The Squeeze on the Middle Class - 5 Steps to Fight Back

Hey, what's up everyone and welcome to the school of personal finance. So, we are coming into the fourth quarter of 2025. Just got my kids up and out of the house. Back to school season is here, which is very exciting for all of us work at home parents. But I've been thinking about a lot the middle class and how everybody is just getting squeezed so hard right now. So, in this video, I'm going to talk more about that and five steps that you could take to try to fight back a little bit because it is not easy. So, I hope that you find this one helpful. Let's get to it. So, I live about 45 miles north of New York City in the suburbs. It's a very high cost of living area. If I could have done things differently, then I probably would have. But my whole family is here. I grew up here and this is just where we put down roots. But the cost of living is very high. And I was just having the conversation with my wife like what even is middle class anymore? I don't really know. I feel like if you're wealthy that means that you have to have like millions of dollars in the bank. Middle class. I think all of my neighbors are middle class. Like I would say that we all relate to being middle class. But depending on where you are in the country, the incomes, the different ranges, the amount of money you have in the bank, it all varies big time. I was saying I feel like that we need to be making a minimum of $250,000 a year just to get by. And that is sad when you think about it. Now again, it's not going to look the same if you live like for example in the Midwest. you have a lower cost of living. But where I am, that's the reality of it. And I feel like everybody is just kind of getting by and struggling and stressed out about money. Now, if you watch my content, then you know that I am a big fan of financial planning, right? I do that for a living. I think it is super important to be organized, to know where you're at with everything, and have a clear and concise plan to move forward. Or else, you're just going through the motions and the money just flies out and you have no clue where it is going. And that's why you could be making a lot of money, feel like you're doing well, but still being stuck in that hamster wheel. The money, it just seems to fly out. And nobody knows where it all is at the end of each and every month. And it's sad, it wasn't always like this, where the middle class, they actually feel very poor just because of inflation and the cost of living increases that we've experienced over the last 5 years or so. So like, let's run through some typical expense categories. And we might as well start with home ownership or just living in general, renting, buying a home. The prices are just up so much from where they were, you know, a decade ago, 15 years ago. To rent a house in my neighborhood right now, it's like over $4,000 a month, which is crazy. That's to rent a house. Home prices, the median home prices across this country, you know, are pushing $500,000. So, in my area, it's very hard to find a house where you could have a family of five that costs less than seven or $800,000. And with interest rates where they are, it's like, how do you manage to do all of that? It's become very difficult where, especially people that are just starting out right now, renting is really the only option. Now, groceries, the average for a household of four is around $1,200 a month. I have a family of five. between groceries, eating out, Instacart, Trader Joe's, BJs. Feel like we're always shopping for food and for groceries. We're spending more than that. I think that we're actually closer to around $2,000 a month. Utilities, the cost of energy, KED in my area. The prices are ridiculous. I have propane to heat my house. Altogether, the utilities in my house, they're costing me well over $1,000 a month, which again just seems insane. When I was going back and looking at our first condo, I was paying not even $200 a month for heating and air conditioning throughout the year in my two-bedroom, two bath condo. And then transportation, I feel like this one has really shot up over the last few years. Car payments are so high. The average car payment is over $700 a month now. Like that's insanity. And that's just a car payment. That doesn't include insurance, gas, everything that goes into maintaining that car. I am a big believer in buying a car that just came off lease. If you need to finance it, then that's fine. You finance it for five years, and you try to drive that thing as long as you can without having to dump more money into it. I have done that numerous times with my cars. So, I go through nice long periods of time where I have no car payments. Child care, this is another thing. It's just squeezing the middle class cuz it's like you have to go to work just to be able to pay for your children to be in daycare. and you're faced with that decision like is it actually worth it or should I just stay home with my children, you know, while they're that age before they get into the school system. But that's very hard for young families right now. The costs are just crazy. Health insurance premiums are another one that is just ridiculous right now. The average for a family of four on the Affordable Care Act under Obamacare is over $1,000 a month. me, a family of five, being self-employed, I am paying close to $2,000 a month for my health insurance. And that's for a high deductible plan where the coverage pretty much sucks. I have a $6,000 deductible before I get any insurance coverage. I do have a health savings account, which I do think is the best way to be able to save for later on in life for health expenses if you don't need to use the money now. But I digress a little bit. The cost of health insurance is ridiculous. If you have an employer who's covering that cost for you or a majority of that cost for you, then that is a very good thing right now. Like you don't want to go to the doctor because it's going to cost you hundreds and hundreds of dollars just to go see somebody. And then another one which I'm very guilty of are like sports, travel sports for our kids, activities, keeping them busy. When I was a kid, there was none of that stuff. It's like you played, you know, for your town team, you went out to the gym all day, played with your friends, played on playgrounds. There wasn't this big expense of travel sports and hotels and going all over the place and training. It's just a different world right now. But I would also be embarrassed to say how much money I spend on that stuff for my children. But at some point you got to look at it and say, is it actually worth it? Like what are we wasting our money on here? You know, it seems a little bit crazy. But all these things, these are just examples of different categories where I find my money going to every month. And I'm sure that I'm not alone in that. So life in general has become very expensive to raise a family. So I mean, just with these seven categories alone that we went over, you're already pushing like $10,000 a month in expenses. We're not even talking about, you know, entertainment, travel, other things that go on in your life. So, life is very expensive right now. In order to have $10,000 a month of expenses, that's $120,000 a year, you have to be making, you know, $160, $170,000. And now we're starting to see credit card balances rise. And the interest rates are very high. The national average right now is a little bit over $6,000 currently carrying on credit cards where the interest rates are