I’ve been reading plenty of articles lately about the middle-class crunch, talking about how it is almost impossible for a middle-class family to make ends meet. The ones that really grab my attention are the ones written by economist that deny that a middle-class crunch exists. I see so many Wall Street economists read off macro-level data showing that the crunch is an illusion because inflation is x, health care is y and GDP growth is z, without ever looking at a real-life situation. You would think that these economists would be some of the more intelligent people who could conduct a simple income statement, considering that these are the ones driving the economics of our country’s financial system.
To show the reality of the middle-class crunch, I conducted a simple budget for an average couple living in Orlando, Florida. Only one member of the household is employed in this example to save on commuting costs (considering the cost of daycare, fuel, cars, etc., unless the spouse can attain a high salary, it is not worth it to have both partners working). This example shows the absolute bare-bones expenses of an average couple in Orlando who has not yet had children:
1. They share one car, which was purchased in 2005 for $23,000 and financed over 6 years with 10% down and an APR near 8%.
2. The commute to work is about 20 miles, and after running errands and other trips, fuel costs about $250 per month.
3. A 6-month rate for Geico is around $600…it is this high because living a house below the median price for the county means you are living in a less than ideal neighborhood.
4. Maintenance of $50 is conservative considering you need to change the oil every 3 months, routine maintenance, flat tires, dents, and all other things that go wrong with a car.
5. Tolls of $0.50 per way on the commute for the each of the 20 work days, plus a few dollars for other travel on the highway.
6. Very little per months on clothing. I didn’t even have to include this line, but it makes the example a little more realistic.
7. Eating out once per week. It is difficult to eat out and buy one appetizer, two entrées, soft drinks and a tip and spend less than $35.
8. Food prices are out of hand. Try to go to the grocery store and eat for a week and pay for laundry detergent, cleaning supplies, batteries, and all other small household necessities for less than $125. Keeping the monthly grocery bill under $500 per month is difficult.
9. Maintaining a house costs money…there are always leaks, broken appliances, filters to change, yard upkeep, termite and pest control, and all other regular maintenance a house requires.
10. Purchasing a small, 3 bed, 2 bath house for $180,000 ($20,000 below Orlando’s median home price) and paid 20% down, leaving a mortgage of $144,000 at about 6%. After real estate taxes and homeowners insurance, the monthly payment is $1279.
11. A gym membership to work off the stress of not being able to make ends meet is $21 for the couple at Planet Fitness.
12. Two small dogs or one big one that eat 12 cans and one bag of food per month. Add in vet bills and heartworm pills and $30 per month is very conservative.
13. The house has a cable and internet package from Brighthouse.
14. Being very economical keeps the electric bill at about $200 per month.
15. A family plan from T-Mobile costs about $80 per month, plus a land line that is required for the alarm system.
16. A home security system that costs $27 per month, because as previously stated, a house at this price is not in the best neighborhood.
17. The water and sewer bill averages $85 per month.
This is a no-frill budget, leaving out many expenses that many people incur This is the budget of a couple with no children living at bare-bones costs in a below-average house and sharing one car. This list includes absolutely no entertainment other than cable TV and eating out a few times with no savings for the future. Does this sound middle-class to you? With these expenses totaling over $3400 per month, living in this situation would require a salary of about $59,000 per year assuming taxes and benefits take 30% off gross income. Throw in children and this monthly cost goes through the roof. Now try to find a job in Orlando that pays $59,000. These are management positions that require significant education and experience. You need a college degree and 3-5 years of experience. Consider that every additional $100 per month expense would require $1714 of added income, living in the middle class today becomes almost impossible. Forget about gifts for Christmas and birthdays, flowers for your mothers on Mother’s Day, a new computer when your old one breaks, or a new sofa after the dogs scratch up the old one, or any other luxury. Let’s just hope this middle class couple doesn’t ever get a cavity, need braces, have a car accident, get sick, or have a baby. Welcome to Middle-Class America, where according to some economists there is no crunch.
