By: Eric Parker
Eric lives in Seattle and has been teaching Tableau and Alteryx for 5 years. He's helped thousands of students solve their most pressing problems. If you have a question, feel free to reach out to him directly via email.
For a while, I’ve been speculating about what percent of an “average” person’s income goes toward taxes and government programs. I’ve also been wondering how people can make a great income and still have little money left for savings and retirement.
I chose to create a profile of a single, college-educated person in Seattle who makes $100,000 per year being self-employed and running a small business. I fully understand this is not average, but I chose this profile to make a point. First, even if you have an above average income (average in Seattle is about $78,000), saving may still be difficult. Additionally, choosing a self-employed profile allowed me to expose costs like federal income tax and health insurance which may be either partly or fully covered by your company. Here are the results:
Click the image above to be directed to the interactive dashboard
Based on my estimates, it turns out that only about 33% of total income goes toward taxes. That is lower than I anticipated. More than 50% goes toward necessary expenses like rent, food, student loans and car payments.
For this “average” person, only 13% of their income was disposable, and that 13% needed to cover a multitude of factors such as emergencies, dental health, vision, charitable contributions, travel, gifts, entertainment, parking and a number of other categories.
Hopefully this is interesting and informative! I know it has been for me. I thought a larger share of income went toward taxes and I was surprised at the annual expenses for someone that makes “average” payments toward rent, car ownership and student loans. Those costs add up quickly.
If you are wondering “So what?” or “What am I supposed to do if this is reflective of me?” the answer is, try to reduce those expenses! Taxes are largely a fixed cost (although some tax accountants may be able to help you reduce those). The more that you can fill up the gray column, the more you have toward savings, emergencies, or even big purchases like a home!
All the data sources used for these estimates can be found in the Tableau Public instance of the dashboard.
Have another idea for a blog post or want help on a project of your own? Feel free to reach out to me directly or schedule an office hour!