Why A $100,000 Salary Can’t Buy The American Dream
Summary
TLDRThe script explores the evolving definition of the American Dream, noting a significant shift in financial expectations and realities. It highlights that over half of Americans now believe they need at least $100,000 annually to be financially comfortable, a stark increase from previous norms. Despite higher incomes, many still live paycheck to paycheck due to rising costs and stagnant wages. The narrative also discusses the challenges of home ownership, increased student loan debts, and the impact of social media on perceptions of financial success. It paints a picture of a dream that is increasingly out of reach, reflecting broader economic strains and changing societal values.
Takeaways
- 💰 More than half of Americans believe they need at least $100,000 annually to feel financially comfortable, up from the traditional benchmark of a six-figure salary.
- 📈 The cost of living has outpaced wage growth over the past 50 years, making it harder for many to achieve a middle-class lifestyle.
- 🏠 Homeownership, a key part of the American Dream, is increasingly out of reach for many, with 66% of renters feeling hopeless about ever owning a home.
- 📚 The necessity of higher education and the resulting student loan debt have become significant barriers to financial stability and the accumulation of wealth.
- 💔 Despite the challenges, a majority of Millennials and Gen Zers still aspire to own a home, viewing it as part of the American Dream.
- 💵 The median household income in the U.S. is significantly lower than the income required to afford a home, leading to financial stress and a focus on short-term spending over long-term goals.
- 🌐 Geographic disparities play a significant role in financial comfort levels, with states like Hawaii, California, and Massachusetts requiring over $240,000 annually for a comfortable lifestyle.
- 📉 Inflation is eroding purchasing power, reducing the ability to save and invest, leading to a sense of financial insecurity and psychological impact on individuals.
- 🛍️ Consumerism and social media are contributing to a culture of spending, where people seek to fill emotional voids through material possessions rather than long-term financial planning.
- 👶 The American Dream is becoming more elusive, with the birth lottery (one's socio-economic background) playing a significant role in determining one's ability to achieve it.
- 🚀 Economists suggest that debt growth has substituted for income growth, leading to a cycle of debt that hinders financial progress and the realization of the American Dream.
Q & A
What is the new benchmark for financial comfort in America according to the transcript?
-More than half of Americans say they would need at least $100,000 a year to be financially comfortable.
What was the traditional representation of earning a disposable income and building savings based on wants?
-The traditional representation was a six-figure salary, which used to be the gold standard income.
What does the American Dream typically represent for a middle-class lifestyle?
-The American Dream represents being able to pay bills, put food on the table, have a roof over the family's head, and have some additional savings.
What has happened to the concept of financial freedom that used to be symbolized by a six-figure salary?
-What used to symbolize financial freedom is now keeping people stressed about making ends meet, with people making well over six figures still living paycheck to paycheck.
What percentage of people say they would need a salary between $100,000 to $149,000 per year to feel financially comfortable?
-26% of people say they would need a salary in this range to feel financially comfortable.
Why has it become increasingly hard for many families to attain a middle-class lifestyle?
-Wages haven't kept up with the cost of living for the last 50 years or so, making it difficult for families to attain the middle-class lifestyle.
What factors can affect how much one needs to feel financially secure?
-The amount needed to feel financially secure varies depending on geographical location and lifestyle.
What did GoBankingRates analyze to understand the financial needs of a family of four in each state?
-GoBankingRates analyzed how much a family of two adults and two children would need in each state to own a home, a car, a pet, and have an additional 20% of their income for savings and 30% for discretionary spending.
What are the most affordable states in terms of the annual income required for the American Dream?
-The most affordable states, such as Mississippi, Arkansas, and Kentucky, need between $109,000 and $117,000.
Which states are identified as the most expensive in terms of the annual income required for the American Dream?
-Hawaii, California, and Massachusetts are the most expensive, each requiring an annual income of more than $240,000.
What is the percentage of the country where a family of four can afford their basic needs on less than $100,000 per year?
