The Real Cost of Living: $150,000 Minimum

The Fiscal Times ^ | March 7, 2012 | Yuval Rosenberg

[2ndDivisionVet]

The divide between the 1 percent and the 99 percent has ignited a national debate about the income gap, especially since Occupy Wall Street protesters descended on lower Manhattan last fall. But how much money does it take to feel financially secure these days?

The answer, at least according to a new survey of Americans by WSL/Strategic Retail, is $150,000. That level of income is more than three times the national median of $49,445 for 2010, and it’s enough to put a household into the top 10 percent nationally.

The survey asked respondents to choose which of four categories best described them: I can’t even afford the basics; I can barely afford the basics and nothing else; I can afford the basics plus some extras; and I can afford the basics, the extras, and I’m able to save too. It is only at that $150,000 level that the survey found the vast majority of consumers, 88 percent, saying they could buy what they need, afford some extras, and still be able to save a bit.

Even as the economy improves and consumer confidence builds, more than half of Americans – 52 percent – feel like they can just afford the basics, and many with six-figure incomes still feel like they are just scraping by. The survey found that 18 percent of American households earning between $100,000 and $150,000 said they could only afford the basics, with another 10 percent saying they sometimes can’t even afford those staples.

“We clearly have what used to be upper middle income – 75 to 150k – folks who are saying, it just isn’t so,” says Candace Corlett, president of WSL/Strategic Retail. “A quarter of them are saying I can barely afford the basics.” So while six-figure incomes used to represent affluence, that’s no longer the case.

Of course, as The Fiscal Times has written before, in many parts of the country, an annual income of $250,000 could easily leave a typical family in the red once all their expenses and taxes are factored in.

The buying power of the average paycheck has shrunk along with home values. The WSL Strategic Retail survey found that $150,000 is the minimum for the average household to be able to afford the basics and a few extras, with a little left over to sock away for a rainy day. Of course, that $150,000 is based on average costs for housing, food, clothing, etc.--perhaps a place like Peoria, Illinois. If it takes that kind of money to have a decent middle class life in Peoria, what would it take to match it in the New York Metropolitan area, Phoenix, or Chicago?

We used Bankrate's cost of living comparison calculator to measure the difference between Peoria and other cities and chose 5 of the top 10 cities with the highest cost of living, according to Kiplinger. We added Chicago to represent the middle of the country.

1. The New York metropolitan area was the most expensive. Equivalent income: $337,311.87. Percent increase to maintain standard of living: 124.87%.
2. Honolulu: Equivalent income: $258,099.19. Percent increase to maintain standard of living: 72.07%.
3. San Francisco: Equivalent income: $255,409.43. Percent increase to maintain standard of living:70.27.%
4. San Jose: Equivalent income: $243,260.85. Percent increase to maintain standard of living: 62.17%
5. Washington, D.C. area: Equivalent income: $218,127.70. Percent increase to maintain standard of living: 45.42%.
6. Chicago area came in with a 21.36% increase to maintain the standard of living. Equivalent income: $182,045.06.

The struggling economy has clearly created a recession mindset among consumers. When asked how long the recession will continue, 80 percent of people say three years or more, Corlett says – up from 43 percent back in 2010. “They may not literally mean the government’s definition of a recession, but they certainly mean a recessionary mindset for them,” Corlett says.

Those financial pressures have made consumers much more cost-conscious. Three-quarters of women now say it’s “important to get the lowest price on everything they buy,” up 12 percentage points from 2008 and 22 percentage points from 2004. To that end, more are using coupons (68 percent vs. 61 percent in 2010) and buying only when items are on sale (45 percent vs. 38 percent in 2010).

And, perhaps unsurprisingly, young people – those between the ages of 18 and 34, who have long been the prized target for marketers – were more likely than other age groups to say they don’t have enough money to cover their basic needs. Nearly a quarter of those surveyed put themselves in that group, compared with 17 percent of those aged 35 to 54 and 13 percent of people 55 or older.

An IRS breakdown of U.S. incomes, released the day after the consumer survey, provides a reminder of why people, even those with six-figure incomes, may be feeling poorer. For tax year 2010, adjusted gross incomes reported to the IRS rose 5.2 percent to $8 trillion total – the first increase after a couple of years of declines. But while tax filers making more than $250,000 saw their total incomes climb almost 14 percent, those earning between $50,000 and $100,000 gained just 1.5 percent.

[2ndDivisionVet]

"Even as the economy improves and consumer confidence builds..."

If I had a dollar for every time I've seen some variation of this lie, I'd probably be making $150,000 a year.

[Buckeye McFrog]

So people making $50K aspire to a $150K lifestyle. It was always thus.

The problem is that they started trying to do it on credit and now are increasingly turning to gubbermint to bail them out.

[wyowolf]

Wow, we make a bit less then that, travel a lot, save 15% and still have fun...

[ctdonath2]

Half the world’s population is eeking by on $730/yr or less.
If you think you need more than TWO HUNDRED TIMES world median income to live on, your income isn’t the problem.

[CodeToad]

“Half the world’s population is eeking by on $730/yr or less. If you think you need more than TWO HUNDRED TIMES world median income to live on, your income isn’t the problem.”

Well, when the US economy provides a cost level of the turd-world you let us know, until then, shut the Hell up. Go live somewhere in the rest of the world and get back to us about their standard of living.

[Svartalfiar]

And, perhaps unsurprisingly, young people – those between the ages of 18 and 34, who have long been the prized target for marketers – were more likely than other age groups to say they don’t have enough money to cover their basic needs. Nearly a quarter of those surveyed put themselves in that group, compared with 17 percent of those aged 35 to 54 and 13 percent of people 55 or older.

Well here's the problem. Most people my age (I'm 23) don't know how to spend their money wisely. They don't understand how eating out every day for lunch, and probably dinner, adds up so fast. They have no concept of saving money, no concept of how expensive stupid gucci bags or designer jeans cost. One of my old girlfriends, EVERY time she went shopping, HAD to buy 2-3 outfits for her niece/nephew. only $10 each, but it still adds up.
You can't go out to clubs every night, every concert you see, eat out all the time, and buy designer jeans, have ridiculously overpriced phone plans, going out drinking at bars, etc. You have to understand that $10 Wranglers/Levis will last you much longer than those $70 pre-torn designer jeans.

I live in Dallas, which is a bit expensive, and I'm on the outskirts so driving anywhere is at least a half-hour commute. I can get by just fine on $25-30,000 a year. No, that won't get me very far in home ownership as I get older, can't save that much, but at the time that's perfectly fine. If I need to save more, I can cut back on some food, frivolous driving, etc. I can't buy much luxury items, but what 'luxuries' do I really need?

[upchuck]

He who knows he has enough is rich.

[2ndDivisionVet]

We miss DFW (we lived next to Hulen Mall in Ft Worth) and hope to get back there soon. I’m seeing some real bargains in real estate on Craigslist, etc.

[ctdonath2]

Way to miss the point.