4 Ways 'Rich' Is Being Redefined In The 21st Century

At one time, the six figure salary was an irrefutable sign of wealth and success – a true mark that one had achieved “The American Dream.”

While earning a six-figure salary is still a sign of status and success, it no longer guarantees a lifetime of wealth like it once did, especially in certain parts of the country.

With the average price of living hovering at $130,000 per year, just 1 in 8 U.S. households currently earn enough to achieve the dream’s basic tenets, which includes “a rewarding career, a healthy and personally fulfilling life, and the ability to retire in comfort.”

What exactly has changed? According to experts, a whole lot. 

Inflation

The Bureau of Labor Statistics offers all kinds of nifty data on inflation rates over the years, including this Consumer Price Index inflation calculator. Play around with it and you’ll see that a $100,000 salary in 1980 would go as far as $288,713.59 does today.  In other words, today’s family would need to earn $288,713.59 to achieve the same kind of lifestyle as someone making $100,000 in 1980.

The median income has risen slowly in terms of dollar amount, but any gains made have simply been chipped away by inflation.  With the rising prices of everything from energy to food, families – even those with high incomes – are forced to spend a larger percentage of their earnings on necessities.

A few examples:

*Economic Noise, 2014

Geography

A six-figure income may still go quite far in the Midwest, but the same cannot be said for large cities and coastal areas where the price of real estate has escalated dramatically over the last few decades. For example, the median price of a home was around $282,000 nationally in May of 2014. However, the median home price in San Francisco, for instance, topped $1 million just last year. Imagine trying to live in a high-cost area like this while simultaneously hearing how a six-figure salary is the key to financial success.

Kids

According to a recent analysis by the U.S. Department of Agriculture, the cost of raising one child for a middle class couple has grown to a staggering $241,080. This figure includes nearly everything it takes to raise a child– including shelter, education, food and even daycare. These costs often fall hard on affluent families since they do not qualify for the kind of help and assistance families with lower incomes often have access to, such as college financial aid or subsidized daycare. Adding insult to injury, the child tax credit begins phasing out once a family reaches an annual income of $110,000 per year.

Healthcare

Nothing has the potential to erode the value of a six-figure salary (or any salary) like the growing costs of health insurance and healthcare in the United States. According to the Bureau of Labor Statistics, in 59 out of the last 73 years leading up to 2008, the inflation rate for medical care increased more than any other item.

How to Stretch a Six-Figure Salary Even Further

Some individuals seem to have a knack to stretch their income to the max, even when living in a high-cost area or having higher expenses than most. In general, these folks tend to live a frugal lifestyle, and place less emphasis on keeping up with the Joneses. Need a new car? Perhaps driving an older, paid off car would be a better choice than committing to a newer, more expensive vehicle.

Those able to stretch their earnings also tend to invest more frequently than their cash-strapped counterparts. Investing in tax-advantaged accounts like employer-sponsored retirement plans is one way to lower your tax liability and accomplish a plethora of goals in one fell swoop.

The bottom line is this: A six-figure salary is no longer a guarantee of financial success. 

And, with the cost of living rising every year, it’s inevitable that it will be worth even less in the future.  Fortunately, there is a plethora of ways to stretch your dollar further and continue “living the dream.”