How to Save Money: 33 Easy Ways

You likely agree that saving money is a good idea. Putting extra cash aside every month can help you reach your financial goals, whether that’s building an emergency fund, going on vacation, or putting a down payment on a car or home.

But wanting to save money and actually doing it are two very different things. It’s easy to get caught up in day-to-day needs (and wants), and never gain any traction on savings. But don’t give up. We’ve got 33 tricks and tips that can make saving simple and pain-free. The best part — you can get started as soon as today.

Saving Money Doesn’t Have to Be Overwhelming

While spending less and saving more admittedly sounds painful, it doesn’t have to be that hard. You don’t have to go to the extremes like never shopping or having fun. Just making a few small changes in your day-to-day spending habits can actually add up to a big difference in how much you save each month.

Getting better with money is like any type of behavior modification — the key to lasting change is to make small, incremental changes that stick.

💡 Quick Tip: Help your money earn more money! Opening a bank account online often gets you higher-than-average rates.

33 Easy Ways to Save Money

What follows are 33 simple money-saving tips you can start working on right now.

1. Tracking Your Spending

One of the best ways to spend less and save more is to take a close look at where your money is currently going. You can track your spending by scanning your checking account and credit card statements over the last few months. But a simpler way is to use a budgeting app that syncs with your accounts and keeps track of what you spend in different categories in real time.

Once you have a big-picture idea of your cash flow, you can make adjustments. Spending a lot more on takeout than you thought? Commit to cooking one or two more nights per week. Is keeping up with fashion killing your budget? You may want to focus on spending less on clothing.

2. Selling Items You Never Use

An simple way to earn some extra cash is to periodically sell gently used items you no longer want or need. You might organize a yard sale or resell your items piecemeal via online marketplaces like OfferUp, Facebook Marketplace, or eBay. If you have extra clothes, shoes, or accessories in good condition, consider listing them on Poshmark or thredUP. Selling your unwanted stuff is essentially getting paid for clearing out clutter.

3. Limiting Time Spent on Social Media

Watching influencers take luxury vacations and promote their favorite products can prompt you to spend more and live beyond your means. In fact, recent research finds that social media can significantly impact your finances — and not in a good way.

Putting a time limit on daily phone scrolling, on the other hand, can automatically lead to less spending and more saving. It also frees up time for activities that can truly enhance your life, like reading, exercising, seeing (real) friends, even taking up side hustle (and earning more money).

4. Setting Goals for Saving

When we do things with focus, intention, and a clear goal in mind, we usually have an easier time making it happen. Instead of saving for the sake of saving, consider setting specific savings goals with target dates and amounts. For instance, maybe you want to save $5,000 for a summer vacation or $2,000 for a new computer.

By setting a target date, you can work backward and figure out exactly how much you need to set aside regularly. For example, if you want a new laptop in eight months, and it will cost you about $2,000, you’ll need to save $250 a month or about $60 a week.

5. Buying Generic Brands

Generic brands typically have the same ingredients and offer comparable quality to name brands but for a fraction of the price. For example, generic drugs usually cost 80% to 85% less than their brand-name counterparts. During your next supermarket or drugstore visit, try to go generic whenever it’s offered. Chances are, the only difference you’ll notice is less money draining out of your checking account.

6. Comparison Shopping

Spending a bit of extra time comparison shopping can help you scoop up the best deals and avoid paying full price. You can do it on your phone while you shop in-store. For online shopping, consider installing a browser extension that helps you find the lowest prices and automatically applies coupons and cash-back options at checkout. Many of these tools will also alert you when the price of an item you intend to purchase drops.

7. Automating Your Savings

Rather than transfer money to your savings account whenever you think of it, consider putting your savings on autopilot. Simply set up a recurring transfer from your checking account to your savings account for the same day each month (perhaps right after you get paid). It’s fine to start small. Even $50 can add up to a sizable sum over time, since the transfer happens every month without fail.

8. Making Monthly Debt Payments

While it’s not directly putting money into your bank account, making on-time, consistent payments on your debt means you’ll pay it off quicker. Once your debt is paid off, the money you are currently spending on principal/interest can go towards savings. In addition to your monthly minimum payments, try to put extra payments towards high-interest debt each month. You’ll whittle those balances down faster and save on interest.

