Data Dive

Data Dive: Where's Your Money Going?

Dustin Boyd

Dustin Boyd

— 21 min read
Data Dive: Where's Your Money Going?

Understanding the Money Cycle

The data presented below was gathered in our research chat, which you can see published here, where we explore the ways in which our economic and financial systems are currently designed, specifically digging into the typical fee structures and required payments to be a "part of the system".

The Bottom 50% Hold Just
2.5%
of U.S. Wealth
While the Top 1% Control
>30%
of U.S. Wealth

Between 1989 and 2023:

The Bottom 50% wealth share has remained
Essentially Flat
While The Top 1% increased their share
from 23.5% to 30.5%

Source: Federal Reserve Distributional Financial Accounts, Q3 2023

The Numbers Behind the Squeeze

The data tells a consistent story: wealth is flowing upward while working people fall behind.

$79T
Wealth Transferred Upward
Since 1975, $79 trillion has been redistributed from the bottom 90% to the top 1% — the difference between what workers earned and what they would have earned if income growth had remained as equitable as before.
(RAND Corporation, 2020)
1,322%
CEO Pay Growth (1978-2020)
CEO compensation grew 1,322% since 1978. Typical worker compensation grew just 18% in the same period — despite productivity increasing 60%.
Economic Policy Institute, 2021
25%
Believe They Can Get Ahead
Only 1 in 4 Americans believe they have a good chance of improving their standard of living — a record low in surveys dating to 1987. Nearly 70% say the American Dream no longer holds true.
(WSJ-NORC Poll, March 2023)
37%
Can't Cover $400 Emergency
More than 1 in 3 Americans couldn't cover a $400 unexpected expense using cash or savings. 13% couldn't cover it by any means at all.
Federal Reserve SHED Survey, 2023

Where Your Wealth Goes

Every day, institutional systems extract wealth through fees, interest, and premiums. Here's what our research revealed about the scale of extraction.

$45-60K
Annual Extraction
Estimated wealth extracted annually from median-income households through the financial system—nearly equivalent to the entire household income.

Based on Federal Reserve data and consumer finance research

$15B
Overdraft Fees (Annual)
Banks collected $15 billion in overdraft fees in 2021, disproportionately from lower-income households who can least afford them.

Source: Consumer Financial Protection Bureau, 2022

$400B+
Credit Card Interest
Americans paid over $400 billion in credit card interest in recent years, with average APRs between 15-25% on revolving balances.

Source: Federal Reserve Consumer Credit Data

67%
Living Paycheck to Paycheck
Two-thirds of Americans live paycheck to paycheck, eliminating their ability to avoid extraction through emergency credit or fees.

Source: LendingClub Report, 2023

How the System Works

Understanding the mechanics of wealth extraction helps us see the patterns. Here's how the system captures resources, locks people in, extracts wealth, and compounds inequality.

Entry Points: Where You Put Resources In

The system captures resources through three primary channels. Each one feels voluntary, but modern life makes them effectively mandatory.

💼

Labor Input

  • Workers sell time/skills for wages
  • Wages deposited into bank accounts (often required)
  • Retirement contributions automatically deducted
  • Health insurance tied to employment
🛒

Consumer Participation

  • Housing purchases require mortgages
  • Education requires student loans
  • Transportation requires auto loans
  • Daily expenses push toward credit cards
  • Insurance purchases mandatory for many needs
🏠

Asset Ownership

  • Home equity (if you can afford homeownership)
  • Retirement savings (401k, IRA)
  • Investment accounts
  • Small business capital

Lock-In Mechanisms: How You Get Trapped

Once you enter the system, a series of dependencies make it nearly impossible to leave. Each decision locks you into the next.

Need Employment

To earn income, you need a job. That job requires a bank account for direct deposit.

Need Transportation

Most jobs require a car. That car requires an auto loan and mandatory insurance. Now you have monthly payments and premiums.

Need Housing

You need to live somewhere near work. Rent or mortgage ties you to location. Housing costs often exceed 30-50% of income.

