Life & Career Archives | Page 38 of 90

May

2024

Pros and Cons of Raising the Minimum Wage

By Timothy Moore | Family Finances, Life & Career, money | Comments Off

Raising the minimum wage, which is a hot-button political issue, could have immediate effects on the lives of low-wage hourly workers. It could help them to move out of poverty and keep up with inflation. Some economists argue that other pros of raising the minimum wage could include increased consumer spending, reduced government assistance (and increased tax revenue), and stronger employee retention and morale.

Alternatively, other financial experts point to the cons of raising the minimum wage, including potentially increasing the cost of living, reducing opportunities for inexperienced workers, and triggering more unemployment.

Learn more here, including the purpose of the federal minimum wage, where the minimum wage currently stands, and the pros and cons of raising it.

Key Points

• Raising the minimum wage could help low-wage workers escape poverty and keep up with inflation.

• Increased wages may lead to higher consumer spending and reduced reliance on government assistance.

• Higher labor costs from wage increases could lead to unemployment and higher product prices.

• A raised minimum wage might improve employee retention and performance in businesses.

• The federal minimum wage has remained at $7.25 per hour since 2009, despite inflation.

What Is the Federal Minimum Wage in 2024?

The federal minimum wage in 2024 is $7.25 per hour. The last time that minimum wage increased was on July 24, 2009, when it grew $0.70 from $6.55 an hour. This was part of a three-phased increase enacted by Congress in 2007.

It’s worth noting that tipped employees (say, waiters) have a different rate. The current federal tipped minimum wage is $2.13, as long as the worker’s tips make up the difference between that and the standard minimum wage.

Some states have their own minimum wage laws with a higher (or lower) starting wage than the federal minimum. In such states, employers must pay out the higher of the two minimum wages.

Here are some minimum wage fast facts:

• The highest current minimum wage is in Washington, D.C., where it is $17.00.

• There are 58 cities and counties with minimum wages higher than their state’s figures. Of these, the city of Tukwila, Washington, currently has the highest wage at $20.29 per hour.

• As of 2023, about 20.6 million US workers make less than $15 per hour, and many are making the federal minimum wage of $7.25 per hour or less.

• While the minimum wage has been stagnant since 2009, inflation has not. The spending power of $7.25 in 2009 is equivalent to $10.55 today. This means that $7.25 can buy today about 68% (or just over two-thirds) of what it could buy in 2009.

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What Is the Purpose of the Minimum Wage?

So why was the minimum wage originally created? The minimum wage was an idea that gained traction during the Great Depression era. During that time, President Franklin D. Roosevelt worked with Congress to pass the Fair Labor Standards Act of 1938, which officially established the minimum wage. Even then, politicians bickered over the hourly rate and potential impacts on the economy, and the final legislation (25 cents an hour) was not what FDR originally had in mind.

Regardless of the final number that Congress landed on, FDR’s vision for this minimum wage law was to “end starvation wages and intolerable hours,” according to the Department of Labor. The Legal Information Institute of Cornell Law School paints an even clearer picture: The minimum wage was designed to create a minimum standard of living to protect the health and well-being of employees.

In short, early proponents of the minimum wage legislation intended for it to be a living wage. And as the Kenan Institute of Private Enterprise points out, in today’s economy, “there is a stark difference between the federal minimum wage and a living wage.”

Recommended: Salary vs. Hourly Pay

Benefits of Raising the Minimum Wage

Many economists point to several pros of raising the minimum wage, including the following:

Helping Families Get Out of Poverty

Even without minimum wage increases in today’s market, inflation is skyrocketing. In July 2022, it was up 9.1% year-over-year, a four-decade high. In 2023, it was 4.98%. The average American family is likely trying to cut grocery costs, gas prices, and utility bills.

The Raise the Wage Act of 2023 focuses on raising the minimum wage to $17 an hour by 2028, giving almost 30 million American workers a long overdue raise and more buying power to make ends meet.

While raising the minimum wage will not stop inflation’s effects, it could help families more easily afford basic necessities. It can also fulfill the legislation’s original intention of eliminating starvation wages and establishing a minimum standard of living.

Increasing Consumer Spending

Multiple studies over the last decade have demonstrated that low wage earners are more likely to put their income directly back into the economy. That’s because low wage workers spend a larger portion of their budget on immediate needs, like food, clothing, transportation, and shelter.

Increased consumer spending is a boon to the economy, as it is a positive economic indicator reflecting consumer confidence in the market — and brings more revenue to small businesses and corporations alike.

Increasing Federal Revenues

Reports have found that federal spending would both increase and decrease if the minimum wage were raised. While those with newly raised wages might rely on government assistance less (for example, there could be reduced spending on nutrition programs like SNAP), workers who lose their jobs as a result of minimum wage increases will put an excess burden on unemployment.

However, increased tax revenue from higher wages should boost federal revenues overall.

Increasing Employee Retention and Performance

The theory of efficiency wages suggests that higher-paid employees are more motivated to work harder and thus produce more goods and services faster. If that theory is true, increasing the minimum wage could help businesses become more profitable.

Further, employees are more likely to stay with a company longer if they earn good wages. The longer an employee is with a company, the more skilled that employee can become — and thus more valuable to the business.

On top of that, employee turnover is expensive. Replacing an employee with a new candidate can cost up to 150% of the worker’s salary or possibly more. In many cases, it might be cheaper for a business to pay an employee a better salary to keep them from leaving. It could be cheaper than recruiting and training a new worker to replace them after they’ve left.

Cons of Raising the Minimum Wage

There are multiple downsides to raising the minimum wage to consider when debating this policy as well:

Increasing Labor Costs and Unemployment

The largest concern with raising the minimum wage is increased labor costs. If the minimum wage increased to $15 an hour, businesses would suddenly need to give raises to everyone making less than that.

