Tag Archives: evergreen

Concerns Define The Middle Class

Updated on 3/23/2018

I spoke to Zach Shrier of Shrier Wealth Management (who also happens to double as Lauren’s cousin and was my investing teacher my freshman year of high school) about the definition of “Middle Class.” In 2017, about 70% of Americans classified themselves as part of the middle class.

Statistical Definitions of Middle Class

There are many ways of defining middle class. You can simply look at raw data and define each class as a percentage of American households earning incomes within a range. Using three classes, we might get something like this:

  • Upper Class – Top 20% of Population – Earning more than $122,500/year
  • Middle Class – Middle 50% of Population – Earning between $35,000 and $122,500/year
  • Lower Class – Bottom 20% of Population – Earning Less Than $35,000/year

You can play with the data however you’d like and define upper class as the top 5% (earning over $215,000) or even the top 1% (earning over $430,000) of the population. However, it doesn’t help define what it means to be middle class (or upper or lower).

Zach had a very nice idea, that rather than the amount you make, concerns are what define each class. Making $50,000 in Manhattan is very different than making $50,000 in a small town in Texas, so it’s clear that a number itself isn’t a great definition.

New Definitions of The Classes

When we look at what concerns people have, we get a breakdown of each of the classes:

People in the lower class are concerned with having a place to sleep and food to eat. These are people who are struggling to come up with the most basic needs. They may not have to worry about these things every day, but it’s something that’s always looming over their head. Will they be able to afford rent next month? Basic federal benefits are very important to them because they have few alternatives to government help.

People in the lower middle class are definitely concerned with the short-term, but less so than people in lower class. They may have the very basics covered, but government subsidies are still very important. They’re not able to save regularly as almost all income goes towards managing their day-to-day life (getting to and from work, food, housing, and basic “wants”). The people often make big sacrifices to get by, including living in multi-generational homes to keep costs as low as possible.

People in the middle class are concerned with having consistent employment as well as the costs of getting around and being able to save. While they might not be living month to month, they are worried about being able to support their family. They want to save to be able to afford to go on vacation with their family and not have to worry so much about the near future. Changes in gas prices are significant because high gas prices mean less money for the other things in their life.

People in the upper middle class worry not about gas prices, but about the costs of home ownership and the costs of education. They may be cognizant of the changes in gas prices in their area, they do not worry about affording the price. Whether it is $3 a gallon or $4 a gallon, they will pay the price because they have no alternative to getting around.  They may want to send their children to private school or live in an area where the public school system is of high quality. But living in that area likely means houses are more expensive, and they are concerned with being able to handle all of the responsibilities.

People in the upper class are people who have a different set of concerns: passing wealth onto the next generation. They don’t have to worry about money to cover the costs of their needs and wants, but they still want to make sure their children won’t have to worry about the same things.

Concerns Define Us

Everyone worries about money. While people in the upper class may not have to worry about affording things in the short-term, they have other concerns nonetheless. They too may never feel complacent with their wealth, something everyone can identify with.

Every class has a different set of concerns, and while there may be some overlap, it’s clear that higher up the ladder you get, the less you worry about your short-term finances.

What do you think of these new definitions? What class do you consider yourself a part of based ?

Force Yourself To Save With A 100% Personal Tax

Since everyone loves taxes so much (right??), let’s talk about a tax that’s a little bit more fun and interesting than income taxes.

With income taxes, you pay the government for money you earn. But with a personal tax, you pay yourself for money you spend.

I stumbled upon a Reddit post of a 29 year old looking for help curbing an expensive spending problem. He and his wife make a decent income and have great pensions and their only debt is an $8,000 car loan at 1.9%. Despite that, they have basically nothing saved up. They just are not good savers.

One reader commented (and I am posting his idea with his blessing) with a solution that I think is great in this situation, but can and should be used by anyone who has a difficult time saving money each month.

How Does A Personal Tax Work?