9. Delaying Gratification

If you see something you want to buy but don’t actually need, consider putting off the purchase for at least one week (or ideally 30 days). Tell yourself that if you still want the item and can afford it after the waiting period, you can go ahead and buy it. Chances are good that once that waiting period is over, you’ll no longer have a burning need to purchase the item and simply move on.

10. Meal Planning

If it’s 6pm, you’re tired from a full day of work, and have no food in the house, you’ll probably seek out the path of least resistance — getting takeout or eating out. Your best defense against overspending on food is to sit down every Sunday to scan recipes and come up with a meal plan for the week (including breakfast, lunch, dinner, and snacks). You can then make a shopping list and hit the store.

Recommended: Examining the Price of Eating at Home Versus Eating Out

11. Avoiding the Daily Coffee

While it’s fine to occasionally splurge on a fancy coffee, getting your daily coffee out can add up, especially if you sometimes throw in a tempting pastry at the last minute. Even cutting back your coffee shop visits to just two or three times a week and brewing at home the other days can help you save a lot on coffee.

12. Making Repairs Instead of Buying New

While it is easier to replace items than fix them, the latter approach is better for both your wallet and the environment. Depending on the item, a repair could end up costing significantly less expensive than a replacement. Call around for quotes or ask for help from a tech-savvy or handy friend. Also see if there are “repair cafes” in your community. These are volunteer-run events where you can get items mended or fixed for free.

13. Using Cash Instead of Credit Cards

While credit cards are convenient, they make it all too easy to spend money. When you tap or swipe to make a purchase, you don’t really have a sense that you are giving up physical money. Switching to cash-only, even for just a month or so, can help you become more mindful about your spending. You might even try the envelope system. This involves labeling envelopes for each spending category, dividing your available cash for the month into the envelopes, and then only spending what’s in each envelope.

14. Switch to a New Cell Phone Carrier

When it comes to cell service, you don’t have to stick with the big names. Mobile virtual network operators (such as Mint Mobile, Consumer Cellular or Republic Wireless) typically offer the same quality of service at a much lower price tag. It’s also a good idea to look at your last cell phone bill to see how much data you actually use. You may be able to get a smaller plan to save even more.

15. Doing it Yourself Instead of Hiring Someone

Before you hire someone for a home repair or improvement job, like painting a room, re-caulking your tub or shower, or installing a water filter under your sink, consider whether or not you could do it yourself. Often, the cost of materials and a simple YouTube search will lead to significant savings.

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16. Stacking Coupons

There are two major types of coupons: Store coupons, which are issued by a specific retailer and can only be used at those locations (you can find these in the paper and through a retailer’s app or mailer); and manufacturer’s coupons, which are found on manufacturer’s and coupon sites. By stacking them, you get an even deeper discount. Stacking coupons for an item that is on sale is a triple whammy that can bring you back to pre-inflation prices.

17. Canceling Some Subscriptions

Dropping subscriptions that you hardly use or are redundant is a simple money-saving move with a potentially big payoff, since these debits occur monthly. It’s worth scanning your checking account and credit card statements for recurring charges to see if there are any items you can cut. If you primarily watch one streaming service but pay for four, for example, canceling three can save you significant cash.

18. Using a Refillable Water Bottle

While keeping bottled water (and seltzers or sodas) on hand is convenient, the cost can add up, especially if you have a family. A simple way to spend less at the grocery store each week is to give each person in your household their own reusable water bottle. You can then take bottled drinks off your shopping list. This will not only save money but also reduce plastic waste.

19. Taking Advantage of Free Resources

You might be surprised at how many things you can actually get for free. For example, your library can grant you access to movies, books, activities, and in some cases, passes to state parks and other nearby attractions. You might also join a Buy Nothing group. These are hyper-local virtual communities where neighbors can give and receive essentially anything for free.

20. Canceling Your Gym Membership

If you’re becoming a stranger to your gym, consider canceling your membership. Even if you got a great deal, gyms debit money out of your bank account every month, whether you go or not. You might look for alternative, low-cost ways to get physically fit, such as walking/jogging/biking around your neighborhood, lifting free weights at home, and taking hikes.

