What is the mindset of middle class people that keep them middle class?

In My Humble Opinion
121

I see your point about security, but I think that you’re taking a first-world concept into a third-world scenario, so the value of security is greatly diminished.

If he’s living in a third world country, chances are there is far more community in his village than we see in suburbs of the US. I’d wager that there is a good deal of looking out for one another in that situation. We in the US have enough wealth that we can afford, monetarily and resource-wise, to live in a fashion such that we can be self sufficient. So the only thing to think about is if the child gets really, really sick - any other sickness (cold, whatever) is just as much an inconvenience to the fisherman as it is to a couple of parents in a first-world situation.

So going with the idea that the child gets really, really sick (cancer, needs an organ transplant, etc) - how is that different than here? There are many cases where the medical bills far exceed the income of a couple who have ‘security’, and they end up in massive debt to care for their sick child.

And if the fisherman loses his boat due to hurricane, chances are it wasn’t a $25k boat that the fisherman will never be able to replace. It’d probably be more like a skiff or something with lashed together logs.

My point is that security is relative. Security is a concept that means to protect against loss. The less you have, the less you need security. First world parents need security because they live in a world where tangible resources like money and assetts are a necessity in the first world economy. Third world parents have little use for first world economy assetts - it’s a completely different paradigm.

But I digress - the moral of the story remains the same. There are those who will run the race to get to the flowers at the end of the road, and there are those who will smell the flowers as they come along. Neither is right, and neither is wrong. Depends on the person.

122

I didn’t mean to sneer. The point I was making is that everyone defines wealth from their own perspective. I’m living pretty close to median income/median wealth, so that’s “comfortable”, and anything significantly above that is “rich”. To someone working a cash register, I might be “rich”. To me, you’re are fabulously rich. A million bucks is something I would be lucky to retire with after careful planning and investment over the course of my entire life, and you just have it laying around.

123

Bwah?? This makes it sound like we have a Scrooge McDuck style vault with stacks of money in it, which while a cool visual is really far from the truth. Having a million dollars in assets is quite different than having a million dollars in liquid assets. I mean, it’s not like you can sell your house overnight and lots of investments have a future maturity date that prevents you from cashing in on the fly.

124

Viewing material success as if it is some sort of odd hobby is a luxury of people who have money. Your parents and the parents of your husband did not have that luxury. They understood that their financial survival depended on the success or failure of their business.

I think however you choose to live your life is fine. But the irony of the middle classes is that most of them aren’t pursuing careers they love. They are working in cubicle jobs they tolerate where they can be moved all over the country or fired at a moments notice.

The flip side of that is I also know people who are pursueing their dream. But they come from some money and don’t feel any sort of sense of urgency. It’s a big hobby for them.

125

I don’t agree, based on anedotal evidence. I have not personally lived a third-world life, but many of my friends have, and the one constant of all of their accounts is a crippling anxiety about basic issues - whether it be periodic starvation, the fear of disease, oppression by government thugs, or oppression by private thugs (often indistinguishable from government thugs).

Of course the other constant is that they all fled to Canada, so a certain amount of self-selection may be involved!

I suspect romanticization of the idillic life of poverty in a communal village environment is at least in part a “first world” concept. Perhaps that idillic life exists in some places. Even where it exists, it tends to be enforced by social convention which many find stifling. The upside is no doubt it is somewhat free from the pressures of alienating modernity. However, it is subject to its own pressures and as I said, no-one I have personally known who grew up in that environment has shown any desire to return to it.

My point is that one of the reasons people run the race is not because they are unwilling to smell the flowers along the way, but because they fear that without money or influence, those flowers may wither in a drought, or someone will ruthlessly trample them.

We are lucky in having the luxury of not worrying excessively about such basic issues, because generally speaking, armed men do not burn us out on occasion, and no matter how unthrifty we are we are unlikely to actually die of starvation or disease; ironically, it makes more sense for one of us to live for the moment than a third worlder - albeit, relying on the hard work of others to provide the social security net and infrastructure.

