DIY Investing: An Easy Guide To Investing Your Own Money
02.12.2023We’re back with a brand new season of Whiteboard Friday episodes for your viewing pleasure. First up: SEO expert Cyrus Shepard shares his top 22 tips for successful Google SEO in 2022. Watch to find out what to prioritize and what to look out for in the year ahead! Click on the whiteboard image above to open a high resolution version in a new tab! Video Transcription Howdy, Moz fans. Welcome to another edition of Whiteboard Friday, a very special edition, our annual SEO tips of the year edition. This year it is 22 smart SEO tips for 2022. I’m going to be talking about some of the most talked about things in the SEO industry over the past year plus a few tips from last year that we wanted to pull over because they were just that important. Because we’ve got 22 of them and we don’t want this video to take forever, we’re going to be going through these pretty quick, but for you we’ve linked to some resources in the transcript below so you can explore all of these topics further if you want. All right. Without further ado, let’s get started. On-page SEO tips for 2022 1. A/B testing I’m going to start with some on-page topics. Tip number one, A/B testing or simply testing. We’ve seen a lot more testing tools pop up in the last couple of years, which is awesome because SEO is not make a decision and implement it and you’re done. SEO is implement, evaluate, and then make decisions or sometimes course corrections. Is this something we need to pull back? Did C perform better than D? Which one would we choose? All the tips we’re talking about today can apply to this testing mentality. SEO is incredibly complex, and the old-school idea of best practices just doesn’t cut it anymore. So in ’22, develop a testing mentality with your SEO. 2. Author pages Number two, author pages. I really love this because Google this year updated some of their advice around author pages and their schema markup. It’s an important part of my strategy and a lot of websites that I use. A good quality author page helps Google evaluate your authors, which can be used for E-A-T and other things, and helps link them with their expertise. So linking your articles to a good author page usually includes links to other websites, author profiles, links to the articles they wrote, some biographical information. It can help establish your authors as expertise in a certain space. So take a look at your author pages and try to improve them and make this a task. 3. Google title rewrites Google title rewrites, number three. I don’t think there is any topic more discussed in 2022 than Google rewriting titles. A lot of studies, including one I did, showing Google rewriting 60%, 70% or 80% of a site’s titles. It can be frustrating. But what we’re finding is a lot of people aren’t evaluating those Google title rewrites. When you do, you can learn a lot about your own titles. Why is Google rewriting it? Is my title too long? Am I missing important keywords? Do I have fluff in there that Google doesn’t like? Or in some cases you can go back and try to correct the title that Google rewrote if they’re doing just a terrible job. So Google title rewriting, do an audit of those Google titles and learn what you can do. 4. Nuke the «fluff» Speaking of fluff, this may be the year that you want to nuke the SEO fluff. You know what I’m talking about with SEO fluff. It’s those flowery keywords. It’s those descriptions and it’s recipe pages. «Oh, I was walking along the Irish countryside thinking about my bread and biscuits.» That is your fluff. We’re finding that it may not be necessary, and it may even be detrimental to your SEO. Glenn Gabe wrote a great case study where they reduced a lot of their fluff on category descriptions and they actually saw an increase. Google is removing fluff from title tags. So this marketing, flowery, SEO writing stuff, it may not be helping you, and, in fact, it may be hurting you. Today Google is rewarding sites or seems to be rewarding sites that provide quick answers and more direct engagement. Better engagement, it’s usually better for your customers as well. So experiment with losing the fluff in 2022. 5. FAQ schema Number five, FAQ schema. So last year we talked a lot about different schema types, how-to schema, FAQ scheme, different things. If there was a clear winner in 2022, it was FAQ. The reason FAQ is the winner is because so many sites can qualify for it, it’s easy to implement, and if you win a FAQ schema in SERPs, you can gain a lot of Google real estate. So there are a lot of articles that talk about how to optimize for FAQs. You can get links, deep links in FAQs. There are a lot of things you can do. We’ll link to those in the transcript below. But take a look at your FAQ schema if you’re not currently using it: How to Optimize Your FAQ Schema to Maximize Positive OutcomesWhat Google’s FAQ Schema Update Means For Your SEO Strategy6. Tabbed content Last year we talked about tabbed content, bringing your content that is in tabs, in navigation and bringing it out. This year, we’re getting a little more advanced. Our friends at Merj did a study about types of tabbed content and how easily Google can extract and render and index different tabbed content. So if you still have content in tabs, it doesn’t necessarily mean you have to take everything out, but you should research if Google is able to index and rank those appropriately. There are better resources this year to try to do that. So take a look at your tabbed content. 