According to a new survey by the financial services company Bankrate, Americans have a psychological income standard, which is the amount of money they need to earn to feel financially secure.
The report by CBS News stated that Bankrate believes achieving financial security means being able to cover daily expenses while having enough surplus funds for discretionary spending and setting aside money for savings for the future. That figure is – $186,000 annually.
Bankrate stated that currently only 6% of American adults are able to earn this much money. According to the latest federal data, the median household income in America ranges between $51,500 and $86,000.
In recent years, due to high inflation, consumers continue to face significant financial pressures. A new survey by the Federal Reserve Bank of Philadelphia found that 35% of Americans are worried about not making ends meet, a higher proportion than the 29% from a year ago.
Analyst Sarah Foster from Bankrate told CBS, “There is a significant gap between the realistic income and target income of the average American. People think they need to earn more money, even though they know it’s not realistic, they will never earn that much.”
The United States has experienced two consecutive years of rising inflation. Currently, housing, food, and medical prices remain high, so earning more income is still a top priority for many Americans. A study by credit analysis firm TransUnion found that American consumers are cutting back on dining out, entertainment, and travel expenses to cope with inflation.
However, a survey conducted by Bankrate in mid-May on 2,400 Americans found that younger generations are more optimistic about eventually earning enough money to live comfortably.
This year, Americans have set higher standards for “wealth.” The survey found that they believe they need to earn $520,000 annually to be considered wealthy, which is higher than the $483,000 from the previous year’s survey.
Foster says that the main reason for the increase in the “wealth” standard is the rise in consumer goods prices. “Americans know where the threshold for a comfortable life is, but every time their income needs to meet this standard, the cost of living increases, so they are further away from the standard of wealth.”
A recent report indicated that adults in major U.S. cities need a pre-tax income of $96,500 annually to afford basic necessities and savings, while dual-parent families with two children need a total of $235,000 to live comfortably.
Interestingly, a study conducted in 2023 by the late Nobel laureate in economics, Daniel Kahneman, and his colleagues showed that happiness does indeed increase with income, peaking at around $500,000 – similar to the standard at which Americans feel “wealthy”.