The Poor Middle-Class
Rich at Queercents has a good post on what it takes to be middle class and makes a great case on why being middle class (at a $75k annual income) means barely getting by.
Sadly, I agree with the post. Ever since the 1960s, where a single earner in the family could provide for a family and send the kids to college, the average american’s standard of living has been eroding at a steady pace. Of course the average house is 30% bigger than a 60s house but apart from the bump in creature comforts, there has been a drastic decrease in the amount of savings.
It now takes 2 incomes to maintain a decent lifestyle, and again, most people barely get by. There’s the choice people have to make – do I want to save for my retirement this year, or go on vacation? And with the government lying about the rate of inflation, Social Security payments (or bank savings rates) haven’t been keeping up. As a result, many seniors who thought the government would take care of them have an even more difficult choice – should we buy food or medicine?
In California, where the median house price is $550k (and dropping), being middle-class is even more difficult. I have friends, where both spouses work. One of their incomes goes totally towards house payments! So far I’ve turned down my wife’s complaints about moving into a bigger house on the grounds that we can’t afford it. I’d rather make the extra payments into areas where the house prices are appreciating and the rent covers most of the mortgage. Its better to have 5 appreciating assets you can afford than 1 depreciating “asset” that you can’t. (isn’t that really a liability?) Of course, the popular press will make stupid comments like “your house is your biggest asset” instead of saying, “if your house is your biggest asset, it just means you don’t really have any assets and are probably broke”. (that deserves a separate rant of it own!)
Just goes to show that no one will take care of you. Its up to you to make your own financial future, to learn about finances and investing, to make the right and smart decisions, to live below your means, and to develop alternate means of income. And thats Kiyosaki’s philosophy in a nutshell! Now you don’t have to read the book 
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February 16th, 2007 at 7:34 pm
This argument drives me nuts. Even with my website income, I do not make $70k per year, and yet my wife (a SAHM) and I and our daughter are doing just fine. At least, I think I am.
I don’t treat my money like your average Joe Sixpack, for sure, but basing “middle class” on income just doesn’t work. It’s a regional thing, and if you live in a high-cost-of-living area, then yeah, $70k will probably feel like you’re living threadbare.
However, if you live somewhere like Texas or Oklahoma, $70k is comfortable. And houses don’t cost $550, so being a homeowner is certainly do-able.
So I guess I’m saying that generalities aren’t always applicable. In some places, one decent income works just fine.
February 17th, 2007 at 12:15 am
“Middle class” is a term than means different things to different people and may vary with context. As Michael points out whether a given level of income makes someone comfortably middle class may well depend on living costs (and other factors).
The point made about the government lying about the true rate of inflation is an important one for anyone planning a comfortable retirement.
February 18th, 2007 at 6:45 pm
Yet at the same time there are so many things that Americans think they “need”. Cable TV, multiple phones, big vans or SUVs, eating out frequently, walk-in closets stuffed with clothes, plasma screens, console game systems, etc etc.
I don’t have as much empathy as I probably should, as there’s tons of discretionay spending out there that gets categorized as “necessary”.
It’s really all about what’s your relationship with money and what does stuff mean to you? Why are you (not you AIMM, I am speaking at a macro level) buying all that stuff? True, housing is expensive in many places, but there’s sooo much discretionary spending that’s not really needed
February 22nd, 2007 at 12:21 am
I’m not sure that discretionary spending has gone up, but I’m not sure it adds up to a whole person’s income.
As for your home, being your biggest asset, that’s true if you can afford the home and over 30-40 years it will appreciate. If you look at my parents, and many other people’s parents, their home was their biggest asset. There’s really no reason why that couldn’t happen again.