Not so long ago, most people viewed the hallmarks of success as something along the lines of a house, a white picket fence, two weeks vacation, two children and the ability to send those kids to college. Today, the middle class is a vanishing breed according to nearly every survey and statistic on the topic. Its disappearance is of such grave concern to the fabric of American society that the U.S. government launched a task force to explore the issue. Despite all of the attention to the subject, defining "middle class" remains a challenge, as everyone wants to be in the middle regardless of their income. Instead of focusing on the dollars, let's take a look at the lifestyle benchmarks that define middle class status. (For a background on the topic, see Losing The Middle Class.)
Have You Made it to the Middle?
A wide variety of numbers have been thrown around in an effort to define the middle. People earning 20% of the average income and people earning 80% all claim to be part of the middle class. More than a few millionaires make the claim too. While there is no official financial standard, the middle class as defined by the government task force is characterized in terms of six financial aspirations, which we can view as benchmarks.

  • Home Ownership
    Home ownership remains the American dream. The step up from renting to owning signifies prosperity and achievement. With median home prices ranges differing by so much in different cities across the United States, the ability to achieve this goal varies significantly by geographical location. Someone earning an income in the 50% range in Detroit may not be able to afford even a small house in Los Angeles. (Looking to leap into homeownership? Read Top Tips For First-Time Home Buyers.)
  • Automobile Ownership
    Owning an automobile provides freedom of movement and the luxury of avoiding the limited schedules and cramped quarters offered by mass transportation options such as buses and subways. Here again, the cost of cars varying widely, as does the kind of automobile required. For one driver, a used Hyundai will do the trick. For another, a new BMW signifies the achievement of this goal.
  • A College Education for the Kids
    Helping children get ahead in life is a primary goal for middle class families. Paying for a college education for children can cost anywhere from the low tens of thousands of dollars to hundreds of thousands. Decisions about which university of college to attend can have a significant impact on the price tag. (Worried about footing the university bill? Check out 5 Ways To Fund A College Education.)
  • Retirement Security
    Retirement is a goal nearly everyone wants to achieve. It demonstrates success and provides a reward for decades of hard work. Once again, definitions make a difference. The amount of gold required to support your golden years will vary significantly depending on whether you want a staff of 10 at your villa in the South of France or a townhouse in Peoria, Illinois.
  • Health Care Coverage
    The ability to obtain healthcare is an important goal for middle class wager earners and their families. The high and rising cost of medical care and prescription drugs make healthcare coverage an ever-increasing need, as going without it can have serious negative financial implications in the event of a severe illness or injury.
  • Family Vacation
    The family vacation is a middle class staple. Vacations demonstrate that a family has disposable income and has been successful enough to take time away from work to focus on leisure. (Check out 3 Money-Saving Cruise Ship Tips and 7 Ways To Save On Summer Getaways for tips on how to have a fun and budget-friendly summer adventure.)

What Happened on the Way to the Dream?
Globalization and technological advances began to reverse the growth of the middle class. The manufacturing base in the United States changed, as good-paying jobs in factories and heavy industries went overseas to lower-paying markets and labor unions lost much of their ability to bargain for high wages and good benefits. Later, white-collar jobs from accounting and data entry to reading medical images and answering telephones in call centers were also sent offshore. Many jobs that remained in the U.S. were eliminated by computers and other technological advancements that increased productivity.

To achieve or maintain a middle-class lifestyle, many households became two-income families. Achieving middle class goals became more difficult as employers eliminated their pension plans and defined-benefit plans, the cost of a college education continued to rise and the cost of healthcare jumped. For most of the 20-year period following 1990, the Commerce Department reports that real median income grew at a rate of about 20%, while the cost of a college education grew between 43% and 60%, the cost of housing rose 56% and healthcare costs jumped by 155%.

How to Get There
Although there are significant challenges to obtaining middle class status, there are some proactive steps that can help make the dream a reality. Budgeting is one of the most obvious. Understanding where your money goes each month can help you determine the exact makeup of the benchmarks you are trying to match. Are you looking for a Hyundai or a BMW? (Check out 6 Months To A Better Budget for some helpful tips.)

