Over the past twenty years, America has experienced multiple recessions, housing crises, and periods of heightened inflation, all of which have significantly influenced the current cost of living and spending behaviors of its citizens.
As inflation has risen, the benchmarks for what is considered ‘wealthy’ and financially comfortable have also increased, reflecting the higher costs and competing financial obligations. According to recent findings, an average American believes a net worth of $2.5 million is required to be considered wealthy, while a net worth of $778,000 is seen as necessary for financial comfort.
Many Americans remain optimistic about their financial future despite the rising cost of living. Sixty percent of adults believe they are in a better position to achieve their financial aspirations compared to previous generations.
Charles Schwab’s 2024 Modern Wealth Survey reveals that the threshold for being considered wealthy has increased to $2.8 million in 2023, up from $2.5 million the previous year. This increase indicates that financial mobility is becoming more difficult. Nonetheless, the optimism remains with various generations having different financial expectations. For example, Gen Z and Millennials define wealth as a net worth of $1.2 million and $2.2 million, respectively, whereas Gen X and Baby Boomers set the benchmark close to $3 million.
Regarding financial stability, Baby Boomers, Gen X, and Millennials agree that having between $725,000 and $823,000 provides comfort. In contrast, Gen Z considers $406,000 sufficient for financial comfort. These varying benchmarks can be attributed to the economic environment in which each generation grew up, with homeownership being a common milestone for Baby Boomers, which is now becoming increasingly unattainable for younger generations. Meanwhile, retirement remains a primary focus for Gen X and Baby Boomers, especially considering one in five Gen Xers believe they might not be able to retire with $1 million in savings.
The cost of living varies significantly across the U.S., especially in major metropolitan areas. Cities like San Francisco, Southern California, New York, Washington D.C., Denver, and Seattle have the highest thresholds for what constitutes wealth and financial comfort. In these areas, a net worth between $2.8 million and $4.4 million is needed to be deemed wealthy, while financial comfort requires between $789,000 and $1.5 million.
Ultimately, implementing a financial plan is crucial for wealth accumulation. Reports show that 86% of individuals with a financial plan grade themselves favorably on their savings and investments, compared to 63% and 67% of those without a plan. Long-term planning for spending, saving, and investing can significantly enhance one’s financial security and help achieve personal financial goals.
