Depending on which area you choose to reside in, you can either live comfortably or struggle to make ends meet with $5,000 a month. In most areas of the US, except for San Francisco, New York, Boston, you can live in a safe neighborhood, enjoy some comforts and save with a $5,000 income per month.
Living on a budget doesn’t mean surviving on barely $2,000 a month. Even people with more significant income need to budget to make the best of their money.
In addition, picking the place to live makes a substantial impact on the future of your finances.
Living a lavish life in one of the world’s greatest cities, New York, or a “concrete jungle where dreams are made of,” as the song goes, can put a significant burden on your account.
Fresh out of college, we all dreamed of the perfect job. One that will allow us to live comfortably, pay off debt, save and even travel.
Fast forward a few years on the job market, you’re met with the greatest realization. An expensive city doesn’t go hand in hand with healthy finances.
You wouldn’t expect to live paycheck to paycheck on a $5,000 monthly income, right? Well, depending on your choices, this is a make-it-or-break-it situation.
For some, this income is exceptionally good, while it barely covers the essentials like utilities, food, and rent for others. So let’s dive into the fine print and see if $5,000 a month is good enough for you.
The Average Us Monthly Salary
As of September 2021, the average monthly salary in the US is $4,294.
The average American made $24.75 per hour in the second quarter of 2021. This amounts to an average of $1,095 per week for men and $890 for women.
Summed up, the annual income barely hits the $50,000 mark. But, of course, we can’t forget that there are areas in the US like San Francisco where 75% of the labor force makes $1,400 a week.
If a particular city or state has considerably higher pay, we need to look at the bigger picture.
It’s often because the cost of living is also substantially higher than in other states. So it’s a lose-lose situation. You’d make more in a greater city, but you’ll also spend more to live.
Another reason why some states have lower average pay is the level of education the workforce obtains.
For example, in Arizona, where the average annual wage is $49,823, the percent of Bachelor’s or professional degree holders and graduates is significantly low. On the other hand, states like Connecticut, where the average annual pay is $80,530, have a high educational attainment level.
The best of both worlds is hard to combine. But with the rise in remote working, it can be more attainable than we think! A higher hourly rate plus low living expenses – the perfect combo!
Where Does $5,000 Stand?
An income of $5,000 a month is above the average for the US in 2021. It’s $60,000 annually before taxes. Depending on your profession, it can even be beginner-level pay.
Programmers, accountants, bankers, insurance agents, film and video editors, freelance writers, architects, therapists are just a few of those who make around $30 an hour or $5,000 a month.
Poverty Level vs. Upscale Income
If you live in a state where $5,000 goes a long way, you might wonder how anyone can classify this income as poverty level pay?
Let’s break it down. To rent a studio in San Francisco, you’ll have to pay between $2,073 and $1,770, depending on the location. Groceries are 16% more expensive, while utilities are 2.5% cheaper than the US average.
Transportation is 50% more expensive than the average, while housing is 496% more expensive! A million-dollar house is any house in San Francisco – with the median home costing as much as $1,471,200.
It’s clear that $5,000 won’t get you far in this city. But let’s see the other side of the coin. California was fun, but what does Texas offer?
To buy a median home in Austin, you’ll pay around $551,200. Utilities and transportation are the US average, while groceries are 4% cheaper.
The living wage for a single-income household with two adults and a child is $4,256. While this is not the cheapest city and state, it’s still way more affordable than our previous example.
Where Can I Live On $5,000 A Month?
An income of $5,000 is what the middle class in America makes, so there must be places where you can earn this much and live comfortably. Here are some areas where you won’t have to compromise on safety, comfort, and struggle to make ends meet.
Cedar Park, Texas, is suitable for families due to its family-friendly neighborhoods, excellent schools, and recreation. It’s an easy commute to Austin for work and entertainment. The cost of living is below the US average, with housing, health, and groceries being as much as 10% cheaper.
Minneapolis, Minnesota, has one of the cheapest healthcare and an excellent median house price. The statistic shows that residents here spend around 21% of their income on living expenses which is very low. Most of the costs are the US average or just 6% higher.
Raleigh, North Carolina, is among the top three safest large cities to live in the US. It has one of the lowest transportation costs compared to the US average, cheaper health care and utilities. It’s a fun, welcoming town with a family vibe, plenty of job opportunities, and rising income.
The $5,000 A Month Lifestyle
Back to our frequent personal finance lesson on budgeting, here’s how to live on $5,000 if you’re a young adult. This income after tax is between $3,500 and $3,800, depending on where you live. We’ll take the average of the two, which is $3,650.
Starting with the basic rule of paying yourself first, we’ll take 20% to savings, which is $730. You use this money to build an emergency fund, send it to retirement accounts, or invest, depending on where in your financial journey you are right now.
Rent and mortgage expenses are very variable, so let’s put an average of $1,200. But, of course, you can rent cheaper, and more expensive too. You can share rent and pay as much as $600 or get a studio for $1500.
The average family in the US spends roughly $2,060 a year on utilities, which is $170 per month.
The groceries and eating out budget for a single person varies personally. If you’re looking to save and cook at home more often, you’ll need less than $300. If you’re eating out more often, the budget can go double.
Gas and car insurance range around $150 if you own one.
So far, we have spent $2,550, leaving you with $1,100.
Our calculation doesn’t include debt payoff, personal spending, pet expenses, and entertainment money. However, you can see that living with a $5,000 net income is doable even for a single person.
Is $5,000 A Month Good Retirement Income
There are some places where you can live an extraordinary life on a $5,000 a month retirement income. Most of them have favorable taxes for retirees and lower living expenses.
Savannah, Georgia, has 16% lower living expenses and 17% cheaper health care. In addition, it has no tax on social security benefits and no estate or inheritance taxes.
Provo, Utah does tax Social Security benefits at a flat rate of 4.95%, but it has social services and a sound support system for the elderly. It’s a thriving city with college-town amenities, and renting an apartment will cost you around $1,450 a month.
Bella Vista, Arkansas, has had a 70% increase in population in just 10 years. The living expenses are 10% cheaper than the US average, and Social Security benefits are not taxes. Real estate is affordable, with the median home costing $178,900, and the property taxes are the lowest in the country.
What Is A Good Amount Of Spending Money Per Month?
Controlling a spending urge is one of the first steps towards financial freedom. Setting a budget each month can help you stop impulsive and unreasonable purchases. This personal pocket money you allow yourself shouldn’t be over 10% of your take-home pay.
How Much Do I Need To Live Comfortably?
The average inevitable living wage in the US is $67,690. Homeowners need less, while renters need to make more. In New York, you can’t survive with less than $18 an hour, while in Texas, you can manage with $10 an hour.
Is 4,000 Dollars A Month Good?
A $4,000 take-home pay and $4,000 pre-tax are different. However, both are below the average US income. You can make both amounts work by adjusting your lifestyle if you don’t have many options. If you can’t sacrifice much of your comforts, you should look for a better-paying job.
The same amount of money works differently for everyone. So comparing your income to someone else’s won’t do you justice. But learning how to make the best with what you’re making at the moment can make you feel like you are making way more!
Start by budgeting and seeing where your money is going. Your living situation, the city, and the surrounding might be the main culprits in your struggles to make ends meet.
Seeing the average US pay, where do you stand? What’s the lowest pay you’ve managed to survive on?