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Building a middle-class budget starts with knowing what being “middle class” means in your life. Is it a fulfilling job? A flush bank account? Advanced degrees? Owning a home? A well-funded retirement account?
While a typical middle class family can look wildly different for different people, some basic desires define this group.
A Washington Post poll reveals most Americans generally agree on what it means to be middle class—finances, education and stability. The catch? Only about a third feel secure enough to claim the title.
Chasing Security in a Pinterest-Perfect World
While nine in 10 of the Washington Post respondents say financial stability—savings, health insurance and steady income—is key to being considered middle class, fewer people thought milestones like owning a home or having a job with paid sick leave were must-haves. It turns out that being middle class isn’t just about having cash; it’s about feeling secure in the future.
Christina Lynn, a behavioral finance researcher and Certified Financial Planner at Mariner Wealth Advisors, says that today’s middle class suffers the added pressure of keeping up with the “mythical middle class” often displayed on social media. This can lead to financial anxiety and even long-term money missteps.
“In the past 20 years, the definition of ‘middle class’ has shifted dramatically. Just compare our parents’ weddings, homes and cars to today’s Pinterest-inspired lifestyles—everything has scaled up,” Lynn says. “While dual incomes and higher education have contributed to this, they haven’t quite kept pace with the rising cost of living and lifestyle expectations. In many ways, the middle class is living ‘higher on the hog,’ but at a price.”
This lifestyle inflation might also be contributing to how much consumers are borrowing. Many homeowners are tapping into home equity and relying on credit cards to cover expenses.
Home equity lines of credit (HELOC) balances grew by $4 billion from the first to the second quarter of 2024, marking nine straight quarters of growth since early 2022. This brings the total to $380 billion, according to the New York Federal Reserve.
Credit card debt also jumped by $27 billion over the same period, hitting $1.14 trillion.
Lynn suggests people can balance short-term pleasures with long-term goals as long as they avoid debt when possible and practice good savings habits.
“Your retirement should come first—think of it as putting on your own oxygen mask before assisting others. Secure your financial future before addressing other expenses, whether it’s funding a child’s education or managing mortgage and healthcare costs,” she says.
Start With the Basics: How To Create a Budget
Your budget is a blueprint based on your unique situation, including your household income and lifestyle, so it probably won’t look like your friends’ budgets—even if you all consider yourselves middle class.
Experts agree that tracking what you’re bringing in versus what’s going out is key for gaining control of your money.
Whether you prefer using good ol’ pen and paper, a spreadsheet or one of the best budgeting apps, try to keep track of everything you spend and earn over a month or two so you have a solid idea of where your money is going.
Many banks have built-in budgeting tools, so take advantage of those. Next, split your spending into fixed (rent, utilities) and variable (groceries, entertainment) categories.
Once you see where your money’s going, you can decide if that’s really where you want it to go. You might be surprised at how much you spend on streaming services or takeout and choose to put that money toward something more important.
A Rudimentary Budgeting Method Is an Easy Place To Start
A simple budget can be just as effective as a complex algorithm that takes Einstein to decipher, especially if you’re consistent. The 50/30/20 rule is such a method.
The idea is to use 50% of your income for needs, 30% for wants (like dining out or travel) and 20% for savings and debt.
If you’re typically paid in cash or prefer seeing the physical money being spent and saved, cash stuffing may be your kind of budgeting system.
It’s basically the old-school “envelope system” with a trendy name. You set aside cash in envelopes for different expenses—like groceries, bills, or fun money—and only spend what’s in each one. It’s a simple way to manage your budget and avoid overspending. For those who prefer to keep things digital, many online budgeting tools offer this feature.
No matter what budgeting style you go with, make sure you prioritize the basics—like saving for retirement and building an emergency fund.
Build Up Your Retirement Savings Now
Unless you plan on working forever, your future self is depending on you to save money now for retirement.
Start by figuring out how much you’ll need in retirement.
Consider your current age, retirement age, household income, savings, and expected investment return rates before and during retirement.
Factor in the percentage of income you’ll save, expected income increases, years you’ll need retirement income, desired retirement income and expected inflation. Finally, adjust based on individual goals and circumstances.
Using a retirement calculator is an easy way to estimate your necessary retirement income.
Most experts agree on these three principles:
- Start early: The sooner you start saving, the more time your money has to grow with compound interest.
- Max out your 401(k)—or contribute at least as much as your employer’s match if offered: Take full advantage of employer matching and contribute as much as possible to your retirement account. In 2022, over a quarter of private industry workers with access to a 401(k) or similar plan didn’t participate.
- If you don’t have access to a 401(k), invest in a traditional IRA, which is a savings account for retirement where your money grows without being taxed until you take it out. You might even be able to deduct what you put in from your taxes now.
- Diversify investments: Spread your savings across assets like stocks, bonds and mutual funds to balance risk and reward.
A big no-no is cashing out retirement savings for short-term needs, Lynn says.
“If funding a child’s college education means under-preparing for retirement, that’s a short-sighted trade-off,” she says. “A troubling trend we’re seeing is people cashing out their 401(k) when changing jobs to pay off credit cards or upgrade their lifestyle.”
Investing in Education
Here’s where budgets diverge. For households without children, you may want to skip ahead. If you have children and want to help pay for their higher education, you can use a tool like a 529 plan.
A 529 plan is like a special piggy bank for college. All 50 states and the District of Columbia offer at least one 529 plan—and you can open a plan in any state, no matter where you live. You put money in, and it grows over time without paying taxes on the growth as long as you keep the money in the account and ultimately use it for qualifying education expenses.
When your child goes to college, you can use the money for things like tuition, books or housing. But the downside is that if you use the money for non-college things, you might have to pay a penalty.
To figure out how much to save each month, you can use a college savings calculator.
Eliminate High-Interest Rate Debt
If you carry balances on your credit card every month, you’re spending money you’ll never see again on high interest rates.
For example, if you have a credit card balance of $5,000 with an average interest rate of 28%, you’re spending an extra $116 per month that you could be putting toward one of your goals.
Besides paying off high-interest debt in one go, you can also apply for a balance transfer card with a 0% introductory rate. You should plan to repay the debt within the intro period; once the interest rate kicks in, you’ll start paying interest on the remaining balance. Note: you typically need at least good credit to qualify for a balance transfer card.
If you’re behind on credit card payments, contact your credit card company immediately. Lenders typically want to work with you rather than going through collections or even small claims court.
If you miss too many payments, your debt could be written off as a loss, tanking your credit scores. But even after that, you may still have room to negotiate.
You can also turn to reputable credit counseling agencies. These pros can help you create a personalized budget, offer free resources and guide you through a plan to manage your debt without making unrealistic promises.
A Budget Can Set You Free
Creating a budget is key to turning middle-class goals into reality. Whether it’s buying a home, saving for kids’ college or just taking that dream vacation, a budget helps you prioritize what matters. It gives you control over your money, making it easier to cut unnecessary expenses and build a safety net.
Plus, it’s empowering—seeing progress toward your goals keeps you motivated. With a clear plan, you’re not just reacting to bills; you’re actively shaping your financial future.
If you’ve never created a budget, it might initially seem restrictive. But the reality is you’re freeing yourself from problems down the road, says Erika Rasure, chief financial wellness advisor of Beyond Finance.
“It creates a plan and empowers you to make saying ‘yes’ or ‘no’ easy. If a particular expense is not in the budget, it’s off the table,” she says. “Remember, this takes about 60 to 90 days to become a habit, so don’t give up. Practice makes progress. It’s easy to let shame get in the way here. People often get upset when they inconsistently check their budget, so commitment is essential.”
