Why A $100,000 Salary Can’t Buy The American Dream

More than half of Americans say they would need at least $100,000 a year to be financially comfortable. The benchmark for a six-figure

salary

used to be the gold standard income. It represented the turning point in finally earning disposable income and building spending savings based on your wants, not just your needs. The American

dream

is what characterizes the middle class lifestyle. You are able to pay your bills. You can put food on the table, put a roof over your family's head, and have some extra savings. Now, people who earn more than six figures are still living paycheck to paycheck.

What used to symbolize financial freedom now keeps people stressed about making ends meet. 26% say they would need more: A

salary

in the range of $100,000 to $149,000 per year would make them feel financially comfortable. I think, unfortunately, what has happened is that wages have not kept up with the cost of living, generally, for the last 50 years or so, so it is becoming increasingly difficult for many families to be able to achieve that level . of the middle class lifestyle, that American

dream

. How much you need to feel financially secure varies greatly depending not only on your geographic location, but also, of course, on your lifestyle.

It used to be that a six-figure salary was like the gold standard, but nowadays that may not be enough to make ends meet in certain parts of the country, especially like New York or San Francisco, where it costs a lot more. Just cover your daily expenses. Here's why a household income of $100,000 is no longer enough to achieve the American dream. GoBankingRates analyzed how much a family of two adults and two children would need in each state to own a home, a car and a pet, plus have an additional 20% of their income for savings and 30% for discretionary spending.

The core of what the American dream means is a certain degree of economic security that you feel like you can get by and do a little better, maybe do better than your parents, maybe be able to afford a house. You will undoubtedly be able to save for your children's future. All 50 states require more than $100,000 in annual income, and 38 states need more than $140,000. The most affordable states (Mississippi, Arkansas and Kentucky) need between $109,000 and $117,000. The median income for a household of four in each of those states in 2022 was between $71,000 and $87,000. Hawaii, California and Massachusetts are the most expensive.

Each requires an annual income of more than $240,000. The median income for a family of four in those three states in 2022 was at least $94,000 below what is required for the American dream. A different AP analysis found that in about 80% of the country, a family of four can cover basic needs on less than $100,000 a year. These include things like housing, food, transportation, healthcare, child care, taxes, and some other basic needs. It does not take into account anything extra. Really, it's just about putting food on the table, putting a roof over your head, getting medical care for your family so you're not saving for a rainy day if something happens to someone or they lose their job.

So no extra money for retirement or the kids' college. That's the kind of thing a lot of people want to save up for. Those are the many things that people consider part of the American dream. Only about 3% of those counties have a median income above the basic cost of living. The idea behind the American dream hasn't really changed, although the lifestyles have. It used to be that you could leave school, get a job, buy a house and start a family. And now those milestones are harder to reach. It used to be that with a high school degree you were all set.

You could get a great job building cars or something and be in the middle class after finishing high school. But now, to enter the middle class, it is clearly not enough to have a high school diploma. Right now you have to pay for college. People graduate with much larger student loan balances, and then it's harder to be on the same kind of career path that would provide the stability that maybe you would have had a generation ago to save for a down payment on a house. Student loan debt hit an all-time high of $1.77 trillion in the first quarter of 2023.

This can have a domino effect, especially when entire generations are entering adulthood with thousands of dollars in debt. So when we think about the types of investments you want to make for your children, the cost of college has risen much faster than general inflation. Therefore, trying to make those investments with a decreasing salary compared to the cost of living can be very difficult and almost impossible. And so the types of debt that young people can accumulate by going to college are increasing, and their ability to make ends meet, to be able to buy a car, to be able to move out of their parents' house.

Those things become much more difficult over time. The American dream is normally about people owning property and having children, but that is becoming largely inaccessible to many people, and even those who have achieved these things find themselves managing every dollar that comes and goes just to stay afloat. . So that trade-off is behind the new cost of the American dream. Millennials and Generation Z still want to buy homes despite feeling like they can't afford them. 62% of younger millennials and 63% of Gen Z still say homeownership is part of the American dream. 66% of American renters surveyed say rising prices make them feel hopeless in owning a home. 72% of those surveyed state that they cannot afford the initial payment. 17% of all homebuyers said saving for a down payment was the most difficult task in the buying process, and 52% said student loan debt delayed their ability to save.

The typical first-time homebuyer in 2022 had a household income of $95,900. Nationally, a prospective homebuyer would need a salary of nearly $110,000 to pay the principal interest, taxes and insurance payments on a median-priced home. But the median household income in the United States in 2022 was just under $75,000. If you are born in a nice neighborhood, where your parents have a lot of wealth and a lot of income, your chances of doing well increase greatly. The part that owns the home. Collectively, Americans owe $1.13 trillion on their credit cards. Inflation is eroding people's purchasing power. You are reducing your ability to save for your future or invest in these long-term goals.

So the loss of financial stability can create a feeling of helplessness and insecurity and contribute to feelings of uncertainty and vulnerability. It can really affect people's self-esteem, their resilience, and their overall psychological health. Economists have suggested that debt growth became a substitute for income growth. More than a quarter of Americans said they are spending money despite economic worries. There is also the idea that young adults feel more discouraged about their own financial situation. That way, they're less likely to save even for long-term goals and more likely to simply live in the moment. It's kind of a you-only-live-once mentality.

I might not buy a house anyway, so let's take that trip or go to that event, whether it's a Taylor Swift concert or another, you know, big-ticket item. 73% of Generation Z say the current economy makes it difficult to set long-term goals. And it's not just about vengeance, it's just about wanting to enjoy life and make the most of what you have, even if you can't necessarily buy that house or you know you're not starting a family yet and you really want to, you know, feel good. with yourself right now. People are giving themselves to the extreme and I think we often buy because we think it is going to change our life or it is going to give us that emotion that we feel we are missing.

And it's like an endless trail of expenses that will constantly make us feel empty because we are externalizing something that we should give to ourselves. I think that's a big problem with consumerism, and it's proliferating. Social media has changed the conversation a lot, because there has been a huge ability to see these glamorous, glorified lifestyles. It's not just celebrities who present themselves this way, but even your own peers, which makes many people feel like they simply don't measure up. They cannot compete financially with what they see online. It has left many people, especially young adults, feeling very discouraged about their own financial situation.

Even if they do well, they may not feel that way when compared to what they see on social media. The question is: can you, given the luck of the birth lottery, have the same opportunities as people who may have been born into families that are better off than yours? The American dream is about it shouldn't matter. The birth lottery shouldn't matter, right? So it is deeply relative.