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The inevitable has finally caught up with us: the American Dream is pretty much out of reach.

There have been warnings for years that ‘the dream’ was getting farther out of reach, and according to a study put together by USA Today, a six-figure income is required to achieve what most Americans strive for. To be exact, Americans need to earn $130,357 annually, which was arrived at by calculating the cost of a family’s essential expenses, some extras, and taxes/savings. Also of note, that amount is what is needed for the average family of four — two adults and two children.

In fact, it’s now easier to achieve the American Dream when you live in another country.

If $130,000 seems like a lot, that’s because to the average American family, it is. Even with two adults working full-time, that can be a target income that’s simply out of reach for most families. According to the U.S. Census Bureau, median household income between 2008 and 2012 was $53,046 per year, less than half of what the USA Today study calls for. While the economy has been picking up steam as of late, it’s still drastically different than the climate that led to prosperous years for the middle class during the 1990s.

The biggest issue and the factor that is really putting the ‘American dream’ out of reach for the vast majority of people, is that the middle class simply doesn’t have the financial power they did before. The cost of living has been skyrocketing over the past ten or fifteen years. Just about every standard purchase — whether it be a home or a pound of hamburger — has seen prices jump dramatically. Not to mention healthcare and transportation costs.

As household expenses have climbed, wages, on the other hand, have plateaued. As everything else has gone up in price, wage growth has barely kept pace with inflation, leading to erosion of purchasing power. Ever wonder why so many retail stores and restaurants closed over the past five years? It’s because those in their target demographic, the middle class, simply don’t have the money to go there anymore.

The Economic Policy Institute looked deeper into the issue, and found that flat wages and job losses have been the major barriers to economic prosperity for many in the middle class. “This lost decade for wages comes on the heels of decades of inadequate wage growth,” the EPI says. “For virtually the entire period since 1979 (with the one exception being the strong wage growth of the late 1990s), wage growth for most workers has been weak. The median worker saw an increase of just 5.0% between 1979 and 2012, despite productivity growth of 74.5% — while the 20th percentile worker saw wage erosion of 0.4% and the 80th percentile worker saw wage growth of just 17.5%.”

Eroding wages and increasing costs are the two most prominent factors causing the middle class to disappear. Most of the middle and lower classes in the U.S. have been sold on the idea of the ‘American dream,’ and have worked hard to attain it. Putting it out of reach, all the while expecting people to continue buying into the ‘meritocracy,’ is going to eventually have consequences, however.

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The Bare Necessities

From the USA Today study, the essentials that are mentioned are the basic tenants of life in modern America. The study tallies up several different price points — $17,062 for housing, $12,659 for groceries, $11,039 in vehicle expenses and just over $9,000 per year in medical expenses — all to get a subtotal of around $58,500 for the essentials.

That alone – the amount needed to cover the bare essentials for life in America — is $5,000 more than the median household income.

There were a few other things taken into account: apparel, utilities, and education expenses, but the items listed above were the major price points. There is also a sound argument to include things like Internet and telephone service in this category, as they are required for daily life by most. Instead, they were listed under the ‘extras’ category.

One other area that is not taken into account that the majority of the population is dealing with is debt. Credit card debt and student loans, neither are put into the calculations. It’s possible that these could be factored in to things like education expenses, or miscellaneous expenses, but for a lot of people, debt repayment represents a big monthly expense. According to Nerdwallet, the average American’s credit card debt tallies up to more than $15,000, and student loan debt is more than $33,600.

These are things that should also be figured in.

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The Extras

USA Today figured in things like family vacations, entertainment, eating out at restaurants and cable/internet costs into the ‘extras’ category. All together, the expenses totaled more than $17,000 per year. Now, right off the bat many people will say there are plenty of costs that can be eliminated in this category, and they are correct. For example, more than $4,500 is allocated for family vacations, which can be reduced, rather drastically, in a number of ways.

However, things like Internet expenses are probably more appropriately filed under the ‘essentials’ category. A huge number (and a growing number) of individuals rely on the Internet for work and school, and many of us really can’t imagine life without some sort of online connection. There are ways to curb the cost as well, by using public libraries or coffee shops with public wi-fi access.

As far as entertainment and eating out is concerned, a lot of wiggle room to reduce expenses can likely be found. Entertainment expenses, for example, can be heavily reduced through modern technology. Public libraries have vast book and movie collections, usually available for free, or for a very low fee. A Netflix account can supply hundreds, if not thousands of hours of entertainment for less than $10 per month.

There are obviously plenty of ways to reduce your family’s ‘extras’ budget, but even with money saving methods in place, it’s still an area that will incur unexpected expenses and cost families plenty over the course of a year.

Taxes and Savings

The final category USA Today takes aim at is that of taxes and savings. The former everybody takes part in. The latter? Well, most people tend to give it a shot, but it can be increasingly difficult. A lot of people saw their savings ruined by the financial crisis, in which either banks gambled it away, or the loss of a job required those who had a safety cushion to actually dig into it. As the economy rebounds and more people get back to work, setting aside money for a variety of savings accounts should become a common expense in many households.

Taxes and savings tally up at $54,857 annually, according to USA Today. The majority of that figure — $32,357 — comes from state, local, and federal taxes. The other large expense of $17,500 is attributed to 401(k) retirement savings, assuming you are contributing the maximum amount.

Finally, college savings for two children tallied up to $5,000 per year. Of course, as the cost of education increases every year, saving even that much annually probably won’t leave the kids with enough to pay for their education. As disheartening as that is, college savings may be an area that should be increased in the calculations.

These are the major expenses that USA Today‘s study looked at to arrive at their annual figure of $130,357. Sure, many of the details are debatable, and there are some expenses that were not taken into account, while others could be reduced through consumer choice and money saving tactics. One important thing to mention is that it’s not just about building wealth and getting rich, but also about securing a future for the next generation.

Speaking with USA Today, Cornell University professor Thomas Hirschl made that point very clear. “It’s not about getting rich and making a lot of money. It’s about security,” he said.“They want to feel that their children are going to have a better life than they do.”

Follow Sam on Twitter @Sliceofginger

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