Despite the unprecedented surge in wealth in the United States, economic anxiety remains widespread even among billionaires: Only 33% of millionaires (those with assets between $500,000 and $3 million) consider themselves wealthy, according to a new survey by Edelman Financial Engines.
Surprisingly, many people feel that even $3 million is not enough to achieve financial security, highlighting the widening disconnect between wealth accumulation and financial confidence in America.
The survey was conducted June 12 to July 3 among more than 3,000 adults age 30 and older, including 1,500 affluent Americans with household assets between $500,000 and $3 million.
Why millions of dollars don’t mean wealth
Wealth inequality continues to grow, with the net worth of the top 1% (those with assets of more than $11 million) increasing by nearly $2 trillion to a record high of $46.2 trillion in the first quarter of 2024, mainly due to growth in stock portfolios, according to Federal Reserve data.
Additionally, a recent report found that the 25 richest Americans paid just $13.6 billion in federal income taxes between 2014 and 2018, despite their combined income increasing by $401 billion.
But the Fed’s Survey of Consumer Finances found that wealth creation has been concentrated primarily among homeowners since home prices began to soar ahead of the COVID-19 pandemic in 2020.
“Homeownership doesn’t feel like wealth,” said Gene Chatzky, a personal finance expert and CEO of HerMoney.com, who produced the report in collaboration with Edelman Financial Engines. “A home is an asset we use every day, unlike the balance in a retirement account or savings account.”
At the same time, persistent inflation has increased the cost of living, putting pressure on households and reducing disposable income. In June, analysts at Bank of America predicted that the U.S. home affordability crisis would continue until at least 2026, citing persistently high interest rates and home prices as the main causes.
The continuing impact of inflation
The Consumer Price Index (CPI), a key inflation indicator that measures the average price change of consumer goods and services, rose 2.5% year-on-year in August 2023. This is down from a pandemic-era peak of 9.1% in June 2022, but rising inflation continues to put pressure on household finances.
Despite a recent lull in inflation, prices are still rising, albeit slowly, and data suggests more people are turning to credit cards to cover everyday expenses to cope with the financial strain.
Credit card debt burden will grow
According to the New York Fed and TransUnion, Americans are currently burdened with a record $1.14 trillion in credit card debt, with the average consumer balance reaching $6,329, up 4.8% from a year ago.
More and more borrowers are struggling to make credit card payments, carrying balances month after month and falling into delinquency. About 9.1% of credit card balances became delinquent in the past year, according to the New York Federal Reserve’s second-quarter 2024 report.
A recent survey by Edelman Financial Engines revealed that nearly half of Americans (44%) believe credit card debt is the biggest obstacle to building wealth.
“Debt has always been and always will be a savings killer,” Chatsky says. “High-interest credit card debt kills savings more than any other type of debt, because when you have debt, you have to feed the debt. You can’t save or invest.”
“That’s what’s preventing people from actually building wealth and feeling wealthier,” she said.
The price tag of wealth
According to a survey conducted by Edelman Financial Engines, most people (about 65%) say they need to have $1 million saved to consider themselves wealthy, but 28% estimate a higher figure of more than $2 million, and 19% set an even higher bar of more than $5 million.
Interestingly, of those who are already millionaires, 68% believe they need $3 million to feel wealthy, while 40% believe they need at least $5 million. In terms of salary, 58% of respondents said they need an average income of $100,000 to cover their daily living expenses.
Additionally, a quarter of respondents said they would need a salary of more than $200,000 to achieve financial security.Experts emphasize that financial security isn’t determined by income alone, but by adopting smart financial habits such as saving more than you spend, diversifying your investment portfolio, and seeking advice from a financial advisor.
“Part of feeling wealthy is not having to worry about money,” says Isabel Barrow, director of financial planning at Edelman Financial Engines. “It’s living within your means and staying out of debt.”
Another Planning and Progress study, conducted by Northwestern Mutual in January, surveyed more than 4,500 adults and found that while only a third (32%) of millionaires consider themselves wealthy, nearly half (48%) believe their financial planning needs improvement.
“For most Americans, ‘feeling millionaire’ isn’t about believing you’re rich, but about exuding confidence and clarity about the future,” said John Roberts, chief field officer at Northwestern Mutual.
