How Much of Income Would Be Enough for You to Live "Reasonably Well"?

Long time lurker here - It's always interesting to read Ozbargain forums and the comments. Some comments totally make my day, due to the excessive laughter that follows.

My question was inspired by the recent discussion by 900dollaridoos on 26/09/2021… "If Your Income Was Double or Tripled, What Daily/Weekly/Monthly Items Would You Buy?" It was very interesting to read everyone's comments.

So my question being.. "How Much of Income Would Be Enough for You to Live "Reasonably Well"?"

My guess is that people would have a variety of different definitions of "reasonably well". From my perspective, the definition of "reasonably well" would be to live life with everything you need but not having everything you want.
- Having everything you need = enough money for home cooked food, utilities, shelter (rented or owned), whilst not living pay check to pay check and the occasional luxury like eating out/takeaway once in 2 weeks or a massage once every 6 months
- Not having everything you want = ie: the new phone/car/house/computer/handbag or the monthly expensive fine dining meal

To clarify, I'm not with a survey company either. I've just been reading a lot on the median income and the "average middle income australian". After reading all of that, it still befuddles me on what is termed "average middle income australian", as it seems that people generally deem themselves as the "average middle income" whether they earn $60k per annum or $300k per annum (business owners included).

Anyhow, I thought it would be an interesting conversation and poll to have.

The poll is based on a 1 person's income (pre-tax), with no kids - I know that a lot of people have kids here, but hey, let's just go with that assumption ok? Also, I've chosen pre-tax income aka gross salary, since it was easier, as some people obviously have special accountants (see below link)
https://www.theguardian.com/business/grogonomics/2021/jun/08...

Poll Options

  • 69
    < $50,000
  • 218
    Between $50,000 to $100,000
  • 429
    Between $100,000 to $150,000
  • 85
    Between $150,000 to $200,000
  • 43
    Between $200,000 to $300,000
  • 228
    > $300,000

Comments

  • +91

    not how much you earn, it's how you spend it

    • +2

      totally agree!

      • +3

        It's less about how much you spend, and a lot more about how much you earn.

        The other thing you're forgetting is: Time.
        What may be reasonable today is most likely going to be an unreasonable figure in a decade or less. Basically inflation. Remember the cost of living (mortgage, transportation, food, utilities, clothing, entertainment*, etc) changes over time, and that is the important point.

        For instance, what if our salaries rose to a great level whilst most expenses were low, but then one of your staples (eg Mortgage) went through the roof. Would you then not call that a regression?

        *by entertainment, I don't mean blowing hundreds on the weekend at a titty-bar. I mean like hanging out with friends, going on a date, etc etc, all done for at a very reasonable/cheap degree.

        • +2

          You had me at "titty-bar"!

          • +2

            @lddv04: 20 years ago I would say its not how much you earn but how you spend it. I was foolish and young to save up enough where I could have outright purchased a house but didnt until later on low income salary still living with parents.

            Now using the same saving tricks it doesnt work so good on a middle class income.. so now its more about how much you earn.

  • +40

    Some do well, even under $50k. Others just spend more as they make more, and never have enough.

    • +5

      Evidenced but the 105 people and counting who think they need 300k as a single to person to heat home cooked food and get a massage every 6 months, I am in years reading this

      • The problem with the survey is it is way to fuzzy on the question as it depends a lot on what you have now, what you have saved, whether you own or rent etc etc. I put 300k, not because I need 300k now, but because eventually I am going to retire and I want to live retirement on 100-150k, not on a pension barely scraping by. To ensure I have that I need to continue with 300k+ for the remainder of my working life.

        • +1

          This very much depends on how long is the 'remainder of my working life'.

          The lesson is to 'start early'.

          Using the example of superannuation:

          1. maximum concessional superannuation contribution = 27500 per year. tax rate 15%. Let's say 'a = 23000'. If earning $150,000 annually as a salary earner, the compulsory superannuation contribution is already about 15000 (before tax).

          2. average superannuation return rate 8% per year. Inflation rate approx 3%. Let's say 4% return 'r = 1.04'

          3. Start maximum contributions early. Thirty years of contributions at maximal rate 'n = 30-1 = 29'

          4. Sum of geometric series = a((1-r**(n+1))/(1-r)) = 1289954.

          Perhaps not quite enough to reliably have a $100,000 per annum return unless tolerant of eating into capital. But a good start. And (currently) superannuation funds in pension phase are also taxed at highly concessional rates compared to 'normal' income.

          In addition, if earning $150,000 (in today's money) as a single person, it is feasible to have other investments outside superannuation.

