, there’s a healthy balance between discretionary spending and savings for such employees.
Why did we tell you about the salaries of various groups? Have you ever wondered why many adults look to rent a place rather than get an apartment of their own?
In the USA, buying an apartment in the city center comes to around $3542.13 per square foot. Meanwhile, the cost of an apartment elsewhere is roughly $2117.94 per square foot, which means despite the high rent, people can still save more by not buying.
Thanks to the US Census Bureau, Construction, the cost of rent in America increased to $1,033 during the second quarter of 2022. But an even more telling stat is that high-income homebuyers accounted for 33% of sales in August this year, an improvement of 31% from last year.
We did some more digging and found that the cost of new houses increased gradually towards the end of 2022 from $330,800 in March to $397,800 for the year. Also, people investing individually in business and housing assets chose to pay in cash instead of drawing a debt or having a mortgage.
These individuals accounted for 14% of home purchases in August and 18% of all transactions. Therefore, since rent forms a major chunk of the take-home pay, it would be best to choose a small city or town to manage expenses better.
We have also compiled a list of the housing costs in popular US cities –
- New York – $335,607
- California – $554,886
- Massachusetts – $422,856
- Washington, DC – $626,911
- Florida – $245,169
- Indiana – $155,640
- Virginia – $285,229
- Texas – $205,229
- Mississippi – $126,502
When calculating the amount they will spend on living expenses, people consider tax, credit score, discretionary spending, payments, etc. but fail to think of healthcare expenses. For some reason, people forget they might fall sick; that’s why it’s essential to set aside a certain amount of money from the salary to create an emergency fund.
We recommend you start putting money into health insurance ASAP to avoid costly payments down the road. While it’s impossible to predict how much you will require for treatments, we can estimate the average monthly health insurance cost.
When you have insurance or substantial savings to pay for private hospitals, healthcare in the USA is one of the best in the world. So, here are some costs you must pay to get quality treatment when needed –
- Family checkup – $155
- Antibiotics – $23
- Cold medicine – $6
As per data provided by Health Affairs, spending toward healthcare will grow at 5.4% till 2028, while the annual growth rate will be 4.3%. Moreover, healthcare spending is expected to reach $6 trillion in 2028 and contribute 19.7% to the country’s GDP.
This means that healthcare expenditure will only go up next year, increasing from the average cost of $121,000 per person in 2020.
Coming to insurance, you can pay for medical expenditures privately or through social insurance, thanks to standard insurance plans. Based on the type of treatment, healthcare doesn’t come cheap, with doctors demanding several hundred dollars while a 3-day hospital visit results in thousands of dollars.
Transportation And Travel
Transportation in major US cities isn’t cheap, but we wouldn’t label them as over the top either. Most families have the ability to purchase multiple cars and usually prefer private vehicles to public transport for greater comfort.
Interestingly, the costliest city in terms of transportation costs is Hawaii, surpassing Alaska, Nevada, California, Washington, and Oregon. On average, people living in the metro areas should expect to spend $435-$1,000 monthly, which can vary depending on whether you are willing to use public transport.
Some of the states with the lowest cost of transportation are –
- West Virginia
- New Mexico
With transportation comes auto insurance, which amounts to $199 per month or $2,388 yearly. But you can choose a policy of your liking, provided it meets that state’s minimum requirements, with some insurance companies offering coverage as low as $876 per year.
According to research, Americans spend approximately 2.44% of their yearly income on car insurance, but this is likely to change due to higher costs. The latest data shows insurance increasing at 4.68% over 5 years with monthly premiums depending on…
- City, town, state of residence
- Model and age of the car
- Your age
- Credit score
Usually, married people are considered low-risk, paying less for insurance, while young drivers and people over 75 years pay more. Another factor to consider is the accident rate in a region because it drives up insurance costs, like in Louisiana. Other regions with high auto insurance rates include New York, Florida, Michigan, and Maryland, while Hawaii, Vermont, Maine, Idaho, and Iowa have some of the cheapest policies.
