In a recent survey conducted by YouGov for Bankrate, it was revealed that the average American believes they need to earn a staggering $233,000 annually to attain financial comfort. This figure is more than three times the average full-time worker’s 2021 paycheck of $75,203, as reported by the Census Bureau. Furthermore, respondents felt they needed to double that amount to $483,000 in order to consider themselves wealthy. However, building wealth requires strategic saving and investment, with respondents in Charles Schwab’s 2023 Modern Wealth Survey stating that they would need a minimum net worth of $2.2 million to feel rich.
The Challenges of Financial Security:
Unsurprisingly, the survey findings reflect the prevailing sense of financial insecurity stemming from an unstable economy, marked by recession fears and layoffs. Respondents cited inflation as the top roadblock to their financial security, with 63% attributing it to their inability to achieve a comfortable financial position. Other contributing factors included the current economic environment, inadequate emergency and retirement savings, and rising interest rates.
Attaining Comfort over Wealth:
Mark Hamrick, a senior economic analyst at Bankrate, noted that most individuals aspire to be comfortable rather than extravagantly wealthy. This sentiment aligns with the desire to cover ongoing expenses, save for retirement and emergencies, pay off debt, and have a little extra for occasional indulgences. While the idea of getting rich may be fantasized, the majority aim to achieve a level of financial stability that allows them to live comfortably.
Barriers to Financial Security:
Regardless of income level, workers face common challenges such as low pay, limited upward mobility, significant debt burdens, and a lack of affordable housing. Nearly three-quarters of respondents in the Bankrate survey admitted to not currently feeling financially secure, but many remained hopeful, with almost half expecting to reach that milestone in the future.
The Subjectivity of Wealth:
Defining wealth is subjective, and much of it is influenced by comparison. People often evaluate their own financial status by comparing it to that of their closest friends. Interestingly, the survey found that the higher the annual income, the more individuals felt they needed to maintain their desired lifestyle. This phenomenon, known as lifestyle creep, can create financial problems when it becomes challenging to scale back one’s standard of living.
Generational and Gender Differences:
The survey results revealed differences in income requirements among generations and genders. Generation X, currently in their peak earning years, reported the highest income needed for financial comfort and wealth at $273,000 and $575,000, respectively. Baby boomers indicated a need for $240,000, while millennials and Gen Z sought $224,000 and $193,000, respectively. Additionally, women respondents required slightly higher incomes ($237,000) compared to men ($229,000). The survey also highlighted the income disparity among different ethnic groups, with Black Americans reporting the highest requirement of $339,000 for financial comfort.
Financial Security Challenges for HENRYs:
The survey emphasized the evolving challenges faced by young workers, particularly millennials, who have experienced multiple recessions and grappled with substantial student debt. Many find themselves as High Earners Not Rich Yet (HENRYs), despite earning six-figure incomes. The cost of living continues to rise, making it increasingly difficult to build wealth or achieve financial stability. As a result, side hustles, multiple jobs, and seeking financial security through marriage have gained popularity.
The survey findings highlight the daunting task many Americans face in their pursuit of financial comfort and wealth. The perception of what constitutes financial security is influenced by various factors, including income levels, generational differences, gender, and personal circumstances. While the path to financial security may seem elusive, there is hope for the future as individuals strive to overcome barriers and adapt to the changing economic landscape. By addressing issues such as inflation, low pay, and rising living costs, society can work towards fostering an environment where financial stability is within reach for all.