If you feel like the middle-class squeeze is getting tighter, you’re not alone. The numbers don’t lie: Life really is a more expensive than it used to be. Let’s look at what life costs now compared to 20, 50 and 80 years ago.
Today, the Great American Dream of buying a house is out of reach for many median-income families. Consider these numbers:
- Median home price in 1940: $2,938
- Median home price in 1970: $23,600
- Median home price in 2000: $119,600
- Median home price in 2018: $368,500
If we’d adjust these numbers for inflation, the median home price in 1940 would only be approximately $40,000 in 2018 dollars. This explains why the average homebuyer in 2018 is 44, as opposed to the average homebuyer in 1981, aged 25-34.
Even after adjusting for inflation, today’s dollar buys much less than it did 50 or 25 years ago. For example, a gallon of gas in 1994 cost just $1.06. In late 2018, the average price for a gallon of gas was $2.88, a full 75% higher than it would be if only adjusted for inflation. Simply put, purchasing basic necessities today takes more money than it did for past generations.
Education in today’s market is more expensive than ever. In 1971, a year of tuition at Harvard University cost students just $2,600 and jumped to $43,280 for the 2016-2017 academic year. The rising cost of higher education has led Americans to owe a collective $1.4 trillion in student loan debt. It’s also taking a lot longer to pay it off.
According to the Census Bureau, today’s average wage-earner pulls in just 10% more than they did in 1970. Meanwhile, prices of homes have risen at a much quicker rate.
Is there a solution?
Regardless of your life stage or circumstance, it’s crucial to build and maintain an excellent credit score. This enables you to purchase your first home and/or take out other large loans with the best terms.
You may also want to consider a major move to a city or suburb with lower housing costs. If you move from New York City to a nearby suburb, for example, you can save more than $71,000 annually in housing costs, even with heightened transportation costs.
If you’d rather not commute, you can move farther away and start over. You’ll be able to work at a lower-paying job, since moving from a big city can slash your living costs by up to 45%. You may even be able to keep your current job in a new town; lots of jobs today are mobile, or even allow you to work from home.
There’s no way to fight the rising cost of living, but with some careful planning, you too can achieve the Great American Dream.