Yahoo Finance Do You Define Yourself as Middle or Working Class? How Attitude Shapes Your Finances
Financial stability seems to be waning in America. With unrelenting inflation, stagnant wages and an overall feeling of being squeezed, the middle class is struggling.
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This has led many Americans to start defining themselves as working class, feeling that there is no opportunity to get ahead — let alone keep up with the current cost of living.
GOBankingRates reviewed the data on what constitutes the middle class vs. the working class, how things are changing today, and what factors are influencing this change — and chatted with a financial expert to learn how to gain financial stability, even when you’re feeling financially stuck.
Inflation Has Wreaked Havoc on the Middle Class
Inflation is more than just the reported Consumer Price Index (CPI) average rate. The underlying numbers of the index tell a clearer story on what goods and services are spiking in price compared to others.
For example, in 2022 alone, food costs were up over 10%, car insurance was up over 14%, electricity costs were up over 14% and fuel was up over 40%! And this is just one year of data. Those increased costs were stacked even higher in 2023, with additional increases of 20% for car insurance, 3% for electricity, 3% for food and 6% for shelter costs.
Add to that the massive increase in borrowing costs due to the Federal Reserve’s high interest rate policy, plus the increased cost of cars and homes, which have doubled in some areas.
All of this adds up to the cost of living rising at a rapid rate — and wages aren’t keeping up. While inflation has skyrocketed the cost of some basic needs, like food and shelter, wages have averaged about a 3.20% increase annually over the last 15 years.
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Middle Class = Working Class?
These massive cost increases may be why some individuals that qualify as “middle class” based on their income now define themselves as “working class” instead. In fact, according to a 2022 Gallup poll, 63% of Americans defined themselves as middle class or upper-middle class in 2003. That figure had dropped to 52% in 2022.
And in 2003, only 35% of Americans defined themselves as working class or lower class. As of 2022, that figure had jumped to 46% of Americans.
But how middle class and working class are defined can vary, and there are wide ranges of income that define each class.
What Is Middle Class?
PEW Research defines “middle class” as two-thirds to double the median annual salary. Using data from the U.S. Census in 2022, the middle class salary range would be about $49,968 to $149,160.
This wide range showcases why some middle class households feel fine, while others are struggling to get by. With inflationary pressures, a $50,000 salary for a family of five would be much harder to manage than a $149,000 salary.
What Is Working Class?
While the term “working class” doesn’t necessarily have an income amount attached to it, median income data from the U.S. Census can still shed some light. Incomes at the 30th percentile and below could constitute those households with working class jobs. This would put working-class household income at $43,930 or below.
But in some states, this income may be at the poverty level or below, depending on family size. And even some “middle class” families might be considered poverty-level, according to the ASPE Poverty Guidelines.
The Psychology of Societal Classes
Whatever societal class you fall in based on your household income, the cost of living can also have a big impact on your view of what class you belong to. And this view can impact how you handle your personal finances.
GOBankingRates interviewed Loretta Kilday, senior attorney at Debt Consolidation Care, for comment on how your view of what societal class you fall in can impact your decision-making.
“When people consider their situation more cramped, it can affect their choices,” said Kilday. “They may spend time anxiety-easing today instead of saving for the long term. Not expecting better jobs or pay advances causes some to settle. Seeing promotions or further education as unrealistic discourages investment. Feeling trapped could spur more debt, like paycheck advances. Yet debt interest just digs the hole deeper. Banks profit while trapping borrowers on [financial] treadmills.”
This downward spiral in how you view yourself and your circumstances can lead to even more difficulty. This doesn’t mean you should ignore your circumstances and put on a “fake it ’til you make it” attitude. But rather, keep your eyes open for areas that can be improved and have hope for the future.
“An optimistic view is that opening doors to potential bright spots offsets giving in to constraints,” said Kilday. “Support networks and leaders fighting unfairness can also replant seeds of upward mobility. By focusing first on possibilities rather than limits, individuals and communities retain power over their narrative and avoid needless financial strains that challenge America’s middle-class promise.”
How the Working Class Can Gain More Financial Stability
While a more optimistic attitude can help you start moving in the right direction, there are some tactical ways to build financial stability into your own life.
Get on a budget. “Budget carefully by tracking expenses to see where the money goes,” said Kilday. “Adjust habits to build up savings bit by bit in low-risk accounts. Savings [can] cushion you for emergencies instead of relying on expensive loans.”
Increase income. “Look for ways to earn more, such as part-time work, side jobs, job training for promotions or side businesses from home,” said Kilday. “Small wage boosts can make a difference when investing in retirement funds.”
Lower expenses. “Control costs by meal planning, carpooling, bargain shopping and choosing affordable hobbies,” said Kilday.
Look for ways to lower housing costs. “Rent is cheaper if owning remains distant. But research helps, like [looking into] VA loans or low-income housing,” said Kilday. “Keep improving [your] credit score over time to widen affordable options whenever possible.”
Take advantage of benefits. “Leverage benefits fully, like children’s healthcare, affordable internet packages for job hunting or tax credits that many miss,” said Kilday. “Community colleges provide quality, job-oriented education with low tuition fees, helping people change careers.”
Find assistance programs. “Sharing challenges with social services caseworkers [who can help] find assistance programs can ease burdens like help paying past-due utilities to clear slates,” said Kilday. “[Some] non-profits also offer financial literacy courses and debt counseling.”
While circumstances can feel dire at times, it’s important to continue taking small steps in the right direction. Policy changes take time, and though they can have a huge impact on your personal finances and wellbeing, you should take control of what you can in the meantime.
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This article originally appeared on GOBankingRates.com: Do You Define Yourself as Middle or Working Class? How Attitude Shapes Your Finances
