Inflation is shattering Americans’ perception of middle-class life

Michael Raines

  • Many Americans have come to feel that a middle-class lifestyle is out of reach.
  • Blame inflation for bringing down the mood and making the economy look much worse than it is.
  • Money experts say people who are feeling down can create a financial plan to relieve stress.

Vincent, a 29-year-old medical salesman, earns $130,000 per year.

It was a dream when he was younger: once he made six figures, he assumed he would be in financial nirvana, carefree, vacationing somewhere at least once a year, maybe able to buy a house to buy in the future. too distant a future.

“I was like, if I could make six figures, I would have a nice life. I can save the down payment on a house and start my life,” says Vincent, who preferred to use only his first name to to protect his privacy.

He was surprised to discover that in Santa Barbara, a city on the coast of California where the cost of living is 65% higher than the national average, he is barely able to save for anything, let alone buy a house. buy, make plans for children or do other things. milestones of middle class life.

“Bigger tickets that our parents could have bought, like a house or a car, that is, just for me, out of reach,” Vincent said, although he acknowledged that his budget could go further in a city with a lower cost of living .

“I would have to save ten thousand euros for six or seven years and really sacrifice myself to put maybe the dirtiest thing I could find here.”

Vincent’s experience is emblematic of what has become of the middle-class American dream, with many earning well into the six figures but feeling like they are way behind the curve or that economic hardship is piled on them.

Some of these concerns are real — see the wildly expensive U.S. housing market — while others, experts say, could be a matter of perception versus reality, as the economy feels tough even as profits are growing and employment is strong.

Vincent is among a growing group of middle-class Americans — last defined in 2022 by the Pew Research Center as households earning between $48,500 and $145,500 — who feel they cannot afford to leave a traditional life to lead the middle class, full of a house and a comfortable retirement.

According to Eoin Sheehan, senior research analyst at Redfield & Wilton, inflation has led many Americans to ignore the overall strength of the U.S. economy.

Growth, employment and financial markets are strong, while wage growth is starting to exceed the pace of inflation.

Wage growth is starting to beat the pace of inflation.
Federal Reserve

While higher costs pose a challenge to retirement or buying a home, with careful planning these goals are not out of reach, said Chris Collins, wealth advisor at Northwestern Mutual’s Collins Financial.

Collins suspects that most middle-class Americans are worried about their financial situation due to financial shock fatigue — the exhaustion of dealing with one big economic shock after another — and a lack of financial planning.

His clients typically start to calm down once they crunch the numbers and figure out how much they need to save for retirement or achieve their other financial goals. Before that, many wrongly thought they had to work forever, he says.

“I don’t tell people, ‘You’re going to die broken and alone.’ It’s, ‘Hey, with a little work here, you’re going to be fine,'” Collins said. “They don’t feel like they can relax until someone manages the financial plan, does the modeling and says, ‘You’re going to be OK.’”

Yet these statements do not reflect the feeling that many households have about their financial and wealth status. The sentiment is pervasive online and expressed by social media users who identify as middle class but say they feel increasingly less affluent.

TikTok user Jessica in Alabama said she believed the middle class was dying. She pointed to her eldest daughter, who she said worked 60 hours a week during her pregnancy to provide for her family.

“Do we even have a middle class anymore, or is it just the haves and the have-nots?” Jessica said in a TikTok post in February. “Because the haves are struggling, and the have-nots are struggling.”

“I’m sorry, but if you know someone with kids and they say they’re not struggling financially, they’re lying,” said Kayla, another TikTok user. She pointed to the rising costs of groceries and other necessities.

“To be honest, life is hard for the middle class,” Vincent added. “I feel like I can make ends meet, but I can’t really change this lifestyle.”

Cost of living crisis

Middle-class Americans have long felt worse about the economy, but negative sentiment appears to have increased sharply in recent years.

Financial anxiety is at an all-time high, according to a survey from Northwestern Mutual, and a Primerica survey found that half of middle-class households say their financial situation is “not that good” or downright “bad.”

For many in the middle class, inflation is at the heart of this feeling. 51% of respondents in the Northwestern Mutual survey said inflation was the biggest obstacle to financial security, while 67% of households in Primerica’s survey said their income lagged behind the cost of living.

That leaves people feeling left out of many of the milestones that have long been associated with middle-class life. According to Primerica’s research, 74% of middle-class Americans have cut back on non-essential spending. A full half of Americans surveyed said they were not planning to take a summer vacation because of the higher cost of living, according to a 2023 Redfield & Wilton survey conducted for Newsweek.

Many also draw on their savings, making their pension uncertain. According to Primerica, 60% of Americans say they are not saving enough to retire comfortably.

46% of middle-class Americans said they have scaled back or completely stopped saving for the future, and 38% said they didn’t think they could afford an unexpected expense of more than $1,000.

“The concerns about things like owning their own home, going to college – all these things that the majority of Americans view as sort of indicators of middle class status – many of them now don’t think those things are for them be feasible,” Sheehan said.

Buying a house is perhaps the best example of a middle-class life principle that seems out of reach for many, and that struggle is very real and not just experienced negatively.

With mortgage rates hovering near a 23-year high and home prices near record levels, Americans need to earn 80% more than they did before the pandemic to comfortably afford a home, a recent Zillow report shows. New homebuyers, meanwhile, accounted for less than a third of all home purchases in 2023, one of the lowest percentages on record, according to the National Association of Realtors.

Vincent says that owning a house seems out of the question for the time being. If he were to cut back on some expenses and live more frugally, he estimates he could save up to $10,000 a year. At that rate, it would take him at least eight years to save for the average down payment on a home, which last year listed at a record $84,000, according to data from CoreLogic.

“What part of that makes sense,” Vincent said.

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