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The real cost of living: $150,000 a year

That's the amount people say they need to pay for necessities, afford some extras and put a little savings away, according to a new survey.

By MSN Money Partner Mar 7, 2012 1:53PM

This post comes from Yuval Rosenberg at partner site The Fiscal Times.

 

The Fiscal Times on MSN MoneyThe divide between the 1% and the 99% has ignited a national debate about the income gap, especially since Occupy Wall Street protesters descended on lower Manhattan last fall. But how much money does it take to feel financially secure these days?

 

The answer, at least according to a new survey of Americans by WSL/Strategic Retail, is $150,000. That level of income is more than three times the national median of $49,445 for 2010, and it's enough to put a household into the top 10% nationally.

 

The survey asked respondents to choose which of four categories best described them: I can't even afford the basics; I can barely afford the basics and nothing else; I can afford the basics plus some extras; and I can afford the basics and the extras, and I'm able to save, too. It is only at that $150,000 level that the survey found the vast majority of consumers, 88%, saying they could buy what they need, afford some extras and still be able to save a bit.


Post continues below.

Even as the economy improves and consumer confidence builds, more than half of Americans -- 52% -- feel like they can afford just the basics, and many with six-figure incomes still feel like they are scraping by. The survey found that 18% of U.S. households earning from $100,000 to $150,000 said they could afford only the basics, with an additional 10% saying they sometimes can't afford even those staples.

 

"We clearly have what used to be upper middle income -- 75 to 150k -- folks who are saying it just isn't so," says Candace Corlett, the president of WSL/Strategic Retail. "A quarter of them are saying, 'I can barely afford the basics.'" So while six-figure incomes used to represent affluence, that's no longer the case.

 

Of course, as The Fiscal Times has written before, in many parts of the country, an annual income of $250,000 could easily leave a typical family in the red once all their expenses and taxes are factored in.

 

That $150,000 is based on average costs for housing, food, clothing, etc. -- perhaps in a place like Peoria, Ill. If it takes that kind of money to have a decent middle-class life in Peoria, what would it take to match it in a major metropolitan area?

 

We used Bankrate's cost-of-living comparison calculator to measure the difference between Peoria and other cities and chose five of the top 10 U.S. cities (not just the top five) with the highest costs of living, according to Kiplinger. We added Chicago to represent the middle of the country.

 

  • The New York City area was the most expensive. Equivalent income: $337,311.87. Percent increase to maintain standard of living: 124.9%.
  • Honolulu area. Equivalent income: $258,099.19. Percent increase to maintain standard of living: 72.1%.
  • San Francisco area. Equivalent income: $255,409.43. Percent increase to maintain standard of living: 70.3.%.
  • San Jose, Calif., area. Equivalent income: $243,260.85. Percent increase to maintain standard of living: 62.2%.
  • Washington, D.C., area. Equivalent income: $218,127.70. Percent increase to maintain standard of living: 45.4%.
  • Chicago area. Equivalent income: $182,045.06. Percent increase to maintain standard of living: 21.4%.     

The struggling economy has clearly created a recession mindset among consumers. When asked how long the recession will continue, 80% of people say three years or more, Corlett says -- up from 43% back in 2010. "They may not literally mean the government's definition of a recession, but they certainly mean a recessionary mindset for them," Corlett says.

 

Those financial pressures have made consumers much more cost-conscious. Three-quarters of women now say it's "important to get the lowest price on everything they buy," up 12 percentage points from 2008 and 22 percentage points from 2004. To that end, more are using coupons (68% vs. 61% in 2010) and buying only when items are on sale (45% vs. 38% in 2010).

 

And, perhaps unsurprisingly, young people -- those from the ages of 18 to 34, who have long been the prized target of marketers -- were more likely than other age groups to say they don't have enough money to cover their basic needs. Nearly a quarter of those surveyed put themselves in that group, compared with 17% of those age 35 to 54 and 13% of people 55 or older.

 

An IRS breakdown of U.S. incomes, released the day after the consumer survey, provides a reminder of why people, even those with six-figure incomes, may be feeling poorer. For tax year 2010, adjusted gross incomes reported to the IRS rose 5.2% to $8 trillion total -- the first increase after a couple of years of declines. But while tax filers making more than $250,000 saw their total incomes climb almost 14%, those earning from $50,000 to $100,000 gained just 1.5%.

 

More on The Fiscal Times and MSN Money

213Comments
Mar 8, 2012 1:08PM
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150k a year isn't enough!!!

