How much does the Average American Make? Breaking Down the U.S. Household Income Numbers.
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How much does the typical American family make? This question is probably one of the most central in figuring out how we can go about fixing our current economic malaise. After all, we don’t hear many people saying in today’s world that they have too much money.
The median household income in the United States is $46,326. Here in California people have a hard time understanding that yes, 50 percent of our population live on $46,000 or less a year. Even today, all the elixirs and remedies being thrown around fail to focus on income and the big brother of income, solid employment. Dual earner households have a higher median income at $67,348.
To highlight the massive discrepancy I’ve put together a chart showing the household income distribution:
As you can see from the above chart, only 17.8% of all U.S. households make more than $118,200 a year. Only 2.67% make more than $200,000. The fact that only 34% make more than $65,000 is astounding given how expensive other cost of living items have gotten over the past decade. That is why the middle class is feeling squeezed from all different sides.
When I put together a budget for a family making $100,000 I received a bit of feedback on both sides. Even though I realized very few people had household incomes in the 6 figure range looking very closely at the data, I can understand why people took issue with a budget that was at that level. I also put together a budget from someone living in California making $46,000 a year and received feedback as well. I think when it comes to income, you can never have too much.
What is even more fascinating, is how even amongst the super wealthy income is not distributed evenly. There are approximately 146,000 (0.1%) households with incomes exceeding $1,500,000 a year. Even at that, the top 0.01% of households had incomes of $5,500,000 and accounted for 11,000 households. The 400 highest tax payers in the nation brought in a stunning $87,000,000 a year. Now that is wealth.
For us mere mortals, it is important again to focus on that chart. $46,000 does not go a long way. In a recent Census report there are 110,000,000 households in the United States. What this data tells us is that 55,000,000 households are living on $46,000 or less a year. Let us assume this is a married couple with 1 child. Let us run the numbers:
I ran the numbers for a state with no state income taxes, Texas. A family at this level is only bringing in $3,215 a month. The national median home price peaked around $200,000. So let us assume this family purchased the median home:
5% down payment: $10,000
Mortgage 30-year fixed (6.5%): $1,200
Taxes and Insurance: $333
PITI: $1,533
Right off the bat, this family is spending 47% of their net pay on a median priced home. We didn’t even account for any pre-tax retirement account investing. Given the recent stock market performance and the loss of $50 trillion in global wealth, maybe that wasn’t such a bad idea. The bottom line is the average American family is being squeezed from every angle. What we need is a focus on jobs and our economy, not bailing out banks. That defeats the entire purpose. The average American family is struggling getting by and when they hear about these billion dollar handouts, they can’t help but to feel left out.
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eternitus said:
Right on. Unfortunately, everyone making the decisions in congress earns over $100k per year… they don’t understand that what we are asking our citizens to pay to own shelter is ridiculous, and sucks up valuable capital and discretionary income that could be spend elsewhere.
That’s why they say the “problem” is falling house prices… when the real “problem” is that house prices were too high and the payments that came with them were crushing American families to death.
December 2nd, 2008 at 7:45 am -
Robert Cornelison said:
The median family did not purchase a $200,000 home in Texas. They started with a $80,000 home and traded up as they built equity and the home appreciated. If you are going to be realistic, be realistic.
December 2nd, 2008 at 9:55 am -
jerry said:
great aricle!
December 2nd, 2008 at 10:28 am -
Zach said:
Disclosure: we are a single income household at $43,300 annual in KY.
1st, regardless of what we may hear on news outlets, the “Free Market” has not failed us. It behaved consistently with all of the applicable influences, i.e. implied backing of the Fed Gov’t.
Our nation is soon to realize that luxury items are called “luxury” for a reason. We cannot finance our way to a wealthy lifestyle.
from the article:
“What we need is a focus on jobs and our economy, not bailing out banks.”The Federal Gov’t needs to focus on its constitutional responsibilities. Cutting down the excesses of gov’t and dramatically reducing taxes is a good start. End income taxes and establish a sales tax system. Taxes on corporations always come back to the consumer as a hidden tax. Attract major employers back to the US by greatly simplifying compliance costs. Encourage a health system that is not dependent upon employment. But it must be a truly free market solution. Tax $$ added to this problem will only increase the costs. Consider College tuition… the more gov’t loans and so-called “access to credit” the fast tuition has risen. Wake up America!
December 2nd, 2008 at 10:53 am -
Chris said:
Your PITI calculation is missing Mortgage Insurance….so tack on another few hundred dollars because in this hypothetical situation you are not putting down 20%.
