Why A $100,000 Salary Can’t Buy The American Dream – And What To Do About It

Why A $100,000 Salary Can’t Buy The American Dream - And What To Do About It

Sharing is caring!

It seems like recently, the idea of financial comfort has dramatically shifted. Where once the allure of a six-figure income signified a comfortable middle-class existence, complete with discretionary spending and savings, it no longer guarantees the same sense of security. Despite incomes breaching this once coveted threshold, families find themselves grappling with the reality of living paycheck to paycheck, the stress of financial constraints shadowing their everyday lives. We’ve come to a point where even earning well above six figures can barely keep the specter of economic anxiety at bay.

Is it so surprising, then, that the definition of the American Dream keeps getting rewritten? With costs of living on the rise and wage growth struggling to keep pace, what constituted a decent living stands redefined—no longer just about survival but about thriving, achieving, and leaving something better for the next generation. It’s one thing to afford a shelter, food, and basic necessities, and quite another to own a home, comfortably save for education, and still have the freedom to enjoy life’s luxuries. But what does this mean for me—and us—as we aspire for economic security in a landscape where the financial goalposts keep moving?

Key Takeaways

  • Financial comfort now requires incomes well above the historic six-figure benchmark due to rising living costs and stagnant wage growth.
  • Achieving the American Dream has become increasingly challenging, with the cost of education, homeownership, and savings requirements outpacing average incomes.
  • Economic conditions and shifting financial landscapes influence consumer behavior, affecting savings and long-term financial planning.

Evolving Perceptions of Prosperity in America

Here is a recent video we saw on this exact subject.

YouTube video

I’ve come to see that what we collectively know as the American Dream has shifted significantly. Remember when a six-figure income used to mean you’ve made it? That was the benchmark for financial comfort, the moment when it became possible to not only meet the essentials but also save, and yes, even indulge in the wants beyond our needs. But now? Even those pulling in salaries well above $100,000 find themselves treading water, barely staying afloat from one paycheck to another.

The price of the American Dream isn’t what it used to be. GoBankingRates puts things into perspective, showing that in every single state, a household income crosses the $100,000 mark just to maintain that dream. Imagine my surprise when data revealed that in 38 states, families require beyond $140,000 per annum. Take a peek at Mississippi, Arkansas, and Kentucky—considered the most affordable states—and you’ll still need between $109,000 and $117,000.

Most Affordable StatesIncome NeededCurrent Median Income (Family of Four)
Mississippi$109,000$71,000
Arkansas$114,000$75,000
Kentucky$117,000$87,000

Now, let’s contrast these numbers with the exorbitant costs in Hawaii, California, and Massachusetts, where the dream costs north of $240,000 annually, dwarfing the median incomes by at least $94,000!

Most Expensive StatesIncome NeededCurrent Median Income (Family of Four)
Hawaii$240,000+Short by $94,000+
California$240,000+Short by $94,000+
Massachusetts$240,000+Short by $94,000+

Why such a chasm, you may ask? Well, our expenses have climbed, but our wages haven’t kept the pace for the last half-century. This lag is evident, and it contextualizes why attaining that middle-class slice of the dream has turned elusive for many. It also brings to light why the prep work for the American Dream–like owning property and having children–seems like a far-off fairytale for numerous Americans. Even those who have realized it are caught in a financial juggling act just to maintain their status quo.

The dream once was attainable with a decent job right out of high school. But now, the scene has changed. To join the ranks of the middle class, a college degree is becoming essential, accompanied by burdensome student loan debt cranking up to an all-time high of $1.77 trillion. I shudder to think of the weight this piles onto graduates, starting life off with such a hefty financial handicap.

And consider the broader societal implications when less than 3% of counties have a median income that outstrips the cost of living. Or the disheartening fact that 73% of Gen Zers view the economy as a barrier to setting long-term goals. Does this state of financial pressure shape our approach to life, tilting our spending habits towards immediate gratification rather than delayed prosperity?

