This is actually one thing with three very important conclusions.

I was reading this article in the WSJ (h/t Ben Carlson) about people who make over $250,000 a year who don’t feel rich. A common theme in my work over my career is that American living standards are better than they’ve ever been and people don’t seem to know it. We don’t realize how good we have it because we don’t have a good way to measure our relative living standards. I often note that modern day necessities like cars, phones or even basic healthcare, would have been luxuries for anyone living 100 years ago. We are unhappy about our healthcare, the cost of (our increasingly gigantic) homes, the quality of our (abundant) food and many other things that previous generations couldn’t dream of having. As the BLS has noted, the things that were necessities 100 years ago are now an increasingly tiny piece of our consumption basket and other things like healthcare, college and luxuries for past generations are now considered necessities. It is a good thing that these new “necessities” are expensive. I know that might sound strange, but it’s a sign that our living standards are improving. And in 100 years robots will be expensive and people will complain about how our personal robots are so expensive. So on and so forth.

Now, this doesn’t mean that modern life isn’t hard. Human life is always hard. It probably always will be. But in a relative sense life today is much easier than it was 100 years ago. We’ve just created different problems for ourselves, mostly thanks to comparing ourselves to people we don’t really know on social media. And in countries like the USA I’d argue we’ve sacrificed some of our social well-being in exchange for our financial well-being. After all, the median American is in the top 10% of global wealth, but we’re middling in many social metrics. And that makes the inherently subjective topic of “living standards” a bit murky. But this isn’t a yoga website (even though I wish it was sometimes).1 It’s a financial website and in financial terms Americans are the wealthiest and most financially successful group of people that have ever roamed this planet.

Conclusion #1 – Americans are really rich. Really, really rich.

Anyhow, I thought this article was a great example of this. The article started with:

“Lauren Fichter and her husband earn about $350,000 a year. The couple own their Reading, Pa., home and a vacation property they rent out on Airbnb. Their three children play club sports, and the family often grabs takeout after games.”

These people own two homes. They own TWO HOMES. I’m gonna say it again for the people in the back. THEY OWN TWO HOMES. So, we have people, who are the stars of an article about being rich and not feeling rich, who own two homes. Let’s stop right there. If you own two homes and don’t know you’re rich then you don’t know what rich is. The Fichter’s are doing great. They probably just don’t give themselves enough credit.

Of course, it’s more complex than that. You might own two homes and not be able to afford those homes. And that’s possible here. But if you make $350K a year and you were approved for two mortgages (or bought the houses with cash) then you might feel cash flow poor, but you are very likely asset rich. I suspect that’s the case here. But this could also be a case where they are experience rich and financially poor. That is, they just don’t save enough. And here’s where I am both sympathetic but also the angry financial dad for the USA. Because Americans just don’t save enough.

Americans have a savings rate of just 4.5%. That’s way too low. The basic financial planning rule of thumb is that we should save 20% of our gross income. We make up for a lot of that shortfall in the way that we invest well and those investments have grown enormously over time, but relying on persistent asset growth isn’t the most sustainable planning program either.

Conclusion #2 – Americans don’t save enough. That leaves them asset rich and/or experience rich and cash poor.

But I reverse engineered the numbers on this article. I took a 47 year old household making $250,000 in 2025 and I backed out the numbers to create a reasonable starting point for two people, living together out of college who make a combined income of $75,000. They then get married and have kids at 30 and start contributing to 529 plans. And in 2012 they hit their target of $100K in taxable savings and decide to purchase a $500,000 home. If they saved 15% every year (evenly distributed between taxable and tax deferred), earned 6% on their investments (60/40 did 6.8%) and purchased a home when they could afford the down payment then here’s the balances as of today:

529 plan: $137,369.

Tax deferred plans (IRA and 401K): $1,021,147.

Home Equity: $849,986.

Mortgage Debt: $270,491.

Taxable savings: $77,350.

Total Net Worth: $2,085,860.

I am using really conservative and generalized financial planning rules here. I am not even modeling this out in any sophisticated planning sense. But this is what actually happened with the housing market and broader financial markets. And if housing does 3% per year from here and stocks/bonds do 6% then these people will have a $5.2M net worth when they’re 60. That is really damn good and it’s not like I am making outlandish predictions here.

So, if you make $250,000 and you are 47 years old and feeling poor then you probably needed better financial advice along the way or you’re fooling yourself. Then again, they’re only 47 and they make $250,000 a year. They’re doing great, even if they are behind the outcomes I outlined above. After all, if they accelerate their savings from here then they still have time to catch up and incur a big multiplier as they are now starting from a much stronger position than they were when they were starting out. That game is far from over and you could easily argue it’s mostly upside from here since most people’s expenses and income tend to become more predictable in their 50s.

Conclusion #3 – A good financial planner is a good investment.

In sum, I suspect the average person probably isn’t perusing the Discipline Funds website reading about macroeconomics and asset-liability matching (although I sure hope they are!), but there’s no world in which the median American should think they’re poor. And there’s no universe in which the average household making $250,000 should think they’re poor. Unfortunately, the data gets much uglier for the lower decile Americans. But for richer Americans the odds are that you’re doing much better than you think, even if your neighbor’s social media account has you thinking otherwise.

1 – If you ever see me in person ask me about the first time I ever did hot yoga. It’s a funny story.