To calculate the overall transportation cost, you are likely to spend per year, factor in –
- Fuel costs
- Public transit fare
- Vehicle maintenance
- Car premiums
- Insurance policy
For further convenience, we have highlighted the common costs of certain cars and public transport.
- Monthly bus pass – $65.80
- 1 liter of gasoline – $0.98
- Taxi fare for 1 km – $1.62
- Single-use bus ticket – $0.98
- VW Golf car – $24,000
- New Toyota Corolla – $22,244
There is no denying that education can be expensive in the United States because most students don’t have a job and have to work part-time. This means you will have a lower take-home pay and are most likely to stay with relatives or rent a place close to campus with other students.
A. Fee Structure
Compared to other countries, the cost of education in the USA depends on whether you choose a private or a public university, as the fee structure varies accordingly. That’s not to say the students from the low-income group will be left out because several institutions have scholarship programs and offer financial support and bursaries.
B. Public Primary Education
But this is for higher education purposes, specifically for students traveling abroad to the United States. So, what about young kids in the family? Luckily, all kids are entitled to free public schools in the country since the government has made public education free.
However, there are some costs involved outside the immediate semester/term spending, including –
- Bus facility
- Art classes
C. Public High School Education
While the Federal government is responsible for funding public education courses, things are slightly different in the high school curriculum. Again, fees are free for US students, but international students will need to invest a hefty amount, ranging between $3,000 and $10,000.
D. Private Institutions
There are also private institutions where the costs are significantly higher and may not be affordable to most families. Here are the average tuitions fees in private day schools for different grades in the United States –
- Grades 1-3 pay between $7,000 and $12,000
- Grades 6-8 pay between $9,000 and $13,000
- Grades 9-12 pay between $11,000 and $15,000
Private institutions have to draw a tuition fee and are often run by religious organizations. Long story short, school or college education in the USA doesn’t come cheap due to a shortage of state funds and financial aid.
We understand the challenges of calculating utilities because it’s impossible to know the discretionary spending on gas or entertainment in a month. For instance, people use the thermostat more during the harsh winter months than in warmer summer temperatures to live comfortably.
We have noted most of the expenses you should bear in mind when calculating utilities –
- Garbage disposal
On average, a family in the US spends $2,060 annually on utility bills which, when broken down, look something like this…
- Natural gas – $20 to $80
- Electricity – $60 to $120
- Water – $10 to $40
- Cable – $50 to $100
- Internet – $30 to $70
It’s important to remember that the costs will vary based on a state’s rules, the number of units, and usage. The most expensive states that charge substantial amounts for utilities, ranging between $200 and $500 per month, are –
- Puerto Rico
- Rhode Island
Meanwhile, the states with the lowest utility costs of around $80 to $120 include –
Food And Grocery
Interestingly, basic necessities like groceries and household food items are cheaper in the USA than in Western Europe, with most people shopping at supermarkets. Despite not being a healthy choice, you won’t have to burn through the month’s savings if you want to consume processed or fast food.
A study by Merrill Lynch and The Bank Of America showed that food and groceries were most costly at Whole Foods while Walmart was the cheapest. Even the Kroger supermarket offers food items at affordable prices so that most US families can purchase groceries for $3-$4. This amounts to a $9 savings per person daily on their take-home pay.
But if you decide to dine out, know that the cost of eating at a commercial joint ranges between $5.50 and $30. It’s an important consideration for people who eat out frequently because even if you dine at the cheaper joints, the cost of 2 meals will result in steeper expenses.
So, it’s time to answer the all-important question – is 55K enough for yourself or for supporting a family in the United States? We believe that given the rising costs, you might be able to live a decent life as a single person, but it would be challenging to support a family.
Even if you are only 3 members – husband, wife, and a kid – it’s not easy to run the household on 55K given the cost of education, food, and utilities. Moreover, international students will have to pay more to acquire a fraction of the comfort US nationals enjoy, so it would be best to live in cheaper towns.
The goal should be to increase your income as much as possible in 2023 and keep more money in hand, especially if predictions for a global recession come true. If possible, you should also invest a certain percentage of your salary in retirement plans to live comfortably.
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