dumb money (ep. 3): the cost of living comfortably
when $100k doesn’t cut it anymore
Hi friends, welcome back to dumb money!
The driving principle behind this series is simplicity. I believe that as long as we direct our efforts toward developing high-value habits, it’s possible to win the money game with minimal time and effort.
A recent analysis by SmartAsset has found that a $100k salary is needed to live “comfortably” in a major U.S. city. But according to Zippia, just 18% of Americans make more than $100k a year. Of those select few Americans, half of them live paycheck-to-paycheck.
Something isn’t adding up. Not only are nearly all of us falling short of a comfortable income, but most of us will never even reach it.
The six-figure threshold, once touted as the holy grail of financial success, has lost its luster.
Let’s first clarify what SmartAsset means by living comfortably.
A “comfortable” salary is defined as one that can cover a standard 50/30/20 budget. In short, this rule allocates:
50% of your monthly income to needs (~20-30% of which goes to rent)
30% of your monthly income to wants
20% of your monthly income to savings
Rent seems to be the main reason why the comfortable salary differs so drastically between cities—from as low as $75k in Texas to as much as $400k in New York (just kidding, it's actually only $140k).
Here’s another way to put things:
A comfortable salary is the income needed to afford a stable living situation, save adequately for the future, and still have some juice leftover to spend reasonably on a few activities that mean the most to us.
A comfortable salary does not enable us to buy whatever we want. But it is necessary if we want a life where money isn’t our primary stressor.
Relative to this comfortable salary, we can bucket everyone into one of the following three groups.
Bucket 1: People who are already earning a comfortable income
If you’re already surpassing the comfortable income threshold for your city, well done! I encourage you to check out the concept of “f*ck you” money, as introduced by Nassim Nicholas Taleb. I’ve included an excerpt from his interview with Esquire below, but I would first recommend checking out Jack Raines’ piece on the delicate balance that is wealth, time, and the freedom to maximize both.
Bucket 2: People who aren’t making a comfortable income yet, but will soon
Maybe you’re just a promotion or two away from breaking six figures. Or once you’re out of med school, you’ll get paid millions to examine people’s most intimate lumps and bumps. Awesome stuff.
If I had to guess though, most of us don’t actually have an accurate sense of how much we’ll make in the coming years. Which is such a shame, because we could if we wanted to. Thanks to recent salary transparency laws and the general nosiness of people on the internet, it's now ridiculously easy to find out how much you’ll earn every single year, for the rest of your life.
After reading the SmartAsset piece, I decided to look into my own earnings projections for the next ten years. It wasn’t the most fun exercise, but now I have a much more grounded understanding of where I’m headed. Eliminating uncertainty improves clarity, and I encourage everyone to spend a few minutes researching and realigning their expectations with reality.
Bucket 3: People who will never earn a comfortable income
So you’ve looked into your salary trajectory and things are bleak. I’m gonna be blunt: it’s time to reconsider your career path.
But there’s more to life than making money!
It’s not all about hitting some sort of magic number!
I’m actively choosing not to play this money game and am instead following my dream to become an artist/social service worker/head chef at the Krusty Krab!
I 1000% agree. But living comfortably (as defined by SmartAsset) and living a fulfilled life (as defined by you) are two different things.
A comfortable income is objective. You can’t argue with numbers. 50-30-20. It can be captured within a spreadsheet. Money in must be greater than money out.
On the other hand, feeling fulfilled is subjective to what you perceive to be your needs. A lot of this depends on our upbringing, the values our families instilled in us. People can thrive on varying levels of income and live happy and meaningful lives.
If you find your work meaningful, you’re already making great progress in the “fulfilled life” part of your existence. But if that work earns you less than what’s necessary for a stable financial future, there’s nothing wrong with trying to supplement your primary income. In fact, it should become a priority. Whether it means looking for a better-paying role, finishing your degree, picking up a new one, or starting a side gig, unique situations require personalized solutions. As long as you stay true to your heart, skills, and values, I trust that everyone will find their best path forward.
Striving for a comfortable life and a fulfilled life are parallel pursuits. Both are super important and can be done at the same time. Time, effort, planning, and honesty are the only ways through it. Neither can fall into your hands in the form of a burning ball out of the night sky.
While those making less than $100k are likely shocked to hear that the comfortable salary threshold is so high, those making more than $100k are probably also surprised that the bar isn’t set even higher.
Which brings me to my final point, something that has bothered me for quite some time now. I’m really frustrated with the lack of discourse around income. Clearly, we don’t talk about this enough. Why else would the cost of living comfortably—something so crucial to our everyday well-being—come as such a shock to us? Where is the practical guidance on how to follow our career passions and make a wage that allows for a comfortable future? Is this something that is just not possible?
As a recent college grad, one area that I know needs work is the alignment between education and market demands. The chart above plots college admissions rate (lower rates indicate more selective schools) against the average salary post-grad. Business, finance, and engineering fields are leaps and bounds more lucrative than the rest of the field.
I know new grads who make over $500k a year as a quant. I also have friends working in research and policy who make less than they did as an undergraduate teaching assistant. The harsh reality is, that’s just how the world works—you get paid relative to how much you contribute to the economy. It just so happens that our economy likes banks and tech firms.
In response to findings like these, many schools have begun removing an assortment of humanities majors from their curriculum. This also really frustrates me! Humanities and the arts serve as the heartbeat of culture and community; they help us make sense of this complex world. I also have a soft spot in my heart for them because both my mom and sister are musicians. Unfortunately, the reptilian interactions in corporate America are a far cry from genuine human empathy. In this increasingly technical age, humanities majors are, in a strictly economic sense, unproductive.
Rather than axing the very lifeblood of what cultivates empathy and understanding, a better middle ground would be to offer mandatory career-oriented courses within all humanities majors—courses that teach how to maintain one’s passion for philosophy, classics, or archaeology without relying on them for a career. Will this fix all our problems? No, but it’s probably a step in the right direction.
At the end of the day, we young people need to be more proactive about securing our financial futures. Have a plan to surpass the comfortable living threshold and another, different plan for living a fulfilled life. Play offense, not defense.
Thanks for tuning into this week’s episode of dumb money!