Planning is another crucial step. Are the kids going to a state university or a private college? Are scholarships an option? Some savvy families find money for college by participating in programs which can aide families with the costs related to sending a child to university.

Working is another one of the requirements. A second job or a side business might be just what you need to boost your income and achieve some of your goals. Putting your money to work is also an important consideration. Investing has helped build wealth for generations. In fact, income earners ranked in the top 1% enjoyed significant increases in wealth even as the middle class fell into decline. Most of that wealth came from investments. Even if you don't have the means to invest for current income, you can take a few dollars from each paycheck and save for your retirement.

The Bottom Line
Don't underestimate the role of hard work and luck. Sometimes being in the right place at the right time or taking one particular course of action over another can make all the difference. So keep watching for opportunities and make the most of them when you find them. As motion-picture mogul Samuel Goldwyn said, "The harder I work, the luckier I get." (For a whole lot more on saving for the important things in your life, see our Investopedia Special Feature: Budgeting 101.)

Related Articles
  1. Economics

    6 Signs That You’ve Made It To Middle Class

    A government task force pinpointed the six financial aspirations that characterize life in the middle class.
  2. Personal Finance

    Is An Ivy League Degree Worth It?

    In 600 B.C. Aesop determined that a bird in the hand was worth two in the bush. Warren Buffett claims that this axiom can be used to determine the most valuable uses of capital. In this article ...
  3. Budgeting

    Preventing Medical Bankruptcy

    If you’re worried medical expenses could overwhelm you, there are some thing you can do to ease your concerns.
  4. Insurance

    Medicare 101: Do You Need All 4 Parts?

    Medicare is the United States’ health insurance program for those over age 65. Medicare has four parts, but you might not need them all.
  5. Savings

    Should You Look at 529 Plans Outside Your State?

    529 savings plans are not restricted by geography. So if your in-state offering has high fees or poor investment choices, look elsewhere.
  6. Insurance

    What's The Difference Between Medicare And Medicaid?

    One program is for the poor; the other is for the elderly. Learn which is which.
  7. Investing

    4 Billionaires Who Dropped Out of Harvard

    People who became successful despite dropping out of Harvard University.
  8. Taxes

    10 Money-Saving Year-End Tax Tips

    Getting organized well before the deadline will curb your frustration and your tax liability.
  9. Retirement

    Top Signs You Aren’t Ready to Retire Yet

    Think you are prepared to retire? These warning signs may indicate otherwise.
  10. Credit & Loans

    Student Financial Aid Changes: FAFSA 2015-2016

    Here is a look at some of the major changes to FAFSA in 2015 - 2016 and how they will affect student financial aid.
  1. Are Flexible Spending Account (FSA) contributions tax deductible?

    The contributions you make to your Flexible Spending Account (FSA) are not tax-deductible because the accounts are funded ... Read Full Answer >>
  2. Does a Flexible Spending Account (FSA) cover massages?

    Flexible Spending Accounts (FSAs) cover massages for certain medical treatments. These treatments must be approved and prescribed ... Read Full Answer >>
  3. Does a Flexible Spending Account (FSA) cover Lasik?

    Flexible spending accounts (FSA) can be used to pay for qualifying LASIK procedures. LASIK is not the only laser eye surgery ... Read Full Answer >>
  4. Are Flexible Spending Account (FSA) expenses tax deductible?

    Flexible Spending Account (FSA) expenses are not tax deductible. The U.S. Internal Revenue Service (IRS) states you cannot ... Read Full Answer >>
  5. Does a Flexible Spending Account (FSA) cover acupuncture?

    A Flexible Spending Account (FSA) covers acupuncture. The Internal Revenue Service (IRS) has defined acupuncture as a qualifying ... Read Full Answer >>
  6. Do Flexible Spending Accounts (FSAs) expire?

    Flexible Spending Accounts (FSAs) do expire and are considered to be a "use it or lose it" type of plan. They are savings ... Read Full Answer >>

You May Also Like

Trading Center