 

It's not my fault I bought a big **** Suburban that gets14 mpg on a good day.  I need it when I go camping once a year! Also not my fault I need a 5 dollar cup of coffee on my way to work every morning.  Drink the free coffee at work?!  Ewww gross.  Tap water?! Eww gross again, I buy bottled water cause it's better for you and comes from mountain springs!  Oh yeah and it's also not my fault I bought a house I couldn't afford. 

 

It's like some people dedicate themselves to pissing their money away.  Live with in your means...simple words but they carry weight.

Mar 8, 2012 4:20PM
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The problem with the "article" and its underlying "research survey is two fold.  It asked a completely subjective question with no quantitative data points, and secondly too many people in US today CAN'T distinguish between a "Basic Need" and a "Want"/"Nice to have". 

 

I.E.  In many major metro areas you don't NEED a car.  If you do "Need" a car, you don't need a brand new $50 K to $100 k Audi, BMW, Mercedes, Lexus, etc.  A $2,000 ten year old "Beater" will get the job done just fine.  You Need housing, you want that 5 bedroom, 5 bath, 5,800 sq/ft. McMansion.  NO, each child does not NEED their own room and bath.  I grow up in a house with 5 kids and ONE bath room.  No they don't Need an X-box/Play-Station/etc/. You don't NEED a 52" (or bigger) LCD/Plasma HD TV with full "Home Theater surround sound".  You don't NEED a $500 iPhone/droid/etc. with a $200/month plan.  You don't NEED the $250/month Cable/Dish TV package.  You don't NEED a new $5,000 laptop or "Gaming" PC.  You don't NEED that $50/month MMORPG subscription and every expansion pack they release.  The list goes on and on.  You need food, you don't need steak-n-Lobster.  Cigarettes, Booze, drugs, vacations, eating out, ARE NOT basic necessities!

 

Our income is less than a 1/3 of that $150 k, and we meet all the basics, have many extras, Digital cable, High-Speed Internet, Netflex, Cell-phones, etc.  Yes, our cars are 16 and 10 years old, but both are in good working order.  Own home, even though we lost over $45,000 when sold last house when we had to relocate due to layoff a couple of years ago.  I guess I could have stayed on unemployment and road the Foreclosure "squatter" wave instead.  NO, don't think so.  Have too much self-respect for that.

 

Give me $150,000 a year and I could be completely debt free and ready to "retire" in 5 to 7 years. In ten, I'd be one of those "EVIL 1% millionaires".  All I have to do is live like I do now and "bank", i.e. save or invest, the rest.

Mar 7, 2012 8:53PM
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Puh-lease.  My husband just got a raise that bumped us up to about $93k combined.  We contribute to retirement, save, and have no debt besides our mortgage.  How do we do it?  We saved up a down payment for our home instead of doing an 80/20 loan.  We bought less house than we could afford in the first place. We would love to have brand new luxury cars, but we drive Chevys, one 11 years old and one 5 years old because they're paid for.  We take cheap vacations and travel in the off season.  We didn't buy a flat panel TV until our regular TV died.  I could go on and on.  Life is what you make it and if you can't figure out how to make it on $100k a year, then that speaks more about you than it does the economy.
Mar 7, 2012 2:21PM
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Here's part of the problem:  Just finished my taxes a couple days ago.  My effective tax rate was just shy of 20%.  Assuming Mitt Romney pays about the same as he did the previous year, his tax rate is only 13% according to his financial statements.  I make a whole lot less than he does and I've actually created a job without government assistance.

I don't mind paying my fair share, but I do mind paying more than someone considerably more wealthy than most of us.
Mar 8, 2012 11:49AM
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First of all, what's the deal with all this dating crap?  Isn't there some way to block it?

 

Ok, my wife and I are pretty close to making the "magic" $150k.  I have 2 degrees, and have been at my job for over 24 years.  My wife has a science degree, and is at her 25 year anniversary.  Both of us went to in-state schools.  We pay our bills, including mortgage pmts, own good vehicles (although are 2004 and 2005 vintages, but were not cheap to buy), and have 1 kid thru state college with business degree, and a hs senior to head off to state university in fall.  I save hard, and should be able to comfortably retire in my early 60's, another 10 years.

