Yahoo Finance 5 Reasons You Don’t Feel Middle Class Anymore
If you’ve enjoyed a middle-class lifestyle, it can feel especially jarring to discover you’ve somehow slipped out of that cushy position.
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“As a result of income inequality and stagnant wages, a ‘middle-class’ income doesn’t necessarily buy what it once did for previous generations,” according to Kevin Huffman, personal financial specialist and owner of Kriminil Trading.
“Housing, healthcare and college costs have grown more rapidly than middle-class wages,” he explained. “For many people, even those who don’t identify their incomes in that way, the struggle to maintain a level of consumption that they — or the people around them — would once have called ‘middle class’ is very real.”
According to Huffman, it’s not solely the socioeconomic class that changes, but also the definition for “middle class.”
As Huffman noted, “What was perceived as a comfortable ‘middle class’ lifestyle three decades ago may not be considered as such in the present economic environment. The blurred line between the middle and the lower ends of the socioeconomic scale might further contribute to the feeling of not being a ‘middle class person.'”
Below, experts offer some reasons why you no longer feel middle class.
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Rising Cost of Living
“One of the primary reasons many individuals who are technically middle class still feel like they’re not is the rising cost of living,” said Dennis Shirshikov, financial expert and head of growth at GoSummer.
As he explained it, expenses such as housing, healthcare, education and childcare have all increased significantly faster than wages in many areas.
“For example,” Shirshikov continued, “the median home price in the U.S. has skyrocketed over the past decade, making homeownership a distant dream for many middle-class families.”
Despite earning a decent salary, many people find that a large portion of their income is consumed by these essential expenses, leaving little room for savings or discretionary spending.
Melanie Musson, a financial expert with Clearsurance, agreed.
She added, “While the parameters for the middle class are set based on a national average, where you live can make a significant difference in how you feel. If you’re living in an area with a high cost of living, your national average middle-class income will not be enough to live like the average person in your neighborhood.”
Musson argued that another reason the middle class struggles to feel like they’re still in the middle class is that they foresee major costs coming up and have no idea how they’ll pay for them.
“For example, they may know they need a new roof or a new car, but their budget can’t absorb another payment,” she explained.
“The middle class has been spending so much more on groceries and utilities in the past few years that they don’t have wiggle room in their budget to feel like they have stability. Instead, these rising costs without an accompanying rising income have put a lot of stress on them.”
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Stagnant Wage Growth
Shirshikov believes stagnant wage growth is another critical factor contributing to this sentiment. He said, “Over the past few decades, wage growth for middle-income earners has not kept pace with inflation and productivity gains.”
According to him, this has resulted in the real purchasing power of wages declining, even as nominal incomes increase.
“This disconnect means that middle-class earners often find themselves struggling to maintain the same standard of living their parents or grandparents enjoyed,” he added.
High Debt Levels
“High levels of debt, particularly student loan and credit card debt, also play a significant role,” Shirshikov continued. “Many middle-class individuals carry substantial debt burdens, which eat into their monthly income and limit their financial flexibility.”
Huffman agreed, noting that specifically student loan debt, car payments and mortgages pinch disposable income so significantly that middle-class families are often forced to be what economists describe as “house-rich, cash-poor.”
“Outstanding student loan debt in the US has reached nearly $1.7 trillion and current graduates are just beginning to feel both the consumption and the macroeconomic impact of this massive debt burden,” he explained. “Young working professionals feel pinched, and discretionary spending decisions are limited.”
Social Comparison and Lifestyle Inflation
Shirshikov also warned that social comparison and lifestyle inflation can further exacerbate these feelings.
He said, “With the proliferation of social media, people are constantly exposed to the lifestyles of others, often leading to unrealistic comparisons and pressure to keep up.”
Middle-class individuals might feel inadequate if they perceive their peers are living more luxurious lives, even if these impressions are based on selective portrayals.
Shirshikov continued, saying, “Moreover, as people’s incomes increase, there is often a corresponding rise in their spending habits — known as lifestyle inflation.”
Instead of feeling more financially secure with higher earnings, Shirshikov explained how middle-class people often find themselves spending more to maintain a certain image or lifestyle, which can lead to financial strain.
Huffman agreed with Shirshikov, noting that social comparison plays a crucial factor in people feeling less financially secure.
“Following friends on social media and being under pressure to keep up appearances can inspire envy and promote spending,” explained Huffman.
“Pictures on Instagram of lives seemingly being perfectly lived can create excessive spending and financial pressures to buy things that are not necessary, even for people who compare positively in economic class terms.”
Economic Uncertainty
As can be expected, times of economic uncertainty also contribute to the middle class feeling more strapped for cash that ever before.
“The volatile job market, fears of automation and economic recessions create an underlying sense of insecurity,” explained Shirshikov. “Even those with stable jobs and decent incomes might feel that their financial situation is precarious.”
According to him, this fear of potential future financial instability can prevent individuals from feeling secure and truly middle class. That said, experts recommend taking a proactive approach when it comes to one’s financial future.
“Remember, financial security is about more than income,” said Huffman. A sound financial foundation is about living within your means while also saving for your future goals.
Huffman concluded, “… saving strategically and investing smartly is the way to build a secure future for those at all income levels.”
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This article originally appeared on GOBankingRates.com: 5 Reasons You Don’t Feel Middle Class Anymore
