The Rachel Cruze Show - 5 Signs You're No Longer Middle Class (My Reaction)

Episode Date: October 25, 2024

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Well, hey, you guys. So I recently came across an article from Yahoo Finance that shared the signs that you may have upgraded out of middle class. So it got me thinking about how often I see people, especially on the Ramsey show or on social media, who aren't just staying in their lane, so to speak. And the truth is, it goes, you know, both ways, right? Some people have harder times. Some people are thriving. So I see people who are making a lower income and managing their money so well that they're actually building. wealth and they're becoming better off financially than those who may be making, you know, a larger income, but they're completely out of control and they're in debt and they're living paycheck to paycheck. So today I want to dig into this topic and react to this article's definition of middle class. And later, I'll share my tips for acting like you're in the upper class, even if you make below an average income. And trust me, it is possible.

But first, make sure to click that subscribe button if you want to see more content like this in the future. All right, first, what is considered middle class these days? Well, Pew Research Center defines middle class as having an income that is two-thirds to double the national median income. And according to the Bureau of Labor Statistics, the median annual income is just over $59,000. Judging by this formula and salary level, if you earn less than $39,505, you're considered a lower-income. household. And if you earn more than $118,456, you are in the upper class. But what I mentioned earlier is that it's not always that black and white. So let's look at their list of five signs that you're no longer in the middle class. And I'll share my reactions as we go. So the first, according to this article,

is that your income has doubled in the last few years. So again, this could be anything, you guys, from making a career pivot, maybe growing a set. side hustle. Maybe you moved up in your current workplace. Maybe you got married and now with you and your spouse having an income that has caused you to double. So again, according to them, that is one of the reasons. And so whatever this looks like for you, they say that this is the number one sign that you might be in the upper class. I guess I would agree with that in a sense. I mean, if you've doubled your income, you're doing pretty good. But again, I think for some people, they may have done that, but still feel this tension of living paycheck to paycheck.

because, again, I think just with my job, I'm like, I mean, I talk to people making $200,000 a year, and they're still really struggling. And I would say, you know, in today's world with inflation, and I think about child care prices, like all of those stuff, you guys, it is higher. I mean, like, things are more expensive. So even if you double your income and you don't reassess, hey, what is our life going to look like? Where can we still find ways to maybe cut some things down on all of it? You may still feel like your living paycheck to paycheck. But this idea of doubling your income. I mean, I think it's great. I think raising your income is always a good thing for your money goals. But being able to sustain your life at that point without going into debt,

I think is really important. All right. The number two on this list is that your only debt is your mortgage. So their argument is that members of the middle class often have to take on debts to afford basic necessities. And I mean, I would disagree with this. I would say you could be middle class and still live without debt. Because again, I talk to people you guys that either make a crazy income and they're still paycheck to paycheck or I talk to people that are making, you know, $70,000 a year and they're doing incredible. They're like getting their self out of debt. You know, they're living within their means and all of it. I mean, I understand the point for sure, right? I mean, if you are middle class, it can feel like, okay, you know, we can't afford a car or even

down to basic groceries and all of that. But I think the reality is that, that we're, we've seen that regardless of your income, what you're doing with your income is what's really important. And we've seen credit card debt, you know, hit in the trillions this past year. It's the highest it's ever been. And so what is interesting is as things have gotten more expensive, people have either chosen to continue to rely on debts, which in my opinion keeps you in the cycle of payments, which keeps your income working for the bank and not for you. Or we've seen people, you know, say, okay, I'm going to stop this and I'm going to get out of debt. I'm not going to use credit cards. I'm not going to use a car loan. Like, I'm really going to live this lifestyle

where I live below my means. And in my opinion, they have created a lot of peace and margin in their life. I mean, both are hard. So I think it's one of those things like, pick your hard, right? But I'd pick the hard that puts you more in control. All right, number three is that you're able to save for retirement. So if your employer offers a 401k match program, be sure to contribute at least up to the match that they offer as soon as you can. That's what the article was saying. And in my opinion, you know, when it comes to investing in general, I want to make sure that you're out of debt and you have three to six months of expenses and then don't just invest up to the match. Invest 15% of your income. So yeah, they could be up to the match, but that's also funding, you know, a Roth IRA. It's even

going back to your 401k maybe and putting some more money in. But being able to invest a lot is really important. And so is that considered an upper class, you know, thing? I mean, again, I don't think it's that black and white because I've just, you know, seen data points of people that are making, you know, middle class incomes and they've, you know, done a different way with their money of living. They've gotten themselves out of debt and gotten to a place to invest. So I would say that, yeah, I think it can be more challenging, obviously, when your income is less, you know, than a certain point to say, okay, we have to afford all these basics. And then again, we're going to put some money towards investing. But I think it can be done. I think being on a budget and knowing where

your income's going, freeing up payments that we're going to car loans or the bank for credit cards that's back in your wallet, back in your paycheck, is key. I mean, that changes everything. So again, it takes more intentionality to do it, but it is possible. All right, number four on the list is that you're not in the middle class anymore. is if you have passive income. So passive income can look different, you know, for everyone. But if you're at the point where you're earning money without a significant amount of extra work, then obviously that is more upper class behavior, right? So maybe you've invested in real estate and you have rental properties and you're, you know, getting some extra money a month.

