Rising living costs and stagnant wage growth mean a $100,000 salary is insufficient for the American Dream in many areas.

Housing, healthcare, and education expenses are key factors, forcing individuals to reconsider financial strategies and lifestyles, even in traditionally affordable regions.

The American Dream, often defined by aspirations like homeownership, marriage, parenthood, financial security, and leisure, is becoming progressively more costly.

According to Sabrina Romanoff, a clinical psychologist interviewed by CNBC, the traditional notion of achieving the American Dream was often tied to reaching a six-figure salary. This income level symbolized a significant milestone, marking the transition to having disposable income for saving and indulging in non-essential purchases, rather than merely meeting basic needs.

According to a 2023 CNBC Your Money survey conducted by SurveyMonkey, over half of Americans (52%) indicate that they would require a minimum annual income of $100,000 to achieve financial comfort. Within this group, 26% specify that they would need a salary ranging between $100,000 to $149,000 per year.

"Unfortunately, what has happened is that wages haven’t kept up with the cost of living, by and large, for the last 50 years or so," explained Elise Gould, senior economist at the Economic Policy Institute.

She emphasized that this trend makes it increasingly challenging for many families to achieve the middle-class lifestyle associated with the American Dream.

Gould's comments highlight a broader issue of income stagnation relative to the rising costs of living, which impedes individuals and families from attaining financial security and realizing their aspirations.

For those seeking financial stability, the popular 50-30-20 budget guideline is often employed. This strategy allocates 50% of income to essential expenses, 30% to discretionary spending, and the remaining 20% to savings.

In a recent report by GOBankingRates, the 50-30-20 budget framework was employed to assess the financial requirements for a family comprising two adults and two children to afford essential expenses such as homeownership, a car, and pet ownership in each state. The analysis involved estimating the annual essential expenses for such a family and then doubling that figure to gauge the necessary income threshold.

According to the findings, GoBankingRates discovered that in all 50 states, an annual income exceeding $100,000 is required to meet these essential expenses. Furthermore, the report revealed that in 38 states, the financial threshold exceeds $140,000 annually. This underscores the considerable financial demands faced by families across the United States in pursuit of a comfortable standard of living.

Economists have proposed that the expansion of debt has served as a substitute for income growth in recent years. Highlighting this trend, student loan debt surged to a record high of $1.77 trillion in the first quarter of 2023, while Americans collectively owed $1.13 trillion on their credit cards as of the fourth quarter of the same year. This accumulation of debt can have far-reaching consequences, particularly as entire generations commence adulthood burdened by significant financial liabilities.

Sabrina Romanoff echoed these concerns, noting that even individuals earning well above six figures find themselves struggling to cover expenses from one paycheck to the next. What was once perceived as a marker of financial freedom now perpetuates stress and anxiety about meeting financial obligations. This shift underscores the evolving economic landscape, where mounting debt has reshaped perceptions of financial security and stability for many individuals and families.

Source: cnbc