Paying way more for goods and services is nothing new, and the financial struggle that goes with it isn’t either — even with an income boost.
According to a U.S. Census Bureau report, the real median household income was $80,610 in 2023, which equaled a 4% increase from 2022’s estimate of $77,540.
“This is the first statistically significant annual increase in real median household income since 2019,” authors Gloria Guzman and Melissa Kollar wrote.
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But was the bump in household income last year enough to ease the financial strain of American families? Here’s what Dre Villeroy, CEO at investment management firm Beyorch, had to say about that.
You can also find out the median household income for the upper middle class this year.
Was the Average Household Income in 2023 Enough?
Villeroy said, regarding the “big picture,” his answer to whether the average household income in 2023 was enough is no. However, he noted whether the amount was sufficient also depends on the family size.
“For a family of three, the income would certainly make life more comfortable, but with inflation and the rising cost of housing, larger families likely didn’t feel much relief,” he explained. “While wages increased, the cost of living didn’t decrease, stifling the potential financial break most families could have experienced.”
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Biggest Challenges for Average-Income Households
“The largest expenses that continued to rise caused the biggest challenges,” said Villeroy. “Housing, groceries (in-store prices went up, but restaurant prices — both chain and local — also increased) were major contributors. Fast food prices, for instance, have nearly doubled in recent years, underscoring the widespread impact of inflation.”
According to the Bureau of Labor Statistics’ Consumer Price Index, food prices increased 4.9% from July 2022 to July 2023. Further, a home price analysis from Core Logic found that home prices rose 4.7% from October 2022 to October 2023.
Factors That Affect a Household’s Ability To Afford Expenses
Villeroy pointed out that income alone doesn’t reflect a household’s ability to live comfortably — and he’s right.
Things like debt load, family size, unexpected expenses, spending habits, cost of living, and a difference in expenses across regions are all factors that affect a household’s ability to afford what they need.
“In regions like NYC, the cost of living is much higher, which pushes average incomes higher,” he said. “That same income in the Midwest, for instance, would provide more financial comfort. However, Midwest residents face different expenses, such as higher transportation costs, including car insurance and gas. Regional differences make it challenging to define a median income that works universally.”
Suggestions for Stretching a Household Budget
One way to effectively manage the income you do have is to make the most of it.
Villeroy said that stretching your budget means you have to prioritize spending on things you need.
“Focus on what your family actually needs to live,” he said. “I recommend tracking your expenses for two weeks to identify areas where you can cut back. Look into consolidating bills, such as bundling cable and Internet. Evaluate whether you still need cable or all of your active streaming services.
“Government assistance programs may also help, depending on your income; healthcare benefits or food cards could make a difference. In the most challenging cases, consider a part-time job or side hustle. Of course, childcare costs and other factors will influence whether this is a viable option.”
Will Income Trends Improve or Worsen in 2024?
Villeroy said it depends on the economy.
“Enough attention has been brought to the issue, so changes are possible,” he said. “However, with an upcoming election, it’s unclear whether either candidate will successfully address the economy.”
The expert continued, “The key factor will be how effectively inflation is managed in the coming months. If inflation continues unchecked, we could be heading toward more financial instability.”
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This article originally appeared on GOBankingRates.com: Here’s How Much the Average US Household Earned Last Year — Was It Enough?
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