An Examination of Debt & the American Middle Class
Does it seem that no matter how hard you work, keeping up with your expenses still continues to be a struggle? Are you a middle-class American who is living paycheck to paycheck? If so, you are certainly not alone. Middle-class lifestyle in America has become increasingly more difficult to maintain over time, as inflation and declining economic conditions have caused many Americans to fall onto rough financial times. But just how far does this issue extend? According to an article published in The Atlantic titled “The Secret Shame of Middle-Class Americans,” the problem of a shrinking middle class may be far worse than we think.
The article presents some alarming data regarding debt in America and the net worth of the average working-class American family. According to a survey conducted by the Federal Reserve Board, 47 percent of Americans said that they would be unable to cover a sudden $400 emergency expense without borrowing money or selling something. Similarly, a 2014 Bankrate survey found that only 38 percent of Americans would be able to cover a $1,000 emergency room visit or a $500 car repair with money they had saved.
In another survey conducted by the Pew Charitable Trusts, 55 percent of households reported not having enough liquid savings to replace a month’s worth of lost income, with 71 percent of respondents claiming to have concerns about having enough money to cover their daily expenses. Possibly the most shocking conclusion regarding the status of the American middle class comes from a study conducted by professionals from Oxford, George Washington University, and Princeton, which found that roughly half of all American adults are “financially fragile” and “living close to the financial edge.”
Why Is the Middle Class On the Decline?
Many economists have pointed towards credit card debt as a leading cause of this sharp decline. According to an analysis of Federal Reserve and TransUnion data, approximately 38 percent of households carry some form of debt, with the average debt exceeding $15,000. With the introduction and ease of access of credit cards in the 1980s and their subsequent surge in popularity, many Americans felt less of a need to regularly save.
Once the Great Recession hit, credit cards began being used as a “life raft” of sorts, further exacerbating the financial woes of many families. This, combined with a general decline in hourly earnings in comparison to increases in cost of living, have caused many Americans to live with a very low income to debt ratio.
Struggling with Debt? Contact Albaugh Law Firm
If you are overwhelmed with debt, know that you can achieve relief. At Albaugh Law Firm, our bankruptcy attorneys have helped countless clients throughout St. Augustine and Jacksonville overcome their financial struggles. To take the first step towards a debt-free future, schedule a free case review today.