          This calculation is not unique to the Australian superannuation system. I am aware that similar arguments apply to, for example, the US 401(k).
          Disclaimer - I am not a financial advisor or tax consultant

          • +1

            @DavidFong: Yeah, this - as of last financial year I've used up all of my $27.5 allowance and all the "catch up" contributions permitted for previous years as well, and I'll be maxing it out year after year from now until retirement as well - and have other investments outside super as well.

            • +1

              @ely: good strategy!

              The above estimates are actually somewhat conservative, at least given the fairly benign investment environment over the past two decades. if return after inflation averages 5% (and Australia's largest super fund has returned almost 10% per annum over ten years before inflation), then the end-balance will be $1.52 million in today's money. Very close to the $1.6 million cap at which no concessional contributions can be made in addition to superannuation guarantee contributions. Depending on how many years you have left, you might not be able (or need!) to 'max' out your concessional contribution limit in the few years before retirement, @ely!

              Given the tax-favourable environment of superannuation returns, there is some rationale to make non-concessional contributions, but I know for myself that is a hard contribution to stomach!

    • how would you buy a house with 50k :O

      • +4

        Play Lotto.

      • +2

        It starts by not spending the whole $50k.

        • +8

          The problem is that the average house price will often increase by more than you can save, I put away 10k a year from my 50k over the first 5 years I worked and the price of houses in the areas I was looking at went up 100k in that time.

          Its quite depressing when you think you are doing the right thing and then just get screwed.

          • @PiratePete1911: No. The problem is that you think you need to buy the average priced house. Look in another area. Australia is a big place. There is more than one area. Or don't and just come up with excuse after excuse. It doesn't matter to me whether you buy a house or not. It's definitely possible though.

            • +5

              @Skylex: This was 10 years ago, I own a house now.

              You dont even address the fact that I objectively would have been better off not saving and just taking out a loan with mortgage insurance.

              My post wasnt a boohoo I can't afford a house, it was that saving for a house is a waste of everyones time in the current market and has been since at least the GFC.

              • @PiratePete1911: You still need to save the deposit. Some people claim not to be able to even do that. You own a house now, proving it is indeed possible.

                I completely disagree that it's not possible in the current market. It is always the current market. The market is not a single monolith. There are plenty of affordable places, that will increase in value with time. The best time to buy is always now. That one house, apartment, area, that you're emotionally attached to, and can't afford, is not the entire property market.

              • +1

                @PiratePete1911: The problem is that people still think that they can "save" for a house. The paradigm has shifted so that if you want a house, you need to "invest" for it. Which means you point of taking out a loan with mortgage insurance is a (risky but) viable way of doing so. Rentvesting, putting money in shares, crypto, etc are the new ways of getting your foot in the door. Otherwise, have fun buying a property out in the sticks commuting 2 hours plus to get to work.

          • @PiratePete1911: Simple solution - stop voting for the Liberal Party.

      • This 3 bedder beauty is only 25k! Big land too! :D

        https://www.realestate.com.au/property-house-qld-cunnamulla-...

        • That's probably a little too extreme for most people, but there are pricepoints between that, and $1M+.

        • Judging by the stumps, it looks like they forgot to build the rest of the house.

          • @r3dfusi0n: Or….they already sold some part of the house to pay council rates? LOL

        • Its got a solid roof and its on concrete stumps. Couple cans of paint and new flooring will work wonders.

      • Don't live in the city. Plenty of liveable houses in rural areas for $100-200k.

  • +11

    Have a look at how the ASFA defines a modest and a comfortable retirement.
    https://www.superannuation.asn.au/resources/retirement-stand...

    Note they assume you have paid off your house and the income is after tax.
    The comfortable options includes regular restaurant dining, overseas trips and a new car every 5 years, which seem at least « reasonably well ».

    • +5

      wow, a new car every 5 years… weren't cars meant to last around 10 to 15 years?

      • +1

        I think their idea is you trade in your 5yro car so it is still worth something towards the replacement.
        It is interesting that they assume you no longer drive in their budget for 85yro+.

        They budget something like $150 a week for car expenses, which would be probably$3k or $4k a year towards the replacement cost.
        $15k or $20k plus whatever you can get for your 5yro vehicle.

        • +1

          It's a reasonable budget.

          I think its more the fact people have unreasonable expectation of what is reasonable.

          A budget is a budget in the end. Just because you have saved enough money after 5 years does not mean you need to buy a new car.

