No, the American dream doesn't cost 130K

A few weeks ago, I was browsing the Internet with my morning coffee when a link to a write-up at USA Today caught my eye. It read "Price tag for the American dream: $130K a year."

The article, which is based on a study conducted by researchers at Cornell University, claims that the rising costs of everything from food to housing have resulted in a new American dream that is out of reach for all but the one in eight American families who earn at least $130,000 per year. They apparently wrote a book about their study as well, in which they described the American dream as "finding and pursuing a rewarding career, leading a healthy and personally fulfilling life, and being able to retire in comfort."

Why does the American dream suddenly cost 130K?

But, $130,000? Confused, I dove right in, picking the piece apart in an effort to understand where the authors were coming from. I even wondered if I had misread the title or discovered the world's most unfortunate typo. No such luck. Here is the basic rundown of the new price tag for the American dream, according to USA Today:

Essentials -- $58,491
  • Housing ($17,062)
  • Groceries ($12,659)
  • Car expenses ($11,039)
  • Medical ($9,144)
  • Education for two children ($4,000)
  • Clothing ($2,631)
  • Utilities ($1,956)

Extras -- $17,009
  • Annual vacation ($4,580)
  • Entertainment ($3,667)
  • Restaurant dinners ($3,662)
  • Cable, satellite, Internet, and cell phone ($3,100)
  • Miscellaneous expenses ($2,000)

Taxes and Savings -- $54,857
  • Federal and state taxes ($32,357)
  • College savings for two children ($5,000)
  • An assumption that at least one working parent maxes out their employer-sponsored 401K ($17,500)

Total: $130,357

Although some of these averages seem startling, a handful can be easily explained. The cost of housing, for example, was predicated upon the median price of a new home ($275,000) and a down payment of 10 percent. Then they simply spread the payment over 30 years at 4 percent interest. We all know how the cost of housing varies drastically due to geography, so it makes sense that areas with expensive real estate bring up the average cost for everyone.

Transportation expenses at $11,039 seem high too, but not so much when you consider that the average car payment reached $471 in Q4 of 2013. With the typical monthly car payment reaching epic proportions, it is not hard to imagine any family spending far more than even this study suggests.

What about the rest?

But does living the American dream truly require an annual vacation to a luxury resort as the study suggests? I don't think so. We all know that many families prefer the simplicity of a campsite under the stars and the opportunity to show their children the beauty of nature. Others relax at home, go on cross-country road trips, or travel to visit family instead. Are they simply doing it wrong?

And it's hard for me to imagine a family of four that needs to spend $16,321 on food to achieve the true American dream. They might want to, but it is certainly not a requirement. That's $1,360 per month in case you're keeping track, and a ton of cash if you are making any kind of effort to keep your costs down. Does any family need to spend that much money on sustenance to be truly happy and prosperous? Hardly.

What is the American dream?

In the book "The Epic of America," James Truslow Adams stated that the American dream is "that dream of a land in which life should be better and richer and fuller for everyone, with opportunity for each according to ability or achievement. It is a difficult dream for the European upper classes to interpret adequately, and too many of us ourselves have grown weary and mistrustful of it. It is not a dream of motor cars and high wages merely, but a dream of social order in which each man and each woman shall be able to attain to the fullest stature of which they are innately capable, and be recognized by others for what they are, regardless of the fortuitous circumstances of birth or position."