But if some employees were making $10 to $15 an hour, they might not be thrilled to hear that other workers with less tenure and experience are suddenly being paid the same. And employees who were making $15 an hour or slightly above it may also expect a raise once entry-level workers are bumped to $15.

The problem? Not all businesses can afford that. Restaurants, for example, operate at a 3% to 5% profit margin. Increasing labor costs could shrink (or eliminate) their margins, meaning they might have to let go of some staff or go out of business.

Another aspect of this is that if employers have to raise their wages, they might well raise their prices, passing along the increase to their customers.

Increasing Cost of Living

As businesses adjust prices to accommodate higher labor costs, consumers should expect that their dollars won’t go as far as they used to. That is, many economists argue that minimum wage is correlated with inflation. Some say that if business owners have to raise the minimum wage they pay workers, they will pay along those costs to their customers, ratcheting up their prices and contributing to inflation.

That said, other economists paint inflation as the boogeyman of the minimum wage debate. For example, Daniel Kuehn, a research associate at The Urban Institute, has said that, though increasing wages will increase the cost of goods and services, it’s not really a 1:1 ratio. In other words, it won’t be “enough for consumers to really feel a burn in their wallet.”

Recommended: Compare Texas Cost of Living to California Cost of Living

Decreasing Opportunity for Inexperienced Workers

Typically, employees without specialized skills — first-time workers in high school and college, people with disabilities, and the elderly — fill some minimum wage jobs to earn what might be considered entry-level salaries. But as employers are forced to pay workers more, some argue that companies will look for employees with more experience (or will invest in automated technology). This could make it more challenging for unskilled laborers to find work.

Handling the Effects of Raising the Minimum Wage

Businesses may need to adjust practices to pay employees a higher hourly rate if the federal or state minimum wage increases. Here are a few ways company leaders might be able to handle the effects of increased wages:

• Raising prices: If a company’s labor costs go up, the company may need to offset those expenses with higher prices for its goods and services. Paying attention to what competitors are doing and how consumers are reacting to price hikes can be helpful in determining how much you raise prices.

• Working with independent contractors: Independent contractors might be more affordable than full-time employees for specific job duties. For instance, the employer would save on paying benefits (though that could mean staff workers get laid off and go on unemployment).

Before establishing an independent contractor model at your business, it’s a good idea to research the guardrails around independent contractors, as defined by the IRS.

• Automating some positions: Technology continues to offer new ways to automate certain business functions, which may allow employers to reduce headcount, avoid future hires, or reassign existing employees to more revenue-generating work.

• Reducing hours or cutting costs: Business owners who do not want to lose any employees might be able to reduce overall hours or find other ways to cut costs instead (perhaps a less expensive benefits package, for instance).

• Getting creative: Offsetting increased labor costs can be as easy as generating more business. But then generating more business isn’t always so easy. Some creative ideas to get customers in the door could include loyalty programs or offering low-cost alternatives for budget-conscious customers.

The Takeaway

The original intention for establishing a minimum wage was to enable workers to have a standard of living that allowed for their health and well-being. While opponents may still argue over “living wage vs. starting wage,” many signs point to today’s federal minimum wage not being enough to have a basic standard of living. Raising the minimum wage has several pros, but it’s important to remember that there are many negative effects to minimum wage increases as well. The economic solution may not be simple, but it will likely be a debate that’s in the spotlight today and in the near future.

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FAQ

How does increasing the minimum wage affect the economy?

Some economists argue that increasing the minimum wage encourages consumer spending, helps families out of poverty, and boosts tax revenue while reducing tax-funded government assistance. Other economists point out the cons of raising the minimum wage, like increased inflation and unemployment.

How does decreasing the minimum wage affect the economy?

In general, the discussion around minimum wage is about increasing it. Economists and politicians are not considering decreasing the minimum wage; doing so would send more families into poverty and decrease consumer spending.

Why are state minimum wages different?

States are able to enact their own laws that supplement or deviate from federal laws. Many states with a higher cost of living, like California and Washington, have increased their minimum wage to roughly double the federal minimum. If a state’s minimum wage differs from the federal minimum wage, employers must pay the higher of the two rates.

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May

2024

The Strategic Guide to Early Retirement

By AJ Smith | Budgeting & Goals, invest, Life & Career, Preparing for Retirement | No Comments

An early retirement used to be considered a bit of a dream, but for many people it’s a reality — especially those who are willing to budget, save, and invest with this goal in mind.

If you’d like to retire early, there are concrete steps you can take to help reach your goal. Here’s what you need to know about how to retire early.

Key Points

• Early retirement requires significant savings, often guided by the Rule of 25, which suggests saving 25 times annual expenses.

• The FIRE movement encourages saving 50-75% of income to retire early.

• Effective budgeting and reducing expenses are crucial for accumulating necessary retirement funds.

• Investment strategies should balance growth and risk, adjusting as retirement nears.

• Health insurance planning is essential when retiring before qualifying for Medicare at age 65.

Understanding Early Retirement

Early retirement typically refers to retiring before the age of 65, which is when eligibility for Medicare benefits begins. Some people may want to retire just a few years earlier, at age 60, for instance. But others dream of retiring in their 40s or 50s or even younger.

Clarifying Early Retirement Age and Goals

You’re probably wondering, how can I retire early? That’s an important question to ask. First, though, you have to decide at what age to retire.

Schedule a few check-ins with yourself, and/or a partner or loved ones, to discuss what “early retirement” means. Is it age 50? Age 55? And what might your early retirement look like? Will you stop working completely? Work part-time? Or maybe you want to switch to a different field or start a business? Perhaps you dream of going back to school, volunteering, or traveling.

Early retirement is different for everyone. So the clearer you can get about the details now, the smarter you can be about how much money you need to make your plan work.