Amidst this backdrop, an alarming detail stands out: although nearly two-thirds of millennials and Gen Zers still cherish the dream of homeownership, a pervasive sense of hopelessness pervades due to out-of-reach housing prices. It might be easy to overlook credit card debt, which has amassed to $1.13 trillion collectively, further eroding financial stability and contributing to a brewing storm of insecurity and vulnerability.

Shifting Financial Benchmarks

YouTube video

Expectations of a Modern Middle Class Lifestyle

I’ve observed that the vision of a middle class life is intricately linked to the American Dream. It encompasses the ability to handle household expenses, ensure a comfortable living, and secure savings for future needs. The essence of this lifestyle is economic stability—a roof over the head, food on the table, and a small financial cushion. Yet, nowadays, even individuals with salaries surpassing six figures find themselves budgeting meticulously from one paycheck to the next. What once signified abundant financial leeway now barely suffices to alleviate fiscal stress.

Rethinking the Six-Figure Income Standard

Isn’t it curious how the perception of a comfortable six-figure income has shifted? While it used to connote a level of financial liberty and the ability to splurge on desires over necessities, the truth today paints a different picture. The cost of living hasn’t been matched by wage increases for decades, stretching family budgets thin. Even a six-figure income is no longer a guarantee of financial ease, particularly in high-cost cities like New York or San Francisco. The GoBankingRates study highlights this by illustrating the necessity for incomes well over $100,000 in all 50 states to maintain the American Dream—home ownership, savings, and discretionary spending.

In states with the lowest cost of living, a household income between $109,000 and $117,000 is essential. Contrast that with the median household incomes in those states, and the shortfall is stark. Meanwhile, in states like Hawaii, California, and Massachusetts, we’re talking about needing more than $240,000 annually—a figure drastically beyond the median incomes.

Now consider this: an AP analysis indicates that four-person families in roughly 80% of the country can cover basic needs for under $100,000 yearly. Yet the basics are just that—the bare essentials, excluding provisions for emergencies, retirements, or education. It’s these extra mileposts, the cornerstones of forward-looking financial planning, that are commonly bound up in the ethos of the American Dream.

Financial Independence: Just How Possible Is It?

YouTube video

With the skyrocketing cost of education, graduates are beginning new life chapters with burdensome debt, impacting their ability to save and invest in their futures. The average first-time homebuyer in 2022 has a household income falling short of what is necessary to afford median-priced homes. While Millennials and Gen Z claim they still yearn for homeownership, the financial realities paint a concerning picture, with a majority claiming the current economy hinders setting sustainable long-term goals.

Amidst all this, we witness a trend of ‘doom spending’—where many, concerned over their financial future, choose instead to live in the moment, indulging in experiences while sidestepping the notion of saving for a house or other long-term investments. It’s a delicate dance, toeing the line between enjoying the present and planning for a seemingly elusive financial future.

This realignment of financial capability versus aspiration is, at its core, the new price tag on the American Dream. The idea of achieving more than one’s parents, owning property, and raising a family is increasingly challenging to actualize. The question then becomes, how do we navigate this new financial landscape to find our version of prosperity and stability?

Regional Economic Thresholds

States with Lower Cost of Living

How does it look when dollars stretch further? Take a gander at places like Mississippi or Arkansas, and you’ll see that it takes less financial heft to live comfortably. In these states, an annual income swinging between $109,000 and $117,000 is sufficient for a family of four, covering a home, car, and even a furry friend. Let’s crunch numbers:

  • Mississippi: Median income – $71,000
  • Arkansas: Median income – $87,000
  • Kentucky: Median income – $87,000

These are places where your earnings echo louder in the halls of financial stability.

States with Higher Cost of Living

On the other end of the spectrum, living in states like Hawaii or California is a different ball game. Think you need a mountain of money? Well, you aren’t far off. Here, you’ll need to pull in upwards of $240,000 annually to hit that dreamy financial benchmark. Just look at these figures:

  • Hawaii: Median income – $146,000
  • California: Median income – $146,000
  • Massachusetts: Median income – $146,000

In these regions, it can feel like you’re running on a financial treadmill, always chasing after costs that seem to sprint ahead.

Isn’t it astounding how the ground you stand on can sway the size of the stash you need to thrive? I tell you, where you plant your roots can make all the difference.