Need Healthcare

Health insurance tied to employment. Leaving job means losing coverage. Medical emergencies without insurance can bankrupt you.

Need Credit Score

Renting, buying, even getting utilities requires good credit. This forces participation in credit systems whether you want to or not.

Living Paycheck to Paycheck

67% of Americans live paycheck to paycheck. No emergency savings means any crisis forces you into high-cost credit. The cycle compounds.

Extraction Points: Where Wealth Flows Out

Once you're locked in, the system extracts wealth through multiple layers. These aren't optional—they're built into how modern life works.

🏦

Financial Services Layer

Banking Fees
$4-15/month
Monthly account fees, overdraft fees ($35 per), ATM fees, wire transfer fees, minimum balance requirements
Credit Card Interest
15-25% APR
Interest on revolving balances. Average household with credit card debt pays $1,000+ annually in interest alone
Mortgage Interest
Doubles home cost
On a 30-year mortgage, total interest paid often equals or exceeds the original purchase price. Plus closing costs (2-5%), PMI, refinancing fees
Student Loan Interest
Often exceeds principal
Interest accumulates during school and forbearance. Many borrowers pay 1.5-2x the original loan amount over repayment period
Payday Loans
300-500% APR
Emergency credit for those locked out of traditional banking. Creates debt spirals that are nearly impossible to escape
🛡️

Insurance Layer

Health Insurance
$500-2,000/month
Monthly premiums for families, plus deductibles ($1,500-8,000), co-pays, out-of-network penalties, and coverage denials
Auto Insurance
$100-200/month
Legally mandatory. Premiums rise faster than inflation. Rate increases after claims, even when not at fault
Homeowners Insurance
$100-300/month
Required by mortgage lender. Deductibles reduce actual coverage value. Premiums rising dramatically in climate-affected areas
🏘️

Housing Layer

Rent
30-50% of income
Monthly payments build zero equity. Annual increases often exceed wage growth. Security deposits, application fees, renters insurance
Mortgage Interest
Primary extraction
Doubles total cost of home over 30 years. Front-loaded interest means early payments are mostly interest, not principal
Property Taxes
1-3% annually
Based on assessed value. Rise faster than wages in many areas. Failure to pay can result in losing home
📈

Investment/Retirement Layer

401k Management Fees
1-2% annually
Compounds over decades. A 1% fee can reduce retirement savings by 25-30% over 30 years
Early Withdrawal Penalties
10% + taxes
Money is locked away until retirement age. Emergency access triggers massive penalties, forcing people into high-cost credit instead
Trading & Advisory Fees
Varies widely
Transaction fees, management fees, performance fees. Advisors often charge 1% of assets under management annually
💼

Employment Layer (Hidden Deductions)

Payroll Taxes
7.65% (employee)
Social Security and Medicare taxes come out before you see your paycheck. Employer pays matching 7.65%
Healthcare Premiums
$200-800/month
Deducted from paycheck before taxes. Employee share of premium for employer-sponsored health insurance
Retirement Contributions
3-10% of salary
401k contributions lock money away with penalties for early access. Reduces take-home pay immediately
Unpaid Time
Hours per week
Unpaid commute time, unpaid overtime (salary exemptions), required training, work-from-home costs (internet, equipment, utilities)
💳

Daily Transaction Layer

Payment Processing
2-3% per transaction
Credit card merchant fees passed to consumers via higher prices. Convenience fees for online payments
Subscription Economy
$200-500/month
Streaming services, software subscriptions, payment plans. Replaces one-time purchases with perpetual payments
Late Fees & Penalties
$25-40 per occurrence
Credit cards, utilities, rent, loans. Designed to maximize revenue from those living paycheck to paycheck

The Feedback Loop: How Inequality Compounds

The system doesn't affect everyone equally. Starting position determines whether you accumulate wealth or whether wealth gets extracted from you. Here's how the same system produces opposite outcomes.

What You Can Actually Do

Based on your income level, here are realistic strategies to reduce wealth extraction. Not all strategies work for everyone—feasibility depends on both money and time.

