What are we told about the middle class?
Charles Smith has gathered a few facts. Generally, we think about income from $45,000 to $125,000, but we fail to include expenses, the roller coaster of inflation and debt and costly services such as insurance.
What if we looked more deeply? Charles is proposing taking a new look at our definition of middle-class:
- No more than 30% of net income is spent on housing, either to own or rent.
- 6-8% of net income is saved–not including retirement IRAs or 401K plans.
- No more than 15% of net income is spent on medical and dental expenses, including insurance.
- The household can afford to pay tuition, fees and books for two household members living at home and attending a 4-year state university/college.
- Food (including meals away from home) costs no more than 15% of net income.
- The household can pay cash for a recent-vintage reliable used vehicle, and can support the one reliable vehicle and a “beater” old vehicle for secondary use; the household carries no auto loans.
- The household pays off all credit card purchases monthly and carries no consumer credit balance.
- The household can afford to take a domestic vacation once a year without incurring debt or tapping the 6-8% of income set aside for savings.
- If the family owns a residence, the equity stands at a minimum of 50% of market value.
- The household maintains at least 6 months’ living expenses in readily accessible savings.
By these standards, how many households in the U.S. are truly “middle-class”? Not very many.
Charles asks, “Do you think this is a fantasy world? This was the world in the U.S.A. from 1955 – 1975.”