It turns out even millionaires aren’t rolling carefreely in the dough, considering how much of their income is getting diverted to everyday expenses and savings for the future.
About 60% of investors with $1 million or more of investable assets categorize themselves as upper middle class, according to a recent Ameriprise Financial survey. And almost a third (31%) of this group consider themselves decidedly middle class.
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“There is no standard definition of what it means to be wealthy, but in general, investors associate it with having the means to live life on their terms,” said Marcy Keckler, senior vice president of financial advice strategy at Ameriprise, in a release.
With costs racking up, many Americans are wondering whether a seven-figure income is enough to weather the current economic climate in comfort.
Here’s how the country’s worried wealthy are adapting to that increased financial strain.
What’s got the wealthy on edge?
There have been several reports this year of folks with higher incomes feeling strained — with everything from the costs of child care to their grocery bills going up.
Folks have no other choice than to save less since they’re spending more. Household credit card debt has surpassed $1 trillion as more folks turn to their credit cards to manage higher prices, and Americans’ savings rate is dropping, according to recent Fed data.
And just this year, the median household income for homebuyers jumped from $88,000 to $107,000, eclipsing six figures for just the second time in the National Association of Realtors’ records. This might come as little surprise, however, with mortgage rates well above 7% and the St. Louis Fed putting the median home sale price at over $430,000.
A growing number of the nation’s millionaires and high-income earners are abandoning the dream of homeownership entirely and opting to rent instead.
“Many people feel squeezed between higher prices and lower asset prices,” said Kim Maez, a certified financial planner and private wealth advisor at Ameriprise, told CNBC.
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The realities of being “regular rich”
The Pew Research Center put together a class and income breakdown using 2018 figures, adjusted for the cost of living in a metropolitan area in 2020. It defined middle-class households having an income somewhere between $48,500 and $145,500.
Of course, a lot of things have changed in the years since then, including wages and the cost of living across the country.
For example, while having a cool $1 million in the bank has long been considered a benchmark of financial prosperity — some folks feel like $1 million isn’t even enough to retire on given the country’s current economic climate.
A more recent study from Bloomberg reveals a quarter of America’s “regular rich” — defined as those who make at least $175,000 a year — consider themselves either “very poor,” “poor,” or “getting by but things are tight.”
However, close to 60% of these high earners say they still stress about their finances — with reasons varying from paying off their mortgage and student loans, to funding their kids’ daycare expenses and college education.
Of course, feeling comfortable with your money can also largely depend on where you live. Several cities and neighborhoods boast higher net-worth residents than others, which can drive up prices of everyday amenities and leave you with less disposable cash.
But some rich professionals are responding by ditching the wealthier enclaves like New York and California for other pockets of the country that have similar amenities but an overall cheaper cost of living.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
