Here’s the Solution to The $4 Million American Dream

Based on the last 12 months’ CPI number, the American Dream costs over $4 million.

A recent analysis estimated the median cost for a family of four to live the Dream in each state was $156,666 annually. A number that seems to be rising at least 4%-5% year over year. All of this is at a time when 80% of millennials and Gen-Zers think it’s impossible to attain.

As of August 2024, the median savings account balance in the United States was $8,000. Inversely, the average credit card balance for QTR 2 was $6,329 per consumer. Folks are going broke while arguing which multi-millionaire should be elected. Just 41% are invested in the market while 68% are homeowners. But only 58% of homeowners owned stocks. The math is all over the place.

According to the Federal Reserve’s 2022 Survey of Consumer Finances, the median retirement savings was $87,000, falling short of their retirement needs of $2.7 million. All in all, the dream is just as expensive as the reality. This might be a financial nightmare but time will tell.

So How Much of the Dream Can I Charge on Credit?

Investopedia’s ‘Cost of the American Dream 2024’ aimed to quantify the costs of eight aspects of life in the U.S. These costs include home ownership; a car; a wedding; raising two children; pets, vacations; and retirement expenses.

While the cost of everyone’s ‘dream’ will differ, the calculation puts a price tag on these expenses across different life stages. Importantly, these items do not include necessities such as food and healthcare.

The cost of food has recently put considerable strain on U.S. consumers (as of July 2024, the cost of food has increased 27% since 2019). Furthermore, nearly 1 in 12 adults hold medical debt, and nearly half have been diagnosed with a chronic condition. It’s it’s not the debt that will take you, your diet will.

Americans will end up paying nearly $500,000 in interest repaying loans, credit cards, homes, and cars. Be careful with adding the extra guac, whipped cream, or doubling down on drinks. Depending on lifestyle, inflation, and changes in global consumption, your household’s prices will vary.

Here are my revised estimated lifetime costs:

• 4-yr College Education and/or Certifications: $40,000 – $100,000
  • 4-yr Out-of-state or private school: $200,000
• Engagement, Rings, and Wedding: $25,000 – $50,000
• Transportation (auto): $400,000 – $800,000
• Pet(s): $20,000 – $37,250
• Owning a Home: $900,000 – $1.6M
• Raising Two Children: $800,000 – $1.2M
  • Infant Daycare: $1,807 per month
  • Over 2: $1,300 per month
• Saving for Retirement: $1.6M – $2.7M
• Yearly Vacation: $180,000 – $250,000
• Funeral: $6,250 – $8,500

So Where Does this Dream Money Come From?

That’s the good news.

Investopedia found that the total was over $1 million more than most individual Americans earn in a lifetime. College-educated dual-income households fared better.

According to the Georgetown University Center on Education and the Workforce’s analysis of the U.S. Census Bureau’s American Community Survey, the average bachelor’s degree holder earns about $2.8 million during their career. In contrast, two earners holding bachelor’s degrees have a lifetime earnings of $5.6 million.

The problem is where the money goes once you earn it.

Based on my research, American households spend nearly 70 cents for every dollar earned. Thinking of this differently, most people simply keep 30 cents, after taxes.

If you made $100,000, your taxes hover around 14%. Out of the remaining $86,000, expect to spend about $60,000 on housing, transportation, and food. Technically, 18%-25% (of the gross) should go to investments, unfortunately, families are opting for 7%-8% (of after-tax). This is not good at all.

With inflation pressing at 3%, a sub-10% savings rate will have you working until 70. There are solutions, however, at this rate, people are opting to live more today and worry about the consequences later.

Is the American Dream without a house possible? 

“Maybe not?,” according to Anna Kodé of the Washington Journal.

“The dream symbolizes many abstract ideals.” For generations, this meant one particular path in life. Go to school. Get a job. Potentially get married. Save money for a down payment. And finally, enter into lifelong mortgage debt payments. “With a modicum of security and a little less responsibility than homeownership, younger people are opting to focus more on their families and their goals.”

Maybe the next generation needs an updated dream. Even slight changes early on would help. Generational living arrangements can reduce costs for the family. Budgeting and Investing money upfront to avoid lifestyle creep. And finally, course-correcting away from spending culture. Keep it simple.

Purchase assets and avoid becoming a liability for yourself or the ones who care about you.

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