The Restless Project: How Much Money Do You Really Need? Let’s start with $100K

It’s no wonder that people, even those who make an upper-middle-class income, aren’t saving for retirement and are spending all that they earn.

Editor’s note: This is part of a series by Bob Sullivan called The Restless Project.

It seems like a simple enough question: How much money does a normal American family need to afford to be … normal? You already know what I’m about to say next: Coming up with a realistic average family budget is fraught with peril.

There are obvious geographic problems: What’s normal in New York City is not normal in Omaha. There are honest questions about what “need” is: Some parents feel their kids need private school, others don’t. Is normal a three-bedroom house in a leafy neighborhood, or an apartment? So it goes.

A brilliant professor friend of mine named David Cloutier, who is working on a book for Georgetown University Press about luxury, kicked this question around on Sunday. His research addresses the issue that people often confuse need and want, and this leads to all sorts of trouble, including financial trouble. (Here’s one of his essays).

Of course he’s right: We all know folks who spend too much on granite countertops, Wolf ovens, Cadillac Escalades, and a fourth bathroom. On the other hand, I am often in the position of defending middle-class Americans who are slowly slipping further and further behind, even while it seems like they make a lot of money. I think they are forced to pay too much money for decent housing near decent schools, and that pretty much wrecks every budget, whether or not they splurge on restaurant food and nice shoes. Add in occasional thoughts about lack of retirement savings and college costs, and you have a lot of restless parents.

Back to this weekend’s exercise. David and I discussed what kind of income an American family needs to live a normal, decent life. I want you to help us. Below, I’m going to lay out the framework of a family budget, and I want you to say what I’m missing. Or, what’s excessive.

There are some ground rules to make the discussion a little more focused, but feel free to break the rules if you like. Just leave an explanation, such as, “Where I live in Columbus, Ohio, a three-bedroom apartment only costs $1,400.”

Before we start, a few numbers for context. The median household income in America, the point at which half of households earn more and half earn less, is right now $53,891, according to Sentier Research, which bases its math on census data. Of course, that number stacks families in San Francisco against families in Columbia, Mo., so it’s a bit misleading. An interesting starting point, however.

So here goes. For the purposes of discussion, we’re talking about a hypothetical four-person household: A married couple with two children younger than 10. We’re going to assume both parents work and that the family must pay for child care for one while the other goes to a medium-priced private school. They live and work near one of America’s largest cities — Washington, D.C., or Seattle, or Chicago. The goal is to come up with a number at which a family of four should feel like it’s at least paying all the bills.

To make it simple, we’re going to have them rent a three-bedroom apartment, rather than pay a mortgage (where they would benefit from the mortgage interest tax deduction but be on the hook for repairs and property taxes). Also to simplify the exercise (admittedly, a bit farcically so) we are describing the amount of money a typical family spends to be normal, which is very different from income, which would be seriously impacted by a variety of taxes: federal, state, and perhaps local income tax, sales taxes, auto registration fees, and so on. This is the amount a family needs after all those taxes, and all those tax deductions, are taken into account.

Still, with all these limitations, it seems a worthwhile conversation to have, if for no other reason that it’s a good excuse to examine the monthly budget, something few of us do very well. Here’s my first stab at it. Note that I’ve gone with big round numbers to make your personal comparisons easier.

monthly budget

When I do my back-of-the-envelope calculation, I come up with a nice round number of $100,000 of spending power. Also, please note the budget includes nothing for emergency savings or retirement, which should be getting at least another 10 percent or so of this family’s money. It also doesn’t include emergencies, expenses for elderly parents, or unexpected high-ticket health care costs like braces.

Personal finance columnists keep writing breathless stories about American families not saving for the future, even “upper-middle-class” families who earn between $75,000 and $100,000 annually. This budget shows why.

One adjustment this hypothetical family might make is for the older child to attend free public school and the younger child to stay home with a parent. That saves $3,000 monthly and lowers annual expenses to $63,600, but it also means the family must live on one income instead of two.

So, what did I forget? What line item is unrealistically high? How does this budget match up with your budget? Tell me below or email me at Bob at

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  • MoreGoodies123

    Looks reasonable. You can see why people have no money. Since this is after taxes, you’d need 2 decent jobs to even have this to spend after taxes. Good post.

  • Kathleen

    Ok, so I think healthcare is way too low (I pay $1137/mo for husband & wife coverage, that’s after employer contribution). I also think you are too low on utilities, food, car loan, & child care. I don’t have any comparative basis for tuition, so I’ll take your word on that. Clothing budget is too high-people don’t need to buy a bunch of clothes every month. Also, you left out credit card bills. BTW, I live in Baltimore, MD, so not too far from DC.