Financial Stability Versus the Pursuit of Prosperity

Day-to-Day Living Expenses

Isn’t it staggering how the cost of simple living has skyrocketed? Once upon a time, earning six figures was seen as the golden ticket to discretionary spending and a comfortable savings cushion. To many people, that salary was synonymous with the American Dream: you could settle your bills, nourish your family, cover your housing needs, and have a bit set aside. Yet, here we are, witnessing individuals pocketing well over that amount, still juggling finances from one pay period to the next.

Let’s consider this: did you know more than a quarter of us believe we’d need between $100,000 and $149,000 annually to even feel financially comfortable? The rise in the cost of living hasn’t matched wage increments, tightening the noose around the ideal of a middle-class lifestyle we’ve long aspired to. And location matters—residing in places like New York or San Francisco means our six-figure salary might barely cover the necessities.

NecessitiesCost in High-Cost StatesCost in Low-Cost States
HousingExorbitantly highMore affordable
FoodPricierReasonable
TransportationCostlyManageable

But have you asked yourself why basic living is so demanding financially even in states deemed ‘affordable’? The median income for a family of four falls significantly short of what’s needed to live without that paycheck-to-paycheck tension. What about the simpler life essentials? Sure, around 80% of the country could meet their basic needs on less than $100,000 per year, yet that doesn’t encompass savings or future planning. Education, healthcare, childcare—these basics don’t cover putting away funds for an unforeseen event or something as basic as funding retirement.

Investments and Future Planning

And how are we managing to save and invest in today’s economic landscape? Savings are a cornerstone of financial security, allowing us to dream of a better life for ourselves and our progeny. Yet, astonishingly, a family of four typically needs an income surpassing $100,000 to save sufficiently, with 38 states needing over $140,000 for a semblance of this dream. If we’re to own a home, maintain a vehicle, care for a pet, and leave breathing room for savings and some leisure, the figures climb even higher.

While savings feel vital, how are we actually faring in setting money aside for the bigger picture? Defining savings goals, whether for our children’s future education or that cherished home, seems increasingly elusive. With those goals in mind, let’s reflect on the current savings landscape:

Savings GoalsRequired Income for Goal
Home Ownership≥ $140,000 in 38 states
EducationImpacted by soaring costs

Millennials and Generation Z harbor the homeownership dream, with over 60% seeing it as an intrinsic component of prosperity. Yet the reality is grim. Most renters feel that property ownership remains out of reach, and student loan debts hamper the ability to stash away funds even for the initial down payment.

Now ask yourself, how feasible is it to carve out a slice of prosperity when student loans have piled up to an all-time high of $1.77 trillion? We’re attempting to lay the foundations of financial freedom on quicksand, where previous generations stood on firmer ground. Let’s face it, the education costs have outpaced inflation, and well, incomes haven’t bridged that gap.

Debt and Living in the Moment

Debt has transformed into a monumental aspect of our financial journey, hasn’t it? It’s no secret that credit card liabilities have soared, amounting to a collective $1.13 trillion, while inflation chips away at our purchasing power and potential to save or invest. Debt convinces some to adopt a ‘live for now’ attitude—why save if the future seems financially blurry? This leads to ‘doom spending’: an emotional response to economic anxiety, ever felt that?

Have we, as hopeful individuals, been encouraged to indulge beyond our means, banking on transient joyous experiences in lieu of a seemingly out-of-reach home or postponed familial aspirations? Therein lies the financial tug-of-war: aiming for long-term goals versus immediate gratification. But consider this for a moment: amid economic difficulties, 73% of Gen Z’ers still aim to map out long-term goals, even if the economy presents a daunting challenge.

The pursuit of happiness and financial security continues, despite the shifting sands beneath us. The question is, with the data at our fingertips, how will we navigate the complex waters of our current financial reality?

Pathways to Wealth Through Learning and the Ongoing Student Debt Struggle

The Role of Academic Advancement in Financial Advancement

Isn’t it surprising that the classic image of financial comfort, the six-figure salary, has lost its luster? In my journey towards financial freedom, the idea was simple: earn more than you spend, climb the ladder, and indulge a little because you’ve earned it. Yet here we are, in a reality where many folks, even those making $100,000 or more, find themselves in a paycheck-to-paycheck grind.