126

I agree - it is easy to have a million dollars in assets without being in the least rich. In Toronto, for example, a reasonably modest 3 bedroom house can cost $800,000 or more, easily. Certainly you could at a pinch sell your house and buy something cheaper elsewhere or rent, but that involves a major lifestyle change.

127

And there is the mindset in a nutshell. What Alice describes is a fairly reasonable amount of wealth for most people making a median income to manage to acquire over the course of a lifetime - you’ll have to be frugal, you’ll have to save…but it IS reasonable to have $1M in assets at the end of your working life on a median salary. But if you think you are screwed before you start, you won’t. On the other hand, if you choose not to because being frugal now isn’t worth having $1M at retirement, that is a choice.

128

I understood their mentality because his grandparents have never been anything other than very rich or very poor. They don’t understand the concept of the middle class very well. They think of us as deprived somehow, though I get the sense that their understanding has changed. I respect people who pursue their creative visions and reap the benefits, even if I find the particular method unappealing personally. But the question was, ‘‘What is keeping you from being rich?’’ The answer to that is basically that I don’t want it bad enough.

This is an interesting point addressed by economist Jacob Hacker in The Great Risk Shift. Essentially our economy has shifted from a production-based industry to a service-based industry, which, combined with the shrinking labor market, has resulted in a situation where middle-class employees must take on the vast majority of the risk. The most volatile, highest-risk group right now in terms of financial hardship is the middle class. The risk is doubled for households where two people are working. It’s becoming less and less comfortable, IOW, to be middle class, where you can literally be one lay-off away from losing everything.

I agree with a point Sattua made earlier in this thread - that kids when they face their educational options are really not getting the truth about what they can reasonably expect from any given degree. Instead they have universities blowing smoke up their ass about how valuable their theater program is or whatever. The emphasis is much more on ‘‘what you want to study’’ than ‘‘how the bills will be paid.’’ Maybe that’s because there was a time in not-too-recent history when an education could pretty much get you wherever you wanted to be. That ship has sailed. It’s time for people to get real with young, impressionable students about what education really means today.

I say that as someone who learned the hard way. I’ve always had a dream of getting a Ph.D. and it was tough for me to accept that it’s a luxury degree I don’t need that won’t help me and that the reality of academia is a lot more bleak than the universities would have you believe. I don’t care about money so much as I care about meaning, but nowadays I feel there are even massive misconceptions going around about the meaning of certain professions.

It’s like success, however you choose to define it, is getting harder to achieve, period. It’s not as simple as choosing between wealth and personal fulfillment. Sometimes people can’t get either.

129

If you do ever get a Scrooge McDuck-style vault full of cash, can I please, please come and swim in it?

I promise not to steal anything.

130

What makes you think that this is the case? Opportunity is not as available as you seem to think it is.

Look at it from an economic perspective. Resources are limited. If they weren’t they’d be worthless. The more people that “move up,” the less benefit there is to moving up.

131

I have often felt that things have changed fundamentally from my parent’s age when it comes to academia. In their day as student - the '50s - getting a university degree, particularly a high degree like a PhD, was a ticket to the sorts of opportunities that current grads can only dream of.

However, there is another side to that coin - very few people got degrees. Their value was in part a reflection of their scarsity.

Also, my dad - who became a university prof - tolerated a level of poverty as a grad student that equals if not surpasses the hard-living-debt stories of today; remember, at that time the social expectation was to marry and have children young; he had three while living hand-to-mouth in grad student’s quarters, and this was not unusual. These days, it would be uncommon from a grad student in his early 20s to have a wife and three kids to support.

132

Back when all they had was cloth diapers, and even to a certain extent today, babies/toddlers really aren’t all that expensive (food & clothes), especially back when moms didn’t work outside the home as much (less daycare). Once they get bigger, everything gets more expensive, though.

133

It isn’t just a question of expense - it is perfectly possible to raise three toddlers on very little money - it is one of toleration for a life of relative hardship and displacement.

