Does the American Dream Cost $130k Annually?

07/05/2014

From USA Today via the Daily Mail (warning, if you leave Daily Mail tabs open while browsing something else, after 15 or 30 minutes they start audibly playing a commercial):

Price tag for the American dream: $130K a year WHAT IT COSTS TO LIVE THE AMERICAN DREAM
… An analysis by USA TODAY shows that living the American dream would cost the average family of four about $130,000 a year. Only 16 million U.S. households — around 1 in 8 — earned that much in 2013, according to the U.S. Census Bureau.

In an interview, co-author Thomas Hirschl, a professor at Cornell University, stressed that for the dozens of people they surveyed and interviewed, the American dream was not about becoming one of the 1%.

Here’s the book by the Cornell professors Chasing the American Dream. And here’s USA Today’s list:

Essentials:

Median housing expenses: $17,062
Groceries: $12,659

Single nice car (4wd SUV): $11,039

Medical expenses (includes out of pocket): $9,144

Education expenses (2 kids): $4,000

Apparel: $2,631

Utilities (gas & electric, no water?): $1,956

Extras:

Family Summer Vacation: $4,580

Entertainment: $3,667

Restaurants: $3,662

Cable/Satellite, Internet, cell phone: $3,100

Miscellaneous: $2,000

Taxes/Savings

College (2 kids): $5,000

401(k) Max: $17,500

Total taxes: $32,357

Now, obviously, this differs radically by region. And I can see a lot of ways to save versus this list (like not taking vacations, owning ancient cars, not attending professional sports events, not having cable, etc.), but I can also see expenses that perhaps aren’t on there. For example, is child care for a working mother included in the $4k education expense? A second car? How about saving to build a rainy day fund? Saving to be able to help your kids with a downpayment on a house? Saving for a daughter’s wedding?

Leaving aside the immense regional differences in the cost of living, there really ought to be two lists based on the father’s earning power:

one in which dad earns over $100k by himself, so mom stays home with the kids. Child care expenses are restricted to the occasional babysitter, the family can juggle things so they only need one car, they don’t eat out much, mom doesn’t need a professional wardrobe, and the tax bill is smaller. This can be a pretty nice lifestyle, but it’s restricted to families where dad can pull down over $100k personally. (Also, the corporate media doesn’t like this lifestyle since it involves less than maximal spending, so there is much agitation directed at women to be unhappy as homemakers. Of course, at the very high end of society, where husbands earn, say, mid-six figures, it’s quite common for wives not to work, but this doesn’t get talked about much. My son won a scholarship to a Pasadena-area prep school where the bake sales were run, superbly, by moms with Ivy League MBAs.)
The second list in which dad’s earning potential tops out in the upper five figures, so mom has to contribute mid-five figures. This does wonders for the national GDP but not for quality of lifestyle. You probably need two cars, you eat out a lot, you buy more expensive groceries that require less cooking, you pay a lot for childcare, you spend more on clothes, you spend more on services, etc.

And then of course there are all those American who don’t have even the second level of earning potential. But they can always borrow, right?

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