A college degree, a respectable salary, and a house in the suburbs. These are likely familiar milestones we've been taught to associate with financial success. They matter today because we're going to examine whether the traditional American Dream still makes financial sense, particularly for younger Americans entering an economy where housing prices, household debt, and financial assets have reached extraordinary levels.

Let's start with housing, because I find it interesting how we've come to associate homeownership with building wealth, while renting is often described as throwing money away. There's certainly some truth to the argument. When you purchase a home, a portion of your mortgage payment goes toward building equity in an asset that may appreciate. But that doesn't necessarily mean purchasing a home is the better financial decision. Especially when we begin accounting for the actual cost of ownership and what that same money could have earned elsewhere.

Consider a $1.1 million home in California. At a mortgage rate of approximately 7.42%, putting 20% down means an initial payment of $220,000 and borrowing the remaining $880,000. Over a 30-year period, your monthly principal and interest payment would be approximately $6,105. That's about $2.2 million paid to the lender, with roughly $1.32 million going toward interest alone.

Now, the mortgage is only one part of the equation. Add property taxes, insurance, maintenance, and potentially HOA fees, and we're looking at approximately $8,800 in monthly housing costs under our assumptions. Over 30 years, including the down payment and estimated closing costs, that comes to roughly $3.4 million, without even accounting for future increases in those expenses.

Three point four million dollars for a house advertised at $1.1 million.

Of course, this doesn't mean you've lost $3.4 million. You'll eventually own the property outright, assuming you complete your mortgage payments, and the property itself may appreciate substantially. However, it's important to distinguish between what a property is worth and what it actually costs to own.

Now let's consider an alternative.

Instead of purchasing the house, you rent a comparable property for $4,500 a month. You invest the $220,000 that would've gone toward the down payment, along with the money you would otherwise have spent on closing costs. Every month, you also invest the difference between your rent and the estimated $8,800 you would've spent on homeownership.

Assuming a 7% annualized investment return, the portfolio could grow to approximately $6.9 million over the same 30-year period, before taxes. Meanwhile, if the purchased property appreciates by 3% annually, its value would reach approximately $2.67 million.

Now, before we conclude that renting is the obvious winner, there are important limitations to this comparison. Rent won't necessarily remain $4,500 for three decades. Property ownership expenses will also change, while the principal and interest payment on a fixed-rate mortgage stays the same. Investment returns are not guaranteed, and the tax consequences of both options differ. So the figures aren't enough to establish that renting will outperform buying in every situation.

Nevertheless, they challenge a commonly accepted belief that purchasing a home is inherently the financially responsible decision.

And that brings us to something I find even more interesting. The distinction between having a high income and actually accumulating wealth.

Because when we turn our attention toward the broader American economy, we begin seeing a similar pattern. The stock market can reach record highs, household net worth can increase by trillions of dollars, and major corporations can report extraordinary financial performance. Yet none of these figures, individually, establish that the average American is becoming more financially secure.

Which raises an important question. If the country is becoming wealthier, who's actually getting wealthier?

That's where we're going to turn our attention next.