The past two decades have seen multiple recessions, housing crises, and heightened inflationary periods. These factors have shaped Americans’ current cost of living and spending habits.
The threshold for what is considered ‘wealthy’ and financially comfortable has increased with inflation, keeping pace with rising costs and competing financial obligations.
The average American believes you need a net worth of $2.5 million to be considered wealthy and at least $778,000 to be comfortable financially.
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Despite the rising cost of living, most Americans are optimistic about their financial future: 60% of adults believe they’re in a better position to achieve their financial dreams than previous generations.
Charles Schwab recently released its 2024 Modern Wealth Survey, and the results indicate that the threshold for being wealthy and financially comfortable has increased. Still, consumers are feeling optimistic about reaching those benchmarks.
How each generation perceives wealth and financial stability
The amount needed to be considered wealthy has increased from $2.5 million in 2023 to $2.8 million this year, while the guidelines for what the average American considers financially comfortable varies. In 2023, that threshold was $1 million, while this year’s estimation of $778,000 is more in line with the 2022 figure of $775,000.
The increase in the amount needed to achieve ‘wealthy’ status signals that financial mobility is becoming more challenging.
However, younger generations are more optimistic about reaching different financial thresholds. Gen Z and Millennials, respectively, consider a net worth of $1.2 million and $2.2 million wealthy, while Gen X and Baby Boomers believe you need nearly $3 million in assets to be wealthy.
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Millennials are much more aligned with their older counterparts regarding financial stability. Baby Boomers, Gen X, and Millennials believe having between $725,000 and $823,000 is the threshold for financial comfort, while Gen Z considers having $406,000 enough to be comfortable.
These differing viewpoints are likely attributed to the environment in which each generation came of age. Buying a house was a given financial milestone for most Baby Boomers, but that dream is becoming increasingly out of reach for Gen Z and Millennials.
Gen X and Baby Boomers are focused on a different financial milestone: retirement. Since one in five Gen Xers doesn’t think they’d be able to retire with $1 million in savings, it’s understandable that older generations may be factoring retirement considerations into wealth benchmarks.
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Wealth expectations are influenced by geographic area
Although cost of living has increased across the U.S. in recent years, it is the highest in major metropolitan areas. The parameters for wealth and financial comfort vary by city, as living costs strongly influence disposable income.
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San Francisco, Southern California, New York, Washington D.C., Denver, and Seattle have the highest threshold for what is considered wealthy and financially comfortable. To be considered wealthy in those regions, you’d need to have a net worth between $2.8 million and $4.4 million, while being financially comfortable would require between $789,000 and $1.5 million.
The cities with the highest expectations for wealth and financial stability also align with the cities with the highest costs of living.
However, one of the most important factors shaping wealth accumulation is implementing a financial plan. 86% of those with a financial plan grade themselves favorably on their savings and investments, as opposed to 63% and 67% without a financial plan.
Creating a long-term plan for spending, saving, and investing your money can pay off tenfold in the future and help you achieve your financial goals.
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