In today's economy, the definition of wealth is increasingly relative, especially in big cities where the cost of living can quickly erode even significant incomes and wealth. This phenomenon has created a strange situation: a city where six-figure salaries and billionaires enjoy only a fraction of the comfort of life.
Let's explore five American cities where millionaires and billionaires live distinctly middle-class lifestyles, despite their enviable incomes and seven-figure net worths.
1. San Francisco: Where tech wealth meets high costs
The Bay Area's jewel, San Francisco, is synonymous with tech innovation and staggering wealth. But it's also a place where families making $300,000 a year have a hard time affording a home. The median home price in San Francisco hovers around $1.48 million, and the average rent for a two-bedroom apartment is a staggering $4,214 per month.
The tech boom has been both a blessing and a curse for the city: While it has brought an influx of high-paying jobs, it has also created unprecedented demand for housing, with limited housing inventory and intense competition making it difficult for even tech workers earning six-figure salaries to live in desirable areas.
The typical budget for a high-income tech worker in San Francisco may seem shockingly tight: After taxes, a $200,000 salary leaves roughly $11,000 to spend on monthly expenses. With $5,000 for housing, $2,000 for student loans, $1,500 for child care, and $1,000 for transportation, there's very little money left for savings or luxuries.
This economic reality has forced many residents into their 30s to make tough choices, like living with roommates or commuting from far-flung suburbs.
The city's unique topography, strict zoning laws, and favorable climate further compound the problem, making San Francisco a place where even the wealthy struggle.
2. New York City: Big Apple, Big Costs
The epitome of urban living, New York City offers unparalleled opportunities and experiences. But these come at a price, leaving even high earners and billionaires feeling like they're barely getting by. The cost of living in the Big Apple is 76% higher than the national average, and housing costs are 236% higher than the norm.
In a city where the median home price is $1.67 million and the average monthly rent is $4,469, even salaries considered affluent elsewhere barely cover basic living expenses: A family making $200,000 a year might live in a modest two-bedroom apartment in Brooklyn rather than a spacious loft in Manhattan.
The financial burden doesn't end with housing. New Yorkers pay high prices for everything from groceries to entertainment. A simple night out with dinner and a Broadway show for two can easily exceed $500. Whether you're paying for a subway pass or a rideshare, transportation costs can add up quickly.
Let's say you make $180,000 a year. After taxes, your monthly take-home pay is about $10,000. Your rent for a one-bedroom apartment in Chelsea is $4,000. Add in $1,000 for utilities and internet, $800 for transportation, $1,200 for food and dining out, $500 for medical expenses, and $1,000 in student loan payments. That leaves you with only $1,500 to spend on savings, entertainment, and unexpected expenses. Not exactly the lifestyle you'd expect from such a high salary.
3. Los Angeles: Charm and Surprising Prices in the City of Angels
The city of dreams, Los Angeles, attracts thousands with promises of sunshine, beaches, and a chance to become a star. But the reality of living in LA means trading off glamour for financial stress, even for the wealthy and six-figure earners.
The median home price in Los Angeles has risen to about $945,000, and the average rent for a two-bedroom apartment is about $3,296 per month.
While the entertainment industry brings wealth and prestige to the city, it also brings with it a high cost of living: Aspiring actors, successful producers and studio executives contend with a cost of living that's 51 percent higher than the national average.
Transportation costs are especially burdensome in Los Angeles: In a city known for its congestion and uncontrolled population growth, many residents spend a significant percentage of their income on car payments, insurance, gas, and parking, and public transportation options, while improving, are still limited compared to other major cities.
Imagine you're a successful television scriptwriter who makes $250,000 a year. After taxes, your take-home pay is about $13,000 a month. The mortgage on your modest home in Studio City is $6,000. Add in $1,500 for utilities and home maintenance, $1,000 for car expenses, $2,000 for food and dining out (including necessary business meals), $1,500 for medical expenses and insurance, and $1,000 for entertainment (which is necessary for networking in his industry). Despite his generous income of $250,000 a year, John has very little income to save.
