Inflation and rising housing prices have taken a toll on America’s budgets over the past few years. This has left many Americans living paycheck to paycheck, and many more feeling as if their incomes are not keeping up with the rising cost of living.
And some new data suggests the situation may be worse than it seems, at least in some cities. HAVE Intelligent Being Research published earlier this year found that an income of $300,000 was closer to $100,000 in New York City, San Francisco and Honolulu. Taxes are a major factor in why a city or state feels a person’s salary is lower, the survey said.
Similarly, a recently released LendingTree survey found that only 52% of Millennials and 43% of Gen Xers believe they are better off financially than their parents.
Let’s look at which cities are the worst for spending the most of your money, a state with a low cost of living, and a few tips to get your finances on track.
Most expensive cities
If you’re trying to stretch your money as much as possible, these three cities are not the place to live.
1. Honolulu, Hawaii
You’d need an eye-popping $312,400 in pre-tax earnings to feel like you made $100,000 in Honolulu. The cost of living in the city is 86% higher than the national average and taxes are very high.
2. New York, New York
No surprises here; NYC generally ranks among the most expensive places in the U.S. With the cost of living about 84% higher than the national average and a combined tax rate (federal, state, and local) of 41%, you’d need to make $312,000 to feel good. It’s like you’re making a six-figure income. Ah.
3.San Francisco, California
Although the commercial real estate market in San Francisco is down, that hasn’t reduced the cost of living in the city, which is nearly 83% above the national average. If you factor in a tax rate that’s in the nosebleed section, you’d have to make $300,000 to feel like you’re making $100,000.
If you want to stay away from the most expensive state in the country, you should probably leave California off the list. SmartAsset said cities in the state need the highest salaries to make you feel like you’re making $100,000 compared to other states.
Your income sounds bigger in Texas
Because there is no state income tax and the cost of living is generally below the national average, you may want to consider moving to Texas if you can find work in the state or work remotely. Workers earning around $100,000 in Texas cities tend to keep more of their paychecks, making their six-figure incomes look like they’re actually six figures.
How do you put yourself in a better financial position?
With the cost of living rising, more Americans may need to find ways to improve their financial situations. Here are a few suggestions to get back on track.
1. Pay off your debt
Latest data shows Americans have a record $1 trillion in credit card debt. One popular way to pay this off is to use the debt snowball method, focusing on your lowest balances first, then working your way up to higher balances. If you’re having trouble making payments, you might consider a debt consolidation loan, which combines your debts into a single payment and usually has a lower interest rate than credit cards.
2. Budget for expenses
I’m guilty of not always doing this, so I feel your pain if you’d rather do something other than budgeting. But knowing where your money goes each month is the first step to finding areas where you can cut back. It will also help you eliminate expenses you forgot you paid, essentially giving you extra cash that you can put toward debt. A few great budgeting apps make this process less painful.
3. Find a few ways to increase your income
I know this may be easier said than done, but as someone who often picks up extra writing gigs on the side, I also know that it’s possible to earn extra income by putting a skill set to work. Take some time to think about how the skills you rely on at your current job could be used for a side hustle and consider signing up for a freelancing platform like Upwork. You may also consider learning a new skill, which has proven to be an effective way to increase your income.
You don’t need to move to Texas to improve your financial situation, but if your current location is becoming unaffordable, it might not be a bad idea to evaluate your housing situation. And remember, taking some small steps to improve your financial situation (including paying off your debt) is proven to increase your overall happiness. There’s no need for a six-figure income.
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