I live in a eastern European country where the monthly salary is around 500$ for most basic jobs, but despite it being so low, if you don’t rent and have your own property, you can have some 50$ saved up even if you live alone. If you have a decent, yet “reachable for many people” job in IT, medicine,etc. with a 800-1500$ salary, you can save upwards of 500$ or even over 1000$ a month.
With this in mind, I expected that, even with much higher living costs, an average person in western countries can easily save up 1000$ a month, but most data I found was shocking to me, like this one The Countries that Save the Most Money Around the World , where it says that:
Germans save up only 360$ a month (a more official statistic said around 400$)
France only around 300$
United States 240$
Italy less than a 100$
I looked up Reddit topics and most users that gave higher numbers were IT-ers or other highly paid professionals, or students and people living with their family, who have much lower expenses.
So if instead of my current 500$ average job, with which I save 50$ a month, I get a better paid 800$ job, will I really manage to save up more, than most people in western countries with 5, 6 times higher salaries? It doesn’t make any sense.
Most people are bad at saving money. As often as not, “living paycheck to paycheck” just means people adjust their spending habits based on how much they brought home that month.
The average salary where I live is $86k/y, or $7000/mo. Maybe $5k after taxes. Food and housing aren’t cheap, but it matters quite a lot how you spend it. It’s easy to spend $1000/mo eating out, but also easy to spend only $250/mo eating food at home. A reasonable studio apartment is about $2k/mo, but it’s going to cost more if you want to be closer to downtown or other desirable areas.
I’d say a single person on an average salary could easily save $2k/mo, but that depends on not having too many luxuries (and certainly not a family).
I live in an area where the median household income is 76K/year and the median rent for a 2BR apartment is $33k per year.
So a median income household in the median rent APARTMENT will be spending 43% of their GROSS income on rent. For many people with the median household income their take home pay (after taxes and health insurance) is less than 80% of the gross. So they would be paying more than half their income on rent.
Groceries are a lot higher priced than the national average, as are electricity and gasoline.
We are living on three times that average income and we are quite frugal (There was a discussion here about what a “nice” restaurant is, and by the consensus here, I haven’t eaten in a nice restaurant for twenty years, unless someone else was paying). We still spend more than half our income on housing, utilities, food, gas and cars (we have an 8 year old and a 4 year old non-luxury brand automobiles).
Would you explain this please? Did you inherit the property? I have a hard time imagining a situation where the average worker inherits a property, without needing to pay rent/mortgage.
Like others said, for many Americans, increased wages results in increased spending. Rather than saving, Americans tend to incur debt.
For a great many Americans, their only “savings” is what they contribute to Social Security. I haven’t done the research into what is an “average” wage - or an average job. But many lower paying jobs lack employer contributions to any savings plan. And a great number of employees who have such plans fail to contribute to them, even when their employer matches. I recall in the book Nudge, the author suggested the default should be for employees to contribute to such plans, with them having the option of opting out - instead of the other way around.
Here in America, we are all forever young, beautiful, and immortal, and someone will always come along and save us should the need arise.
My parents scrimped and saved all their lives, even though they earned well under the median most of their working lives.
Managed to accumulate a million. Looks like they will die penniless with the million going to nursing homes and medical care beyond what Medicare will cover.
People are saying that they should have bought long term care insurance. They did the math 35 years ago on that. If they had bought it, they would have broke in five years instead of three AFTER paying in 300k in premiums. Because the coverage would only be a fraction of the cost.
To them, sacrificing consumption and saving now seems like a mugs game.
Saving per month seems like a weird way to do it, because expenses vary so much. Like, we put an extra $300 a month aside for unexpected medical expenses. This is in addition to our savings. That account is normally in surplus, but sure enough, once every few years it goes negative for a while because a big medical expense hit. Then it builds up again. If we had a medical expense that was even greater, we’d top it off out of savings.
So is that $300/month “savings”? It’s going to be spent, almost certainty. Usually within a few years.
I mean, we put aside money each month for the annual property tax bill. Is that “savings”?
Irregular expenses aren’t the same as unexpected expenses. Just because your regular expenses leaves you $x month to “save”, it’s not really savings if predictiable irregualar expenses will drain it within a year or two.
Rent & mortgage, and car payments, are due on a monthly basis. Those categories account for the majority of spending for most people. Utility bills are also monthly, as well as cable/internet. In addition, many people pay car/homeowner’s/renter’s insurance on a monthly basis. If you have life insurance, that’s likely to be monthly as well.
When you get right down to it, groceries are just about the only common recurring expense that’s NOT on a monthly basis, and that can easily be figured on a monthly basis.
As for the irregular recurring expenses, such as buying car tires, those can be approximately figured out on a monthly basis. The statement that “Saving per month seems like a weird way to do it” is itself a very weird outlook on life – because, as I have demonstrated, the overwhelming majority of expenses are, in fact, routinely placed on a monthly basis.
