Does the Middle Class Actually Exist Anymore?

You hear so much about the declining middle class that it's hard to separate fact from fiction. The middle class is the backbone of this country, and its decrease is quite alarming for many hardworking people.

When faced with economic turmoil, the best thing you can do is arm yourself with the right information. This guide delves into the facts and gives you a strategy to solidify financial stability.

What's Really Happening With the Middle Class?

The American middle class has undergone many changes over the years. While definitions can vary, those who earn from $52,000 to $156,000 constitute the middle class in this country. Based on those criteria, 50% of Americans could claim middle-class status in 2021. As a comparison, 61% of families were middle class 50 years earlier.

This considerable decline rightfully has a lot of Americans concerned, especially with the volatile economy and the consistently rising cost of living. The wealth disparity is a major factor, with families in the higher income levels generally growing their wealth at a faster rate over the decades. Conversely, middle-class families have not grown at the same rate.

How Can Middle-Class Families Build Wealth?

The first step to wealth building is establishing financial stability. A financially stable household will find saving and investing money easier, which increases wealth even further. Because excessive debt prevents families from being stable, many experts recommend targeting high-interest debt first, which will free up more of your money for other expenses.

Next, it's time to develop an investment plan to help you achieve future financial goals, like retirement. Ideally, at least 15% of your yearly income should go into a retirement fund of some kind. Because that's not feasible for all families, contribute as much as you reasonably can while still having money to cover your expenses and put into savings.

Additionally, you should also start saving for retirement as soon as possible. Young people without families are able to put more money away, which will come in handy once a large portion of their income will go toward child-rearing. Retirement might be a long way off, but you can never start saving too early.

How Can You Avoid Damaging Financial Behaviors?

In addition to the above smart steps, you must also avoid poor behaviors that can increase debt and deplete your income. They include:

  • Using Credit Cards for Daily Purchases - Credit is a must to maintain a good score and build a financial history. However, you must make wise purchases when using credit cards. Pay off your credit card bill in full each month and use cash or debit cards for expenses like groceries and gas. 

  • Making the Minimum Payment - The larger your monthly payments are, the sooner you will get rid of your debt. If it's not possible to make more than the minimum every month, do so as much as possible. Going over the minimum payment also reduces interest costs. 

  • Making Impulsive Purchases - You must also be careful when making large purchases, such as new vehicles. The first step is to develop a budget, one that aligns with your current financial outlook. Next, consider the practicality of the purchase and whether you're paying more for features or extras you don't need. 

  • Lacking Financial Discipline - Spending money is fun, but you must keep the big picture in mind. Making meals at home, skipping expensive coffee shops, shopping at thrift stores and other frugal behaviors means more of your income can go towards wealth building. 

While times are certainly tough for many families, good financial behaviors can go a long way when it comes to wealth building. By remaining dedicated to your goals and making small sacrifices, you can ensure a bright future for yourself and your family.