Amid inflation, more middle-class Americans are struggling to make ends meet

As inflation rose, middle-class Americans were hit particularly hard.

For them, prices have risen faster than their incomes, according to a September report by the Congressional Budget Office. The report found that household incomes in the lowest and highest income groups grew faster than prices over the same period.

While middle-class wage growth is high by historical standards, it doesn’t match the cost-of-living increase, which rose 6.5% in December from a year earlier — making it harder for the middle class to live the same lifestyle as before. generations did.

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Nearly three-quarters, or 72 percent, of middle-income families say their earnings fall short of the living wage, up from 68 percent a year ago, according to a separate Primerica report based on a survey of households with incomes between $30,000 and $30,000. and $100,000. A similar share, 74%, said they were unable to save for their future, compared to 66% a year ago.

The middle class is shrinking

Economists have different definitions of the middle class. The Pew Research Center defines the middle class as those earning between two-thirds and two times the median American household income of $70,784 in 2021, according to Census Bureau data. This means that American households earning less than $47,189 and up to $141,568 are technically included, although the median income is about $90,000.

As is often noted, the share of seniors living in middle-class households is declining. According to Pew, 50% of the population will now fall into this group by 2021, down from 61% 50 years ago.

Several other studies show that their share of the country’s wealth is also shrinking, while the top 1% continue to accumulate more and more.

“It’s only going to get worse”

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According to the Consumer Financial Protection Bureau’s recent Making Ends Meet report, financial well-being is generally deteriorating.

Overall, households have been slow to adjust their spending habits. Although prices have increased significantly, consumer spending has not changed much.

To close the gap, Americans are dipping into their savings accounts and racking up credit card balances. This makes them more financially vulnerable in the event of an economic shock.

With economists now predicting a possible recession, 62% of middle-income households said they should prepare financially, Primerica also found.

“Unfortunately, I think it’s going to get worse,” said Ted Jenkin, CEO of Atlanta-based Oxygen Financial and a member of CNBC’s Advisory Board.

Hope for the American Dream is at an all-time low, especially among the middle class, according to a recent Gallup poll that tracks Americans’ assessment of the likelihood that the next generation will outlive their parents’ living standards.

Currently, according to Gallup, 59% of middle-income Americans, or those earning between $40,000 and $100,000 — said it is very or somewhat unlikely for today’s young adults to have a better life than their parents, compared to only 48% of those with an annual household income of less than $40,000.

‘You have to be really disciplined’ amid inflation

“As middle-income families prepare for a possible recession this year, it’s more important than ever to take control of their personal finances by tackling debt, budgeting and controlling spending,” said Primerica CEO Glenn Williams. statement.

Experts often recommend starting with high-interest credit card debt. Credit card rates in particular now average over 19%—an all-time high. These annual interest rates will also continue to rise as the Federal Reserve continues to raise its benchmark rate.

If you currently have credit card debt, tap into a lower-interest personal loan or 0% balance transfer card and avoid making additional purchases on credit until you can pay off the balance in full at the end of the month and even put some money aside.

“You’ve got to be really disciplined or you’re outpacing your income,” Jenkin said.

How to calculate your personal inflation rate

To keep your costs down, Jenkin said some simple financial tricks can help, such as going to the grocery store less and shopping less online.

“Grocery stores are like Las Vegas; they are there to separate you from your wallet”. Meal planning is a way to reduce your shopping list to weekly essentials and save money.

Disabling one-click ordering or deleting stored credit card information can also help. “Anyone who shops on Amazon and has a credit card on file, you’re basically pouring lighter fluid into your budget,” Jenkin said.

Jenkin recommends waiting 24 hours before shopping online and then using a price tracking browser extension like CamelCamelCamel or Keepa to find the best price.

Finally, tap into a savings tool like Cently, which automatically applies a coupon code to your online order, and pay with a cash-back card like the Citi Double Cash Card, which earns you 2%.

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