Do you currently feel like your salary is not being able to pay for your lifestyle?
The fact that this may not just be a feeling, but a reality for many, especially the American middle class, if we can still consider the middle class the standard designed by the government.
The government considers that the middle class has annual salaries of around 48,500 dollars, the Pew Research Center, although not a government body, also agrees with the same understanding.
Let us consider that, since the 1970s, the so-called reference value of middle class income has increased substantially. But when adjusted for inflation, current purchasing power has stagnated and even declined.
No less appreciated, even with this inertia of the classification phase, the American middle class has been disappearing. According to statistical data from the Pew Research Center itself, since 1971 the middle class has lost 11% of its members, and not because they rose in standard, the fact was just the opposite.
The research states that 61%, in 1971, belonged to the middle class, now in 2021 this number has fallen to 50%. At the time, the middle class, which had an annual income of around US$11,000, according to research by the United States Census Bureau, was raised to its current salary of US$48,000 per year, a value 336.4% higher than at the time, to equalize, the term middle class.
Visually it is very promising for the middle class, but the illusion appears when we apply inflation calculations.
Surprisingly, what should be a leap forward translates into a suppression of 77.1% in real terms. This reveals a significant gap between perceived progress and actual financial situation. Statistical data from the Pew Research Center paints a vivid picture of this disparity. In reality, to maintain the same purchasing power, the value should be around 85 thousand dollars per year. This is a substantial gap that reflects the inability to keep up with changing times.
So it’s not just a feeling that you’re having, in relation to your earnings, that you don’t have the lifestyle of a middle class.
What would be the solution we have so that we can return to the real middle class?
Well, my suggestion, and this is what worked for me, was to tackle the problem head on.
First, recognize the difference between your income and your standard of living. Then take proactive steps to readjust, this is an immediate corrective action.
What does the readjustment imply? It could mean downsizing of your patrimony, selling your current property for a more affordable one, perhaps revaluing or the exchange for more economical vehicles, including maintenance costs.
But here’s the key change: ensuring your expenses are consistently below your earnings. It’s about living within your means and at the same time ensuring a surplus, ideally around 30% of your income.
Adjusting can feel daunting. But is necessary.
If you are from a class that precedes the middle class, the method works in the same way, but I know that in this case survival, the cost of maintenance, is higher and that it generally compromises all income, and on another occasion I will talk about this topic more comprehensively.
But here’s the gist: This surplus, this ability to live within your means and save, is the cornerstone of financial progression. It’s not just rhetoric; It is a methodology that has been tried and tested.
Many cling to status symbols, but for the 11% who left the middle class, this fixation may have led them to share the new status of poverty.
I am not claiming here that poverty is something deplorable, even because I have already experienced it, and with due care, work, patience and perseverance these stages were overcome.
However, overcoming these obstacles requires the implementation of the excess income principle. There is simply no other way. I believe in the saying ‘money makes money’. Even a single dollar, invested strategically, can generate more wealth. The secret is to value your work, your dedication – recognizing that it is not just income, but your life that you are investing in.
In essence, the solution lies in adapting your lifestyle to match your income, whilst ensuring a surplus. It’s a journey of recalibration, financial prudence and a commitment to ensuring your future prosperity. Remember, it’s not just about winning, it’s about maximizing the potential of every dollar earned – that’s the cornerstone to “financial liberation.”
So value your work, do more for yourself, the work you do is subtracted from your life time.