Vincent, a 29-year-old medical salesman, earns $130,000 a year.
It was a dream when he was younger – once he earned six figures, he thought he’d be in financial nirvana, worry-free, on vacation somewhere at least once a year, maybe able to to buy a house in the future. too distant a future.
“I told myself if I could make six figures, I would have a good life. I can save the down payment on a house and start my life,” said Vincent, who preferred to use only his first name to protect himself . his privacy.
He was surprised to learn that in Santa Barbara, a coastal California city where the cost of living is 65 percent higher than the national average, he is barely able to save for anything, let alone to buy a house, plan for children, or finance other expenses. milestones of middle-class life.
“More expensive items that our parents could have purchased, like a house or a car, are, for me, out of reach,” Vincent said, while acknowledging that his budget might be larger in a city where the cost of life is inferior.
“I would have to save $10,000 for six or seven years straight and really sacrifice to save maybe the stupidest thing I can find here.”
Vincent’s experience is emblematic of what the dream has become for the American middle class, many of whom earn well into the six figures but feel that they are falling far behind or that the economic odds are stacked against them.
Some of these worries are real — for example the extremely expensive U.S. housing market — while others, experts say, could be a matter of perception versus reality, as the economy appears tough even as incomes rise and that employment is strong.
Vincent is part of a growing group of middle-class Americans — recently defined in 2022 by the Pew Research Center as households earning between $48,500 and $145,500 — who don’t feel like they can’t afford to living a traditional middle class life, filled with a home and a comfortable retirement.
According to Eoin Sheehan, senior research analyst at Redfield & Wilton, inflation has caused many Americans to ignore the overall strength of the U.S. economy.
Growth, hiring and financial markets are strong, while wage growth has started to outpace inflation.
Wage growth began to outpace the rate of inflation. Federal Reserve
Although higher costs pose challenges for retiring or buying a home, those goals are not out of reach with careful planning, according to Chris Collins, a wealth advisor at Northwestern Mutual’s Collins Financial.
Collins suspects that most middle-class Americans feel anxious about their financial situation because of financial shock fatigue – the exhaustion of having to deal with one economic shock after another – as well as a lack of financial planning.
His clients usually start to calm down once they crunch the numbers and understand how much they need to save for retirement or to meet their other financial goals. Before that, many mistakenly 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’ll be fine,'” Collins said. “They don’t feel like they can relax until someone runs the financial plan, runs the modeling and says, ‘Everything will be OK.'”
However, these statements do not correspond to what many households may think about their financial and property situation. This feeling is pervasive online, expressed by social media users who identify as middle class but say they feel increasingly less well off.
Jessica, a TikTok user from Alabama, said she thinks the middle class is dying. She pointed the finger at her eldest daughter, who she said worked 60 hours a week while pregnant to support her family.
“Do we still have a middle class, or is it just the haves and the have-nots?” » Jessica said in a post on TikTok in February. “Because the haves are succeeding 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 highlighted the rising cost of groceries and other essentials.
“Honestly, life is difficult for the middle class,” adds Vincent. “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 their negative mood appears to have sharpened sharply in recent years.
Financial anxiety is at an all-time high, according to a Northwestern Mutual survey, and a Primerica survey found that half of middle-class households say their financial situation is “not so good” or downright “bad “.
For many in the middle class, inflation is at the heart of this sentiment. 51% of respondents in Northwestern Mutual’s survey said inflation was the biggest barrier to financial security, while 67% of households surveyed by Primerica said their income was below the cost of living.
This makes people feel excluded from many stages long associated with middle-class life. 74% of middle-class Americans have cut back on non-essential spending, according to a Primerica survey. Fully half of Americans surveyed said they weren’t planning to go on a summer vacation because of the higher cost of living, according to a 2023 Redfield & Wilton survey for Newsweek.
Many are also dipping into their savings, making retirement uncertain. 60% of Americans say they don’t think they’ll save enough to retire comfortably, according to Primerica.
46% of middle-class Americans said they have reduced or completely suspended their savings for the future, and 38% said they don’t think they can afford an unexpected expense greater than $1,000.
“Anxieties about things like owning their own home, going to college – all of these things that the majority of Americans perceive as indicators of middle-class status – many of them no longer think these things are achievable for them,” Sheehan said.
Buying a home is perhaps the best example of a principle where middle-class life seems out of reach for many, and this struggle is very real rather than just perceived negatively.
With mortgage rates near a 23-year high and home prices near record highs, Americans need to earn 80% more than before the pandemic to be able to comfortably afford a home, according to a recent Zillow report. First-time home buyers, meanwhile, accounted for less than a third of all home purchases in 2023, one of the lowest proportions on record, according to the National Association of Realtors.
Vincent says owning a home seems out of the question at the moment. If he cut some expenses and lived 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 hit a record $84,000 last year, according to CoreLogic data.
“How much of this makes sense,” Vincent said.
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