Is $120K a Good Salary for Housing? Smart Budget Planning for Mid-to-High Earners

Whether earning $120,000 annually puts you in a comfortable financial position depends largely on how you allocate your income—specifically to housing. This income level often sits at the intersection of stability and affordability challenges, especially when it comes to your largest expense: where you live. Financial experts provide clear guidance on what you should realistically spend on accommodation, whether you’re at the $120K mark or earning significantly less.

The 30% Rule: A Smart Starting Point

Financial advisors have long recommended that your housing expenses should not exceed 30% of your gross annual income. For someone earning $120,000, this translates to approximately $3,000 per month. For those making $80,000, the target would be $2,000 monthly. This principle has become the gold standard in personal finance because it leaves sufficient room for other essential expenses and savings.

The logic is straightforward: spending beyond this threshold leaves little flexibility for emergencies, investments, or debt repayment. When housing consumes too much of your paycheck, other life areas suffer.

Why Reality Often Beats the 30% Target

In practice, the 30% guideline frequently proves unrealistic, particularly in major metropolitan areas. According to the U.S. Census Bureau, nearly half of all renters now allocate more than 30% of their income to housing. Cities like New York, San Francisco, and Boston have created a market where one-bedroom apartments regularly exceed $3,000 monthly—a figure that challenges even six-figure earners.

Melissa Caro, a certified financial planner and founder of My Retirement Network, acknowledges this disconnect: some families find themselves spending 35% to 39% of their income on housing simply due to geographic constraints. While the 30% rule remains the ideal target, flexibility may be necessary for those living in expensive regions. However, experts still recommend returning to the 30% threshold whenever feasible, as the higher percentages create financial vulnerability.

Safe Spending Limits Across Income Levels

Here’s what a 30% housing allocation looks like at various income brackets:

• $120,000 annual salary: $3,000 monthly
• $100,000 annual salary: $2,500 monthly
• $80,000 annual salary: $2,000 monthly
• $60,000 annual salary: $1,500 monthly
• $40,000 annual salary: $1,000 monthly
• $30,000 annual salary: $750 monthly

These figures encompass all housing-related costs: rent or mortgage payments, utilities, maintenance, insurance, and property taxes. The total housing expense tells the real story of affordability.

The 50% Danger Zone: When Housing Becomes a Risk

No matter your salary level, financial experts strongly caution against spending 50% or more of your income on housing. This threshold represents genuine financial risk. “Rent and mortgage payments don’t adjust when you face a job loss,” Caro warns, “so it’s critical to evaluate what’s truly essential versus what feels ideal.”

At this spending level, a single income disruption—job loss, reduced hours, or unexpected medical expenses—can quickly create a crisis. Housing isn’t flexible like entertainment or dining expenses; it’s a fixed obligation that continues regardless of your circumstances.

For earners at the $120K level, while you may have more absolute income to work with, the same percentage-based principles apply. Financial security comes from maintaining reasonable housing costs relative to your earnings, not from the absolute salary figure itself.