Is a $120K Per Year Salary Good?

With the cost of living steadily rising, $120,000 a year is good money. However, is it really enough to live comfortably? To understand this, I’ll look at several factors that affect how far that income will go each month. So, if you have been wondering, is a $120K salary good? Keep reading.

Is a $120K Salary Good?

Yes, $120,000 a year is a decent salary for most people. After taxes and deductions, you could pocket around $82K in take-home pay each year. With that income, you can get ahead on your mortgage, save for retirement, start a side business, and even enjoy some treats along the way!

Man using his laptop during work hours

However, remember that with higher earnings comes increased responsibility. You’ll need to be wise in how you use your money, or else it could easily slip away. Financial experts suggest starting with a budget to help track your monthly expenses and ensure you make the most of every dollar you earn.

How to Determine if $120,000 a Year Is a Good Salary

While an average salary of $120,000 is a good amount of money, it’s essential to review your financial expectations and lifestyle to make the best decision for you.

To understand whether this income will be enough for you, you will need to consider factors like

  • Your location 
  • Family size and dependants
  • Your tax obligations (such as income and property taxes)
  • Your current financial situation
  • Your long-term goals
  • Your insurance payments

The Cost of Living in Your Area

The cost of living in an area can directly influence your perception of a $120k annual salary. For example, if you stay in an expensive city with crazy mortgage rates, house rents, and tax obligations, this income may not be enough for you.

On the other hand, if you live in a more rural area where the lifestyle is much more affordable and things like house mortgages cost less, this income will be enough for you to live comfortably. If you don’t think you are making enough, you can negotiate a higher salary or find other jobs with better compensation. 

The table below shows some great cities to live with a $120k salary. 

City Livability IndexMedian Income Annual Necessities Cost
Madison, Alabama89$94,214$39,946
Gilbert, Arizona87$99,154$49,065
Simsbury Center, Connecticut85$109,245$48,644
Columbia, Illinois88$107,500$39,515
Pike Creek, Delaware87$121,750$48,918

Family Size & Dependents

If you live as a single person and have no financial dependants, this salary should be good for you. However, things might be slightly different if you have a family that depends on you.

Tax documents, calculator and pen on the table

Not only will you need to provide for your children’s needs, you will also need to cover their daycare costs or medical expenses and insurance while still trying to clear any debt you have.

However, considering that the real median household income is just above $70k, earning $120,000 a year should be able to support most families. This will, of course, depend on the size of your family. 

Your Tax Obligations

Based on the current tax rates, you will pay up to 24% in federal taxes if you earn $120,000 a year. That is if you are a single filer, head of household or married and filing separately. However, if you are married and filing jointly, you will fall in the 22% tax bracket. 

It’s important to factor in how much of your income will be subject to tax deductions so that you can get an accurate representation of what you take home each month. This way, you will be able to plan accordingly and make sure that you are making appropriate payments. 

Generally, you should know how much tax deductions you will foot in:

  • Federal taxes 
  • Income taxes
  • Property taxes 
  • Insurance payments
  • Social security payment 

Your Current Financial Situation

The average consumer debt in America is around $96,371 according to data from Experian’s 2021 Consumer Credit Review. If you have more debt than the average American, you might struggle even with a decent salary, like  $120,000 a year. 

The income might not be enough to settle your expenses, pay your mortgage, and pay your credit cards and other debts while still meeting your other financial goals.

On the other hand, if you already have a healthy level of savings and few debts, you will have more money left to settle other costs.

Your Long-term Financial Goals

Finally, it’s essential to consider how this salary will help you reach your long-term financial goals. Will the money be used for retirement savings, like your 403b retirement funds? To pay off debt or mortgage? Or simply to enjoy life and travel? 

Woman with her hands on her head with a dollar bill on a table

These things can help you decide if $120,000 yearly is a good income. If it’s not, you might have to consider other jobs to make more money. 

How to Make the Most Out of a $120K Salary

Whether or not $120,000 a year is a good salary for an average person is situational. So, to ensure that you are getting the most of this income and live a comfortable life, you will need to do a few things:

  • Learn personal finance management
  • Consider investment
  • Create a budget
  • Come up with a saving plan

Learn Personal Finance Management

The main reason people don’t make the most of their pay is that they do not know how to manage the cash properly. Some people can burn through their monthly payments to the last dollar within two weeks.

To better understand money and finances, look into a course or book that can teach you personal finance management skills.

This knowledge will help you understand how to use your money best and maximize its potential. It will also help you know which jobs or businesses can help you make more money and ensure every dollar is well spent.

Start Investing

The easiest way to grow your cash, increase your wealth and grow your net worth is to start investing. However, it’s essential to research different investments to know what is best for your portfolio. 

Start small and only invest what you can afford to lose from your monthly income. Some personal finance knowledge will come in handy here.  

Generally, financial experts recommend investing at least 15% of your monthly income. So, if you make $120k a year, you should invest less than $1,500 monthly. 

Create a Budget

It’s essential to track your spending and ensure that you are not splurging your monthly payments to the last dollar within two weeks. A good budget will help you stay on track. I recommend using the 50/30/20 budget rule

Man pumping both fists in the air with a silver laptop near him

This rule states that 50% of your income should go toward essential expenses such as housing and utilities, 30% should go toward discretionary items such as entertainment and dining out, and 20% should be saved for the future.

So, if you make $120,000 annually or $10,000 monthly, a sample budget would look like this: 

  • Necessities (50%): $5,000/month
  • Wants (30%): $3,000/month
  • Savings and Debt Repayment (20%): $2,000/month

Come Up with a Savings Plan

If have extra cash after paying your mortgage, taxes, insurance, and so on, you should also create a saving plan. This way, you can ensure that you are always putting away money for the future. 

Based on the 50/30/20 rule, you should save 20% of your gross income. With a $120k salary, should be saving at least $24k per year or $2,000 per month. 

Related Questions

How Much Is $120,000 a Year Hourly?

$120,000 a year is approximately  $57.69 per hour. To calculate the hourly payment, divide the annual salary by the number of hours in a year. This assumes a full-time work schedule of 2,080 hours per year (40 hours per week x 52 weeks per year).

How Much House Rent Can I Afford With a $120K Salary?

You can afford to spend about $3,000 monthly on house rent if you have a job paying $120,000 a year. As a general rule of thumb, experts recommend that an average person spend no more than 30% of their gross income on house rent. However, your mortgage payment for a house may be higher. 


Whether or not a $120K  is good for you depends on various factors such as your location, family size, tax obligations, and financial plans. To ensure that you are getting the most out of this income level, it’s important to take a financial management course, start investing, create a budget and have a regular saving plan. 

Jared Bauman is the owner and editor of He has started and sold several companies, along with owning several investment properties. His interest in personal finance started as a young kid, developed through his entrepreneurial ventures and real estate investments, and continue through his conversations with friends and colleagues.

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