 

I'm no genius.  I buy what I can afford AFTER I do my saving.  At our ages we live fine, I don't want for anything, but also don't want EVERYTHING.  Keys to my "luck":  I hammer every day at work, and have since day 1, don't bitch, and add value to my employer.  My wife has done the same.  I don't feel that people owe me anything just because.  I don't need to be the smartest guy, because I will outwork you.  Everyone I know that is successful, degreed or not, has busted his/her **** until they won.  There's a saying around here:  "nothing but a**holes and elbows", meaning head down, and hard labor.  Life is not complicated, if you can't find work, move somewhere that there are jobs.  I did that when I came here, and didn't know a soul when I arrived.  This town is not paradise, just another blue collar town, but is filled with hard-working people that get up early and work late to provide.  People, I don't think that there is some conspiracy to keep you from succeeding.  Look in the mirror, take a deep breath, and figure out what needs to be done to improve your station in life.

Mar 7, 2012 5:17PM
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It's clear that a bulk of Americans spend more than necessary.  Do you really need internet access with an unlimited data plan on your phone?  Does your 9 year-old daughter really need a cell phone?  Do you really need 3,000 sq. ft. of home?

 

My wife and I get by are far less than $150,000 a year.  More like half of that, before taxes.  We have no debt, two newer cars (an '08 and an '09) that are paid for and no credit cards.  We also have no kids, which is a choice, but one that you make and should expect to be an expensive choice.  We're able to save away 20% into retirement accounts as well as cash into savings.

 

The point is, live cheap and you can save.  Squander your money on frivilous luxuries and expect difficulties making ends meet.

Mar 8, 2012 1:51PM
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This article shows one of the huge problems in the US and that there is no difference between wants and needs. You may "need" 150k if you need every cable channel available, go out to dinner a few nights a week, need the latest electronic device as soon as it comes out, etc. We have become a fat, bloated, materialistic society. Really sad.
Mar 8, 2012 5:26AM
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I find this data to absolutely ridiculous. The simple fact is that many Americans are horrible at managing money. They do not understand what it means to live within your means. The more money they make the more they spend it on unnecessary luxuries. If they managed their money correctly and lived within their means we would not have ridiculous reports such at this one. My dad who made approximately 80k a year living in California, could afford all necessities, extras, and he was able to save a ton so when he had no income for almost 3 years he didn't lose his home, truck, savings, or anything else since he understands the concept of living within your means. He was not financially ruined like all these other Americans who lost their jobs  when he had to unexpectedly retire at 52, there is no difference between this and losing a job, at least many of those people who lost their jobs could find a job and have some form of income, he had nothing for 3 years and didn't get help from the government either. So in my opinion the only reason people are in the situation of not being able to afford anything and losing their possessions is because they made poor financial decisions in the first place.  Its all about living within your means and managing the money you make effectively and most Americans do not understand this concept.


Mar 7, 2012 5:29PM
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Give me a break. Our household income is about 100K combined...I truly feel blessed. 2 homes (one's a condo), 2 cars, 2 kids, 2 TV's, retirement fund.

Learn to live with what you have, eat at home, buy stuff on sale when you need it and don't be sucked into buying the next iPad that comes out (every year!)

Mar 7, 2012 7:08PM
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I'm going to go out on a limb and say that a bunch of people under $150,000 are flat lying, are stupid, or don't know the definition of "need" (i.e. cable or satellite TV, beer, cigarettes, smart phones, etc are NOT needs). The savings part doesn't surprise me. Too many people spend to their level. Give them a 3% raise and they will spend 3% more instead of putting the 3% in savings. How much people think they need to make to live AND save and how much people truly need to make to live and save are two entirely different questions. Too many people are flat out irresponsible.

Mar 8, 2012 3:53PM
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In the USA 2.5% of the people make $150,000 or more a year, so if we are to believe this article 97.5% of the population cannot afford to live in the USA. That stretches credibility beyond any reason. 
Mar 8, 2012 11:27AM
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Bullsh**T !!!!!

 

I put myself through a very expensive private college without ever borrowing a dime or even having a credit card making less than 40K a year (working two jobs). Always had my own place, car, paid for everything. In the ten years since, I have religously saved 25K a year and never made more than 75K. Through careful investing / saving I should have no problem retiring.

 

BUT here's the catch - you have to live within your means, you have to NOT buy a house or car you can't afford, you have to suck it up and live in reality (comparison - my brother, who makes more money than me but is about half a million in debt - house he can't afford, two new cars, three vacations a year....he'll die in debt and work until he goes straight to the hospital)....just remember, DEBT = SLAVERY and you have to prefer to  be a free person with a slightly older car and smaller house than a slave that looks like a king.

