Wealth is relative. An annual income of $50,000 might be more than enough for a single person living in a mid-sized city. But a family of four in New York City might feel pinched on $500,000 if they live in a penthouse apartment, pay private school tuition and own a second house in the Hamptons. Even a big paycheck might not go far in some parts of the country if you have an over-the-top lifestyle.
To find out what life is like at various income levels in very different areas, GOBankingRates talked to three people with three very different paychecks. You might be surprised by the similarities and differences in their spending and saving habits.
Click through to find out what it’s like to live on $50,000, $300,000 and $1 million and whether salary alone can make you wealthy.
What It’s Like to Live on $50,000
When Ben Huber started working as a nurse at a hospital in 2014, he was making $36,000 a year. It was just enough to cover his expenses and his monthly student loan payments, so he had to survive paycheck to paycheck. But that changed in 2016 when he landed a nursing supervisor role at the hospital and his base salary jumped to $52,000.
“I was in a position where I went from making ends meet to a position where I could start looking forward and putting money toward goals I had,” Huber said. Last year, his pay climbed to $55,000. Now, his base salary is $56,000 for a 36-hour workweek, but he’ll bring home more than that with overtime pay for the additional hours he will work.
It’s Enough for a Comfortable Life
Now that Huber makes more than $50,000 a year, he lives a comfortable life as a single guy in Blacksburg, Va. After taxes, he brings home about $3,000 a month, which is more than enough to cover his expenses.
Huber pays $750 a month in rent for a three-bedroom townhome. However, his biggest monthly expenses are debt payments. He pays about $600 a month for auto loans on a sedan and SUV and $300 a month for student loans. And Huber has a food budget of about $500 a month. “I’m actually very frugal, but food is my Achilles heel,” he said. “I spend way too much on Starbucks and dinner.”
Even with housing costs, debt payments and splurges on restaurant meals, there’s still room in his budget for a $35 monthly gym membership fee, tithing to his church and entertainment such as sporting events.
There’s Room in the Budget to Save
Once Huber started making more than $50,000, he was able to save more for retirement and start saving for other financial goals. His employer allows him to contribute up to 10 percent of each paycheck to a 403b retirement account. “I max that out now,” he said. He also has a Roth IRA and expects to contribute the maximum of $5,500 this year.
He’s been setting aside money for emergencies and a down payment on a house, too.
Challenges of Living on $50,000
Getting that pay raise in 2016 made it easier for Huber to tackle his debt. But he wouldn’t have been able to pay it down as quickly as he has if he hadn’t started a side hustle — the personal finance blog DollarSprout.
“Even with the pay increase, it was tough to get ahead,” Huber said. That’s what led him to launch his blog with a friend four years ago — but they didn’t start making any real money from it until last year.
Combined with his nursing income, though, the blogging income has helped Huber whittle down his student loan debt from $112,000 to $14,000. He expects to pay off that and the $8,000 he still owes on his two cars by the end of the year. “I actually have cash on hand to service those debts,” he said. But, he doesn’t want to deplete his sizable emergency fund and house fund to pay off his debts immediately.
Although he’s been saving for a down payment, Huber said his biggest financial challenge is making the jump from renting to homeownership. His housing costs could rise significantly because the monthly mortgage for the type of house he would want would be $1,000 to $2,000. And Huber realizes that living on his same income with a significant other would be more challenging because of the added costs of another person in the household. Because there aren’t many opportunities for advancement in his current nursing career, Huber is looking to build his blog to boost that source of income.
Keep Reading: 50 Ways to Make More Money in 2018
What It’s Like to Live on $300,000
It’s well known that doctors can make big bucks. Leif — who asked that his last name be withheld because he shares details of his finances on his blog, Physician on FIRE — is one of those doctors who brings home a hefty paycheck.
As an anesthesiologist, he’ll make about $300,000 this year — working less than full time. He used to earn about $400,000 annually but dialed back his work hours to spend more time with his wife and two sons. Now, he works 40 hours in a week, Monday through Thursday, at a surgery center followed by a 72-hour weekend at the hospital.
“But that busy week is my work for the month, which gives us lots of time to travel or just be more present with my family at home,” Leif said.
It’s More Than Enough for a Comfortable Life
Despite his high income, Leif lives a relatively modest life compared with many of his physician colleagues. When he was working full time, his family lived on about one-fourth of his take-home pay. Now that he’s earning less, they live on about one-third of his pay.
He lives in a 3,600-square-foot home on the Mississippi River in northern Minnesota. He and his wife drive cars that are at least 10 years old. And his sons attend public school.
“In an average month, we spend roughly $5,000 to $6,000 as a debt-free family of four,” Leif said. That spending includes food, transportation, healthcare, bills and utilities. “Having an income that would support much higher spending levels has been a blessing. Rather than increasing our standard of living, we’ve chosen to eliminate student loan debt, mortgage debt and save for retirement.”
