The current state of the financial world has undergone significant transformations compared to the past. In earlier times, there was a widespread consensus that earning a six-figure salary was considered a lot. However, in recent times, there has emerged a growing contention suggesting that earning $100,000 is just not enough to cover your day-to-day expenses.
Traditionally, possessing a $100,000 annual income was considered the benchmark for financial success. However, numerous factors, such as increasing expenses and changing economic dynamics, have reshaped the concept of economic security and prosperity.
Here are 5 reasons why $100,000 salary is just not enough.
1. Inflation
The phenomenon of inflation has had a profound impact on the purchasing power of money throughout history. It is an undeniable reality that the value of a dollar in one’s pocket has gradually diminished over time due to the effects of inflation. To illustrate this point, consider that to achieve the same level of buying power that $100,000 held in 1973 (the year gold standard was abandoned), one would require a staggering $702,000 in today’s currency.
In recent decades, inflation has generally been relatively moderate, with only slight fluctuations. However, the trend has taken a significant turn in the past couple of years, as inflation rates have surged considerably. This sudden shift has resulted in a more pronounced and noticeable impact on the overall cost of living.
To put it into perspective, if you were earning a $100,000 salary as recently as 2018, you would now need to earn over $121,000 in order to maintain a comparable standard of living. This highlights the urgent need for individuals to adapt to these changing financial circumstances and adjust their earning potential accordingly.
2. Higher student loan debt
Pursuing higher education has traditionally been regarded as a crucial component of the pathway to secure well-paying careers. However, one significant drawback associated with this pursuit is the exorbitant cost of obtaining a degree.
Startling statistics from the Education Data Initiative reveal that Americans currently find themselves burdened with an overwhelming student loan debt totaling a staggering $1.76 trillion. This astronomical figure highlights the magnitude of the financial strain faced by individuals seeking to invest in their education. On average, those carrying student loan debt are obligated to repay around $37,338.
Recognizing the need for relief, President Joe Biden has proposed a student loan debt relief plan. However, the implementation of this plan has encountered legal troubles, leading to delays and uncertainties regarding its execution. Furthermore, it is important to note that not all individuals are eligible for this proposed relief program. Specifically, if an individual’s income surpasses $125,000 or if a household’s combined income exceeds $250,000, they are ineligible to benefit from this relief initiative.
3. Higher credit card debt
While student loan debt remains a major financial burden for Americans, it is important to note that credit card debt is also a significant concern. Although the outstanding credit card debt is not as massive as student loan debt, the numbers are still alarming. As of May, the collective credit card balances across the nation reached nearly $1 trillion.
Various factors have contributed to the steady increase in credit card debt, including rising interest rates, inflation, and other economic influences. Financial experts express concerns that it is only a matter of time before the credit card debt surpasses the $1 trillion mark, further emphasizing the severity of the situation.
Debt, regardless of its form, possesses the potential to severely hinder financial prosperity and accumulate stress over time. It is widely recognized that tackling and eliminating debts is one of the most prudent actions individuals can take to regain control over their financial well-being.
4. High health care expenses
The increase of health care expenses continues to be a pressing issue. According to the Centers for Medicare & Medicaid Services, as of 2021, health care spending accounted for a staggering 18.3% of the gross domestic product in the United States. This substantial portion of the economy underscores the financial burden placed on individuals and the nation as a whole.
A significant portion of Americans find themselves paying high health care premiums on a monthly basis. Moreover, they often face additional financial strains through costly co-pays and out-of-pocket expenses whenever they require medical services or treatment.
Regrettably, individuals earning an annual income of $100,000 or more often encounter a particular challenge in managing the mounting health care costs. Due to their higher income bracket, they frequently do not qualify for subsidies or financial assistance, further exacerbating the financial strain associated with health care expenses.
5. Higher housing costs
The concept of owning a home has long been considered a fundamental aspect of the American dream. However, the path to homeownership has become increasingly challenging in recent times.
Data from the Federal Reserve Bank reveals a significant shift in the housing market over the past decade. The average sale price of a house in the United States has experienced a notable surge, rising from $307,000 to $516,000. This substantial increase in home prices has created a significant barrier for prospective buyers looking to enter the housing market.
Simultaneously, rental prices have also experienced substantial growth. The median rents across the country surpassed the $2,000 mark for the first time ever in 2022. This surge in rental costs further contributes to the financial strain experienced by individuals and families, making it even more challenging to save for a down payment and transition from renting to homeownership.