Mar 7, 2012 8:56PM
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amazing, i have never made over 45,000 dollars a year and i am 54 years old and worth 525,000 dollars. I only buy what i need and not worthless junk. 
Mar 7, 2012 7:42PM
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Oh, come on!  I make $45K per year, don't own a home, drive an old car, have no retirement savings, am raising my daughter alone, and working toward improving my skills and income.  We are far from well off, but we are safe, happy, and healthy. I'm grateful, and not whining about what I don't have. 
Mar 8, 2012 1:40PM
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This is a load of BS. I make substantially less then 150K per year and I am able to "...buy what they need, afford some extras and still be able to save a bit." I live in a state that is expensive to live in; however, when I bought a house I bought one I could afford. When I bought a car I bought a good used one that I paid cash for and each month I pay my credit cards off in full. My only debit is my home and an equity loan that I used to remodel my kitchen, which most of the work I am doing myself. If you live within your means then really at most incomes you can "...buy what they need, afford some extras and still be able to save a bit."  
Mar 8, 2012 12:11PM
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6-figure income and can only afford the basics?

 

Yeah, sure. And to them, the basics are the gardener, housekeeper, babysitter, landscaper, manicures/pedicures/fashion stylist, 3000 channel satellite, full data/voice/text cell phone plans, security monitoring, new car every 3 years, new cabinets, kitchen remodeled, dining out 5 times a week, 3 trips to Aspen each year, and every version of an iPad and iPod there is.

 

Yes, people acclimate to their level of income - I get it. Earn more, spend more. But guess what? At some point in that process, you have to RECOGNIZE that all that acclimation is a sign that you have moved from just having the basics to getting that + what you want!!!

Mar 8, 2012 3:56PM
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I think this just really reveals the vast differences in costs of living around the country.  I watch House Hunters alot, and I've seen 1500 sq. ft. houses in L.A. selling for MILLIONS when mine in Indiana cost less than 100K.  Obviously someone living in L.A. is going to need a much higher income than my wife and I make. 

 

Currently, I'm a father of one and my wife and I bring home about 35K.  We have alot of debt because of our own stupidity (student loans, car loans, and credit cards, oh my!) but through good budgeting we still make enough to pay our bills, afford the extras, and save about 300-500 each month.  I can only say with certainty that here in southern IN I would feel like a one-percenter with a 50K income!

Mar 8, 2012 12:01PM
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The problem is largely what people consider to be 'basics'.   Most people now consider a cell phone with unlimited data, text, and talk a basic.  They also consider Cable TV to be a basic.  Just these two items alone are probably costing more than $100.00 each monthly.  How about their morning coffee at Starbucks.  That is another $100.00 a month minimum.  More if they are picking up a muffin or breakfast sandwich.  Also, people are eating out more often, both lunch and dinner.  If you take your own lunch and cook at home,  you will fatten you wallet and slim the waistline.  While it does cost more for TRUE basics such as housing in metropolitan areas.  I am pretty sure a lot of those folks making six figures and still 'scraping' by, are probably just spending a little to much time at the mall.
TRUE BASICS:  Housing, Utilities, Basic phone service, Transportation (not a BMW or Lexus), Clothing  (Not recreational shopping.)  Education (Public, not Private.)  Medical (OK, this one is a problem for a lot of folks.)

Mar 8, 2012 5:11PM
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These articles are crap! 

My wife and I saved a ton so we could afford to buy a house!  It took 5 years in an apartment we that's less than ideal.  We bought a $380K house with 20% down, do the math, that's $76000!  But that eliminates the biggest scam in housing - PMI (think about it, why do you have to pay PMI when if you default on the loan, the bank gets the house and can sell it for the amount they approved your mortgage for - why should they get the insurance pay out as well??)! We have two cars that we have paid off, but we're saving for our next down payment with one of them already 9 years old.  We don't live outside our means and together make $105K.  Oh yeah, and I had to pay $674 in additional taxes this year!  We can save a bit everymonth and still have all the stupid iphones, ipads, LCD tv's, and toys that we want.  There is no mention of what the "basics" refers to in this article.  Stop getting the $5 lattes, thousand dollar Coach purses, manicures, hair stylings, buy a car that's not a mercedes, BMW or Audi, and lay off the $200 dinners downtown and then tell me you can't live on $150K a year. 

Mar 8, 2012 12:50PM
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Another piece of fatuous journalism! Very few of the people I know in our midwestern city have family incomes above $100,000. Many have nice homes, send their kids to college and have retirement savings. But what they do not have are 2012 model luxury automobiles, 4,000 square foot homes or other forms of conspicuous consumption!

 

Problems come from comparing your lifestyle with "1%ers." They can afford luxuries, but they often admit they do not "need" them.

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