Income Needed to Live Comfortably and Grow Your Wealth

As you are well aware, the cost of living in the U.S. and around the world is on the rise.  Let’s take a look at what is needed to live comfortably and stay on track for your wealth-building goals.

Ever wonder how much money you need to live comfortably anywhere in the U.S.? Wealth-building is challenging. On one side, we see massive wealth gains by those fortunate enough to take advantage of high risk / high reward investments, entrepreneurship, and high-paying jobs with livable wages. On the other side, we see a growing number of Americans struggling to make ends meet due to low wages, inflation, and the rising cost of housing —barely leaving enough to invest in your future.

The average income needed to live comfortably in the US is always changing due to different economic and political environments. We must constantly adjust our budgets to ensure we have enough to cover our basic needs and have enough to invest in your future. Paycheck to Wealth’s suggested budgeting allocation (50-20-30) helps keep you balanced, regardless of which part of the country you live in.

Let’s start by looking at the cost of living by state and what it takes to live comfortably while building towards a healthy financial future.

Cost of living by state

It comes as no surprise that the cost of living by state varies depending on where you live. A six-figure salary in high-cost-of-living states like California, New York, and Hawaii doesn’t go as far as someone making the same salary in lower-cost-of-living states like Tennessee, Missouri, and Mississippi.

The basic cost of living includes expenses such as housing, healthcare, food, transportation, and taxes.

Here’s a list of the top 10 highest and lowest states for costs of living for comparison:

Top 10 States with Highest Cost of Living (As of 2023)

1.     Hawaii - $55,491

2.     Massachusetts - $53,860

3.     California - $53,171

4.     New York - $49,623

5.     New Jersey - $49,511

6.     Alaska - $48,670

7.     Maryland - $48,235

8.     Washington - $47,231

9.     Connecticut - $46,912

10.  Oregon - $46,193

Top 10 States with the Lowest Cost of Living (As of 2023)

1.     Mississippi - $32,336

2.     Arkansas - $32,979

3.     Alabama - $33,654

4.     Oklahoma - $33,966

5.     New Mexico - $34,501

6.     Tennessee - $34, 742

7.     South Carolina - $34,826

8.     West Virginia - $34,861

9.     Kansas - $35,185

10.  Missouri - $35,338

Data provided by Forbes.

As you can see, there’s a significant gap ($23,155) between the most expensive state (Hawaii) and the least expensive state (Mississippi).

Average Income Needed to Live Comfortably by Region

Now that you have an idea of the cost of living by state, let’s take it a step further and see the minimum income you need to not only live comfortably but also meet your investment goals. Remember Paycheck to Wealth’s 50-20-30 rule says you should spend 50% of your paycheck on basic necessities, 20% for investing, and 30% on your wants. This means that the cost of living should only account for 50% of your annual salary.

Here’s a breakdown by region for average salaries needed to live comfortably:

The cost of living in Northern and Western states greatly outpaces those in the Midwest and the South. According to Yahoo Finance, the 2023 average salary in the US was $59,428. This figure is significantly lower than the recommended average salary for any region. However, you can get by in most states when comparing the average US salary to cost of living figures at the top of the article.  However your wealth-building will not keep track due to the lower salary will barely cover the basic necessities.

Since current average salary figures don’t support the ideal 50-20-30 rule, most people make sacrifices in their monthly investments and even cut back on their wants in order to have substantial funds to cover basic needs. Also, keep in mind that these are just averages, and most people don’t even come close to these numbers.

If you’re living at or above the average income needed to live comfortably in your state, keep up the good work! For those trying to make ends meet, we have a few solutions to bridge the gap between living paycheck to paycheck and building long-term wealth.

Managing Your Finances for a More Comfortable Living

There’s always room for improvement in everyone’s budget. Everyone’s situation is different, and adjusting accordingly can have significant benefits to healthy finances. Here are a few tips that are especially helpful for those trying to find room in their paycheck to begin investing:

1.     Stay informed

Understanding how money works is key to knowing exactly how it impacts your wallet. From economic trends to politics to business news, everything has an effect on your daily living. Increasing your financial knowledge will keep you ahead of these trends.

2.     Have an emergency fund

An emergency fund is the foundation to starting your wealth-building journey. Cost of living is constantly rising—usually outpacing salary growths in many areas. An emergency fund will help you sustain sudden increases in your lifestyle while allowing time to adjust to the new normal.

3.     Stick to your budget

The harsh truth is that if your salary doesn’t increase with inflation, you have to cut back on expenses—but it’s not as bad as you think! For example, switching food brands to more generic labels can save dollars on every item at the grocery store. Also, consider eating in or staying home to watch a movie instead of going out. These changes are always temporary while getting your budget back on track, and you’ll be back on the prowl in no time! Remember, it takes as little as $50 per month invested over time and you can reach more than $200,000 by the time you retire.

Get Help with Financial Planning

Understanding the cost of living by each state and knowing what you need to live comfortably is a step in the right direction to becoming financially savvy. Regardless of where you live, wouldn’t you like to know how to best use your paycheck to start building your wealth? Get a FREE consultation with Paycheck to Wealth to discuss how you can start achieving your wealth-building goals.