21. Saving Change

A nickel here and a quarter there might not seem like much, but if you start dropping all your spare change into a jar every day, you’ll be surprised at how much you’ll accumulate. If you rarely carry or pay in cash, consider collecting digital change. Many money-saving apps automatically round up your purchase to the nearest dollar, then transfer the difference into your savings account.

💡 Quick Tip: Want a simple way to save more everyday? When you turn on Roundups, all of your debit card purchases are automatically rounded up to the next dollar and deposited into your online savings account.

22. Skipping Alcohol at Restaurants

Ordering a cocktail or a glass of wine (or three) when out to dinner can significantly inflate your bill. Consider getting water or a non-alcoholic beverage instead, then perhaps having a glass of wine when you get home. If you must drink, local beer, “house wine” options, and happy hour cocktails are usually the cheapest options.

23. Finding Free Family Entertainment

Taking the family to concerts, movies, and immersive art exhibits can add up quickly. Instead, look for free or low-cost community activities. These offerings typically spike during the summer months and around holidays. To stay abreast of upcoming goings-on, you can sign up for newsletters or follow social media accounts of your local community, recreation centers, and libraries.

24. Doing a No-Spend Challenge

A simple way to save (potentially hundreds) is to do a no-spend month. This involves spending money only on essentials for 30 days. Before you begin, it’s a good idea to set parameters for what you will and won’t spend money on and then commit to the plan. It’s only a month! By the end of the challenge, you may realize there were certain things you didn’t really miss and rethink your approach to spending.

25. Reducing Your Energy Use

You may be able to significantly lower your utility bills with just a few tweaks to your habits and home. Try taking shorter showers, fixing any drippy faucets or constantly running toilets, turning off lights whenever you leave a room, and washing your clothes in cold water. Once you see a difference in your monthly bills, you’ll be encouraged to carry on and find more ways to cut energy use.

26. Adjusting Your Tax Withholdings.

If you typically get a refund after doing your taxes, you’re essentially giving the government an interest-free loan. That’s money that could be working for you by earning interest in a high-yield savings account. Revisit your withholdings and put that extra money into your own bank account.

27. Taking a Staycation Instead of a Vacation

It may sound boring, but you’d be surprised how much a staycation can feel like a fun and luxurious getaway. The key is to take a complete break from your daily routine, change up the scenery, and spend time doing things you truly enjoy. This can provide the respite you’ve been longing for — minus the headaches of travel — and for a fraction of the price.

28. Finding Cheap Ways to Reward Yourself

If you focus too hard on saving and never on fun, you might end up feeling deprived and give up on the whole project. Instead, allow yourself to celebrate small money wins and life events on the cheap. For instance, for every X amount you’ve put away into your emergency fund, you might reward yourself with a fancy coffee, a $5 “spree” at the dollar store, or getting a treat at your favorite ice cream shop.

29. Avoiding Bank Fees

Overdraft fees, ATM fees, and monthly maintenance fees can make your bank account balance move in the wrong direction — down instead of up. To ditch costly overdraft fees, keep regular tabs on your checking account to make sure you have enough to cover your debits and checks. To eliminate other fees, you may want to look for a bank account that doesn’t charge monthly maintenance fees and ATM fees.

30. Haggling

Negotiating prices isn’t just for buying cars or houses. You can haggle for just about any product or service — your cable and cell phone bills, things you buy in stores, and even your rent. The key to success is to come to the negotiation prepared (do all the research you may need in advance), speak with confidence, and start off the conversation with the question, “What flexibility do you have?”

Recommended: 15 Creative Ways to Save Money

31. Saving Your Windfalls

It can be tempting to go hog wild and spend your windfalls. But next time you get a work bonus, cash gift, or tax refund (which you actually want to avoid, see tip #26), consider spending a small percentage of it on something frivolous and fun, then putting the rest into your savings account. This can help you reach your savings goals significantly faster.

Recommended: The Fastest Ways to Get a Tax Refund

32. Timing Your Purchases Right

If you want to buy something that you don’t need right away, it’s worth researching the best times of the year for deals and sales. For example, you can often find great deals on cars in May, October, November and December; clothes are typically cheapest at the end of any season; and the end and the very beginning of the year are generally the best times to buy appliances.

