Even Millionaires Feel BROKE. Here’s Why.

Key Concepts

• Modern Wealth Survey: A survey by Charles Schwab to understand Americans' perception of wealth.
• Net Worth: The total value of assets minus liabilities.
• Wealth Mobility: The ability of individuals to move up or down the economic ladder.
• Lifestyle Creep: The gradual increase in spending as income rises, often leading to living paycheck to paycheck despite higher earnings.
• Discretionary Expenses: Non-essential spending.
• Savings and Investments: Allocating income towards future financial security and growth.

Americans' Perception of Wealth and Financial Realities

1. The Elusive Definition of Wealth: Charles Schwab's 2025 Modern Wealth Survey reveals a significant disconnect between income and the feeling of being wealthy. Americans, on average, believe a net worth of $2.3 million is required to feel wealthy. This perception is further underscored by Fideli's State of Wealth Mobility report, which indicates that 89% of Americans do not consider themselves wealthy. This sentiment extends even to those with substantial financial resources, as a late 2024 CBS report found that two-thirds of American millionaires, including some with over $10 million in net worth, do not identify as wealthy.

2. The Impact of Lifestyle Creep: A primary driver behind this feeling of not being wealthy, despite potentially higher incomes, is "lifestyle creep." This phenomenon describes the gradual expansion of discretionary expenses that often accompanies income increases. A 2025 Lending Club study highlights the severity of this issue, reporting that a surprising 44% of Americans earning over $100,000 annually still live paycheck to paycheck.

• Mechanism of Lifestyle Creep: The process begins with small indulgences, such as premium streaming subscriptions, slightly nicer cars, or more frequent restaurant meals. Over time, these increased expenditures become normalized, transforming into a "new normal." Consequently, discretionary expenses expand to consume all available income, leaving minimal room for wealth building, even with a higher salary.

Strategies to Combat Lifestyle Creep and Build Wealth

1. Balanced Allocation of Income Increases: To counteract lifestyle creep and ensure progress towards financial goals, a balanced approach to managing income boosts or pay raises is recommended. The suggested methodology is to allocate 60% of any new income towards savings and investments. The remaining 40% can be allocated for lifestyle upgrades.

• Rationale: This balanced approach allows individuals to enjoy the benefits of their hard work and increased earnings through modest lifestyle improvements while simultaneously making substantial progress towards their long-term financial objectives. This ensures that increased income translates into actual wealth accumulation rather than just increased spending.

Conclusion

The prevailing sentiment among Americans is that significant financial resources, specifically a net worth of $2.3 million, are necessary to feel wealthy. This perception is exacerbated by lifestyle creep, where increased earnings are absorbed by gradually rising expenses, leaving many, even high earners, living paycheck to paycheck. To effectively build wealth and avoid this trap, a disciplined approach to income increases is crucial, advocating for a 60/40 split between savings/investments and lifestyle upgrades. This strategy enables individuals to enjoy their current success while securing their future financial well-being.