Life of a grad student was (and I suppose still is) a rather nomadic one, since you have to go where the research is happening. My earliest memories are of being packed with all our belongings into a car for a trip, like some sort of academic Oakies, to California from Toronto or back again; and living in student quarters with three kids and diapers drying on the line was sorta crowded.

134

I can show you the other side of your luck. I had a $40,000 portfolio and we were moving into a new house. I needed to drop a car payment and noticed I’d made in three weeks enough money to pay off a car and get it’s transmission serviced. I called the broker on Monday and had them cut a $10k check. The next day, the market tanked with my portfolio eventually esttling around the 11,000 mark. It stayed that way (even with me paying into it) for 6 years. At which point we had another family crisis and I cashed them out to take care of it.

We still have our 401k’s, the house, my pension, and the wife’s SS, but the market never really did right by me, and the only thing I really got out of it was that car. (a depreciating item, nonetheless) But I still have it, and it still makes me smile.

135

Sorry that I haven’t even come close to reading the whole thread, but the question is, “what is the mindset of the middle class” and THIS is that mind set. It’s believing that you are middle class, and that you’ll stay there. There were a few posts before this that said the same thing, “I make $50-80,000 and I’m okay with that.”

What you don’t realize is that you are actually rich, and more importantly you are becoming RICHER. You are saving, you don’t have debt, you are becoming richer. Eventually, you will have over a million dollars is savings.

So to everyone that said something similar to this quote, ask yourself this question: how much money do I need to be rich?

Now, do you realize that your retirement plan will involve saving twice that amount? Most people are putting 6-10% of pre-tax income towards retirement, with the idea being that they need well over $1million to retire comfortably. And at the point, you will be rich, and you will stop working, and coast. Does that sound like middle class life?

Think about that for a second. You are saving a small amount now, so that you will be rich, and then you can stop working.

That is the mindset of the middle class–live cheap and save for retirement.

If you had the mindset of the rich, you would live even cheaper, so that you’d have that money BEFORE retirement. Play with your retirement calculator some time and look at what is required for a 30 year old to move retirement age from 65 to 55 to 45. It’s all do-able, but requires more saving, which requires more sacrifice.

You can also play around with the save a million dollars calculator. It is entirely possible for a middle class person to save a million dollars. What’s odd is that most of us are told the minimum: aim to retire at 65, and have a million dollars. But you could just as easily aim for 55, or 45. Or you could aim for 2million.

136

Here is that mindset again.

Are you saving for retirement? What is your retirement goal (in terms of savings and age)? [you don’t actually have to tell us]

Chances are, your plan is to save upwards of $1million so that you can stop working. At that point you won’t be middle class, you will be a millionaire and you can stop working.

You are actually both very rich and very wise. By delaying some pleasure now, you will save enough to be a millionaire. The money you put into retirement could make you very happy right now. It’s enough to lease a luxury vehicle. If you wanted you could blow all your savings on a private jet. But then that would make you poor. Instead, you sacrifice now so that you will be rich soon.

What actually makes people middle class has less to do with their salary, and more to do with their inheritance. Again, play with the millionaire calculator but start putting in different START values.

Most of use in the middle class start with either zero savings or massive student loans. From there we save 10% of our salary and eventually have a million dollars. Pretend your parents left you $100,000 when you were 30, how does that change your graph?

A 30 year old making $50k a year, that puts 10% away, will have over a million dollars at age 65. If that same person starts with $100,000, they’ll be a millionaire at 54! Starting with $200,000 will get you there at 48. That’s the difference capital has in a capitalist society.

If you start with nothing and save, you will eventually be a millionaire. If you start with something, you’ll get their sooner.

137

That’s great emacknight, but what if your bottom line ALSO includes Half a Mil for raising kids, plus another half a mil to put them through college…how bout you ALSO can’t count on any inheritance, as the healthcare system is designed to bleed a person dry before they hit Medicare/Medicade, leaving nothing to the kids? How about not planning on having Social Security? How bout 401k’s that have been underperforming due to things like a REALLY EXPENSIVE armed conflict, a Housing Bubble, and massive Bank and Auto manufacturer bailouts?

