Americans Spent an Extra 20 Percent. Here are the details on the 2022 Fed Survey
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If you are feeling poorer, you are likely spending way more than you think. Household income isn’t dropping. Prices on everyday items are going up.
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Feeling a bit stressed about Expenses?
The average annual expense per median household went up from $66,928 in 2021 to $72,967 in 2022. This was an increase of 7.5 percent.
Add another 3.7 percent from 2020-2021 and there’s your proof of purchase. Americans are spending nearly 20 percent more since the beginning of the pandemic.
Record-high inflation means faster spending and way more debt. Even though the Federal Reserve increased interest rates, consumer appetite hasn’t slowed. Americans are opting for soft savings while relying on credit card debt to keep up with their lifestyle.
America is truly a consumer market via apps. And the consumers are always spending.
Where does the data come from?
The data comes from three sources.
Just so you know, every year, the Bureau of Labor Statistics runs a survey on the median US Household income and expenses. This data is typically released in September for the prior year. Subsequently, the US Census Bureau filters the results by Age, Gender, Race, State, and etc. And finally, the Federal Reserve Survey’s Triannual Survey of Consumer Finances comes around to round up the numbers.
Why all these data points?
Technically, it’s a good thing since we can cross-check information. But sincerely, it’s because each organization has its own metrics and mandates. All of these data can help leaders and even everyday Americans make SMARTER financial decisions.
Although household income typically rises, economic disruptions, such as the housing crash of 2008 and the global pandemic dramatically alter lifestyle expenditures and household dynamics. The labor shortage and supply chain issues from 2020 are caught up to us. As well as, droughts and wheat shortages stemming from the Russia-Ukraine war and now the Israel vs Hamas conflict.
It’s been a catastrophic marathon of events but we are still pushing forward.
Median household income for 2022 rose by 11.44 percent, compared with 2020
So how are we paying for everything? Credit and Saving Withdrawals. This is like juggling gasoline, diesel, and a flaming ball.
While at first, the average household savings hit as high as 33 percent back in April 2020, the prolonged issue led to the faster growth in inflation in four decades.
Credit card average balances fell again in 2021, though not as sharply as in 2020. The average credit card balance as of Q3 2021 was $5,221. This grew to $5,963 in Q2 2022. And now, the average cardholder had $6,568 in credit card debt in Q2 2023.
In summary, debt is up as high as 20 percent with average spending in 2023 peaking at an additional $7,500 (when the dust settles). Total household debt surpassed $17.06 trillion in Q2 2023. Mortgage, auto loan, and credit card balances increased (FRS Bank of NY report, August 8, 2023). Once the dust settles, we will find that in Q4 savings will drop even more.
As of late, with a new recession brewing, the majority of US households are just one financial emergency away from taking on costly credit card debt, withdrawing from their retirement savings draining their emergency fund.
By the way, $1,000 is not going to help you when a real emergency hits.
Here are some key US household statistics for 2022
Most Americans are feeling the crunch even as median income grew to $74,580 in 2022. Other key findings include:
- GenX-ers, ages 45 to 54 are earning the most, with $91,900. Millennial Households are trailing behind with $86,500.
- The state of Maryland bolsters homes with a median income of $108,100. This is almost 45% of the national median.
- While being the most educated, women earned 10% less than the median wage of men. This amounts to a difference of $9,990. But both are down more than 3 percent over 2020.
- Black American households pulled in a median income of $46,500, nearly 34% less than the median income of total households in the US. While Asian American households pulled in $108,700.
Median US Household Income
“Median” is defined as the middle number, indicating that half of all households earned more while half earned less. There is a difference between the median and the average. Whereas the average can skew heavily if there are too many high or low earners, the median works best.
For 2022, the median income was $74,580.
While there was no big statistical difference from the 2020 estimate of $71,186, American employees made headways through 2022. This was higher than it was in the three years prior to 2019. Diving deeper we can look at the median income by age, education, race, and state.
Thankfully, this amount of income greatly improves your chances of becoming a millionaire in less than 20 years.
Estimated Median income by age
| Age | 2022 | 2019 | % Change |
|---|---|---|---|
| Less than 35 | $60,500 | $56,700 | +6.70% |
| 35-44 | $86,500 | $85,000 | +1.76% |
| 45-54 | $91,900 | $90,900 | +1.10% |
| 55-64 | $82,100 | $73,200 | +12.16% |
| 65-74 | $60,500 | $57,800 | +4.67% |
Median household income peaks for workers in their 40s and 50s with the highest growth potential in the 20s and early 30s. This is why it’s highly recommended to boost your educational attainment in your 20s.
Also, it’s beneficial to bounce around for up to a 40% income boost. Staying in a job that doesn’t promote you by more than 10 percent in 3 years, becomes a financial death sentence.
Households with workers ages 45 to 54 brought a median of $91,900. It’s important to note that it was a +1.10 percent increase from 2019. Those 65-47 held at +4.67 percent — or $60,500. At 75+, the retirement income decreased by 3.16 percent or $49,100.
Social Security and Supplemental Security Income (SSI) benefits for approximately 70 million Americans will increase 8.7 percent in 2023. Read more about the Social Security Cost-of-Living adjustment for 2023. Additionally, the maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $160,200.
In the end, we are brewing a perfect storm of the Have and Have Nots in the US.
Estimated Median income by gender
The real median earnings of all workers (including part-time and full-time workers) decreased by 2.2 percent between 2021 and 2022. Settling at around $47,960 per year or barely $4,000 per month. The median earnings of those who worked full-time, year-round decreased 1.3 percent (down to $60,070).