Or maybe, you know, you've developed an investment portfolio and it pays you dividends. Like, whatever it is, there is a level that's like, oh, wow, yeah, you've had, you know, extra income to do something with that is creating now more income. So yes, I would say that tends to lean more in the upper class. But the beautiful thing is I'm here to debunk like all this whole list because I'm like I've seen people in the middle class, you know, that are doing things like investing. And again, they may not be reaping the benefits of those investments right now, especially if in their retirement and they're not able to get those investments so they're 59 and a half. But again, they're putting a strategy towards the future. And I think that's what's really important.

but I would also encourage you to focus on the basics first. I think sometimes we can jump to this idea of like, oh, I just want passive income and all this. But make sure you're at a place that you're building on a really solid foundation first and foremost, which again is having an emergency fund in place, being out of debt and all of those types of things. But when you free up your income and have margin, you are able to do more. And that's why we love investing is for your money to make money, right? So I think that really is important.

All right. Number five, you're actively taking steps to reduce your tax burden. This is what the article said. So their argument is that most people don't obsess about their taxes until tax season rolls around, meaning that they've never taken a big enough hit maybe with taxes to find ways to save. But if your income has reached a certain point, then you are more concerned about, hey, how can I keep some of my money and not send it all to taxes? So you're thinking, you know, more like, okay, do I, you know, have some exemptions here or am I doing this? kind of a strategy around that.

I mean, I guess that's more of an upper class priority. Again, I think depending on your situation, what's going on. But when it comes to taxes, and we say this on the show all the time, you guys, that there are industries when it comes to this money conversation that's a lot, whether it's insurance, taxes, investing. So always getting pros in your corner, I think, is really important. So I think you can take advantage and do well for you when it comes to taxes, whether you're lower, middle, or upper class, right?

And there's ways to do that that I think is important to benefit you and your family. So, you know, this list, you know, some of them I agree with, some of them I don't, different parts of it. But I think it is a really great conversation when it comes to this idea of doing well financially. And I think that's what people really want. But I also think there's like this perception of what doing well really is and the reality of it. And the beautiful thing is that your habits, you guys, are going to make the biggest difference. really are. I said it in this video already, but I'm going to say it again because there's people that make six figures, and they're still living paycheck to paycheck because they still have

two car loans and two student loans and credit card debt and all of this. And they're still like living, you know, beyond their means in that sense. And then you talk to people who are making less than that. And they actually have more of a net worth than the person that's making more money year to year. And so using debt as a tool, remember, it does not define who you are. Your mistakes do not define you. But using your income and the resources that you have to say, hey, how can I become a healthier person and out of the overflow of who I am and my character, my money is going to reflect that. And I think levels of contentment and generosity, all of that plays into this. And so there's just something beautiful about saying, hey, I'm not going to let other people dictate where my money

goes. I'm going to decide. And the thing is, is that you can. So if you want to achieve this idea of feeling like, hey, I want to win with my money, whether I have a middle class salary or an upper class salary. There are three things that you can do to get you there, where you actually can start feeling like and acting like and checking off this list that was in the article of being more upper class is what it feels like. And number one, that is getting rid of debt. Bring up your income, you guys, and putting money back for you and your family versus funding the bank and the car companies out there is huge. So get out of debt. Number two, have an emergency fund.

Having that margin and that padding between you and life is going to keep you from taking this crisis that comes up, whether it's a car maintenance issue or your hot water heater brakes. Like, whatever the thing is, it takes, you know, it can create that problem. And it sometimes can create a money problem if you don't have the money to help yourself in that situation. So the emergency fund is huge. And then lastly, investing in retirement and investing for the future. This is actually going to do so much for you. Not just you today, but you in the next 10, 20 years, which is huge.

All right, you guys, I want you to start really working towards those three goals in that order. And you're going to feel some margin, which is what the upper class is supposed to feel, even though not all of them do. But again, it's giving you that control back and that piece, which is what we're all wanting. And if you need to get help in this process, I really recommend checking out every dollar. This is the best budgeting app ever, and it helps you get in control of your money. So click the link below to try it out. And share this episode with a friend who might be curious on how they're measuring up when it comes to the lower, middle, and upper class. And speaking of middle class, you'll definitely want to check out my episode on 15 things the middle class can't afford anymore.

It's really eye-opening. So click over here to check that out. Or if you're listening on podcasts, click the link in the description. All right, you guys, remember to take control of your money and create a life you love.