Lets turn this around…lets say your house is paid off at ‘retirement age’…SO you have $6000 a year in taxes and insurance costs. You have $600 a month in utilities (not unusual today), and $400 a month in food. That’s $1500 a month in expenses…you can work three days a week at $25 an hour, and make $2000 a month after taxes and cover that…without touching any other investments. Keep in mind this doesn’t include healthcare, but I think you see where I’m goin’.

The problem with retirement is: You think you can get by on the money you’re spending now, but the money you’re spending now includes 40 hours a week of distraction while you’re at work. That are you going to do to fill that time? What will it cost?

138

Here is another “mindset” that keeps people middle class.

What is your excuse for not learning to understand investments?

Did you realize that at 1.5% interest you are losing money every year? You are taxed on that interest, AND THEN you lose to inflation.

I’ve noticed a few people mention they don’t bother to follow the markets. Which is the same thing as not bothering to pay attention to the weather. You’ll be fine day to day until WAM a hurricane will destroy everything you own. You’ll wake up one morning wondering why everyone else evacuated, and assume they were “lucky” and you were “unlucky.”

You don’t have to be a meteorologist or market guru, you simply need enough information to know it’s going to rain, and that you’ll need an umbrella.

There is no excuse for burring your head in the sand. The simplest rule is this: if you know you won’t need the money for 5 years, put it in something more risky, which can be as simple as an index fund. You should know what an index fund is. Now read that again, if you don’t need the money for 5 years, put it in something risky.

The opposite if also true, which is why we keep hearing about retirees losing all their savings. If you NEED the money, don’t put it or keep it in something risky like the stock market. After 55, start moving your money into safer investments.

139

What about it? If you choose to have children, that choice should also include the cost of their education, that has to be factored in.

It isn’t any different than saying, “but what if your bottom line includes a $1000 a month coke habit?!” Or “what if you’re bottom line includes a 6 bedroom house and two luxury cars.”

The concept from The Wealthy Barber is based on paying for retirement first, and discretionary spending second. If you have kids that’s going to come out of your discretionary spending. It means a lower cost house, lower cost cars, and few channels on your smaller tv.

Retirement savings isn’t something that happens after you buy your kids icecream, it happens BEFORE you have kids.

Now that you have kids, and their college tuition, it means you have even less discretionary spending.

That’s right, life sucks. So this is the point where you need to look at your retirement calculator and up the amount you’ll need per month, and lower the expected interest rate. If someone told you health care expenses would go down, and that you’d easily make 20% they were lying to you.

No, I don’t see where you are going with that.

First, why are you paying $6000 a year for taxes and insurance? Are you completely powerless to change that?

Second, what did you think would happen in retirement, the taxes and insurance would disappear? Did you not bother to account for it?

It’s called retirement planning for a reason.

You’re point? Did you think play time was going to be free?

140

Fair enough. The story obviously isn’t meant to be applicable in all real life situations - its simply a way to make a point that oftentimes, people get caught up in the ‘I have to do such and such to further my career to earn more money so that I can eventually enjoy life’. Many times these people fail to realize that they are missing life in the process, because as they age they are unable to do things they were unable to do when they were young. Then they turn around in their mid 60’s, wondering what happened and wishing they had lived their life more fully when they could have. I see it a lot.

Of course, if a situation is such that maintaining status quo means a life long fear of oppression - then it may very well be worth 10, 20 or 30 years of busting their ass, head to the grindstone in order to save up enough money to get out and move to a different country. But when I read the story, I took it with more of an ‘all else being equal’ approach.

Anyway, back to the OP - could part of the ‘issue’ be that the middle class is defined so damn broadly? I mean, essentially anything from just above poverty to just below filthy rich is considered middle class. Thats a wide gap. So maybe its not that there is a mindset that keeps people in the middle class, its just that while a few people who start off poor go through the ranks and end up filthy rich, the vast majority go through the ranks of lower, middle and upper middle class more slowly using the tried and true method of working hard on a day to day basis to earn an honest paycheck and save a bit for the future.