Why would so many Americans think they are so wealthy? Looking at a New York Times study of class in America, one particular statistic stood out to me:
First of all, setting the question of realism aside, it’s an amazing statistic that almost half (45%) of Americans think they will be wealthy in their lifetimes. Here are a list of reasons why you might think you will be wealthy when actually you won’t.
I can buy practically anything I want to, already! Having a credit card with a $30,000 credit limit doesn’t actually mean you have $30,000. Just because the price of flat-screen TVs is dropping does not mean that you must buy one. The content of your cable channels is still the same junk, they’ll just look better.
My house is already the size of
My house is already worth more than
My retirement accounts are full of investments returning 14% annually! After you net out fees and expenses and account for the inevitable higher taxes when you withdraw (because the bill will come due for the Baby Boomers) you’re looking at 3% per year, and inflation ate that up.
I know that I often take the view that managing life and career and personal finance are battles. I think of them as zero-sum games, and they are not; sometimes we can all win. But if you have the mindset that 50% of the population could become wealthy in their lifetime, then something is wrong with my definition of wealthy.