In a complex economic climate, understanding how consumer behavior is shifting is more important than ever. While many households are navigating rising costs, our latest Visa Business and Economic Insights (VBEI) report focuses on the 'affluent' segment to help businesses and policymakers better understand the full spectrum of economic activity and its geographic dimensions.
Is being a millionaire still the benchmark for wealth? Not exactly. The entry threshold for affluence has risen sharply, and factors like where you live and your generation play a huge role in your economic standing. To understand this new landscape, we sat down with Michael Brown, Principal U.S. Economist from the VBEI team to discuss the key findings from their latest report, "Redefining rich—the geographic dimension of the affluent."
We often hear about 'millionaires,' but your research suggests the definition of 'affluent' has changed. What does it take to be considered affluent today?
The classic milestone of a $1 million net worth isn't what it used to be. We now define "affluent" as entering the top 10 percent of U.S. households. According to our new analysis, this requires an annual household income of $210,000 or higher, or a net worth of at least $1.8 million. This shift is driven by two key factors: a surge in asset prices that has elevated the net worth required, and persistent labor shortages that have fueled strong income growth.
VBEI’s analysis highlights geography as a critical factor. Why is where you live becoming just as important as what you earn?
Where you live can be just as important as what you earn. Significant differences in the cost of living have emerged across the country, reshaping the landscape of affluence. For example, in California, where prices are 13 percent higher than the national average, you'd need an income of about $236,000 to be in the top 10 percent. In contrast, in Arkansas, where the price level is 13 percent lower, an income of $182,000 is enough to qualify. These regional pressures are deepening the gap in what it takes to be considered affluent.
Where are we seeing the biggest concentration of affluent households and spending?
The South is the clear leader, home to the largest share of affluent households (4 million) and the highest share of affluent spending (33 percent). The region’s more affordable housing, lower taxes, and robust job growth have made it a magnet for affluent baby boomers, Gen Xers, and millennials. The West and Northeast have higher income thresholds for affluence due to a higher cost of living, while the Midwest lags in both affluent households and spending.
The findings on generational spending are fascinating. Which generation has the biggest impact on affluent spending, and why?
While Gen X comprises the largest group of affluent households at 57 percent, it's the baby boomers who are spending the most. Affluent boomers make up just 12 percent of affluent households but account for a staggering 42 percent of all affluent spending. They control the bulk of their generation’s wealth and are funding discretionary pursuits like travel and dining through investment income and dividends, rather than spending their wealth out of necessity.
How do the spending patterns of affluent consumers differ from everyone else?
Besides simply spending more, affluent households allocate a larger share of their budget toward discretionary purchases. For example, they over-index in categories like apparel, spending about $180 more per month than non-affluent consumers. We also see they maintain higher levels of discretionary spending for longer in life. Restaurant spending for a non-affluent consumer peaks at age 39, but for an affluent consumer, it peaks at 50. This highlights how their priorities evolve differently and presents a unique opportunity to tailor products and marketing to match their life stages.
By understanding these trends, people and their businesses can make smarter decisions about investment and hiring, contributing to economic growth and stability in communities across the U.S.