7. Faceted navigation Along the same lines, faceted navigation. We’ve been talking about faceted navigation for years, but this is the year to get a little more strategic with it. In certain ways, faceted navigation has always been like a set of rules, like if it has green dress, we are not going to index this or crawl it, but if it is size 12 or higher, we will index it. Today, smart SEOs are getting a lot more savvy about what they index, don’t index, and crawl with faceted navigation, and these tools are becoming increasingly available for sites like WordPress and things like that, where you can actually look at the traffic each page receives and index, crawl, faceted navigation on a page by page level, and these broad rules aren’t necessarily as necessary. You can get down to the nitty-gritty and increase your traffic that way, with fine-grained tools. So both tabbed content and faceted navigation, old-school concepts, but we’re getting much more sophisticated with them in 2022. Link building tips for 2022 All right, let’s talk about everybody’s favorite subject, links, because you need links to rank in SEO. But what a lot of smart SEOs know and talk about is you need links to rank in SEO, but you probably don’t need as many as you think. 8. Internal link optimization If you only have a few good external links, one of the best ways to leverage that is optimize your internal link optimization. We’ve seen a number of new tools and processes talking about internal link optimization. We’re talking about pages that have too few links, under optimized anchor text, pages that have great opportunities that aren’t ranking that should. So if you haven’t done an internal link optimization audit in a while, this is the year to do it and this is the way to leverage those internal links that you’re getting. 9. Deep linking Speaking of which, deep linking. In the old days, if you linked to a page, you just linked to the URL. But we’re seeing an increase in deep linking, linking to specific passages, text fragments, things like that, navigation, jump links. This is increasingly becoming a popular strategy to get people deeper into the page and give Google and other search engines signals about very specific parts of pages. This seems relevant as Google has recently introduced passage ranking, where they’re not just evaluating the whole page. They can understand individual passages as well. So making deep linking part of your strategy, as opposed to just linking to the URL, seems to be a great way of moving forward. 10. High ROI link building High ROI link building. I watched a great presentation from Ross Simmonds this year, the Coolest Cool, on link building with assets and determining the ROI of each of them, because everything you build links with, whether it be a tool, a blog post, a free PDF, it has a cost and that cost has an ROI. Ross found that certain things have higher ROIs than others. Tools have an incredibly high ROI, but they’re also expensive to create. Pages with stats on them, not that expensive to create, but also a really high ROI. I’m going to link to that video. It might be a paid subscription. I apologize about that. But it’s awesome. It was voted number one at MozCon. If you do link building, it’s definitely worth watching and definitely worth the cost. High ROI link building, know the cost of everything you’re producing and how much value you’re getting out of it. 11. Reduce redirects Let’s go old school again. Our friend Nick LeRoy tweeted not too long ago about reducing redirects. This is really old school, but a lot of people are forgetting it these days. If you have a large site and you have thousands or millions of redirects all sending confusing signals, 301 jumps to a 302 jumps to a 404, what is that? Looking at your redirect chains and reducing them to a single redirect with a clear directive can help reduce canonicalization errors. It can improve crawling efficiency, and at scale it can influence your rankings. So if you have a large site or even a small site with a lot of redirects, this is the year you want to do a redirect audit. Get on it. Audit, on it. 12. SEO for affiliate links How about SEO for affiliate links? We don’t talk a lot about affiliate links here at Moz, and Google traditionally hasn’t talked a lot about it either. But this year we saw Google introduce specific guidance for affiliate sites, which is something they really haven’t done before. Specifically for review sites, Google talking about what a good review looks like, talking about the good and the bad part of the product, the fact that you should link to multiple merchants so consumers have a choice. We haven’t seen this from Google before. So if you do SEO for affiliate sites, you do review sites, this is the year to review those Google documentations and make sure you’re creating sites that Google rewards and actually following Google’s guidance on it, which is something in past years I didn’t think I would be able to say about that. So it’s awesome to see. Google SEO tips for 2022 13. Reputation research All right, moving on to different topics, reputation research. My friend Lily Ray talks about reputation research a lot in terms of E-A-T. The idea that Google can evaluate your site based on what other people say about you. So if you’re Dr. Mercola and an anti-vaxxer and everybody is saying all these terrible things about you on other websites, Google can disappear you from search. Reviews, what are other websites saying about you in terms of reviews? Google quality raters often look at other websites to get reputation research, and it’s supposedly believed that Google can do the same thing algorithmically. So making reputation research part of your SEO audit process, what are other sites saying about you, is it incredibly positive, is it incredibly negative, this is especially important for your money or your life sites, sites that are going to be more impacted by E-A-T algorithms. So if you sell things or dispense medical advice, reputation research is a little bit more important for those sites. 