Also, consider why you want to retire at a specific age. Is it because you’re financially prepared to take that step? Or are you feeling ready to spend more time with family and friends? Determining what’s motivating you can help you better prepare and plan for your retirement.

Reasons for Retiring

In a recent SoFi survey, respondents cite the following as the top factors influencing their reasons to retire:

• Financial readiness: 54%

• Enjoying more time with family and friends and pursuing hobbies: 50%

• Health considerations: 46%

• More travel and leisure: 43%

• Eligibility for Social Security benefits: 41%

Source: SoFi Retirement Survey, April 2024

Insights into the Financial Independence, Retire Early (FIRE) Movement

There’s a movement of people who want to retire early. It’s called the FIRE movement, which stands for “financially independent, retire early.” FIRE has become a worldwide trend that’s inspiring people to work toward retiring in their 50s, 40s, and even their 30s. In the 2024 SoFi Retirement Survey, 12% of respondents say the retirement age they’re aiming for is 49 or younger.

Here’s how FIRE works: In order to retire at a young age, people who follow the movement allocate 50% to 75% of their income to savings. However, that can be challenging because it means they have to sacrifice certain lifestyle pleasures such as eating out or traveling. Of the SoFi survey respondents who said they want to retire at age 49, 18% are not using any strategies that might help them retire early.

Once they retire, FIRE proponents tend to use investments that pay dividends as passive income sources to help support themselves. However, dividend payments depend on company performance and they’re not guaranteed. So a FIRE adherent would likely need other sources of income in retirement as well.

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Financial Planning for Early Retirement

In order to start planning to retire early, first ask yourself how confident you are about pulling it off. In the SoFi Retirement Survey, 68% of respondents say they are very or somewhat confident in their ability to retire at their target age, while 15% are very or somewhat doubtful they can do it.

Once you’ve assessed your confidence level, the next step is to calculate how much money you’ll need to live on once you stop working. How much would you have to save and invest to arrive at an amount that would allow you to retire early? Here’s how to help figure that out.

Many people wonder: How much do I need to retire early? There isn’t one answer to that question. The right answer for you is one that you must arrive at based on your unique needs and circumstances. That said, to learn whether you’re on track for retirement it helps to begin somewhere, and the Rule of 25 may provide a good ballpark estimate.

The Rule of 25 recommends saving 25 times your annual expenses in order to retire. Why? Because according to one rule of thumb, you should only spend 4% of your total nest egg every year. By limiting your spending to a small percentage of your savings, the logic goes, your money is more likely to last.

Here’s an example: if you spend $75,000 a year, you’ll need a nest egg of $1,875,000 in order to retire.

$75,000 x 25 = $1,875,000

With that amount saved, and assuming an annual withdrawal rate of 4%, you would have $75,000 per year in income.

Obviously, this is just an example. You might need less income in retirement or more — perhaps a lot less or a lot more, depending on your situation. If your desired income is $50,000, for example, you’d need to save $1,250,000.

The Benefits of Social Security

Once you reach the age of 62, which some consider a traditional retirement age, you are then able to claim Social Security benefits. (Age 67 is considered “full retirement” age for those born in 1960 and later, and you can wait to claim benefits until age 70.)

The longer you wait to claim Social Security, the higher your monthly payments will be. You could add those Social Security benefits to your income or consider reinvesting the money, depending on your circumstances as you get older.

Effective Savings Strategies

How do you save the amount of money you’d need for your early retirement plan?

Having a budget you can live with is critical to making this plan a success. The essential word here isn’t budget, it’s the whole phrase: a budget you can live with.

There are countless ways to manage how you budget. There’s the 50-30-20 plan, the envelope method, the zero-based budget, and so on. You could test a couple of them for a couple of months each in order to find one you can live with.

Another strategy for saving more is to get a side hustle to bring in some extra income. You can put that money toward your early retirement goal.

Adjusting Your Financial Habits

As you consider how to retire early, one of the first things you’ll need to do is cut your expenses now so that you can save more money. These strategies can help you get started.

Lifestyle Changes to Accelerate Savings

Take a look at your current spending and expenses and determine where you could cut back. Maybe instead of a $4,000 vacation, you plan a $2,000 trip instead, and then save or invest the other $2,000 for retirement.

You may be able to live more of a minimalist lifestyle overall. Rather than buying new clothes, for instance, search through your closets for items you can wear. Eat out less and cook at home more. Cut back on some of the streaming services you use. Scrutinize all areas of your spending to see what you can eliminate or pare back.

Debt Management Before Retirement

Obviously, it’s very difficult to achieve a big goal like saving for an early retirement if you’re also trying to pay down debt. It’s wise to work to pay off any and all debts you might have (credit card, student loan, personal loan, car loan, etc.).

That’s not only because being debt-free feels better — it also saves you money. For example, the interest rate you’re paying on credit card or store cards can be quite high, often above 15% or even 20%. If you owe $6,000 on a credit card at 17% interest, for example, when you pay that off, you’re essentially saving the interest that debt was costing you each year.

Health Care Planning: A Critical Component of Early Retirement

When you retire early, you need to think about health insurance since you’ll no longer be getting it through your employer. Medicare doesn’t begin until age 65, so start researching the private insurance market now to understand the different plans available and what you might need.

It’s critical to have the right health insurance in place, so make sure you devote proper time and attention to this task.

Investment Management for Future Retirees

Next up, you’ll need to decide what to invest in and how much to invest in order to grow your savings without putting it at risk.

Understanding Your Investment Options

How do you invest to retire early? You can invest in stocks, bonds, mutual funds, exchange-traded funds (ETFs), target date funds, and more.

