You’ll own nothing and be happy
If current financial trends continue, middle-class Americans may find things they used to afford unattainable. Over the next five years, housing, healthcare, and transportation could exceed the budget of average earners.
Though this trend is troubling, there are things that can help, like solid financial planning and changes to government policies affecting the middle class.
1: Homes
According to the National Association of Realtors, as of February 2024, home prices were rising in 85% of U.S. cities. High demand, high mortgage rates, and changes to property tax laws, as seen in legislation like California’s Prop 19, could put homeownership out of reach for middle-class Americans.
2: College Tuition
A report by U.S. News and World Report shows college tuition has been steadily increasing over the last two decades. Given inflation and real wage stagnation, it may be increasingly difficult for middle-class parents to cover the cost of college for their children.
3: Private Schools
Student writing letters on a chalkboard.
Photo Credit: ElinaManninen via stock.adobe.com.
Many middle-class families opt for private K-12 education for their children, but that may be changing. According to the Education Data Initiative, the current average cost of private high school tuition is over $16,000. That price will almost certainly increase over the next five years.
4: Healthcare
Affording regular health insurance and standard preventative care may become difficult for many middle-class Americans. Healthcare expenses have been outpacing general inflation for years, according to experts interviewed by Yahoo Finance. Add in the cost of caring for aging parents, and middle-class families are likely to feel serious financial strain.
5: Extended Family Vacations
Rising fuel, hotel, and restaurant prices could make longer family vacations unaffordable. A weekend trip to somewhere nearby might still be in the cards, but middle-class families probably won’t be able to afford extended overseas trips.
6: Retirement
An analysis by NORC at the University of Chicago found that older middle-class Americans, particularly those in Black and Hispanic communities, will have difficulty retiring. While the people in the analysis made too much to qualify for Medicaid, they did not have enough liquid assets to cover the medical, housing, and care expenses that often happen during retirement.
7: Premium Streaming Services
Americans think they spend around $60 per month on streaming services, but studies show the average is closer to $300 per month. As middle-class Americans tighten their financial belts, they may have to cut out some of their streaming services in the upcoming years.
8: New Cars
Cars are getting smarter thanks to autonomous technology. They’re also becoming more safe and more environmentally friendly. Unfortunately, all of those high-tech improvements come at a cost, and though the U.S. has seen a slight improvement in car prices, new car prices overall are likely to keep rising.
9: Organic Foods
Grocery bills are increasing across the board, but with organic products, the price hike is more extreme. For example, conventional produce increased prices by 10% in 2023; organic products increased by 13%. Many of the price increases are due to convoluted supply chain and climate change issues, which means they’re unlikely to drop in the next five years.
10: Leisure Travel in Retirement
Many middle-class Americans look forward to traveling in retirement, but that may not be feasible. Given the rising costs of travel and health care, many in the middle class will likely have to forgo retirement travel.
11: Safer Investments For Retirement
Relatively safer investments like bonds and fixed income have long been cornerstone investments for retirees because they provide stability. However, with rising inflation and low interest rates on bonds, these investments may not keep up with retirees’ income needs.
12: Cultural Experiences
A night at the opera or seeing a live show was always a treat for middle-class Americans, but cultural experiences like these are becoming so expensive that they may not be feasible at all. More severe storms, which interrupt live events, rising mandatory event insurance prices, and increasing costs for production equipment are causing ticket prices to increase significantly. According to Hollywood Reporter, there’s been a 14% increase in event ticket prices since 2019.
13: Home Renovations
Lumber shortages, rising labor costs, and an increased interest in home improvement (probably stemming from Americans’ inability to afford a new home) all contribute to rising renovation prices. Middle class Americans may find making changes to their living space isn’t in the cards.
14: Comprehensive Insurance
The average cost of car insurance went up 26% in 2024, and increases are likely in years to come. This could drive middle-class Americans to opt for minimum insurance coverage rather than comprehensive options. However, in the event of an accident, minimum coverage can leave Americans in dire financial straits.
15: Childcare
Childcare options decreased significantly during the COVID-19 pandemic. Fewer options combined with rising costs could make childcare unattainable for many Americans. Without childcare, middle-class Americans may have to adjust to a single income, creating even more financial concerns.
16: New Technology
Recent reports show the average age of turned-in Smartphones is at a record high of 3.5 years. Americans are keeping their tech-based tools, like smartphones and laptops, longer, in part because affording the latest upgrades is becoming difficult. This is a trend that will likely continue.
17: Entertainment
Going to see a movie, taking the family to a theme park, or even just enjoying the local county fair is slowly becoming too expensive for middle-class Americans. As entertainment prices continue to rise, it’s likely that average earners in the U.S. will have difficulty enjoying themselves outside the house.
18: Luxury Purchases
Middle class Americans in the early 2000s had a massive amount of disposable income, making the occasional luxury splurge possible. However, as financial constraints grow in the coming years, designer handbags, high-end clothing, and jewelry aren’t things middle-class Americans will be purchasing.
19: Emergency Funds
According to Bankrate’s annual emergency savings report, 36% of Americans have more credit card debt than they do emergency savings. Though Bankrate also reported that Americans are more interested in increasing their emergency funds now than they were in 2023 or before, they may have trouble doing so. Rising costs in almost every other area of American life could make it difficult for average earners to avoid touching their savings accounts.
Continued
mindfullyamerican.com/things-the-middle-class-wont-be-able-to-afford-in-5-years/
h/t Phen