over 20%. That makes it very hard, right? because that starts to snowball on you and you're just trying to keep up with the interest payments and you find yourself charging more. That alone is super stressful, especially for a young family trying to figure all this stuff out. And according to Bank Rate, 57% of families cannot cover a $1,000 expense that comes up out of nowhere. So that alone is also very stressful. All right, so enough of painting this ugly picture, which happens to be reality. But now, what can you do about it? I wish that there was an easy button. I wish that I had a great answer for what you could actually do to start fighting back, but it's going to take hard work and dedication and tracking everything. So, let's get into it. So, the first thing, and I talk about this all the time, is that you need to turn the lights on in your financial life. You need to start looking at your numbers. You need to know them. So, you need to track income, money coming in versus expenses, money going out, and you need to do it on a monthly basis so that you know where your money is going. It's very hard to cut things out if you don't know what you're spending money on. And there's lifestyle creep. There's things that just come up that you got to just shell money out for and they're unexpected. They're not part of your monthly budget or your monthly expenses. And you have to account for those things. So my advice is keep it simple. If you could use one credit card or using your debit card or you get a monthly statement and you could actually go through it and make sense of it. Create a spreadsheet where you could go through and categorize all your transactions and have a date night and look through it and compare. How much did we spend last month compared to this month? How much are we willing to spend next month on going out to dinner, on our kids, on travel, on all of that stuff and come up with these numbers so that you have a plan going forward. But you have to be in the know with your financials so that you can plan for it. There is software out there that will track all of this stuff for you where you could link in your accounts and start to go through and categorize all the transactions. But the more you know this, the better prepared you are for unexpected expenses, for cash flow, for projecting into the future, for coming up with financial goals. You're not able to have a goal. All right, let's save this much in 2026. How do you know if you don't know how much life costs you compared to how much money you have coming in? So, step number one is just dig into it. Don't shy away from it. Don't put your head in the sand and just not want to know. You need to know how much money you're spending and what your expenses are and where you could cut back, what the lowhanging fruit is. Step two is to set a goal for a savings rate. How much of your income could you actually save? And you're not going to know this unless you do step one first. So, what is your goal? Do you have zero in the bank right now? Do you have no emergency fund? Do you have credit card debt? Right? So, if you do, then priority number one, the goal has to be, all right, let's attack this credit card debt. How long will it take us? How much could we commit on a month-to-month basis to knock out that credit card debt? And then once we do, how quickly could we build up 1,000, 2,000, $3,000 in an emergency fund? And you got to keep going down the priority list, right? Once you get to that point, then it's like, all right, how do we start saving for retirement? Because we don't want to keep putting that off. So, when can we commit 5% of our income into a 401k, maybe we get a match or a Roth IRA. So, step two is simply come up with a goal that you could start going after. And then the third thing is to go through the monthly expenses that you've been tracking and really try to pick out things that you could change. Maybe subscriptions that you're just not utilizing or maybe shopping your car insurance, your utilities, trying to get those bills down. Just really digging in there and seeing where could we actually make a difference in our monthly budget where we can start taking some of that money and putting it towards those goals that we prioritized in step number two. And then step number four is really evaluating your income and your job and what that looks like and if there are opportunities for you to make more money. If that means working more hours at your current job or getting a side hustle, doing something, maybe if you have a significant other who's not really working or working part-time, having them work a little bit more. You have to come up with a plan. You guys have to be on the same page where you come up with a plan to start making so some more money, right? cutting expenses, increasing income, those are the things that could change your life around and can start turning the ship into the right direction with all this stuff. Again, none of these things are easy. I'm not saying that it's easy to just go get a job or a side hustle and make some more money, but it's just things that need to be done if you want to get through all of this and get on a path to financial freedom. And then number five is to actually create your own financial plan. Do projections. How long will it take me to do this? How long will it take me to do that? income versus expenses. Net worth statement. Start tracking that. All right. So, your net worth, all it basically is is a list of all of your assets. So, if you own your home, that's an asset. If you own a car, that's an asset. Money you have in the bank, money in your 401k, right? Emergency savings, IRA, those are all assets. And liabilities, those are the amounts that you owe people, right? So, your mortgage is a liability. If you have a loan, student loans, car loans, all of those things are liabilities. Credit card balances. You take all your assets, you add them up. You take all your liabilities, you add those up, you subtract the liabilities from the assets, and that is your net worth. It is a great number to track. It's almost like your scorecard in your financial life. You should be tracking it each and every year. And that's the first part of a financial plan. And then it's looking at your cash flow statement. Money in versus money out. Those two statements, net worth statement, cash flow statement, those are the beginnings of creating a financial plan, right? Because then you can make decisions based on those numbers. What are the priorities? what do we have to do? And you could run projections. You don't want to work forever, right? Without some type of financial plan, you won't know when you'll actually be able to retire. Or if you have kids that'll be going to college, right? How are you saving for them on a monthly basis? How much will you be able to save? It brings you into reality. Like if you say, "All right, I'm not saving any money for college right now and I have a 12-year-old." Then, you know, it's going to be very hard for them to go to a very expensive school without taking on a ton of debt, right? It just brings that frame of mind where you have clarity and you see what's going on with your future and what your plans are and it helps you make smarter decisions. So having a financial plan is super important in all of this stuff. All right everyone, that is it for this one. I hope that you found it helpful. Head over to school of personal finance.com, jump on my email list, check out all the resources that I have over there, and I will see you again in the next video. effects.