One major factor to consider is how aggressively you want to invest. That means: Are you ready to invest more in equities, say, taking on the potential for greater risk in order to possibly reap potential gains? Or would you feel more at ease if you invested using a more conservative strategy, with less exposure to risk (but potentially less reward)?

Whichever strategy you choose, you may want to invest on a regular cadence. This approach, called dollar-cost averaging, is one way to maximize potential market returns and mitigate the risk of loss.

Balancing Growth and Risk in Your Investment Portfolio

Because you have less time to save for retirement, you will likely want your investments to grow. But you also need to consider your risk tolerance, as mentioned above. Think about a balanced, diversified portfolio that has the potential to give you long-term growth without taking on more risk than you are comfortable with.

As you get closer to your early retirement date, you can move some of your savings into safer, more liquid assets so that you have enough money on hand for your living, housing, and healthcare expenses.

Retirement Accounts: 401(k)s, IRAs, and HSAs

If your employer offers a retirement plan like a 401(k) or 403(b), that’s the first thing you want to take advantage of — especially if your employer matches a percentage of your savings.

The other reason to save and invest in an employer-sponsored plan is that in most cases the money you save the plan reduces your taxable income. These accounts are considered tax deferred because the amount you save is deducted from your gross income. So the more you save, the less you might pay in taxes. You do pay ordinary income tax on the withdrawals in retirement, however.

The caveat here is that you can’t access those funds before you’re 59½ without paying a penalty. So if you plan to retire early at 50, you will need to tap other savings for roughly the first decade to avoid the withdrawal penalties you’d incur if you tapped your 401(k) or Individual Retirement Account (IRA) early.

Be sure to find out from HR if there are any other employee benefits you might qualify for, such as stock options or a pension, for instance.

Additionally, if your employer offers a Health Savings Account as part of your employee benefits, you might consider opening one.

A Health Savings Account allows you to save additional money: For tax year 2024, the HSA contribution caps are $4,150 for individuals and $8,300 for family coverage. For tax year 2025, the HSA contribution caps are $4,300 for individuals and $8,550 for family coverage.

Your contributions are considered pre-tax, similar to 401(k) or IRA contributions, and the money you withdraw for qualified medical expenses is tax free (although you’ll pay taxes on money spent on non-medical expenses).

Finally, consider opening a Roth IRA. The advantage of saving in a Roth IRA vs. a regular IRA is that you’re contributing after-tax money that can be withdrawn penalty- and tax-free at any time.

To withdraw your earnings without paying taxes or a penalty, though, you must have had the account for at least five years (as per the Roth IRA 5-Year Rule), and you must be over 59 ½.

Recommended: How to Open an IRA in 5 Steps

The Pillars of Early Retirement

Retiring early means you’ll need to have income coming in to help support you. You may have a pension, which can also help. Once you’ve identified the income you’ll be generating, you’ll need to withdraw it in a manner that will help it last over the years of your retirement.

Establishing Multiple Income Streams

Having different streams of income is important so that you’re not just relying on one type of money coming in. For instance, your investments can be a source of potential income and growth, as mentioned. In addition, you may want to get a second job now in addition to your full-time job — perhaps a side hustle on evenings and weekends — to generate more money that you can put toward your retirement savings.

The Role of Social Security and Pensions in Early Retirement

Social Security can help supplement your retirement income. However, as covered above, the earliest you can collect it is at age 62. And if you take your benefits that early they will be reduced by as much as 30%. On the other hand, if you wait until full retirement age to collect them, you’ll receive full benefits. If you were born in 1960 or later, your full retirement age is 67. You can find out more information at ssa.gov.

If your employer offers a pension, you should be able to collect that as another income stream for your retirement years. Generally, you need to be fully vested in the plan to collect the entire pension. The amount you are eligible for is typically based on what you earned, how long you worked for the company, and when you stop working there. Check with your HR department to learn more.

The Significance of Withdrawal Strategies: Rules of 55 and 4%

When it comes to withdrawing money from your investments after retirement, there are some rules and guidelines to be aware of. According to the Rule of 55, the IRS allows certain workers who leave their jobs to take penalty-free distributions from their current employer’s workplace retirement account, such as a 401(k) or 403(b), the year they turn 55.

The 4% rule is a general rule of thumb that recommends that you take 4% of your total retirement savings per year to cover your expenses.

To figure out what you would need, start with your desired yearly retirement income, subtract the annual amount of any pension or additional revenue stream you might have, and divide that number by 0.4. The resulting amount will be 4%, and you can aim to withdraw no more than that amount every year. The rest of your money would stay in your retirement portfolio.

Monitoring Your Progress Towards Early Retirement

To stay on course to reach your goal of early retirement, keep tabs on your progress at regular intervals. For instance, you may want to do a monthly or bi-monthly financial check-in to see where you’re at. Are you saving as much as you planned? If not, what could you do to save more?

Using an online retirement calculator can help you keep track of your goals. From there you can make any adjustments as needed to help make your dreams of early retirement come true.

How to Manage Early Retirement When You Get There

The budget you make in order to save for an early retirement is probably a good blueprint for how you should think about your spending habits after you retire. Unless your expenses will drop significantly after you retire (for instance, if you move or need one car instead of two, etc.), you can expect your spending to be about the same.

That said, you may be spending on different things. Whatever your retirement looks like, though, it’s wise to keep your spending as steady as you can, to keep your nest egg intact.

The Takeaway

An early retirement may appeal to many people, but it takes a real commitment to actually embrace it as your goal. These days, many people are using movements like FIRE (financial independence, retire early) to help them take the steps necessary to retire in their 30s, 40s, and 50s.

You can also make progress toward an early retirement by determining how much money you’ll need for post-work life, budgeting, and cutting back on expenses . And by saving and investing wisely, you may be able to make your goal a reality.

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FAQs

How much do you need to save for early retirement?

