In today's society, there is a surprising paradox: many people who earn more than $100,000 a year do not feel rich. Although this income puts them at a level significantly higher than the average, they are trapped in a routine of living from check to check.
A recent report by PYMNTS and LendingClub reveals that more than half of Americans with annual incomes in excess of $100,000 struggle to stay afloat financially.
The cost of living and student loans
The high cost of living in cities like Washington D.C., where many well-paid jobs are found, can consume a large part of the income. In addition, many people who earn $100,000 a year have had to acquire student loans to access well-paid jobs. These loans can create a significant financial burden and limit the ability to save and the feeling of wealth.
Inflation and depreciation of purchasing power
Inflation is another important factor to consider. Over the years, the dollar has experienced an average annual inflation of about 2.6%, which means that today you need to earn approximately $129,000 to have the same purchasing power that you had with a salary of 100,000 dollars a decade ago. This depreciation of purchasing power can affect the feeling of wealth despite having a high income.
Geographical variations and cost of living
The place of residence also plays an important role in the feeling of wealth. The cost of living varies depending on the geographical location, and earning $100,000 in a city like New York may not be comparable to earning the same amount in Memphis, Tennessee. State and local taxes, as well as the overall cost of living in certain areas, can significantly reduce purchasing power and affect the feeling of wealth.
The importance of saving and patience
To counteract the lack of feeling of wealth, it is essential to promote the habit of saving and long-term financial planning. Saving a fixed percentage of income, before any discretionary spending, can help ensure that financial objectives are met and feel more secure in economic terms. Although it can take time, investing regularly can be the way to the creation of real wealth.
The pressure of maintaining a high living standard
As income increases, so do the expectations and responsibilities associated with maintaining a certain standard of living. People who earn more than $100,000 a year often face greater pressure to pay a larger mortgage, cover their children's education costs, maintain a luxury car or meet other financial obligations. These additional expenses can consume a large part of the income and make the feeling of wealth illusory.
Ultimately, the feeling of wealth is not limited only to the level of income. It is a multidimensional concept influenced by a variety of factors, such as cost of living, debt, inflation, lifestyle slippage and financial education.
It is important to recognize that the feeling of wealth is subjective and can vary from one person to another.
The establishment of realistic financial goals, the efficient management of income and expenses, and the acquisition of solid financial knowledge can help improve the sense of economic well-being and establish a solid foundation for building long-term wealth.