33. Switching to a High-Yield Savings Account

If your extra cash is sitting in a traditional savings account, you’re missing out on a free source of extra cash. A high-yield savings account is a type of savings that you can open at many banks and credit unions. But it differs from a traditional savings account in that it offers an annual percentage yield (APY) that’s 10 to 20 times higher. If, for example, you put $25,000 into a savings account with a 4.60% APY, you’ll earn an extra $177.78 by the end of the year — just for letting the money sit in the bank.

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Why is saving money important?

Saving money enables you to build an emergency fund that protects you against the unexpected. It also allows you to work towards — and achieve — future goals, such as buying a car or home, sending your kids to college, and being able to one day retire.

How can I find the motivation to save money?

To find the motivation to save money, it helps to set specific goals. Think about the things you want to buy or do in the next year or two and how much these things will cost. You can then determine how much you need to set aside each month to reach your goals. Watching your savings account balance go up can also help keep you motivated.

What are the consequences of not saving money?

When you don’t have a cushion of savings, any bump in the road (such as a car or home repair, trip to the ER, or loss of income) can force you to run up credit card debt. This can lead to a debt spiral that can take months, if not years, to recover from. Not saving also means you won’t make any progress towards your financial goals and simply continue living paycheck to paycheck.

Photo credit: iStock/Chaninan Boongate

SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2023 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
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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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What Is the Average Pay in the United States Per Year?

Whether you’re deciding on a new career path or wondering if you’re being paid enough, it can help to know what the typical American worker earns per year.

Based on the latest data available from the Social Security Administration (SSA), the average annual pay in the U.S. in 2022 was $63,795 — a 5.32% jump from the previous year. The U.S. Bureau of Labor Statistics (BLS) estimates the average worker made closer to $69,986 that same year. The amount you make may depend on a number of factors, including your occupation, where you live, your gender, and your level of education.

Key Findings

Let’s take a closer look at how the average annual pay in the U.S. has changed over a three-year period based on data from both the SSA and BLS.


Average Annual Salary per SSA

Average Annual Salary per BLS

2020 $55,628.60 $64,021
2021 $60,575.07 $67,610
2022 $63,795 $69,986

It can also be helpful to look at median earnings, which represent the midpoint of salaries in the U.S. In other words, half of the salaries fall below the median, and half are higher than the median.

The following table shows the median annual salary for a three-year period.


Median Annual Salary

2021 $51,896
2022 $54,132
2023 $59,540

Source: BLS

As you can see, average and median incomes have risen each year. However, average salaries can be affected by various factors such as your occupation, age, and gender. Note that the numbers above also don’t include unearned income.

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Examples of High-Salary Jobs in the US

Some industries tend to pay more than others, which means the career you choose may affect how much you earn. Here’s a sampling of high-paying jobs and their average annual salary, according to the BLS:

•   Cardiologist, $421,330

•   Dentist, $172,290

•   Aircraft pilots and flight engineer, $225,740

•   Lawyer and judicial law clerk, $161,680

•   Public relations manager, $150,030

•   Air traffic controller, $130,840

Recommended: How to Reduce Taxable Income for High Earners

Average American Income by Occupation

While salaries tend to vary based on geography, seeing how much certain types of jobs pay can be informative. Let’s take a look at different occupations and how much they typically pay.

Occupation (Type)

Average annual salary

Management $131,200
Legal $124,540
Computer and Mathematical Operations $108,130
Architecture and Engineering $94,670
Healthcare Practitioners and Technical $96,770
Business and Financial Operations $86,080
Life, Physical, and Social Science $83,640
Arts, Design, Entertainment, Sports, and Media $76,500
Educational Instruction and Library $63,240
Construction and Extraction $58,400
Community and Social Service $55,760
Protective Service $54,010
Installation, Maintenance, and Repair $55,680
Sales (and Related) $50,370
Office and Administrative Support $45,550
Transportation and Material Moving $37,920
Farming, Fishing, and Forestry $37,870
Building and Grounds Cleaning and Maintenance $35,900
Personal Care and Service $36,210
Healthcare support $35,560
Food Preparation and Serving Related $28,130

Source: BLS, May 2022 data

Keep in mind that average salaries may differ depending on the specific occupation you have. For example, although claims adjusters fall under the business and financial operations category, their average salary is around $72,040.

