Landing a job that pays $55,000 a year is one thing. Determining whether the amount is good enough to live for as long as you’ll be on that jib is a different thing altogether. So is 55K a good salary or should you invest your time in an additional stream of income?
$55K is a good salary to live on if you spend wisely and save every month. You can afford to pay for a two-bedroom house in states such as Alabama, West Virginia, and Michigan. It’s also possible to support a family of two to three, but it might require a bit of a stretch if the demands are high.
We can’t deny that we have varying perception about money.
To some, an annual salary of $55,000 may be good enough to live on. Yet, to others, there may be a need for an additional stream of income to live what one would consider a comfortable life.
Even with the variance in perception about money, it’s important to look at factors that determine whether $55K would be good enough in the first place.
3 Factors That Determine if $55K is a Good Salary
One thing I’d like to make clear before we go further is that whether or not 55K is a good salary is quite subjective. But even with the answer not fixed in stone, we can easily determine if $55,000 can be a good estimate based on a number of factors.
With that said, here are some factors that determine whether $55,000 is good enough to live on from January to December:
Debts can easily deplete your $55,000 paycheck, leaving you with less money to spend on a monthly basis and almost nothing to save.
Consider shredding your credit cards or handing them a person that you trust to ensure that you only use them in the event of an emergency.
We often have the urge to spend more than we have, but eliminating that sensation can go a long way to help you budget appropriately and save from time to time.
2. Cost of Living
Do your research on the cost of living to determine if you can live comfortably in a given state in the United States. Remember, there’s more to the cost of living than just house rent. You also have to factor in the cost of food, transportation, childcare (if you have a family), entertainment, and utilities.
Taking an annual salary of £55,000 as the benchmark, one must understand that the net annual pay equates approximately to £42,930 after tax deductions. Keeping spending habits, debts, and cost of living in check, this sum can demonstrate sufficiency to cover the rent of a two-bedroom house in economical regions like Alabama, West Virginia or Michigan. It could even financially sustain a family size of two to three people with reasonable demands. A monthly take-home of around £3,360, which surpasses both the national minimum wage and the average American income, offers an opportunity to manage a variety of expenses effectively. This involves prudent budgeting for necessities like groceries, utilities, and transportation, while harboring some potential for savings. Affordability, though, is a function of individual's perception of good life and therefore the understanding of 'good salary' remains subjective, varying with people's expectations of a comfortable life.
The amount of rent you pay for a one, two, three, or four-bedroom house depends on the state where you choose to live.
Los Angeles, New York, Boston, and San Francisco are some of the most expensive cities in the United States. The average rent in such cities is between $2,500 and $3,500, so you may not be able to afford living in such a city on a salary of $55K.
The best option is to live in a state where you don’t have to pay a lot of money for rent. Examples of such states include Michigan, Idaho, Kentucky, and Alabama.
Here’s a comparison table of the monthly housing cost in the inexpensive states in the United State of America.
|State||One Bedroom||Two Bedrooms||Three Bedrooms||Four Bedrooms|
After tax deduction, your net pay will be $3,706 per month. The money won’t afford you a comfortable life in Washington DC or Los Angeles, but at least you can rent a two-bedroom apartment in a state such as Alabama and Kansas and do just fine.
You might consider relocating to big, luxurious, and expensive city if you get a job that gives you a salary of at least 80K a year.
Gas and electricity tariffs vary by location.
Generation and transmission expenses regulated by the government and consumption rates determine your state’s rates. It’s best to compare prices in your region and choose a purchase option that allows you to save money on utilities on a monthly basis.
On average, American households spend 60% of their food expenditure on meals and snacks at home and 40% on eating out.
But there are ways to stretch your food budget farther.
Purchasing food at local farmer’s markets rather than supermarkets will significantly reduce your food cost because foods from them have significantly shorter journey from their market to your house.
If you prefer to shop at a grocery store, go to a less expensive one in your region, so that you can save money on food every time you go grocery shopping.
Calculating the annual cost of having a car vs taking public transportation can help you to determine whether you should own a car, move to a different state, or use public transportation to work and other places.
