Beating the income averages in the USA is important to your future.We will dive into income definitions, income by household, and income disparities. This post provides information on current income and debt averages and ways that you can boost your income and secure your financial future. If you are not above average now, the future will be a tough one financially. Read on!
The Income Averages In The USA
As of the date of this post, the income averages in the USA is about $62,000 per household. Depending on where you live in the United States, that can be difficult to live on. The average is based on the total income of all working individuals within a household. When you put it in perspective, and include children and family pets, it really is not much play money available in most families. So, ask yourself, do you have enough income for now, your future, and the future of your children?
The income average in the USA does continue to climb. That’s the good news. However, this is often driven by inflation, with the value of the dollar going down each time; bad news. Further, to go out and purchase a service or product, like an In & Out burger, because more costly per dollar as time goes on.
Income By Household
The income by household varies drastically across the USA. In the image below(By Datawheel – Interactive Visualization: Data USAData Source: Census Bureau – ACS 5-year Estimate, CC0, Link) you can see the darker blue representing higher income by household, and lighter below being lower-income by household. However, the cost of living various in each of these areas. I live in Los Angeles and can tell you first hand, it’s expensive.
If I were to move to Louisiana my costs would be much less, but I would not make as much money in my job. Beating the income average becomes important because making more money does not automatically mean that you will have more money. If where you live is costly with a high income by household, you have to make that much more money to survive and live comfortably.
Income Debt Ratio
Added to what your income may be is your income debt ratio. In 2017, the total debt owed by Americans was 12.84 trillion (yes with a ‘T’). Let’s do a little math. In that same year there were 325 million people living in America. All of which have to eat and live, and only some of which contribute to the household income. In order to zero out the debt in the country it would require that everyone living in the United States to cough up nearly $4,000.
No matter what age or working status you might be. That’s insane by any measure. If you look at your own family and the financial resources you have, what would your income debt ratio? How much would each member of your household have to contribute to get the family our of debt completely?
In that same year, there were about 126 million households in the USA. So, each household is carrying an average debt of $10,000. Some more or less obviously. This affects the average income debt ratio in that for every $10 the average American earns, nearly $2 has to go towards paying off a debt. Think: How can you change this for you and your family?
In order to understand how you can change your income debt ratio, you have to understand three types of income definitions. These are easy to understand: active income, passive income, surprise income.
Active income is what you are most familiar with. You likely have a 9-5 job where you punch-in and punch-out. You are paid for a set number of hours to do a good job. There set days off you have, and if you are lucky, some benefits such as medical or dental attached to that. As long as you show up to work, you are paid for those hours, then you move on with the rest of your day. This is one of many income definitions.
Passive Income is money that you make if you are working or not. Usually passive income is earned by creating something that people purchase over time. A great example of this are movies. As movies are made, a lot of money goes into filming, production, marketing, and release. After it is made, for years to come, people will go see the movie or purchase it. Movies made in the 1940s still make money today. Those involved, depending on their role, still get paid from that work. They invested hours upfront, and reap benefits decades later. In many ways, among all the income definitions, this is the one I like the most.
Surprise income is just that. Think about a person who is a waiter. Their tips are a form of surprise income. They were hoping for it, but not guaranteed. And tips fluctuate throughout the day. Which of these income definitions are you currently doing? Do any of them stand out to you?
Income Americans Usually Have
The income Americans usually have is active income. Most of us do have a regular job we report to five days out of the week. The problem with that is we are not making any money during the other hours of the day or week. Technically, we spend money while at work. Every dollar we make within the typical eight-hour work day is going towards rent, car payments, food, soccer clubs, clothing, etc. You get the picture.
What we have is 325 million people most of which are constantly spending money. The loss of income Americans experience is passive income loss instead of passive income gains. Although we slow down on eating out, or buying things in general, the cost of living continues to create the income debt ratio we experience. This scenario is the worse case.
We are actively making money, passively losing money, then feeling the burdens of debt. What is the income Americans usually have move from just passive income, to both active and passive. Would that make a difference in your current financial situation? Would it make a difference in your future and the future of your children? Which of these income definitions do you like the most?
