Thursday, September 2, 2010
We know what the answer to this question is...
Can A Family Of Four Survive On A Middle Class Income In America Today?
When I was growing up, $50,000 sounded like a gigantic mountain of money to me. And it was actually a very significant amount of money in those days. But in 2010 it just does not go that far. Today, the median household income in the United States for a year is approximately $50,000. About half of all American households make more than that, and about half of all American households make less than that. So if your family brings in $50,000 this year that would put you about right in the middle. So can a family of four survive on $50,000 in America today? The answer might surprise you. Twenty years ago a middle class American family of four would have been doing quite well on $50,000 per year. But things have changed.
So just how far will $50,000 go for a middle class American family of four today? Well, $50,000 breaks down to about $4,000 a month. So how far will $4,000 a month stretch for a family of four in today's economy?....
First of all, the family of four needs some place to live. Even though house prices have come down a bit recently, they are still quite expensive compared to a decade ago. Let's assume that our family of four has found a great deal and is only spending $1000 a month on rent or on a mortgage payment. In many of the larger U.S. cities this is a completely unrealistic number, but let's go with it for now.
Next, our family of four has to pay for power and water for their home. This amount can vary dramatically depending on the climate, but let's assume that the average utility bill is somewhere around $300 a month.
Our family is also going to need phone and Internet service. Cell phone bills for a family of four can balloon to ridiculous proportions, but let's assume that our family of four is extremely budget conscious and has found a package where they can get basic phone service, Internet and cable for $100 a month. Most middle class American families spend far more than that.
Both parents are also going to need cars to get to work. Let's assume that both cars were purchased used, so the car payments will only total about $400 a month. If the vehicles were purchased new this number could potentially be much higher.
If our family has two cars that means that they will also be paying for automobile insurance. Let's assume that they both have exemplary driving records and so they are only spending about $100 a month on car insurance.
Our hypothetical family of four is also going to need health insurance. In the past, families could choose to go without health insurance (at least for a while), but now thanks to Barack Obama all American families will essentially be forced to purchase health insurance. Health insurance premiums are absolutely skyrocketing, but let's assume that our family has somehow been able to find an amazing deal where they only pay $500 a month for health insurance.
Our hypothetical family is also going to have to eat. Let's assume that our family clips coupons and cuts corners any way that it can and only spends about $50 for each member of the family on food and toiletries each week. That works out to a total of $800 a month for the entire family.
Lastly, the parents are also going to need to buy gas to get to and from work each week. Let's assume that they don't live too far from work and only need to fill up both cars about once per week. That would give them a gasoline bill of about $50 a week or $200 a month. Of course if either of them lived a good distance from work or if a lot of extra driving was required for other reasons this expense could be far, far higher.
So far our family has spent $3400 out of a total of $4000 for the month. Not bad, eh?
We haven't taken federal, state and local taxes out of the paycheck yet. Depending on where our family lives, this will be at least $1000 a month.
So now we are $400 in the hole.