How much money do I need to be financially independent?
Americans say they'd need to earn about $94,000 a year on average to feel financially independent. That's about $20,000 more than the median household income of $74,580.
Perhaps surprisingly then, financial freedom comes at a much lower price point in the eyes of the average American, according to Empower—about $94,000 a year, is how much they said they'd need to earn to feel financially independent.
Can You Be Financially Stable Earning the Median Income? The median household income in the U.S. is just under $75,000, so it makes sense that the largest proportion of those surveyed (45%) said that it's possible to be financially stable by earning between $50,000 and $100,000 a year.
Being financially independent means having sufficient income, savings, or investments to live comfortably for life and meet all of one's obligations without relying on a paycheck.
Key takeaways: The typical American making $40,480 a year needs at least $826k invested with a 4.9% annual return to live off interest alone. Estimate how much you need invested to live off interest with the formula: Annual income / Annual interest rate = Savings goal.
Just 1 in 10 respondents to a new survey said that they are living financially free as they see it. And that doesn't mean 'being rich' with just 12% stating that as their definition of financial freedom.
In 2021, the most recent year with available data, 39% of 21-year-olds were working full time, compared with 64% in 1980. And only a quarter of people this age in 2021 were financially independent of their parents – meaning that their income was at least 150% of the poverty line – compared with 42% in 1980.
Here, a single person needs $110,781 annually or $53.26 in hourly wages to be comfortable, according to the data. For a family of two working adults with two children, a salary of $276,557 is needed.
To live “comfortably” as a single person in 99 of the largest U.S. metro areas, you'll need a median income of $93,933, according to a recent SmartAsset analysis.
That said, the typical age of financial independence should be between 20-23 years old, according to a Bankrate survey.
What is the fastest way to become financially independent?
- Know Your Finances. ...
- Reduce Debt. ...
- Live Below Your Means. ...
- Increase Your Income. ...
- Invest in Your Future. ...
- Build an Emergency Fund. ...
- Monitor Your Credit Score. ...
- Seek Professional Financial Help.
Among the key findings: 45% of young adults say they are completely financially independent from their parents. Among those in their early 30s, that share rises to 67%, compared with 44% of those ages 25 to 29 and 16% of those ages 18 to 24.
- Learn How to Budget. You won't get ahead if you don't have a plan for your money. ...
- Get Debt Out of Your Life—For Good. ...
- Set Financial Goals. ...
- Be Smart About Your Career Choice. ...
- Save Money for Emergencies. ...
- Plan for Big Purchases. ...
- Invest for Your Retirement Future. ...
- Look for Ways to Save Money.
States that require the highest living wage for individuals are Hawaii ($112,411) followed by Massachusetts ($87,909) and then California ($80,013).
- The Top 11 Ways to Earn $10,000 in Passive Income Each Month : Make Money Online. ...
- Dropshipping: The Gateway to E-Commerce. ...
- Using Endorsem*nts to Earn Through Affiliate Marketing. ...
- Etsy Print on Demand: Innovation Meets Business. ...
- Real estate crowdfunding. ...
- Creating and selling digital products.
Rank | State | Income Required |
---|---|---|
47 | New York | $73,226 |
48 | California | $80,013 |
49 | Massachusetts | $87,909 |
50 | Hawaii | $112,411 |
As of May 2023, more than 1 in 5 Americans have no emergency savings. Nearly one in three (30 percent) people in 2023 had some emergency savings, but not enough to cover three months of expenses. This is up from 27 percent of people in 2022. Note: Not all percentages total 100 due to rounding.
Bankrate's latest survey results found 56% of U.S. adults lack the emergency funds to handle a $1,000 unexpected expense and one-third (35%) said they would have to borrow the money somehow to pay for it.
Official Poverty Measure
The official poverty rate in 2022 was 11.5 percent, with 37.9 million people in poverty. Neither the rate nor the number in poverty was significantly different from 2021 (Figure 1 and Table A-1). The official poverty rate for Black individuals decreased between 2021 and 2022.
How much cash should a 21-year-old have?
However, a good rule of thumb for a 21-year-old is to have $6,000 in a savings account for emergencies and long-term financial goals. And that requires you to learn how to start budgeting and saving money. If you're nowhere near that amount, don't panic.
Current Financial Situation. At the end of 2022, 73 percent of adults were doing at least okay financially, meaning they reported either "doing okay" financially (39 percent) or "living comfortably" (34 percent). The rest reported either "just getting by" (19 percent) or "finding it difficult to get by" (8 percent).
1 ADULT | 2 ADULTS (BOTH WORKING) | |
---|---|---|
0 Children | 2 Children | |
Living Wage | $27.32 | $33.26 |
Poverty Wage | $7.24 | $7.50 |
Minimum Wage | $16.00 | $16.00 |
Earning $25 per hour puts you well above the poverty line, especially if you're single. With careful budgeting and financial planning, $25 is still a viable hourly wage. Even though it's not a particularly high hourly rate, it's still well above the minimum wage rate in most areas.
2022 | 2021 | |
---|---|---|
Monthly | Annually | |
One person | $3,693 | $40,859 |
Family of two | $6,372 | $69,382 |
Family of three | $7,189 | $79,163 |