Income Level for ComfortPercentage of People
Less than $100,000 
$100,000 – $149,00026%
More than $150,000 

Evidently, the cost of living has outpaced income growth over the last five decades, rendering the once-coveted American dream a daunting task for most families. High living expenses in places like New York or San Francisco now require incomes far beyond the six-figure mark for people to enjoy what used to be a middle-class lifestyle.

In states with the highest costs, a family of four is looking at a required income of over $240,000 to secure home ownership, transportation, and a little left for savings—comforts once more easily attained. And yet, the actual median incomes in these areas come in significantly below that threshold.

The Student Loan Debt Bind

Ever considered how the pursuit of higher education is suffocating dreams before they even have the chance to take flight? Think about this: the student loan debt has spiked to an astronomical $1.77 trillion.

As I see it, attaining that middle-class milestone, that part of the American dream, has been drastically redefined. No longer can a high school diploma unlock the door to a stable, middle-class income; a college degree has become a requisite. But at what cost?

Education DebtImpact on Financial Freedom
Initial Balance$1.77 trillion in Q1 2023
HomeownershipDelayed due to increased debt
Young AdultsStarting with substantial debt

With the cost of higher education far outpacing inflation, young adults begin life already buried under debt, challenging their ability to purchase a car or leave their parent’s home, let alone start saving for their own children’s education.

Despite these hardships, the spirit of owning a home still resonates, with 62% of Millennials and 63% of Gen Zers equating it to achieving the American dream. Yet, the gap widens as the majority express the feeling of being priced out of this legacy, hopeless against the ever-increasing prices. It remains clear that without significant changes, the keys to a home, a symbol of personal stability and achievement, float just out of reach for an entire generation.

Navigating the Tides of Property Acquisition

Aspirations of Younger Generations on Home Ownership

It appears that for many, the prospect of property ownership remains a core element of personal success. Despite a challenging financial landscape, 62% of younger millennials and 63% of their Gen Z counterparts still uphold the ideal of home ownership as emblematic of fulfilling the American dream. What can be said about our society when the majority of our youth still harbors the same aspirations as previous generations, yet senses an almost insurmountable barrier to their realization?

Roadblocks on the Path to Purchasing a Home

Let’s consider the obstacles that are currently hindering would-be homeowners. A notable 66% of renters in the U.S. express a sense of futility regarding property ownership due to escalating prices. Additionally, a sobering 72% acknowledge the inability to accumulate the necessary funds for a down payment, often the first substantial barrier to entering the housing market. Here’s a telling data point: 52% identify student debt as a delay in saving for home purchases. Does this not illustrate a misalignment between the value of education as an investment and its return in terms of financial stability and empowerment?

The stark reality of income disparity is further elucidated by the fact that the typical salary required to comfortably afford home ownership has eclipsed the median national household income – the gap further exacerbated by the rising costs of living and the pressures of debt. Tooling around with the numbers, the median household income sits shy of the $75,000 mark, while a salary nearing $110,000 is needed to cover a median-priced home’s basic financial commitments. Is it any wonder that feelings of powerlessness and vulnerability have crept into the collective consciousness of aspiring homeowners?

This financial strain is not solely confined to the burden of debt. The invisible hand of inflation has also had its wicked way, steadily chipping away at the purchasing power required to pursue long-term objectives like property acquisition. When every dollar’s future is uncertain, does investment in the now not seem like a more legitimate choice? It is amidst this tumultuous economic seascape that an individual’s resilience and self-worth are being put to the test. Are we seeing a fundamental shift in priorities as dreams are being reshaped by fiscal realities?

Economic Affluence and Local Dynamics

Income, a familiar term, yes? We often hear about the six-figure threshold, heralded as the milestone for abundance, allowing for the comforts beyond mere survival—luxuries, savings, the whole shebang. But today, even earning well above that mark, some still find themselves marching to the beat of the paycheck’s drum. Why? It’s simple: life’s expenses have outrun wage growth over the last half-century.

