What’s Happening to the Middle Class?

What’s Happening to the Middle Class?

During a business call, our friend Alex asked: “What is happening to the middle class?” His question led us to examine the shifts within this socio-economic group, particularly focusing on the economic challenges they face today. 

The Impact of Inflation

One of the most palpable pressures on the middle class is inflation. Over the last four years, inflation has eroded the purchasing power of the dollar by approximately 21%. What cost $1.00 in 2020 now requires $1.21. The cost of many staples have increased by more than 21%. For instance, in November 2020, the average price of gasoline was $2.20 per gallon; but in 2024, it averaged $3.73 per gallon, a 70% increase. The rise of fuel prices and other staples hits the middle class particularly hard.

The “Keeping Up with the Joneses” Phenomenon

The middle class faces significant social pressures to maintain a lifestyle that aligns with societal standards, a phenomenon often described as “keeping up with the Joneses.” This pressure to match the perceived affluence and consumption patterns of peers and neighbors can lead to financial strain and overspending. In today’s world, the bar for what constitutes a “necessary” lifestyle has risen, introducing new challenges for the middle class.

Modern “Necessities” and Lifestyle Inflation

Modern life brings with it an array of new necessities that were once considered luxuries. Smartphones, once a novel invention, have become indispensable tools for communication, work, and entertainment. It’s not uncommon for every family member, including children, to have their own device. Similarly, owning multiple vehicles to accommodate the diverse schedules of family members is increasingly seen as a requirement rather than a luxury.

Activities, which used to be occasional treats, such as dining out, vacations, travel, sporting events and shows tend to become regular expenses. This lifestyle inflation means that maintaining a middle-class status today often requires a higher level of consumption than in times past. Once someone experiences a higher standard of living, it is challenging to revert to a simpler lifestyle without feeling a sense of loss or deprivation.

Schedule Strategy Session »

The Financial Consequences

The pressure to keep up with the Joneses has significant financial consequences. Families may overextend themselves financially to maintain this elevated lifestyle, leading to increased debt and decreased savings. Purchasing the latest technology, owning luxury vehicles, or frequently dining at expensive restaurants can quickly drain financial resources.

Social media amplifies these pressures by showcasing curated images of friends, family, and influencers living seemingly perfect lives filled with luxury and comfort. This constant exposure can create unrealistic expectations and drive individuals to spend beyond their means to replicate these lifestyles.

Strategies to Alleviate the Pressure

• Mindful Spending: Becoming aware of the psychological impact of keeping up with the Joneses is the first step. Practicing mindful spending involves making deliberate choices about where and how to spend money based on personal values and long-term goals rather than external pressures.
• Setting Financial Goals: Establishing clear financial goals can help prioritize spending and resist the urge to splurge on unnecessary items. Saving for a down payment on a home, funding education, or building a cash cushion can provide motivation to stay on track.
• Budgeting: Creating a budget can be helpful to ensure that spending aligns with financial goals and limits impulsive purchases driven by social pressure.
• Value-Based Living: Focus on what truly brings joy and satisfaction rather than what is perceived as socially desirable. This might mean valuing experiences over material possessions or prioritizing financial security over luxury goods.
• Financial Education: Educating oneself about personal finance and understanding the long-term impact of debt and overspending can help you make better financial decisions. 
• Community Support: Engaging with like-minded individuals who share similar values can provide support and reduce the feeling of isolation that may come with rejecting the norms of keeping up with the Joneses.

Savings

Savings is a big problem for the middle class. Many middle class Americans aren’t saving enough money, and when they do save, it’s often in places where they can’t use it if opportunities arise. A good savings plan should take better than average care of your money, not be affected by a poorly performing market, and allow you to access money without restrictions or penalties. Most modern saving plans are mediocre at best. 

In the past, many Americans used whole life insurance as a savings plan. The cash value in those policies was guaranteed to exceed the amount they would ever pay in premiums, and they could freely borrow money without restrictions or penalties and continue earning growth within the policy, all while providing their family the protection of the death benefit.

Sadly, many middle class Americans today don’t even own whole life insurance, let alone know how to use it as a financial tool.

Strategies for Financial Success

Many Americans find the current financial times challenging, but these three tips will help you succeed financially.

• Save wisely: Keep at least 10% of your income in a place that takes good care of your money and where you can still access money to use for opportunities without getting penalized. 
• Avoid the “Joneses” Trap: Evaluate personal needs versus societal pressures. Prioritize spending on necessities and long-term benefits over short-term luxuries.
• Financial Education: Educate yourself and family members on money management to build a foundation of financial literacy and smart decision-making.

Financial Decision Making 16-page Slide Deck If you do some of the right things financially, but do them in the wrong order, your finances will suffer. This quick guide gives you 4 easy steps in order of priority. Get It Here>

How we can help you

At McFie Insurance, we design and sell whole life insurance. Well designed whole life insurance can make a substantial difference in how well you succeed financially. If you want to get started with whole life insurance, are skeptically curious, or anywhere in between, call us: 702-660-7000 or schedule a strategy session. We are happy to answer your questions, and it’s our pleasure to assist you on your journey to financial success. 

Review WealthTalks on Apple Podcast here: https://podcasts.apple.com/us/podcast/wealth-talks/id978187163

Follow the Wealth Talks Podcast on:

Instagram: https://www.instagram.com/wealthtalkspodcast/?utm_source=ig_web_button_share_sheet&igshid=OGQ5ZDc2ODk2ZA== 

Facebook: https://www.facebook.com/profile.php?id=61554798231074 

Listen to the Wealth Talks Podcast on:

Apple Podcasts: https://podcasts.apple.com/gb/podcast/wealth-talks/id978187163 

Spotify: https://open.spotify.com/show/7MOugefeGkTl5jdkhYdjvQ?si=80ce9359d8e54cc8 

Youtube Music: https://music.youtube.com/playlist?list=PLwU1nBBz00on-wImV9bLClndzJhc0a2eu

Watch on YouTube: https://www.youtube.com/@wealth-talks-podcast