Being “Middle Class” is burying us!
Following on Paula’s excellent and provocative post, “What Class Are You?” I wonder what we do to ourselves when we’re not honest about what class we’re actually in? For example, what happens when we think we are middle class, and try to behave middle class, but we’re not?
I personally experienced this earlier in my life, when I thought I was middle class and felt I had to have what middle class people had, but actually I was working class (at best). It got me in to serious debt!
Now according to the same Wikipedia article that Paula referenced, $67,348, was the median income for a household of two earners in the U.S. for 2003. With inflation, that’s about $73,500 today. Since this is the ‘median’ or dead-center of the income ladder, this has to be “middle class” right?
Let’s see if it will fund the kind of lifestyle we would associate with being middle class, for a purely hypothetical gay couple with no kids.
Gay people must file taxes (federally) as singles, so if each partner earned $36,750, that’s $4457 in federal taxes after the standard deduction, minus another $604 or so in state taxes after deductions. Not to mention Social Security ($2279) and Medicare ($533) payroll taxes each year. So our median gay couple is now bringing home $28,877 a year each, or $57,754 together. That’s a sizable $4813 a month. Let’s try to be “middle class” within that budget.
For most people, “middle class” means owning your own home. The median price of a home in the U.S. in December 2006 was $220,000, so with 20% down, that’s a mortage of $176,000 at about 5.8% interest a year. With interest, taxes and insurance, we’re looking at a mortage payment of about $1662 a month. Home maintenance and repairs are generally figured at 2% to 4% of the home’s value per year, that’s another $370 a month just on the low side. (As a homeowner I actually find it’s more like 4%, but I’ll play along).
Each adult needs his or her own car to get to work. Buying an average car new and financing $15,000 of it means a car payment of about $380, each, plus insurance of about $840 a year, each, plus gas and oil change. Then there’s the usual health insurance, groceries, toiletries and utilities, i.e., basic necessities. As I see it, that comes to $4242 a month”and we’re still within budget.
Monthly Necessities:
Housing: $1662
Home upkeep: $370
Car payments (x2): $760
Car insurance (x2): $140
Gasoline, oil, etc. (x2): $120
Health insurance (x2): $160
Food: $600
Haircuts/toiletries: $70
Water & Sewer: $80
Electricity: $90
Heat: $100
Phone: $60
Trash collection: $30
But let’s face it: being “middle class” is more than just getting by with basic necessities, it’s about having some entertainment, maybe a dog, certainly at least one vacation a year. Let’s see if our median income gay couple can afford that:
Monthly Middle class indulgences:
Expanded cable: $120
Eating out twice a week@$30 a pop: $240
Entertainment (concert, movies): $80
Clothing: $100
Pet costs: $80
$3000 Annual vacation (monthly cost): $250
Whoops! Those ‘indulgences’ come to $870 a month, which with our necessities is $5112. That’s almost $300 over our monthly budget for the median household in America. So we’re going to have to cut back $300 in there somewhere: either no vacation, or no eating out (ever!) AND no concerts or movies. Or we could limit ourselves to one car for a two-earner family, or else forgo any and all home maintenance until the place falls down around us. None of these are attractive choices for a “middle” class gay couple.
Even so, notice I’ve put in zero expenses for paying off credit card debts, student loans, gym fees, hobbies, weekend trips, Christmas or other gift-giving. Notice also there is ZERO SAVINGS happening: no 401(k), no emergency fund. If we were to slice off even 10% of our gay couple’s take-home pay (that’s $481) for retirement or other savings we’re now nearly $800 in the hole each month ($481+$300).
So much for the myth of the middle class: on a median two-earner household income of $73,500 (gross), you can’t save for retirement and take an annual vacation”or if you do, you have to cut almost $800 from your expenses somewhere else. But I think many of us (gay and straight) are in denial about this. Our friends take nice vacations; AND they have a pool. My buddy gets a nice new outfit every month, and eats out 3 or 4 days a week.
