The New American Dream Costs More Than Most Families Realize
The American Dream has long been associated with home, financial stability and eventually a comfortable retirement. But while the dream itself hasn't disappeared, the price tag for it has changed dramatically.
Many families find themselves earning more than previous generations ever did while still feeling like they're struggling to keep up.
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Experts explain why the "new" American Dream costs more than many realize.
The American Dream Looks Different Than It Did for Previous Generations
The traditional middle-class lifestyle has expanded in both expectations and costs recently.
Sherman Standberry, a certified public accountant (CPA) and CEO of My CPA Coach, pointed to inflation being “at an all time high” as a key reason that “families need to make almost double the amount to support a middle-class lifestyle versus eight years ago."
In fact, a decade and more ago, a middle-class household could be supported by one salary when now two are required, he added.
Jonathan Ness, CPA and founder of Know Money, Yes Money, even suggested that the new American dream would have been considered “borderline upper-class 70 years ago."
For example, he said, "Instead of every family owning a car, now the parents both have one and so do any kids 16 or older. Then there are expenses that they simply didn't have in the '50s, such as cable TV, internet, expensive smartphones and their plans ... gaming systems, subscriptions, etc."
Housing, Childcare and Education Consume a Larger Share
Standberry said that the expenses that have increased the most include housing, childcare, insurance and education.
Even more, he said, “Many families delay major purchases like buying a home or even delay expanding their family due to such high costs."
Education adds another layer of stress, as well, he pointed out, because families may feel pressured to save for college, but these with competing priorities force parents “to make difficult tradeoffs when it comes to present and future goals."
Additionally, Ness pointed out that new homes cost as much as six times as much as they did in the 1950s, and “student debt is higher than ever."
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Why Six-Figure Earners Still Feel Financially Stretched
Many Americans assume six figures should guarantee financial comfort. Yet some of these earners feel financially stretched due to the higher cost of living, which can outweigh their income, Standberry said.
"Inflation has also reduced the purchasing power of what high-income earners were once able to afford," he said.
Ness blames lifestyle creep for a lot of people’s financial woes. "It's difficult to out-earn bad spending habits,” he said. People are forgetting to prioritize savings.
The Biggest Financial Tradeoffs Families Face Today
For many households, achieving one financial goal increasingly means postponing another, Standberry said.
“Financial tradeoffs families are increasingly forced to make to maintain stability include saving for retirement vs. college, buying a home vs. maintaining lifestyle, and paying off debt vs. building emergency funds."
The modern American Dream is no longer one-size-fits-all because geography increasingly determines what families can afford. A family earning six figures a year may feel more secure in some regions than others.
A New Version of Financial Security
Rather than focusing solely on homeownership or status symbols, the experts argue that there are new markers of financial security.
"With uncertainty surrounding the economic future, stability and flexibility have become more important than hitting societal milestones,” Standberry said.
Ness feels that the American dream is still a reality, “but the irony is you get there by slowing down, not by speeding up." He recommended people try to offload their debts well before retirement, including a mortgage if possible, and to fund their own retirement accounts.
"For anyone under 50, I recommend assuming Social Security will not be available, at least not in its current form. I would not depend on it."
An Evolution
The American Dream hasn't vanished, but its definition and price have evolved. For today's families, financial success depends upon building enough flexibility to weather rising costs, competing priorities and an uncertain future.
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This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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