Comparing Military & Non-Military Income
How much money does the “average” American make?
It is vital that you understand just what the truth is. The lifestyles typically represented on television are, unsurprisingly, not reflective of reality. No one believes that rich and famous we see on television have the same standard of living that the average American does. We aspire to that level of riches, but we understand they are not like most of us. Unfortunately, we are also misled when we “ordinary” people portrayed in the media. The young woman living in an expansive New York City apartment, while working as a barista or as a writer at a fashion magazine, is not reality. The average barista in New York City makes about $17 per hour, or a little more than $35,000 a year. The average fashion writer in New York City makes a little more than $26 an hour (just over $55,000 a year). Contrast this income with the cost of rent in New York City, where the average rent is more than $87 per square foot. After taxes (Federal income tax, Medicare, Social Security, state income tax, NYC income tax), our fashion writer is left with about $3,050 each month. If she spends 100% of her income on rent, she could rent a 34-square-foot apartment (less than 6 foot square). Not big enough to fit a twin bed (the mattress alone is 75 inches long), and certainly nothing like television would lead us to believe. Indeed, if our fashion writer budgets her money effectively (allowing her to eat, bath, and do other things we all enjoy), she would spend about 25% of her gross income on housing. That brings the money available for rent down to about $1,145 each month. This is enough to rent about 13 square feet in New York (about enough space to sit down). Clearly, what we see in the media is typically very different from reality.
Unfortunately, we cannot rely on what we see in real life either. As you will learn, most Americans fall into one of two groups: 1) people who spend money people, and 2) who have money. Most American fall into the first group. A recent study found that 41 percent of “Gen Z” (born between 1995 and 2010) have a negative net worth! That’s right, your neighbor owes money more than she has in the bank. One way to think of this: If you have no debt, and you have $1 in your pocket, you might be in the top half of your generation in terms of wealth. Your friends may have nicer cars and nicer apartments that you, but you can reasonably assume they have no wealth; they are spending every penny they have. . . and then spending more! Their lifestyle might be nicer than your today, but this behavior is not sustainable. More on that later.
To get the answer to the question of how much our peers are actually making, we turn to the data collected by the United States government (data collected by the Bureau of Labor Statistics).
So, what’s it all worth? Let’s imagine, you have just finished your training (usually about six months or so in duration) and are now an E-2 stationed at Fort Hood, Texas (an area with a cost of living that is about 80% of the national average). Your basic pay for the year would $31,190.40. You will likely be living in the barracks, but if you were living off base your housing allowance would equal $15,588 for the year. It is also likely that you would be getting all of your meals for free; if not, you would receive an annual Basic Allowance for Subsistence (BAS) totaling $5,589.24. The tax advantage you enjoy –because you don’t need to pay income tax on your housing allowance or your BAS– is equal to $2,117.70. The estimated value of your medical coverage is at least $5,488 (for you as a single person). So, at the very start of your career, your compensation package is worth more than $59,000 a year! Compare that with the average personal income in this area of $24,941.26 You’re less than a year out of high school and making more than twice as much as the people around you, not to mention the fact that you are also earning a pension and get four weeks of paid vacation every year. In the later years of your career, you would be earning much more; in fact, 20 years into your career you would be making more than twice as much as you made at the start. The total compensation for an E-7, with a spouse and kids, living in the Fort Hood area would be well over $100,000 –four times what their “average American” neighbor is bringing home.