Inflation and soaring housing costs have put a damper on American’s budgets over the past few years. That’s left many Americans living paycheck to paycheck, and many more feeling as if their income isn’t keeping pace with the rising cost of living.
And some recent data shows that it may be worse than it seems, at least in some cities. A SmartAsset survey published earlier this year found that in New York City, San Francisco, and Honolulu, a $300,000 income feels more like $100,000. The survey said that taxes were a significant factor in whether a city or state made a person’s salary feel smaller.
Similarly, a recently released LendingTree survey found that just 52% of millennials and 43% of Gen Xers believe they’re better off financially than their parents.
Let’s look at which cities were the worst at making your money stretch the furthest, one state with a low cost of living, and a few tips for getting your finances on track.
The most expensive cities
If you’re trying to make your money stretch as far as possible, these three cities are not the place to live.
1. Honolulu, Hawaii
You’ll need an eye-watering $312,400 in pre-tax earnings to feel like you’re making $100,000 in Honolulu. The cost of living in the city is 86% higher than the national average, and taxes are steep.
2. New York, New York
No surprise here; NYC typically ranks among the most expensive places in the U.S. With the cost of living nearly 84% higher than the national average and a combined tax rate (federal, state, and local) of 41%, you’ll need to earn $312,000 to feel as if you’re making a six-figure income. Ouch.
3. San Francisco, California
Even with the commercial real estate market on the skids in San Francisco, that hasn’t brought down the cost of living in the city — which is nearly 83% higher than the national average. Throw in a tax rate that’s in the nosebleed section, and you’ll have to earn $300,000 to feel as if you’re making $100,000.
If you want to stay away from the country’s most expensive state, you should probably take California off the list. SmartAsset said cities in the state require the highest salaries to make you feel as if you’re earning $100,000, compared to other states.
Your income feels bigger in Texas
With no state income tax and a cost of living that’s generally lower than the national average, you may want to consider moving to Texas if you can find work in the state or work remotely. Workers earning around $100,000 in Texan cities tend to hold onto more of their wages, making their six-figure income actually feel like six figures.
How to put yourself in a better financial position
With the cost of living on the rise, more Americans may need to find ways to improve their financial situation. Here are a few suggestions for getting back on track.
1. Pay off debt
The latest data shows that Americans owe a record $1 trillion in credit card debt. One popular way to pay it off is by using the debt snowball method, focusing on your lowest balances first and then working up to the higher balances. If you’re having trouble making payments, you may want to consider a debt consolidation loan, which combines your debts into one payment and typically has a lower interest rate than credit cards.
2. Budget for expenses
I’m guilty of not always doing this, so I feel your pain if you’d rather do anything else than create a budget. But knowing where your money goes every month is the first step to finding areas you can cut back. It will also help you eliminate expenses you forgot you were paying for, essentially giving you extra cash you can put toward debt. Several great budgeting apps make this process less painful.
3. Find a few ways to boost your income
I know this can be easier said than done, but as somebody who often picks up extra writing jobs on the side, I also know it’s possible to generate extra income by putting a skillset to work. Take some time to think about how the skills you rely on in your current job may be used for a side hustle, and consider signing up for a freelancing platform like Upwork. You may also want to think about learning a new skill, which has been proven to be an effective way to boost your income.
You don’t have to move to Texas to improve your financial situation, but if your current location is becoming unaffordable, it may not be a bad idea to assess your housing situation. And remember, taking some small steps to improve your finances — including paying off debt — has been proven to increase your overall happiness. No six-figure income required.
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