Twenty years ago, a $200,000 salary meant taking luxurious vacations and buying fancy cars with enough money left over to save for your kids’ college educations and still go Christmas shopping.
But, according to the Income Paradox Survey, a new study released by The Harris Poll, the top 10% of earners — those earning $200,000 and over — are struggling. Here are three more surprising truths the survey revealed.
Did You Know?
Sixty percent of Americans earning $200,000 or more report a six-figure income feels more like survival mode than a sign of wealth. In fact, 43% have had to delay paying a bill in order to cover essentials.
Groceries, housing and healthcare are the expenses draining even the top 10% of earners. Forty-five percent of those earning $200,000 have held off on medical care because it was too expensive.
Fifty-six percent of those earning $200,000 and up report needing more than one income to survive, with many turning to side hustles, skipping meals or selling possessions just to stay afloat.
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Why Are the Top 10% Struggling Financially?
According to experts, the top 10% are feeling the squeeze because of two main factors that keep doubling back on themselves.
Inflation and the Cost of Living
“Strong incomes continue to narrow under contemporary financial stress,” Joe Braier, stated CEO and president at Lake Country Advisors.
In fact, according to the CBS News Price Tracker, since January 2022, the cost of food has risen 18.2%; the cost of apparel has risen 9.1%; the cost of new vehicles has risen 6.7%; the cost of public transportation has risen 14.5%; the cost of pet food and treats has risen 120%; the cost of dental services has risen 17.7% and the cost of car insurance has risen 55.1%.
Wages simply have not kept pace with the rising cost of living.
Lifestyle Creep
Prices alone, however, may not be telling the full story. According to Robert Johnson, chairman and CEO at Economic Index Associates, human behavior and social pressures are also to blame. This is because individuals allow their spending to increase commensurate with a higher salary.
“People move into a bigger apartment or buy a more expensive car or home to reward themselves for receiving a raise,” stated Johnson. “What happens is they are unable to improve their financial condition because they spend everything they make.”
How Can High Earners Stretch Their Paychecks?
This may sound like an out-of-touch question to those earning $40,000 a year, but, since lifestyle expenses tend to increase commensurate with salary, it’s one worth addressing:
Audit Recurrent Withdrawals
“High earners tend to make fixed costs which grow at a higher rate than they realize,” stated Braier. “The pressure is increased due to the automatic resettlement of many of these expenses every year and the infrequent changes in income.”
To bridge the gap, he encouraged frequent transaction reviews — particularly for recurrent withdrawals pertaining to housing, education, insurance, travel and lifestyle services. This can help to determine which charges are actually valuable and ensure consumers are eliminating obsolete subscriptions or duplicate services.
Automatic Transfers
Braier also recommended setting up automatic transfers to savings and/or investment accounts. By automatically re-allocating a percentage of one’s monthly paycheck before it hits their checking account, consumers will not clock the deduction as a loss. This helps keep individuals on track with their savings goals and prevents unnecessary spending.
Limit Lifestyle Spending
When it comes to spending, think necessity–not opulence. A luxury home may look great on Instagram, but owning that home is meaningless if costly mortgage payments keep you financially strapped and unable to build real wealth. This is why Johnson encourages buyers to “procure the house you need, not the most expensive house you can afford” based on your income.
Melanie Musson, insurance and finance expert at Clearsurance.com, encouraged limiting lifestyle spending so you can have extra money left over each month: “It may feel like cutting back puts you in a lower income bracket, but once you experience the freedom of having excess to save and invest, you’ll feel like you’re earning more.”
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This article originally appeared on GOBankingRates.com: The Top 10% Are Struggling Financially: 2 Shocking Truths About Americans Earning Over $200K
