How financial milestones have changed over the years

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milestonesThis is an article from our partner site, written by Richard Barrington.

A recent conversation I had with some fellow 50-somethings sparked a series of thoughts on how expectations about wages have changed in the 30-odd years since we got out of college. Some compensation milestones have clearly changed, while some haven’t. This in turn got me thinking about other financial milestones and how they have also changed over the years.

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Comparing the past and the present isn’t simply nostalgia — after all, only by comparing different points in time can you see what course something is on. Unfortunately, the general trend seems to be that Americans are having a harder and harder time reaching their financial goals.

Changes in compensation milestones

The thrust of the compensation conversation is that we remembered two pay milestones from 30 years ago. The first was simply to “make your age”; i.e., if you were 24 years old, that you should be aspire to make $24,000, and so on. While this was considered a goal for the early stage of a career, it was harder than it sounds 30 years ago — my first long-term job after graduation paid me $11,500 to start. Eventually, though, just about everybody I know worked their way up to making their age at one point or another, and this would be a relatively easy goal to reach for anyone coming out of college today.

The other big compensation milestone was making $100,000. Thirty years ago, this nice, round figure was considered a very high level of pay, a sign that you had really made it. Curiously, this doesn’t seem to have changed that much. While $100,000 salaries are common in some professions, they are still a long way away for most people. In part, this is because the rich really have gotten richer, leaving average folks behind. For example, from 2002 to 2012, mean wages in the U.S. rose by 28.8 percent, but median wages rose by just 25.5 percent. The fact that the mean rose faster than the median indicates that the mean was pulled up by stronger growth in the highest salaries. The idea that the rich got richer is confirmed by the fact that the top-25 percent of earners saw their wages grow by 29.7 percent over the past ten years, while bottom-25 percent earners saw just 21 percent wage growth.

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The point is simply this: one milestone has changed greatly, while the other has not. It is now not that big a deal to make your age. However, if you are making $100,000 or more, you should still consider yourself part of a small and very fortunate minority.

Other milestones

Here’s a look at how the nature of some other financial milestones has changed over the years.

  1. First car. The long-standing love affair between Americans and cars has been joined by a growing infatuation with debt. For example, according to Federal Reserve figures on finance companies, the amount of consumer auto loan debt outstanding grew by nearly 40 percent in just three years from 2009 to 2012. With all that debt, people are probably owning nicer first cars than they did 30 years ago, but with car loans stretching in length to eight years now, it is probably much longer before today’s car buyers own their vehicles free and clear.
  2. Paying off student loans. Several of my peers fondly remember reaching this milestone. We were given as long as 10 years to pay off some loans, but most people I know made a point of getting rid of the debt sooner than that. Paying off student loans early may be less of an option these days. According to the Economist, college costs in the U.S. have risen at three times the rate of inflation since 1983, making paying off student loans a bigger accomplishment these days, but one that is likely to be much longer in coming.
  3. First house. From 1989 to 2007, home ownership rates rose from 63.9 percent of American households to 68.6 percent — and this was soon followed by a spike in foreclosure rates. While home ownership has long been linked to the American Dream, pushing too hard for everyone to share this dream has made it a nightmare for many families.
  4. Being ready to retire. Several studies have documented the unreadiness for retirement of most Americans, even those for whom the date is fast approaching. Perhaps we would be better to celebrate beginning to save for retirement rather than completing the job — it’s at least a milestone more are likely to reach, and maybe drawing attention to the beginning of the process would encourage more to start a little earlier.

Though a recurring theme is that Americans have taken on a shocking amount of debt over the years, that’s not the entire problem. What compounds the problem is that more people seem to be miserable about their finances, as reaching financial goals either becomes less satisfying or more elusive under the burden of that debt.

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