Despite the United States standing out in the global economy, a significant number of wealthy Americans, including millionaires, are not confident about their financial situation.
According to a recent report, only 12% of Americans consider themselves wealthy, with only a third of Americans who have assets in the range of one to three million dollars feeling wealthy. So what could be the reason for this discrepancy?
A study conducted by Edelman Financial Engines from June 12 to July 3 surveyed over 3,000 American adults over the age of 30, including 1,500 affluent Americans aged between 45 and 70 with household assets ranging from $500,000 to $3 million. The report revealed that despite owning million-dollar assets, only 33% of Americans consider themselves wealthy.
The survey indicated that 58% of Americans believe an annual income of at least $100,000 is needed to not worry about daily expenses, while 25% think $200,000 is necessary to live comfortably.
Although Federal Reserve data shows that the total net worth of the top 1% wealthiest individuals, with assets over $11 million, increased by nearly $2 trillion in the first quarter of 2024, reaching a record $46.2 trillion, predominantly driven by stock market gains. The Fed’s consumer finance survey also indicates that since 2020, with the outbreak of the pandemic leading to rising home prices, wealth has mainly concentrated among homeowners.
“Owning a home doesn’t feel like wealth,” remarked personal finance expert Jean Chatzky, CEO of HerMoney.com, in an interview with CNBC. He collaborated with Edelman Financial Engines on this report. “A home is an asset we use every day; it’s not like the balance in your retirement account or savings account,” he stated.
The report highlighted that undoubtedly, Americans have been facing increasing economic and social pressures in recent years. Setting politics aside, financial issues for individuals and families remain a primary source of stress, with inflation challenging household budgets, interest rates causing homeowners to feel trapped, and growing credit card balances jeopardizing the long-term financial security of American households.
While inflation is cooling off, groceries and food prices remain high in most cases. Data shows that an increasing number of people are relying on credit cards to cover daily expenses to maintain a balanced budget.
According to data from the Federal Reserve Bank of New York and TransUnion, Americans’ credit card debt has reached a record $1.14 trillion, with an average balance of $6,329 per consumer, a 4.8% year-over-year increase. In the second quarter of 2024, around 9.1% of credit card balances turned into delinquencies.
A research report from Edelman Financial Engines revealed that 44% of Americans view credit card debt as the biggest threat to wealth accumulation. Nearly half (49%) of Americans carry credit card debt month after month, with 40% having debts totaling $10,000 or more.
“Debt has always been the enemy of savings,” said Chatzky to CNBC. “High-interest credit card debt can suffocate savings more than other types of debt, hindering your ability to save and invest.”
“This impedes people from accumulating real wealth, thus feeling more affluent,” she added.
The report found that most individuals (approximately 65% of respondents) believe they need a bank deposit of $1 million to feel wealthy, while 28% feel they require at least $2 million in savings, and 19% set the bar at $5 million or more. Among those with million-dollar assets, 68% stated they need at least $3 million in savings, and 40% require $5 million or more to feel wealthy.
Experts often say that in most cases, economic security is not about how much you earn but about being able to save more, spend less, maintain a diversified investment portfolio, and work with financial advisors.
According to a study from Northwestern Mutual Life Insurance Company on independent planning and progress, only one-third (32%) of millionaires consider themselves wealthy, with nearly half (48%) believing their financial plans need improvement. The company surveyed over 4,500 adults in January.