How Much Does it Really Cost to Be Middle Class?

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The following is a post by MPFJ staff writer, Kevin Mercadante, who is professional personal finance blogger, and the owner of his own personal finance blog, He has backgrounds in both accounting and the mortgage industry.

We hear a lot these days about the “shrinking middle class;” is it true?

When we say “middle class,” it conjures up visions of a family living comfortably—but not extravagantly—in a leafy suburban community with good schools. Most people, I think, consider themselves to be middle class whether they’re actually below it, above it, or right about there, financially speaking. It’s pretty accurate to say that the term “middle class” is really more subjective than actual.

Let’s work past perceptions, and take a look at what it costs to be middle class based on typical living expenses. 

Here’s my shocking conclusion: it costs a lot of money to be middle class! And because of that, many people who used to be middle class may no longer be.

Defining our mythical family

Let’s start by setting some definitions. We’re going to use a family of four, with a husband, wife, and two children, living in an unpretentious suburban community. The family has a modest home, two cars, both adults are employed outside the home, and the children attend public schools.

We’re going to exclude factors like child support or alimony, daycare, one or more kids in college, a second home, excessive debt levels, and private school attendance. As suburbanites go, this family lives on the down low.

The cost of an ordinary middle class life

Now we’re going to look at the cost of living that this family incurs in living this modest lifestyle, broken down individually. To keep it simple—and for easy reading—we’re going to keep these numbers nice and round.

Payroll taxes. The couple earn $75,000 per year between both their jobs. FICA taxes eat up 7.65%, or $478 per month. For federal income taxes, the family pays little, since they have significant deductions plus the $1,000 per child tax credit. Estimate, $300 per month. State income taxes, $200. Monthly total, $978, or let’s say $1,000 to keep the numbers round.

Housing. The house is worth $200,000 and carries a $120,000 mortgage. They recently refinanced to a 30 year fixed rate loan at 4%, so the monthly payment is $573, plus $77 for homeowners insurance and $350 for property taxes. There’s homeowner’s association dues of $50. Total house payment is $1,050—nice and round, but totally credible at the same time.

Monthly utilities: gas, $100, electricity, $100, water and sewer, $50, trash, $25, cable TV/internet/cell phones, $200. Utility total: $475. House payment plus utilities: $1,525.

Health insurance and medical costs. One of the spouses has family health insurance coverage through work. The plan costs $1,000 a month, but with a 60% employee subsidy, the monthly cost is $400. We’ll add $100 per month for co-payments and deductibles, bringing total monthly medical costs to $500.

Car expenses. One car has a monthly payment of $350 ($10,000 loan balance), the other is owned free and clear. Neither of the children are of driving age yet. Monthly car insurance is $150. The couple drive about 2,000 miles per month and consume 80 gallons of gas (25 mile per gallon average), so we’ll put gasoline at $300 per month. We’ll also add $150 a month for repairs and maintenance. Total monthly car expense, $950.

Groceries. The family do a lot of shopping at food warehouses, and are moderate coupon clippers. Monthly grocery bill: $600.

Clothing. The family shops at moderately priced department stores, mostly Kohl’s and JC Penny, but also a bit at Wal-Mart and even some thrift stores. Monthly average: $200.

Entertainment. Two or three dinners out, and maybe one movie are the family’s extent of obvious entertainment costs. Monthly average: $200.

Annual vacation budget. $3,000, or $250 per month.

401K contributions. Both spouses have a 401K plan at work, and each get a 50% employer match up to 6%. Though they’d like to contribute more, it’s hard to find the extra money with raising a family. They each go with the 6% contribution, hoping to increase it in the future. Monthly contribution: $375.

The kids college funds. Once again, though they’d like to save more, they’re limited to payroll deductions at $100 per month per child. Monthly total: $200.

Charitable contributions. They’d like to give more, but $100 per month is the best they can do right now.

Miscellaneous expenses and short-term savings. There are always significant home repairs, unexpected expenses, and furniture and appliances to be replaced. On top of that, there’s funding and maintaining short-term savings to have for emergencies. Estimate: $350.


Payroll taxes, $1,000
Housing, $1,525
Health insurance/medical, $500
Car expense, $950
Groceries, $600
Clothing, $200
Entertainment, $200
Vacation, $250
401K contribution, $375
College fund, $200
Charity, $100
Miscellaneous expenses and short-term savings: $350

Total, $6250 per month, or $75,000.

That fits nicely within the family’s $75,000 annual income.

Being middle class is expensive!

If your household income is at least $75,000, you may be asking “what’s the big deal?” But here’s an interesting statistic; according to the U.S. Census Bureau, the median (50% above, 50% below) household income in the United States is $49,777. A little bit less than 32% of the households in the country earn at least $75,000.

What that means is that the average household in the U.S. cannot afford the stereotypical middle class lifestyle!

Remember that at the beginning, we excluded some costs that would complicate this family’s cost of living, like childcare, child support payments, and possible debts from car loans, credit cards, or even possibly payday loans that have been accumulated over the years.