There isn’t one right answer to the question of how much you need to save for early retirement. It depends on your specific needs and circumstances. However, as a starting point, the Rule of 25 may give you an estimate. This guideline recommends saving 25 times your annual expenses in order to retire, and then following the 4% rule, and withdrawing no more than 4% a year in retirement to cover your expenses.

Is early retirement a practical goal?

For some people, early retirement can be a practical goal if they plan properly. You’ll need to decide at what age you want to retire, and how much money you’ll need for your retirement years. Then, you will need to map out a budget and a concrete strategy to save enough. It will likely require adjusting your lifestyle now to cut back on spending and expenses to help save for the future, which can be challenging.

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May

2024

What Is the Average Salary by Age in California in 2024?

By Jason Steele | Life & Career, relay | Comments Off

Thinking about job hunting in California? You may wonder how much you can expect to earn. While pay depends on a number of factors, the average annual salary in California is $73,220. That’s according to a 2024 analysis of Bureau of Labor Statistics (BLS) data conducted by Forbes. By comparison, the average annual salary in the U.S. is $63,795 — nearly $10,000 less.

Let’s take a closer look at how pay in California varies by age, location, and profession.

Average Salary in California by Age in 2024

Average income by age in California tends to increase as you get older and gain more experience. For instance, workers age 24 and younger earn an average of $44,205 a year, according to data from the U.S. Census Bureau. Pay jumps up to an average of $90,138 a year for workers aged 25 to 44, and $98,785 a year for those age 45 to 64. Employees who are 65 and older earn an average of $60,832 a year.

These numbers make sense, as many people reach their peak earning years in their late 40s to late 50s. And after turning 65, many Americans choose to either retire, work fewer hours, or switch to a less-demanding job. No matter where you are in your professional journey, a money tracker can help you monitor your spending and saving.

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Recommended: Average U.S. Salary by State

Average Salary in California by City in 2024

Income varies from state to state and even city by city. A budget planner app is one way to stay on top of your finances and make progress toward your financial goals. Knowing which areas tend to pay more can help, too. Just keep in mind those same places may also have a higher cost of living.

Here are the 10 cities in California with the highest average salaries, according to ZipRecruiter.

City	Average Salary
East San Gabriel	$219,808
Foster City	$103,522
Sunnyvale	$103,006
California Pines	$102,542
Santa Clara	$99,308
Mountain View	$98,739
Palo Alto	$96,828
San Francisco	$94,878
Menlo Park	$93,629
Cupertino	$93,212

Average Salary in California by County

Wages in California can change by county. Let’s see what an average salary is in 10 different counties in California, based on 2022 data from the BLS.

County	Average Salary
Alameda County	$93,132
Los Angeles County	$85,124
Contra Costa County	$82,680
San Diego County	$79,612
Orange County	$77,428
Sacramento County	$76,180
Santa Cruz County	$64,480
San Bernardino County	$59,748
Riverside County	$57,096
Fresno County	$56,628

Examples of the Highest-Paying Jobs in California

Depending on your line of work and your living expenses, you may find you can earn a comfortable salary in California. According to Zippia.com, the top 10 highest-paying jobs in California pay on average between $199,736 and over $235,100 per year.

Some of the most lucrative positions in the state are in health care, including hospital physician, primary care pediatrician, orthodontist, psychiatrist, and medical director.

Recommended: What Is a Six-Figure Salary?

The Takeaway

When it comes to earning potential, you may find you can make more in California than you would in some other states. A typical worker in the Golden State makes an average of $73,220 a year, which is nearly $10,000 more than the national average salary. But income can change based on such factors as your age and level of experience, where you live, and the type of work you do.

Remember that salary is just one piece of your overall financial situation. To get a more complete picture of your overall financial well-being, it helps to calculate your net worth.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

See exactly how your money comes and goes at a glance.

FAQ

What is a good average salary in California?

A “good” salary in California depends on several factors, including where you live and whether you’re supporting other people. For example, to live comfortably in any major city, including those in California, a single adult needs to earn $96,500 or more a year. Meanwhile, a family of four should earn at least $235,000 a year, according to SmartAsset.

What is the average gross salary in California?

The average yearly salary in California is $73,220. This is nearly $10,000 higher than the average salary for the entire country, which is $63,795.

What is the average income per person in California?

The average income per capita in California is $45,591, according to incomebyzipcode.com. This is based on the most recent 2022 Census data. The average income per person will be lower than the average income because per capita income accounts for every person, even ones who are not working full time.

What is a livable wage in California?

In order to earn a livable wage in California, a single adult will need to make at least $56,825 a year, according to MIT’s Living Wage Calculator. The livable wage for a family of four with two working adults and two children is $138,357. A livable wage is the income needed to cover necessities, including food, housing, taxes, transportation, childcare, and healthcare.

Photo credit: iStock/milan2099

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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May

2024

Is 75K a Good Salary for a Single Person in 2024?

By Melissa Brock | Building Your Career, Life & Career, relay | Comments Off

Have you just received a salary offer and now wonder, “Is $75K a good salary for a single person?”

In many cases, that salary can offer a comfortable lifestyle and plenty of opportunities to save. But if you live in an expensive area or have a lot of debt, you may find that living on $75,000 a year requires more careful planning and budgeting.

Let’s take a closer look.

Is $75K a Year a Good Salary?

If you make $75,000 a year, you’re earning more than half of all workers in the U.S. And in fact, many people would probably consider the salary as good pay.

After all, a $75,000 salary works out to around $6,250 per month, $1,442.31 per week, or $36.06 an hour. This may easily cover your expenses — depending on your situation. If you live in a high-cost area, you may find that you’d be more comfortable earning more.

Need help monitoring where your money is going each month? Online tools like a money tracker can help.

