How much money do you need to be financially stable?
So, if you've been wanting to know how much you need to be financially independent, it comes down to the “4% rule”. The 4% rule means you can safely withdraw 4% from your investment accounts each year, adjust your withdrawal for inflation, and never run out of money. Here's an example.
found that the majority of Americans (69%) believe that financial stability is achievable for those earning less than $100,000, with 25% believing they would only need less than $50,000 in annual income to be on firm financial footing. See: How Much Household Income is Considered Upper Middle Class for 2023?
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. But that's still about $20,000 more than the median household income of $74,580.
Being financially stable means you have enough money coming in to cover your expenses, as well as some extra funds to put aside for savings or potential crises. You continuously save money, you have paid your high-interest debts and you don't fret about emergencies because you're financially prepared.
Bottom Line. Living on $1,000 per month is a challenge. From the high costs of housing, transportation and food, plus trying to keep your bills to a minimum, it would be difficult for anyone living alone to make this work. But with some creativity, roommates and strategy, you might be able to pull it off.
Though Americans on average say they'd need about $233,000 a year to feel comfortable, that number drops to $184,000 a year among those currently earning less than $50,000 and rises to $341,000 a year among those currently earning at least $100,000.
“On average, Americans believe it takes approximately an additional $284,000 above feeling wealthy to really be 'worry-free. ' This 'wealth delta' depends greatly on where you are in life, with the difference being highest for those in their 30s and 40s — peaking at nearly $1 million.
This means the value of money today is not the same as it will be in the future. To account for this, experts suggest you multiply your desired retirement income by 25 times. So if you want to retire on $20,000 a year, you would need $500,000 saved to live comfortably and never have to work again.
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.
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.
How much money is considered rich?
Based on that figure, an annual income of $500,000 or more would make you rich. The Economic Policy Institute uses a different baseline to determine who constitutes the top 1% and the top 5%. For 2021, you're in the top 1% if you earn $819,324 or more each year. The top 5% of income earners make $335,891 per year.
- Dependence. You are still dependent on someone else to provide for you. ...
- Survival. You earn just enough income to cover your expenses. ...
- Stability. You consistently earn enough money to cover your expenses and have enough left over to start saving. ...
- Security. ...
- Independence. ...
- Freedom. ...
- Abundance.
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.
Living debt free: 54.2% Living comfortably, but not necessarily being rich: 50% The ability to regularly meet all of their financial obligations and still have some money left over each month: 49.3% Never having to worry about money: 46.2%
Living on $2,000 per month is doable, but you won't be able to live just anywhere. This is important because at the time of writing the average Social Security benefit paid is $1,701 per month.
“Retiring on $2,000 per month is very possible,” said Gary Knode, president at Safe Harbor Financial. “In my practice, I've seen it work. The key is reducing expenses and eliminating any market risk that could impact your savings if there were a major market downturn.
- Choose quality over quantity. ...
- Prioritize value over price. ...
- Use credit wisely. ...
- Declutter regularly. ...
- Use a budget to guide your spending. ...
- Know the difference between wants and needs. ...
- Be a savvy consumer. ...
- Prioritize your values.
Americans say they would need to earn $483,000, on average, to feel rich or achieve financial freedom, according to a recent Bankrate survey. That's over eight times the national median income of about $57,200, according to Labor Department data.
There is no one-size-fits-all answer to the question of how much money you should have in your savings account. The standard recommendation is to have enough to cover three to six months' worth of basic expenses. As a goal, that number can be steep.
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.
What does God say about worrying about money?
Proverbs 23:4 "Do not weary yourself to gain wealth, Cease from your consideration of it."
Financial anxiety, or money anxiety, is a feeling of worry about your money situation. This can include your income, your job security, your debts, and your ability to afford necessities and non-essentials.
Set aside 70% for essential expenses:
A majority of the money you make should be used for the essentials in your life. Things needed to maintain a standard of living fall into this bucket. Monthly rent, groceries, utilities, any commuting costs, or insurance/credit card payments all fall into this category.
The most common answer was between $1 million—$10 million (USD). That is a surprisingly low number when you consider that they were not asked “how much do you need to retire?” but how much to fund their “ideal life”.
The $75,000 Study
This belief is supported by a widely publicized 2010 study led by Daniel Kahneman and his Princeton colleague, Angus Deaton — both winners of the Nobel Prize in Economics — which concluded that happiness only increases with income up to $75,000.