-In about 80% of the country, a family of four can afford their basic needs on less than $100,000 per year.
What has been the impact of student loan debt on the ability to achieve the American Dream for many young adults?
-Student loan debt, which reached an all-time high of $1.77 trillion in the first quarter of 2023, has a ripple effect, making it harder for young adults to achieve the American Dream by delaying their ability to save for a down payment on a home and increasing financial stress.
Outlines
💼 The Changing Face of Financial Comfort in America
The American Dream, traditionally associated with a middle-class lifestyle, is increasingly out of reach for many. A six-figure salary, once the gold standard, no longer guarantees financial security or disposable income. Over two-thirds of Americans believe they need an annual income between $100,000 to $149,000 to feel financially comfortable. The cost of living has outpaced wage growth, making it difficult for families to attain the middle-class lifestyle. Geographic location plays a significant role, with states like New York and San Francisco requiring even higher incomes. According to GoBankingRates, owning a home, a car, and having savings and discretionary spending necessitate an annual income exceeding $100,000 in all states, with the most affordable states still requiring between $109,000 and $117,000. The median income for a family of four in these states is significantly lower, highlighting the gap between income and living costs. The analysis also shows that a substantial portion of the country can afford basic needs on less than $100,000, but this does not account for savings or additional goals. The rise in student loan debt further exacerbates the issue, with graduates facing the challenge of entering the middle class with significant debt. The American Dream, which includes owning property and starting a family, is becoming increasingly elusive, with even those who have achieved these milestones struggling to maintain financial stability.
🏠 The Struggle for Home Ownership and the Pursuit of the American Dream
Despite the financial challenges, millennials and Gen Zers continue to aspire to home ownership, which remains a significant part of their vision of the American Dream. However, a significant majority of these younger generations feel that the rising cost of homes leaves them hopeless about ever owning one. A substantial percentage of respondents indicate they cannot afford the down payment, with student loan debt being a major factor delaying their ability to save. The typical first-time homebuyer in 2022 had a household income of $95,900, yet the median household income in the U.S. was under $75,000, illustrating the disparity between what is earned and what is required to afford a home. Socioeconomic background plays a crucial role in one's financial success, with those born into wealth faring better. The collective credit card debt of Americans stands at $1.13 trillion, and inflation is eroding purchasing power, impacting the ability to save or invest in long-term goals. This financial instability can lead to feelings of powerlessness, insecurity, and negatively affect psychological health. Economists suggest that debt growth has become a substitute for income growth, with many Americans continuing to spend despite economic concerns. The current economic climate makes it difficult for Gen Zers to set long-term goals, leading to a focus on immediate enjoyment and experiences, even when it means delaying traditional milestones like home ownership and starting a family. The rise of consumerism and the influence of social media, which often portrays glamorous lifestyles, further exacerbate feelings of inadequacy and discouragement, especially among young adults. The American Dream, which should be independent of one's socioeconomic background, is becoming increasingly relative and challenging to achieve.