US Income by Gender

Demographics, specifically gender, are another factor to consider. By and large, men tend to outearn women throughout their career. The median annual salary for a 16- to 24-year-old man is $38,688; a woman of the same age earns $36,088, per the latest data available from the BLS. Likewise, the median annual salary for a man aged 25 and older is $64,376; a woman of the same age earns $52,520.

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Median Income by State

Wages often vary based on where you live. In many cases, states with higher costs of living also have higher wages. For example, the median annual income in Hawaii is $104,704 — much higher than Mississippi’s median annual income of $70,950.

Below is the median income by state for a household of three people, according to data compiled by the Census Bureau between April 1 and May 14, 2023.


Median annual income

Alabama $77,419
Alaska $113,035
Arizona $90,193
Arkansas $74,475
California $104,785
Colorado $113,822
Connecticut $121,958
Delaware $103,598
District of Columbia $146,440
Florida $83,396
Georgia $87,742
Hawaii $104,704
Idaho $87,960
Illinois $101,951
Indiana $89,800
Iowa $95,739
Kansas $88,271
Kentucky $75,700
Louisiana $73,393
Maine $95,531
Maryland $122,385
Massachusetts $127,172
Michigan $93,873
Minnesota $114,267
Mississippi $70,950
Missouri $89,515
Montana $84,019
Nebraska $99,845
Nevada $86,618
New Hampshire $136,886
New Jersey $122,540
New Mexico $71,283
New York $103,444
North Carolina $87,369
North Dakota $93,240
Ohio $90,912
Oklahoma $77,166
Oregon $101,989
Pennsylvania $100,888
Rhode Island $109,514
South Carolina $82,114
South Dakota $92,794
Tennessee $85,014
Texas $87,228
Utah $102,941
Vermont $103,763
Virginia $111,017
Washington $116,345
West Virginia $81,964
Wisconsin $99,261
Wyoming $93,651

US Income by Race

As the BLS data below shows, there is often a pay disparity among workers of different races and ethnicities.

•   Asian, $79,456 per year

•   White, $60,164

•   Black or African American, $50,284

•   Hispanic or Latino, $45,968

How Does Your Income Stack Up?

Now that you’ve seen some of the average and median annual salaries by occupation, location, gender, and race or ethnicity, how does yours compare? If you’re not making as much as you’d like, you may want to research wages in your industry and region, and use that information to help you negotiate a higher salary. If you’re ready to make a bigger change, you can use this data as you consider whether to switch to a more lucrative field or relocate to a higher-paying region.

Recommended: Cost of Living by State

How to Stretch Your Income

Here are some different strategies to help you make the most of the money you make:

Track Your Spending

Understanding exactly where your money is going can help you keep tabs on where your money is going and identify areas where you can cut back. Consider using a spending app to track your spending and saving.

Negotiate Bills

Want to lower monthly expenses, such as your cell phone or internet services? Consider calling up various providers to see if you’re able to get a better deal or if there are promotions you can take advantage of.

Cut Back on Large Expenses

Housing, food, and transportation tend to be the largest line budget items. Explore ways to trim your biggest costs. Examples include refinancing your mortgage, negotiating your rent, shopping at discount grocery stores, and taking public transportation when possible.

Sharpen Your Marketable Skills

Accepting networking opportunities and taking professional development courses could help you become more marketable as an employee. This in turn could set you up to earn more in the long run. If you’re on a tight budget, look into no- or low-cost ways to cultivate high-income skills, and ask your employer if there are any free resources available.

Pros and Cons of a High Salary

A high income can be great, but it does come with some downsides.


•   Improved quality of life: With more money, you can afford a higher standard of living and be able to afford different amenities such as better access to healthcare and food.

•   Financial security: The more you earn, the more you can feel secure you have enough money to afford the things you want and need.

