As a small business consultant who has both bootstrapped my own startups and guided entrepreneurs across industries, I‘ve developed an in-depth understanding of personal finance planning. When speaking with solopreneurs or individuals striking out on their own, one of the most common questions I receive is: "What salary do I need to live comfortably?"
My first piece of advice is always: it depends. There‘s no universal benchmark. Where you live, your lifestyle preferences, and overall expenses all play a major role in determining your number. In this article, we‘ll explore these factors and equip you with strategies to quantify and even boost your income over time.
Quantifying Cost of Living
I always counsel clients to start by quantifying their basic cost of living—including essentials like housing, food, transportation, and healthcare. America has extreme variability in expenses across different metro regions. For example:
- Average rent for a 1-bedroom apartment in San Francisco, CA runs $3,469 per month while Huntsville, AL averages just $726 per month.
- A single person spends approximately $3,970 per year on groceries nationwide. But you‘ll likely allocate more if you live in an urban area like New York City where costs run higher.
- Owning a car also varies – from $9,282 per year in the midwest to over $12,000 on the coasts.
I advise tallying up these major living costs in your city to start. Resources like Numbeo or the BLS Consumer Expenditure Surveys can help provide estimates.
Pro Tip: Break expenses into fixed vs variable totals. Your housing costs rarely fluctuate but activities like dining out and entertainment can adapt more fluidly to your income level.
Average Income Benchmarks
To put your tallied living costs into perspective, let‘s examine some average salary benchmarks:
- The median personal income in the U.S. is approximately $36,000. But again – distribution varies substantially based on location.
- Research from Purdue University suggests $105,000 in annual income represents a point of "emotional well-being." However, this applies to overall life satisfaction – not just basic needs.
- The average living wage ranges from about $35,000 to $55,000 depending on your metro area to cover fundamental needs. For example, a living wage clocks in at:
| Metro Area | Annual Living Wage |
|---|---|
| Dallas-Fort Worth, TX | $31,634 |
| Washington, D.C. | $54,381 |
| Seattle, WA | $51,366 |
Keep in mind even a "livable" salary requires budgeting discipline. But it provides a good baseline indicator to assess salaries during career transitions.
Strategies to Bolster Your Income
If your current income falls short of supporting your lifestyle, several strategies exist to bridge the gap over time:
- Develop in-demand skills – Consider pursuing an advanced certification or additional training to expand your income potential. For example, many small business owners I advise obtain quick qualifications in digital marketing, web development, bookkeeping, etc. to unlock new revenue streams.
- Generate passive income – Can you monetize a hobby or turn a side-project into an additional source of cashflow? From towing an AirBnb property to selling crafts on Etsy, technology enables diverse "side-hustle" opportunities.
- Negotiate higher compensation – If you‘ve increased output and taken on more responsibilities at work, leverage these wins to make a case for a raise with your manager. Be prepared to quantify your impact and have a target number in mind grounded in industry salary norms.
There‘s no "easy button" to substantially grow your income overnight – but with diligent efforts across months and years, you can reach an amount that sustains the lifestyle you envision.
Key Takeaways
- There‘s no universal definition of a "good salary" – your individual expenses and preferences must determine your target number. Use cost of living data for your metro area as a starting point for estimates.
- Average salaries either fall short of actual costs (median income) or represent aspirational happiness benchmarks rather than essentials (like the Purdue study). Focus instead on quantifying a "livable wage."
- Proactively employ strategies like acquiring in-demand skills, generating side income, or negotiating compensation packages in order to work towards your income goals over time.
As an entrepreneur and small business consultant, I hope this guide gives you a framework for determining and progressing towards your personal definition of a "good salary." My team specializes in assisting both solopreneurs making career shifts as well as early stage startups optimizing their compensation budgets – so don‘t hesitate to reach out if you need additional support!
