If you’re looking considering a job offer, you’ll know there are many things to consider when trying to find your perfect role. Inevitably, one of the main things to consider is securing a great salary. If you’re currently paid at an hourly rate or perhaps this is your first job, you may not know what you’re looking for when it comes to an annual income. A salary offer seem like a significant amount, but this may actually turn out to be considered extremely low income when broken down into a monthly or weekly income and when you consider factors such as the cost of living in your state and compare to the median household income.
So, what kind of lifestyle can you afford on an annual salary of $65,000? If you’ve received a salary offer for this amount and you want to know if this is a good salary and what kind of lifestyle you can afford, look no further.
This guide will break down how much you will earn every week or month and how this compares to average salaries in the US as well as what type of lifestyle you will be able to afford.
Breaking it down
It would be highly unusual to receive your entire salary in a one off payment. Let’s break it down to show what you will receive each month or week from your $65,000 salary.
If you’re paid monthly, $65,000 a year translates to $5,416.67 per month.
Before you accept a job offer with a $65,000 salary, it’s important to know your work hours – if these are standard or unsociable hours and how many hours you’ll be expected to work each week.
The average job would expect you to work 35 to 40 hours each week. You should also ascertain whether your employer will offer paid vacation.
If you work 40 hours per week on a $65k salary, you will earn $5,416.67 per month.
Plenty of employers in the US offer their employees two paid vacation weeks per year. This would mean you will be paid 52 weeks of the year, even if you take leave. In this case, you’ll earn $1,250 per week. This equals $250 per day and $31.25 per hour.
Your rate will increase to $32.50 if your employer does not offer paid vacation. However, this means that if you take vacations these will be unpaid, and there will be two weeks where you don’t receive any earnings.
The next thing to consider if you are contemplating a $65k job offer is state tax.
Tax on your $65,000 annual salary
You will of course have to pay tax on your earnings, so you will not receive the full $65k into your bank account each year.
There are nine states in America which do not charge tax on your salary. these are Nevada, New Hampshire, Washington, Wyoming, Alaska, Florida, Tennessee, Texas and South Dakota. If you live in one of these states, your salary will go further than if you earned the same salary in another state.
As for the rest of the USA, workers are charged a federal income tax rate that is calculated based on your earnings. For 2022, there are seven different tax brackets:
- Earnings up to $10,275 pay 10% tax
- Earnings between $10,276 to $41,775 pay 12%
- Earnings between $41,776 to $89,075 pay 22%
- Earnings between $89,076 to $170,050 pay 24%
- Earnings between $170,051 to $215,950 pay 32%
- Earnings between $215,951 to $539,900 pay 35%
- Earnings over $539,900 pay 37%
A $65,000 salary falls within the 22% bracket. This means you will pay:
- 10% on the first $10,275 of your earnings which is $1,027.5
- 12% on the portion of your earnings between $10,276 to $41,775 which is $3779.88
- 22% on the portion of your earnings between $41,776 and $65,000 which is $5,109.28
So you won’t have to pay 22% of your entire salary to to tax. Your total tax bill will be $9,916.66. This equals around 15.26% of your $65,000 that will be payed in tax. After tax you will receive $55,083.34 in earnings.
Is $65k a good salary compared to other household incomes in the US?
If you’re trying to decide if this is a good salary for you, you might be wondering how this compares to the average salary in the US.
Is $65,000 a year a good salary compared to the median incomes in America?
Labor statistics show that the average hourly earnings during January 2022 across all employees in America was $11.22.
This is well below the $31 per hour you would receive on a $65,000 salary.
Minimum wage in the US as of January 2022 ranges from $9.20 to $15 depending on which state you live in.
However, $65,000 a year isn’t enough to be categorized as middle class. In the USA, salaries that are above $80,000 are regarded as a middle class income.
In 2021, the annual median salary in America was $53,490 per year, so $65,000 per year would put you well above this.
When we look at minimum wage in America as well as the average salary, $65k is a great salary in comparison. this could afford a more luxurious lifestyle than the median salary in the US.
Other factors to consider
looking at the above statistics, we can see that $65,000 is a substantially higher salary than the average salary of a typical American employee, the type of lifestyle you can afford will depend on whether you are trying to support yourself alone or others in your household..
$65k for a single person
To put it plainly, $65,000 is a very good salary for a single person.
If you live on your own and have no one to support, then your salary only has to cover one person’s cost of living so will afford a very good quality lifestyle.
If you’re trying to support a spouse and children on this salary alone, you’ll find this won’t stretch as far as households with combined salaries.
Single people may also have higher mortgage or rent payments compared to dual income households where these bills are split between 2 or more people.
Accommodation is often the highest outgoing cost for many Americans. You will have more disposable income if you opt for a more modest home compared to a contemporary and spacious house.
If your job offer does not include insurance, you may have to pay out for private insurance at an additional cost.
$65k is a good salary, particularly if you are a recent graduate. You may still be living at your parents home and therefore you will be able to save a lot of your yearly salary if you are not paying rent.
