The United States is experiencing an unprecedented boom in wealth, but few Americans, including billionaires, are confident about their financial situation.
According to a new report from Edelman Financial Engines, only 12% of Americans consider themselves wealthy.
Despite their higher net worths, only 33% of billionaires said the same, according to the report. Edelman Financial Engines surveyed more than 3,000 adults age 30 and older in June and July, including 1,500 affluent Americans with household wealth between $500,000 and $3 million.
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Indeed, the wealthy are getting richer: According to Federal Reserve data, the combined net worth of the top 1% of individuals (defined as those with assets of $11 million or more) increased by nearly $2 trillion in the first quarter of 2024 to a record high of $46.2 trillion, driven in large part by gains on stock holdings.
But as the coronavirus pandemic has driven up home prices in 2020, wealth creation has been concentrated primarily among homeowners, according to the Fed’s Survey of Consumer Finances.
“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, a long period of high inflation has made virtually every price increase, straining household finances.
Rising prices put pressure on household budgets
The Consumer Price Index, a key inflation gauge that tracks the average prices of a wide range of consumer goods and services, rose 2.5% year-on-year in August, down from a pandemic-era peak of 9.1% in June 2022, according to the Bureau of Labor Statistics.
While inflation is currently subsiding — in most cases, price increases are only slowing, not falling entirely — data shows that more people are turning to credit cards to cover everyday expenses.
Credit card debt is the biggest threat to building wealth
According to the New York Fed and TransUnion, Americans now owe a record $1.14 trillion on their credit cards, with the average balance per consumer standing at $6,329, up 4.8% from a year ago.
More borrowers are taking on more debt each month, and more are falling behind on their monthly credit card payments: About 9.1% of credit card balances fell into delinquency over the past year, the New York Fed said in its second-quarter 2024 report.
Nearly half of Americans, 44%, say credit card debt is the biggest threat to their ability to build wealth, according to Edelman Financial Engines.
“Debt has always been and always will be a savings killer,” Chatzky said. “High-interest credit card debt kills savings more than any other type of debt, because when you have debt, you have to feed that debt. You can’t save and you can’t invest.”
“It keeps people from actually building wealth and feeling wealthier.”
How much money do you need to feel wealthy?
According to the Edelman Financial Engines survey, about 65% of respondents said they needed $1 million in their bank account to consider themselves wealthy, while 28% said they needed at least $2 million and 19% said they needed more than $5 million. Among millionaires, 68% said they needed at least $3 million, and 40% said they needed another $5 million to feel wealthy.
When it comes to salary, 58% of those surveyed said they would need an average income of $100,000 to not have to worry about daily living expenses, while a quarter said they would need to earn more than $200,000 to be financially secure.
Experts often say that in most cases, feeling financially secure depends not on how much you make, but on your commitment to saving more than you spend, maintaining a well-diversified portfolio, and working with 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.”
A separate Planning and Progress study by Northwestern Mutual also found that while only a third (32%) of millionaires consider themselves wealthy, nearly half (48%) believe their financial planning needs improvement. Northwestern Mutual surveyed more than 4,500 adults in January.
“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.
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