$130,000.00 American Dream

[AthenaAwakened]

In an America with a median income of $51,000, the American dream is a bit more pricey, or so say USA Today.

http://www.usatoday.com/story/money/personalfinance/2014/07/04/american-dream/11122015/

 

[AthenaAwakened]

From the link

With that in mind, USA TODAY added up the estimated costs of living the American dream:

•Home ownership is central to the American dream. So, we took the median price of a new home ($275,000), subtracted a 10% down payment, then projected the annual cost of a 30-year mortgage at 4% interest. We also added annual maintenance costs of 1% of the purchase price. Total: $17,062 a year.

•We used the U.S. Department of Agriculture's April 2014 figure of $12,659 for a moderate-cost grocery plan for a family of four.

•In May, AAA estimated it would cost $11,039 a year to own one four-wheel-drive sport-utility vehicle.

•The Milliman Medical Index pegged annual health insurance premiums and out-of-pocket medical expenses at $9,144.•We used various estimates for the costs of restaurants and entertainment; one family summer vacation; clothing; utilities; cable or satellite; Internet and cellphone; and miscellaneous expenses (see table).

•Total federal, state, and local taxes were pegged at 30% for households at this income level, based on a model developed for Citizens for Tax Justice.

•USA TODAY calculated current educational expenses for two children at $4,000 a year and college savings (all of it pretax, we assumed) at $2,500 per year per child, based on various rules of thumb.

•Finally, the maximum annual pretax contribution to a retirement plan for people under 50 is $17,500. That's slightly less than 15% of this American dream household's annual earnings, in line with financial planners' recommendations.

Total: $130,357.

It sounds like a lot

 

[Malintent]

Now I gotta redo my houshold budget... <sarastic> Thanks ALOT! </sarcastic>

 

[Derec]

On the other hand, Americone Dream is a much cheaper alternative.

Well if you call something a "dream" USA Today is dreaming way too small. If on the other hand we are talking about a comfortable middle class existence then they are off base in the other direction.

Many US real estate markets have plenty of good houses on offer that are <<$275,000. Why does it have to be a new house? Plenty of preexisting houses around that are just as good or better. Also size does matter. Large houses with many bedrooms are not necessary unless you have a lot of children. And may I suggest that condos are perfect for many people, cost less than comparable detached houses and are cheaper to own as well.
Same with cars. Do you really need a new "Chelsea tractor"? $11k in costs for a vehicle is way too high for most people - what did they base it on? Porsche Cayenne?
Otoh, most families will have two vehicles but even so total cost should be under $10k for both of them even if they are still payments owed on both (which is stupid in most cases).
Neither do you have to spend $3.6k on restaurants or $3k on TV, internet and cell phones, $4.5k for vacations and $3.6k for "entertainment" presumably not included in the previous categories.
If you can't afford it it is not necessary to fund your children's college fund or your retirement plan to the statutory maximum.

And so on.

 

[Malintent]

On the other hand, Americone Dream is a much cheaper alternative.

Well if you call something a "dream" USA Today is dreaming way too small. If on the other hand we are talking about a comfortable middle class existence then they are off base in the other direction.

Many US real estate markets have plenty of good houses on offer that are <<$275,000. Why does it have to be a new house? Plenty of preexisting houses around that are just as good or better. Also size does matter. Large houses with many bedrooms are not necessary unless you have a lot of children. And may I suggest that condos are perfect for many people, cost less than comparable detached houses and are cheaper to own as well.
Same with cars. Do you really need a new "Chelsea tractor"? $11k in costs for a vehicle is way too high for most people - what did they base it on? Porsche Cayenne?
Otoh, most families will have two vehicles but even so total cost should be under $10k for both of them even if they are still payments owed on both (which is stupid in most cases).
Neither do you have to spend $3.6k on restaurants or $3k on TV, internet and cell phones, $4.5k for vacations and $3.6k for "entertainment" presumably not included in the previous categories.
If you can't afford it it is not necessary to fund your children's college fund or your retirement plan to the statutory maximum.

And so on.

Georgia may be a "poorer" state than NY, but I nonetheless read your post and have difficulty finding a single accurate statement.

"New home" does not mean "newly built home". It means "one I just bought".

As for your complaints about what the average costs for various things are... I can only assume you are in an area that is "lowering the curve", so to speak.

