I’m a middle-class Texan doing everything right, but one emergency away from financial crisis. How do I build stability?
CastOfThousands / Envato
Struggling to stay afloat as a middle-income earner in the U.S.? You’re not alone.
Pew research reports (1) that the incomes of middle-class households have not risen as quickly as the incomes of upper-income households over the past several decades, widening the gap between the haves and the have-nots.
Its latest data (2) shows that only 51% of Americans were considered middle class as of 2023, down from 61% in 1971.
Ayesha is one middle-income earner who is struggling. She’s in her 30s and lives fairly modestly with a secondhand car and a small apartment that she rents with a friend. Ayesha makes $60,000, but living in Dallas is expensive — the average rental price for a two-bedroom home is $2,066, and the cost of living there sits slightly higher than the national average. (3)
Ayesha’s take-home pay, after taxes but before her 401(k) contributions, is just over $49,000. However, after subtracting all expenses, she has very little left at the end of each month to build an emergency fund or spend as she pleases. She also has over $10,000 in credit card debt.
Ayesha feels like she’s just one bad day away from a serious financial emergency. She often imagines scenarios like being laid off from her job or getting into a car accident and her car or health insurance not covering the majority of the costs and worries about how she would manage.
Here’s what Ayesha — and others like her — can do to feel more secure financially.
Ayesha is not alone in feeling that her salary is stretched too thin. Wages have stagnated for middle-income earners.
Between 1979 and 2013, the hourly wages of this segment of the population, which covers people earning more than half the workforce but less than the other half, rose only 6%, according to the Economic Policy Institute (EPI). (4)
The EPI also found that the wages of these middle-income workers were totally flat or in decline in every decade except the late 1990s. Conversely, for the highest earners, the hourly wages rose 41% in the same time period.
Being single and only having one income can also add to Ayesha’s struggles. In fact, she only just makes the grade as middle class. In plenty of places, she barely qualifies for this status and, in various others, would be considered low income.
SmartAsset, drawing on data from the U.S. Census Bureau, claimed that a middle-class income in big cities ranges from $49,478 to $148,449. (5) The numbers vary widely across the country. For example, in Detroit, the middle income range is $25,384 to $76,160, while in Arlington, Virginia, the range is an eye-watering $93,470 to $280,438.
Meanwhile, in Texas, the middle class is defined as earning between $50,515 to $151,560. This means Ayesha is very much in the lower bounds of what is considered middle class in the place she lives and close, like many others, to being squeezed out.
A gloomy feeling about the future is pervasive across the country. According to a survey from the National True Cost of Living Coalition (6), 65% of middle-class Americans are struggling financially and don’t expect this situation to improve for the rest of their lives. While inflation is showing signs of cooling, costs for most consumer goods are still high, and tariffs are likely to continue to increase the price of necessary goods on store shelves.
A recent Primerica poll (7) found that 69% of Americans feel their income is falling behind the cost of living. The data bears this out: While the living wage for a family of four is $68,808 per year on average, the expenses for that family are $61,334 per year, leaving very little left over for savings or luxuries like family vacations.
The housing market also remains a massive issue for most Americans. Foreclosure rates are surging and prices remain out of reach for most households.
This perfect storm of factors explains why so many Americans are feeling pessimistic about their financial futures.
While the odds might seem stacked against you, it is possible to find ways to become more financially stable. This doesn’t just require earning more income. Changing your budgeting and spending style can also make a huge difference.
One of the first steps to take is building an emergency fund with at least three months of expenses. This is essential to ensure you can cover both minor costs like car repairs and healthcare expenses, but also feel secure if you happen to lose your job or face another major crisis.
Paying down debt is also critical, as the interest payments eat into your budget and prevent you from finding extra room in your budget to save.
For example, Ayesha’s $10,000 in credit card debt at an average rate of 23.99% costs her $199.07 per month. (8) If she parked that amount monthly in a high-yield savings account offering a return of 4.5%, over a single year she could save $2,437.87.
One of the best ways to begin building a realistic budget is to track your spending for 30 days so that you truly understand how you use your money — you may be surprised where it really goes.
You should also treat your savings as another bill that you must pay and can consider setting up an auto deposit so that it’s built into your budget.
Pew (1); Pew Research Center (2); Zumper (3); Economic Policy Institute (EPI) (4); SmartAsset (5); National True Cost of Living Coalition (6); Primerica (7); Investopedia (8).
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