14. Core Web Vitals — minimums Boy, last year we talked about Core Web Vitals a lot. One of my happiest things is that we are talking about it much less. Google announced a big update. It was a big hooplala. It didn’t quite work out the way Google kind of explained that it might. What happened was Google released Core Web Vitals, and some sites saw a boost, other sites saw a decrease, but it wasn’t as intense as we thought it might be. A lot of sites did improve. But we’re finding in 2022 maybe we don’t need to worry about it as much as we thought. My colleague Tom Capper did a study that showed that slow sites were still ranking and fast sites were ranking even higher, but the effect wasn’t as much. The one thing Tom did find though, that was important, was sites that failed all three Core Web Vital requirements were definitely in the dumps. So we should optimize for speed always, but perhaps in 2022 we don’t need to obsess over it as much as possible, based on Google advice. Speed is awesome. You should make your sites as fast as you can. But Core Web Vitals, don’t sweat it as much as we were in 2021. 15. Ditch AMP? Other things we might want to consider not sweating, AMP. 2021 was the year that we’ve seen a lot sites start to ditch their AMP. This is because Google no longer requires it as a ranking factor in their top stories. It does provide some speed benefits. It’s kind of a neat technology. We know people who work on it. It’s really cool. But a lot of companies were stressing out trying to maintain two different versions of their website to get that ranking boost. A lot of sites are starting to like, «Well, we don’t want to have two different versions. It’s a lot of overhead. It’s a lot of engineers. What if we just got rid of it?» They’re finding it really doesn’t make a difference. They can just work with one platform and still get as much rankings as they want. So if your company is struggling with AMP, this might be a year to experiment with ditching it. Or keep it if you like. It’s great, but a lot of people seem to be walking away. 16. Google Discover On the flipside, a lot of people are flocking to Google Discover. Google Discover is interesting. It’s not traditional SEO traffic, where you research a keyword and people are converting. It’s a little bit more like social media traffic. In fact, social media sharing seems to be one of the ranking factors that can influence how much traffic you get from Google Discover. But what we’ve seen in the last year is some publishers are optimizing for Google Discover, publishing those stories, and seeing huge amounts of traffic for that. Great for like news sites, blogs, popular things, things that talk about popular topics. We’ve gotten some Google Discover traffic here at Moz. We’re going to link to a couple of articles to show you how to optimize for Google Discover. But if you haven’t tried it yet, it may be a channel for you to explore in 2022. 17. Local SEO GBP categories We’ve got to squeeze in one local SEO tip. We’re doing this for our friend Darren Shaw, who publishes the Local Search SEO Ranking Factors every year, doing an awesome job at it. If you have a local site and you just have five minutes to do one thing, the number one SEO tip for 2022, get your GBP categories in order. Ranking factors studies show that it is the number one thing that can influence rankings. Do an audit of your Google Business Profile categories. Darren has a lot of tips over there with that Local SEO Ranking Factors. I would encourage you to look at it. Also Joy Hawkins is doing a lot with experimentations. I’d encourage you to look at her site as well. 18. Favicon review My tip, the tip that I’m going to die on this hill — favicon optimization. Why favicon optimization? I talked about this last year, but I don’t think people took me seriously enough. Over 50% of search results take place on a mobile phone where your favicon shows, and people are not optimizing those favicons. A good favicon can draw attention. It can zero you in on a very busy SERP, and it does it with just a few pixels. A good favicon can raise your click-through conversion rate one or two percent, which is awesome. How does it work? What do you notice on this screen? You notice the tip with a favicon. A good favicon is usually bright, it’s usually high contrast, and it draws your attention to your search results. So optimize your favicon, folks. I’m dying on that hill. SEO career tips for 2022 All right. So I want to spend a few tips on talking about your SEO career, because I don’t think we talk about this enough. What should you be learning this year, aside from Python because everybody loves Python? 