•   Ability to achieve financial goals faster: Having more disposable income could mean you can set more money aside for long- and short-term savings goals, like retirement or going on a family vacation.


•   Higher taxes: Earning more can put you in a higher tax bracket. However, there are ways to reduce your taxable income.

•   Pressure to maintain income: If you’re accustomed to a certain living standard, you may feel like you need to keep earning the same amount or more to maintain it.

•   More work stress: In many cases, higher-paying jobs come with more responsibilities and, at times, longer hours.

💡 Quick Tip: Income, expenses, and life circumstances can change. Consider reviewing your budget a few times a year and making any adjustments if needed.

The Takeaway

Understanding what the average American worker makes in a year can come in handy, especially if you’re considering a new career path, negotiating a higher salary, or looking for a new place to live. According to the latest data from the Social Security Administration, the average annual pay in the U.S. is $63,795. But the amount you earn may depend on a wide range of factors, such as the industry you work in, where you live, your gender, and your race or ethnicity.

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.

With SoFi, you can keep tabs on how your money comes and goes.


What is a good salary in the US?

There’s no one set amount that would be considered a good salary in the U.S. However, the average salary is around $63,795, according to the Social Security Administration.

What is the real average wage in the US?

The average wage in the U.S. is $69,986 according to the most recent data available from the U.S. Bureau of Labor Statistics.

What is the top 10 percent income in the US?

According to the Economic Policy Institute, the top 10% of workers in the U.S. earn $135,605.

How much should you be making at 30?

While there is no definitive amount you should earn by the time you’re 30, the average salary for U.S. workers aged 25 to 34 is $56,160, according to data from the U.S. Bureau of Labor Statistics.

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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.

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

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

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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Roth 401(k) vs Traditional 401(k): Which Is Best for You?

A traditional 401(k) and a Roth 401(k) are tax-advantaged retirement plans that can help you save for retirement. While both types of accounts follow similar rules — they have the same contribution limits, for example — the impact of a Roth 401(k) vs. traditional 401(k) on your tax situation, now and in the future, may be quite different.

In brief: The contributions you make to a traditional 401(k) are deducted from your gross income, and thus may help lower your tax bill. But you’ll owe taxes on the money you withdraw later for retirement.

Conversely, you contribute after-tax funds to a Roth 401(k) and can typically withdraw the money tax free in retirement — but you don’t get a tax break now.

To help choose between a Roth 401(k) vs. a traditional 401(k) — or whether it might make sense to invest in both, if your employer offers that option — it helps to know what these accounts are all about.

5 Key Differences Between Roth 401(k) vs Traditional 401(k)

Before deciding on a Roth 401(k) or traditional 401(k), it’s important to understand the differences between each account, and to consider the tax benefits of each in light of your own financial plan. The timing of the tax advantages of each type of account is also important to weigh.

1. How Each Account is Funded

•   A traditional 401(k) allows individuals to make pre-tax contributions. These contributions are typically made through elective salary deferrals that come directly from an employee’s paycheck and are deducted from their gross income.

•   Employees contribute to a Roth 401(k) also generally via elective salary deferrals, but they are using after-tax dollars. So the money the employee contributes to a Roth 401(k) cannot be deducted from their current income.

💡 Quick Tip: The advantage of opening a Roth IRA and a tax-deferred account like a 401(k) or traditional IRA is that by the time you retire, you’ll have tax-free income from your Roth, and taxable income from the tax-deferred account. This can help with tax planning.

2. Tax Treatment of Contributions

•   The contributions to a traditional 401(k) are tax-deductible, which means they can reduce your taxable income now, and they grow tax-deferred (but you’ll owe taxes later).

•   By contrast, since you’ve already paid taxes on the money you contribute to a Roth 401(k), the money you contribute isn’t deductible from your gross income, and withdrawals are generally tax free (some exceptions below).

3. Withdrawal Rules

•   You can begin taking qualified withdrawals from a traditional 401(k) starting at age 59 ½, and the money you withdraw is taxed at ordinary income rates.

•   To withdraw contributions + earnings tax free from a Roth 401(k) you must be 59 ½ and have held the account for at least five years (often called the 5-year rule). If you open a Roth 401(k) when you’re 57, you cannot take tax-free withdrawals at 59 ½, as you would with a traditional 401(k). You’d have to wait until five years had passed, and start tax-free withdrawals at age 62.

