When considering your household income, you’ll want to have a good idea of how much you need to live comfortably in your area. With housing prices going up across the country, how do you make sure you’re living within your means without selling yourself short?
The average income for full-time earnings in Australia is $82,436, but this is always changing. Things like global pandemics, the unemployment rate, and more can affect the average earning potential. Household income also depends on how many people live within a household (single, married, partnership, etc.), the location, and experience level.
Even those on the higher end of the pay scale might find themselves unable to afford their expenses. Living paycheck to paycheck is a cycle many people of all economic backgrounds fall into. However, for those living on just $60,000 a year, is it possible to live comfortably? In this guide, we’ll discuss whether that’s a reasonable wage depending on your situation and how to stretch your money further.
What Factors Go Into Understanding Income?
It’s important to realise that no two situations are alike. While $60k might be a perfectly reasonable salary for one family, it could be the complete opposite for another.
In general, the fewer debts and expenses you have, the further your income of $60k will take you. However, it also depends on the following factors:
- Location – With some parts of Australia (namely: the big cities) having significantly higher costs of living than suburban or remote areas, your location is likely the biggest factor in this discussion.
- Experience – For someone starting out in their career, $60k is a reasonable pay. People with only 1-5 years of professional experience typically have fewer expenses as well.
- Family size – If you’re a single person, $60k a year will get you further than someone trying to support a family. This also depends on whether you’re the sole-earner in your family or if others are adding to the household income.
- Debts – If you have existing debts, $60k might not be enough to cover your monthly payments. Depending on your specific tax situation, you’ll be looking at around $3,900 in net income (after tax) per month. After housing and other expenses, this might not be enough depending on your debt situation.
- Housing – Another important question is how much you’re paying for housing. Whether you rent or own your house impacts whether $60,000 is enough to live well.
- Misc expenses – Finally, you need to keep in mind other expenses you might pay each month like transportation, streaming services, internet, insurance, and so on.
It’s true that many families make $60,000 or even less and this works for them. It’s also true that other families struggle to make ends meet at this income level. Realistically speaking, $60,000 is not enough to support a family of four in Sydney, Melbourne, or another expensive city. In a less expensive location, however, it could be the right income for your needs.
How Much Income Do You Need to Live Well?
With that in mind, how much income do you need in reality to live life well? Again, you’ll need to pay close attention to the factors above. There is no one-size-fits-all for budgeting lifestyle expenses.
It all comes down to the average cost of living for your location. This is the best starting place to determine how much income you need to live comfortably without falling into debt.
A website like Numbeo is a great place to find updated data about the cost of living for specific cities. You can add up the average price of things like rent, meals out, groceries, and transportation to determine just how much you’d need to make per month to live life comfortably.
For example, let’s look at one of Australia’s most expensive cities. In Sydney, here are some of the average costs of things you’ll need to consider each month:
- Average meal at an inexpensive restaurant ($18)
- Regular price of coffee ($4.13)
- Basic monthly utilities ($198.09)
- Basic internet cost ($70)
- Monthly transportation pass ($217)
- Rent for 1 bedroom apartment in city centre: ($2,664)
These are the most basic of expenses for the average single or married couple without kids. For someone who eats out once a week, has a few take away coffees, rents an apartment, and uses basic utilities, this will average around $3,233 per month in expenses. While this might be just enough to support on a $60k salary, it’s cutting things very close.
Creating Your Own Monthly Budget
Because no two budgets look completely alike, try making your own. Factor in your average monthly expenses and leave nothing out. This should be realistic, so don’t be afraid to take a close look at your financial situation.
Review your account statements for the month to get an accurate picture of what your monthly spending really is. Sometimes we don’t even realise what exactly we’re spending our money on until we take a closer look after the fact. This is especially true if you’re using credit or debit cards.
There are a few rules of thumb to consider when making your own monthly budget. It helps to use what’s called the 50-30-20 rule. In general, you’ll want your monthly necessities (housing, transportation, etc) to be around 50% of your monthly net income. This means it should be under $2,000 based on a $60,000 income. That is where the 50 in the 50-20-30 rule comes from.
You’ll want 20% of your monthly income to go towards financial investments. This could be loans, debts, credit card payments, and eventually your savings plan. The final 30% is flexible spending. This is for any extras you might need at the end of your budget, like eating out, entertainment, and hobbies.
How to Stretch Your Income Further
It’s entirely possible to stretch your income further, even if you’re limited to a $60,000 monthly income. The first step in doing this is to simply create a budget. From there, you’ll know what you need to do moving forward to keep you from overstepping your income.
When you’re not on top of your finances, it’s easy to live beyond your means. This is a slippery slope, and it could leave you without a plan in case of emergency. However, you can stretch the income you have further with these tips:
- Limit unnecessary purchases – To start, get in the habit of creating a shopping list and sticking to it. Also, look for coupons and discounts whenever possible to save on things you already need to purchase.
- Share housing – Most people spend most of their income on housing. You can limit this expense by sharing housing, living at home with parents, or moving in with a significant other.
- Lower cost-of-living location – While there are certainly benefits to living in big cities, it’s also true that these come with a bigger price tag. You’ll be surprised how much you can save by moving outside of these areas.
- Do a spending reset – If you feel your spending is out of control, do a 30-day spending freeze to get your priorities in order.
- Government assistance – Don’t be afraid to look for assistance in the form of local or government programs. You might be eligible for allowances or benefits.
- Set financial goals – If you don’t know where you’re going, how will you ever get there? Creating long-term and short-term goals for your financial future is the key to becoming debt free.
- Find a side hustle – Lastly, don’t be afraid to increase your earning potential with a side hustle.
No matter how much you’re spending each month, it’s important to find a comfort level that works for you. This might be different to someone else’s spending habits, and that’s okay. Everyone lives a different lifestyle and has different priorities. It’s just essential that you understand what it means to live within your budget.
Understanding Your Income
There’s more to life than your income. While it’s true this is just a number, it forms the basis for your entire monthly budget and spending. Though $60,000 might not be enough for some people to live well, it’s certainly enough for others. This depends on a number of factors like where you live, your expenses, and the size of your household.
If you’re struggling with your income, no matter how much or how little it is, you’re not in this alone. Reach out to one of the experts at Debt Busters. Our financial professionals have extensive experience helping Aussies of all income levels and backgrounds reach their financial goals.
You are more than just your income. While it’s easy to feel defined by this, challenge yourself to look beyond. Recognise when it’s time to make a change, and also recognise when it’s okay to adjust your budget to suit your lifestyle. There’s a lot of room for stretching money further and also meeting new goals. Need help along the way? We’re here to help. Take control of your financial future and call us today on 1300 368 322.