          One would assume you would keep the car for around 5 to 10 years (personally I pick 8 years). The car should still have a value of around $5k. This is a safe value. Really you could keep the car for 10+ years until it breaks down but then we would not factor in trade in value. The older the car the more expensive maintance will cost but the less value the car is worth. I think they picked 5 years because this would be approx 100,000km and you would need to do things like timing belts and etc.

          • +1

            @pandadude: Not if you buy ozbargain favourite: Camry. Parts are cheap and if you get the 4 cyl you can do all the work yourself. Perfect for that 85 year old bloke to cruise around in

            • @Jackson: I thought the OZB favorite was a Tesla?

              • @serpserpserp: who's planning for the futre when they hit retirement? The added resale of the tesla won't help him when he's dead

            • @Jackson: Ah yes, always see old people working on their own cars right. At that age, I'd pay extra for reliability as it would suck to have a car break down in the sun as an old person.

              • @AH: Sorry, areyou suggesting there's a car in the world more reliable than a Toyota Camry?

                • @Jackson: Just stating that yes Camrys are reliable but the age of the car still matters, especially when a car is your only form of transportation, you'd likely want it to not break down.

                  Even in the case of Camrys, a 5 year old Camry is much less likely to breakdown than a 10 year old version.

                  • @AH: Sorry, I didn't refer to the age of the car the only age I referred to was an old bloke. Tesla is 60k and up, base camry can be had for 27k or so (not that I have checked) I think I know what I would be doing with my money if I was on my last legs

      • +5

        Its always in the best interests of Superannuation funds to make the average cost of living in retirement as high as possible. The reason being it will force people to contribute more to their super and therefore the funds will make more money in fees in the case of industry funds and profit in the case of retail funds. Its been proved that what super funds' projections of what is needed to live a 'comfortable' retirement is way way overestimated.

        The whole finance industry never has your best interests at heart. The Royal Commission proved it, but the LNP have not done a thing about it as they are subservient to them lock, stock and barrel.

        • +2

          your probably not wrong with average cost of living, but putting extra into super and maximising it is a wise thing to do

        • Seems they always assume you turn up at retirement with $0 cash in your bank accounts and no other liquid assets too…

          • @BobLim: That's because they don't have this information about you. Would people be willing to provide more info to super funds if they can allow for this in their projections?

            • @ccymli: Usually I see calculators - you input your salary, expected growth, retirement "comfort"/lifestyle expectations, and it'll spit out a "you need $x balance".

              I see no real reason not to give you an option to input some other data about your assets, or maybe have an option to tick to use the average assets on retirement? Maybe no assets is the reality - seems strange but who knows

      • Mate car manufacturers are endlessly working towards a point where you want to change your car annually.

      • 1 international flight every seven years? I need to keep working…

    • This report published by the ASFA just proves that the superannuation industry have a vested interest in massively overstating what a 'comfortable' retirement looks like. Their report states in 2004, $44,818 per year for a single is required to live 'comfortably', this also assumes you own a fully paid off house!

      To put this ridiculously high figure in perspective, adjusted for inflation this is $62,756 in $2021 dollars! This is higher than the median wage according the ABS!!!

      Never trust numbers put out by the super industry as they are designed to scare you into contributing more. Almost all Australians will be fine in retirement. Compared to other nations, even those on the pension here have a very high standard of living.

      • I am 100% on the same page with this criticism of the ASFA report, and completely agree it is not suitable to base retirement planning if you earn average incomes.

        It is somewhat useful because they publish a weekly budget along with it, so you can review their spending an see for yourself where it exceeds sensible expenditure, to help with your own planning.

        And I think it is useful for hypotheticals like OPs post, where they didn’t want somebody to break down a personal budget for them, just give them a number.

  • +45

    Mortgage and no mortgage makes a massive difference. Once you're mortgage free, you can live well off a much lower income.

  • Whats living reasonably well?

    Just having a few grand extra in your bank account to burn and you're doing better than most of the population.

    • +3

      Whats living reasonably well?

      It’s getting the best revenge.

      • Thanks Charles Bronson.

  • This median shit is different everywhere you read it. I just googled it again and now it's this or on the ABS site it's this

    • +28

      The different figures are to do with what is reported, and how it is presented.
      The median household income, which includes worker’s wages, welfare, investment income from all the people living there is about $85k. So half of households earn more, and half earn less.
      The average is quite a bit higher, because there aren’t households on zero or negative incomes, but there are households on $1m+ incomes. So when you see averages quite high, it is because of this.