  • grandmaguest

    WOW…..I don’t know how I made it only earning (at my maximum in 2008) about 35K. Of course I didn’t have cell phones, cable TV, and never would have spent 500 a month for clothes, nor private school. Instead, house phone, over the air TV, and depending on the age of the child (if young) & for myself, garage sale clothes, sometime Goodwill…you can find some with the tags still on them. I always lived within my means if not slightly below and managed to save some and put some in for retirement. Never lived in an apartment once I had a family. Found reasonably priced homes (KC, MO and in central Kansas) so my house payments were always under $1000/month but usually in the 500-600 range. I’ve owned 4 homes over the years.
    If necessary, I did without so that my kids could have something that they needed (not necessarily a “want”). I bought cars that were used…usually a couple of years and did my research on them…usually through Consumer Reports. I helped with college, but for the most part the kids applied for scholarships, grants, and student loans. I knew that it was up to me to fund my retirement (no loans available for that) so I did what I could for their college, but a lot was up to them.
    We were comfortable, had a nice roof over our heads, good food (we seldom ate out…..that was a treat for special occasions), and decent, clean clothing. Our cars were not big and brand new, but were well cared for and not beat up clunkers that we drove for years. Oh yes, we did not buy cars for the kids. If they wanted one they worked and saved for them. I don’t understand why parents these days seem to feel they need to provide for every whim of their children. Unfortunately there are a lot of “entitled” kids out there who turn into “entitled” adults who still have the “I want what I want and I want it right now” life. They are the ones who often wind up in financial trouble, heavy credit card debt, or back living at home where mom and dad wind up paying for everything again.
    My kids grew up to be pretty much financially responsible adults raising their own families and living within their means….and comfortable too. Oh yes, we also talked with them when young about money, the cost of things, saving, and being financial responsible. I’m so happy we did.

  • Dee

    Hi, I live in Southern California. Your grocery figure is low. A roast here is $45.00! Steaks are 5.99 to 6.99 a pound. Good quality fresh fruit is 1.99 to 2.99 + a pound. You will only find anything for .99 a pound when on sale. Fresh vegetables are all over 1.00 a pound and more. Just having real meat once a month expect to pay $100 to $200 a week! Other wise you are eating junk processed store food – boxes of mac and cheese, hot dogs, fried noodle cups & boxes of cereal
    The monthly rent is questionable. The average 3 bed, 2 bath apt. in So. CA is running 2,500 to 4,000 / month (in a good neighborhood with average schools). It is less expensive to purchase a house. I purchased a home in 2013, the pmt. is $1390 including taxes & Ins.

    • grandmaguest

      At those prices I doubt I would be eating much red meat (roasts/steaks) but then I don’t because even in the Midwest it is pricey for me on a fixed income. I shop the sales and seldom buy anything including meat/poultry/pork/fish except when it is on a really good sale. Then I try to stock up and freeze. I buy my fresh fruits & veggies when they are in season and reasonably priced. Otherwise, I buy frozen or canned when on sale. ( I also have a very small garden…mostly tomatoes, bell peppers & some onions)
      If you are paying 100 to 200 a week to eat meat once a month you must be buying “kobi” (?) beef, or feeding an army. I don’t buy cereal (don’t care for it) or any of the junk foods you listed. I don’t use coupons as a general rule…..but I do have 3 grocery stores within a 1/2 to 3/4 mile radius of each other….so I really scan those sale bills and plan my meals around them. (oh buy the way it is a 50 mile round trip for me to go to town for groceries….so it’s only once a week for me) It might take a little work to only buy things on sale like that but I doubt if I spend much more than $200 a month. I seldom buy ready made meals and to eat out is very rare…..special occasions. But I do eat well and healthy.

  • PE

    I do live in Michigan. But, my heating bill, on the budget plan, mind you, is $190.00 per month for 11 months. I’m thinking my neighborhood oil man is getting rich off his neighbors. I have next to no money for clothing, entertainment, etc. And I’m also thoroughly
    in debt. Always trying to wade my way out of it.

  • Vince Ryder

    Private school is a luxury, not a necessity (for middle class). Entertainment costs are not listed here, either, but I assume some of the entertainment is falling under the “other goods” heading. In Northwest Florida, I raise a family of four on a retired Major’s (US Air Force) pension of about $4,000/month, with highly subsidized medical care that costs me (at most) $250/month. I own two homes and rent one of them out. I would pay income taxes, but my two children’s tax credits cancel out the minimal taxes (federal). My recommendations to folks are: 1) enjoy the simple things that cost little or nothing, 2) buy used/older things for best value, and 3) understand your tax situation. Real Estate can also be helpful, but educate yourself before committing to those investments. In this area, $65,000 per year for a family of four is more than enough. One other note: 4) Life insurance and insurance generally make up a category that can help or hinder your budget situation. Shop around and get only what you really need. Information is power/money.

