High expenses remain a challenge in many US cities, even for those earning over $25,000 annually.
Joint research conducted by PYMNTS and LendingClub in 2022 revealed that among consumers in the United States earning over $250,000 annually, 36% are living paycheck to paycheck, struggling to pay various bills until their next payday. Additionally, among consumers earning over $100,000 annually, 42% face similar challenges.
In a statement, Anuj Nayar, Chief Financial Health Officer at LendingClub, stated, “Earning over $250,000 annually is more than five times the national average and clearly a high income. The fact that one-third of them are living paycheck to paycheck should come as a surprise.”
57-year-old Deborah Sponder, who owns two galleries in Miami’s bustling design district, situated between Emilio Pucci and Cartier, doesn’t consider her $250,000 income as wealthy. She points out that she has to pay for her three children’s college tuition. “My money is constantly going in and out between rent, tuition, and all other expenses.”
Study also found that in San Jose, California, a family of three with a monthly income of $8,333 would experience a net loss of $1,493 after deducting all expenses. The exorbitant costs of housing and transportation drive San Jose’s monthly expenditure to a staggering $9,496.
In San Francisco and Oxnard, the same family would face net losses of $1,163 and $904, respectively. San Francisco, with its high housing and transportation costs, also surpasses $1,000 in monthly food expenses. In Oxnard, the average rent for a two-bedroom apartment stands at $2,023.
According to research conducted by the Pew Research Center, among the 260 metropolitan areas surveyed, there is a wide disparity in the proportion of middle-income households and their income levels. The Pew Research Center defines the “middle class” as households with income ranging from two-thirds to double the national median household income.
Based on income data from 2020 and 2021, using the U.S. Census Bureau’s figures, the median household income in the United States in 2021 was $70,784.
This means that American households with incomes between $47,189 and $141,568 are defined as “middle class.”
Carla Bellamy, a resident of Manhattan, New York, falls into this category. Carla is a professor of anthropology at Baruch College, holds a Ph.D. from Columbia University, and is an accomplished Ivy League scholar.
But she can’t afford to raise children…
When Carla was expecting her second child, she had an annual salary of $74,000, while her husband worked as a part-time composer and executive director of a music organization, bringing their combined income to $110,000.
However, when their second child was born, their eldest daughter was only 5 years old, and Carla’s life took a sharp turn for the worse.
To take care of their two young children, she took unpaid parental leave, resulting in a reduced income. Their disposable income was quickly drained by the exorbitant costs of daycare and preschool. With her husband’s unstable job, their debt gradually increased, pushing them beyond the threshold of the middle class.
Living in New York City made their lives even more challenging.
The high cost of housing made Carla feel like she could never afford to buy a home.
As a middle-class individual, Carla had many friends who were financially well-off. She felt ashamed to discuss her true financial situation with other mothers, believing that talking about bank account balances or her own budget would be “inappropriate” and could lead to losing friends.
To maintain the appearance of middle-class respectability, she also had to keep up a refined appearance, take her children to amusement parks, attend birthday parties, and listen to other parents discussing hiring “tutors” for their three- or four-year-olds just to pass the gifted and talented test (an exam organized by the New York City Department of Education, taken before kindergarten, that grants entry into gifted and talented programs). This constant pressure left her in a state of anxiety every day.
Childcare in New York City is expensive, and the couple struggled to make ends meet. To avoid frequent expenses for hiring babysitters, Carla sometimes had to fake illness and take sick leave. Even with her own career, it was difficult to juggle everything and take a breath.
The scarcity of time and money also impacted Carla’s chances of promotion.
As a professor, she should have used the summer months for writing and research, to compete for tenure. However, doing so would have plunged her family into even greater financial crisis. At one point, she even considered taking on a restaurant job as a dishwasher during the summer, just like her students. In the book “Surviving in the Cracks,” there was indeed a female professor who did this and ended up feeling extremely self-conscious and embarrassed when she encountered her own student while washing dishes.
No Hope for a Raise: Carla’s job in the New York public university system froze salary increases due to budget constraints. The family couldn’t even afford to go out for a meal, and the last time they dined out was six years ago.
Meanwhile, they were paying the price for the pursuit of prestigious education and degrees – six years of student loans.
Was Carla, a university professor, destined to struggle with a family of four forever?
Finally, there was a glimmer of hope. Her husband found a higher-paying job, earning $50,000 a year, and Carla finally became a department chair, receiving a rare salary increase, bringing the family’s annual income to $160,000.
However, fate played a cruel joke at this point – when their income was low, they qualified for affordable housing, but now that their income had increased, they no longer qualified.
So they had to continue “rolling,” facing increasingly unaffordable housing prices and falling into a new cycle of financial worries. “Highly educated poor” individuals like Carla, or what some call the “middle-class precariat,” are not uncommon in the United States.
Stan Oklobdzija and his partner, Sarah Boyd, living in Los Angeles, have an annual income of around $225,000 but still cannot afford a home.
Living in a One-Bedroom Apartment in Little Tokyo, Los Angeles.
Stan, in an interview with Fortune magazine, stated, “With our combined income, we belong to the highest income bracket.”
He further added that their annual income is approximately $225,000. However, they are renting their accommodation, and he never believed that the situation would change.
“Considering the housing costs, buying a house is simply out of the question for us. It’s more like considering owning a spaceship,” he remarked.
He stated that both of their salaries are in the six figures. Stan, a 40-year-old adjunct assistant professor in public policy at the University of California, Riverside, and his 35-year-old partner working in the digital advertising industry. They pay a monthly rent of $2,400, and he previously tweeted, “The idea of owning a house here is hilarious.”
If someone with a six-figure income, combined with their partner’s earnings, still feels unable to afford a house in Los Angeles with an annual income exceeding $200,000, how can we expect those earning below this threshold to be able to afford one?
Stan said, “Where do we come up with that down payment? Even with our current income, it’s not feasible to gather a 20% down payment. People don’t have $100,000 lying around.”
Every time he and his partner open Zillow or browse listings to see if they could own their own home, Stan said it seems unrealistic for them. He used a treadmill analogy, saying they feel like they’re “sprinting in place.” Later this year, Stan will be moving to New Orleans to become a professor at Tulane University, a decision partly influenced by the housing market situation in Los Angeles.
Amy, who has worked in human resources for 18 years at various technology companies in the Bay Area, and her husband together have a combined annual income of $150 thousand, It sounds like a good income, but half of their monthly income has to pay the mortgage, the house is not near the company, they have to spend a long time commuting every day, and the child care costs another 30%, and the remaining 20% is used for basic living, paying for the children’s special classes, summer camps, and so on.
Although the situation is not precarious, it still needs to run hard to maintain the status quo. In order to match their incomes with the Bay Area’s fancy spending, many of them have joined the gig economy.