How to Know If Your Salary Is Actually Good (3 Numbers That Matter)
Gross salary is almost useless for measuring whether you're paid well. The three numbers that actually tell you: your take-home rate, your rent burden, and your COLI-adjusted purchasing power.
Why Gross Salary Is Misleading
Almost every salary conversation — job offers, annual reviews, comparing notes with friends — happens in gross figures. "I'm on £60K." "They're offering $95K." "She makes €75K in Amsterdam." These numbers feel concrete and comparable. They aren't.
Gross salary is what you earn before the government takes its share. It tells you nothing about what you actually receive. And even after-tax salary tells you nothing about what your money buys — because the same $4,000/month take-home goes very differently in Prague versus San Francisco.
There are three numbers that actually reveal whether your salary is good. Here they are.
Number 1: Your Real Take-Home Pay
Take-home pay is gross salary minus income tax and social security contributions. This is the first filter — the money that actually lands in your bank account each month.
The gap between gross and take-home varies wildly by country:
- UAE, Qatar: Zero income tax. $100K gross = $100K take-home
- US (NYC): Federal + state + city + FICA ≈ 35%. $100K → ~$65K
- UK: Income tax + NI ≈ 28% at £75K. Take-home rate is better than most people expect
- Germany: Tax + social contributions ≈ 40%+ at €80K. High taxes, but includes healthcare
- France: Social charges + income tax can reach 45%+ at €100K equivalent
A good rule of thumb: if your take-home is less than 60% of gross, your tax burden is high. If it's above 75%, you're in a relatively low-tax environment.
Number 2: Your Rent Burden (%)
Rent burden is the percentage of your take-home pay spent on housing. The classic "30% of gross income on rent" rule is widely cited and widely misleading — it uses gross rather than take-home, which overstates what you can actually afford.
Use this instead: rent should be under 35% of monthly take-home pay.
- Under 25%: Comfortable. Plenty of room for savings and lifestyle
- 25–35%: Reasonable. Manageable but leaves less flexibility
- 35–50%: Stretched. A salary increase or housing change may be needed
- Over 50%: Rent-burdened. This is a structural problem, not a budgeting one
Example: $90K in Austin → $5,685/month take-home → $1,800 rent = 32% rent burden ✅
$120K in San Francisco → $6,480/month take-home → $3,200 rent = 49% rent burden ⚠️
Number 3: Purchasing Power (The One That Actually Matters)
Purchasing power is the number that tells you whether your salary is genuinely good — not just in absolute terms, but relative to the real cost of living where you are.
The formula: (Monthly take-home − rent) ÷ (City COLI ÷ 100)
The COLI adjustment normalises your after-rent income against local prices. $2,000/month after rent in Bangkok (COLI 37) has the same real purchasing value as $5,400/month after rent in New York (COLI 100) — because everything in Bangkok costs 63% less.
Here's what the Austin vs San Francisco comparison looks like when purchasing power is the metric:
| Austin ($90K) | San Francisco ($120K) | |
|---|---|---|
| Take-Home / Month | $5,685 | $6,480 |
| 1BR Rent | $1,800 | $3,200 |
| After Rent / Month | $3,885 | $3,280 |
| City COLI | 64.8 | 97.6 |
| Purchasing Power | $5,995 | $3,361 |
Austin's $90K salary delivers 78% more purchasing power than San Francisco's $120K. The $30K gross difference doesn't just disappear — it inverts.
Putting It Together: What Makes a Salary "Good"
A salary is genuinely good when all three conditions are met:
- Take-home rate above 65% of gross
- Rent burden below 35% of take-home
- Purchasing power that reflects your lifestyle expectations
Most people only look at #1, ignore #2, and have never heard of #3. The purchasing power number is the one that tells the full story.
Check your salary against all three numbers
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