How Can I Determine if I am in the Middle Class

Save The Middle Class

 How Can I Determine if I am in the Middle Class

Three subcategories exist for the Middle class. USA had an article from December of 2020 looking at middle class on a national scale. Based on income alone for a family of three. This table is used for general purposes and not meant to categorize people. The subcategories are as follows.

Lower Middle Class Middle Class Upper Middle Class
     32,048-53,413   53,413-106k         106k-373k

 

Pew research has a calculator which can be used for each individual state and family size. Categories can change from state to state depending on cost of living. It should only be used to give an idea based on income of where you might stand. Experts in this area disagree about the classes and there is no definitive answer.

Numerous factors determine class, not just oncome. One’s education, geographical location (city, state, neighborhood), family financial philosophy and habits, and social circles.

Lower Middle Class

Because classes are too difficult to define and there are too many factors to consider, I am using my own parameters for the purpose of how to prosper based on basic living situations rather than income.

The working poor and working lower middle class usually have government assistance. General characteristics of lower middle class is that they may have a car for transportation. Most of the time these vehicles are old and more than likely it was bought with cash and isn’t reliable and valued less than the asset limit to qualify for government assistance. Qualifying for a car loan is highly unlikely. The poor are the people taking public transportation.

Lower middle class may have a college degree, the working poor less likely.

The working poor and lower middle class are more often paying fines and penalties for overdue bills or broken headlight that they got pulled over for.

Both the working poor and lower middle class are less likely to have or use a budget. The main reason is the anxiety that it causes. When I was struggling, I didn’t want to look at my bills or know what was going on because it was too depressing to think about it, making the situation worse.

Much like those in the working poor class the middle class are working hard and long hours for an income that doesn’t meet their living expenses. The lower middle class might have a school loan, but neither are likely to have credit cards or other debts. They do not have the income to qualify for a loan. Both have been victims of Payday loans. In my opinion, Payday loans are predatory loans and should be outlawed. Payday loans pray on those that are poor charging 300% or more for their loans, while those that can qualify for credit cards or other loans can get interest rates far below that.

Multilevel Companies, Corporations, Entrepreneur

The less money someone has the more likely they are to spend it on lottery tickets, Multilevel Marketing Companies (MLM’s) or other financial Gurus selling a dream.

Let’s start with MLM’s, I love them and hate them. On the hate side, I do not like selling a dream that they can become multi-millionaires by only doing a few things. Building up someone’s hopes and dreams when only a select few, will ever become wealthy from it. Some companies have you spending an obscene amount of product that you won’t even use before use have to order again.

Some of these MLM salesmen tell you things like this is your own business. How many businesses can you buy for $100 a month or whatever the cost might be. That is a true statement, but it is also true that corporations do not buy more product than they can use or sell.

Debating between the MLM hierarchy and the MLM haters. People that hate all MLM industry say they are all pyramid schemes, only the people at the top are making the money. True statement and only the CEO’s and other C executives are making all the money on the corporate side and the same percentage of those that make it to the corporate top is the same percentage of those that make it at MLM’s. The strongest argument against MLM’s is that at least at the bottom of a company you get a guaranteed paid with benefits and a paid vacation.

Another argument that MLM haters have is that there are expenses with this industry that isn’t found in real businesses or jobs. These haters are not familiar with the insurance industry where you have to pay for training, pay for the test, pay for your Errors and Omissions insurance, pay for your license every few years and appointment fees.

For most people MLM’s should be avoided. I am involved in a MLM, LegalShield, because I saw the value for myself in 2001 and have used the service multiple times. I am also in the insurance industry. I am licensed in life, health, and property and casualty. It makes sense to offer another service that can prevent a moving traffic violation off your record and increasing or having a Will prepared by an attorney if something should happen. I am not out there recruiting everybody I can telling them they can get rich. I do recruit other insurance agents or financial advisors as it compliments their business.

If you are in a business that it would make sense to be in a MLM because you believe in the product and it compliments what you are doing, it might be a good fit.

Some people dream of being true entrepreneurs and opening their own business. It takes several years to build a business. Depending on the business anywhere from 4 – 10 years if you work it fulltime. If its part time double that, if you work 80 hours or more week, it could be shorter, you could cut that in half. Do you have that kind of time?  Be sure you want this commitment and have the time. Most businesses fail.

Middle Class

Save The Middle Class ParadeThese are those that have a job that is considered secure, and they can meet their expenses without help from the government. They may have money in the bank and might be able to afford a vacation. The ambition for those that are poor or lower middle class is to get to this place.

Once upon a time the American dream was to own a house with a white picket fence. It wasn’t about getting rich and owning a mansion, with a yacht, and multiple cars or homes all over the world.

