Why aren’t most Americans rich? These theories may help explain it

What does it take to become wealthy?

Most Americans believe it takes $2.4 million in personal net worth, or nearly 30 times the actual median net worth of U.S. households to be considered wealthy, according to the Modern Wealth Index, a June 2017 study by Charles Schwab and Koski Research, a market research company in San Francisco.

But with the median net worth of Americans currently hovering at $68,828 per household, most hardworking Americans are far from being millionaires. In fact, one in five Americans say they have more credit-card debt than they do in emergency savings and less than 40% of Americans say they have enough savings to cover a $1,000 emergency room visit or car repair.

Most Americans believe it takes $2.4 million in personal net worth, or nearly 30 times the actual median net worth of U.S. households to be considered wealthy.

This question recently went viral on Twitter. “I keep paying extra to add guacamole #ReasonsImNotRich,” wrote one Twitter user. “The lottery doesn’t draw my numbers. They always draw their own. #ReasonsImNotRich,” lamented another.

Those were just two of the more than 7,000 (and counting) explanations Twitter TWTR, +3.00% users recently tweeted using the #ReasonsImNotRich to share what is holding them back from being the Bill Gates they could otherwise be.

In a more serious context, that hashtag raises complex questions like, What does it mean to be rich today? And would you, in fact, be rich if not for #ReasonsImNotRich?

But even people who don’t have $2.4 million to their name can feel wealthy. For instance, having a healthy work/life balance or spending time with family allows people to feel wealthy, according to Charles Schwab’s SCHW, +0.39% the Modern Wealth Index survey of 1,000 Americans aged 21 to 75.

So what’s holding Americans back from achieving their dreams of riches?

Outstanding student loan debt: “It feels like a lot of people are feeling helpless,” said Daniel Stein branch manager at Charles Schwab in Bethesda, Md. and a co-author of the Wealth Index, while scrolling through #ReasonsImNotRich tweets that mentioned Americans’ crushing $1.5 trillion student debt burden. “People in that position are delaying action and they think I’m never going to dig out so why try,” he said.

Having children: Excluding college expenses, American parents spend $233,610 on a child from the day he or she is born till they reach the age of 17, and that excludes college expenses. At the same time, having loving relationships with friends and family was one of the top three most popular personal definitions of wealth, according to the 2018 Modern Wealth Index. “Being wealthy for me isn’t being able to afford a fancy car or having three houses,” Stein said. “Taking my two sons to a Nationals game makes me feel wealthy.”

Taxes: Approximately 80.6 million or 46% of Americans were not required to pay any federal income tax in 2018. But for those who do pay taxes, Uncle Sam can take a bite out of the bottom line: The average amount owed per household in 2018 was $8,367, according to the Bureau of Labor Statistics. However, tax bills in 2019 for many Americans will be lower under the new tax law.

Spending habits: On average, millennials spend $2,300 more per year than older generations on key items such as groceries, gas, restaurant meals, coffee and cell phone bills. In addition to ordering a side of guacamole, other #ReasonsImNotRich included being the primary Netflix NFLX, +1.72% account holder — which suggests that one person in a household sometimes shoulders the burden for cable bills and other ancillary expenses — making drunk purchases on Amazon.

Interestingly, the Wealth Index study found that more millennials partake in financial planning than baby boomers, most of whom are now in their 50s and 60s. Millennials are much more likely to take advantage of free resources, Stein said. “Baby boomers don’t have the same trust in the financial-planning industry as millennials do,” he added.

Will having enough money really make you happy?

Grant Sabatier, founder of Millennial Money, a personal-finance advice blog geared towards millennials, said he graduated college without a job and with just $2.26 in his bank account and had not partaken in any sort of financial planning. “I didn’t get serious about money until I was 24,” said Sabatier who is the author of Financial Freedom.

“I didn’t have enough money to cover my rent and had to move back into my parents’ home, and it was like, ‘Ooof, I gotta get out of here’ and I have to make a million dollars as fast as I possibly can.” After launching a consulting business, five years later, Sabatier said he successfully achieved his goal of becoming a millionaire.

“A lot millennials ask me if money made me happier, and I think that it really gave me the time to figure out what makes me happy,” he said. For Sabatier, money represents options, ideas and freedom, but for others money might take on an entirely different meaning.

To avoid finding yourself in Sabatier initial post-college circumstances, he advises graduates to “keep their expenses as low as possible for as long as they can.” He also encourages them to save enough money so that they can afford to pay for expenses themselves. “Saving isn’t a sacrifice,” he said, “it’s an opportunity.”

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