Furthermore, women continued to earn less than men in 2022.
| Gender | 2022 | 2020 | Change |
|---|---|---|---|
| Women | $52,360 | $50,982 | +2.70% |
| Men | $62,350 | $61,417 | +1.52% |
Women who worked full-time, year-round positions earned about $10,000 less than men. While full-time working women gained ground toward earning an equal wage over time, a significant gap remains.
The pandemic added new stressors or sped up these outcomes which include caregiving, whether raising children or taking care of aging parents, lower-paying jobs or industries, and further discrimination.
Even with a decrease in productivity, most Americans are demanding at least $79,000 per year. I’m not sure where they will get this miracle.
Estimated median income by race
Race has always played a large role in US society.
Nearly all households, regardless of race saw incomes saw a nominal increase since 2019. The pandemic presented a myriad of new challenges, with Black and Brown communities taking the brunt of the issues. Data shows that income rebounded overall in 2022, however not all households felt the financial boom.
| Race | 2022 | 2019 | % Change |
|---|---|---|---|
| Asian | $108,700 | N/A | N/A |
| White | $81,100 | $80,300 | +1.00% |
| Hispanic | $46,500 | $47,200 | -1.48% |
| Black | $46,500 | $47,200 | -1.48% |
| All Households | $70,300 | $68,500 | +2.63% |
The US is definitely creating a ruling class formed around an educational meritocracy. In the end, the true WINS belong to long-term investors.
Asian households earned a median income of $108,700 while white households continue to fall behind with $81,100. Black and Hispanic households continue to lag behind at $46,500.
Nearly 55% of Black households in the US earn bring in less than $50,000 per year. Conversely, over 74 percent of Asian households bring in over $50,000 per year with 33 percent earning more than $150,000 per year.
The difference in median wealth is even more glaring. Asian American households held over $500,000 in median wealth in 2022. This far outpaced the median wealth of all American households by 178 percent. See the graphic below:
Median income by Education Level
Besides what social media says, education is still a massive wealth-building tool. Although student loans remain a contentious issue, the benefits of education are undeniable.
| Education level | 2022 | 2019 | Change |
|---|---|---|---|
| Bachelor’s degree or higher | $117,800 | $110,900 | +6.22% |
| Some college | $60,500 | $59,000 | +2.54% |
| High school, no college | $53,000 | $53,100 | -0.19% |
| No high school diploma | $32,400 | $35,400 | -8.47% |
College degree households nabbed nearly $117,800 in 2022, over 120 percent more than those with a High school diploma of $53,000.
Workers with a bachelor’s degree or higher made as much as 264 percent more than those who didn’t finish high school.
Additionally, those with a college degree have a median household wealth of $464,600 in contrast to households with a high school diploma at $106,800. This is a tangible outcome of 335 percent or $357,800 cash equivalent.
A major subcomponent of this is the Occupation
Among the major occupational groups, persons employed full-time in management,
professional, and related occupations had the highest median weekly earnings—$1,840 for
men and $1,350 for women. While both men ($799) and women ($686) earned the least when
employed in service occupations.
What you do for work and where you work matters (as seen below in income by state).
Median income by state
According to the US Census Bureau, Maryland and DC had the highest median income. The North East continues to be the center for income growth potential. Also note that the median income in New Mexico, Arkansas, and Mississippi had the lowest.
| State | 2022 | 2021 | 2020 | 2019 |
|---|---|---|---|---|
| US | $74,580 | $70,787 | $67,521 | $68,703 |
| Maryland | $108,200 | $97,332 | $94,384 | $95,572 |
| District of Columbia | $101,700 | $90,640 | $88,311 | $93,111 |
| Massachusetts | $93,550 | $86,566 | $86,725 | $87,707 |
| Virginia | $85,170 | $80,268 | $81,947 | $81,313 |
| California | $85,300 | $81,575 | $77,358 | $78,105 |
| New York | $75,910 | $72,920 | $68,304 | $71,855 |
| Texas | $74,640 | $67,404 | $68,093 | $67,444 |
| Maine | $75,160 | $71,139 | $63,440 | $66,546 |
| North Carolina | $65,070 | $62.891 | $60,266 | $61,159 |
| Georgia | $67,730 | $61,497 | $58,952 | $56,628 |
| Florida | $65,370 | $59,734 | $57,435 | $58,368 |
| Louisiana | $58,330 | $57,206 | $50,935 | $51,707 |
How can you weather this Median Income Storm?
We pushed through. While the pandemic presented a massive global shift, Americans more or less, preserved with a +3 percent increase in US household income from 2019 to 2022. With a looming reversion to the means, most households will have a tougher time keeping up with the Jones post-pandemic.
With expenses from 2021 to 2022 increasing by 9 percent, persistent inflation is eating through some of this consumer joy. Q4 2023 is not looking any brighter, all of which will lead to a turbulent 2024.
No matter how things shake out, there are still immutable laws of household income. Remember the golden principles which include Education, Structural Employment, Geo-arbitrage, Multiple Streams of Income, and Marriage.
Education provides access if used wisely.
College is a precision exercise that pairs the student with a high-paying in-demand career. Anything short is a pipe dream. Never rest in comfort and move around for opportunity.
Also, tap into making multiple streams of opportunity for yourself and your family. The more money coming in, the less likely you will fall into the two-income trap of marriage.
Here are easy-to-use Net/Max Financial plans for any age range and situation.
How workers can preserve their income
Families will have to learn to navigate economic challenges, such as a surge in inflation, and raising the costs of housing, food, and other household expenses.
Remember to invest more than you spend. Tucking away your earnings in a retirement plan, IRAs or health savings accounts can help households afford to retire with dignity.
The average US family is mismanaging as much as $12,000 per year. Necessary changes in lifestyle habits and investing $625 per month, can yield as much as $1.5 Million in less than 40 years. Here’s how my household is changing our investment strategy while inflation hits a 30-year high.
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