I remember a story, I believe was from the book “The Millionaire Next Door” but truthfully, I can’t remember, but the point of the story is that income does not define wealth, but rather how much is spent. The story tells about a husband and wife in their fifties, that were school bus drivers. After saving money for most of their life, they went to a financial advisor to find out if they could retire early. The advisor was skeptical about their ability to do so, knowing that a bus driver didn’t earn much. When the advisor looked at their investments and assets, he was shocked. They owned their home and vehicles, had little to no debt and each had a savings form their retirement accounts of around 500k each. There was no question they could retire.

Much could be said about living below our means. Warren Buffet got to where he is today by living below his means. Some people have become minimalists. Too many businesses and financial Gurus telling the masses you have to spend money to make money, only to convince you to buy their product or service.

The important lesson here is income security reducing your expenses and living below your means. That isn’t a secret everyone has heard this before, but how many are doing it? For those that aren’t doing it because you do not know how to start or begin, this website is for you. The website is not complete, it will have several future blogs with more information.

Living Below your Means Cost of Utilities

Whether you have moved up from poverty or lower middle class to middle class. You want to have more discretionary income to be able to do other things you couldn’t afford to do when you were broke.

In other blogs I have discussed why I prefer to track spending rather than budget. It’s not that I don’t have a budget, it’s that budget alone doesn’t solve the issues of what one spends. A budget determines how much should be spent and on what. Tracking is keeping a log of how much money is going where. Before you budget track what you spend and where it is going.

For an entire year I tracked all my spending. It doesn’t matter which medium you use to track spending if you see monthly and yearly averages. I use Microsoft Excel. I did a monthly and yearly average of all expenses, then I compared my utilities of what the average expenses were in my community. I wanted to get to what was at least average or better than average. Most of my expenses were gas and electric. The electric was twice as much as the average. My neighborhood average was around $150 -$200 a month for electric. I was spending $400 -$500 a month. Gas was more and so was water.

Here is why a budget wouldn’t have worked. I would be changing the thermostat to lowering my bills rather than finding out where the problem was coming from. The house that I have uses central air conditioning. The unit was way too small for the size of the house making it run much harder and not cooling off the house. It also wasn’t as energy efficient as newer models. Factoring in the unit size and the energy efficiency, I needed for a new system including a new boiler (mine was almost 50 years old) It would pay for itself in 3 and a half years. After one year the electric was slightly over $200.00 each month. I also added insulation and soffits to the attic for more ventilation. Lastly, I got solar and now my bill is $100.49 a month, my gas was reduced by $75 a month. The rain this season has kept my city bill for water, trash, and other things at $83 a quarter. It used to be around $350 a quarter. To keep the city bill low, I will be changing the landscaping. Planting vegetation that doesn’t need to be watered yet still gives the curbside appeal.

Sometimes you are overspending, there needs to be a budget. Usually when this happens children are involved. Cranking up the heat or air with no clue to how much that costs the household. I didn’t have to lower my thermostat. I needed to look for the source of the problem and make changes. Look for the source of the problem first before you make budget cuts.

When Financial Catastrophe Hits

Most financial advisors talk about an emergency fund of at least 3 months of living expenses. I have been through 8 recessions including with the pandemic of 2020 and I can tell you that none of them lasted 3 months. They have all been more than a year. Three months should be a starting point. I factor in one year of living expense and a cushion for a anything that breaks done and needs to be replaced or fixed during this time. Part of this preparedness is having additional insurance that covers an appliance repair or replacement. I have full insurance coverage for these things. It is likely during recessions and even the pandemic of 2020 that those in the middle class have briefly experienced poverty. You can minimize the effects by having things in place.

Why is food storage and having other essentials is important? During emergencies store shelves are empty. It’s hard to get what you need and when you do you are paying exponentially more. Go through the things you use often; make a list of things you would need to have on hand and make sure you have it.

A common mistake for those that store essentials is never using it. Keeping it for a rainy day. You want to use it in your daily life and rotate these as you use them. What’s nice about this is how much is saved when you buy in bulk or can buy when you see it on sale rather than when you need it.

Instituting the practices saved me from having to rely on government even through the pandemic. I was also one of those that my employment was affected by the pandemic and like everyone else got the stimulus during this time. Unlike popular belief the only people that made more money than their unemployment were low income workers or maybe people living in low income states where the cost of living was so much less wages were also less.

I didn’t have to ask for food stamps. I had plenty of food, and I didn’t need money for my other expenses. I planned for it and it would last me.

Upper Middle Class

Often upper middle class have graduate degrees, above average incomes from professional occupations like doctor or lawyer. It is these people and the rich that influence our political structure and how we live. The upper middle class and the rich influence how political candidates vote because they are the ones most likely to vote and be involved in politics.

Rich vs Wealthy

People use these words interchangeably thinking they mean the same thing, but they don’t. A rich person has a great paying job, that pays great money. An example would be actors like Nicholas Cage who went from riches to rags or MC Hammer. They were rich not wealthy and when the money was gone, they were broke. Some lottery winners could be categorized this way. Wealthy is someone that has managed their money to work for them, money is working, not the person controlling it. It goes back to the Husband and wife that were retired school bus drivers. They weren’t rich, they were wealthy.