The idea is a 100% personal tax. Whenever you buy something that isn’t a necessity, you impose a 100% tax on yourself that goes toward your savings account. For example, if there is a Blu-Ray you want to buy on Amazon for $20, you have to have $40 to spend on it. $20 goes to the Blu-Ray and $20 goes to the savings account. As the redditor puts it, “your larger savings plan can dictate where the money goes that accumulates in this account. (i.e. IRA, 401k, emergency fund, etc)”

Who Should Use a Personal Tax?

This plan is not for everyone. It’s not for Lauren and me because we are already saving nearly 50% of our after-tax income. We save plenty (some would say more than enough) and we already have our motivation to save.

This plan is for people who make more than enough to cover their basic needs but who, at the end of the each month, find that they are not saving as much as they want to.

The 100% personal tax is great for a few reasons:

  • It’s free
  • It keeps you accountable
  • It forces you to do something you can’t do on your own

If you aren’t able to save much each month, give this a try for a month. There’s no ‘I can’t afford it’ because this only applies to non-necessary purchases. You don’t need to match your rent and food spending, only items and activities that you choose to partake in. Your needs aren’t taxed, only your wants are.

Do you need a little more help saving? Would you try the 100% personal tax?

Update: There’s now a way to automate the 100% personal tax!

How We Turned One Credit Card Into Over $800 In Cash and Flights

I’m writing from my flight from Los Angeles to San Francisco for a weekend trip to visit my brother, sister-in-law, baby niece, and my visiting parents. Lauren and I booked pretty cheap tickets ($99 each way) about 6 weeks ago, but we didn’t pay a penny for them. In fact, we still had over $420 in cold hard cash rewards left over after using miles for this trip. All from signing up for a single credit card.

Why This Credit Card Is Better

Many credit cards offer a certain number of points, a free roundtrip ticket, or a few hundred dollars in cashback rewards. But the card we signed up for netted us a huge haul. In fact, it’s so rare that I’ve avoided writing the post because the rewards for the card we signed up for has not been available for the past few months. But now it’s back and if you’re in the market for a credit card with great rewards, now may be the time to jump on it.

I signed up for the Southwest Plus credit card with 50,000 points a few months ago (typically the offer is 25,000 points, spend the required minimum, $2,000 within 3 months, and saw the 50,000 Southwest points deposited into my account a few weeks later. Score!

We Did Not Want Southwest Credit

We booked our $400 in tickets for this trip and were planning on a Labor Day weekend trip back to Boston and New York. But we ran into an issue. The problem is that when you fly from the west coast to the east coast, you spend nearly 6 hours on the plane, and when you add in the time difference, you lose about 9 hours just from takeoff to landing (whereas you only lose 3 when flying from the east coast to the west coast). So we prefer to take red-eye flights so we don’t lose a full day flying (just the night, which isn’t comfortable, but it’s more bearable).

Southwest does not offer red-eye flights and I did not want to have to take an extra day off work to fly, so we started looking at other flights. We ended up booking with another airline for a reasonable price (considering it was Labor Day weekend), but we were left with nearly half our rewards (and no upcoming trips to spend them on.

Selling Points For Cash

So I did what anyone with lots of miles they can’t use should consider doing: trading or selling the points for something useful. It’s against the terms of use to sell Southwest points, but you may book a ticket for a family member of friend. So I looked for a friend with a need for points and found that my brother-in-law’s mother was going to book a few tickets and could use tickets. So I offered a 15% discount for her in return for the cash value, which came out to $420. Not a bad trade-off!

So in all we got $400 worth of tickets and another $420 in cash for a total of $820 in travel and cash! I love going on free vacations!

I found out the other day that the credit card offer I signed up for is back. Usually they only offer 25,000 points for signing up (which is still very good as it’s estimated worth is about $415 for signing up. But right now for what I assume is a limited time, you can get around $833 in rewards for signing up.

The only caveat is that there is a $99 yearly fee (or a $99 annual fee with slightly more annual rewards, which is the one I signed up for). Since the day-to-day rewards of the card itself are not very impressive, I plan on cancelling the card before the year is up. Even including the $69 fee (which you pay at the beginning), the rewards come out to about $765. I think anyone can get on board with that.

Check out this slickdeals forum to learn more and hopefully it’s still available if you are interested.

*I don’t receive any commission if you sign up. It’s simply a great deal.