Have you ever caught yourself wondering how your salary stacks up against your peers?
Do you make $5,000 a month or less and wonder if this is a good income? In this article we’ll dissect the numbers and explore the $5,000 a month income, giving you a good picture of how a $5k per month income lines up.
An income of $5,000 per month is a healthy income, and in recent years, punches in slightly below the national average income. A person earning $5,000 a month puts themselves in the middle class of the United States, which also makes them wealthy in terms of a global comparison.
Considering this, and the buying power this salary, $5,000 a month is a good income.
How Much Salary is $5,000 a Month?
On the surface, the math is simple: $5,000 per month income is $60,000 per year. Of course it varies based on where a taxpayer lives, but on average, the net annual income after taxes is approximately $49,223.
Breaking that down even further, the net monthly income on $5,000 per month is approximately $4,102 per month, or slightly less than $1,000 per week (52 weeks a year).
So if a person made $5,000 per month and had no debts other than taxes, then that would make for a pretty sweet living, and in that scenario, $5,000 per month seems like a decent chunk of change.
But in reality, most Americans making $5k per month have mortgages, credit card debts, auto loans, and many other household or family expenses. Studies vary on this, but the estimated debt balances of all Americans range from $87,000 to $140,000.
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How to Stretch $5,000 a Month and Live with Debt
To better understand this, we will need a basic rubric to do this analysis.
Consider that the average American credit score is 698 and many Americans have a debt-to-income ratio of anywhere from 9% to a staggering 43% or more. These numbers greatly impact the ability to stretch $5,000 a month, so let’s examine how that works.
First, your credit score is how banks from whom you are requesting credit or loans determine whether you qualify and your interest rate. The three credit bureaus include Equifax, Trans Union, and Experian.
Additionally, the Fair Isaac Corporation credit scores are largely used for mortgage loan underwriting. If you want to increase your credit score, make sure you have a good amount of money left over after you pay your bills, pay all your bills on time and work to keep your debt-to-income (DTI) ratio lower than 30%.
If you want to calculate your DTI, determine your total debts per month (any debts that would appear on your credit report, then divide that by your monthly gross income. While there is evidence to show that persons with high DTIs (some as high as 46%) are still qualifying for mortgages, this is definitely not optimal. So start early in your attempts to avoid large credit purchases and don’t be afraid to tell yourself “no” when you can’t pay cash for something.
The average living expenses per month range from approximately $3,000 for a single person to $5,000 or more for a family. But because taxes are a reality, a person making $5,000 a month is actually netting the more like $4,100 as we examined before.
So depending on your family situation, and assuming you live within your means, making $5,000 ($4,100 after taxes) should be considered a good income and be an amount that the average American can live off.
How Hard is it to Make $5,000 a Month?
While research will show slightly varying numbers, it’s safe to say that $60k per year clocks in at just below the national average American salary of approximately $66,665 per year.
But with 9.2% of the world population living on less than $1.90 per day, the argument can be made that achieving an income of $5,000 per month is pretty hard. Looking at the U.S. Bureau of Labor Statistics, it’s obvious that more education means more pay.
For instance, those without a high school diploma or those with one (but without any college) earn between $600 and $800 per week. This leaves these workers with $31,200 to $41,600 per year, which breaks down to gross monthly salaries ranging from $2,600 to $3,466 per month. Obviously, it will be very tough to make $5,000 per month without at least some sort post secondary education (albeit not impossible by any means).
If we examine earners with some college, college degrees, and post-graduate degrees, there is a monumental shift upwards in earnings. A bachelor’s degree will potentially put you in the running for the national average salary of around $67,000. At this salary, the individual will gross approximately $5,583 per month.
To continue to the progression, it’s worthy to note that you’ll likely need a professional or a doctorate degree to earn around $98,000 per year, which is $8,166 per month. And of course, more experience and further education degrees could extend that well above $10,000 and up per month. And let’s be honest, anyone earning $100,000 per year or more is making a good salary.
With this analysis, we can conclude that it does take some work and time to reach a monthly income of $5,000. However, it’s worth noting that some college or a bachelor’s degree can get you to $5,000 a month, without the requirement of a masters, doctorate, or other post graduate degree.
The Bottom Line: $5,000 Per Month is a Good Income
At this level of income, an individual or household has the “American Dream” available to them. Of course, proper financial planning, debt management, and careful spending is necessary to maximize the efficacy of $5,000 per month.
But provided that is done, $5,000 per month, even after taxes, should be considered a “good income”, but of course, the elephant in the room is that this is a relative term.
What is considered a “good income” is all dependent on what type of lifestyle you live, and how well you can live within your means and manage your money wisely.
Thanks for reading folks!