But that’s not reality; it’s not sustainable on a median income. By my calculations above, the couple would need to earn at least $100,000 (before taxes) to be able to have and do all those things, and even they might be tempted to rack up debt chasing the middle class dream.
Maybe earning the ‘median’ income isn’t middle class? Or maybe the middle class is confused, and think it is grander than it is. Either way, we need a reality check, to live below our means and actually improve our financial situation versus allowing our fantasies to bury any chance of a secure financial future.
Rich,
I really appreciate this post. I fully agree with you that “maybe earning the “median” income isn’t middle class”. To me, this implies that what we hold to be “middle class” in the popular imagination (though there are many imaginations as well) best culled from TV, magazines, ads, the movies, etc. is subjective. What we feel are middle class needs are not Platonic forms but cultivated stories we reproduce through our practices. I personally don’t think a vacation a year is a “need”–just to show you what I mean.
The impulse to save is not a bad one and, politically, can do some good if it forces companies to rely less on personal consumption for their revenue. That said, I worry that the discourse on saving also can leave government off the hook. Part of the reason Americans feel financially insecure is because the welfare state and the safety net have been progressively dismantled since the 1980s.
Religious organizations assumed much of the responsibility for responding to what happened in New Orleans and this was good, of course, but also demonstrated the inadequacy of the state infrastructure (and will). To draw an analogy, if private citizens take up the slack to fill in gaps once provided for by decent pensions and social security, something that is in one sense positive can also be, from another point of view, contributing to the widespread privatization of life. Make sense? Let’s save AND demand that society provide for its vulnerable (like the elderly and the poor).
Part of this week’s 30s and 40s Personal Finances Carnival:
http://makingourway.blogspot.com/2007/02/second-edition-of-30s-and-40s-personal.html
Very thought inspiring post. I have been in this position in my past wondering how people made it work and whether or not I was living within my “class”.
Not saving anything is a HUGE problem. One thing you can do is to save the spikes in income, like bonuses, the delta money you get from raises every year (if you get them), etc. Also, even I have scaled down eating out in favor of learning to cook more. I couldn’t believe how much we were throwing away on meals out.
Also, a $3000 vacation every year is not something I would have expected to see in your budget. I love to travel and wouldn’t think about spending that much every year. You can travel cheap and exotic if you do your homework. Either way, you might think about scaling that down. …or if that is your guilty pleasure, scale down on other things to make it happen. The point is, you have to make some hard tradeoffs.
All of that said, the point of your post is whether or not you are living within your “class”… and unfortunately, you may not be.
Just want to point out that the couple in this post, and all figures in the budget, are totally fictional. I based everything on “median” figures in the U.S., and was surprised myself to learn that the “median” income would not really support what we may think of as a “middle class” lifestyle.
I guess being middle class ain’t what it used to be.
instead of using the median income, if they used the average, it would skew it upwards (coz wealth is trickling upwards) and thus show that we’re not really middle class, but infact lower middle classs.
Mea Culpa for not realizing they were fictional! Thanks for pointing that out.
Hey Rich,
Interesting Post…So how about a Twist in the Logic..}:~D
It all comes down to Defining what is “Middle Class”.
Today “Middle Class” means 2600 square feet of House, Two Cars, and a whole bunch of other things like Cable, Internet, etc.
However if you are old enough to remember growing up in the 60’s and 70’s a home that size and all the other things were the perogative of the Upper Class.
When you talk of living “Below Your Means” you are referring to what would have been during MY childhood Solid Middle Class in a 1500 Sq Ft House and (usually) only 1 car for the Family and Rabbit Ears (but if you were lucky some form of Basic Cable) on top of the TV.
So when people complain they earn more than their Parents did but aren’t moving into the Middle Class its because they keep “Moving the Cheese”
If you live like your parents did 30 years ago you can still Legitimaely claim you are Middle Class.
~ Roland