The "American Dream" is having the opportunity to live an average lifesyle in America - which itself is akin to a rich lifestle in many places (and nowhere is a poor lifestyle). It really pisses me off when the term is misused to imply it means, "To get rich".

The ability to live the lifestyle of an average American is a really big deal to those that have not been born into it... thus the "dream".

 

[Derec]

Georgia may be a "poorer" state than NY, but I nonetheless read your post and have difficulty finding a single accurate statement.

Lower cost of living for sure, and your difficulties are your problem.

"New home" does not mean "newly built home". It means "one I just bought".

Wrong. Real estate statistics distinguish between "new homes" and "existing homes". See here for example.

As for your complaints about what the average costs for various things are... I can only assume you are in an area that is "lowering the curve", so to speak.

I am talking about expectations. Buying a brand new home, brand new SUV, maxing out your retirement fund and still having enough for vacations, eating out and random "entertainment" is not only not average lifestyle in America but it's not even average middle class lifestyle in America. If you can afford all that at the same time good for you, but that's not reality for most people. Neither is all that required to live a good life and it's not necessarily a bad thing to have to prioritize spending.

The "American Dream" is having the opportunity to live an average lifesyle in America - which itself is akin to a rich lifestle in many places (and nowhere is a poor lifestyle).

Which means that it is ridiculous to claim that you need 2.5x the median income to afford "to live an average lifestyle in America". My whole fucking point.

 

[Loren Pechtel]

From the link

With that in mind, USA TODAY added up the estimated costs of living the American dream:

•Home ownership is central to the American dream. So, we took the median price of a new home ($275,000), subtracted a 10% down payment, then projected the annual cost of a 30-year mortgage at 4% interest. We also added annual maintenance costs of 1% of the purchase price. Total: $17,062 a year.

I wonder where they are getting their data. $275k for a starter home seems out of line in most of the country.

•We used the U.S. Department of Agriculture's April 2014 figure of $12,659 for a moderate-cost grocery plan for a family of four.

I find this questionable.

•In May, AAA estimated it would cost $11,039 a year to own one four-wheel-drive sport-utility vehicle.

And you need a SUV?? Very few people do!

•The Milliman Medical Index pegged annual health insurance premiums and out-of-pocket medical expenses at $9,144.

More bad data. The problem is the high medical costs are considerably weighted towards the elderly, not the family of 4.

 

[EricK]

There are undoubtedly many quibbles one could make with the data.

A few which sprang to mind:
They should be using the median income for a family of four, rather than the median income of all households
Even then, many families of four will have bought a house and car when they had two full time salaries and no children, and hence a higher household income; but will have lower expenditures on those items now they are a family of four
It is not totally clear that they aren't double counting taxes - I would hope they are not, but they might be including sales taxes etc in both the cost of eg food and entertainment and in the taxes section

 

[AthenaAwakened]

There are undoubtedly many quibbles one could make with the data.

A few which sprang to mind:
They should be using the median income for a family of four, rather than the median income of all households

why?

Even then, many families of four will have bought a house and car when they had two full time salaries and no children, and hence a higher household income; but will have lower expenditures on those items now they are a family of four

how many are many and since we are introducing theories, these families of four may not being paying for a car or house but they could very easily be paying for nursing home costs and they may be living on jobs that are paying less than the jobs they had when they were younger.

It is not totally clear that they aren't double counting taxes - I would hope they are not, but they might be including sales taxes etc in both the cost of eg food and entertainment and in the taxes section

if you have no proof they are double counting, why bring it up? Are you looking for a invisible pink unicorn?

 

[AthenaAwakened]

I wonder where they are getting their data. $275k for a starter home seems out of line in most of the country.

most of the land mass or most of the population?

•We used the U.S. Department of Agriculture's April 2014 figure of $12,659 for a moderate-cost grocery plan for a family of four.

I find this questionable.

so?

•In May, AAA estimated it would cost $11,039 a year to own one four-wheel-drive sport-utility vehicle.

And you need a SUV?? Very few people do!

what does need have to with anything and who are you to decide what anyone needs?

•The Milliman Medical Index pegged annual health insurance premiums and out-of-pocket medical expenses at $9,144.

More bad data.

More? You have yet to prove any!

The problem is the high medical costs are considerably weighted towards the elderly, not the family of 4.

