Earnings Expectations vs. Reality of Americans

Chart of the Week #20

Today's chart shows the findings of a recent Bankrate study that revealed the average American believes they need to earn $186,000 a year to live comfortably. Note that’s just the average figure, reflecting what most people mentioned. You can see a breakdown of how different groups of Americans perceive their financial needs below.

It jumps right out from the graph that income expectations vary significantly across different backgrounds, generations, and individual situations. Yet, even the lowest figure across all groups stands at $171,000.

Now, according to the U.S. Bureau of Labor Statistics, the median full-time worker in the U.S. earns $59,500 a year. That's a long way from $186,000.

You can already see the problem here. That's a huge gap. And it can be squarely laid at the feet of inflation.

In the past 5 years, we've seen an unprecedented rise in the cost of living. This happened for two main reasons...

First, during the COVID pandemic, the Fed pumped an unprecedented $6.1 trillion into the economy from 2020 to 2021. Then came Bidenomics, with a trillion-dollar spree on initiatives like the American Rescue Plan, Infrastructure Investment and Jobs Act, Inflation Reduction Act, and other measures since Biden took office.

You don’t need to look far to see the consequences of all these policies.

Groceries, tuition, childcare, healthcare, and insurance have become increasingly unaffordable for millions of Americans. About three out of every four are currently living paycheck to paycheck.

Interestingly, in that same study, they also asked people to define what financial success means to them. The responses showed that Americans now define financial success as “living debt-free” and being “prepared for future financial obligations.”

That’s not the kind of answers you’d typically expect to hear. Just a few years ago, it was much more common for people to define financial success as becoming a multi-millionaire or having enough money to quit their job.

Fast forward to 2024, and the American Dream isn’t about a suburban house with a white picket fence and affording your kids' education anymore. It's about getting those pesky credit cards paid off.

Have a great weekend!

Lau Vegys