The “Remember When…” booklets that are found at car washes or random gift shops supplied some of the data found below. Other sources such as TheCostofLiving.com and Trulia’s average home sale prices filled in the holes.
In the last 40 years prices have increased quite a bit. But let’s look at percent increases for the cost of living in 1973 compared to 2013:
- Salaries have increased almost 400% since 1973, BUT…
Compared to cost increases since 1973…
- Housing has increased 4.61 times, or 461%
- Groceries have increased 4.5 times, or 450%
- New car has increased 8 times, or 800%
- Gasoline has kept pace with car price increases at 9.37 times, or 937%
- Average rent has increased 5.8 times, or 580%
Not surprising, but salaries have just not kept pace with daily expenses. (I did a similar cost of living comparison two years ago with similarly dismal results.)
Of course, averages are just averages. There are plenty of people making more than the average annual salary in their particular state. For those that make more, the cost of living doesn’t affect their pocketbooks quite as much.
As for housing, cost is completely dependent on where you live. New York, San Francisco and Los Angeles on one end of the spectrum might push that average price a bit higher than average home prices in the mid-west or the southern states. In Arizona, a state hit hard by the housing bust, average home sales are now at a very low $128,000 (Phoenix area 2012). That’s a bit less than the even the national average of $152K.
Bottom line: No matter how much income you generate you should always try to live in a state you can afford, save more than you spend and keep your debt in check.
Has your salary increased as much as groceries? Is your rent half of your income?