Mindmap
Keywords
💡Financial Comfort
💡Six-Figure Salary
💡American Dream
💡Cost of Living
💡Disposable Income
💡Economic Security
💡Geographical Location
💡Student Loan Debt
💡Down Payment
💡Inflation
💡Social Media
💡Consumerism
Highlights
More than half of Americans say they would need at least $100,000 a year to be financially comfortable
The benchmark of a six figure salary used to be the gold standard income, representing a tipping point of earning disposable income and building savings
The American Dream represents a middle class lifestyle where you can pay bills, provide for your family, and have savings
People making well over six figures are still living paycheck to paycheck, and the symbol of financial freedom now causes stress about making ends meet
26% say they would need a salary in the range of $100,000 to $149,000 per year to feel financially comfortable
Wages haven't kept up with the cost of living for the last 50 years, making it hard for many families to attain a middle class lifestyle
The amount needed to feel financially secure varies greatly depending on geographical location and lifestyle
A six figure salary may not be enough to make ends meet in certain parts of the country like New York or San Francisco with high daily expenses
All 50 states require more than a $100,000 annual income for a family of four to own a home, a car, a pet, and have 20% of income for savings and 30% for discretionary spending
The most affordable states like Mississippi, Arkansas and Kentucky need between $109,000 and $117,000
The most expensive states like Hawaii, California and Massachusetts each require an annual income of more than $240,000
In about 80% of the country, a family of four can afford their basic needs on less than $100,000 per year
Only about 3% of counties have a median income higher than the basic cost of living
The American Dream is harder to achieve now with milestones like getting a job, buying a home and starting a family becoming more difficult
A high school degree is no longer enough to get into the middle class - college education is now required
Student loan debt reached an all time high of $1.77 trillion in Q1 2023, causing a ripple effect on generations starting adulthood with debt
Millennials and Gen Zers still want to buy homes despite feeling they can't afford it, with 62-63% saying home ownership is part of the American Dream
66% of US renters feel hopeless about ever owning a home due to rising prices, and 72% can't afford the down payment
Collectively, Americans owe $1.13 trillion on their credit cards, with inflation eroding purchasing power and reducing the ability to save
Debt growth has become a substitution for income growth, with over a quarter of Americans doom spending despite economic concerns
Social media has changed the conversation, with the abundance of glamorous lifestyles making many feel they can't financially compete and are discouraged in their own financial standing
The American Dream is about having opportunities regardless of the luck of the birth lottery, but it's becoming increasingly relative and inaccessible for many
Transcripts
More than half of Americans say they would need at least
$100,000 a year to be financially comfortable.
The benchmark of a six figure salary used to be the
gold standard income.
It represented the tipping point of finally earning a
disposable income and building a savings spending
based on your wants, not just your needs.
The American Dream is what makes a middle class
lifestyle. You're able to pay your bills.
You're able to put food on the table, put a roof over
your family's head, and you have some additional
savings.
Now, people making well over six figures are still living
paycheck to paycheck.
What used to symbolize financial freedom is now
keeping 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
haven't kept up with the cost of living, by and
large, for the last 50 years or so, and so it
becomes increasingly hard for many families to be able
to attain that sort of middle class lifestyle, that
American dream.
How much you need to feel financially secure varies so
much depending on not only your geographical location,
but of course, 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 so much more
just to cover your daily expenses.
Here's why a $100,000 household income no longer
buys 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, as well as have an additional 20% of
their income for savings and 30% for discretionary
spending.
The core of what the American Dream means is some
amount of economic security that you feel like you can
get by and do a bit better, maybe do better than your
parents, maybe be able to afford a house.
Certainly be able to save for your children's future.
All 50 states require more than a $100,000 annual
income, with 38 states needing 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 people 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 fell at least $94,000 short
of what's required for the American dream.
A different analysis from AP found that in about 80% of
the country, a family of four can afford their basic
needs on less than $100,000 per year.
Those include things such as housing, food,
transportation, health care, child care, taxes and
a few other basic necessities.
It doesn't take into account anything extra.
It's really just putting food on the table, putting a
roof over your head, getting health care for your
family and so you're not saving for a rainy day if
something happens to somebody or if they lose
their job. So there's no extra in there for
retirement, for kids college.
Those are the kinds of things that many people want
to save for. Those are the many things that people
consider a part of the American dream.
Only about 3% of those counties have a median
income higher than the basic cost of living.
The idea behind the American Dream hasn't really changed,
even though lifestyles have.
It used to be that you could get out of school, get
a job, buy a home, and start a family.
And now those milestones are harder to achieve.
It used to be that a high school degree, you're good
to go. You could get a great job building cars or
something and be right in the middle class off of a
high school degree. But now, in order to get into
the middle class, a high school degree is clearly not
enough. Right now, you got to pay for college.
