Clinging Precariously To Middle-Class Status

Middle-class people are going into ever-deeper debt to hang on to their position, says this article by AnnaMaria Andriotis, Ken Brown, and Shane Shifflett in the Wall Street Journal. (Note, you will probably encounter a paywall but I wanted to provide the link for proper attribution. The WSJ is offering a “12 weeks for $12” special, which I signed up for because I wanted to read the article and support a good publication.)

Prices of cars, college, housing, and medical care have skyrocketed, while incomes have budged little. Unsecured personal loans are filling the gap between what people earn and what they spend.

The WSJ article authors say that people’s willingness to borrow money for living expenses indicates that they feel optimistic about their future incomes. But I suspect that for at least some people, something other than optimism is at work. That “something” is fear and denial about losing their middle-class status. I think a lot of people know deep down that this lifestyle is unsustainable. And the denial is causing them to dig in their heels.

It would be great if we could adjust our definition of being well-off, so that it does not have to include (for example) big houses, and every single person feeling they have to own their own car. Why couldn’t the definition of “well-off, comfortably middle-class” instead include being able to walk to work, and not having a huge house to maintain? Why can’t it include being free of college debt because people saw the writing on the wall and either found a way to do it without big loans, or went to trade school or community college? (Plumbers and electricians and sewing-machine repair people and engine mechanics are in high demand. Now those are some folks who have economic security.)

When I see people of modest means spending half their income on car payments and other expenses of car ownership, the feeling I get is like watching clueless characters in a horror movie start walking down the long dark hall that everyone knows they shouldn’t walk down. “For Goddess sake, turn back, ditch the car,” I want to scream.

People new to this blog might be tempted to conclude that I’m just a crank who hates lawns and cars. What I hate is things that suck too much time and money for too little benefit.

Personally, I favor Henry David Thoreau’s take on wealth: “A man is rich in proportion to the number of things he can afford to let alone.” — Thoreau

If you find yourself having to take on debt in order just to meet your living expenses, I sympathize. A lot of stuff has gotten insanely expensive. (The charts in the article show just how dramatically the costs of medical care, cars, and college have outpaced income growth.) But instead of digging in your heels (and digging yourself further into the hole), take it as an invitation to make some changes that will really boost your position in the long run. It could be something as simple as getting a roommate (or an additional roommate if you already have one), or living with a family member and sharing a car. You might be surprised at how such changes can end up not only being less burdensome than anticipated, but actually adding to your quality of life. (It can help make student-loan payments, if you have them, more manageable too.)

I am seeing more families these days sharing living space and cars, and all in all I think it’s a positive trend, not only in terms of finances and carbon footprint but also for people’s emotional and spiritual health.

Another thing a family might consider is creating a business together. That’s a good way, which is all too overlooked nowadays, to pool resources and build intergenerational wealth.

On the subject of family businesses, a book I really like is The Lohman Way: Entrepreneur Lowell Lohman’s Story and Strategies for Building Multimillion-Dollar Family Businesses, by E.L. Wilks. The Lohmans have been successful in the funeral-home business and in apartment-building ownership and management, among other arenas.

(I met several of the family members when they came to 1 Million Cups Daytona Beach as the featured presenters. If you have a 1 Million Cups in your area, I strongly recommend you take the opportunity to attend. In a nutshell, it’s entrepreneurial networking, but mere words don’t do it justice. I’ve been bowled over by all I’ve learned there, and the people I’ve met. Kudos to the Ewing Marion Kauffman Foundation for its major contribution to helping communities build intellectual and social capital.)

My particular reason for bringing up The Lohman Way book here is to share what I consider its core concept. According to Mr. Lohman, there are just three compelling reasons to go into business with partners (as opposed to solo). One reason is because you need a partner’s money; another is because you need a partner’s experience. And the third? To create a family business, build wealth as a family.

Bit of a long tangent on the original topic of this post, but I felt it was a tangent worth including. Just as sharing cars, homes, and other assets among family members can help people get out from behind the 8-ball of unmanageable overhead expenses, so going into business with one’s family can maximize assets beyond what each individual could do alone.