Personal Finance
89% of Americans do not consider themselves wealthy, Fidelity finds
Inflation is cooling and wages are rising. Yet, few Americans — including millionaires — feel confident about their financial standing.
Across all income and asset levels, 89% of Americans said they do not consider themselves wealthy, according to Fidelity Investments’ State of Wealth Mobility study. Fidelity polled 1,900 adults in August.
“Only one-tenth of Americans consider themselves wealthy today — despite many having considerable wealth,” said Rich Compson, head of wealth solutions at Fidelity Investments.
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For most Americans, the definition of what it means to be wealthy is relatively modest, with 71% saying being wealthy is simply the ability to not have to live paycheck to paycheck.
Roughly 57% said wealth also entails traveling and taking vacations, while 56% said it’s being able to pass down money to the next generation.
Nearly half — 49% — said feeling wealthy meant the ability to own a home, Fidelity found.
For high-net worth individuals, or those with $1 million or more in savings and investable assets not including real estate or retirement funds, more households associated wealth with traveling and fewer said a major criterion for feeling wealthy was not living paycheck to paycheck.
Surprisingly, the same share — 49% — said being wealthy meant owning a home.
Obstacles to feeling wealthy
Housing affordability has become a major hurdle.
High home prices and higher mortgage rates along with low inventory have put ownership just out of reach for many households.
One “silver lining” is that affordability has improved somewhat since October 2023, when mortgage rates were near 8%, according to a new analysis by Freddie Mac.
Jose Luis Pelaez Inc | Digitalvision | Getty Images
Although vacationing has also gotten more expensive, Americans are still determined to travel.
Travel spending among households continues to outpace its pre-pandemic levels, some reports show.
However, concerns about high prices are playing a larger role in keeping some would-be vacationers home. Those that are travelling have had to adjust their budgets accordingly, spending roughly 10% more compared to 2023, according to another study by Deloitte.
Rising debt is another threat to wealth
At the same time, rising consumer debt has weighed on household balance sheets. Nearly half, 44%, of Americans said credit card debt is the biggest threat to their ability to build wealth, according to a separate report by Edelman Financial Engines.
Americans now owe a record $1.17 trillion on their credit cards, and the average balance per consumer stands at $6,329, up 4.8% year over year, according to the Federal Reserve Bank of New York and TransUnion, respectively.
“High interest rate credit card debt, more than other sorts of debt, is a savings killer, because when you have it, you have to feed the beast. You can’t save, you can’t invest,” Jean Chatzky, personal finance expert and CEO of HerMoney.com, told CNBC in September.
“That stands in the way of people building actual wealth and therefore feeling wealthier,” she said.
What it would take to feel rich
Most people — roughly 65% of those polled — said they would need $1 million in the bank to consider themselves wealthy, although 28% said it would take at least $2 million and 19% put the bar at $5 million or more, Edelman Financial Engines found.
Among current millionaires, 68% said they would need at least $3 million and 40% said feeling wealthy would require $5 million of more.
Edelman Financial Engines polled more than 3,000 adults over age 30 from June 12 to July 3, including 1,500 affluent Americans with household assets between $500,000 and $3 million.
When it comes to their salary, 58% of all of those surveyed said they would need to earn $100,000 on average to not worry about everyday living expenses, and a quarter said they would need to earn more than $200,000 to feel financially secure.
In most cases, feeling financially secure is not based on how much you earn, but rather a commitment to save more than you spend, maintain a well-diversified portfolio and work with a financial advisor, experts often say.
“Having confidence in being able to invest strategically is what often separates those who feel they are wealthy from those who don’t,” said Fidelity’s Compson. “Improved confidence starts with education and planning.”
A trader wears a Trump hat as he works on the floor of the New York Stock Exchange during the opening bell on Nov. 6, 2024.
Timothy A. Clary | Afp | Getty Images
On Nov. 5, the presidential election handed a decisive victory for President-elect Donald Trump. In the days that followed, the markets soared.
A “Trump trade” led to new index highs for the S&P 500 and Dow Jones Industrial Average, lifted with the help of certain sectors expected to do well under the president-elect’s second term.
As of Monday, the postelection market fervor had started to subside to preelection levels.
Yet, some experts say they are seeing a renewal of so-called animal spirits.
“Animal spirits” is a term first coined by economist John Maynard Keynes and refers to the tendency for human emotion to drive investment gains and losses.
Some experts say animal spirits are a sign of consumer confidence. However, the phenomenon can also be trouble for investors if they take on “excessive risk,” said Brad Klontz, a psychologist and certified financial planner.
“It’s essentially why dead investors outperform living investors, because dead investors are not impacted by their animal spirits,” Klontz said.
Research has shown dead investors’ portfolios tend to outperform, since they are left untouched because they are less likely to be influenced by emotional decisions, such as panic selling or buying.
Investors may be excited or fearful
The recent market runup was not prompted by individual investors chasing the market to a meaningful extent, according to Scott Wren, senior global market strategist at Wells Fargo. Individuals, who were split in their election choices, are also divided in their investment outlook, he said.
“Depending on who your candidate was, you may be excited about the future or fearing the future,” Wren said.
Instead, it has been professional traders and money managers — who couldn’t sit on cash when the S&P 500 index was setting new records every two or three days — who have helped drive the markets higher, he said.
