Big purchases
One of the biggest costs you’ll bear in your quest for the American Dream is (surprise, surprise) homeownership. Investopedia says buying a home will set you back around $796,998 in your lifetime — based on Zillow’s average home price estimate of $346,653 in September, a 10% down payment and a 30-year fixed mortgage at 7.2%.
That huge total does include other major housing costs like taxes, origination fees, lender charges and home insurance. You could pump a lot more than $797,000 into your housing over time.
Cars will make another big dent in your personal balance sheet — squeezing you for around $271,330 during your lifetime — based on 10 purchases of six-year old used cars, lasting around six years each.
Again, that doesn’t cover additional driving costs like gas, car insurance, maintenance and vehicle registration fees.
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Family milestones
Historically, the phrase ‘American Dream’ has conjured up images of happy children playing in a big backyard with a white picket fence. Well, if that’s the path you choose (even if it looks a little different in today’s ultra-expensive housing market), it’s going to cost you … a lot.
The average cost of a wedding and engagement ring was $35,800 as of 2022, according to The Knot. If you decide to raise a family, that’s when things get really expensive.
Read more: Owning real estate for passive income is one of the biggest myths in investing — but here's how you can actually make it work
A hospital birth for two children will cost you around $5,708, if you’re enrolled in a large group insurance plan. Raising those two children until the age of 18 will cost you over half a million dollars — at a whopping $576,896 — and then if they both want to go to college, the average cost of sending two kids to a state college for one year is about $42,070 (including tuition, room and board).
On top of all that sits your biggest overlying cost: health insurance. Using data from Peterson-KFF, Investopedia worked out the average family premium costs over 39 years (aged 26-65) to be just shy of $1 million — at $934,752, which is almost one-third of the lifetime earnings you’d need to live the American Dream.
Caleb Silver, editor in chief of Investopedia, told The Daily Mail: 'While everyone's idea of the so-called ‘American Dream’ is unique, the rising cost of everything a family might reasonably want and need to afford, like health insurance, owning a vehicle, buying a home, raising children and sending them to college, continues to put that dream further out of reach for most households.”
Retirement
Living out your golden years in comfort will likely be the third biggest expense in your lifetime, according to Investopedia.
If you plan to live off 80% of your pre-retirement annual income, as some personal finance advisers recommend, you’re going to need at least $715,968 to live 12 years in retirement without any money woes.
If you plan to enjoy a longer retirement, you’ll have to plan ahead for that and ensure you have enough money saved and invested — in traditional and alternative assets — to build a sustainable nest egg.
When planning for your financial future, consider using tax-friendly investment vehicles like a 401(k) account or an [individual retirement account (IRA). These accounts allow you to grow your wealth and put your money to work, giving you needed cash flow in retirement.
Stop overpaying for home insurance
Home insurance is an essential expense – one that can often be pricey. You can lower your monthly recurring expenses by finding a more economical alternative for home insurance.
SmartFinancial can help you do just that. SmartFinancial’s online marketplace of vetted home insurance providers allows you to quickly shop around for rates from the country’s top insurance companies, and ensure you’re paying the lowest price possible for your home insurance.
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What to read next
- Commercial real estate has outperformed the S&P 500 over 25 years. Here's how to diversify your portfolio without the headache of being a landlord
- Millions of Americans are in massive debt in the face of rising rates. Here's how to get your head above water ASAP
- Rising prices are throwing off Americans' retirement plans — here’s how to get your savings back on track
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