The median household income in the United States in 2021 was $79,900.00. This increased from 2020’s average of $78,500.00 by approximately $1400.00, or 1.7%. Currently, the average U.S. household income in 2022 is $87,864.00, up $7964.00 or 9.9% from 2021. According to these stats, it appears as though the country is moving along just fine right? Think again. While the average household income has increased at an average rate of 5.8% since 2020, expenses have increased at a much faster rate. 

According to Zillow the average home price in the United States in January 2020 was $246,000. In January 2021 the average price increased to $269,039, up 9.3% from 2020. In February 2022, the average home price in the United States was $331,533.00; an increase of 23.2% from 2021. So while the average income in the U.S. is increasing at an average rate of 5.8% since 2020. The average home price in the U.S. has increased at an average rate of 16.25% since 2020. 

If the average U.S. household grosses $87,864,00 annually, that equates to $62,309.31 annual net pay, or $5192.44/month. Rule of thumb is that you should only spend approximately 25% - 30% (max) of your monthly net income on your mortgage/rent. 25% of $5192.44 is $1298.11 and 30% of $5192.44 is $1557.73.  The monthly mortgage payment on a home that sold for $331,533.00 with a minimum 5% down payment and a 30 year fixed loan would be $1673.47/ month. What does this mean? A household netting $62,309.31 cannot afford the average U.S. home costing $331,533.00. 

So let’s look at rent. The national average rent for a one bedroom apartment in the United States is $1683.00, up 22.1% from 2021. We have already shown that a household that makes the average net income of $62, 309.31 cannot afford to pay more than $1557.73/ month for rent. That means that in 2022, an average household that makes that average income, cannot afford to rent a one bedroom apartment. 

We have only discussed the rate of inflation for housing. When you factor in other basic expenses such as average cost of gasoline is $4.24/gal  (up 96% from 2020) , utilities $171.66 (up 48.6% from 2019), and food. The average food cost per month can be a few hundred dollars for singles and over $1,300 for families. Finally, we cannot forget our cell phone bill. Most Americans are pretty helpless unless their smartphones are attached to their hands. The average monthly cell phone bill in the United States is $114/month. 

When all is said and done, after paying your rent/mortgage that you cannot afford, and paying for your basic necessities (needs, not wants), there is not much left over for taxes, fun, and unexpected expenses. This does not bode well for the stock market, as there is definitely not much left (if anything) for investing. 

With the record high inflation rate, how is the average American household supposed to survive, let alone thrive? It does not equate. It ends up being “funny math,” which is not good for our economy or our country. 

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