There is also big-picture excitement going into 2025, according to Wren, with expectations for lower taxes, less regulation and reasonable levels of inflation. However, the U.S. economy might have a couple of quarters of slower growth in 2025, he said.
“We’re not going to have a recession,” Wren said. “We think that’s very unlikely.”
‘Nobody is immune’ to investing missteps
Ideally, investors ought to sell stocks when they are priced high and buy when they are low.
But research consistently finds the opposite tends to happen.
Humans are wired to take on a herd mentality and follow the crowd, which guides our decision-making on everything from who we vote for to how we invest, according to Klontz.
“The first thing is to just recognize that nobody is immune from this,” Klontz said.
Now is the perfect time for investors to make sure they have an asset allocation that is appropriate to their personal risk tolerance and financial goals, he said.
“It’s harder to do when the market’s crashed,” Klontz said.
Additionally, it is important to keep in mind that financial advisors, like all humans, are also susceptible to biases. When seeking financial advice, investors should ask questions such as “What would you do as my advisor if the market went down 50%?” Klontz said.
Good advisors should have systems in place to keep them from making big mistakes, Klontz said. They may have an investment committee or a predetermined approach for how they will act.
Importantly, investors should also be asking themselves the same question, Klontz said. For example, if the market drops 40%, are you OK with your portfolio dropping from $100,000 to $60,000?
“If the answer is no, then you probably shouldn’t be all in stocks,” Klontz said.
However, if you are young enough, a big market drop could be an important opportunity to dollar cost average — or invest a fixed amount of money on a regular basis — and position your money for larger gains when it recovers.
“Most people have a real tough time doing that, which is why advisors can help,” provided they are familiar with behavioral tendencies, Klontz said.
If you still haven’t booked your holiday travel plans, take note: Prices tend to rise the closer you get to the days you’re looking to travel.
To afford holiday trips, about 50% of respondents are cutting back on other expenses while 49% are picking up discounts and deals, according to the 2024 Holiday Travel Outlook by Hopper, a travel site.
Some last-minute holiday travelers are leaning into so-called “Travel Tuesday” — or the Tuesday after Cyber Monday and Black Friday — which falls on Dec. 3 this year.
Search interest for Travel Tuesday rose more than 500% from 2021 to 2023, according to a recent report by McKinsey and Company.
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There’s a reason why shoppers are searching for the term.
Last year, 83% more deals were offered on Travel Tuesday versus Cyber Monday and 92% more than Black Friday, according to Hopper data.
Yet, there may be some limitations on the deals available, experts say.
“The challenge for a lot of people is, ‘Do I wait?'” said Sally French, a travel expert at NerdWallet.
For travelers who are set on specific days and places to visit, the answer might be “no.”
“While airlines and online travel agencies are going to offer flight deals on Travel Tuesday, there is no reason to wait,” said Phil Dengler, co-founder of The Vacationer, a travel platform.
How much you benefit from potential discounts on Travel Tuesday will depend on your flexibility, experts say.
“If you have zero flexibility,” said Hayley Berg, economist at Hopper, then “if you see a good deal before Travel Deal Tuesday, feel free to book it.”
How Travel Tuesday works
People wait in line for security checkpoints ahead of the Thanksgiving holiday at O’Hare International Airport in Chicago, Illinois, U.S. November 22, 2023.
Vincent Alban | Reuters
Similar to Black Friday and Cyber Monday sales, Travel Tuesday deals sometimes begin to roll out before the day itself, said Dengler. They might even stretch into the day after.
Nonetheless, you will typically need to book the flight, hotel stay or cruise trip by the end of the day in order to reap the benefits, he said.
As you shop, make sure to read the fine print in case discounts only apply for certain routes and days, Dengler explained.
Retailers often have a limited stock for Black Friday and Cyber Monday doorbusters. With Travel Tuesday, there may be a limited number of airline seats or hotel rooms, NerdWallet’s French said.
“They’re not going to fly two planes on the same route at the same time,” she said.
‘Be ready’ to book
Travel Tuesday might be better suited for deciding when and where you’ll go for an upcoming vacation in 2025, versus a very specific itinerary home over the holidays.
If you are not flexible on the days and destinations you plan to travel to and you find a flight available at a price you’re comfortable with, “book that trip right now,” French said.
“If you wait until Travel Tuesday, then that deal could be gone,” she said. “You don’t want to wait for Travel Tuesday for it to be sold out.”
In some cases, it doesn’t hurt to book ahead and keep browsing for potential price drops, experts say.
You typically have 24 hours from booking to cancel for a full refund as long, as it’s seven days before a flight’s scheduled departure time, Dengler said. Plus, some airlines don’t have change fees for non-basic economy fares, he said.
If those terms are in your favor, “if you see a better deal on Travel Tuesday, simply cancel your current bookings and book the Travel Tuesday offer,” Dengler said.
On the flip side, if you’re less tied to specific dates and places, but have a general sense of where and when you want to travel, then holding off until discount days may be worthwhile.
“We tend to see the deals do get better and better the closer we are to actual Black Friday or actual Travel Tuesday,” French said.
The biggest takeaway for travelers is to start thinking about what you might want to book, Berg said.
“I really encourage travelers to do that exploration now so that on Travel Deal Tuesday, they can be ready to actually book,” she said.
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