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Sunday, June 21, 2015

12 Signs You Might Not Be Middle Class


A Bear Market Economics Feature Article

A Bear Market Economics Feature Article


Unfortunately, fewer people now consider themselves middle class, studies show. Only 44 percent of Americans described themselves as middle class last year, down from 53 percent in 2008. And that's not because a chunk of the country is suddenly more wealthy. More people were describing themselves as lower-middle class or poor.

If most of the following signs occur for you, you are probably not middle class

1. You “Earn” Less Than $40,000 a year

Median household income was $54,510 in February, according to the latest estimates from Sentier Research. That's up from just above the $51,000 mark in 2012.

Pew Research defines a middle-class household income as two-thirds to double the national median, or between about $36,000 and $109,000 a year.

Of course, a middle-class income can vary depending on where you live. In San Jose, California, it ranges between $51,000 and $182,000 a year, according to a recent analysis by NPR. But in Milwaukee, Wisconsin, the range drops to between $18,000 and $67,000 a year.

2. You Do Not Have a Secure Job or Career

Americans may be changing their views on what it means to be middle class. In 1991, some 70 percent of people said that homeownership was essential to being in the middle class, according to Pew Research. Only a third said that having a "white-collar job" was key.

Fast-forward to 2012, when nearly nine out of 10 Americans said a secure job is essential to being in the middle class. Only 45 percent said owning a home was important.

3. You Do Not Have a College Education

To be sure, many households are able to reach middle-class income levels without a college education. But generally, when Americans think of middle-class families, surveys show they think of parents who went to college and are saving for a college education for their children.

Americans used to think that a college education was more essential for the middle-class label. In 1991, nearly half of those surveyed said a college education was important to the middle class. That number dropped to 37 percent in 2012, according to Pew.

4. You Do Not Own a Home or Probably Never Will (or You Will Never Pay Off Your Mortgage)

Homeownership has long been a hallmark of the middle class. In a 2013 speech, President Obama called it "the most tangible cornerstone that lies at the heart of the American Dream, at the heart of middle-class life."

But owning a home became much harder after the financial crisis walloped the housing market. The homeownership rate fell to 64 percent in 2014, according to the U.S. Census Bureau, down from 69 percent a decade earlier.

"Perhaps the main new reality is that homeownership isn't as easy to attain as it has been during most of the decades after World War II," trade publication Commercial Property Executive reports. "For a lot of people, the money isn't there, because the American economy simply doesn't offer as many well-paying jobs as it used to."

5. You Do Not Take Vacations

A vacation is an extra expense that many middle-earners cannot afford without sacrificing something else. A Statista survey found that this year 54% of people gave up purchasing big ticket items like TVs or electronics so they can go on a vacation. Others made sacrifices like reducing or eliminating their trips to the movies (47%), reducing or eliminating trips out to restaurants (43%), or avoiding purchasing small ticket items like new clothing (43%).

The family vacation "is a middle-class staple," writes James McWhinney at Investopedia. "Vacations demonstrate that a family has disposable income and has been successful enough to take time away from work to focus on leisure."

You'll need plenty of disposable income for some family vacations. The average American family spent nearly $4,600 on a summer vacation in 2013, according to American Express. As the economy has improved, consumers have begun planning more vacations and spending more on them as well.

6. You Do Not Own or Purchase A New Vehicle

Very few people who earn the median income can afford to buy a new car or truck. Interest.com recently analyzed the prices of new cars and trucks, as well as the median incomes across more than two dozen major cities, and found that new cars and trucks were simply not affordable to most middle-earners.

"Median-income families in only one major city [Washington DC] can afford the average price Americans are paying for new cars and trucks nowadays." As of 2013, new cars are priced at $32,086, according to the study. Mike Sante, Interest.com's managing editor reminds us, "just because you can manage the monthly payment doesn't mean you should let a $30,000 or $40,000 ride gobble up all such a huge share of your paycheck."

7. Your Debt Exceeds Your Net Worth

"More than 160 million Americans have credit cards.""The average credit card holder has at least three cards.""On average, each household with a credit card carries more than $15,000 in credit card debt."

