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Price Tag for the American Dream: Much Less Than $130K—Sorry, USA Today

On July 4th, a day which celebrates our pursuit of happiness, USA Today claimed that 7 of 8 households can’t afford the American Dream. This gloomy article tried to pull a summertime Grinch on us (said the media giant to the little girl, “You say you want some fireworks, Cindy Lou? We’re sorry but you can’t afford them, so boo hoo hoo.”).

Fortunately for us all, USA Today is flat wrong. Why? Because its version of the American Dream requires oversized homes, constant overeating, overweight SUVs, and inexplicably, stratospheric taxes (weren’t sky-high taxes why we declared independence in the first place?).

If you run USA Today’s bloated mirage up against a less extravagant lifestyle, it proves that the American Dream is alive and well. In fact, my figures show that families of four (FOFs) can easily fund the American Dream on annual incomes of roughly $75,000—or about 42% less than the $130,000 USA Today claims is necessary.

To begin with, I’ll put USA Today’s inflated numbers side-by-side with my more modest estimates. Then I’ll compare each major expense line-by-line. Note: each item below reflects the annual cost for FOFs (so if you reside in a smaller household, you can reach your dreams for even less).

USA Today Frugal Fringe Difference
Essentials
Housing Expenses $17,062 $11,665 $5,397
Groceries $12,659 $7,741 $4,918
Car Expenses [4WD SUV] $11,039 $4,386 $6,653
Medical Expenses $9,144 $9,144 $0
Education Expenses $4,000 $1,593 $2,407
Apparel $2,631 $1,973 $658
Utilities $1,956 $1,467 $489
$58,491 $37,970 $20,521
Extras
Summer Vacation $4,580 $2,290 $2,290
Entertainment $3,667 $1,834 $1,834
Restaurants $3,662 $1,831 $1,831
Cable/SatTV/Internet/Cells $3,100 $1,800 $1,300
Miscellaneous $2,000 $1,000 $1,000
$17,009 $8,755 $8,255
Savings
College Savings $5,000 $5,000 $0
401k Contribution $17,500 $17,500 $0
$22,500 $22,500 $0
Taxes
Total Taxes $32,357 $6,229 $26,128
Grand Total $130,357 $75,453 $54,904

Housing

Here’s the USA Today recipe for residential happiness: “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.”

The McPaper fails to consider the McMansion craze. Factoid: whereas in 1987 the median US home measured 1,730 square feet, today’s median home is 2,306 square feet. This gives rise to a fundamental question: “are families happier now with 25% larger homes than they were back in 1987?” Despite living in bigger houses, Americans seem crankier than ever (I know this from published polls and also because I’ve been stuck on highways at rush hour).

Since larger homes haven’t produced a happier citizenry, why not move our FOF into a house that’s 25% more compact, as was typical in 1987? This cuts the yearly housing expense from $17,062 to $11,665. And since our FOF now resides in 25% smaller living quarters, it spends about a quarter less on utilities as well.

Food: Home and Away

USA Today writes: “We used the U.S. Department of Agriculture’s April 2014 figure of $12,659 for a moderate-cost grocery plan for a [FOF].” Factoid: the same USDA report also provides a “thrifty” alternative that costs FOFs just $7,741. No one starves under the thriftier plan, which serves good food with less processing (such as cholesterol-cutting oatmeal instead of sugar-infested dry cereals).

USA Today also pads its ledger with $3,662 in restaurant visits. As the article acknowledges, however, restaurants are an “extra.” Since fewer restaurant visits can scale back family waistlines, spending 50% less here will likely improve our FOF’s overall happiness.

Car Expenses

USA Today supersizes transportation: “In May, AAA estimated it would cost $11,039 a year to own one four-wheel-drive sport-utility vehicle.” Factoid: the same AAA report states that a small sedan costs only $6,967 per year. Our FOF could even buy a used Prius. My 2010 Prius costs a mere $4,386 per year and seats four people comfortably (and still gets everyone from Point A to Point B).

Vacations, Entertainment, and Other Extras

My version of the American Dream cuts these “extras” in half. Summer vacations can occur every other year or involve camping trips or family visits. For entertainment, our FOF can use the local library and enjoy outdoor activities instead of joining health clubs. Our FOF can bundle their TV, internet, and cell service with a single provider for about $150 per month (or use pay-as-you-go phones instead of full data plans).