Whatever you’re saving for, your savings should quickly amass if you are making a conscious effort to grow your savings.
$65k for a family household
The report ‘Expenditure on Children by Families’ by the USDA highlights how expensive it can be to raise a family, with the cost of living on the rise. You may also find that with children you need to take time away from your job or cut your work hours at times due to childcare issues, which would also impact your take home pay.
Managing your $65k salary
To determine the lifestyle you can afford on your $65k salary, you first need to look at your current monthly outgoings.
Compile bank statements for at least 3 months and review them closely, noting each transaction and whether it is essential or non-essential.
Reducing your expenses
Assessing how much of your salary you spend on essential and non-essential expenses will help you find which areas you can reduce your spending.
Here are some examples of non-essential expenses:
• Unnecessary travel
• Going out for drinks
• Going to see movies or concerts
• Meals out
Examples of essential expenditure include:
• Rent or mortgage payments
• Household bills
• Paying off debts
• Car payments, insurance and fuel
Reducing your outgoings
If the sum of your expenses is higher than your $65k salary, you will need to reduce your outgoings. Decide if there are items on your non-essential spend list which you could cut out completely. You may find you can save a substantial amount by finding lower cost alternative for the high cost treats you enjoy, meaning you don’t have to cut them out completely.
If you find that most of your salary is going to essential expenditure, there are still perfectly reasonable ways you can reduce this to leave you more cash at the end of each month. If you find you are spending too much on housing costs you could consider moving to a cheaper area or property. If your utility bills are high you can shop around for better deals and consider changing supplier. If you are finding your grocery shopping too expensive, it may be that you are shopping in high cost grocery stores when you could be buying groceries at a lower price elsewhere.
If your monthly take home pay is greater than the sum of your outgoings, you’re on the right track. You should have cash left over at the end of each month which can be used towards paying off debts or added to your savings. You may still find there are some areas you can reduce your spending to free up some extra cash.
Determine a reasonable amount you will spend on each category and how much you will place into savings each month. This will form your monthly budget.
Following these steps will give you a better understanding of how your $65k salary is being spent.
You will find that if a high proportion of your money is being spent on paying off debt, your monthly earnings won’t last long. It’s a good idea to pay off your debts as soon as you can so that you don’t end up paying more in the long run in interest. Compile a list of your debts including ant student or personal loans or outstanding credit card debt. You should aim to pay off the highest interest debts first. Don’t leave yourself short, but keep in mind that the more you can put towards paying off your debts each month, the faster they will be paid off. You may also wish to look at taking out a balance transfer to help you pay off the balance of the debt more quickly, as opposed to just the interest.
The city you live in can have an impact on how far your salary will stretch and what kind of lifestyle you can afford. You may be lucky enough to live in a city with a low cost of living. In this case, your $65k salary offer would be considered more high income than in other locations.
Studies have revealed that San Francisco is one of the locations with the highest cost of living. As of December 2021, it was found that the median listing price for a hot here was $1.3M. With a $65,000 salary, it is absolutely doable to live comfortably in San Francisco, but you may have to reduce your non-essential spends to accommodate the higher cost of living.
The price of groceries can differ greatly depending on which state you reside in. You will find that prices also vary depending on which stores you shop in. If your grocery bill is too high, consider shopping in different stores where the prices are lower. You may even find that the quality of the food you are buying is just as good despite the cheaper price tag.
For many of us, commuting to work can be expensive. It is important to consider this cost when working out your monthly budget. If you don’t have much of a commute, you could save a lot each month, so keep this in mind when choosing accommodation. As the cost of living varies from state to state, car payments and gas prices may also differ.
If you find your utility bills are unusually high, consider switching to a cheaper supplier. Rates may also vary depending on which state you live in.
What to do with your $65k salary
You should be able to live comfortably on your $65k salary, with spare cash left over so long as you don’t have high amounts of debt to pay off or excessive spending each month. Here are some ideas of what to spend your leftover money on.
Pay off your student loans
Whilst paying student debt early isn’t a good idea in the short term if you don’t have much spare cash, it will give you financial freedom in the long run if you can afford to pay it off.
Become mortgage free
If you have the means to do so, consider repaying your mortgage. As with paying off student debt, this will lead to financial freedom in the long term. You will find you have more disposable income at the end of each month as you won’t have to make monthly mortgage payments. This also means if your financial situation changes in the future, if you lose your job or your salary suddenly drops, you will own your home outright, giving you one less thing to stress over. It’s important to check your mortgage agreement first as many lenders will charge penalties for early payments.
Start an emergency savings fund
With a good salary of $65,000, you should be in the fortunate position of being able to save for an emergency.
In America, no more than 39% of people have the means to set up an emergency fund of $1,000. Now you’re earning a high income, this would be a smart financial decision.
It’s not necessary to put all of your spare cash into your emergency savings. Ideally, you should have enough to cover 3-6 months of outgoings. This will vary for each individual as one person’s cost of living may be higher than another based on many factors.