Select Your Income Bracket:

Switch to Credit Union

High Feasibility

Credit unions are member-owned and return profits as lower fees and better rates. Most offer free checking with no minimum balance requirements.

Potential Annual Savings
$300 - $600

Time: 2-4 hours initial setup. Minimal ongoing effort. May require changing direct deposit and auto-payments.

Eliminate Overdraft Fees

High Feasibility

Opt out of overdraft "protection" (which charges you $35 per transaction). Instead, transactions simply decline if you lack funds.

Potential Annual Savings
$200 - $500

Time: 15-minute phone call or online form. No ongoing effort required.

Use Free Bill Pay Apps

High Feasibility

Apps like Mint Mobile, prepaid plans, and free bill management tools eliminate late fees and reduce monthly costs without requiring credit checks.

Potential Annual Savings
$150 - $400

Time: 1-2 hours to research and switch. Minimal ongoing management.

Trade-off: "Free" apps monetize through your financial transaction data, which has significant commercial value. You're trading privacy for reduced fees—a reasonable choice at lower income levels where fees hurt most, but worth understanding explicitly.

Avoid Payday Loans at All Costs

Medium Feasibility

Payday loans charge 300-500% effective APR. Consider alternatives: credit union emergency loans (12-18% APR), employer advance programs, or community assistance.

Potential Annual Savings
$500 - $2,000

Time: Varies by alternative. Requires advance planning before emergencies hit.

Build $500 Emergency Fund

Low Feasibility

Even $500 prevents most emergency credit needs. Start with $25/month automatic transfer to a separate savings account you don't touch.

Long-term Savings
$1,000+ annually once established

Time: Minimal ongoing effort, but requires 20 months at $25/month to reach $500. Discipline required to not tap it.

Refinance High-Interest Debt

High Feasibility

Consolidate credit card debt (15-25% APR) into personal loan (8-12% APR) or balance transfer card with 0% intro rate. At this income level, you likely qualify.

Potential Annual Savings
$1,500 - $3,000

Time: 3-5 hours to compare offers and apply. Requires good credit score (680+). One-time effort with ongoing savings.

Maximize Employer 401k Match

High Feasibility

If employer matches up to 5%, contribute at least 5%. This is free money—typically 50-100% immediate return. At this income level, you can likely afford it.

Annual Benefit
$2,000 - $4,000 in free employer contributions

Time: 1-hour setup through HR portal. Automatic ongoing deductions. Reduces take-home pay but builds wealth.

Drop PMI on Mortgage

Medium Feasibility

If you have a mortgage with PMI (private mortgage insurance), once you reach 20% equity, request removal. Many lenders won't tell you automatically.

Potential Annual Savings
$1,200 - $2,400

Time: 2-3 hours to get appraisal and submit removal request. Requires reaching 20% equity threshold through payments or appreciation.

Shop Insurance Annually

High Feasibility

Auto and home insurance companies raise rates gradually, betting you won't shop around. Comparing quotes annually can save significantly with zero service degradation.

Potential Annual Savings
$500 - $1,500

Time: 2-3 hours annually to compare quotes. One-time effort with immediate savings. Set calendar reminder.

HSA Triple Tax Advantage

Medium Feasibility

If you have a high-deductible health plan, maximize HSA contributions ($4,300 individual, $8,550 family in 2025). Tax-free in, tax-free growth, tax-free out for medical expenses.

Annual Tax Savings
$900 - $1,800

Time: 1-hour setup, automatic contributions. Requires having eligible health plan and ability to pay medical expenses out of pocket initially.

Accelerate Mortgage Principal

Low Feasibility

Extra $100-200/month toward mortgage principal can save tens of thousands in interest over life of loan. At this income level, tight but possible if budget allows.

Long-term Savings
$20,000 - $50,000 over loan life

Time: Minimal—set up automatic extra payment. Requires disposable income and discipline to maintain. Long time horizon to realize savings.