Taxes

USA Today says that “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.” But this one-size-fits-all tax model produces a major fallacy. After all, we know a number of important tax-reducing specifics about the authors’ hypothetical FOF: they enjoy four exemptions, they stash $17,500 in a 401(k), and they pay specified amounts for mortgage interest, real estate taxes, state income taxes, and medical costs. All of this lowers the FOF’s taxable income. Indeed, when I apply the available deductions, the combined bill for federal, state, and local taxes plummets to $6,229. To see my tax calculation, click here.

The Biggest Fallacy of All

USA Today concludes that “living the American dream would cost the average [FOF] about $130,000 a year. Only 16 million U.S. households—around 1 in 8—earned that much in 2013, according to the U.S. Census Bureau.” This sounds dire but USA Today is mixing apples (incomes for FOFs) and oranges (incomes for all households, most of which are smaller than FOFs and tend to earn less). The paper’s own sources report that the average FOF earns $90,184 per year (per the 2012 Consumer Expenditure Survey). Therefore, most FOFs can easily afford the $75,000 it takes to fund a non-inflated version of the American Dream.

Bottom line: the American Dream is alive and well and living in the USA (no thanks to USA Today).

*   *   *

I apologize that it took me ten days to rebut our national McPaper of McRecord, but getting the numbers right takes time. Besides, I spent the Fourth of July weekend celebrating my own freedom from the many tyrannies of over-consumption—the same tyrannies that USA Today buys into for its overbloated version of the American Dream.

I hope that you were able to enjoy your own July 4th free from the ensnarements of excess. For the American Dream isn’t about big McMansions or colossal SUVs or pricey restaurants or the most expensive cell plans. Sorry USA Today, but maybe the American Dream doesn’t come from a store, maybe the American Dream . . . perhaps . . . means just a little bit more. And no summer visitation by a media Grinch can stop us all from gathering—hands clasped in hands—to celebrate together our most cherished freedoms (hopefully with fireworks overhead and low overheads on our household ledgers).

Photo Credit: Nathan Rupert

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6 Responses to Price Tag for the American Dream: Much Less Than $130K—Sorry, USA Today

  1. Kathy July 14, 2014 at 9:39 AM #

    The thing that struck me is that this family spent more on eating out, entertainment and vacation than they did on their children’s education. Since the article doesn’t say if it was college savings or private elementary school tuition it leaves open the question how will they pay for college? Also, a thousand a month for groceries plus the restaurant is a huge amount to spend. Even the amount spent on the SUV is inflated if they just pay the thing off and drive it for several years after that. The whole article is probably written by someone on the east coast who doesn’t have a clue about how inexpensive things are in the Midwest.

    • A Noonan Moose July 14, 2014 at 10:00 AM #

      Kathy: Great point about Midwest cost efficiencies. And if we’re talking Midwest household expense numbers, the cost of funding the American Dream for a family of four drops much further yet. Thanks for visiting!

  2. No More Waffles July 16, 2014 at 11:25 AM #

    Dear lord, $3,100 every year on cable/internet/mobile!? That would be over 10% of my after taxes income (although I’m from Belgium, so a one-on-one comparison isn’t entirely fair). Also, why would you spend almost as much money on cars as on groceries?

    Well done debunking USA Today’s utter crap! Totally worth the wait to get the numbers right.

    Cheers,
    NMW
    No More Waffles recently posted…Stuff Our Parents Never Taught Us, Part I: Compounding InterestMy Profile

    • A Noonan Moose July 16, 2014 at 12:13 PM #

      NMW, thanks so much!

  3. Free To Pursue July 17, 2014 at 7:59 PM #

    Wow! I’d be curious to read what Mark Robert Rank, Thomas A. Hirschl and Kirk A. Foster have to say in “Chasing the American Dream”. The article clearly focused on only one aspect of the overall recipe for success. One of the quotes points us in a more meaningful right direction: “finding and pursuing a rewarding career, leading a healthy and personally fulfilling life, and being able to retire in comfort.” but sadly it’s not explored any further.

    The USA Today article pays no attention to what makes one’s life more balanced: access to green space and public services, amount of available leisure time, pursuit of healthy and fulfilling activities…they just went with, well, “stuff”.

    Why? Stuff is easy to measure. Happiness…well I guess that’s just too complicated.

    Thanks for pointing out the outlandish “base requirements” to fulfill the dream. Less is indeed more.

    • A Noonan Moose July 17, 2014 at 8:12 PM #

      Someone needs to develop a Funometer to quantify all that is the real and true stuff of life!

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