      Next is the average wages/salary. The average full time wages are a little higher that median household income. What? Yes, because full time workers earn more than pensioners, households on welfare and people in low paid or part time work.
      So when you see average wages at $88k or similar, it is the full time worker, and again, it includes those people with $1m+ incomes.
      The median worker is more like $65k, with an equal number or full time workers earning less, and more, because it includes part timers.

      The last confusion is disposable income. This ABS statistic is useful to compare changes over time, but it excludes tax, and some other inclusions and exclusions.

      So basically, make sure you are comparing apples to apples, and most newspaper articles don’t make it clear what they are reporting, because most journalists don’t understand it either.

    • +28

      Lucky to be on centrelink but you'd settle for 100k after tax? Lol

      • +1

        yes and according to his logic that would put him in the top 0.001% of the globe.

      • +4

        jesus christ didn't she drink, smoke or even do drugs? what sort of a life is that? /jk

    • +20

      student on centrelink here. I get $11960 a year from centrelink.

      Spoiler- its not comfortable

      • -1

        Can’t even afford drugs, how can that be any fun.

        • +5

          He just spins around for 2 minutes and gets his mate to punch him out

      • +6

        Pretty damn good for not having to work

      • +1

        Better than nothing. Cant complain.

      • -1

        Don't students have part time jobs these days?

      • +17

        I spent five years on Youth Allowance with a part-time job (near minimum wage, 16-20 hours per week) and no financial support from family. With that income I was able to:

        • put a roof over my head in various share houses, usually located in or close to the trendy parts of town
        • run and insure a 250cc motorbike + concession Myki for public transport
        • have an active social life (on the beers every second or third weekend, going out for coffee, house parties etc)
        • acquire fairly decent / new appliances, including a 4K smart TV, PS4 Pro and budget gaming PC (thanks Ozbargain!) plus a bit of basic furniture (usually second hand or cheap IKEA stuff)
        • have a tiny amount of savings ($4-5K) for emergencies
        • fly home to Tassie at least once a year, sometimes twice
        • go on three overseas trips (one to Japan, two to Thailand).

        Spoiler: it was pretty comfortable, even if it didn't always feel that way at the time. I'm now working full time on a decent salary (>$100K p/a) and I miss the freedom and fun I had at uni. Enjoy it while it lasts!

        • +2

          On the beers every second or third weekend isn't what I would call and active social life, it's rather restrained IMO for someone at uni

          • +2

            @Jackson: If you're literally living off welfare payments then you need to temper your expectations of what "social life" entails. It's just not conducive to hitting the bags six nights a week. There are plenty of other things you can do that are social that cost you little to no money - they just don't involve alcohol.

        • -5

          live the dream I miss them days too. I was sitting in the office one day think is this it. Why cut spent up save invested in the stock market and a few houses now back to basic lifestyle work went I want 3 days a week bit of event work. I go to movies have few beers out on weekend go cheap local meals own near a new car 2018. I go overseas pre covid 3 times a year eup I been 10 times one for uni for a year. Japan I have been 3 times. 60 plus cruise ship cheap cruise ship. if want some I get it. I own my own home.

          • @nikey2k27: Sounds like you make your own drugs too.

          • +3

            @nikey2k27: Negged because you worked out a way to increase your font size (along with being incoherent)

      • you must work as well

        • no problem working just not been a slave to your job.

  • -2

    75mill

  • +5

    Really depends on your expected lifestyle and attitude towards money. My parents came from a working class background and their outlook on what constitute a "reasonably well" standard of living is drastically different to what myself and my siblings would consider a comfortable lifestyle.

    • If only more people understood this point. I see and hear of people still bludging off their parents when they go on e.g an overseas trip every year and swap their vehicle over every 2 or 3 years, and their parents haven't been on a trip or bought a car in 15 years. It can be a chellenge to get people to spend money on themselves though when they have been tight arsing it for years and come from a different time

  • -1

    aaahhh - need a little more context here.

    Location?

    From what I can read you have stated, you note this does NOT include the 'nice to have' - bags, travel etc.

    So just living, by way of rent/mortgage, food, utilities, etc…

    A major variation on this would be location.

    Sydney is going to cost you around 30% + more than Melbourne, which will be higher than Brisbane etc.

    Im having somewhat of a guess here of what/who you may be… but…
    Sydney, 10-15km from the CBD: I'd say, rent, public transport, fuel, car, insurances, gas, electricity, food, etc and in your own apartment 1bed;
    You're going to need around $1200-$1500 a week. Add in the odd 'nice to have' and you need around $100k-$125k to live in Sydney pre tax.