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Median Household Income in the US by State

When we talk about median household income, we’re referring to an income level that half of households earn more than and half earn less. As of 2022 — the most recent data available from the U.S. Census Bureau — the median annual salary in the U.S. is $74,580. Individuals may make more or less depending on where they live, their age, the type of work they do, and other factors. Here’s a look at the median household annual income in every state:

State	Median Household Income
Alabama	$59,910
Alaska	$89,740
Arizona	$73,450
Arkansas	$53,980
California	$85,300
Colorado	$89,930
Connecticut	$90,730
Delaware	$80,750
Florida	$65,370
Georgia	$67,730
Hawaii	$91,010
Idaho	$72,580
Illinois	$78,020
Indiana	$70,030
Iowa	$76,320
Kansas	$73,040
Kentucky	$55,880
Louisiana	$58,330
Maine	$75,160
Maryland	$108,200
Massachusetts	$93,550
Michigan	$68,990
Minnesota	$90,390
Mississippi	$48,610
Missouri	$71,520
Montana	$72,980
Nebraska	$78,360
Nevada	$72,330
New Hampshire	$84,970
New Jersey	$92,340
New Mexico	$56,420
New York	$75,910
North Carolina	$65,070
North Dakota	$78,720
Ohio	$67,520
Oklahoma	$63,440
Oregon	$86,780
Pennsylvania	$72,210
Rhode Island	$80,650
South Carolina	$61,770
South Dakota	$67,180
Tennessee	$65,380
Texas	$74,640
Utah	$95,800
Vermont	$72,190
Virginia	$85,170
Washington	$89,430
West Virginia	$52,460
Wisconsin	$73,330
Wyoming	$73,090

Related: Average US Salary by State

Average Cost of Living in the US by State in 2024

The cost of living is the amount of money needed to cover basic living expenses, such as housing, food, taxes, and health care. Here’s what you need to know about the average cost of living in the U.S. by state:

State	Average Cost of Living
Alabama	$39,657
Alaska	$54,331
Arizona	$44,875
Arkansas	$39,044
California	$53,082
Colorado	$53,374
Connecticut	$55,803
Delaware	$51,113
Florida	$50,689
Georgia	$43,482
Hawaii	$49,155
Idaho	$39,739
Illinois	$49,558
Indiana	$42,697
Iowa	$41,758
Kansas	$43,147
Kentucky	$40,816
Louisiana	$42,294
Maine	$50,559
Maryland	$48,650
Massachusetts	$58,532
Michigan	$45,591
Minnesota	$48,615
Mississippi	$36,445
Missouri	$44,990
Montana	$47,887
Nebraska	$46,190
Nevada	$44,831
New Hampshire	$56,727
New Jersey	$54,700
New Mexico	$40,028
New York	$53,255
North Carolina	$43,959
North Dakota	$48,182
Ohio	$44,089
Oklahoma	$38,650
Oregon	$47,779
Pennsylvania	$49,040
Rhode Island	$46,909
South Carolina	$43,305
South Dakota	$47,740
Tennessee	$42,469
Texas	$45,114
Utah	$42,653
Vermont	$50,761
Virginia	$48,249
Washington	n/a
West Virginia	$41,153
Wisconsin	$45,165
Wyoming	$47,832

Source: Bureau of Economic Analysis

Can You Live on $75K a Year?

While there’s an average pay in the U.S., there’s no one-size-fits-all salary needed for a single person to live comfortably. As the charts above show, $75,000 can go further in some areas than others. Regardless of what you make, it helps to understand how much money you’re taking home — and how much you’re spending — each month. Creating a budget and tracking all of your expenses can make it easier to keep tabs on your finances.

How Can You Budget for a $75K Salary?

There is no shortage of options when it comes to creating a budget. One of the most popular methods is the 50/30/20 budget. Essentially, this approach involves allocating:

• 50% of your after-tax dollars to necessities, including groceries, housing, utilities, transportation, insurance, child care expenses, minimum debt payments, and more.

• 30% to “wants,” such as going out to eat, gifts, travel, and entertainment.

• 20% on savings and additional debt payments (beyond the minimum payments).

Prefer something more straightforward? Consider a line-item budget, where you keep track of monthly expenditures so they don’t exceed spending targets. Another option: using an online budget planner to keep finances organized.

How Can You Maximize a $75K Salary?

Budgeting, putting every dollar you can into savings, and paying off debt can all help you get the most out of every paycheck. But those aren’t the only ways to maximize a $75,000 salary.

One strategy is to enroll in your company’s 401(k) plan. Some employers even offer matching contributions, meaning they’ll mirror your contribution to your retirement, often up to a certain percentage.

Another avenue to explore? Setting up autopay for recurring bills, which helps prevent missed payments and late fees. While you’re at it, you may also want to automate your savings so you don’t have to remember to move money between your accounts on payday.

What Kind of Quality of Life Can You Have With a $75K Salary?

Can you have a good quality of life with an annual salary of $75,000? For many people, the answer is yes. With that kind of income, you may find it easier to make ends meet and make progress toward your financial goals. But keep in mind that “quality of life” is subjective, and the amount needed to live comfortably can vary from person to person.

Recommended: 25 Highest-Paying Jobs in the U.S.

Is $75,000 a Year Considered Rich?

It depends on who you ask. A 2023 Bankrate survey showed that Americans do not feel rich with a salary of $75,000. Rather, respondents said they’d need to earn an average of $233,000 per year to feel financially secure and $483,000 per year to feel rich.

That said, a $75,000 salary can feel like a fortune to one person but not to the next. Whether you feel financially secure with that salary may also depend on your living expenses, whether you live within or below your means, and other factors.

Is $75K a Year Considered Middle Class?

