7 Everyday Items That Could Become Unaffordable For The Middle-Class Soon

Is rising cost of living putting the American Dream out of reach for the middle class?

Damjan

• Published in Community
• October 28, 2024

For many in the middle class, financial security is a reality they’ve worked hard to achieve. Homeownership, a steady retirement fund, family vacations, and the ability to support a college education for their kids have become hallmarks of a comfortable lifestyle.

Yet, the financial landscape for middle-income earners is evolving, and experts caution that maintaining this stability may be more challenging over the next five years. Rising costs in housing, healthcare, education, and everyday essentials all contribute to an uncertain future.

Alyssa Huff, real estate expert and owner of Sell House As Is, points out that while many middle-class families still manage to afford these core parts of the American dream, increasing living expenses could make this more challenging. Housing prices continue to rise, placing pressure on mortgages and housing affordability.

Education expenses are climbing, adding more strain to those saving for their children’s future. Meanwhile, healthcare costs are rising, creating a heavy burden on household budgets. Even small luxuries, like family vacations or dining out, may become more challenging as budgets are stretched thinner.

The upside is that knowing these challenges beforehand allows middle-class families to strategize for the future. Adjusting savings plans, exploring alternative education and healthcare options, and setting realistic budgets for discretionary spending are all ways to counter rising expenses.

With proactive planning, middle-income households can improve their chances of maintaining financial stability, even as the cost of living rises.

Extended family trips.

“I would say the tradition of extended family trips, especially overseas, will probably increasingly be something the middle class can’t afford in the coming years. In lots of ways I already feel like the traditional family vacation has fallen to the wayside over the last decade due to a number of factors — Covid and inflation being some of them.” said David Kemmerer, CEO of CoinLedger.

As a result, Kemmerer believes that more families will prioritize essential expenses over leisure trips. With other financial priorities, such as housing and healthcare, likely demanding a larger share of income, the traditional family vacation may soon be unaffordable for many middle-income earners.

Affording new cars

“Vehicle prices have increased dramatically in the past four years and will likely continue to become more expensive. Safety features, autonomous technology and EV batteries contribute to the rising prices.” said Melanie Musson, finance expert with Clearsurance.

With these factors in play, Musson warns that the dream of buying a new car may become unattainable for much of the middle class. Instead, used vehicles or other transportation alternatives may become the norm as families adjust to higher price tags.

Private school tuition and education costs

“Tuition rates have been steadily climbing for years, and it’s highly likely they’ll outpace a middle-class income in the near future.” said Jake Hill, CEO of DebtHammer.

With inflation driving prices up across the board, Hill anticipates that the combined financial burden of housing, healthcare, and other family expenses will push private schooling out of reach for many middle-income families.

The rising costs of higher education also mean that families may need to re-evaluate education plans, including relying more heavily on scholarships and financial aid.

Homeownership and real estate

“Honestly, with the way things are going, a mortgage or house purchase might be something the middle class won’t be able to afford in five years. I can certainly see owning a home becoming something that’s more and more out of reach for your average middle-class citizen." said Carter Seuthe, CEO of Credit Summit.

Tax changes, such as California’s Proposition 19, may further complicate real estate ownership for the middle class. David Brillant, a tax and estate lawyer, notes that such changes make it harder for families to own and pass down property, especially with proposed reductions in tax credits.

Brillant’s experiences with clients highlight how navigating these tax adjustments can be financially challenging, prompting some families to reassess their estate planning strategies.

Healthcare costs

“These expenses have been rising steadily, outpacing general inflation rates for years, and there’s no sign of this trend reversing. My work with clients has underlined the importance of integrating healthcare planning into a comprehensive retirement strategy." said Mike Kojonen, financial advisor and owner of Principal Preservation Services.

Without adequate planning, middle-class families may struggle to afford long-term care, especially for aging parents. As these costs continue to rise, they could drain retirement savings or limit other essential spending, highlighting the need for comprehensive healthcare planning as part of a robust retirement strategy.

Retirement leisure and travel

“For many, the desire to explore and enjoy leisurely pursuits forms a central part of their retirement dream. This shift could lead to necessary adjustments in retirement planning, emphasizing the need to build a more robust savings strategy to accommodate higher costs of leisure and travel.” said Mike Kojonen, financial advisor and owner of Principal Preservation Services.

Kojonen emphasizes that rising costs across airfare, accommodation, and dining mean that travel may become more of a luxury than an attainable retirement goal for many.

Reconsidering “Safe” investments

“This reality poses a risk to the preservation of purchasing power for many middle-class retirees. In advising clients, it’s become increasingly important to explore diversified investment strategies that can offer both growth and protection against inflation, ensuring their retirement savings can support their lifestyle and goals.” said Mike Kojonen, financial advisor and owner of Principal Preservation Services.

Kojonen explains that today’s retirees need to consider a more diversified investment strategy to maintain their purchasing power. Planning carefully, families can help secure their financial future and protect against rising costs that could erode their savings.

The future finances of the middle class look less predictable, with experts pointing out that rising housing, healthcare, education, and everyday expenses could make things tougher. However, this challenge also offers a chance to prepare.

Families can start by rethinking their budgets, setting new priorities, and getting advice from financial experts to stay on solid ground. By planning, the middle class can protect the lifestyle they’ve worked hard for, keeping goals like owning a home, retiring comfortably, and enjoying family vacations possible for years.

Damjan