May 23, 2023
Many people find tax season to be a stressful time of year, but individuals living in some of the most popular cities in America may find paying taxes to be an even more discouraging experience — even if they are wealthy.
SmartAsset, a financial research firm, analyzed the impact of taxes and living costs on individuals living in America’s biggest cities. Their research found that an annual salary north of $300,000 in New York, San Francisco and Honolulu is required just to bring home $100,000 after taxes and cost-of-living adjustments.
Don't miss
- Rich young Americans have lost confidence in the stock market — and are betting on these 3 assets instead. Get in now for strong long-term tailwinds
- Here's how much money the average middle-class American household makes — how do you stack up?
- You could be the landlord of Walmart, Whole Foods and CVS (and collect fat grocery store-anchored income on a quarterly basis)
For context, the median American household income is $70,784, according to the U.S. Census Bureau. But SmartAsset’s research shows that a family living in the Big Apple or Silicon Valley would need more than four times that amount to feel like they are in the "middle class."
Advertisement
Regardless of income level or location, it's always a good idea to save money. With that in mind, here are five ways to stretch your paycheck.
Must Read
- Dave Ramsey warns nearly 50% of Americans are making 1 big Social Security mistake — here’s what it is and the simple steps to fix it ASAP
- Robert Kiyosaki begs investors not to miss this ‘explosion’ — says this 1 asset will surge 400% in a year
- Vanguard reveals what could be coming for U.S. stocks, and it’s raising alarm bells for retirees. Here’s why and how to protect yourself
Join 250,000+ readers and get Moneywise’s best stories and exclusive interviews first — clear insights curated and delivered weekly. Subscribe now.
Minimize housing costs
Housing expenses can be among the most significant drains on your finances. Making adjustments to these costs can be an effective way to stretch your paycheck further.
If you're looking to buy a home, it's important to stay well below your mortgage approval amount to ensure you don't stretch your finances too thin. Locking in at a good interest rate can also save you money in the long run.
According to a study by Freddie Mac, borrowers who obtain at least five quotes when shopping for a mortgage save an average of $3,000 over the life of the loan.
It's important to ensure that your monthly payments are stable and less than one-third of your monthly income. This is known as the 30% rule and is widely recommended by financial experts. By adhering to the rule, you make sure that your housing costs are not eating up too much of your budget, leaving you with more money to save or invest.
Put simply, live below your means.
Maximize tax-advantaged retirement accounts
Contributing to a 401(k) or IRA can help to reduce your taxable income and lower your tax bill. It can also fuel your wealth-building over time.
You should also look to take advantage of employer-sponsored benefits. Many employers offer perks such as commuter benefits and flexible spending accounts, which can help to reduce your out-of-pocket expenses and save you money.
If your employer offers health insurance benefits, be sure to take advantage of them so you can reduce your health-care costs and save money on medical expenses.
Read More: Dave Ramsey says this 7-step plan ‘works every single time’ to kill debt, get rich in America — and that ‘anyone’ can do it
Hire a professional accountant
If you make a lot of money, it's a good idea to hire a professional accountant to help with your finances, including filing your taxes, to ensure you don't make any costly mistakes.
Those of you who have a side gig might want an accountant to help you figure out how to deal with the income tax complications that come with being self-employed.
Even if you don't make a lot of money, it might still be worth it to hire an accountant. They can help you get the most out of government subsidies and tax credits that you might qualify for. This could save you a lot of money in the long run and bring you peace of mind.
You May Also Like
- Turning 50 with $0 saved for retirement? Most people don’t realize they’re actually just entering their prime earning decade. Here are 6 ways to catch up fast
- This 20-year-old lotto winner refused $1M in cash and chose $1,000/week for life. Now she’s getting slammed for it. Which option would you pick?
- Warren Buffett used these 8 repeatable money rules to turn $9,800 into a $150B fortune. Start using them today to get rich (and stay rich)
- Here are 5 easy ways to own multiple properties like Bezos and Beyoncé. You can start with $10 (and no, you don’t have to manage a single thing)
Vishesh Raisinghani is a financial journalist covering personal finance, investing and the global economy. He's also the founder of Sharpe Ascension Inc., a content marketing agency focused on investment firms. His work has appeared in Moneywise, Yahoo Finance!, Motley Fool, Seeking Alpha, Mergers & Acquisitions Magazine and Piggybank.
Managing Money • 4h ago