Max Out Tax-Advantaged Accounts

High Feasibility

At this income level, you can likely max 401k ($23,500 in 2025), IRA ($7,000), and HSA ($8,550 family). This reduces taxable income by up to $39,050 annually.

Annual Tax Savings
$8,500 - $11,000

Time: 2-3 hours initial setup through payroll and online platforms. Automatic ongoing. Significantly reduces take-home but builds long-term wealth.

Refinance Mortgage to 15-Year

Medium Feasibility

If you can afford higher monthly payments, switching from 30-year to 15-year mortgage typically saves 1-1.5% on interest rate and cuts total interest paid nearly in half.

Long-term Savings
$80,000 - $150,000 over loan life

Time: 8-12 hours for refinance process. Requires qualifying income and manageable debt-to-income ratio. Monthly payment increases 30-50%.

Backdoor Roth IRA

High Feasibility

At this income level, you may be phased out of direct Roth IRA contributions. Backdoor Roth (contribute to traditional IRA, immediately convert to Roth) is legal workaround for tax-free retirement growth.

Long-term Value
$50,000 - $200,000 in tax-free retirement growth over 30 years

Time: 3-4 hours to understand process and execute annually. Requires working with brokerage or financial advisor. Must not have existing traditional IRA balance to avoid pro-rata rule.

Negotiate Better Investment Fees

High Feasibility

With $100K+ in investments, you likely qualify for lower fee tiers. Switch to low-cost index funds (0.05% vs. 1% fees). Over decades, this compounds dramatically.

Long-term Savings
$100,000+ over 30-year investment horizon

Time: 4-6 hours to research, compare platforms, and transfer accounts. One-time effort. May trigger tax events if moving taxable accounts.

529 College Savings Plans

Medium Feasibility

At this income level, you can likely contribute meaningfully to 529 plans for children. Tax-free growth for education expenses. Some states offer additional tax deductions.

Annual Tax Benefit
$500 - $2,000 (varies by state)

Time: 2-3 hours to research plans and set up automatic contributions. Requires having children or intended beneficiaries. Funds locked for education use.

Umbrella Liability Insurance

High Feasibility

At this income/asset level, you're a target for lawsuits. $1-2M umbrella policy costs $200-400/year and protects everything you've built from catastrophic liability claims.

Risk Protection
$1-2M additional liability coverage for $200-400/year

Time: 1-2 hours to get quotes and purchase. Minimal cost relative to protection. Requires already having auto/home insurance with same carrier typically.

The Local Economy Question

You might wonder: "What if I just buy local and avoid large corporations entirely?" It's a reasonable question—and it does help. But the reality is more complex.

When you buy from local businesses, more money stays in your community. Local owners reinvest locally, hire locally, and don't extract profits to distant shareholders. This matters.

But here's what we discovered:

💰 Price Premium
Local businesses often cost 10-30% more due to lack of scale advantages. At lower income levels, this premium is unaffordable without sacrificing necessities.
🏢 Infrastructure Lock-In
Even local businesses use corporate banking, payment processors, insurance, and supply chains. Your local coffee shop still pays Visa 2-3% per transaction.
⏰ Time Costs
Working multiple jobs? Shopping local takes more time—multiple stops instead of one-stop shopping. Time is a resource lower-income households can't spare.
📍 Geographic Access
Many communities have been hollowed out by corporate chains. Local alternatives simply don't exist for essential goods in many areas.

The class dynamic: Buying local is more feasible for higher-income brackets who can absorb price premiums and have time flexibility. It's a helpful strategy where possible, but it can't be the solution for most people at most income levels.

The extraction system operates at the infrastructure level—banking, payment processing, insurance, debt financing. Even when you shop locally, institutional capital still extracts wealth through these mandatory systems.

What Unites Us

Whether you earn $40,000 or $140,000, you're experiencing versions of the same squeeze. The strategies differ, but the system is the same: institutional capital extracting wealth through mandatory participation points.

The bottom 50% holds 2.5% of wealth.
The top 1% holds 30.5%.

This isn't about left versus right. It's not about lazy versus hardworking. It's about a system that results in wealth channelling upward through financial infrastructure that working people must use but don't control or influence.