Loren, I lived with an elderly parent in a home. His checks went to pay his nursing home bills, living my mother to live on $800 a month. That's why she had to move in with me. And I had to help her out. If you bother to look it up, which you won't, you will find "tweeners" (those of us caught between caring for children and parents) is a thing, a big thing.

 

[Derec]

why?

Because the proposed spending is based on a family of four.

how many are many and since we are introducing theories, these families of four may not being paying for a car or house but they could very easily be paying for nursing home costs

And yet others will have neither.

and they may be living on jobs that are paying less than the jobs they had when they were younger.

That's not the point as the aim of the exercise is to determine what they think is the target income needed for a certain lifestyle they call "American Dream". I.e. the income is the output of the function, not one of the inputs.

 

[Derec]

most of the land mass or most of the population?

$273,000 is the median for new home sales (June 2014), which means that half of the new homes sold were more expensive and half were less expensive. The median for existing home sales was almost $50k cheaper and there is nothing wrong with purchasing an existing house anyway. Also the more expensive houses tend to also be bigger which would be an overkill for a family of four. Also no reason to buy in a super expensive neighborhood to live a comfortable middle class life.

so?

A defense of the figure would be good if you agree with it.

what does need have to with anything and who are you to decide what anyone needs?

It is USA Today who seems to think that everyone needs an expensive "Chelsea tractor" type SUV to be considered as living the "American Dream".
How much does your car cost you each year? Anywhere close to $11k? Mine is paid off and it costs me maybe $3,500 a year to run, including gas, taxes, insurance and maintenance. It is nearing the end of its useful life so maintenance costs are higher than they were before and it is not the most fuel efficient car around, but even if I do not save anything in gas and maintenance when purchasing a new vehicle my car note would have to total ~$600 a month to equal USA Today's number. That's a lot of car! It also presumes that one will always be financing a car and never drive a paid off one.

Loren, I lived with an elderly parent in a home.

Your experience aside, that was not part of USA Today's scenario and is thus not really relevant. But if you have an elderly parent living at home, maybe best hold of on buying that brand new SUV eh?

 

[Loren Pechtel]

$273,000 is the median for new home sales (June 2014), which means that half of the new homes sold were more expensive and half were less expensive. The median for existing home sales was almost $50k cheaper and there is nothing wrong with purchasing an existing house anyway. Also the more expensive houses tend to also be bigger which would be an overkill for a family of four. Also no reason to buy in a super expensive neighborhood to live a comfortable middle class life.

Definitely. You don't need to have an expensive house to have a reasonable living.

I just looked up our old house. Plenty of space for a family of 4, you could get almost of two of them for that $273k. The neighborhood is fine. Admittedly it's 20 years old.

It is USA Today who seems to think that everyone needs an expensive "Chelsea tractor" type SUV to be considered as living the "American Dream".
How much does your car cost? Mine is paid off and it costs me maybe $3,500 a year to run, including gas, taxes, insurance and maintenance. It is nearing the end of its useful life so maintenance costs are higher than they were before and it is not the most fuel efficient car around, but even if I do not save anything in gas and maintenance when purchasing a new vehicle my car note would have to total ~$600 a month to equal USA Today's number. That's a lot of car! It also presumes that one will always be financing a car and never drive a paid off one.

Yup. You can't exclude the price of the car from the calculation but you can spread it over the life of the car. I doubt I'm spending even $5k/yr even counting the purchase price. The few times I need something bigger than what I normally drive I have rented--much cheaper than driving around in a big fuel hog with one person in it most of the time.

Loren, I lived with an elderly parent in a home.

Your experience aside, that was not part of USA Today's scenario and is thus not really relevant. But if you have an elderly parent living at home, maybe best hold of on buying that brand new SUV eh?

Normal economic calculations don't expect you to spend any substantial amount on your parents. They shouldn't be burdening you with their costs.

 

[EricK]

why?

Becasue you need to make a like-with-like comparison, and all the other figures are based on this scenario.

Even then, many families of four will have bought a house and car when they had two full time salaries and no children, and hence a higher household income; but will have lower expenditures on those items now they are a family of four

how many are many and since we are introducing theories, these families of four may not being paying for a car or house but they could very easily be paying for nursing home costs and they may be living on jobs that are paying less than the jobs they had when they were younger.

