How $3 Million Became the Price of the American Dream

Based on Investopedia, the American Dream now costs over $3 million. Well, $3,455,305 but what’s an extra $450,000 between friends? See the dream isn’t dead, the reality is that it costs a lot of money over your lifetime.

Against the backdrop of sustained high prices and lingering inflation, the average American is struggling to keep up with the social media Joneses. Gone are the days of discipline and measured spending, in are the days of conspicuous consumption, higher credit card debt balances, and toxic poverty porn.

Surrounded by the conversation of debt crises and financial trauma, did Investopedia drop clickbait or are they unto something? We will go through each element and fact-check the numbers while providing potential resolutions for your household.

But also, yes, it was clickbait since we are all talking about it. And no, it didn’t use to cost this much back in 1950 but they also had Measles, fallout drills, and a toxic amount of racism. Times have changed, and so has the American appetite for luxury goods, eating out, and meal deliveries.

What else did their research and methodologies reveal?

Table of Contents

Breaking Down Every Element of the Dream

To kick this off, the $3.4 million is an estimated lifetime cost which includes the traditional path of education, marriage, homeownership, and 2.5 kids. Keeping people alive is costly nowadays and leveling up socially often requires you to leverage debt. If the Median weekly earnings for full-time wage and salary workers were $1,118 (based on the US BLS, October 2023), a 40-year career would equal $2.3 million in earnings.

At this rate, dual-income households should be MANDATORY ($4.6 million). Another consideration if you want to win the earnings game; consider living north. The South has always lagged when it comes to income. Additionally, working in technical fields typically brings in more money. However, this doesn’t mean that you neglect the blue-collar jobs. Electricians, plumbers, and architects are banking a pretty penny in this environment. No matter how this cookie crumbles, your household needs to bring in north of $120,000 per year.

Next up those pesky expenses

According to the Knot, the average cost of a wedding and engagement ring ranges from $35,800 +/- $10,000 as of 2022. In the age of social media, all those prices are up, and then some. I’ve seen weddings going for $60,000 being judged as basic. I also know couples who are still paying off their wedding debt three years after the fact. It’s getting ridiculous out here. Most people don’t believe this but the wedding industry is up to $60 billion annually. This excludes the honeymoon industry netting an estimated $6 billion.

That’s way before even living with that special extra income-getter. This isn’t Hallmark or Pinterest, everyone has to work for the soft life.

Annual median expenses are up to $72,967 or $6,081 monthly. Over 40 years that’s a humbling $3 million easy with the biggest expenses being Housing, Transportation, and Food.

When it comes to having kids, a hospital birth will cost you an average of $5,708 out-of-pocket per kid and that’s without complications. The cost of raising two children to the age of 18 is estimated at over half a million dollars.

Don’t tell the parents, that their kids will likely be sapping their wealth through their 30s. You can easily add an extra $250,000. However, the hope is that you have invested enough into their soft skills so that they can become future income-getters too. You need the money, they need to work.

The big ticket dream expenses

While the report briefly covered it, at over 35 percent of your income, the big three expenses are driving your income to zero. Quick home math – if you purchased a home for $400,000, your total real cost in the long run would be $920,000. Why? Due to the length of the loan, the maintenance, and the interest rate, multiply your principal by 2.3. So that part also checks out.

New Cars are going for nearly $60,000. On average people are beginning to pay over $900 per month. It’s expensive.

While not as damaging as a home, tagged together with student loans and credit cards. the average home is coming out of pocket of at least $3,000 per month.

Americans are now spending $779 on food per month, with almost two-thirds being spent on groceries ($475) and the rest on eating out ($303). The US restaurant industry made $898 billion in 2022, which was a $166.5 billion increase from 2021. The meal kit delivery services market was valued at $20.54 billion in 2022. It is slated to increase by 15.3% by 2030.

Americans aren’t just getting fatter, we are getting poorer too. Subtle nod for you to cook more at home. It’s better for your health and pockets to meal prep.

Maintaining the Dream in Retirement

The worst part of all these numbers? The more we spend on everything else, the less we invest in the future. The Average American household is walking off the fiscal cliff and right into a retirement nightmare. According to the 2022 US Survey of Consumer Finances, the median retirement savings for all families was $87,000.

In contrast, most American households will need north of $2.7M just to retire comfortably. Investopedia was being lenient. Based on these numbers, if the average cost of retirement is $716,000 (2023), it would increase to $1.6M with an inflation rate of 3%. This means you would need an investment goal of at least $900,000 (+ social security benefits).

How does the math break out?

Total contributions $230,024 + Total interest gained $669,976 = Balance $900,000
4% withdrawal from investment $36,000/yr + social security at $40,000/yr = Retirement income $76,000 (minus about $7,500 taxes/yr).
You would need to invest $640/mo for 30 years, starting with $0.

Why you need to look at the numbers differently

Setting aside that amount per month is likely the best thing you can do with your money. It’s not just that prices are going up, the American appetite for spending for enjoyment is going up too. While some Millennials and Gen Zers will be screaming “Gaslighting” until the end of time, take your time to work on your home’s economy.

If prices are going up, do what you can to keep your expenses low. If you somehow got stuck in a loop thinking that happiness is equal to spending, break free of it as soon as possible. You really can be happy without spending a dime.

Beyond that, when articles like Investopedia’s $3.4 million drop, instead of being angry, seek to understand what’s going on. Learn to read the numbers and adjust as needed to win for the future. That’s how you will achieve your dream. And remember; these prices won’t change, but you NEED to change. And that’s not a bad thing.