For quite a few years $100,000 was the “magic number”, the benchmark for financial success that most people used to determine whether or not they were “wealthy” and “making it”.
Today, things have changed quite drastically. First, less than 20% of American households actually earn $100,000 a year or more. Even worse, while a “6-figure income” still is prized and coveted by many Americans, it simply doesn’t pay for the kind of lifestyle that it used to 30 years ago.
In other words, in the 1980s making $100,000 a year meant living in a very nice neighborhood, owning two cars, traveling on a regular basis and having enough money to pay the kids college tuition, among other things.
Today, unfortunately, it does not.
Now, to be fair, making $100,000 in income a year is still much more then millions of Americans are earning these days and, If used wisely, can provide a very nice quality-of-life. On the other hand, it very much depends on where you live, how many people are in your family and what type of lifestyle you live as well.
For example, a married couple with one child living in the suburbs of Texas can easily live a very comfortable lifestyle. Take that same couple, add three more children and put them in the suburbs of New Jersey, Los Angeles or Boston and it’s a whole different story. In those locations, as well as many others, $100,000 a year is barely enough to cover the essentials.
Stagnant wage growth is one of the biggest culprits in this huge financial change. Wages have simply not kept up with inflation, and today the average American is making about the same amount of income that they made 20 years ago. In some cases, many are making even less, once other factors are included into the mix.
We also mentioned location and that is a huge factor. When you consider things like State income taxes, real estate taxes, home prices, gas prices, energy prices and a number of other factors, it can be extremely expensive to live in some areas of the United States. And, while living in other, cheaper areas is certainly an option, most of those come with lesser schools for the kids, less social services and less things to do like sports teams, recreation, museums and so forth. Add that to the fact that many of these areas simply don’t have jobs and you realize why so many people are forced to live where their money doesn’t stretch daily as far as it could.
Of course, when you consider that many Americans simply live beyond their means and spend more than they make, even making $100,000 a year isn’t going to go as far as it should. Unfortunately, many of the things that Americans find “essential” are nothing of the sort, but simply a way to “keep up with the Joneses”.
If there is one thing that will give solace to someone making $100,000 a year and just getting by, it’s the fact that many people making more are just getting by as well.