OP should consider that people in the US have some combination of paying for medical care out-of-pocket or for a plan that may be subsidized by the employer.
FWIW my heavily-subsidized individual plan costs me $115/mo and has a $1500 annual deductible (if you’re not familiar with this, the insurance doesn’t kick in until I’ve spent $1500 on medical expenses that year.)
But yes, what other people said. I spend far more now than when I made 1/6th as much twelve years ago.
But if Iwant to evaluate how much I am actually saving, the amount my monthly income exceeds my regular expenses is far too high, as unpredictable expenses come along. The only real way to know how much you are saving is to look at how much you have in savings at the end of the year.
Another issue is that in the US people generally have their retirement saving deducted from their checks. Is that savings?
Social Security and retirement plans may or may not be considered savings. They sometime pay out amounts weakly related to the amount put in, more like insurance plans than savings. Other plans like 401K are real savings plan where you own the money you put in along with interest it earns. If you include the actual savings plans in calculating the average salary then it should add something to the average savings.
When the university I work at in metro Vancouver opened in 1964 (I was 8 years old) newly hired profs were hired at around $9K, and many paid about $27K for their houses, according to the reminiscences at various retirement parties I attended. Today, the average starting prof salary is about $70K and the median house price in metro Vancouver is close to a million dollars. So, yeah, saving is a little trickier than it once was.
I was mostly thinking of IRAs. I agree those are absolutely savings, but maybe not what the OP would think of, because the money isn’t as liquid.
I think the OP is really asking “By how much does a person’s take home income exceed their typical monthy expenses?”, which isn’t the same question at all, especially sense, in my experience, most people consider what isbreally their theoretical minimum monthly expenses to be their “typical”, despite literally never spending that little.
I think that’s what is being asked. But it means very little. It needs an explanation of those typical monthly costs. I live in an area with a growing number of people with high incomes mired in student loans, mortgages, car payments. So I don’t see much direct relationship between salary and savings. I used to carry enormous credit card debt that exceeded liquid savings but I had a lot of equity in my home that I used to straighten out the situation. It’s much different when people have investments instead of considering a single person who could in theory have very little in actual expenses and save almost everything they earn.
Are they both in a nursing home? I know in the US, homes can run $10,000 per month per person. So a million dollars may sound like a lot, but thats 4 years in a nursing home for a couple.
My personal plan is when I’m older if I need nursing home care, to move to mexico and get it because right now its only about $1500 a month there even for advanced dementia care. I think I should be able to afford assisted living, but not nursing home care in the US for a long duration. Median stay in a nursing home is only 5 months, but a small % of people spend many years there and that skews the average stay duration.
Unrelated, but I’m hoping some of the medicare reforms of the future expand long term care. I think the ACA tried but it was too expensive.
Anyway, back to OP. I live in a fairly low cost of living large city and you could get rent/utilities for $500 or less here if you’re willing to live with roommates on the outskirts of town.
Other expenses may run another $500 or so if you’re highly frugal (eat at home, take the bus when possible, don’t have any expensive hobbies, health care premiums are covered by work and your health expenses are cheap, etc).
If you assume an average salary is 40k a year, thats $3300 a month pre-tax. You could probably max out your 401k at $1700 a month, leaving $1600 in taxable income a month. Your tax rate (federal, state, local, FICA) would probably be something like $500/month, which means you’d save about 20k a year on a 40k a year income.
However this equation falls apart if you have any dependents, want to live alone, have expensive health issues, etc. You can pull this off in your 20s, but probably not your 50s.
Had they saved nothing and spend everything as it came in, their long term care would be covered by medicaid.
They scrimped and saved their whole lives just to use the money to pay for medical care that people who didn’t save got for free.
Not that I’m opposed to medicaid covering LTC. Its just that there needs to be a LTC program that covers everyone. Long term care is already about 70% covered by the public sector already.
I’m single, 61, and make $70K/yr. I own my home outright, no longer having a mortgage, and the only debt I have is a small mortgage on a rental home I own. I financed my farm for 15 years. I currently save about 1/2 my pre-tax income.
I did this by basically putting all my raises over the years into retirement savings. I’ve been frugal, but not “wash out the zip-lock bag and re-use it” frugal. My frugality was doing things like using the library instead of buying books, going to matinees instead of paying full price, and never really going on vacation, which was more because of the farm and dogs and horses to care for. Buying used cars instead of new. I’ve never felt like I lacked anything.
My deductibles are $4000 for something and $8000 for something else. I’ve already gone way, way past one and am closing in on gping past $8000 for the other. My savings (thanks, cancer and our health care system) are gone. I foresee bankruptcy, to be honest.