Read Also: Rich People Who Live Like the Average Joe
Saving, Paying Down Debt and Giving Is Easier With a High Income
Leif finished medical school and his residency 12 years ago with $60,000 in student loan debt. His wife had about $15,000 in student loans, too. But his high income allowed him to pay off all of those loans in 2012.
With no student loan payments, mortgage or other debt, Leif is able to save about two-thirds of his income now because he only spends one-third of it. In addition to building a retirement nest egg, he has saved more than $100,000 in 529 college savings plans for each of his two sons. He also has set up a donor-advised fund, which has $250,000 for charitable giving.
A High Income Makes Life Easier
With an income of nearly $300,000 and a part-time work schedule, Leif can afford to travel frequently with his family. In the past year, they have spent three weeks in Guanajuato, Mexico, three weeks in Hawaii and two weeks in Honduras. They’ve also taken a cruise to Cuba and spent a week at Disney World.
“Life is certainly easier with a generous income,” Leif said. He may be able to spend even more time with his family soon because he has saved enough — 25 times his annual expenses — to be financially independent. He plans to wind down his anesthesia career next year when he’s 43 and focus on his blog, Physician on FIRE.
“As far as money goals, I’ve got all we need,” he said.
What It’s Like to Live on $1 Million
Dan never imagined that he would be making more than $1 million. “I grew up relatively poor, and I don’t have a college degree,” he said.
However, Dan has always been a hard worker. In fact, he got a job with a telecommunications company to put himself through college. But he dropped out of college as he moved up the ranks at work, eventually becoming the youngest director ever at a Fortune 100 company, he said.
He then took a pay cut to become the general manager of a logistics company because he saw long-term potential in the position — and he was right. Between his base pay and quarterly bonus payments, he’ll make $1.385 million this year.
“It’s a little mind-blowing,” said Dan, who asked to use his first name only because of his high-level corporate position.
Making Big Bucks Requires Long Hours
Dan’s base pay is $200,000, so the bulk of his nearly $1.4 million income comes from his bonus, which is based on the company’s performance. To ensure his company’s — and his success — he works long hours and has little down time. “I’ve put in a ton of hours at work,” he said.
He has also spent a lot of hours on the road. In the past year, Dan has logged more than 130 nights on business trips. Even when he takes time off to travel with his three children, he doesn’t spend more than a week away from the office and doesn’t leave work at work.
“There’s never really a vacation,” Dan said. “I’m always working to some extent.”
Taxes Take a Big Bite
Although Dan makes more than $1 million, he takes home less than half of that. Taxes take the biggest bite, followed by child support payments. Combined, they claim 58 percent of his net income, said Dan, who is divorced with three young children.
He’s pretty frugal with the remaining 42 percent of his income. “I drive a 10-year-old car that’s been paid off for five years,” he said. He did have a house that was paid off but tore it down and built a new one in the past year. He now has a $670,000 mortgage, but his goal is to pay it off in a year or two.
Dan contributes the maximum allowed to his 401k retirement plan and health savings account at work to reduce taxable income and lower his tax bill. Every quarter, he also deposits about $30,000 into an account with his financial planner to invest for him. And he saves $500 a month for each of his three kids — $1,500 total — in 529 college savings plans.
Financial Worries Exist Even With a $1 Million Income
Dan readily admits that making more than $1 million has made his life easier financially. “It just takes pressure off,” he said.
But he worries that his high income might make it easy to spend too much. “My biggest financial concern is that I’m going to have some awful lifestyle creep and put myself in a bad position,” he said.
That’s why he’s taken steps to be financially secure if his bonus is restructured, his income drops or he loses his job. Those steps include paying off his mortgage quickly and saving a significant portion of his income. “I’m realistic that this might not last forever,” he said.
Keep reading to find out how much Americans think they need to be rich.
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About the Author
Cameron Huddleston is an award-winning journalist with more than 18 years of experience writing about personal finance. Her work has appeared in Kiplinger’s Personal Finance, Business Insider, Chicago Tribune, Fortune, MSN, USA Today and many more print and online publications. She also is the author of Mom and Dad, We Need to Talk: How to Have Essential Conversations With Your Parents About Their Finances.
U.S. News & World Report named her one of the top personal finance experts to follow on Twitter, and AOL Daily Finance named her one of the top 20 personal finance influencers to follow on Twitter. She has appeared on CNBC, CNN, MSNBC and “Fox & Friends” and has been a guest on ABC News Radio, Wall Street Journal Radio, NPR, WTOP in Washington, D.C., KGO in San Francisco and other personal finance radio shows nationwide. She also has been interviewed and quoted as an expert in The New York Times, Chicago Tribune, Forbes, MarketWatch and more.
She has an MA in economic journalism from American University and BA in journalism and Russian studies from Washington & Lee University.