The American dream – which for many people involves some combination of owning a home, getting married, having children and earning enough after expenses to save for retirement and spend on leisure – is becoming more and more expensive.
“The benchmark of a six-figure salary used to be the benchmark income,” Sabrina Romanoff, a clinical psychologist, told CNBC. “This represented the tipping point to finally earning disposable income and building savings and spending based on your wants, not just your needs.”
More than half (52%) of Americans say they would need at least $100,000 a year to feel financially comfortable, and 26% say they would need a salary between $100 $1,000 and $149,000 per year, according to a 2023 CNBC Your Money survey conducted by SurveyMonkey.
“Unfortunately, what has happened is that wages have not kept up with the cost of living, overall, over the last 50 years,” said Elise Gould, senior economist at the Economic Policy Institute.
“It’s becoming more and more difficult for many families to be able to achieve that kind of middle-class lifestyle, that American dream,” Gould said.
Consumers who use the popular 50-30-20 budget guideline aim to spend 50% of their income on essential spending, another 30% on discretionary spending, and the remaining 20% on savings.
A new report from GOBankingRates used this framework to analyze how much money a family of two adults and two children would need in each state to own a home, a car and a pet. The report took stock of the estimated annual essential expenses for such a family, then doubled that figure.
Using this framework, GoBankingRates found that all 50 states require annual income above $100,000, according to the report, and 38 states require more than $140,000.
Economists suggest that debt growth has become a substitute for income growth. Student debt reached a record high of $1.77 trillion in the first quarter of 2023 and Americans collectively owe $1.13 trillion on their credit cards in the fourth quarter of 2023. This debt can have a ripple effect, especially when entire generations are starting adulthood with thousands of dollars in debt.
“Now people who make well over six figures are still living paycheck to paycheck,” Romanoff said. “So what once symbolized financial freedom now keeps people stressed about making ends meet.”
Watch the video above to find out how much American families need to earn to achieve the American dream.
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