December 2nd, 2008 at 11:38 am -
Joey Boots said:
Zach is wrong: the “free market” did fail, because of greed at all levels. People buying houses they can’t afford; builders/real estate agents pushing home ownership as “the best” wealth builder for average people (as they made huge profits/commissions on those sales); mortgage brokers pushing products with the best commisions (not the best loan for the borrower); banks/financial institutions repackaging/pooling/dividing up the loans, so that no one knows who owns them; financial institutions insuring against the failure of those packaged loans with “pennies on the dollar” in reserve, etc…
Those that believe we can ever live in a totally free market are living in fantasy land. Society must be protected from its own greed and the damage to others that greed will do.
I don’t want Communism/Socialism, but Capitalism must ALWAYS be watched for those who would exploit it for their own gains!
December 2nd, 2008 at 12:30 pm -
jon said:
Lets be realistic. The median family did purchase a 280K house in CENTRAL Ca where the median income is 46K. Let the falling home prices continue until they are REALISTIC as well
December 2nd, 2008 at 1:26 pm -
jon said:
Until we tax the speculator/investor at least 50% for capital gains of a sold home which was held for less than 4 years this bubble will rear its ugly head again
December 2nd, 2008 at 1:32 pm -
Don said:
That’s why I sold my $700K house in Long Beach CA in 2006 and bought the same house for $150K in Wisconsin, where gee whiz, the average house cost about 3 times annual earnings.
I need to stop now, cause I’m making too much sense.
Move to Wisconsin and get real. Oh, and for you Snow haters, wake up. There is a new invention it’s called 4 wheel drive and heated seats, shopping on the internet, and indoor heat. You can live in snow, so take that you So Cal Snobs. Enjoy your 201 k’s and your $4,0000 dollar a month house payments.
don
Spring Green WIDecember 2nd, 2008 at 3:52 pm -
joel said:
I’m considering making my first home purchase. I have followed the markets over the past couple years and agree that eventhough prices have drastically come down, they still seem over-inflated. My concern is that we have entered a downward spiral of bankrupcy, forclosure, and jobloss which will continue to compound the housing values…which may not be a bad thing, but for someone purchasing their first home, makes me a bit weary.
Suspending bank forclosures may aleviate some of the issues out there right now, but I think it all comes back to what people can reeally afford and sustain. When your parents bought their first home for 5,000 back in the 40’s, how much of a stretch was that for them? What was the percentage of their mortgage in relation to thier income? These are things I would like to learn to compare with where we are today and where we came from. I would love your advice!
December 2nd, 2008 at 6:47 pm -
Derek said:
Nice article and nice site.
One correction:
You said
“As you can see from the above chart, only 17.8% of all U.S. households make more than $118,200 a year. ” but from the chart, I believe that you ment only 10% make more than $118,200 a year.December 3rd, 2008 at 3:46 pm -
Neil said:
This article is definitely warped and unrealistic. I own a home in Texas and the math that this article dishes out about the average Texan paying 200K for a home is pure Baloney! The Median Home price is actually 126K!! Compare that with a California Median price of 360K.
December 3rd, 2008 at 7:41 pm -
Eric said:
Neil,
It is baloney, but so is the average person making 46k a year. Try 25-30k and 100-125k and you’re closer to reality. Also toss in the need to buy a car every 3-4 years due to the long commutes to work. His analogy was an average-income person in this country with an average-priced house, but singling out Texas to remove state income taxes from the calculation. Mattering on where you live, that might be another 10% (sometimes more) of your income, but varies greatly.
Still, it’s better than the east and west coast, especially the superheated cities, where the state taxes and local sales taxes are also the highest.
December 5th, 2008 at 11:17 am -
Jay said:
Love the article. The numbers may not be entirely accurate. But the article and its details were superbly captured. Hats off!
December 5th, 2008 at 4:40 pm -
Zachary Williams said:
Joey, the markets cannot be declared a failure if the banks and GSE were taking huge risks with the implicit backing of the Federal Gov’t. I do believe in in the depravity of Man, but you can’t regulate that out of the equation. We must refuse to reward it. A belief in Free Markets does not mean there should be no laws or regulation. It relies upon the fact that a price for goods and services will be set by the risk vs reward sentiments. When the Feds, GSEs, and various gov’t programs attempt to play god and manipulate the results, there are always unintended consequences. E.G. make home ownership a national goal, and you can bet that depraved men people will find a way to take advantage of the situation. We must allow the deflation to occur… it will only be worse later if we try to stop it.