What does it take to secure the so-called “American Dream” now? Let’s crunch some numbers.

  • Yearned Financial Comfort: Over a quarter of Americans feel they’d breathe easier earning $100,000 to $149,000 annually.
  • Redefining the Dream: The dream was economic security, bettering one’s station, perhaps outshining our parents, saving for the kids, and buying that picket-fenced home.
  • Reality Check: Every U.S. state demands an income surpassing $100,000 to truly grasp this dream, with 38 states necessitating over $140,000.
State Cost ComparisonsIncome NeededMedian Income (2022)
More Affordable States$109,000 – $117,000$71,000 – $87,000
Priciest StatesOver $240,000Around $150,000 short
  • Basic Costs vs. Dream Costs: While 80% of the country can cover basic needs for a quartet family on less than $100K, this scrimps out savings, higher education, and even rainy-day funds—the very fabric of the dream.

Has the kaleidoscope of life really shifted? At one time, a high school diploma sufficed. Jump forward, the middle-class gates now require a costly college diploma, a ticket to entry—often at the hefty price of student loan debt, now peaking at $1.77 trillion.

A glaring question emerges: Is the American property-owning, child-raising standard slipping through our fingers?

  • Homeownership Woes: Despite 62% of younger millennials and 63% of Gen Z aiming to own homes, a staggering 66% of U.S. renters feel priced out forever.
  • Income to House Price Rift: To purchase a median-priced home, one needs an income nearing $110,000, substantially higher than the U.S.’s median household income of under $75,000.

Don’t you ever ponder the might of your birthplace? Born into affluence and prosperity, the odds sway in your favor. Debt, however, paints a different portrait entirely. The collective American credit card debt stands at a robust $1.13 trillion.

Inflation nibbles away purchasing power, a slow feast that chips away at our abilities to save for those grand life milestones. Economists theorize: in place of salary hikes, debt balloons.

And then there’s the cost of living high—my generation’s mantra? Perhaps the “enjoy the moment” mindset. Why save for the unattainable when you can experience now?

Across this landscape, 73% of Gen Z feel hemmed in, unable to chart a course for long-term ambitions. But it’s not mere hedonism; it’s about embracing life’s experiences amidst the tides of economic change.

We debate, question, and ponder, don’t we? The American Dream’s blueprint remains unfazed, yet its pillars—the schooling, the job, the home—now rest on a precarious foundation.

Household Financial Struggles and Discretionary Expenditure

Ballooning Balances on Plastic

Have you noticed the surge in what it takes to feel content with your finances? It’s no longer about scraping by; we desire a savings cushion and the liberty to spend beyond mere survival. Yet this pursuit often leads to credit card balances skyrocketing. Americans owe a collective $1.13 trillion on their credit cards. Inflation is nibbling away at our buying capacity, making it harder to save or chase those long-term dreams. What does this mean for our financial stability? Well, it can certainly shake one’s sense of control and security, affecting not just the wallet but also the psyche.

YearTotal Credit Card Debt
First Quarter 2023$1.13 Trillion

As an economist, I’ve observed a troubling trend: debt accumulation is frequently substituting for income growth. Now, isn’t that a precarious way to sustain a lifestyle?

The Trend of Imminent Spending

So, what happens when financial optimism fades and the economy looks bleak? People start spending more, believe it or not. Over a quarter of Americans admit they’re engaging in what’s termed “doom spending,” purchasing with abandon amidst economic worries. What drives this behavior?

  • Is it the desire to live for the moment?
  • Or perhaps it’s a response to feeling down about their financial stature?

Interestingly, 73% of the younger generation report that today’s fiscal climate hinders their ability to plot out long-term ambitions. This isn’t about compensatory spending; it’s about seizing the day and extracting joy from life despite financial constraints.

Do you ever indulge just to experience a fleeting high? Take heart; you’re not alone. Our society often buys into the promise that a purchase will transform our lives. But let’s pause and reflect on the implications of this mindset for our long-term financial health.

