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7 Things The Middle Class Can No Longer Afford

johnDuring economic discussions, we often hear about the financial burden that’s placed on the middle class. So, who are the middle class? Though there is some debate over the exact income a middle class household brings in, we do have an idea of who the middle class are — most working class people. They are neither rich nor poor and they have a reasonable amount of discretionary income (perhaps about 1/3) after taking care of the necessities. But things that the middle class could easily attain in the past are getting harder and harder for people to afford.  The following list is in order
1.) Vacation.
Number one on our list is vacation.  Vacations used to be simple.  I remember hopping into Grandmas station wagon, the kind where you faced the rear of the vehicle (with no seatbelt…) and embarking on a road trip. These road trips would lead us to our Aunt’s farm, a simple cabin by the lake or or maybe even to a museum or historical village.  Today’s vacations consist of high priced airline tickets, passport fees, cruise ships, attraction tickets, expensive meals at chain restaurants and pricey hotels filled with amenities you’ll probably never use. As vacations become more expensive, the temptation is to pay for them using a credit card, which ultimately leads to a potentially dangerous financial situation.

2.) New Vehicles.
A ton of new innovations in vehicles, such as GPS, Sensors, Cameras, Adaptive Cruise Control, Onboard WiFi and more has driven the price of vehicles up to new heights.  The average price of a new vehicle today is $32,000, which makes those monthly payments go sky high and many buyers finance a car loan for 72 months. A new vehicle quickly depreciates in value—when you drive off the new car lot, the vehicle is immediately worth 25%-30% less than what you paid, which ultimately ends up costing you more money for less value. Your best bet here: purchase a reliable used / certified vehicle.  It won’t depreciate as much as a new car and your payments won’t be nearly as cumbersome as a new car.

3.) Paying Off Debt.
It’s getting increasingly difficult for the middle class to pay off their debt.  Whether it’s vacation debt, misc. expenses, emergencies, home-related expenses, student loans, car payments, etc. debt can be a huge burden.  The average household has 3 credit cards with about $15,000 in debt and the average mortgage debt is about 150K. If you find yourself in this situation and need some advice on how to tackle paying off your debt, look over the debt payment tools on our website (CompassCatholic.org)

4.) Emergency Savings.
With more and more money going out the door and less and less money going into a savings account, emergencies can take a toll on a middle class family.  It could be anything, an exploded water pipe in your home, an air conditioner that has decided to quit, a health crises or other tragedy.  Emergency savings are becoming a thing of the past and that’s a frightening situation.  One of the best pieces of advice that we can give you is start keeping track of your spending. Check out the tools on our website (CompassCatholic.org) or use an app to track your spending. Once you track every dime you spend and have some facts, you can find the leaks and redirect the money into savings.  Maybe it’s frequent visits to the fancy coffee store, lunch at a restaurant, or excessive spending at the grocery store.  Whatever it is, tracking your spending lets you be in control.

5.) Retirement Savings.
A sad and scary statistic is that about 20% of individuals 65 years and older have no money saved for retirement.  Their money will run out and it’s a gamble to rely on social security payments. Establishing that emergency fund, then building on it will help you save for retirement. The sooner you start the more time you will have to build that a egg. If you do have a retirement plan, congrats.  Be sure to NOT borrow money against it and remember that you CAN’T get a loan for retirement, so it is critical that you save today for tomorrow.

6.) Medical Care.
Medical insurance costs escalate EVERY year.  Like it or not, it’s going to happen.  A lot of younger folks today are skipping the health insurance offerings from their employer to simply get more out of their paycheck, but it’s a dangerous gamble.  Healthcare and its annual increases of 10-15% need to be a line item factored into your budget.

7.) Dental Work.
This one might surprise you, but there are over 108 million people in the United States with no dental coverage at all.  The problem with this, it’s not IF you’ll need a dentist, it’s WHEN you’ll need a dentist.  If you do not maintain your dental health through regular visits, you run the risk of incurring huge fees when you finally go to the dentist in pain.

The important takeaway from this post is this: The bible teaches us to be good stewards of what God has given us, including how we manage our finances. While it’s getting more and difficult to make a living and to have ⅓ of your paycheck left over, with some diligence and focus, you can make the cuts where you need to and feed the mission critical areas of your budget that we just discussed.

We will leave you with this verse: Proverbs 21:5 “The plans of the diligent end in profit, but those of the hasty end in loss. ”

Thanks for reading and sharing.  To learn more about Compass Catholic and being a good steward of your financial resources, visit our website: https://compasscatholic.org

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