Another significant factor we didn’t account for is geography. The living costs we used assume that the family lives in a moderately priced region of the country. If you live on the West Coast, in the Northeast, or in many large metropolitan areas in between, the cost of living is significantly higher. The $1,000 per month base house payment we used doesn’t exist in those areas.

Then, there’s the employment situation. We’ve assumed that both spouses are comfortably employed in salaried positions with full benefits. If you’re self-employed, not only will you have to pay the matching FICA taxes (7.65%) but there’d also be no employer subsidy on the family’s health insurance plan. The combination of the two would raise your cost of living by many thousands of dollars.

Being middle class is no longer truly about being in the middle. It’s about being somewhere above the middle—maybe well above it.

What are your thoughts about what it costs to be middle class? And, do you think that the middle class is shrinking?

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    About the Author Jacob A Irwin

    Hi folks! My name is Jacob. I am the owner and operator of My Personal Finance Journey. I started this blog in January of 2010 and have enjoyed the journey ever since. Since finishing up graduate school in Virginia in 2014, I have been working in biopharmaceutical development in Colorado. You can read more about me and this site here​. Please contact me if you have any questions!

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    Leave a Comment:

    Kevin Mercadante says October 22, 2012

    Hi Thomas, I agree, and the point of the post was mainly to point out that an average middle class lifestyle is more expensive than most people realize. I think I was pretty conservative with the numbers too. Like you pointed out, many truly middle class people live much more extravagently. Credit lets people do that, and once you get into that addiction it's tough to get off. It's not just the pain of paying back the debt, but also of giving up the lifestyle it provides.
    My recent post Building Your Savings With a Savings Snowball

    Thomas S. Moore says October 22, 2012

    Really loving the way you broke it down but sadly most living in middle class won't or simply don't live the way you put it here. Sure a lot of people in the financial blogging atmosphere would go for this but this is a small percent of the population. Most have homes they shouldn't be in $300-500k, both have car payments of $300 per month, and other spending is just crazy on clothing, entertainment, etc.

    The problem isn't what people are making so to speak its how much they are trying to spend if you ask me. You make 75K year combine but live like you make $150k. That's the real problem.
    My recent post Sneaker Friday Part 2 – AirMax 90 Infrareds

    Billy says October 26, 2012

    I grew up in the Middle class…

    2nd Homes? Private School? You think these are middle class things? They're not.

    $3000 a year for vacations? No… We usually went on one or two short trips (half a day driving – 1 or 2 night hotel stay) a year, and one bigger trip (flight to far away state, and ~1 week in a hotel) every 3 or 4 years. Doesn't cost $3000 a year. $800 a year should be a better estimate.

    Utilities and all the phone/tv/internet was definitely far less than that. We didn't have cell phones at this point though so that might be part of the reason though.

      Kevin Mercadante says October 26, 2012

      Hi Billy–It's interesting that you said that you grew up in the middle class. I agree with you, the things that the middle class spends money on today isn't what the middle class used to do. Today we have middle class families taking on six figure debt burdens to send their kids away to college, or buying new cars every few years. In the example I gave, the family doesn't have a second home or send their kids to private schools, yet a lot of middle class people do exactly that.

      That being said, I think that the cost of being middle class is higher than most people think.
      My recent post They Call This an Economic Recovery?

    Des says October 26, 2012

    Per your census bureau link, the average income for a four-person household is $73,071, and the average income for a two-income household is $78,473. Both very near your $75k estimate.

    The number you cite as average ($49,777) is the average for all households, which includes those in one and two person households, which skews the numbers down. It doesn't say on that form, but last I saw the average household had only 1.3 income earners.

    So, your estimates for this particular family are both quite reasonable, and totally attainable for an “average” four-person, two-income family.

      Kevin Mercadante says October 26, 2012

      Hi Des, that's true, but a lot of middle class families live at higher cost levels than the example I laid out. Some do have second homes and and take exotic vacations regularly. And there's a lot of debt making up the difference. I see a lot of middle class families with kids in private schools, and paying people to clean their houses, cut their lawns and shampoo their dogs (mobile pet services).

      Also there are a lot of split families (divorce) that may have two wage earners, but are also juggling child support payments–the divorce rate is over 50% now. Being middle class isn't as simple as it once was.
      My recent post They Call This an Economic Recovery?

    Sarah says October 26, 2012

    I track every penny, cut coupons, look for deals, do our own repairs…try to be good — earn right where this example shows — but then throw in braces for one child, an emergency room visit for another (what insurance doesn't cover ambulance transport?), private tutoring for special needs child, and my own tuition for night school to earn a second masters in order to stay competitive…and there's no-wiggle room. I think it's why when food or gas prices jump a little we see such a reaction through the economy. I don't mean to sound sour or gloomy because I KNOW I am FORTUNATE. I cannot imagine making it on less, and I have huge respect for those that do, and would love to know more about how they do it! Thank you for this breakdown…now I'd love to read more real life examples of those getting by on less. Fuel costs are my biggest problem right now…and long ago I gave up taking rides for fun…every trip has many purposes.

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