If you're making more than $100,000 a year and still struggling to make ends meet, you're not alone. It may be cold comfort, but 51% of people making more than $100,000 report living off their monthly paycheck, according to a joint PYMNTS and Lending Club study. Still, the average annual median salary in the U.S. is $56,940. How do people who earn this much manage to spend as much money as they earn each month? Here we consider some of the factors that make it possible.
where they live
Living in Omaha, Nebraska is just like living in Long Beach, California, and living in Albuquerque, New Mexico is just like living in Austin, Texas. Simply put, it's much more expensive to live in some parts of the country than others, and you'll end up with less money in your bank account at the end of the month.
To test this hypothesis, we compared one city to another using Sperling's Best Places Cost of Living Calculator. Calculations do not include childcare fees or taxes.
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Here's what we found:
- A person making $100,000 a year in Omaha, Nebraska would need to make more than $177,000 in Long Beach, California to maintain the same standard of living.
- A person making $100,000 a year in Albuquerque, New Mexico would need to earn $169,000 a year in Boston, Massachusetts to maintain their current income.
- Even if your salary in Kansas City, MO is $100,000, if you move from KC to Austin, TX, you'll have to jump to just over $147,000.
- To maintain the $100,000 salary you make in Lansing, Michigan, you'll need to make more than $168,000 in Portland, Oregon.
And it's not just cross-border movement that changes the purchasing power of $100,000. For example, if a person making $100,000 a year in Champaign, Illinois were to move two hours north to Wheaton, Illinois, he would need to earn just under $144,000 to keep up that pace.
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Childcare
According to the Economic Policy Institute (EPI), childcare costs also vary widely depending on where a family lives. For example, recent average annual costs for infant child care in 10 states are:
- Alabama: $6,001
- Alaska: $12,120
- Colorado: $15,325
- Delaware: $11,021
- Indiana: $12,612
- Louisiana: $7,724
- Massachusetts: $20,913
- Mississippi: $5,436
- New Jersey: $12,988
- South Dakota: $6,511
In Hawaii, the average annual cost for infant child care is $13,731. Considering this number, early childhood care costs $4,022 more per year than her four-year in-state tuition at a public university in Hawaii.
The United States ranks 40th out of 41 countries for providing accessible, affordable, and high-quality child care, according to the humanitarian organization UNICEF. You can't blame your parents for that.
Article from new york times It has been revealed that the United States spends just 0.2% of its gross domestic product (GDP) on child care for children under the age of two. With child care tax credits, this equates to about $200 a year for most families. Compared to Sweden's $18,000 per child and Norway's $30,000 per child, American parents save considerably in terms of paying for quality child care. It's clear that it's taking a toll.
Let's say a household living in Texas has a total income of $100,000. They have two children, an 11-month-old and a 4-year-old. After taxes, the couple takes home about $6,000 each month. The average cost of infant child care in Texas is $9,324 per year, or $777 per month. The cost of care for a 4-year-old is $7,062 per year, or $589 per month.
Of the $6,000 the couple takes home, $1,366 will automatically go toward childcare costs.
Note: These are rough numbers. We calculated your take-home pay based on taxes, but we didn't take into account any other expenses that would reduce your take-home pay. This includes costs such as medical insurance and union dues. Ideally, this will also include retirement benefits.
Lifestyle changes
Lifestyle creep is sometimes referred to as “lifestyle inflation.” This happens when an increase in income causes an increase in spending on non-essentials. For example, when a person earns more, they may go on nicer vacations, eat out more, or buy more expensive clothes. Things that were once considered luxuries become necessities, eating up a significant portion of your income.
The word “creep” is appropriate because it happens so slowly that you may not notice it until you find yourself living paycheck to paycheck.
Nor did he mention high taxes, exorbitant housing prices in some areas and current concerns about inflation. When you consider the bills that come in every month, it's easy to see how even high-income households can suffer losses.
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