According to a report, only 33% of millionaires consider themselves wealthy. Understanding the psychology behind feeling wealthy.

• Although many Americans have experienced an increase in wealth, a significant number of them, including millionaires, are not confident in their financial stability.
• Building wealth is often hindered by credit card debt.
• According to Jean Chatzky, CEO of HerMoney.com, high-interest rate credit card debt is a savings killer because it consumes more of your income than other types of debt. You can't save or invest when you're constantly paying off high-interest debt.

Despite the U.S. experiencing an unprecedented wealth boom, few Americans, including millionaires, feel confident about their financial standing.

A recent study by Edelman Financial Engines reveals that just 12% of Americans classify themselves as wealthy.

According to a report by Edelman Financial Engines, only 33% of millionaires agreed with the same sentiment, despite their high net worth. The study polled over 3,000 adults aged 30 and above, including 1,500 affluent Americans with household assets between $500,000 and $3 million, from June to July.

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The wealth of the top 1% has surged by $2 trillion in the first quarter of 2024, reaching a record $46.2 trillion, thanks to gains from their stock holdings, according to Federal Reserve data.

Since the start of the Covid-19 pandemic in 2020, the concentration of wealth creation has been mainly among homeowners, according to the Fed's survey of consumer finances.

"Jean Chatzky, a personal finance expert and CEO of HerMoney.com, stated that homeownership does not equate to wealth. According to her, homes are a daily asset that is used, unlike the balance in a retirement or savings account."

High inflation for an extended period led to an increase in the cost of everything, leaving less financial flexibility in households.

Higher prices put households under pressure

The consumer price index, which measures average prices of a broad basket of consumer goods and services, decreased by 2.5% in August compared to the same month a year ago, according to the Bureau of Labor Statistics. This is a significant decrease from the pandemic-era high of 9.1% recorded in June 2022.

Despite the decrease in inflation, prices are still increasing at a slow rate rather than falling outright. To manage their finances, individuals are increasingly turning to credit cards to cover their daily expenses, according to data.

Credit card debt is the biggest threat to building wealth

The average credit card balance for Americans has increased by 4.8% year over year, resulting in a record $1.14 trillion owed on credit cards, as stated by the New York Fed and TransUnion.

The number of borrowers carrying debt from month to month and falling behind on their monthly credit card payments has increased. According to the New York Fed, approximately 9.1% of credit card balances transitioned into delinquency during the second quarter of 2024.

According to Edelman Financial Engines, nearly half of Americans consider credit card debt as the greatest obstacle to wealth accumulation, with 44% of the population expressing this concern.

"High-interest rate credit card debt is a savings killer because it prevents you from saving and investing," Chatzky stated.

"People cannot feel wealthier due to the obstacle that prevents them from accumulating actual wealth."

How much money it would take to feel wealthy

According to Edelman Financial Engines, most people (65%) believe they need $1 million in the bank to be considered wealthy, while 28% require at least $2 million and 19% set the bar at $5 million or more. Among millionaires, 68% need at least $3 million and 40% believe feeling wealthy requires $5 million or more.

A majority of survey respondents (58%) stated that they would require an average salary of $100,000 to alleviate concerns about daily living expenses, while a quarter (25%) indicated that they would need to earn more than $200,000 to achieve financial security.

Experts suggest that financial security is not determined by income, but rather by saving more than spending, diversifying investments, and consulting with a financial advisor.

"Not worrying about money is a key aspect of feeling wealthy, according to Isabel Barrow, the director of financial planning at Edelman Financial Engines. This involves living within your means and avoiding excessive debt."

Nearly half of millionaires believe their financial plans need improvement, while only one-third consider themselves wealthy, according to a study by Northwestern Mutual. The study polled over 4,500 adults in January.

According to John Roberts, chief field officer at Northwestern Mutual, for most Americans, feeling confident and clear about the future is more important than believing they are rich when it comes to exuding a sense of wealth.