There’s no single definition of “middle class.” According to the Pew Research Center, middle class households have an income that’s between two-thirds and twice the U.S. median household income of $70,784. (A $75,000 salary falls easily within this range.)

A 2023 Washington Post poll reported that Americans consider a $75,000 to $100,000 salary range as middle class. Respondents said being middle class involved such things as:

• Having a secure job

• Having health insurance

• Ability to save money for the future

• Affording an emergency $1,000 bill without incurring debt

• Ability to pay all bills on time

• Ability to retire comfortably

Recommended: What Is a Six-Figure Salary?

Examples of Jobs That Pay $75,000 a Year

There are plenty of jobs that pay $75,000 per year, and some don’t require a degree. Let’s take a look at examples of positions that typically pay $75,000 or more.

• Network administrator: Network administrators manage technical systems and networks.

• Broker: Brokers mediate sales processes, particularly in real estate.

• Quality assurance manager: Quality assurance managers establish quality standards, resolve concerns, and identify system and procedural needs.

• Junior software engineer: A junior software engineer assists in developing and deploying computer software.

• Dental hygienist: Dental hygienists perform cleanings, inspect teeth and gums, and educate patients on oral health.

• Radiation therapist: Radiation therapists run machinery, perform X-rays, counsel patients, and more.

• Clinical nurse: Clinical nurses work with patients and medications, and manage medical records.

The Takeaway

Is $75,000 a year a good salary for an individual in 2024? How about as an entry-level salary? In general, yes. A $75k salary is more than what half of U.S. workers earn, and depending on where you live and your expenses, may be more than enough to live comfortably.

See exactly how your money comes and goes at a glance.

FAQ

Can I live comfortably making $75k a year?

Depending on your expenses, you should be able to comfortably make a $75,000 salary work in many areas of the country.

What can I afford with a $75k salary?

Many lenders use the 28/36 rule to help borrowers understand how much to use to repay a mortgage and other debts. Experts suggest spending no more than 28% of your income on housing expenses and no more than 36% on total debt payments. Consider using this rule as you make decisions about how large of a house to purchase or how much debt you’re willing to take on.

How much is $75k a year hourly?

A salary of $75,000 works out to $36.06 hourly.

How much is $75k a year monthly?

A salary of $75,000 is $6,250 per month.

How much is $75k a year daily?

A salary of $75,000 works out to $288.46 daily.

Photo credit: iStock/fizkes

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SORL-Q224-1841143-V1

May

2024

Is $40,000 a Good Salary for a Single Person?

By Jason Steele | Financial Independence, Life & Career, relay | Comments Off

Is $40,000 a year considered a “good” salary for an individual? The answer depends on a number of factors, including your lifestyle, location, and expenses. A single person living in a smaller town may be able to live more comfortably on $40k a year than, say, a family that calls a pricey city home.

External forces also play a role. For instance, inflation continues to steadily rise, and that can impact whether a single person is able to get by on their income.

Let’s put a $40,000 annual salary into perspective.

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Is $40K a Good Salary?

Earning more than the average worker is one way to determine whether a salary is “good.” With that in mind, how does a $40,000 salary stack up? As of 2024, it falls below the average annual salary in the U.S., which, according to the Bureau of Labor Statistics (BLS), is $59,228.

But keep in mind financial needs differ from person to person. Earning $40,000 a year may be considered a good entry-level salary and could be more than enough for someone with low monthly expenses. Adding another income to the mix also makes a difference. For example, if your spouse or partner also earns $40,000, your household income would be $80,000. That’s higher than the national average household income of $74,755.

No matter what your income is, it’s a good idea to keep tabs on your spending and saving. Tools like a money tracker can help make the job easier and provide valuable insights on your finances.

Recommended: U.S. Average Income by Age

Median Income in the U.S. by State in 2024

The median income of a state can provide a snapshot into what it costs to live and work there, as the BLS data in the chart below shows. Interested in a more lucrative career? You may want to look into the highest-paying jobs by state.

State	Median Annual Salary
Alabama	$41,350
Alaska	$56,140
Arizona	$47,680
Arkansas	$39,060
California	$54,030
Colorado	$54,050
Connecticut	$56,130
Delaware	$49,280
Florida	$45,070
Georgia	$45,480
Hawaii	$50,510
Idaho	$44,240
Illinois	$48,730
Indiana	$45,470
Iowa	$46,460
Kansas	$45,250
Kentucky	$43,730
Louisiana	$41,320
Maine	$47,590
Maryland	$55,810
Massachusetts	$60,690
Michigan	$46,940
Minnesota	$50,880
Mississippi	$37,500
Missouri	$45,080
Montana	$45,690
Nebraska	$46,440
Nevada	$44,810
New Hampshire	$49,980
New Jersey	$54,860
New Mexico	$43,620
New York	$56,840
North Carolina	$45,440
North Dakota	$48,830
Ohio	$46,690
Oklahoma	$41,480
Oregon	$50,010
Pennsylvania	$47,430
Rhode Island	$50,970
South Carolina	$42,220
South Dakota	$43,680
Tennessee	$43,820
Texas	$45,970
Utah	$47,020
Vermont	$49,630
Virginia	$49,920
Washington	$59,920
West Virginia	$39,770
Wisconsin	$47,590
Wyoming	$47,250

Source: BLS

Average Cost of Living in the U.S. by State in 2024

Generally speaking, half of your salary probably goes toward necessities like food, housing, healthcare, and taxes. If you want to see your money go farther, you may need to put down roots in an area with a lower cost of living. Let’s take a look at the average cost of living in each state.

