What does “living comfortably” really mean?
Earning enough money so you can buy the things you need.
Having time for leisure activities like going out with friends or hobbies.
Saving some of your earnings each week in case something unexpected happens such as a medical emergency or losing your job.
So, how you can calculate the salary you need to live comfortably? Take note of some of the factors to consider in your calculations.
Cost Of Living
The cost of living changes depending on where you live. Here is the average cost of living in major North American cities:
Toronto is $98,174
Chicago is $94,917
Calgary is $66,00
New York is $128,552
Some expenses that change depending on where you live include:
Fun and Entertainment
What are some other factors that affect the cost of living from one place to another?
Your lifestyle will affect your monthly expenses. Ask yourself:
Do you have a car or use public transportation?
Do you go out to eat a lot or cook most of your meals at home?
Do you have dietary restrictions? (vegetarian, vegan, etc.)
Do you own a house or rent?
Debt to Income Ratio
The debt-to-income (DTI) ratio is the percentage of your gross monthly income that goes to paying your monthly debt payments.
Some types of debt that you might pay monthly:
Knowing how much debt you pay each month compared to your income will help you calculate how much you'll need to earn.
Saving for an emergency, a down payment, or retirement are financial goals you might have.
Considering savings is crucial when calculating the salary you need to live comfortably. Use The 50-20-30 Rule as a guide.
The 50-30-20 Rule
This rule is helpful as it gives you an idea of how much is recommended for needs, wants, and savings:
50% in necessities
30% in wants
20% in savings
Now that you know what to consider when calculating your salary to live comfortably:
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