19. Learn GA4 This might be the year that you want to finally familiarize yourself with GA4. GA4 is the product that’s replacing traditional Google Analytics. You’re going to see it in a lot more client accounts. It can be a little confusing to people. Some of the metrics aren’t there. It’s got some cool things in it admittedly, like they basically got rid of bounce rate and replaced it with engagement metrics, which is great because a lot of SEOs are a little too focused on bounce rate and engagement may be more representative, a holistic way that Google views your website. Our friend Dana DiTomaso has a course on LinkedIn that you can check out. But familiarize yourself with GA4 so you can walk into those meetings and you can present those reports and know what you are talking about. 20. Attend virtual conferences Conferences. COVID moved a lot of conferences virtually online. People attended them. A lot of people are getting burnt out on virtual conferences. But looking back at all the virtual conferences of 2021, there’s some great value there. Here at Moz, we had MozCon. We had some tremendous speeches. It also makes it more affordable for people all over the world. Traditional conferences, you pay $1,000 to $2,000 just to attend the conference plus travel and all that. But with virtual conferences, oftentimes they’re free or just $100 or $200. You can attend virtually and focus on the content and the learning and advance your career, and do the networking, reach out to the speakers. There are lots of opportunities there. So I would commit in 2022 to attending two or three virtual conferences and make that part of your career advancement. 21. Charge more Finally, the last tip on the career, charge more. 2022 is the year to charge more for your SEO services. Our friend John Doherty at Get Credo publishes his annual salary report or agency fee report. If you’re an independent consultant or agent, you can check to see what you’re charging compared to your peers. But, in general, SEO services are in high demand all over the world, especially high-quality SEO services. The power is in your hands to charge what you are worth, not undermining yourself. If you’re working in-house, it might be time to evaluate your salary and make sure you’re getting paid what you deserve, especially if you’re not getting paid as much as your colleagues or you’re part of an underrepresented group. Charge more in 2022. Make more money. And finally… 22. Be the last click Final tip of 2022, this was the final tip of 2021. It’s my favorite SEO tip of all time. Be the last click. That means satisfy your users. When someone is searching Google or any other search engine and they’re presented with a list of results, they’re clicking around, looking for what they want to be, make sure you are the last site that they click. Why? Because when they clicked to your site, they found what they were looking for. You satisfied them so much that when they see your site again, you’re going to be the first one that they click on because you gave them the answer. Provide awesome experiences for your users. Think of them first. Give them everything they want. Give Google no excuse not to rank you number one in the search result. All right, 22 tips for 2022. That’s all I’ve got. I would love to hear your tips. Please leave them in the comments below. Reach out to me on social media. If you liked this video, please share it. Thanks, everybody. It’s been fun. Video transcription by Speechpad.com
02.12.2023[ad_1]
In order to comfortably raise a family in an expensive coastal city like San Francisco or New York, you’ve probably got to make at least $300,000 a year. Thanks to inflation, $300,000 or more may be required for you to live a middle-class lifestyle today.
You can certainly raise a family earning less. Most do. However, it won’t be easy if your goal is to save for retirement, save for your child’s education, own your own home instead of rent, and actually retire by a reasonable age.
Although $300,000 is a lot compared to the median household income in the United States of ~$68,000 in 2021, it’s not an outrageous sum of money once you look at the realistic income statement I’ve put together for this article. After all, the cost of living is quite different across the United States.
A Middle Class Lifestyle Is All We Really Want
All expenses in my example use current prices. I’ve also cross-checked the expenses with my family’s monthly expenses now that we have a son to make sure they are within reason. I’ve also cross-checked the expenses with over a dozen other households who make around $300,000 a year.
I use $300,000 in this post because I also believe it is close to the ideal income for up to a family of four to experience maximum happiness.
At $300,000, you aren’t paying an egregious amount in taxes. You probably aren’t killing yourself at work if both parents are working. At the same time, you’re still earning enough to live a comfortable lifestyle anywhere in the world. A middle-class lifestyle is all we really want.
About half the US population lives on the coasts, therefore, this post is directly targeted at folks who need to live on the coasts because of their jobs, schools, or families. If you don’t live on the coasts, you might live in a city like Denver or Austin, where the cost of living is rising rapidly as well.
Finally, this post should also provide insights to non-coastal city residents on how good you’ve got it if you enjoy living where you are. $100,000 – $150,000 is a rough non-coastal city household income equivalent to $300,000.
