My husband rolls his eyes when I tell him about how I had an awful day, claiming I’m suffering from “first world problems.” I’m upset about a water filter that won’t work in my refrigerator while some people worry about having clean water to drink or food to eat. I have the typical problems of people in the middle class. In the modern economy, the middle class is being redefined as the “wealthy poor.” I can’t afford to pay $300 to have my refrigerator fixed, at least not if I want to get ahead. A recent article The Exchange cites new research by economists from Princeton University, and New York University that looks at 70 million American families living paycheck-to-paycheck. I know I sometimes feel as though I’m living on minimum wage even though we make 6-figures because of our many bills.
Financing the future
According to researchers, high-income earners today are more vulnerable. It used to be people could tap their home equity if they needed money to pay for their children’s college tuition. When my sons first attended college, we were underwater on our mortgage because of the housing downturn. Looking back now, I’m glad we didn’t have the option of taking out a second mortgage. It would make it even more difficult to get out of debt.
Finding money for retirement
Experts say one-third of Americans live hand-to-mouth or paycheck-to-paycheck. One third of those who live paycheck-to-paycheck have no assets, but the other two-thirds have “illiquid wealth” tied up in mortgages and things. Few people have a cash cushion. I know our emergency account gets depleted every new college semester. We have saved for retirement throughout the years despite the fact we couldn’t afford to. The reality is we couldn’t afford not to save for the future.
Living below our means
We have learned to live below our means since the Great Recession. The Exchange author points to the new research as evidence that middle-class families spend more money on homes, cars and “middle-class entitlements” than they can afford. One look at Zillow and I can see that dozens and dozens of homes in my area are in pre-foreclosure. Maybe some people did stretch themselves when they purchased a home, but some of us did not.
It’s difficult economy for the unemployed and poor, but it’s also challenging for the wealthy poor. As a homeowner, I am growing wealth by paying off my mortgage over time. Middle-class people in my community who are forced spend most of their paychecks on rent while lower-income people get housing vouchers to help them afford to live in the middle-class communities. By saving money for retirement and paying off our house, I’m hoping my financial picture will be a lot brighter in another 20 years. As the economy improves, we will no longer be treading water.
More from this contributor:
Why Rich People Feel Hated, But I Don’t
I Pay Myself Last
Escaping a Lifetime of Debt