Income Averages After Taxes
Then there is taxes. We have the average income of $62,000, but not all of that ends up in your pocket or purse. As you are looking at average income for most Americans, you must subtract taxes from it. Your income after taxes will limit your spending abilities. There is a saying that you have to do two things in life: pay your taxes and die. Kind of a morbid reality, but completely true. Depending on your income situation, and how you set up your tax withholding, this is yet another bill to pay. And maybe you are the type to claim ‘0’ every year to ensure that you do not owe taxes in April.
That means that you have less to live on all eleven of the other months. So, you must pay attention to your bottom line income after taxes to get a true snapshot of where you stand financially.
Income Averages By Age
There are differences in income averages by age. The Bureau of Labor Statistics did a study in 2017 on income averages by age. If you are between the ages of 16-24, on average your annual salary is $25,000. Between the ages of 25-44 the income average is $45,000. And lastly, between the ages of 45-65, the average is about $49,000.
What this tells us is that after age 24, most Americans will make about the same amount of active income at age 65. There is not an large average increase. So, you have to ask yourself where do you fit in by age averages currently, and where do you want to be in the future?
Income Distribution In The USA
If you look at the income distribution in the USA it seems like the extremities win. If you live in a coastal state, it seems for the most part people are making more money than in landlocked states. There are two variables to consider however with income distribution in the USA. We live in a beautiful country. Nearly anywhere you go, America is a gorgeous place. Many of the higher income residents choose to live in coastal states. Simply put, the like access to views, oceans, and cooler climates. So, that’s a big factor.
Another factor is that coast states have access to trade via the oceans. This provides more trade opportunities for coastal states than landlocked states. With that in mind, no matter where you live, you do have control over your income, at least active and passive income. Moving to California does not automatically put more money in your pocket. Your other actions do however.
Income Classes In America
There are four income classes in America. They are lower class, middle class, upper middle class, and wealthy. The income brackets for each income classes changes a little year by year based on inflation and income averages. The bracket are set by the government and are currently, $9,526 to $38,700, 38,701 to $82,500, $82,501 to $157,500, and $157,501 to $200,000. Remember, you are not bound by which you are labeled. If you are in the middle-income class and want to become wealthy, it is within your power to do so.
There are also some income disparities to note. It is a hard fact that in the United States of America two people doing the same job are often paid a different amount of money. If you work for a government agency, this is usually controlled for decently. However, within the private sector there are income disparities for women and people of color. For some reason, both of these groups are paid less than white males to do the same work. You would think this would have changed being that it is 2018. However, no.
The income disparities still exist despite women outpacing men in college and an increase of minorities now accessing college. This factor, as shameful as it is, can impact your average annual income, based on it being a factor that you were merely born into. Time for this one to change, but until it does, it could impact you a great deal.
Income Approaches That Can Change Your Life
Based on what you have read so far, you can take account your income status. There are a few income approaches that can change your life drastically. You learned that there is a difference between surprise, active, and passive income. Most people who are employed have active income. My challenge to you is to purse passive income as well.
Passive income is one to the best additional income approaches that can change your life. If you are willing to put in a little work, day by day, you can earn on going passive income everyday, every hour. The truth is that you cannot simply let go of your current job as an active income source. Any person or website that tells you that is lying. What you can do is start building your passive income potential could one day be more than what you are active income may currently be.
The best resource of passive income is blogging and affiliate marketing. It is simple to do, and you set your own pace doing it. You are your own boss and it is a very lucrative field. With blogging and affiliate marketing, you keep 100% of your profit, minus the taxes of course. You stand to make a better living doing it.
There are a few resources that I can recommend when it comes to blogging and affiliate marketing. In the most self-serving way possible, this website BroketoBest, is one of those resources. We have many blog posts and resources available to help you. We do not charge money for the information. It is simply there for you to access. There are two posts that I can recommend to help you get started with blogging, affiliate marketing, and changing your financial life through passive income. Please read our Earn Money Affiliate Marketing post and our Passive Income Definition post. This will put a few things in perspective for you about your potential to change your income approaches.
I would also recommend affiliate marketing packages. These cost little money and accelerate your ability to make passive income tremendously. They are both short videos that you can watch, learn more about making passive income, and get started: Income #1 and Income #2. No matter your income by household, you could benefit from extra money.
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