Middle Class, Schmiddle Class

Everywhere I look these days someone is discussing the "downfall" of the middle class in America. This of course spirals into talk of how the economy will fail because we NEED the middle class.
News anchors and bloggers are quick to blame the oppressive CEO's and the growing income inequality...but what is really going on and can it be fixed?

First lets define middle class.  Middle class is often defined in terms of income.  The stats below are often what you will see if you flip on a T.V.

Income stats from www.cnbc.com

- Household of one: $24,042 to $72,126
- Household of two: $34,000 to $102,001
- Household of three: $41,641 to $124,925
- Household of four: $48,083 to $144,251
- Household of five: $53,759 to $161,277

Other studies indicate that middle class is measured by wealth.  If you have around $400,000 in assets then you may be considered middle class.

Do you spend 38,000 - 50,000 annually?  Then you may be middle class.

I've always thought this defined middle class...



*By the way, sorry if this is happens to be you...please direct your hate towards google search:)

I digress.

Maybe middle class means comfortable but not excessive.

Whatever the middle class means to you the stats say the middle class is dying.

What the heck is going on here?

I don't believe that the "death" of the middle class can be attributed to any one factor.  Wage inequality makes a nice soundbite or rally cry but why does it matter if a CEO makes millions of dollars (unless he/she hires an army to come throw me in prison).  Income inequality should be renamed income envy in my opinion.

BTW: The only CEO I've ever met is actually been a really nice and generous guy AND he treats his employees spectacularly.   

*I think that many people living beyond their means and then getting hit hard by overdrafts, foreclosures, terminations, etc... contributes to a larger pool of poor people.  A government which encourages welfare and unwise life choices certainly doesn't help.

On the flip side increasing technology, the ease of entry to business ownership, increased financial literacy (internet/blogs/books), and the amazing upward social mobility in America has helped many escape the middle class and become wealthy!

Do we need to fix this? 

I'm going to go out on a limb and say NO.  Everyone who opposes me will most likely lead off with the fact that the middle class drives spending.  I would argue that they drive false spending.

False spending is spending money you don't have.  I'm looking at you credit card junkie...in fact the U.S. median credit card debt is $16,000.  And it doesn't stop there.

Mortgage Debt: $172,806
Auto Loans: $28,535
Student Loans: $50,000

Being middle class doesn't mean prosperity, it means bondage!

Is the middle class the middle class or just the working poor?  According to the stats above it appears that most people are living paycheck to paycheck.  I would also venture to say that these peeps don't have a plan for emergencies ($$$$$).  In other words, when it rains we are all going to get wet!

Maybe being middle class isn't so desirable after all.  The term middle implies that you are in-between the high and the low.  Sounds like a tough spot to be in all day, every day.

Think of it like this:  The middle class shouldn't be a permanent state of life, but merely a transitional period.  

How to escape:

Some people choose to believe that the government is responsible for helping the middle class out...




Not me.  Not in a million years.  I would never trust an organization who came up with social security, medicaid, and lives in debt to run my finances or "help" me out.

I think the best way to escape the middle class is to stop acting like you are middle class.  In America you oddly get to decide whether your arrow points up or down.

• STOP taking out car loans.
• STOP being house poor.
• STOP living check to check
• STOP using credit cards like they solve all of your problems.
• STOP listening to financial advice all willy-nilly.
• START a 3-6 months emergency fund.
• START saving up cash for large purchases (sinking funds).
• START investing.
• START exercising self control, get on a budget, and say no to yourself.

Is everyone in America going to end up in the same place at retirement if they practice these principles? Of course not.  Will it be easy?  Dream on.

But if you practice a few of these simple principles day after day after day you will go from being poor to middle class, and then one day become wealthy.  There is no reason that the average American cannot retire wealthy under his or her own power.  

So get out there, work and save your butt off, and help me kill the middle class!

OSC out.