3. Spending Habits
Your spending habits have a direct impact on how you spend your monthly salary. So we strongly recommend checking your bank statement to learn more about your spending patterns. You’re more than likely to notice:
- Excessive costs on cell phone usage
- Money spent on items you don’t necessarily need
- Excessive (or impulse) buying
- Purchases made to make your friends happy
- Spending without a budget
Figure out where you spend the most money unnecessarily, and remove them from the list. You might be surprised just how much extra money you spend on things you don’t necessarily need.
By changing your spending habits, and budgeting your money accordingly, a salary of $55,000 can go a long way to make a big difference in your life.
How Much is $55K a Year Hourly?
The following table shows how much a salary of $55K a year is hourly. To arrive at the month, we divided the salary by 2080 hours, which is an average of 8 hours a day.
The $55K is the gross pay, so the $26.4 hourly rate is how much you earn per hour before tax deduction.
An important thing to notice here is that the hourly wage is more than three times the current median hourly rate for many Americans. So, it’s possible to live comfortably on a salary of $55K a year if you plan your budget well.
How Much is $55K a Year Per Month After Tax Deduction?
The $55,000 is your gross salary, not what you take home. To know how much you get, you need to determine how much tax you have to file first. The difference between your gross pay and total tax is the net pay that you take home.
Each state has a distinct tax rate. Some states charge a higher tax rate than others. For example, New York has a higher Federal income tax rate than Florida. So it’s important to determine what you’ll be required to pay in your location.
Based on the Federal Income Tax Bracket due in April 2022 or in October 22 (with an extension), an employee who makes $55K a year has the obligation to pay $4,664, plus 22% of the amount over $40,525.
These numbers can be somewhat confusing, so let’s break them down even further to make the calculations easier to understand.
|Tax Amount Charged||$4,664|
|Amount After Deduction||$50,336|
|Amount over $40,525||$50,336 – $40,525 = $9,811|
|Total Annual Tax||$6,822.42|
|Total Net Annual Salary||$48,177.58|
The figures above will differ if you have dependents or make pre-tax contributions to a pension or health insurance. It’s important to understand the various tax rates that apply in the United States, as they affect the proportion of your earnings. Also, note that your tax burden will increase with an increase in your income.
Is $55,000 a Good Salary for a Single Person?
As long as you continue to stay in an employment that pays $55K a year, you’ll earn $3,706 per month. That may not be a lot of money, especially if you compare it to a salary of 100K a year, but it’s still good enough for a single person to live on.
Being a single person, you don’t have many expenses to worry about, so the cost of living in a state like Michigan, Alabama, and Idaho shouldn’t be difficult to cater for.
If anything, you only worry about yourself. And if you have the right spending habits, you can save enough money for your future projects.
Is 55K a Good Salary for a Family?
$55K may be a good salary for a family of two provided you have a reasonable monthly budget, which allows you to spend and save at the same time.
A reasonable budget for the month might look something like this:
- Savings: $800
- Housing: $1,000
- Car Payment: $350
- Utilities: $200
- Insurance: $200
- Phone: $50
- Food: $350
- Personal: $250
- Entertainment: $225
You’ll still have about $280 left, which you can set aside to use in the case of an emergency.
Final Thoughts: Is 55K a Good Salary?
In the United States, the minimum wage is $7.25 per hour. If you earn $55,000 per year, it equates to $26.44 per hour, which is more than three times the minimum wage. That’s $23.16 an hour after tax deduction.
If you work 8 hours a day, 5 days a week, you take $926.5 home per week. That’s $3,706 per month, which isn’t a bad salary, especially for a single person.
According to the Bureau of Labor Statistics, the average American earns $865 per week working full time, which equates to $44,980 per year. If you earn $55,000, you are earning more than a typical American. Depending on your financial objectives, you may or may not consider adding an additional stream of income, because you might do just fine with the 55K.
And as we always say, make sure you live within your means so that you don’t spend money that you don’t already have on things you don’t really need.
In states like Alabama, West Virginia, and Michigan, you can afford to rent a two-bedroom home at this level of income. It is also possible to support a family of two or three, but this may require some effort if the demands are high.
The answer to this question depends on various factors, such as the cost of living in the area where you reside, your lifestyle, and your financial goals. However, according to the United States Bureau of Labor Statistics, the median personal income for individuals over the age of 25 in the United States was $45,776 per year.