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The amount of income you bring home obviously affects your financial life. If you aren't earning much, you may need to borrow to make ends meet and could find yourself stuck in credit card debt. On the other hand, if you have a good salary, you may be more likely to have plenty of money to invest in a brokerage account to build a secure future.
So, how do you know if you're doing well when it comes to your income? Read on to find out what a good-size paycheck is for people of different age groups.
It's natural to start out your career not earning much, but you'll want your salary to go up over time as you advance in your profession. That's why it can be helpful to compare your earnings to the average for people in your age group. If you're making more than your peers, you're earning a pretty good income. If you're making less, you may struggle more with your finances.
Here's a look at the median annual incomes for people in different age ranges.
| Age | Median Annual Income |
|---|
| 20 to 24 | $39,104 |
| 25 to 34 | $57,356 |
| 35 to 44 | $64,844 |
| 45 to 54 | $68,432 |
| 55 to 64 | $62,244 |
| 65 or above | $60,008 |
Data source: Bureau of Labor Statistics
If your income is above the median for your age group, then your income is on the upper end of the scale and you should feel pretty good about it.
Should you be worried if you're making less than your peers?
So, if your income is average or below, does that mean you should panic about the fact that you aren't making a "good" income for someone your age? Not necessarily.
Many people choose jobs that don't pay a lot but that they love, and there's nothing wrong with that. Others take longer to advance in their careers, and that's OK, too.
Of course, if you're being underpaid by your employer relative to what others in your position are making, that's a different story, and you should approach your employer for a raise or look for another job. But if that's not your situation, you don't necessarily need to panic just because you're below where others are.
What can you do to make the most of your income?
The reality is, how much you make matters, but what you do with the money does as well. Plenty of people who earn a lot of money live paycheck to paycheck, while many people who don't earn much have a big bank account balance.
The key to success is to make spending choices that you can support based on your income and to ensure you're saving enough. You should typically try to keep fixed costs to no more than 50% of your earnings, save 20% of what you make, and reserve 30% for discretionary spending. Some tips to help you do that include:
- Limiting fixed costs. It might be easier to sacrifice once by buying a cheaper car than it is to deprive yourself of the daily latte you love for the next 10 years.
- Living on a budget. If you make a budget, you can prioritize what matters most to you. For example, you might decide you want to spend more on dining out, so you cut your spending in other areas to do that without compromising your ability to save.
- Saving your raises. If you're used to living on what you're making now, when you get a salary bump, divert that money to savings right away. You won't miss money you never had to spend, and you can increase your savings percentage effortlessly.
If you use your income wisely, this can help set you up for a secure future even if your income isn't "good" relative to your peers'. Just be sure to build your budget around the right limits and you can achieve the success you deserve when it comes to money matters.
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