Why Do We Feel Poor Despite Higher Incomes? A Deep Dive Into American Financial Perceptions

On a global level, the U.S. is generally considered a wealthy country. In light of that, one Reddit user wants to know why people in the U.S. commonly feel so poor.

A May 2024 Pew Research Center study found that 36% of Americans rate economic conditions in the U.S. as poor. And given this recent stretch of rampant inflation, that’s understandable.

But the poster is confused and states that since every U.S. salaries tend to be higher than salaries in the UK, it doesn’t make sense for Americans to feel as poor as they do. But there are a few factors the poster may be overlooking.

When the government fills in the gaps

It’s true that living in the U.S. has some benefits. But as one Redditor writes in response to the original poster, “In the UK, people make it work on less not because life is cheaper, it’s not, but because the government fills in more of the gaps.”

Healthcare is free in the UK. In the U.S., workers can contribute hundreds of dollars a month out of their paychecks for health insurance, and that doesn’t even account for costs like deductibles and copays

It’s a matter of perception and expectations

Another reason so many Americans might feel poor is that they have lofty goals they’re struggling to meet. It may be that they’re able to cover their bills without too much stress, but they’re not necessarily getting ahead the way they want or expect to.

As a Reddit user points out, “Brits generally don’t aim for early retirement the way Americans do. It’s not part of the national conversation in the same way. In the U.S., people chase ‘financial freedom.’ In the UK, most folks just want a quiet life and a pint down the pub. Could boil it down to different expectations.”

How to improve your financial outlook

If you’re someone who feels poor in America, it may be that you don’t earn a very large income and are truly struggling financially. Or, it could be that you may need to reset some expectations.

If you’re looking to improve your financial situation, start by getting into the habit of tracking your monthly spending so you can identify opportunities for savings. If you’re blowing $140 a month on digital entertainment but you don’t use most of it, cut that bill in half and bank the difference. If you’re dining out three nights a week because you’re too lazy to cook, stop being lazy and get to know your kitchen better.

You should also get into the habit of investing your money if you’re not doing so already. Investing is a great way to turn small amounts of money into larger sums over time.

If you’re new to investing, you can always fall back on S&P 500 index funds to grow wealth. Or, consult a financial advisor for guidance. They can help you create an investment portfolio that aligns with your long-term goals and appetite for risk.

Finally, try to identify one or two major expenses to reduce so you’re able to gain more financial freedom. If you’re spending 34% of your salary on rent, see if moving right outside a major city could reduce your rent burden substantially. If so, do that for a year or two to build up a safety net.

If you’re a two-car household, see if it’s possible to downsize to one vehicle. It may be less convenient, but it could do wonders for your finances.

A financial advisor can also look at your spending and help you figure out ways to trim your costs and bank more savings. That could help you feel better about your financial picture as a whole.