It can be hard to feel financially stable when the cost of living continues to cut your fortune dramatically. budget. Although wages grew 5.1% between December 2021 and December 2022, the pace of wage growth has not been able to keep up with inflation, averaging 8% in 2022.
Ultimately, inflation has affected everything from housing costs to egg prices, making it increasingly difficult to live comfortably in America’s biggest cities. With this in mind, SmartAsset set out to explore the after-tax income currently needed to live comfortably in the nation’s 25 largest metropolitan areas.
To determine how much money is needed to live comfortably in the largest urban areas, we used 50/30/20 . rule to define a comfortable lifestyle. This rule is a budgeting strategy that allocates 50% of after-tax income to basic living expenses (needs), 30% to discretionary spending (wants), and 20% to savings or debt payments. .
“Budgets are the foundation of many people’s financial plans. And that’s especially important,” says Susannah Snider, a certified financial planner and managing editor of financial education at SmartAsset. It’s essential to understand and track your spending as the cost of everyday items increases.”
“Being able to stick to a 50/30/20 budget means you have enough money to fund your short- and long-term goals while covering essential living expenses.”
Data and Methodology
Most Recently Used SmartAsset MIT Living Wage Calculator data to collect the basic cost of living of a childless individual in each major metropolitan area. The data includes the cost of living in each city as of 2022. The online tool calculates the cost of living by adding together the average costs of housing, food, transportation, and medical care. and other expenses in each major city area.
We assume that the MIT cost of living figure for each major metropolitan area will cover the need (i.e. 50% of one’s budget) and then calculate the total allowable take-home pay. individuals spend 30% more on needs and 20% on savings or payment debt.
This is SmartAsset’s second study on how much money it takes to live comfortably in the 25 largest metropolitan areas. You can read the 2022 version This.
Main results
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Louis is the most affordable, again. Metro area St. Louis was the most affordable place for the second year in a row, asking for $57,446 after tax to live comfortably. The San Francisco Bay Area, on the other hand, is once again asking for the highest take-home pay — over $84,000 — to maintain a comfortable lifestyle.
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Demand for income in this Southern California metro area has increased by nearly 30%. None of the 25 places in our study experienced a faster increase in after-tax income needed to live comfortably within a year than Riverside-San Bernardino-Ontario. A year ago, $52,686 was needed for a comfortable lifestyle. That number has since grown 27.28% to $67,060 in 2023.
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On average, you need $68,499 after taxes to live comfortably. The average after-tax income needed to lead a comfortable lifestyle across the 25 major metropolitan areas in our study has increased by about 20% from a year ago when it was just $57,013.
Five places that demand the highest salaries
1. San Francisco-Oakland-Berkeley, CA
A single person without children needs $84,026 after taxes to maintain a comfortable lifestyle in San Francisco-Oakland-Berkeley. Using the MIT Cost of Living Calculator, SmartAsset found that an individual spends an average of $42,013 on living expenses annually in the San Francisco area. A person on a 50/30/20 budget would set aside $25,208 on discretionary spending and $16,805 on savings or debt payments. While still the most expensive place in our study, San Francisco-Oakland-Berkeley had the smallest one-year increase in required after-tax income compared with a year ago (13.12%).
2. San Diego-Chula Vista-Carlsbad, CA
According to MIT, San Diego-Chula Vista-Carlsbad rose four places in this year’s rankings after the annual cost of living increased by 21.32%. Therefore, a person must currently earn $79,324 after taxes to live comfortably in that part of California. After covering basic living expenses ($39,662), an individual can spend $23,797 on needs and set aside $15,865 for savings or debt repayment.
3. Boston-Cambridge-Newton, MA
The metropolitan area that surrounds Boston and extends into southern New Hampshire requires the third-highest take-home pay for a comfortable lifestyle. A single person needs to earn $78,752 after taxes to cover basic living expenses ($39,376) and still spend half of his earnings on needs and savings/debt. Under a 50/30/20 budget, a comfortable person would allocate $23,626 for discretionary spending and $15,750 for savings or debt payments.
4. New York City-Newark-Jersey, NY-NJ-PA
The New York metropolitan area may be the most populous in the country, but it’s not where you need the most after-tax dollars to live comfortably. However, the New York City-Newark-Jersey area requires a take-home wage of $78,524, as the typical cost of living is $39,262 per year. That means someone following a 50/30/20 budget would set aside $23,557 of their income for discretionary spending and save the remaining $15,705, or use that money to pay off debt.
5. Seattle-Tacoma-Bellevue, WA
It takes $77,634 after taxes to live comfortably in the Emerald City and surrounding areas. The cost of living for an individual in Seattle-Tacoma-Bellevue adds up to $38,817. Thus, a person would allocate 30% of their earnings ($23,290) to discretionary spending and the remaining $15,527 to savings or debt payments.
Five places with the lowest salary requirements 1. St. Louis, MO-IL
Living comfortably in the St. Louis larger means your after-tax income should be $57,446 – the least amount in all 25 metropolitan areas. That amount could cover basic living expenses ($28,723) with enough left over to set aside 30% for your needs ($17,234) and another 20% for savings or debt payments ($11,489).
2. Detroit-Warren-Dearborn, MI
A single person needs to earn $58,358 after taxes to live comfortably in the Detroit-Warren-Dearborn metropolitan area. With basic living expenses up to $29,179 per year, a person on a 50/30/20 budget would have $17,507 left for discretionary spending and $11,672 to save or pay off debt. While comfortable living in the Detroit area claimed the second-lowest take-home pay in our study, that number is 24.39% higher than it was a year ago.
3. San Antonio-New Braunfels, TX
To live comfortably in the San Antonio-New Braunfels metropolitan area in Texas, a person must earn $59,270 after taxes. The typical cost of living in this part of the Lone Star State adds up to $29,635 per year, meaning an individual living comfortably would have $17,781 in discretionary spending and another $11,854 in deposits. their savings or debt.
4. Philadelphia-Camden-Wilmington, PA-NJ-DE-MD
The typical cost of living in the Philadelphia-Camden-Wilmington metro area is $30,839 per year. That means a single person would need to take home at least $61,678 per year to live comfortably in the greater Philadelphia area, spread across four states. Doing so will allow them to spend 30% of their after-tax income on needs ($18,503) and the remaining 20% on savings or debt ($12,336).
5. Charlotte-Concord-Gastonia, NC-SC
A single person can live comfortably in the Charlotte-Concord-Gastonia metro area in the Carolinas for $62,110. The median cost of living in the Charlotte area amounts to $31,055 per year, meaning someone who is on a 50/30/20 budget would allocate $18,633 on their discretionary spending and save $12,422. remaining or use that money to pay off debt.
Budgeting tips in times of inflation
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Be realistic with your budget. Using SmartAsset budget calculator to develop a spending plan, but don’t be afraid to make adjustments as needed. “It’s important to stick to a spending plan,” says Snider, “but give yourself some flexibility and grace. A plan that’s too restrictive can quickly be abandoned.” “So if buying yourself a daily latte is the only thing that brings you joy every morning, make room for it in your budget and look at other places where you can cut back.” .”
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Talk to an expert. ONE Financial Advisor can help you budget, plan your finances, and invest your assets to weather high inflation. SmartAsset’s free tool connects you with up to three vetted financial advisors serving your area, and you can interview the right advisors for you for free to decide which one is right for you. If you are ready to find an advisor who can help you achieve your financial goals, start right now.
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