Over the past few years, many Americans have seen their incomes impacted by the COVID-19 pandemic. Despite this, there is an even bigger threat to Americans’ finances that has changed the way consumers spend, save and altered their idea of what they feel they need to get by.
A recent poll by CNBC Make It, in partnership with Momentive, found that across age groups, racial groups and income levels, inflation remains a top concern for most Americans.
What Americans need to feel wealthy and financially secure
So what is the ideal income during these tough economic times? For most Americans (80%), the sweet spot for feeling “rich” is around $100,000 a year. Just over 20% of respondents say they would need to earn at least $1 million to feel rich, and 11% say they would feel rich earning more than $50,000 but less than $100,000 a year, while that 6% would feel rich earning less. over $50,000.
Of the people surveyed, households with higher incomes said they needed more money to feel wealthy.
For households earning $100,000, the amount they would need to earn to feel wealthy was at least $1 million a year, while 19% of households earning between $50,000 and $100,000 and 18 % of those making less than $50,000 say the same.
Financial comfort is another matter.
While a small percentage (3%) reported that they would need to make at least $1 million to be comfortable, more than half (54%) say they would be fine living on less than $100,000 a year, with 1 in one in 5. (18%) say they will be financially comfortable earning less than $50,000 a year.
4 ways to generate a more comfortable income
Earning enough to live comfortably now and into the future requires taking a hard look at what your current financial situation is and making moves now to set yourself up for a more fruitful future. Some ways you can increase your earnings and make your money go the extra mile:
- Ask for a raise: The easiest and fastest way to increase your income is to ask your employer for a raise. According to data from Payscale, the odds of getting one are in your favor: 70% of employees who ask for a raise get one, and 39% of those who asked for a raise get the amount they asked for. Take some time to do market research and determine what your value is based on your skills and experience. Then set up some time with your employer and make your case. If your answer is still “no,” set a time to revisit this conversation in six months to a year.
- Explore investments for income: A recent survey by investment platform Magnifi found that 49% of Americans invest for extra income. Assets like dividend-paying stocks, bonds and real estate carry varying degrees of risk, but all can generate income to give your budget some wiggle room. And even if you don’t have a lot of income to begin with, sometimes all it takes is a few dollars.
- Make room for yours budget: If you’re struggling to increase your income, you may want to consider ways to use the income you have more strategically. If you don’t already have a budget, consider breaking down all your expenses and savings in black and white to determine if there are any items you might consider cutting back or eliminating entirely. You might be surprised to find out which categories you’re overspending on that you could easily adjust. Budgeting strategies like the 50/20/30 and the zero-based budgeting method can help you figure out where all your dollars are going and how to make them go even further.
- Make a long-term plan for your future: The “right” amount of income will vary based on your lifestyle, and will likely fluctuate as you age and your expenses change. Still, finding ways to generate sustainable income is crucial. “Researchers say the biggest financial threat facing retirees is that they will outlive their money. It’s called longevity risk. Think about it: You can’t look at what you have in your bank account and predict whether it will be enough” , says Yanelys Benham, TIAA’s wealth management advisor. “You have to make sure you have income for life. There are three sources: one is Social Security, but it’s often not enough. Another is pensions, but they’re increasingly rare. The third is annuities, which a growing number of workplace retirement plans include as an investment option.”
Your financial circumstances will change throughout your life, and as a result, your definition of what you can comfortably live with will also change. Make it a priority to monitor your finances regularly and look for ways to increase your income, even if only by a small percentage. Whether it’s cutting spending by a few dollars and redirecting that money into a lucrative savings account or investing a few dollars each month, these small increases can make a big difference to your long-term financial comfort.
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