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Comfort is an elusive luxury for most consumers in today’s economy.
Some 77 percent of U.S. adults say that the cost-of-living – rent, mortgage, groceries, childcare and other essential expenses – is a “significant” source of stress, according to an October survey of 3,132 adults by the American Psychological Association.
That leads to a question: How much money does someone need to feel financially comfortable?
That’s more about a state of mind than a single number, Dave Wangberg, owner of Wangberg Financial Coaching, told The Independent in an email.
“Financially comfortable means all bills are paid each month, the family gets to enjoy the money in some regard (nights out, vacation, kid sports, etc.), and they don’t have this fear of being unable to pay the mortgage, credit card bill, or other necessities to ensure they have everything for their home,” he said.
Feeling financially comfortable can help relieve stress, as it makes it easier for consumers to say “yes” to a night out with friends without worrying over how you’ll pay for it (Getty)
Calibrating comfort
Anthony Guerriero, a certified public accountant and managing partner at Manhattan Miami Real Estate, told The Independent in an email that he goes beyond a single figure.
“I’d start with two ceilings, not one number,” Guerriero said. “The first is monthly: take-home pay minus fixed costs and debt payments. The second is cash: what sits in savings after you keep a reserve you will not touch. Whichever ceiling is lower is the number that decides how comfortable you really are.”
If your income, after costs and debt payments, is $2,000 and you have $6,000 in savings aside from your emergency fund, then your income is what sets your comfort level.
State of play
It also helps to understand the cost-of-living in your state and how your salary stacks up against national data, Sepehr Parsa, founder of DollarMap, a state-level cost-of-living tracker, told The Independent in an email.
States with a lower cost-of-living require a lower comfort number. A single person’s salary equal to the national household median – $87,460 – could be enough to live comfortably in West Virginia, for example, Parsa said.
But in a state where life is expensive, such as California or New York, an individual may need double the national median to feel financially at ease.
For a family-of-three, a household income of $110,000 to $130,000 should be enough to feel comfortable based on national averages for daily expenses and debt, Eric Croak, founder of wealth management firm Croak Capital, told The Independent in an email.
“With that range, you can still afford to save 15% for retirement,” he said.
Safety net
As Guerriero noted, financial comfortability is about two numbers – salary and savings.
He and other experts agree that individuals need to save an amount, equal to three to six months of their monthly bills, in an emergency fund. That way, they can sustain themselves after a sudden job loss or other unexpected life event.
“Once you hit that goal, whatever the number is, you’ll be surprised by how infrequently it gets touched,” he said. Generally speaking, for six months that number is around $20,000 for single people and $60,000 for a family with two kids, Croak said.
Signs of discomfort
Financial discomfort is relatively easy to spot because of the stress and worry it causes consumers. Those who live in turmoil over money tend to feel tension anytime unexpected expenses arise, Wangberg said.
“The mere thought of an unexpected expense puts them on edge,” he said. “Even something as small as $100 can cause panic because they are cautious to a point where there’s no wiggle room to allow for unexpected payments.”
Croak pointed out warning signs like relying on buy now-pay later programs to cover the cost of everyday essentials like groceries, or being afraid to open your banking app.
Warning signs of financial uncomfortability include paying for everyday items like groceries with buy now, pay later plans such as those offered by Klarna (Getty)
While earning more money could suggest a more comfortable life, those earning $200,000 or more aren’t immune to financial discomfort.
Around 25 percent of those earning $200,000 to $300,000 are living paycheck to paycheck, and that rate goes up to more than 30 percent for those earning $300,000 to $500,000, according to a September survey from financial firm Goldman Sachs.
“The one that people forget about is the high earner with no money in their pocket,” Croak said. “It’s not as rare as you think, and it’s just as stressful to get a large salary with no cushion.”
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