Where the Money Goes

Interest payments flow to capital holders. Fee income concentrates in financial institutions. Rent builds equity for property owners, not renters. Stock market gains accrue to the investment class.

The math: A typical worker might pay 2-5% in banking/payment fees, 15-30% in debt service (mortgage, auto, credit card), 10-20% in insurance premiums, 1-2% in investment fees — plus housing costs representing 30-50% of income.

The bottom 90% of Americans' share of total income fell from 67% in 1975 to below 47% in 2019. Most of that loss went to the top 1%, whose share nearly doubled from 7.3% to 12.9% (EPI, 2022).

The strategies outlined above can help individuals reduce extraction. They're worth pursuing. But individual action can't fix systemic design.

Why This Drives Inequality

Starting position matters: Born with assets → access to low-cost credit → acquire more assets → wealth compounds. Born without assets → high-cost credit → extraction via fees/interest → wealth depletes.

Compounding effects work both directions: Fees compound against workers (debt spirals). Returns compound for capital holders (investment growth). The wealthy can wait; workers living paycheck to paycheck cannot.

The evidence is clear: Research shows inequality accounts for more than 70% of the decline in absolute mobility — far more than slowing economic growth (Chetty et al., FiveThirtyEight analysis).

This isn't speculation. It's the mechanical operation of the system—not a moral judgment, but a structural analysis of where wealth enters, how it's extracted, and where it accumulates.

The real question is: do we want an economy where wealth extraction is the business model, or do we want an economy where working people can actually build wealth?

That's not a partisan question. That's a practical question about what kind of economy can sustain itself—because one where workers can't afford to be consumers eventually breaks down for everyone.

We're all in the same system. The only question is whether we organize to change it, or keep getting squeezed separately.

Sources & Methodology

All claims in this analysis are based on documented research from credible sources. Here's where the data comes from.

Primary Data Sources

Federal Reserve Distributional Financial Accounts (DFA)

Quarterly data on wealth distribution across U.S. households. Provides wealth share percentages by income/wealth percentile.

https://www.federalreserve.gov/releases/z1/dataviz/dfa/distribute/chart/

Consumer Financial Protection Bureau (CFPB)

Overdraft fee data, consumer credit reports, financial protection research. 2022 report on overdraft fees totaling $15 billion annually.

consumerfinance.gov

Federal Reserve Consumer Credit Data

Credit card debt, interest rates, and revolving credit statistics. Source for $400B+ annual credit card interest figure.

federalreserve.gov/releases/g19

Bureau of Labor Statistics (BLS)

Wage data, productivity statistics, employment costs, and consumer expenditure surveys.

bls.gov

LendingClub Report

2023 report on paycheck-to-paycheck statistics showing 67% of Americans living without financial buffer.

lendingclub.com

Methodology

Wealth Extraction Estimates: The $45-60K annual extraction figure is derived from aggregating typical household costs across financial layers: banking fees, credit card interest, mortgage interest, insurance premiums, investment fees, and payment processing costs. This represents the institutional capital layer between income and take-home purchasing power.

Income Bracket Strategies: Feasibility assessments are based on: (1) typical discretionary income at each bracket, (2) time requirements relative to work schedules, (3) access to financial products based on credit scores and assets, (4) documented savings ranges from consumer finance research.

Feedback Loop Comparisons: Based on longitudinal wealth accumulation studies, Federal Reserve Survey of Consumer Finances data on wealth by age cohort, and research on intergenerational wealth transfer patterns.

Cross-Verification: All significant claims are verified across multiple independent sources. Where estimates are used, ranges reflect documented variance in consumer finance literature.

Additional Research Sources

• Federal Reserve Survey of Consumer Finances (wealth by demographic)

• National Association of Insurance Commissioners (premium data)

• Government Accountability Office reports on retirement savings

• Economic Policy Institute wage and productivity analysis

• Center for Responsible Lending research on predatory financial products

• Urban Institute housing cost and wealth building research

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