December 5th, 2008 at 6:34 pm -
Dee said:
Honey, you are living in la-la land !!! Many of us in NY are living on less money and with some wise and frugal planning one can make it.
Your figures are guesstimated….there are more ‘we the people’ who are living far below that $65 K figure…..government bailing out any organization only succeeds in more enslavement, poorer guality of life for the masses and assurance of more comfort for the greedy controllers of all of us….the only CHANGE I see coming is economical immplosion of the USA….December 16th, 2008 at 4:54 am -
Surviving A Recession said:
It is sad that you cannot live off of 50,000 a year. And they wonder why the bottom fell out of the real estate market.
January 9th, 2009 at 9:31 am -
Chris said:
Well I’ll tell you this, I for one am not gonna give up my to 60inch plasma screens and my awesome chilled beer keg. I got them all from Circuit City\Chase at 0% interest for 3 years. I make 145k in the banking industry and I am loving it…Now that the rates are so low, people are refinancing again….it just never stops, I have been making huge bonuses for the last 8 years. I love our Govt. I feel sorry for the rest of you living on less than 50k a year. The best thing is I get to work from home in my Mansion that I bought in 02 for 500k which is still now valued at over 1.3 million. Man life is great! Depression, recession bring it on, there are always opportunities if you seek them out and get off the couch! Who was that politician who said Americans are a bunch of cry babies. You all have it so good and are not even thankful, go live in another country, maybe then you’ll realize how good you have it….
January 20th, 2009 at 3:48 pm -
Mama Maria said:
OK, why can I, a person with just 2 years of college, figure this out (see my blogpage) but the moronic idiots in Congress haven’t managed to understand? I am THRILLED that the housing market in CA will crash, so my adult children have a hope of getting a home in the same state as me, but I am appalled to think how many people bought houses they couldn’t afford on predatory lending schemes that are sending them to the streets with nowhere to live.
Can anyone reach the twits on Capitol (note the spelling is obviously not what we need) Hill? I’ve written my rep, and senators, but they are as clueless as Paris Hilton.
HELP!
January 21st, 2009 at 6:37 am -
Letisha said:
Chris,you are a nonsympathetic a–hole! Did it ever occur to you that not all people b–ching about the Gov. and the economy actually have a good reason for complaining about their situations and it’s not because they are on the couch all day? Hat’s off to you for making 145k;you probably earned it over the 8 years you have worked in your job position and deserve every penny. BUT…. I cannot assume that because I was not there over those 8 years to personally see how you acquired how you got where you are today.The same reason you should not assume that these individuals who are commenting negatively are not making it in our society because they are lazy and not doing enough or anything at all and that’s why they are in these bad positions in the first place because YOU WERE NOT THERE to see why they are only making 50k or less! I appreciate my government and all the rights I have as a citizen but that does not mean I do not work hard for what I do have and in the position I am in there are things stopping me from getting ahead and I also would like to own a house in california but the prices of houses are so ridiculous I dont know if saving all my money for along time would even be sufficiant to feel safe and secure when I do decide it MIGHT be possible.I need ucla medical center to keep working with me on my particular illness and I had to move because I could not even afford the 1500 dollar a month apartment,bills that go with it,feed my child,save for his college and try to save a little on the side for both of our futures;That was’nt gonna happen so we had to move. YES I believe the government is to blame for alot of things wrong and our housing prices are ridiculous in alot of states but alot of these people are working their butt’s off and it is still JUST NOT ENOUGH TO the next month. And since your cocky egotistical sounding personality(not saying that that’s what you are definitly like)but that is how you come across! Since you seem to have all or most of the answers than please provide us with some clue on how to get out of our ruts;you do work at a bank,tell us please the best possible way to go when it comes to our money and some possible ways to get ahead. Unless that is that you are to good for cry-baby neandrathols like us and refuse to give a helpful suggestion to your fellow man kind who also wish the government would consider our situations too.The economy sucks and the Gov. did their fair share to make it that way. Iwould love to be in your place;give me the oppurtunity,the training and I’LL DO THE WORK. We need to help each other right now,not condemn them.If you are doing so well than help your fellow man by contributing to college tuition funds so that these kids who do’nt have the funds to get their college edu. can.I need to stop b-cause I could go on forever! Chris you offended me and the comments you made were cruel. Iam happy for your success but alot of us are working really hard and still are not even close to your more than efficiant lifestyle. Learn how to have some compassion for the other citizens in this country that are working their tails off but it’s still not working out. BE A SUPPORTER OF THE PEOPLE,NOT A TYRANT. You might have money but try to have a heart too! I hope on those cold lonely night AND days that 60inch plasma is there to support you,emotiolally and physically cuz your gonna need it,plus hold on to those cold beers;they’ll help your 60inch with those pysical nights. GOOD-LUCK A–HOLE!