4. Seattle: Tech boom raises cost of living in the Emerald City
Once known for its grunge scene and coffee culture, Seattle has transformed into a tech hub rivaling Silicon Valley. This transformation has created high-paying jobs, but it has also caused the cost of living to soar. The median home price in Seattle is $818,975, and the average rent for a two-bedroom apartment is $2,075 per month.
The influx of tech giants like Amazon and Microsoft has transformed Seattle's economic landscape. While these companies offer salaries that look attractive on paper, the local cost of living quickly reduces their actual value. Seattle's overall cost of living is 120.1% of the national average, meaning a $100,000 salary here feels closer to $83,000 in a typical US city.
Recent changes in the housing market, including rising mortgage rates and increasing inventory, have added new complexities. While this may suggest a buyer's market, rising interest rates are eroding purchasing power, especially for first-time homebuyers.
A software engineer making $150,000 a year in Seattle may seem wealthy, but their finances are tough. After-tax monthly income is about $8,500. A modest mortgage or high rent can easily wipe out the $3,500. Add to that $800 in utilities, $1,000 in transportation (car payment, insurance, fuel), $1,200 in food, $800 in medical expenses, and $500 in student loans.
That leaves you with around $700 to save and for discretionary spending, which is far from the lavish lifestyle you would expect from this salary.
5. Arlington: Washington suburb where the average income is six figures
Located across the Potomac River from Washington, D.C., Arlington, Virginia, is a perfect example of how proximity to power can come at a cost: With a cost of living index of 146 (46% higher than the U.S. average), Arlington makes a salary that would be considered expensive in other cities merely a comfortable income.
The median home price in Arlington is $796,000, and the average rent is approximately $2,507 per month. These housing costs, combined with the rising costs of utilities, transportation, and everyday items, create an economic environment in which even households earning $150,000 a year can struggle to get by.
Arlington's economic situation is heavily influenced by its proximity to the nation's capital. Government jobs, lobbying firms, and contractors provide many residents with stable, high-paying jobs. But these salaries often don't provide the financial security one would expect.
Consider a two-income household living in Arlington making $200,000. After taxes, their monthly take-home pay is about $11,000. The mortgage on a modest single-family home could easily reach $4,000.
Childcare for two children might cost $3,000. Add to that $1,500 for utilities and home maintenance, $1,000 for transportation, $1,500 for food, and $1,000 for medical expenses and insurance. That leaves just $1,000 for savings, entertainment, and unexpected expenses. That's a far cry from the wealth many people associate with an income of $200,000.
Arlington’s competitive housing market adds further financial stress: homes are sought after by multiple buyers and often sell quickly, driving up prices and forcing many residents to stretch their budgets to the limits just to secure housing.
Conclusion
These five cities — San Francisco, New York, Los Angeles, Seattle and Arlington — represent a growing trend in America's urban areas where traditional notions of wealth are being redefined: salaries that would allow for a lavish lifestyle in many parts of the country barely cover basic living expenses in these expensive areas.
Millionaires who move to these cities can quickly spend a large portion of their net worth on a home purchase, and then state and city taxes and living expenses can quickly eat away at what's left.
This phenomenon has far-reaching implications, influencing everything from career choices to family planning decisions, and raises important questions about sustainable urban development, income inequality, and the changing nature of the American Dream.
As these cities continue to attract talent and industry, finding solutions to the crisis of rising housing prices becomes increasingly important. Addressing these issues, whether through policy changes, urban planning innovations or shifts in corporate practices, is essential to maintaining the vibrancy and diversity that made these cities so attractive in the first place.
For now, residents of these cities survive in a complicated financial environment where being “wealthy” often means simply not keeping your head above water. It's a stark warning that when it comes to wealth in today's economy, context is everything.
