It’s hard to feel financially stable when the cost of living continues to eat away at your budget. While wages increased by 5.1% between December 2021 and December 2022, wage growth could not keep up with inflation, which averaged 8% in 2022.
Ultimately, inflation affected everything from the cost of housing to the price of eggs, making it increasingly difficult to live comfortably in America’s largest cities. With that in mind, SmartAsset set out to uncover the after-tax income now 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 metropolitan areas, we used the 50/30/20 rule to define a comfortable lifestyle. This rule is a budgeting strategy that allocates 50% of after-tax income to basic spending (needs), 30% to discretionary spending (wants), and 20% to saving or paying down debt.
“A budget is the foundation of many people’s financial plans. And understanding and tracking your spending is especially critical when the cost of everyday items rises,” says Susannah Snider, certified financial planner and editor of the financial education at SmartAsset.
“Being able to stick to a 50/30/20 budget means you have enough funds to fund short- and long-term goals while paying for essential living expenses.”
Data and methodology
SmartAsset used the most recent data from the MIT Living Wage Calculator to collect the basic cost of living for a childless individual in each metropolitan area. The data covers the cost of living in each city as of 2022. The online tool calculates the cost of living by adding the average cost of housing, food, transportation, medical care and other expenses in each metropolitan area.
We assumed that the MIT cost-of-living figure for each metropolitan area would cover the needs (i.e. 50% of its budget), then we calculated the total take-home pay that allows individuals to spend 30 additional % for their needs and 20% for their savings or debts. Payments.
This is SmartAsset’s second study of how much money you need to live comfortably in the 25 largest metropolitan areas. You can read the 2022 edition here.
St. Louis is again the most affordable. The St. Louis metro area is the most affordable place for the second year in a row, needing $57,446 after taxes to live comfortably. The San Francisco Bay Area, on the other hand, once again requires the highest take-home pay – over $84,000 – to maintain a comfortable lifestyle.
Income claims in this Southern California metro area have increased by nearly 30%. None of the 25 places in our study had a more pronounced year-over-year increase in the after-tax income needed to live comfortably than Riverside-San Bernardino-Ontario. A year ago, $52,686 was needed for a comfortable lifestyle. This number has since increased by 27.28% to reach $67,060 in 2023.
On average, you need $68,499 after taxes to live comfortably. The average after-tax income needed for a comfortable lifestyle in the 25 metro areas in our study is up 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 support a comfortable lifestyle in San Francisco-Oakland-Berkeley. Using MIT’s Cost of Living Calculator, SmartAsset found that an average individual spends $42,013 in annual living expenses in the San Francisco area. A person following the 50/30/20 budget would set aside $25,208 for discretionary spending and $16,805 for savings or debt repayment. While still the most expensive location in our study, San Francisco-Oakland-Berkeley had the lowest year-over-year increase in after-tax income needed in a year (13.12%).
2. San Diego-Chula Vista-Carlsbad, CA
San Diego-Chula Vista-Carlsbad moved up four spots in this year’s rankings after the annual cost of living rose 21.32%, according to MIT. As a result, a single person now needs to earn $79,324 after taxes to live comfortably in this part of California. Once basic living expenses ($39,662) are covered, a person could spend $23,797 on basic necessities 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 tax to cover basic living expenses ($39,376) while spending half of their income on wants and savings/debt. Following the 50/30/20 budget, a person living comfortably would spend $23,626 on discretionary spending and $15,750 on savings or debt repayment.
4. New York-Newark-Jersey City, 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. The New York-Newark-Jersey City area, however, requires a net salary of $78,524, given that typical living expenses are $39,262 per year. This means that someone following the 50/30/20 budget would set aside $23,557 of their income for discretionary spending and save the remaining $15,705 or use it to pay down debt.
5. Seattle-Tacoma-Bellevue, WA
It takes $77,634 in after-tax dollars to live comfortably in the Emerald City and surrounding areas. Living expenses for an individual in Seattle-Tacoma-Bellevue are $38,817. As a result, a single person would spend 30% of their take home pay ($23,290) on discretionary spending and the remaining $15,527 on savings or debt repayment.
Five places that demand the lowest wages 1. St. Louis, MO-IL
Living comfortably in the greater St. Louis area means your after-tax income should be $57,446 — the lowest amount in all 25 metro areas. This can cover basic living expenses ($28,723) with enough left over to spend 30% on your needs ($17,234) and another 20% on savings or debt repayment ($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 metro area. With basic living expenses amounting to $29,179 per year, someone following the 50/30/20 budget would have $17,507 left over for discretionary spending and $11,672 for savings or debt repayment. While living comfortably in the Detroit area requires the second-lowest take-home pay in our study, that figure 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 of Texas, a single person needs to earn $59,270 after taxes. Typical living expenses in this part of the Lone Star State are $29,635 per year, meaning someone living comfortably would have $17,781 for discretionary expenses and an additional $11,854 to spend on savings or to his debts.
4. Philadelphia-Camden-Wilmington, PA-NJ-DE-MD
Typical living expenses in the Philadelphia-Camden-Wilmington metro area are $30,839 per year. That means a single person would need to bring in at least $61,678 a year to live comfortably in the greater Philadelphia area, which spans four states. This would allow them to spend 30% of their after-tax income on their wants ($18,503) and have the remaining 20% for savings or debt repayment ($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. Average living expenses in the Charlotte area are $31,055 per year, which means someone on the 50/30/20 budget would allocate $18,633 to discretionary spending and save the remaining $12,422. or would use it to repay its debt.
Tips for Budgeting During Inflation
Be realistic with your budget. Use SmartAsset’s budget calculator to build a spending plan, but don’t be afraid to make any necessary adjustments. “It’s important to stick to a spending plan, but allow yourself some flexibility and grace. A plan that’s too restrictive can be quickly abandoned,” says Snider. “So if buying yourself a daily latte is the one thing that brings you joy each morning, make room for it in your budget and think about other places you can cut back.”
Talk to an expert. A financial advisor can help you budget, create a financial plan, and invest your assets to deal with times of high inflation. SmartAsset’s free tool connects you with up to three licensed financial advisors who serve your area, and you can interview your matching advisors for free to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, start now.
Photo credit: ©iStock.com/Evrymmnt
The post Salary needed to live comfortably in the 25 largest metropolitan areas – 2023 edition appeared first on the SmartAsset blog.