Who Makes $300,000 A Year?
Before we look at the income statement, let’s go through a list of various $300,000 income households. To no surprise, many of these $300,000+ household income earners live in more expensive areas around the country.
- A Bay Area Rapid Transit janitor who makes $234,000 + $36,000 in benefits who gets together with a Bay Area Rapid Transit elevator technician who makes $235,814 + $48,429 in benefits.
- Starting total compensation packages for 22 year old employees at Facebook, Google, Airnbnb and Apple range from $120,000 – $150,000. By the time they are 30 years old, they are making $300,000+ a year.
- 30-year-old first-year Associate in banking earns $150,000 in base salary + ($0 – $120,000) in bonus. In a couple years, she is making over $300,000 a year.
- A 26-year-old first year law associate at a big law firm like Cravath makes $190,000 base + $30,000 sign on bonus. By the end of his 6th year his is making over $330,000.
- A 29-year-old Director of Marketing at a startup makes between $150,000 – $180,000. She’s married to a pro blogger who makes $350,000.
- A 42-year-old college professor at Berkeley makes $235,000 and $279,000 at Columbia and NYU.
- The average specialist doctor finishing his or her fellowship at 32 makes $300,000. The average salary for a primary care physician is $200,000.
- A 26-year-old middle school teacher making $60,000 a year plus her $250,000 a year VP of Marketing wife.
- My 60 year old high school athletic director colleague makes about $180,000 a year plus his wife who makes about $200,000 working for the city.
- Thousands of employees at tech companies like Google, Apple, Facebook, Google, Slack, Zoom and more.
The permutations of people making $300,000 goes on and on. If they aren’t there now, they will get to such a level of income eventually.
Related post: The Top 1% Income Levels By Age
Living A Middle Class Lifestyle On $300,000 A Year (One Child)
Please study the middle class lifestyle budget chart below closely. Every expense has been carefully vetted by hundreds of people who live in expensive metropolitan areas like NYC, LA, and SF and who diligently track their cash flow to give you the most realistic budget possible.
I’ve tracked every line item with my own budget when I had only one kid. All figures are pretty spot on. Today, with two children, I’m thinking $350,000 a year might be more apt.
Gross Income Review
With a $300,000 household income, this dual income household of three puts away $38,000 a year in their 401(k)s. The maximum 401(k) contribution is now $20,500 in 2022.
With the passage of the Tax Cuts And Jobs Act, they’ve lost their ability to deduct more than $10,000 worth of state income, sales, and property taxes. As a result, I’ve used the $24,000 standard deduction for married couples to keep things simple. The standard deduction for married couples increases to $25,900 for 2022 or $12,950 per individual.
For 2022, the FICA tax rate for employers is 7.65% — 6.2% for OASDI and 1.45% for Medicare tax. For example, an employee will pay a 6.2% Social Security tax on the first $147,000 of wages (maximum tax is $9,114 [6.2% of $147,000]), plus 1.4% of all income earned. Since both parents work, both parents pay the tax. At least both parents eventually gain when they collect Social Security, if it’s still around.
They have a marginal federal income tax rate of 24% and a marginal California income tax rate of 9%. Most of their income also faces a 7.65% FICA tax since both work. Their combined effective tax rate is roughly 32%, for a tax bill of ~$76,160. In other words, their total tax bill is ~$12,000 more a year than today’s median household income. Therefore, hopefully folks who earn less can give them some slack.
The family also gets a $2,000 child tax credit to help support their middle class lifestyle.
In the past, the credit began to disappear for married couples who earned more than $110,000 and for single filers with AGI above $75,000. Now, singles and married couples can earn up to $200,000 and $400,000 respectively, before their child tax credit begins to disappear.
Bottom line: their $300,000 gross income gets reduced by roughly 38% after taxes and retirement contributions to $187,840.
Expenses Review
Childcare ($24,000):
A middle class lifestyle often includes kids. There’s no getting around this expense if both parents are working. Babysitting and childcare for $20/hour is the standard rate I’ve found in San Francisco. Some prices go up to $35/hour.
If the parents decide to send their child to private school, this $24,000 annual expense will increase to $35,000 a year for K-8. Come high school, the cost will increase to $45,000 – $55,000 a year. I coached varsity tennis at a boy’s private high school for three years. Its annual tuition is now $49,000 a year. It’s a shame that so many expensive coastal cities have troubled public school systems.