4. Early Withdrawal Rules

•   Early withdrawals from a 401(k) before age 59 ½ are subject to tax and a 10% penalty in most cases, but there are some exceptions where early withdrawals are not penalized, including certain medical expenses; a down payment on a first home; qualified education expenses.

You may also be able to take a hardship withdrawal penalty-free, but you need to meet the criteria, and you would still owe taxes on the money you withdrew.

•   Early withdrawals from a Roth 401(k) are more complicated. You can withdraw your contributions at any time, but you’ll owe tax proportional to your earnings, which are taxable when you withdraw before age 59 ½.

For example: If you have $100,000 in a Roth 401(k), including $90,000 in contributions and $10,000 in taxable gains, the gains represent a 10% of the account. Therefore, if you took a $20,000 early withdrawal, you’d owe taxes on 10% to account for the gains, or $2,000.

5. Required Minimum Distribution (RMD) Rules

With a traditional 401(k), individuals must take required minimum distributions starting at age 73, or face potential penalties. While Roth 401(k)s used to have RMDs, as of January 2024, they no longer do. That means you are not required to withdraw RMDs from a Roth 401(k) account.

For a quick side-by-side comparison, here are the key differences of a Roth 401(k) vs. traditional 401(k):

Traditional 401(k)

Roth 401(k)

Funded with pre-tax dollars. Funded with after-tax dollars.
Contributions are deducted from gross income and may lower your tax bill. Contributions are not deductible.
All withdrawals taxed as income. Withdrawals of contributions + earnings are tax free after 59 ½, if you’ve had the account for at least 5 years. (However, matching contributions from an employer made with pre-tax dollars are subject to tax.)
Early withdrawals before age 59 ½ are taxed as income and are typically subject to a 10% penalty, with some exceptions. Early withdrawals of contributions are not taxed, but earnings may be taxed and subject to a 10% penalty.
Account subject to RMD rules starting at age 73. No longer subject to RMD rules as of January 2024.

Bear in mind that a traditional 401(k) and Roth 401(k) also share many features in common:

•   The annual contribution limits are the same for a 401(k) and a Roth 401(k). For 2024, the total amount you can contribute to these employer-sponsored accounts is $23,000; if you’re 50 and older you can save an additional $7,500 for a total of $30,500. This is an increase over the 2023 limit, which was capped at $22,500 ($30,000 if you’re 50 and older).

•   For both accounts, employers may contribute matching funds up to a certain percentage of an employee’s salary.

•   In 2024, total contributions from employer and employee cannot exceed $69,000 ($76,500 for those 50 and up). In 2023, total contributions from employer and employee cannot exceed $66,000 ($73,500 for those 50 and up).

•   Employees may take out a loan from either type of account, subject to IRS restrictions and plan rules.

Because there are certain overlaps between the two accounts, as well as many points of contrast, it’s wise to consult with a professional when making a tax-related plan.

Recommended: Different Types of Retirement Plans, Explained

How to Choose Between a Roth and a Traditional 401(k)

In some cases it might make sense to contribute to both types of accounts (more on that below), but in other cases you may want to choose either a traditional 401(k) or a Roth 401(k) to maximize the specific advantages of one account over another. Here are some considerations.

When to Pay Taxes

Traditional 401(k) withdrawals are taxed at an individual’s ordinary income tax rate, typically in retirement. As a result these plans can be most tax efficient for those who will have a lower marginal rate after they retire than they did while they were working.

In other words, a traditional 401(k) may help you save on taxes now, if you’re in a higher tax bracket — and then pay lower taxes in retirement, when you’re ideally in a lower tax bracket.

On the other hand, an investor might look into the Roth 401(k) option if they feel that they pay lower taxes now than they will in retirement. In that case, you’d potentially pay lower taxes on your contributions now, and none on your withdrawals in retirement.

Your Age

Often, younger taxpayers may be in a lower tax bracket. If that’s the case, contributing to a Roth 401(k) may make more sense for the same reason above: because you’ll pay a lower rate on your contributions now, but then they’re completely tax free in retirement.

