The idea of the ‘American dream’ usually embraces the views of possessing a house, being financially secure, and offering the best life to the family. But what is the exact amount of money you have to earn to reach this dream and live the life you always wanted? Of course, there are many general trends, but the total cost of living greatly depends on the region of the country. But looking at averages can give some ideas, although imperfect, of what it means to be average.
A survey that was conducted, revealed that the average person in American society feels that achieving the American dream requires one to earn at least $132, 000 per year. But is that doable for most households? Let's break it down.
Housing
Another key aspect of the American Dream is people’s desire to build their own homes and own property. But for home prices, and, consequently, mortgage payments, the variation between states and metro areas is significant. For instance, in San Francisco, the price for a median home hits the $1.3m mark, which, according to some mortgage calculators, would call for an income of $320,000. That is significantly higher than the $125,000 median home price in Pittsburgh, PA, which makes it a lot easier for the average person to earn enough money to buy a home.
Indeed, the results presented above show that the income necessary for housing differs massively depending on the location of the housing unit. But let’s say you intend to buy a house that is average for the area, you should aim not to exceed 28 percent of your gross monthly income in paying for your mortgage. This percentage may place you in an “average home” that can afford the attainment of the American Dream.
Cost of Living
Expenses on housing remain one of the largest line items in most households’ expenditures. However, there are other expenses such as food, light bills, medical bills, transport fees, and other expenses that one has to cater for as well when it comes to identifying how much income is required to afford a comfortable lifestyle. These costs can once again differ depending on several factors some of which include the region in which you live, the number of people in your household, and the amount of money you would like to spend on other activities that you may consider as necessary.
It is recommended that most of your income, or 50% of your take-home pay should go towards what is considered necessary expenses such as shelter, food, transportation, child care, and insurance among other necessities such as health care. The rest of the income is spent on other expenses such as entertainment, travel, savings, or investments. Doing this arithmetic and understanding the requirements of your family makes a realistic notion of how much annual income is needed to live the American Dream you perceived.
Saving and Investing
To discuss the matter, financial gurus recommend keeping 10-15% of one’s earnings to generate wealth in the long run. It can be directed to retirement funds, college funds for your children, emergency funds that you would not want to use regularly, or other long-term investments. This is very important to feel financially secure and to be able to get actual financial freedom.
The next measure of quality work is that a worker should be able to set aside his/her disposable income and channel it to productive investment. It is evidenced that focusing on saving early in one’s life enhances the choices and the freedom in the course of a lifetime – two critical components for building lasting wealth.
Attaining the Dream
For the current generation, the average American tends to agree with the assertion that at least $ 130,000 income is enough to realize the American dream but the criteria will vary from one individual or family to another depending on the present expenditure and the amount they would wish to save. However, prices of homes in the different regions are simply the largest factor as they establish the income requisite in specific regions. Adhere to spending no more than 28% of your income on housing, 50% on the bare necessities, and saving should be between 10-15%, the scheme is outlined. Calculate the requirements based on your family’s status and necessary lifestyle, then divide this figure by 12 to find out what annual wage is needed to fund the American Dream.
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