How much do you need to earn each year to feel financially secure—not wealthy, just comfortable? For many young Americans, the answer is surprisingly high. A recent survey by Bankrate found that on average, Gen Zers and millennials believe they need an annual income of around $200,000 to feel financially secure.
However, the reality is far from this figure. According to data from the Federal Reserve, the average household income for Americans under 35 was just over $82,000 in 2022. For those between the ages of 35 and 44, the average was nearly $169,000. So, why are young people aiming so high, and is it still possible to live comfortably on less?
Why Young Americans Think $200K is Necessary
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The belief that $200,000 is necessary for financial comfort stems from growing concerns about rising living costs, mounting debt, and economic uncertainty. In many urban areas, skyrocketing housing costs make it difficult to imagine living comfortably on a more modest income. Many young adults may feel that a six-figure salary is the only way to cover these expenses while still having room for savings and discretionary spending.
Additionally, student loan debt is a significant burden for many young Americans. With the average federal student loan debt around $37,000, finding high-paying jobs has become a necessity to manage both loan repayments and day-to-day expenses. Younger consumers are also seeing their credit card balances increase at a faster rate than older generations, as the cost of entering adulthood has risen sharply over the past decade.
“Many Americans are stuck between sticker shock from elevated prices, stagnant income growth, and a feeling that their financial goals are out of reach,” says Mark Hamrick, senior economic analyst at Bankrate.
Can You Live Comfortably on Less?
While a $200,000 salary certainly provides access to higher-quality housing, investment opportunities, and the ability to pay off debts, living comfortably on a lower income is possible with careful planning and good financial habits.
For starters, building an emergency fund covering three to six months of expenses can create a safety net for unexpected costs. Focus on paying off high-interest debt, like credit cards, and prioritize essential expenses—housing, utilities, groceries, and transportation. Adopting the 50/30/20 rule can help: allocate 50% of income to needs, 30% to wants, and 20% to savings.
You might also consider refinancing student loans to reduce monthly payments and secure a lower interest rate. Keeping debt manageable frees up more income for saving and discretionary spending.
At work, make the most of employer-sponsored benefits, such as health insurance and 401(k) matching. Health Savings Accounts (HSAs) offer tax advantages that can help cover medical expenses more affordably.
Bridging the Gap with Side Hustles and Smart Financial Choices
Many young Americans are turning to side gigs or freelance work to supplement their incomes. The gig economy provides ample opportunities for young professionals to capitalize on their skills and generate extra income.
Living within your means doesn’t have to mean giving up on quality of life. Cutting back on dining out, reducing subscription services, and taking advantage of sales or discounts can go a long way in stretching your budget.
Setting clear financial goals, both short-term and long-term, is key to making the most of a modest salary. Whether it’s saving for a vacation or planning for retirement, regularly reviewing your budget can help you stay on track and adjust as your income changes.
Even with a $65,000 salary, saving consistently is possible. Aim to set aside at least 20% of your income, either in a 401(k), IRA, or high-yield savings account. If that seems out of reach, at least contribute enough to take full advantage of your employer’s 401(k) match.
Adjusting Expectations and Finding Satisfaction
The $200,000 benchmark reflects concerns over rising living costs and the desire for financial security. However, true financial stability doesn’t only come from a high salary. It also depends on discipline, budgeting, and long-term financial planning.
By focusing on smart money management—budgeting, paying down debt, and building savings—you can achieve financial peace of mind, even with a more modest income. While earning $200,000 may seem like the key to financial freedom, managing your money wisely can help you feel secure and content, regardless of how much you make.