State	Average Cost of Living
Alabama	$33,654
Alaska	$48,670
Arizona	$39,856
Arkansas	$32,979
California	$53,171
Colorado	$45,931
Connecticut	$46,912
Delaware	$44,389
Florida	$40,512
Georgia	$38,747
Hawaii	$55,491
Idaho	$37,658
Illinois	$41,395
Indiana	$36,207
Iowa	$35,871
Kansas	$35,185
Kentucky	$35,508
Louisiana	$35,576
Maine	$39,899
Maryland	$48,235
Massachusetts	$53,860
Michigan	$37,111
Minnesota	$41,498
Mississippi	$32,336
Missouri	$35,338
Montana	$37,328
Nebraska	$37,519
Nevada	$41,630
New Hampshire	$45,575
New Jersey	$49,511
New Mexico	$34,501
New York	$49,623
North Carolina	$36,702
North Dakota	$35,707
Ohio	$35,932
Oklahoma	$33,966
Oregon	$46,193
Pennsylvania	$40,066
Rhode Island	$44,481
South Carolina	$34,826
South Dakota	$36,864
Tennessee	$34,742
Texas	$37,582
Utah	$40,586
Vermont	$43,927
Virginia	$43,067
Washington	$47,231
West Virginia	$34,861
Wisconsin	$37,374
Wyoming	$37,550

Source: Forbes

How to Live on $40,000 a Year

While an annual salary of $40,000 is below the national average, there are ways that you can make the income work for you. One way to approach your spending is to follow the 50/30/20 rule, which recommends earmarking 50% of your money for needs, 30% for wants, and 20% for savings.

But depending on your monthly expenses and lifestyle, you may need to make some sacrifices to live comfortably on $40,000 a year. Fortunately, there are plenty of ways to lower expenses. Some examples include meal planning, looking for free or cheap entertainment, and sharing your housing costs with a roommate.

How to Budget for a $40K Salary

Tracking where your money goes can go a long way toward helping you stretch a $40,000 salary. Online tools like a budget planner app provide a high-level overview of your financial habits so you can identify areas where you can cut back, if needed.

While there’s no one-size-fits-all approach to budgeting, there are some things you’ll want to do at the outset. A good place to start? Setting your short- and long-term financial goals. Next, calculate how much money you’re bringing in each month — and where it’s going. (Reviewing recent financial statements can be useful at this stage.)

Once you have a good understanding of your financial picture, select a budgeting method — and then follow it. Remember, a budget isn’t written in stone, so plan on reviewing and adjusting yours regularly to ensure it still fits you.

How to Maximize a $40K Salary

If you’re making $40,000 a year, one question you may have is how to get the most out of every dollar you earn. There are different approaches to explore. A common one is to try living below your means, which is getting by on less money than you earn each month. Whatever is left over can be put in savings or invested.

Another strategy is to sock away as much as possible for your retirement savings. Find out if your employer offers a 401(k) matching program (many do), and consider contributing enough to get the match.

You may also want to explore ways to lower your tax bill, such as making charitable contributions, contributing to an HSA, or taking advantage of certain credits. A tax professional can help you decide which option makes sense for you.

Can You Have a Good Quality of Life on a $40,000 a Year Salary?

Recent research suggests there’s a link between income and happiness. But that doesn’t mean an individual earning $40,000 a year can’t have a good quality of life. In fact, a single person may find that such a salary can indeed provide a comfortable life. Affordable housing, reasonable living expenses, a low debt-to-income ratio, and a solid savings plan can all help lower financial stress and allow you to focus on the people and activities that matter to you.

Is $40,000 a Year Considered Rich?

A $40,000 annual salary may not be most people’s definition of rich. But there are situations where that can feel like a substantial sum.

For example, a young adult living at home might be able to make $40,000 go very far, so long as she doesn’t need to reimburse her family for things like housing, health insurance, food, or other major living expenses. In that scenario, earning $40,000 would be more than enough to cover meals out, occasional vacations, and maybe even a few luxury goods.

Is $40K a Year Considered Middle Class?

There are different ways to define “middle class”; income and net worth are two of them. According to Census Bureau data, a middle-class household in the U.S. makes between $58,201 and $94,000 a year. A $40,000 salary is classified as lower-middle class, which is defined as households that earn between $30,001 and $58,020 a year.

The numbers change when you consider class through the lens of net worth. Census Bureau data defines “middle class” as households with a net worth of $145,000. Curious about how much you’re “worth”? A net worth calculator by age table can show you how you compare to your peers.

Examples of Jobs that Make $40,000 a Year

Looking to make a career move? There are plenty of jobs — including ones for introverts — that pay around $40,000 a year. Here are 10 to consider, per Indeed.com:

• Kindergarten teacher

• Reporter

• Junior copywriter

• Firefighter

• Events manager

• Admissions counselor

• Loan processor

• Customer service representative

• Project coordinator

• Property manager

The Takeaway

Is $40K a good salary? Though not exactly a six-figure salary, earning $40,000 a year may provide a single person with enough to live, depending on their location, expenses, and lifestyle. It may also be a reasonable salary for young adults at the start of their careers. By carefully budgeting your income, you can stretch $40,000 a year farther than you might have thought.

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FAQ

Can I live comfortably making $40K a year?

It’s possible for a single person to make it on a $40,000 a year salary. Having an affordable place to live, reasonable monthly expenses, and a low debt-to-income ratio can help create a more comfortable life.

What can I afford with a $40K salary?

The amount of disposable income you have each month depends largely on your cost of living. You may find a $40,000 annual salary goes farther in an affordable area than it would in a pricey location.

How much is $40K a year hourly?

A $40,000 annual salary works out to an hourly rate of $19.23. This is higher than the federal minimum wage of $7.25 per hour.

How much is $40K a year monthly?

If you earn $40,000 a year, your monthly pay comes out to $3,333.

How much is $40K a year daily?

A $40K annual salary comes out to $153.85 per day, assuming you work 40 hours per week.

Photo credit: iStock/Lyndon Stratford

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