You may end up needing this fund for things such as:
• Unexpected maintenance for your home or car and home repairs
• Car payment and car insurance
• Emergency medical treatments
• Supporting your current lifestyle in the even you lose your job
• covering your outgoings if you become ill and are unable to work
• Replacing items which have unexpectedly broken such as a dishwasher or television
Don’t forget about retirement
You may think retirement seems a log way away and that there’s no point thinking about or saving for it now. However, the earlier you begin saving, the more secure you will be when you reach retirement age. Many people think that benefits from social security will be enough to sustain them when they reach retirement, but this is not realistic. As people are now living longer than previous generations, the money we have when we reach retirement has to stretch further. It’s a good idea to start saving now to relieve some stress further down the line.
When it comes to budgeting, there are many different methods to choose from. It’s important to find a method that suits your budget needs.
Pay yourself first
Saving a small percentage of your pay check each month will quickly add up to a substantial amount in savings and the habit will become second nature. Aim to save 15% or 20% of your earnings each month.
Once you have put your savings aside, you can budget the remainder of your money, paying off your essential outgoings and using the rest for misc expenses.
Even with your essential outgoings, there are ways to reduce these costs.
Keep in mind that even your essential expenses shouldn’t use more than half of your monthly budget. If you are spending more than this, think about where you can cut back.
The remaining 30% can be used as pocket money and spent on luxury expenses such as meals out and pampering yourself.
The envelope method
The envelope method means mainly dealing with cash instead of using your cards. Label each envelope with a different spending category and place your budget for that category inside in cash. Once the cash is gone, you have reached your budget and can’t spend any more on that category for that month. Studies have revealed that dealing with cash rather than card helps prevent negative spending habits. This system lets you see exactly how much your spending per month, whereas when constantly paying with card it is easy to lose track of your spending.
Use a spreadsheet to help create and keep track of your budget. There are tools and websites to help with this if this is not familiar to you such as Tiller Money.
Write it down
If you prefer to look at a piece of paper rather than a computer screen, you can also budget just as effectively using a pen and paper. You can make a list of your expenses and split the page into essential and non essential. Looking at your outgoings on a page may surprise you and highlight any areas where you are overspending or spending unnecessarily.
You may wish to invest your earnings as a way to increase your income and help you achieve your monetary ambitions sooner. You may have seen some of your American friends have great success with investing. Make sure you do your research before you invest in anything you aren’t educated in. There are several methods to choose from when it comes to investing your money.
If your goal is to invest for a long-term return, stocks could be a great option for you. The most straightforward route to enter the stock market is via an online stockbroker. Once you have set this up, you can start looking into companies you have had a positive personal experience with as a customer. This may show you the companies you might want to invest in. Don’t invest too much when you’re starting off as there is a chance you could lose your investment. It might be smarter to start small and build up your investments as you go.
Whilst your spare cash may not be enough to buy a property outright, it may be enough for a downpayment on a property, and you can use a mortgage to cover the outstanding amount. You can rent out the property and the rent you receive should cover the mortgage. In time the mortgage will be paid off and you can sell the property for profit further down the line.
Of course, life isn’t all about saving. After all, what’s the point in earning a good salary if you can’t spend it on what makes you happy? Here are some ideas of what you can spend your $65k salary on.
Consider starting a business
You might have a business plan you’re passionate about. If so, now that you are earning good money it might be the perfect time to make your dreams a reality. Be careful not to get carried away and put all your spare cash towards your new business, as many businesses can fail in the early stages and you would lose your investment. Start by putting a modest sum into your business to help it get started. After working on your business, consider investing more if the business shows promise. Only invest if you’re confident your plan is sound.
Purchase a new vehicle
If it is time to replace your car, you may save money in the long run by investing some of your net pay in a new car rather than buying an older less expensive model. If you’ve had a job offer for $65k, and live in a state with a low cost of living, you may be able to afford newer German cars if this is something you are interested in. New cars are often cheaper to run than older cars as they tend to be more fuel efficient, road tax costs less and is even free in many cases and you won’t have to pay for repairs as often with a newer car.
For most people in the US, week long vacations are a luxury which motivates them to set money aside each year. Whilst it may not be wise to spend all your spare cash on an expensive trip, if you are earning a decent amount, spending part of your earnings on a vacation can help you recharge and prevent burnout and spend quality time with friends and family. While you want to make sure you are making smart financial decisions, it’s okay to spend some of your hard earned cash on experiences you enjoy.
How to make the most of your $65,000 salary
Even when earning a good salary, there are simple tricks you can use to make your money stretch further. Using the tips outlined here you will find you are able to achieve more with your salary.
Is $65k a good salary?
If you are earning $65,000 a year in your career, you’re earning more than most. $65k is a good salary compared to other salaries in the US, although not considered middle class.
If you have accepted $65k as a starting salary, your income should increase throughout your career as your skill level improves.
Whilst you should be able to live very comfortably off this yearly salary, keep in mind that the quality of your lifestyle will vary depending on the state you live in, how many people you are supporting and the outgoings you have to pay.
For more information on managing your finances, check our personal finance blog.