If you’re older, perhaps mid-career, and in a higher tax bracket, a traditional 401(k) might help lower your tax burden now (and if your tax rate is lower when you retire, even better, as you’d pay taxes on withdrawals but at a lower rate).

Where You Live

The tax rates where you live, or where you plan to live when you retire, are also a big factor to consider. Of course your location some years from now, or decades from now, can be difficult to predict (to say the least). But if you expect that you might be living in an area with lower taxes than you are now, e.g. a state with no state taxes, it might make sense to contribute to a traditional 401(k) and take the tax break now, since your withdrawals may be taxed at a lower rate.

💡 Quick Tip: Before opening any investment account, consider what level of risk you are comfortable with. If you’re not sure, start with more conservative investments, and then adjust your portfolio as you learn more.

The Benefits of Investing in Both a Roth 401(k) and Traditional 401(k)

If an employer offers both a traditional and Roth 401(k) options, employees might have the option of contributing to both, thus taking advantage of the pros of each type of account. In many respects, this could be a wise choice.

Divvying up contributions between both types of accounts allows for greater flexibility in tax planning down the road. Upon retirement, an individual can choose whether to withdraw money from their tax-free 401(k) account or the traditional, taxable 401(k) account each year, to help manage their taxable income.

It is important to note that the $23,000 contribution limit ($30,500 for those 50 and older) for 2024 is a total limit on both accounts.

So, for instance, you might choose to save $13,500 in a traditional 401(k) and $9,500 in a Roth 401(k) for the year. You are not permitted to save $23,000 in each account.

What’s the Best Split Between Roth and Traditional 401(k)?

The best split between a Roth 401(k) and a traditional 401(k) depends on your individual financial situation and what might work best for you from a tax perspective. You may want to do an even split of the $23,000 limit you can contribute in 2024. Or, if you’re in a higher tax bracket now than you expect to be in retirement, you might decide that it makes more sense for you to put more into your traditional 401(k) to help lower your taxable income now. But if you expect to be in a higher income tax bracket in retirement, you may want to put more into your Roth 401(k).

Consider all the possibilities and implications before you decide. You may also want to consult a tax professional.

The Takeaway

Employer-sponsored Roth and traditional 401(k) plans offer investors many options when it comes to their financial goals. Because a traditional 401(k) can help lower your tax bill now, and a Roth 401(k) generally offers a tax-free income stream later — it’s important for investors to consider the tax advantages of both, the timing of those tax benefits, and whether these accounts have to be mutually exclusive or if it might benefit you to have both.

When it comes to retirement plans, investors don’t necessarily have to decide between a Roth or traditional 401(k). Some might choose one of these investment accounts, while others might find a combination of plans suits their goals. After all, it can be difficult to predict your financial circumstances with complete accuracy — especially when it comes to tax planning — so you may decide to hedge your bets and contribute to both types of accounts, if your employer offers that option.

Another step to consider is a 401(k) rollover, where you move funds from an old 401(k) into an IRA. When you do a 401(k) rollover it can help you manage your retirement funds.

Ready to invest for your retirement? It’s easy to get started when you open a traditional or Roth IRA with SoFi. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

Easily manage your retirement savings with a SoFi IRA.


Is it better to contribute to 401(k) or Roth 401(k)?

Whether it’s better to contribute to a traditional 401(k) or Roth 401(k) depends on your particular financial situation. In general, if you expect to be in a lower tax bracket in retirement, a traditional 401(k) may make more sense for you since you’ll be able to deduct your contributions when you make them, which can lower your taxable income, and then pay taxes on the money in retirement, when you’re in a lower income tax bracket.

But if you’re in a lower tax bracket now than you think you will be later, a Roth 401(k) might be the preferred option for you because you’ll generally withdraw the money tax-free in retirement.

Can I max out both 401(k) and Roth 401(k)?

No, you cannot max out both accounts. Per IRS rules, the annual 401(k) limits apply across all your 401(k) accounts combined. So for 2024, you can contribute a combined amount up to $23,000 (or $30,500 if you’re 50 or older) to your Roth 401(k) and your traditional 401(k) accounts.

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.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

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