That's not really the point I am making. They seem to be imagining a scenario equivalent to a family of 4 arriving in the country with nothing but jobs, and sees how much it would cost them to start an "American Dream" style life. Are many families in an economic situation roughly equivalent to that? Perhaps what they should actually be doing is finding a broad population of median income households and actually looking to see if they are living the American Dream (by the arbitrary definition they are using), and if not, how much extra they would need to finance it. I would expect they'd find that some are, and some aren't.

It is not totally clear that they aren't double counting taxes - I would hope they are not, but they might be including sales taxes etc in both the cost of eg food and entertainment and in the taxes section

if you have no proof they are double counting, why bring it up? Are you looking for a invisible pink unicorn?

They appear to have pulled ready made figures from lots of different sources. I did a brief check of eg the food one, and could find no mention of whether those costs included sales taxes. Which suggests another area where they might be double counting - the higher the figure you assume for restaurant costs and holidays, the lower the figure you should assume for groceries. But what assumptions about holdays and restaurants were made by the people who drew up the costs of food?

 

[Metaphor]

I wonder where they are getting their data. $275k for a starter home seems out of line in most of the country.

I can only dream of how ridiculously cheap a $275,000 home would be in Australia.

 

[AthenaAwakened]

Its not the American Need, its the American Dream.

In the American Dream, houses and cars are new. Gramma and Gramps live in their own home and are healthy. Mortgages get paid off not constantly refinanced. Mom and Dad get to go out to nice restaurant when they want and the family gets to go camping or to Disney World and the cost doesn't max out four credit cards. Parents in the American Dream can front the kids the downpayment for a starter home without taking out 2nd and 3rd mortgages. Real estate is handed down after someone dies not sold to pay medical debt or for nursing home care. Four years of college doesn't cost more than a house. in the American Dream, pensions are safe and savings are encouraged and bank accounts pay a reliable 3-4%. Wages rise not stagnate and jobs last for decades.

My folks had the American Dream. We owned our home (I remember my folks mortgage burning party.) We took vacations and every Christmas you got what you asked for (unless your parents got confused at Toys R Us.) My folks got regular raises, had affordable insurance and even with my mom having heart and cancer surgeries, our financial situation remained stable. Mom's job was not in jeopardy and when my folks retired, they had guaranteed benefit pensions to live a good life on.

Then came the Reagan Revolution

Anyway, the Dream was real for a little while for a lot of people. And now it isn't. And that's a fact. We can quibble over the cost of the dream but not the growing number of hard working people who will never have it.

And that's the point

 

[untermensche]

The American dream has been overtaken by the dreams of a few to have more than can possibly be spent in a lifetime.

By the vanity of a small few.

 

[ksen]

And that's the point

Now come on, you know that's not the point. The point is that lying moochers used to be able extort way more than they were worth from the poor job creators. That's been fixed now and all is right in the universe.

 

[Loren Pechtel]

I wonder where they are getting their data. $275k for a starter home seems out of line in most of the country.

I can only dream of how ridiculously cheap a $275,000 home would be in Australia.

Yeah, your country is much more expensive than the US.

 

[Playball40]

On the other hand, Americone Dream is a much cheaper alternative.

Well if you call something a "dream" USA Today is dreaming way too small. If on the other hand we are talking about a comfortable middle class existence then they are off base in the other direction.

Many US real estate markets have plenty of good houses on offer that are <<$275,000. Why does it have to be a new house? Plenty of preexisting houses around that are just as good or better. Also size does matter. Large houses with many bedrooms are not necessary unless you have a lot of children. And may I suggest that condos are perfect for many people, cost less than comparable detached houses and are cheaper to own as well.
Same with cars. Do you really need a new "Chelsea tractor"? $11k in costs for a vehicle is way too high for most people - what did they base it on? Porsche Cayenne?
Otoh, most families will have two vehicles but even so total cost should be under $10k for both of them even if they are still payments owed on both (which is stupid in most cases).
Neither do you have to spend $3.6k on restaurants or $3k on TV, internet and cell phones, $4.5k for vacations and $3.6k for "entertainment" presumably not included in the previous categories.
If you can't afford it it is not necessary to fund your children's college fund or your retirement plan to the statutory maximum.

And so on.

They are referring to the typical "american dream" derek, which includes helping your kids pay for college and having a retirement one day. Yes, we ALL KNOW that we can cut corners, skip vacations, work two jobs.....blah blah blah. But last time I checked that wasn't the definition of 'dream'.