Financial Impacts on Forward-Thinking Strategies

The Economic Perspective of Generation Z

In reviewing our current financial landscape, it’s worth asking how well prepared the younger generation is for the future. More than just the basic survival of affording essentials like food and housing, where does Generation Z stand when it comes to forging ahead financially? I find myself considering the heavy burden of student loans, which soared to a staggering $1.77 trillion in early 2023. Such debt, right from the outset of their working lives, poses significant hindrances to these young adults. It’s evident, given that even with diligent saving, achieving milestones like purchasing a home is proving elusive.

Median Income vs. Homeownership Affordability:

  • 2022 Household Income: $95,900 for typical first-time homebuyers.
  • Salary Needed: Nearly $110,000 for median-priced home affordability.
  • Reality Check: The median household income hovers around $75,000.

Can these young individuals stride towards owning property or is the gap between earning and living costs rendering the dream far-fetched? Bold as it may be, this is a question demanding contemplation.

The Surge in Indulgent Expenditure

Let’s shift focus now on spending patterns that emerged from a sense of deprivation—what’s been coined as ‘revenge spending’—particularly after the constraints experienced by many in recent times. One might wonder, is it a fleeting trend or a sign of changing financial attitudes?

Consumer Spending Behavior:

  • Emotional Spending: A quarter of Americans admit to “doom spending” despite economic uncertainties.
  • Life Enjoyment: A significant 73% of Generation Z faces hardship when trying to set long-term financial goals.

Is this spontaneous spending a byproduct of dwindling hope for long-term security, or is it a conscious choice to prioritize present enjoyment over future stability? The ability to save for future aspirations or invest in one’s dreams seems overshadowed by the immediate gratification of experiential splurges. Does this behavior reflect a deeper sentiment of resignation or a renewed zest for life? Understanding the causes is key, but acknowledging the intricate balance between financial freedom and life satisfaction is equally crucial.

What to Do About It

In the pursuit of financial freedom, especially for those of us over 40, it’s crucial to take decisive, informed actions that align with our goals of achieving a stable and robust financial future without relying on traditional Wall Street investments. Understanding that time is a finite resource and the need for financial stability is pressing, here are actionable strategies to guide you on this journey.

Embrace Cash Flowing Investments

The first step towards financial freedom is identifying and investing in opportunities that provide consistent and predictable cash flow. Real estate, particularly passive real estate investing, stands out as a practical choice for many. Consider exploring investments in single-family rental properties or multi-family units, which can offer regular rental income and potential tax benefits. Moreover, these investments can appreciate over time, providing not only monthly cash but also long-term wealth accumulation.

For those new to this arena, real estate investment trusts (REITs) or online real estate platforms can serve as a less hands-on approach to get started. These options allow you to invest in real estate indirectly while still reaping the benefits of the property market.

Diversify with Non-Traditional Tools

Beyond real estate, consider diversifying with tools like the Infinite Banking concept. This strategy involves using whole life insurance policies as a personal bank to fund investments, providing a dual benefit of life coverage and investment liquidity. While this approach requires careful planning and advice from a financial professional, it can lead to substantial financial growth and security.

Additionally, investing in other tangible assets such as precious metals or in niche areas like peer-to-peer lending could further diversify your investment portfolio and reduce the overall risk.

Develop Multiple Income Streams

To amplify your investment capacity, focus on growing your income through avenues that require minimal active involvement. Side hustles, especially those that leverage your existing skills or hobbies, can be a lucrative way to supplement your income. For instance, if you have a knack for writing or digital marketing, consider freelance consulting. Alternatively, if you have a passion for crafts, online platforms like Etsy provide a marketplace to sell your creations.

The key is to select side hustles that align with your interests and lifestyle, ensuring that they do not become another full-time job but rather a source of passive income.

Stay Educated and Connected

Finally, commit to continuous learning and community engagement. The landscape of non-traditional investments is ever-evolving, and staying informed through reputable financial education resources can provide you with a competitive edge. Additionally, being active in investment communities online or in-person can offer insights and opportunities not available elsewhere.

By integrating these strategies, you not only work towards your own financial freedom but also set a robust example for others in your community aiming for a secure financial future. Remember, the path to financial independence is a marathon, not a sprint. Patience, persistence, and informed action are your best tools for success.