    • I'm guessing you're an FBI profiler or work for the ATO

      • Do you think my assumptions and profiling was that good?

        Can't say I'm either. In some manner of speaking, I think both are very similar, of which, neither are friends of mine!

        Once upon a time, I did have some aspirations of being involved in Gov and thinking if I would even have a chance of becoming a politician, then… I snapped out of it. At least for the time being anyway.

        • -1

          Near enough go my assumptions and estimated value in that case.
          Maybe I should become a investigator.
          Lol…

          150k sounds about right if there is an "easy and enjoyable" lifestyle you are seeking.

          Keep in mind, depending on your career/professional, you should be able to climb a good portion of your tax back. Although a lot is pending on circumstance and your role.

    • +2

      In my post above, I would be happy on 100K after-tax … so we are looking at around $140k gross but that would be affected if I ended up travelling for the bulk of the year or living primarily abroad, and became a non-resident for tax purpose.

    • I'm not so sure about Sydney costing more than Melbourne. House prices aside, the prices for both states are about the same Actually, I would dare say that eating out and groceries in Sydney are cheaper than Melbourne.

      • Not so sure about that (food).
        I travel between both each month (usually) and still fine melb cheaper than Sydney.

    • +1

      How are you figuring $1200-$1500 a week?

      • Read up. If one doesn't want too much by way of 'extras'.

        "Im having somewhat of a guess here of what/who you may be… but…
        Sydney, 10-15km from the CBD: I'd say, rent, public transport, fuel, car, insurances, gas, electricity, food, etc and in your own apartment 1bed;
        You're going to need around $1200-$1500 a week. Add in the odd 'nice to have' and you need around $100k-$125k to live in Sydney pre tax."

        • Yeah, but break it down.

          I spent around 2k a month for that exact lifestyle in Melbourne. Rent is not that much higher in Sydney + I live closer to the city.

          • @Zephyrus: Yeah, it's super high. I spend about 2.5k per month, live in my own place in the inner suburbs of Melbourne, and spent money on all kinds of useless stuff. 1500$ a week you'd need a ferrari for your daily driver.

            Edit/ $1500 a week very high for your regular living expenses is what I mean. Obviously if you want to save money or buy/do luxury things it could be higher.

            • @nigel deborah: I think the fact that someone lists buying "bags" as an expense can only mean they are into expensive brand name bags that cost thousands or coke (not the kind you drink). Either way both these items tend to indicate an expensive lifestyle

  • -3

    Does it have to be in fiat?

    • +1

      unless the government starts accepting tax payments in blow jobs.

  • How long is a piece of string…

    • +5

      Mine is 36cm

    • +1

      Double the distance from the middle to one end.

  • +4

    75k. In this day and age having a stable job and a mortgage/house is 'reasonably well'

    • +1

      Having a house is doing 'very well' in the current market.

    • Finally, a sensible answer.

  • It'd depend?

    If you have to see a doctor or a specialist every now and then, amount of income you'd need would be different. Reasonably well might mean that you see someone about your problem as much as you need to (which would be a lot of money) or every now and then (which would likely be less so?).

    Oh and about the whole "average" stuff, I think there is an observed phenomena where people tend to rate themselves as "average", when they are not. I remember hearing about how 90% of the American drivers in survey answered that their driving skill was average.

    • Actually, most drivers overstimate their driving skill and place themselves 'above average'.

      McCormick, Walkey and Green (1986) found similar results in their study, asking 178 participants to evaluate their position on eight different dimensions of driving skills (examples include the "dangerous–safe" dimension and the "considerate–inconsiderate" dimension). Only a small minority rated themselves as below the median, and when all eight dimensions were considered together it was found that almost 80% of participants had evaluated themselves as being an above-average driver.[30]

      https://en.wikipedia.org/wiki/Illusory_superiority

      • Yeah, I think that was it. I must've remembered the whole phenomena slightly wrong. Regardless, the point about the whole misjudgment of their own skill I think still fits into this narrative.

        • Hmmm actually this kinda struck me as I was thinking, both probably are different in why they happen, so probably does not fit the narrative. :P

  • +15

    Your definition of reasonably well is my exact lifestyle. Single, mortgage in Northern suburbs of Melbourne.
    I don't splurge in luxury items but still buy new games and treats for myself.
    Cook my own meals and eat well, pre covid I'd go out with friends every few weeks.
    Still putting money aside into ETFs so got cash left over.

    Was doing this on around 70k, easier now I've got a raise but when people say you need 300k+ for a reasonable lifestyle you can tell they come from a different world.

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