Here’s a sad reality: In order to raise a family in an expensive coastal city like San Francisco or New York, you’ve now got to make $350,000 or more a year.
You can certainly live on less, but it won’t be easy if your goal is to raise a family, save for your children’s education, save for your own home and save for retirement (so you can actually retire by a reasonable age).
A middle-class lifestyle is a reasonable ask. But thanks to inflation, it has gotten a lot more expensive if you want to have children. The median wealth of middle-income Americans has stayed flat for years, at about $87,140, according to the Federal Reserve’s latest Survey of Consumer Finances. Yet, prices for things such as housing and college tuition have risen tremendously.
In some major cities like San Francisco, the public school system starting in kindergarten is based on a lottery system, so even if you pay tens of thousands of dollars per year in property tax, your child is not guaranteed a spot in your neighborhood schools.
Coastal counties in the U.S. are home to almost half of the nation’s total population; therefore, this article is directly targeted at folks who need to live in these areas because of their jobs, schools or families.
Who makes $350,000 a year?
Before we look at how quickly $350,000 can be spent by a family of four, let’s go through a list of various workers who will eventually make around $350,000 on their own or in household income if they have a partner who also works:
- A Bay Area Rapid Transit janitor who makes $234,000 plus $36,000 in benefits marries a Bay Area Rapid Transit elevator technician who makes over $250,000 in salary and benefits. Together, they’d make well over $350,000.
- Starting total compensation packages for recent college graduate employees at Facebook, Google, Airbnb and Apple range from $120,000 to $150,000. By the time these employees turn 35, their total compensation alone can easily surpass $350,000.
- A 30-something first-year associate in investment banking earns, on average, a base salary of $150,000 plus a $20,000 to $100,000 bonus. After five years of experience, a total compensation of $350,000 should be achievable.
- A 20-something first-year big law associate makes a base salary of up to $190,000 plus a $20,000 signing bonus. By the end of their seventh year, many are making over $350,000.
- A 40-something tenured professor could make about $202,000 at the University of California, Berkeley, $260,000 at Columbia University and $218,000 at New York University.
- A specialist doctor finishing his or her fellowship at around the age of 32 could make about $300,000. After several years in the business, $350,000 isn’t unheard of.
The permutations of people making $350,000 goes on and on. For many professionals, if they aren’t there now, they’ll get to such a level of income eventually, especially if they team up with someone else.
Living a middle-class lifestyle on $350,000 a year
Below is an example budget of a dual-income household with two kids. The budget has been vetted by thousands of readers on my personal finance website, Financial Samurai, who also raise families in expensive cities like San Francisco, Los Angeles, New York, Boston and Washington, D.C.
Gross income review
In order to make $350,000 a year, both parents must be working. In this example, each parent puts away $19,000 in their respective 401(k)s for a combined $38,000 a year. After getting their standard $24,000 deduction, they pay $92,160 in total taxes and are left with $221,840.
Because this couple earns less than $400,000, they can receive a tax credit of $2,000 per child. Since they have two children, they get a $4,000 credit.
- Childcare: $2,450 per month. There’s no getting around this expense when both parents are working. Their childcare center costs $2,200 a month for full-time care. The couple then spends an extra $250 a month for some babysitting help.
- Preschool: $2,000 per month. The second child goes to preschool full-time. The $2,000 per month does not include the suggested $3,000 per child donation the school asks each year to help fund new construction. The parents’ ultimate plan is to send both children to private grade school, which costs about $35,000 from K-8 and about $45,000 from 9-12.
- Food: $2,129 per month. It makes little sense to spend hours cooking when you’re already tired and want to reserve your remaining energy for taking care of your kids. The budget includes expenses like groceries, eating out and food delivery.
- Mortgage: $3,900 per month. This amount isn’t bad for a $900,000 mortgage with a 3.25% interest rate; $2,000 out of the $3,900 goes toward paying down principal and building net worth. Therefore, this couple is adding $24,000 a year in forced savings to their annual 401(k) savings. (Their $1.8 million assessed house is a standard 2,200 square feet, four-bedroom, three-bathroom home on a 3,000 square foot lot. But it’s nothing fancy since the median price for a single-family home is $1.7 million in San Francisco. To give you an idea of how little you actually get for a $1.85 million home, below is an example of a typical home in that price range in Golden Gate Heights, one of San Francisco’s best-kept secret neighborhoods. As you can see, it’s a standard middle-class house — granted, with panoramic ocean views — and only has 1,288 square feet of living space, two bedrooms and one bathroom.)