In San Francisco, there’s a lottery system for the sake of social engineering. In other words, even if you buy a $1.5M median home and pay $20,000 a year in property tax, you are not guaranteed to have your kid get into the public school down the street.
Of course, if you have a second kid, childcare expenses will increase, but probably not double due to synergies. That is unless you want find some 4th trimester childcare relief. Then we’re talking $40,000 and up for three months.
Food ($25,200):
When you are a dual job household with a baby, there’s little time to cook. Further, given the family is living in a city like New York or San Francisco, food is world class, and on demand food delivery is ubiquitous.
It makes little sense to spend hours cooking when you’re already tired. You want to reserve your remaining energy for taking care of your baby. However, food is where this family can cut expenses if they start feeling a little tight.
Mortgage ($46,800):
A middle class lifestyle should include owning you own median-priced home. Although the payment is $3,900 a month for a $900,000 mortgage at 3.25%, $2,000 of it goes towards paying down principal and building net worth. Therefore, you can add $24,000 a year in forced savings to their $37,000 a year in 401(k) savings.
Their $1.5M assessed house is a standard 1,750 sqft, three bedroom, two bathroom home on a 2,500 sqft lot. For new homebuyers, only interest on up to a $750,000 is taxable.
Here’s an example of a typical $1.855M home in Golden Gate Heights, one of San Francisco’s best kept secret neighborhoods. As you can see from the picture, the house only has 1,288 square feet of living space. It is a simple two bedroom and one bathroom home. At least it has ocean views from the living room.
This buyer needs to spend another $50,000 – $80,000 remodeling the house because everything is about 25 years old.
The $10,000 SALT cap deduction for individuals and married couples really hurts homeowners in expensive real estate markets. Property tax on a $1.5M assessed house alone is roughly $19,200. Then the couple is paying ~$18,000 in state income taxes.
Now if we look at home prices in 2022+, prices are still elevated in big cities. I’ve been keeping track of a number of home sales during the pandemic, and I’m impressed.
Bought Their Home Earlier
Further, this couple is lucky because they bought their home several years ago for $1.2M. Now imagine renting a house for $6,000 a month and trying to save up $300,000 for a downpayment on a median priced home. Difficult to do with less than a $300,000 household income. Probably impossible without living in a one bedroom for “only” $3,200 a month or getting help from their parents.
In 2022, this Golden Gate Heights home is likely worth over $2,100,000. Further, mortgage rates are still low. Homeowners can now refinance to a lower rates and save money as a result.
I recommend checking out rates on Credible, one of the largest online lending platforms today for free. Qualified lenders compete for your business so you can get the lowest rate possible.
I was able to refinance my loan for free to a 7/1 jumbo ARM at 2.625%. But I’ve seen rates that are even lower. Everybody needs to take advantage of record-low mortgage rates to refinance and maybe buy if you are ready to settle down.
Vacation ($7,800):
A middle class lifestyle includes vacationing several weeks a year. Some will say that spending three weeks of vacation is a luxury. However, I say spending three weeks of vacation is normal for two working parents who want to keep their sanity.
By law, every country in the EU has at least four weeks of paid vacation days. Meanwhile, Brazil gets 41 paid vacations days a year. Yes, their respective economies might be a mess compared to ours, but at least they are enjoying life!
Car Payment ($7,400):
When you have a baby, all you want to do is protect him or her from harm. Even if you are the best driver in the world, one reckless drunk driver might t-bone you one evening.
No longer do you feel comfortable driving a compact city car while transporting your family. Instead, you want a larger vehicle that has the highest safety rating.
Baby/Toddler Things ($6,000):
You can spend as little or as much as you want on your baby. But this family buys disposable diapers, not washable diapers. They buy tons of baby proofing material. They paid up for the best car seat and have two strollers. It’s funny, but one of the best toys for our son is a tissue box.
Entertainment ($7,200):
A middle class lifestyle includes general entertainment and nothing lavish. During the good old days pre-pandemic, date night could easily cost $200+ an outing for two once you include tickets to a ball game or a show and transportation.
Entertainment also includes the cost of sporting equipment, memberships, Netflix, cable, internet, and more. If your friends invite you to a weekend getaway, a bachelor or bachelorette party, or a function or two, your entertainment budget will be blown to smithereens.