  • Lorilu

    Most of the expenses shown are too low for major metropolitan area like Boston/NY/SanFrancisco, family/friends tell me. In most areas, families must own a car and often pay $300-$400 to commute via mass transit, too. Heating oil is $4.09/gallon (which translates to about $3,600 per year for heat/hot water, electric bills are several hundred a month. Food is wildly expensive and going up fast. Meat, especially beef, is outrageous. The only way a family can manage the expense is to ruthlessly cut out any and all vacation, dining out; shopping only when necessary for everything else. Real estate taxes in NY/NJ area run anywhere from $10K to $15K/yr. or more for a 1,500 sq. ft. house. A one-bedroom apartment costs everyone I know closer to $1,800/month, and it’s nothing special, sometimes a basement apt. Don’t forget many states have state income tax, too. The healthcare contribution is too low, too–$1,200 is more like it, though I know one family that’s paying about $2K with no serious illnesses. Then there are co-pays, prescriptions and dental bills (dentists here get $135 for a cleaning, $200 for a filling). There are a lot of people living in nice neighborhoods for the sake of their kids going to good schools who are barely making it or dead broke.

  • Here’s the thing: you say families are being “forced to pay too much money for decent housing near decent schools,” but then you list private school as a necessity. Well, which is it? If you’re sending your kids to private school anyway, you don’t need to pay the higher housing premium to live in a good school district; if you’re paying more to live in a good school district, then you don’t need to pay for private school tuition. So one of these numbers needs to be adjusted.

  • Patrick Seitz

    I guess there’s a lot to be said for regional cost of living differences. I was going to suggest that rent and healthcare seem too high and then I read all the comments saying just the opposite. In my central California town, $2,200 will get you a fantastic and large apartment, and my employer charges about $400 per month for a family for health insurance (not including co-pays) which is pretty standard if a little pricey for this area. Suddenly I feel grateful to live where I do.

  • Dale

    I’m in the western ‘burbs of Chicago, less than ten minutes drive from the city. Don’t have human children but have two fur babies (cats). I

    guess I’d have to ask what standard you’re using for ‘decent’ homes and schools. I just moved from boutique ( read ‘upper middle class’) Oak Park to working class blue and pink collar Forest Park. I make less than 50K a year and just STOPPED paying $950/mo. for rent. Here I pay $775/mo plus all utilities but I’m super frugal with electricity and heat (more clothes less heat).

    I pay more for my cat’s food than my own but even at that I don’t buy w/o coupons for any breathing being here. I manage to save about 15% of my income (most but not all months), have a realistic view of my future (bad habits = poorer health when older) and that’s why I save more. I have health insurance at work and maintain several free memberships where I may join their group health insurance once I retire (soon Lord, soon!). I plan to pre-pay for “final expenses” because I don’t need life insurance.

    In my day to day life I spend about $50/week on groceries (and see no reason why your fictional family needs to spend more than $400/mo on their’s). And that’s being generous. They can join a CSA and/or Costco or another warehouse to save on that grocery bill.

    There are any number of things this family could do to save some moolah w/o undue discomfort. The scenario you posit here is one of indulgence. As fond as people may be of it, pay tv is a WANT not a need. If cell phones are actually needed why not make one of them the primary phone and skip the landline? Or have an “emergency only” minimal service landline? Who needs both these days?

    If you don’t like the local public school why settle for opting out of it and throwing money at the problem? There’d be less need for the money if parents spent more time getting involved. When I was a school aide the most successful students were the ones with a parent in the classroom one or more times a week. Are parents truly too busy to get involved in their kids lives?

    All just my opinion of course. Your mileage may vary…

    • grandmaguest

      Congratulations Dale….I for one totally agree with you! Too many people equate “wants” with “needs” in this day and age. Sounds like you are doing a great job.

      • Dale

        Thanks grandma! ;-)) Just putzin’ along one inadequate paycheck at a time like a lot of folks.

        But I have to say, I kind of enjoy the challenge in finding more frugal ways of working in my indulgences. Love to travel so I take advantage of those memberships, every sale and coupon code out there and I learn the local language free from apps and online sites. I know I’ve got the basics down when I can call the destination hotel and/or travel agent and negotiate a better price in their native language. Trust me – they’re usually impressed as H E double hockey sticks at my sheer nerve in trying to negotiate – and in THEIR language yet! I have to laugh at myself sometimes.

        The virtual world is where I navigate to get the best bargains and it works really well for me.

  • I suspect gas is included, but not specifically mentioned, under “car loan/ins.” We pay $300 a month to own one car (counting all costs), so $500 a month for two seems plausible.

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