A $100K salary feels more like making $36K if you live in this city — here are 5 ways to break free from the paycheck-to-paycheck cycle
Have you ever looked at your account after you pay your bills and thought: Where did all my money go?
A staggering number of Americans from all walks of life are living paycheck to paycheck — in fact, at the start of the year, around 8 million people in that financial position were making more than $100,000 a year, according to a survey by PYMNTS.
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But by May, PYMNTS found that the group feeling the most pressure were urban dwellers. A staggering 70% of city residents reported living paycheck to paycheck — 25% more than their suburban counterparts.
Part of the problem is that those paychecks don't go very far in the country's biggest cities. Recent analysis from SmartAsset shows that a $100,000 salary is realistically worth different amounts depending on where you live — and it's not a handsome sum for everyone.
For instance, $100,000 in New York City equates to less than $36,000 once you factor in the high cost of living and taxes — making it the most expensive city in the country. (Honolulu and San Francisco are close behind.)
Memphis, Tennessee is where your $100,000 will go the furthest; the analysis found that after-tax earnings result in a take-home figure that feels more like $86,444. That’s more than double the buying power Big Apple residents have.
Yet no matter where you live or how much you make, there are ways to get more value out of your paycheck.
1. Stay away from high-interest debt
Carrying balances on your credit card costs you more than you might realize. The average credit card interest rate is now 24.24%, but CreditCards.com predicts some lenders may see their rates go up to 30%.
To put that in perspective, imagine you have a balance of $10,000 at a comparatively reasonable rate of 21%. Given payments of $200 a month, it would take you 10 years to pay off the balance and cost you an extra $13,972 in interest charges over and above the $10,000.
Think twice before you buy expensive items on a credit card. If you need to make a big-ticket charge, plan ahead to pay it off within a month or two in full.
Then you can dump the money you saved into a high-powered retirement account or whatever else you like. Anything beats losing large amounts of money to interest payments.
2. Maximize your 401(k) or IRA contributions
It’s not easy to think about the future when you’re struggling today. According to U.S. Census Bureau data, 50% of women and 47% of men between the ages of 55 and 66 have no retirement savings.
But putting your future first need not be painful and will reap huge benefits – even if you can only put away small sums of money over time.
Work-sponsored 401(k) accounts or independent IRAs are the common gateways to retirement savings. The closer you can get to the maximum yearly contributions – $22,500, or $30,000 if you’re 50 or older for 401(k)s, $6,500 for IRAs – the closer you’ll get to retiring with a secure cushion.
Sadly, saving for retirement gets relegated to the back burner for many of us, especially as the cost of living and inflation put more demands on our incomes.
What’s more, nearly 57 million Americans reportedly work for an employer that doesn't offer a retirement savings plan, according to the AARP.
Tweak your budget so you can find ways to make retirement contributions, even if you can’t max them out.
Read more: 3 big mistakes people make with cash back credit cards that cost them every time they swipe
3. Create a budget
A budget is your lifeline to financial freedom because it takes spending from vagueness to clarity.
No matter which method you use, you’ll use the same starting point: List how much money comes in and how often you get paid. Then you’ll tabulate every expense, including the dollar amount and payment due date.
Since every budgeting method differs, your next steps can vary. Some popular methods include:
The 50/20/30 method
The zero-based budget
The envelope or cash-stuffing method
The reverse budget
The “pay yourself first” method
It can help to remember you don’t have to stick with the first one you try. Sample different methods to see which works best for you.
4. Negotiate your salary
Most people don’t negotiate a salary. A 2023 ZipRecruiter survey found nearly two-thirds of job-seekers accept the salary offered to them and don’t make a counter-offer or negotiate.
But employers expect you to negotiate. CNBC reported that 85% of people who negotiated a salary offer were successful in those counteroffers.
While a budget is a vital component of smart spending, earning more allows you more leeway to pay off debt and save for your future.
5. Take advantage of all your employee benefits
Whether you’re scouting for a new job or like where you’re at, explore all the benefits your job (or potential job) offers.
What does your health insurance cover? Is it just for you or your dependents as well?
You should also look at options for life insurance, 401(k) matches, continuing education stipends, student loan debt matches, and more.
If your company matches retirement account contributions, it's a golden opportunity to land “free money" from your employer.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
