Young Americans think they need to earn $200K/year in order to feel ‘financially secure’ — but the average US salary is $65K. Here’s how to live comfortably with the money you have

But we know from Federal Reserve data that young Americans are not making close to this much. The average household income of those less than 35 was a little over $82,000 in 2022. For families of Americans ages 35 to 44, it was almost $169,000.

So is it still possible to live comfortably on that?

Why young Americans think $200K is necessary

The data reflects growing concerns about financial stability in an era marked by rising housing costs, record levels of debt, and economic uncertainty. For young adults living in urban areas, rents have skyrocketed and it’s possible many believe only a six-figure salary can cover these expenses while allowing room for savings and discretionary spending.

Student loan debt — American borrowers have an average federal student loan debt of $37,000 — is putting pressure on younger Americans to secure high-paying jobs to manage their loan repayments while covering expenses. According to Experian, younger consumers are seeing average credit card balances spike faster than others and a possible explanation is “the costs of entering adulthood have increased significantly this decade.”

“Many Americans are stuck somewhere between continued sticker shock from elevated prices, a lack of income gains and a feeling that their hopes and dreams are out of touch with their financial capabilities,” said Mark Hamrick, a Bankrate senior economic analyst.

Getting by on less

A $200,000 salary is significantly higher than the national average of $65,470, an amount that increases access to high-quality housing, investment options, plus the ability to pay off debts and pursue certain lifestyle choices, like travel or entertainment.

But with careful planning and good habits, $65,000 can go a long way.

The first step is building an emergency fund worth three to six months of expenses. Focus on paying down high-interest debt, such as credit cards or personal loans. Then set a budget that prioritizes essential expenses, including housing, utilities, groceries, and transportation. Consider the 50/30/20 rule: spend 50% of your income on needs, 30% on wants, and save 20%.

You can also consider refinancing student loans to secure a lower interest rate and reduce monthly payments. Keeping debt under control frees up more income for savings and discretionary spending.

At work, consider taking advantage of employer-sponsored benefits, such as health insurance, 401(k) matching, or employee discounts. If your company offers a health savings account (HSA), contribute to it — HSAs offer tax advantages and can help you cover medical expenses more affordably.

Closing the gap through hustle and discipline

Many young Americans are turning to side hustles or freelance work to supplement their income. The gig economy offers numerous opportunities for young professionals to leverage their skills and generate extra cash flow.

Living within your means doesn’t mean sacrificing quality of life. Consider cooking more meals at home instead of eating out, reducing subscription services, and shopping during sales or using discounts.

Setting both short-term and long-term financial goals is important to wringing everything you can from what you think is a modest salary. Short-term goals may include saving for a vacation or building an emergency fund, while long-term goals might involve purchasing a home or planning for retirement. Creating a budget and regularly reviewing it as your income and expenses change can keep you on track.