Let’s face it – the average salary or income makes it pretty hard to get ahead financially.
The current political debate is full of banter about rising income disparity, lagging middle-income salaries and lack of employment opportunities for young workers, even those who complete their college degrees.
Maybe you heard about or even read the USA Today article that put the price tag for the middle-class “American Dream” lifestyle at $130,357 in 2014.
44.9% for Essentials — $58,491
- Housing 13.1% of gross: $17,062 annually or $1,422 a month
- Groceries $12,659 year, $1,055 month
- Transportation at $11,039 a year and $920 a month (for 2 working adults)
- Medical Insurance and Out-of-Pocket Expenses $9,144 year, $762 month
- Education (public school extras) for two children $4,000 year, $333 average monthly
- Clothing $2,631 year, $219 a month (for 4 people???)
- Utilities $1,956 annually, $163 per month average
13.0% for Extras — $17,009
- Family Vacation $4,580 ($382 a month)
- Entertainment $3,667 year, $306 a month
- Restaurant Meals $3,662 annually or $305 a month
- Cable, satellite, Internet, and cell phone $3,100 a year, $258 per month
- Miscellaneous /Cushion $2,000 year or $167 a month
42.1% for Taxes and Savings — $54,857
- Federal and state taxes at 24.8% or $32,357 a year, $2,696 a month
- Higher Education savings for two children of $5,000 a year
- Contributions to employer-sponsored 401K of $17,500 (max for 1 person) 13.4% of combined gross income
Since the median USA income for a family of 4 with 2 working adults is about $51,000, something doesn’t add up!
And, as numerous people continue to prove (thanks to many personal finance bloggers for revealing their stories), a high income is not what it takes to achieve wealth and financial freedom. There’s even some data out now indicating your attitudes and emotions about the past, present and future have a greater impact on your financial decisions and life.
Are Frugalistas Happier?
Frugal living rules the day at popular sites like GetRichSlowly and MrMoneyMustache . Their premise is a combination of reduced lifestyle costs and massive, early savings leads to “early retirement” or the financial freedom to quit earning income via trading time for money.
So, if you’re going to become wealthy by being frugal, you know the $920 a month average/middle-class families spend on their cars is going to get chopped – and probably the $305 spent at restaurants.
On the other hand, I’d say spending less than 20% of your gross earnings on housing is only possible outside the major urban markets. And it’s those same markets that usually offer above average wages (a bit of a Catch22).
So, I’d say that NO you don’t have to earn an above average wage but you do have to be an above average saver and very careful about your spending.
The good news? Once you have a nest-egg earning you passive income, and you allow it to compound, you’ll find your non-earned income starts exponentially increasing. Then you can either work less or spend more or some combination that suits you and your lifestyle.
Live Long and Prosper – Leah the MoneyDiva.com