Making $300,000 a year sounds like a lot of money. $300,000 is a top 10% income. But unfortunately, making $300,000 will provide you a very middle class lifestyle in a big expensive city, especially if you have children.
To make $300,000 usually means having to live in a more expensive city. Making this level of income also means having to work long hours.
For example, making $300,000 a year is a common household income for couples living in places like New York City. Same thing for families living in LA, DC, Boston, and Seattle. The reason why is because many first-year top graduates now earn $150,000 – $180,000 all-in their first year!
Here are some examples of household combinations that make $300,000 a year or more.
Examples Of Households That Make $300,000+ A Year
- A Bay Area Rapid Transit janitor made $234,000 + $36,000 in benefits
- Or a Bay Area Rapid Transit elevator technician made $235,814 + $48,429 in benefits
- Starting salaries for 22 year old employees at Facebook, Google, and Apple range from ($85,000 – $120,000) + ($30,000 – $60,000) in annual equity grants.
- 30-year-old first year Associate in banking earns $150,000 in base salary + ($0 – $120,000) in bonus
- A 26-year0old first year law associate at a firm like Cravath make $180,000 base + $20,000 sign on bonus. By the end of their 6th year they are making over $300,000
- Or 29 year old Director of Marketing at a startup makes between $120,000 – $180,000
- A personal finance blogger with 500,000 pageviews earns between $300,000 – $600,000
- A 42-year-old college professor at Berkeley makes $235,000 on average and $279,000 at Columbia and NYU
- The average specialist doctor finishing his or her fellowship at 32 makes $300,000. The average salary for a primary care physician is $200,000
- A 26-year-old middle school teacher making $70,000 a year plus her $250,000 a year VP of Marketing wife
- A 56-year-old high school athletic director making $120,000 a year plus his $200,000 a year management consultant wife
As you can see from the examples, it is very easy to reach $300,000 a year if you both went to college and land decent jobs in expensive cities like San Francisco, Seattle, New York, Los Angeles, Washington DC, and Boston. Half of America’s population lives on the coasts.
A Middle Class Lifestyle On $300,000
Now let’s look at how easily the money gets spent if you have just one child while making $300,000. This is a real budget I put together based on a couple’s expenses sent to me. I also cross-referenced every line item with my own family’s expenses since we have one kid.
As you can see from the budget, there’s not that much cash flow left ($4,500) a year for emergencies. Yes, the couple is saving $37,000 a year in their respective 401(k) plans. Thy are also paying down principal on their home. But it’s not like they’re balling out and living the high life.
They are comfortable, and will turn out fine. But with their savings rate (<15% of gross), they will likely have to work for at least 20 more years. 20+ years of work is fine if you like your job, but most people don’t. They get sick and tired of it all and want to do something else.
$300,000 Feels Like A Middle-Class Income
Psychologically, earning $300,000 feels OK because it puts the household in the top 10% of household income earners. But making $300,000 feels like a middle-class income due to how little cash flow is left.
A household needs to earn $470,000+ to be in the top 1% in 2022. They know that if they could just find some way to live in a lower cost area, they’d be just fine. Unfortunately, Insulation is now running above 7.5%, making everything much more expensive.
When you make $300,000 a year, you are surrounded by folks who make a similar amount, if not more. Some will even come from super wealthy families who will hook them up with everything in the world. Ironically, having rich friends will often times make you feel poorer.
Paying Taxes On A $300,000 Income Is A Killer
The biggest bummer about making $300,000 a year or more is having to pay around $100,000 in total income taxes. If you are a W2 employee, there’s really no other way around paying ay such a high tax amount.
Conversely, if you can earn $300,000 a year in investment income, you’ll likely pay an effective tax rate of 10% less. My personal goal is to shoot for $300,000 in passive investment income to support my family of four. This way, both my wife and I don’t have to work and leave our children.
The good thing about making $300,000 a year is that Joe Biden won’t be raising your taxes. Joe Biden plans to raise the highest marginal income tax rate from 37% to 39.7% for households making over $400,000 a year.
At the end of the day, making $300,000 a year feels good. But it feels better if you can make $300,000 in a low-cost area of the country or through investment income.
If you are stressed out at work with a household income of over $400,000, beware. Your taxes may also be going up under President Biden. Is it really worth spending so much time away from your kids if you have to pay a 39.7% federal marginal income tax rate? I say no.
The Keys To A Better Life
The key solutions to a better life are to save more aggressively and track your finances diligently. Use the best free financial tools to optimize your finances.
I’ve used Personal Capital’s free tools since 2012. Since then, my net worth and financial peace of mind have increased tremendously.
We are seeing this with the migration out of expensive coastal cities to more affordable places like Houston. There is no reason to be stuck living in a city where you have to pay a whopping $4,300 a month for a regular two bedroom apartment when you can get a mansion for the same monthly cost.
Find Flexibility At Home
The global pandemic has encouraged the permanent trend of working from home. Therefore, you want to invest in heartland real estate. Valuations are cheaper and net rental yields are higher.
It makes sense, since technology allows us to be untethered from an office while the cost of living has truly become untenable in many coastal cities. Therefore, I’ve invested $810,000 in real estate crowdfunding to take advantage.
When you can earn rental yields 4-5X greater without having to maintain the property thanks to real estate crowdfunding, I’m all over it. My SF rental property I sold in 2017 had a 2.4% rental yield. Once I sold, I reinvested the proceeds in commercial property in places like Texas with 10% – 13% rental yields.
Earn your big bucks and get out of the grind! You won’t regret enjoying life when you look back.
Invest On The Best Platforms
With real estate crowdfunding, you don’t need to risk $100,000 or more to invest in commercial real estate. Instead, you can invest for much lower amounts such as $5,000 and be better diversified. The best real estate crowdfunding platforms today are:
1) CrowdStreet is based in Portland and connects accredited investors with a broad range of debt and equity commercial real estate investments. CrowdStreet is intriguing because they focus primarily on 18-hour cities (secondary cities) with lower valuations. Net rental yields and growth are usually higher as well.
2) Fundrise, founded in 2012 and available for accredited investors and non-accredited investors. I’ve worked with Fundrise since the beginning, and they’ve consistently impressed me with their innovation. They are pioneers of the eREIT product. For most investors, investing in a diversified eREIT is the way to go.
Both of these platforms are the oldest and largest real estate crowdfunding platforms today. They have the best marketplaces and the strongest underwriting of deals. Sign up and take a look around as it’s free.
As always, do your own due diligence and only investment in what you understand. I’ve personally got $810,000 invested across 18 different commercial real estate projects around the country. My current internal rate of return is about 12% since 2016.
It feels great to earn $300,000 a year or more. However, it feels even better if you can make more passive income and pay less taxes. Once you get to about $300,000 a year, extra income won’t make you any happier. In fact, it might make you sadder if you’re working too hard for your money.
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About the Author: Sam started Financial Samurai in 2009 as a way to make sense of the financial crisis. He proceeded to spend the next 13 years after attending The College of William & Mary and UC Berkeley for b-school working at Goldman Sachs and Credit Suisse.
In 2012, Sam was able to retire at the age of 34 largely due to his investments. He spends time playing tennis, hanging out with family, and writing online to help others achieve financial freedom. Financial Samurai began in 2009 and is one of the largest and most trusted personal finance sites today.