Not only do we have large amounts of credit card debt, we also have student loans, mortgages, cars, and medical debts. Our debt is growing faster than our income, and many middle class workers have trouble staying afloat. Money-Zine evaluated debt growth and income growth over the past few decades and found that "back in 1980, the consumer credit per person was $1,540, which was 7.3% of the average household income of $21,100. In 2013, consumer debt was $9,800 per person, which was 13.4% of the average household income of $72,600. This means debt increased 70% faster than income from 1980 through 2013."

These debt statistics come from Debt.org.

8. You Have No Significant Emergency Savings

To provide ourselves with a degree of financial security, we are supposed to have emergency savings to protect ourselves in the event of job loss, illness, or some other catastrophe. Most members of the middle class don't have at least six months of emergency savings, however, and some working people have no such savings.

A Bankrate survey found that only around one out of four households have six months of emergency money saved, and many of them are in the higher income groups. Another one-fourth have no emergency savings at all, and the remaining household have a small to moderate amount of savings, but not enough to cover six months of expenses.

9. You Have No Significant Retirement Savings

Investing for the golden years is important to America's middle class, but that doesn't mean they do a very good job of it.

It has become more difficult for most Americans, including the middle class, to set enough money aside for the retirement years. Researchers with the Employee Benefit Research Institute ran some scenarios last year that looked at what would happen for Americans who spent a maximum 35 years in retirement.

Would people in the second- and third-income quartile -- the middle income quartiles -- run out of money? In the second-income quartile, 47 percent would fall short. In the third-income quartile, 28 percent would run out.

If you reach the retirement age with little or no money saved, Social Security is probably not going to be enough to cover your basic needs. Even if you want to work for your entire life, you have no way of knowing whether or not you will be physically capable of doing so.

Although having a lack of a retirement savings is a risky move, so many people bet on double zero, just hoping that things will work out in their favor. While some members of the middle class neglect this aspect of financial planning because they are procrastinating, there are also some workers who cannot afford to set this money aside. Nearly half of those who don't save for retirement say it's because they simply don't have the money.

As of late, around 20% of people near 65 have not saved anything for retirement at all, and the majority of people — 59% — worry that they don't have enough money saved for retirement, according to a Gallup Poll.

10. You Cannot Meet A Medical Emergency Requiring Out of Pocket Cost Over $400

Medical care is a basic necessity and something we'd think would be affordable for someone earning a middle income. A Forbes article published data indicating that workers in large companies — many of whom are members of the middle class — "face nearly $5,000 in premiums, co-payments, deductibles and other forms of co-insurance."

During the past few years, these costs have had a large impact on working Americans. A report by Feeding America found that a shocking 66% of households say they've had to choose between paying for food and paying for medical care — 31% say they have to make that choice each and every month.

This was another hot topic in Pew's survey of middle-class characteristics. Two-thirds of adults said health insurance was necessary to be considered middle class.

Many Americans get health insurance through their work, so it goes hand-in-hand with a secure job that comes with the middle-class lifestyle.

The Affordable Care Act is making health coverage available to more lower-income Americans who previously couldn't afford it. As health insurance becomes more pervasive, it may become less of a signifier of middle-class culture.

11. You Need But Cannot Afford Dental Work

According to the U.S. Department of Health and Human Services, "the U.S. spends about $64 billion each year on oral health care — just 4% is paid by Government programs." About 108 million people in the U.S. have no dental coverage and even those who are covered may have trouble getting the care they need, the department reports.

Oftentimes, people will purchase medical coverage and forgo dental because it's so expensive. Plus, dental insurance may cover only 50% of the more expensive procedures, like crowns and bridges. This leaves those who have insurance with large co-payments.

In many cases, middle-earners will delay or even forego some of these procedures in efforts to save on costs. According to the CDC, nearly one in four adults between the ages of 20 and 64 have untreated dental caries (like cavities or infections).

12. You Do Not Think of Yourself as Middle Class

This may be the most important distinction of all: For many, being middle class is simply a state of mind.

It implies a commonality with the rest of the country, an implicit understanding that you're pursuing the American dream by working hard, saving money, being responsible and providing for your children.

It's also an acknowledgement that you're being rewarded for your efforts. You aren't filthy rich, but you're comfortable enough. "It's a feeling, a touchstone. It defies numbers," Xavier University political scientist Gene Beaupre told The Cincinnati Enquirer in 2013. "It's a mindset that says, 'I'm part of the working fabric of American culture.'"

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