What’s Missing From The Budget? This couple is lucky in that they have no student loans. They paid their loans off by the time they were 35. They are 39 years old today.
Ending Cash Flow Analysis
To live this middle class lifestyle, the end result is annual cash flow of only ~$2,920. $2,920 is not a great buffer because something always pops up.
But overall, this middle class family is building roughly $54,000 in net worth each year through principal pay down and 401(k) savings. Plus, they growth wealth with any appreciation in their investments and primary residence.
After 22 years of work with no change in income or expenses, this household will likely amass a net worth of over $2,000,000. They will have the ability for at least one spouse to retire since their son will have graduated college.
However, based on my recommended net worth goal for financial freedom equal to 20X annual gross income, this couple needs to accumulate closer to $3,500,000 to really feel comfortable for both to retire.
A Middle Class Lifestyle On $300,000 A Year With Two Children
To be comprehensive, here is another budget I put together for a $300,000 household with two children. I’ve updated the 401(k) contribution amounts to $41,000, given the maximum contribution limit is $20,500 per worker in 2022. Further, you’ll see more childcare expenses and fewer leisure expenses.
With inflation so strong, families may now need to earn $350,000 a year in a big city to live a middle-class lifestyle!
Earn Just A Little More
After analyzing all the numbers above, the ideal household income to raise a family is around a MAGI of $340,100 (after deductions). Any income over $340,100 is taxed at a 32% marginal income tax rate, or an 8% increase. This marginal federal income tax jump is large compared to the 2% jump from 22% to 24%.
Below is a chart that shows the marginal income tax rates and the long-term capital gains tax rates for 2022 for married couples, filing jointly.
For individuals, a Modified Adjusted Gross Income of $170,050 is likely ideal, from a tax optimization and lifestyle situation. You can see the marginal income tax rates and long-term capital gains tax rates for singles in the chart below for 2022.
Based on my experience, happiness did not increase for me when I began making over $200,000 as an individual. Happiness did not increase for us when we began making over $300,000 either. Therefore, due to the increase taxes and increase stress, it seems pointless to put yourself through the ringer simply to try and make more from a day job.
Save Aggressively Then Move
In order for this household to achieve financial independence, they’ve got to either up their 17% gross savings rate, figure out a way to reduce expenses, or boost income. Their middle class lifestyle might have to take a hit for a while.
Since boosting income probably hurts their quality of life due to more work and stress, the best way is to reduce expenses and diligently keep track of their finances online for free with Personal Capital in order to continuously optimize their net worth.
If you still don’t believe $300,000 for a family with two kids is required to live a middle class lifestyle, take a look at this chart below.
For San Mateo County, which is equally as expensive as San Francisco County, a family of 4 with a $146,350 is consider low income. With rising home prices, it simply takes a lot more income for families to live comfortable lifestyles in big cities.
Relocating To A Lower Cost Area Of The Country Works
If you feel the cost of living is too high, then consider moving to a lower cost area. In this new decade, it has become much more acceptable to work from home thanks to the pandemic.
There’s a moving truck shortage in places like San Francisco because so many people are moving out of this expensive city and other expensive coastal cities. The trend is towards relocating to the heartland, where valuations are cheaper and net rental yields are much higher.
The best way to do so is by investing in real estate through Fundrise and CrowdStreet. You can sign up for free and review their pre-vetted properties. These properties were once only reserved for institutional investors or high net worth individuals. Fundrise offers diversified eREITs, which is likely most appropriate for most investors looking for real estate exposure.
CrowdStreet offers individual commercial real estate deals, mostly in 18-hour cities, where you can build your own select portfolio. 18-hour cities are very enticing due to lower valuations and higher cap rates. Both platforms are free to sign up and explore.
Personally, I’ve invested $810,000 in real estate crowdfunding to diversify my holdings and earn income 100% passively.
Thanks to technology, there’s no need to grind so hard in cities where the median home price is over $1M. You can earn a similar amount of income working remotely while spending a fraction of big city living costs.
Life is so much easier when housing is affordable. The country is large. Go explore it!
With the bull market in everything post-pandemic, costs are likely going to continue to rise. Therefore, earning a household income of $300,000 to live a middle-class lifestyle is not far-fetched at all. Politicians need the middle class to stay in power. And President Biden has said he won’t raise taxes for anyone making under $400,000. Therefore, President Biden would certainly agree that $300,000 for a family of four is a middle-class income.
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