January 23rd, 2009 at 9:02 am -
Rog in Miami Gardens said:
What we all need to understand is that we’re all connected, as cliche as that sounds, but we are.
To those who say: “Let the housing prices/values continue to fall, so that I can take advantage of it and purchase my home,” I would say: be careful. Remember, home prices are falling partly because the GLOBAL economy is faltering, so chances are if values continue to fall, that means the communities/neighborhoods where those homes are located are suffering, and pretty soon, unless you work in healthcare (even though some hospitals are laying-off nurses and cutting physician fringe benefits), you could be out of a job, as well. It seems that no one’s immune.
Finally, I do agree that some Americans got tremendously greedy, especially, those house-flippers and mortgage brokers, and there’s enough blame to go around. However, I just think that we all need to re-evaluate our own lives, period. Does every room have to have computers and televisions? Does every home really have to have two cars? Must every child have a cell phone? Do you HAVE to have a vacation EVERY year?
This economic downturn has me and a lot of my friends really re-evaluating the things that are truly important, i.e.: family and friends. Just the other day, we forfeited eating out, met at a friend’s house, played board games and cooked our own meal. I hadn’t had so much fun in months! It was truly great! Also, I barely use my car anymore. I catch the bus to work, I walk/bike to the store & dry cleaners; thankfully, most of my friends/family live in biking distance. I only use my car to go out of town to visit my other family members. And, you know what? I don’t miss the rushed, gotta-have-the-latest-this-or-that lifestyle. I truly don’t, and I actually pity those who still think they do. Funny how that works.
February 11th, 2009 at 5:32 pm -
Ivan said:
Chris
If your making 145K/yr and getting HUGE bonuses, couldn’t you just pay cash for your awesome beer keg instead of financing it for 3 years?
this has got to be some kind of jokeFebruary 19th, 2009 at 10:11 am -
Don said:
hummmmm……. wonder why the great thinkers in D.C. think iddle class is between 100k - 250k. That doesn’t seem to fit reality.
Maybe they are out of grasp of reality, naaaa …. just cluelessApril 9th, 2009 at 4:50 am -
joel said:
this is bull crap most people are getting payed 15 to 30 a year or nothing. in the 80’s you could get a lone for a home and pay 400 a month. now people are swamp ratting in the same houses because they have no where to go. and they cant even go to the doctors because they cant even afford their own shared rent. every one I know is doing this and I know hundreds. so who’s counting them? no one! they cant afford or have time to fight this greed their just hopeless.
its story’s like this that make people think its OK to charge people so much. when most of them have nothing.
May 7th, 2009 at 10:41 am -
Pete said:
hey i’m on $60000 at the moment single 24, i could be making more probably if i’d passed university at 20 if it weren’t for alcohol and women. its a bad combination when your trying to succeed. Anyway I find myself in a casino job now that i’ve been in for just over a year and with $60K looking at two guaranteed promotions over the next year and a half which would take me up to about $80K. After that there is a lot more room to move, just not guaranteed cause you have to move into management and the union doesn’t get you your promotions anymore. So anyway I gotta look on the bright side I’m doing ok bought an aparment in the city last year got no other debts, but hey I’m passing uni at the end of the year been doing it part time. still I gotta cut down on th edrinking at some point don’t wanna end up with all sorts of health problems
May 10th, 2009 at 8:22 pm -
auto phi said:
This is an amazing post. I had no idea everyone around me was poor too! And I thought the BMWs and Mercedes meant people actually made a lot more. This is really a sobering message for me.
August 24th, 2009 at 2:59 pm -
Terry said:
I make $11K per year, can you make me a budget?
August 27th, 2009 at 8:29 am -
testing said:
here’s your budget, move in with a family member, and your 11K per year can go along way, since you most probably have to pay little to nil in taxes , good luck
September 3rd, 2009 at 11:35 pm -
Young Finance Guy said:
damn …
You write and blog with some real conviction and purpose i liked every damn post I read.
I am a instant fan but… I catch myself calling you a prick at the same time. Thats so not fair.
Good stuff.
i especially liked the BoA post with countrywide settlement.
I think we are all pretty screwed here. The next few months could get scary. What do you think?
October 17th, 2009 at 7:29 pm