People are graduating with much larger student loan
balances, and then it's harder to be on that same
sort of career trajectory that would provide the
stability that you maybe would have had a generation
ago to save up for the down payment on a home.
Student loan debt reached an all time high of $1.77
trillion in the first quarter of 2023.
This can have a ripple effect, especially when
entire generations are starting their adulthoods
with thousands of dollars in debt.
So when we think about the kinds of investments you
want to make for your children, the cost of
college has gone up a lot faster than overall
inflation. So trying to make those investments on a
smaller and smaller paycheck compared to the
cost of living can be very difficult and almost
impossible. And so the kinds of debt that young
people can rack up going to college gets larger and
larger, and your ability to then make ends meet
yourself, be able to buy a car, be able to move out of
your parents house. Those things become much more
difficult over time.
The American Dream typically is people owning property
and having children, but that's becoming largely
inaccessible for many people, and even those who
have attained these things are finding themselves
managing every dollar coming in and out just to
stay afloat. So that trade off is underlying the new
cost of the American dream.
Millennials and Gen Zers still want to buy homes
despite feeling like they can't afford it.
62% of younger millennials and 63% of Gen Zers still
say owning a home is part of the American dream.
66% of U.S.
Renters surveyed say rising prices leave them feeling
hopeless about ever owning a home.
72% of respondents say they can't afford the down
payment. 17% of all home buyers said that saving for
the 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 home buyer would need a
nearly $110,000 salary to afford the principal
interest, taxes and insurance payments on a
median price home.
But the median household income in the United States
in 2022 was a little under $75,000.
If you're born into a nice neighborhood, which your
parents have lots of wealth and lots of income, your
chances of doing well are vastly improved.
The part that's home ownership.
Collectively, Americans owe $1.13 trillion on their
credit cards.
Inflation -- it's eroding people's purchasing power.
It's reducing their ability to save for their future or
invest in these longterm goals.
So that loss of financial stability can create a sense
of powerlessness and insecurity, and contribute
to feelings of uncertainty and vulnerability.
It can really impact people's self-esteem, their
resilience, their overall psychological health.
Economists have suggested that debt growth became a
substitution for income growth.
More than a quarter of Americans said that they are
doom spending or spending money despite economic
concerns.
There's also this idea that young adults are feeling
more discouraged in their own financial standing.
So in that way, they're are less inclined to even save
for long time goals and more likely to just live in
the moment. It's just sort of that mentality, like you
only live once.
I may not buy a home anyway, so let's take that
trip or let's go to that event, whether it's a Taylor
Swift concert or other, you know, big ticket item.
73% of Gen Zers say the current economy makes it
difficult to set up long time goals.
And it's not just about revenge spending, it's just
about wanting to enjoy life and make the most of what
you have, even if you can't necessarily buy that home or
you know you're not starting a family just yet
and you really want to, you know, feel good about
yourself in the moment.
People are indulging to the extreme, and I think we
often buy because we think that it's going to change
our life or it's going to give us this emotion that we
feel like we're missing.
And it's like an endless trail of spending and
constantly going to make us feel empty because we're
externalizing something that we need to give to
ourselves. I think that's a big issue with consumerism,
and it's running rampant.
Social media has changed the conversation so much,
because there's just been this abundance of the
ability to see these glamorous, glorified
lifestyles. It's not only celebrities that are
presenting themselves this way, but even your own
peers, which makes a lot of people feel like they're
just not measuring up.
They can't financially compete with what they're
seeing online.
It has left a lot of people, especially young
adults, feeling very discouraged in their own
financial standing.
Even if they're doing okay, they just may not feel that
way when they compare themselves to what they're
seeing on social media.
The question is, are you able, given kind of the luck
of the birth lottery, are you able to have
opportunities that are the same as those of people who
may have been born into families that are in better
circumstances than your own?
The American dream is all about it shouldn't matter.
The birth lottery shouldn't matter, right?
So it's deeply relative.
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