Members of the American middle class are often the litmus test to find just where someone falls on the spectrum between social status and self-respect. Yes, the grass in the Joneses’ yard is always greener, but, outside of questionable government data, you may find it hard to establish just where your median household income falls.
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With today’s economy seemingly injecting everyone’s cost of living with performance-enhancing drugs, it’s safe to say that most middle-class people don’t feel rich. However, are there little things you are doing in your daily spending habits that are telling you that maybe your idealism is writing checks your bank account can’t cash? Here are the top five signs you may think you’re middle class, but you actually can’t afford it.
No. 5: Your Debt Is 6 Figures, but You Only Earn 5
If debt feels like an ex you just can’t shake, especially for daily living expenses — this could be a sign that you’re not truly in the middle class. Don’t let it keep hurting you. You are strong, you are financially independent, you need to stop putting groceries or monthly bills on your credit card with no plan to pay it off in full.
You may think this is a money move many people in middle-income households make, but typically, being middle class means you have enough disposable income to cover essentials and save for future goals without resorting to credit cards or loans. Having high levels of debt relative to the income you bring in can hobble your financial footing.
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No. 4: You Plan on Nothing Unexpected Happening
“Expect the unexpected” seems like a bad, or at least counterintuitive, bumper sticker. However, a hallmark of middle-class stability is having some form of financial safety net, often in the form of an emergency fund.
If you don’t have at least three to six months’ worth of expenses tucked away for a rainy day to cover you, should you suffer a financial shock like job loss or medical bills, you may not be under the umbrella of the middle class.
No. 3: You Need To Paycheck Yourself Before You Wreck Yourself
The paycheck-to-paycheck cycle is better than drowning in debt, but this form of treading water makes it hard to escape the confines of the poor house. Earning a decent salary doesn’t necessarily mean you’re middle class if most of that income is being gobbled up by the monster of living expenses, debt payments or lifestyle inflation.
No. 2: You’re Only Retirement Plan Is Letting People Know Where You Want To be Buried
Being middle class often comes with participation in retirement accounts like 401(k)s or IRAs. If you’re not contributing to a retirement account at all, or if you’re only making minimal contributions, you might not be as financially secure as the middle-class label suggests.
If you can’t currently provide for your future nest egg, you may have to financially scramble later. Or, simply put, if you don’t have retirement savings, you won’t be able to stop working.
No.1: You’ve Kissed Your Assets Goodbye
And now, the number one sign you’re poorer than middle class is … you have no assets beyond your personal belongings. If this is the case, you may not live in a middle-class household so much as you do a lower-income one.
This is because owning a home, having an investment portfolio or other income-generating assets is often a characteristic of middle-class wealth. Unfortunately, if everything in your possession depreciates in value as soon as you touch it (think cars or consumer electronics) then this reverse-Midas touch might land you squarely outside the middle class.
Cindy Lamothe contributed to the reporting of this article
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This article originally appeared on GOBankingRates.com: Top 5 Signs You Are, in Fact, Poorer Than Middle Class
