If you think you’re ‘middle class' you’re probably wrong. Half of Americans are ‘treading water’: How to come up for air

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Do you know whether you’re middle class or not?

Based on the Pew Research Center’s 2024 analysis of government data, roughly 49% of Americans don’t actually fall into the middle-class income category (1).

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The Pew Research Center defines the middle class as a household with an income that is at least two-thirds of the U.S. median income to double the median income. This would imply a range of incomes from $56,600 to $169,800, based on government data for 2022 (2). As of 2023, 51% of American households fit into this category.

The middle-class squeeze

If you think that’s too small a percentage, you may be right. Roughly 61% of households across the country were part of this group in 1971 — a full 10 percentage points higher than the recent 51% rate (3).

This trend may be a reflection of growing income inequality across the country. And many families feel like they’re on the brink of sinking into a lower category. After all, it’s not just about your income bracket when you're swimming through life. It’s also about your disposable income and how you use it, which is an essential part of long-term financial health — not to mention your debt-to-income ratio.

A recent survey by the National Foundation for Credit Counseling (NFCC) found that 53% of U.S. adults feel like they can’t make financial progress and 48% say they are “constantly treading water financially” (4).

Read more: Warren Buffett used 8 solid, repeatable money rules to turn $9,800 into a $150B fortune. Start using them today to get rich (and stay rich)

Are you at risk?

If you and your family are middle-income and worried about falling behind, there are ways to cement your position.

Reducing debt, especially consumer debt, could be a great way to secure yourself financially. In 2024, there were 494,201 personal bankruptcy filings in the U.S. — over 60,000 more than the previous year, according to Debt.org (5). Two general strategies for reducing your debt are the snowball and avalanche methods:

• Snowball: Knock off your smaller debts one at a time to build up momentum — and income — to put towards your biggest debt.

• Avalanche: Start with clearing your most substantial debt, then, once it’s settled, use the windfall to aggressively pay down any smaller debts.

By reducing your debt burden, you can mitigate the risks of bankruptcy and reduce the monthly cost burden of servicing the debt.

Once your debt is under control, it could pay to start looking at putting away the money you were paying into your debts into your investments instead.

One way you could do this is automated investing in low-cost index ETFs with Acorns. Consistently saving spare change from everyday purchases can add up over time, thanks to the powers of compounding.

Here’s how it works: When you buy a coffee for $4.25, Acorns automatically rounds up the purchase to $5 and sets aside the extra $0.75. Once the round-ups reach $5, they’re automatically invested into a smart investment portfolio of diversified ETFs.

While the spare change doesn’t seem like much, saving and investing just $3 each day adds up to over $1,000 a year — and that’s before it compounds and earns money in the market.

What’s more, you can get a $20 bonus investment when you sign up for Acorns with a recurring deposit.

Secure your future

Another way to secure your position is to have an emergency fund that can cover your living expenses if you suddenly lose income. A six-month emergency fund can give you enough time to find a new job or a different source of income without putting your family at risk.

Parking your emergency fund in a high-yield savings account can help you earn higher returns while keeping your money accessible at all times.

One option is to use a Wealthfront Cash Account, which can be a great place to grow your emergency funds, offering both competitive interest rates and easy access to your cash when you need it.

A Wealthfront Cash Account can provide a base variable APY of 3.50%, but new clients can get a 0.65% boost over their first three months for a total APY of 4.15% provided by program banks on your uninvested cash. That’s over ten times the national deposit savings rate, according to the FDIC’s November report.

With no minimum balances or account fees, as well as 24/7 withdrawals and free domestic wire transfers, you can ensure your funds remain accessible at all times. Plus, Wealthfront Cash Account balances of up to $8 million are insured by the FDIC through program banks.

Find other ways to save

Almost one in five Americans are “doom spending” — making impulsive and excessive purchases amid increasing economic uncertainty — according to a recent report from CreditCards.com (6).

However, this could result in increasing financial insecurity, especially among the middle class.

Budgeting and tracking where your money is going at all times can help you identify the areas in which you’re overspending, helping you take control of your finances.

Search for room in your budget

One area where you are likely overspending is insurance. The average American spends approximately $2,433 on full-coverage auto insurance yearly, according to MarketWatch (7). In addition, homeowners' insurance costs roughly $2,341 per year, according to Bankrate (8).

And premiums are projected to rise further. Insurify estimates that car and home insurance costs are expected to rise by 5% and 8%, respectively, in 2025.

You can reduce your premiums by shopping around and comparing rates from multiple insurers near you, and choosing the lowest rate. A LendingTree survey showed that 92% of Americans lowered their monthly auto insurance premiums by switching insurers.

But shopping around and calling insurance providers can take up a lot of time. That’s where Money.com’s auto insurance comparison tool can help.

How it works is simple: Just enter a bit of information, like the make and model of your car plus your driving history. From here, you can instantly compare offers from top insurers like State Farm, Lemonade, Progressive and more.

If you’re looking to switch homeowners insurance carriers as well, consider shopping around and comparing rates through OfficialHomeInsurance.com.

Simply answer a few basic questions about your finances and the home you’d like to insure, then OfficialHomeInsurance.com will sort through more than 200 providers near you to display the best rates. On average, you can save $482 each year by shopping around and selecting the lowest possible rate.

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Article sources

We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.*

Pew Research Center (1), (2); Gallup (3); National Foundation for Credit Counseling (4); Debt.org (5); CreditCards.com (6); MarketWatch (7); Bankrate (8)

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.