Middle-Income Americans Are Hurting Financially – Here are 10 Ways To Cope

If you’re struggling to make ends meet with how high prices surged in recent years, you’re not alone.

Sure, year-over-year inflation is sharply down from 9.1 percent a year ago to 3.3 percent last month, but all that means is that prices are going up more slowly.

It doesn’t mean prices have gone back down to where they were before COVID.

And wages have not kept up with inflation. In fact, they’re down at least 8 percent after adjusting for inflation, and that’s on average. Removing data on high-income earners would likely increase this shortfall.

A Recent Primerica Survey Shows Middle-Income Families Are Hurting

In their most recent quarterly poll, Primerica’s findings (PDF) are sobering.

• Nearly half (49 percent) of middle-income American families feel their finances are “not so good” or “poor.”
• Nearly 4 in 10 (38 percent) feel worse about their credit card balances than a year ago.
• More than a third (36 percent) use their credit cards more often than before.
• Six in 10 (60 percent) who don’t pay off their balances in full each month say that managing their card debt is challenging.
• Nearly 3 in 10 (27 percent) plan to reduce their retirement plan contributions this year. This, even though 6 in 10 (60 percent) don’t think they’re saving enough to be on track for a comfortable retirement.
• Nearly half (46 percent) expect the economy to worsen over the coming year.
• Nearly 9 in 10 (88 percent) feel higher food prices impacted their families.

If you’re a middle-income earner, I suspect all this is far from surprising for you.

How Are Middle-Income Families Coping?

Say what you will about us Americans, we’re an adaptable bunch.

Faced with these economic and financial headwinds, middle-income families are resorting to a variety of steps to cope with these financially challenging times.

1. Replacing what they used to buy with cheaper options (think store brands).
2. Buying less food. According to Feeding America, 38 percent of all food in the US is wasted, of which the food industry wastes just over half. This means most of us can buy less food and not go hungry.
3. Using coupons more often is another way to fight food inflation. Nearly 4 in 10 (37 percent) middle-income families report this is one of their responses to higher food prices.
4. Three in 10 middle-income families report buying in bulk. This often reduces the unit costs they pay. The only concern here is that this may contribute to more wastage.
5. Looking for additional income sources is another common response, with nearly a third (32 percent) reporting this.
6. Nearly 3 in 4 (74 percent) try spending less on discretionary expenses such as eating out and entertainment.
7. In cases where their debt load is high, debt consolidation is a potential way to reduce interest costs. Nearly 1 in 6 (16 percent) families report considering this.
8. Avoiding credit card debt is smart, given the usurious interest rates charged by card issuers. Nearly 1 in 4 (24 percent) avoid this needlessly high expense.
9. Nearly half (46 percent) are reducing or pausing saving and investing for the future. While this is a bad idea in the long run, in the short term, it is an understandable way of coping.
10. Three in four (73 percent) of married couples merge their finances. Since the cost per person for a couple living together is much lower than the cost of living on your own, in most cases this is a financial boon (especially if your partner brings in a significant income).

Some additional ways you can improve your situation include:

• House hacking: Renting out an unused portion of your home or sharing rent with someone other than your immediate family can significantly reduce your monthly spending.
• Side hustling: Finding ways of monetizing your skills is easier than ever. However, this is not passive income, so expect to (a) need to spend time learning how to do this effectively, (b) invest in such new businesses, (c) spend significant time on such efforts, and (d) need to learn how to market your products and/or services.
• Working remotely: Although more and more employers are trying to get their employees to return to the office, at least several times a week, finding work you can do remotely will save you a significant amount of money through reduced commuting cost, reduced commuting time that lets you side hustle (see above), reduced spending on business attire and the care thereof, and for parents, reduced cost of childcare.

Bonnie Maize, JD, CFP, founder of Blazing Star Financial agrees and adds some cost-cutting ideas, “If your wages aren’t keeping up with inflation, there are only two options to help make ends meet, increase income or reduce expenses. You can look for a side gig or a higher-paying job to increase income. To trim expenses, I recommend cutting spending before you think of reducing savings or retirement contributions. Many of us signed up for new subscriptions during the pandemic that we no longer use but keep paying for, even as their costs rise. We also engaged in a lot of travel, eating out, and other expensive ‘experiences’ post-pandemic that may need to be reduced if our wages aren’t keeping up with inflation. Depending on your specific circumstances, a small investment to consult with a financial coach or planner can be well worth the cost to get an expert’s objective opinion.”

Jeremy Zuke, Financial Advisor, Abundo Wealth adds, “Cars are often your biggest hidden expense. Car payments are higher than ever. And expensive cars often require expensive insurance, gas, and maintenance. We find that trading down to an efficient car is a huge win for struggling families. In addition, rather than cutting out purchases entirely, consider reducing them by 20% (e.g. four days a week instead of five, or once every five weeks instead of every four weeks). That way you can continue doing the things you enjoy without breaking your budget. To maintain your savings rate consider adopting a ‘savings first’ budget. That means, if at all possible, prioritizing savings and then spending what remains. A ‘spending first’ budget often leads to savings being sacrificed. If you truly can’t save as much as you used to after trimming subscriptions, online shopping, eating out, etc. then that’s reality. But it’s good to at least try budgeting with a ‘savings first’ mindset.”

The Bottom Line

Our economic inequality levels are high and rising.

This leaves the middle class increasingly further behind the wealthy, to the point that many (most?) Americans no longer expect their kids to do better than they did, financially.

High interest rates make an already challenging environment even more difficult by pushing up mortgage payments (with rents usually following along for the ride), auto loan payments, and credit card interest. The above shows multiple worrying stats about how middle-income families are hurting financially, 10 ways they try to cope with how incomes have failed to keep up with price increases in recent years, and three more ideas to improve your financial situation.

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This article was originally published on Wealthtender and is intended for informational purposes only and should not be considered financial advice. You should consult a financial professional before making any major financial decisions. Wealthtender earns money from financial professionals, which creates a conflict of interest when these professionals are featured in articles over others. Read the Wealthtender editorial policy and terms of service to learn more. Wealthtender is not a client of these financial services providers.

Disclaimer: This article is intended for informational purposes only, and should not be considered financial advice. You should consult a financial professional before making any major financial decisions.

About the Author

Opher Ganel, Ph.D.

My career has had many unpredictable twists and turns. A MSc in theoretical physics, PhD in experimental high-energy physics, postdoc in particle detector R&D, research position in experimental cosmic-ray physics (including a couple of visits to Antarctica), a brief stint at a small engineering services company supporting NASA, followed by starting my own small consulting practice supporting NASA projects and programs. Along the way, I started other micro businesses and helped my wife start and grow her own Marriage and Family Therapy practice. Now, I use all these experiences to also offer financial strategy services to help independent professionals achieve their personal and business finance goals. Connect with me on my own site: OpherGanel.com and/or follow my Medium publication: medium.com/financial-strategy/.

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