8 Biggest Financial Challenges the Middle Class Could Face in 2024
The middle class is under pressure and, consequently, shrinking. A Pew Research Center analysis found that the share of adults who live in middle-class households fell from 61% in 1971 to 50% in 2021, likely due to the rising cost of living and wage stagnation.
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It’s just not easy to become and stay middle class anymore. There are too many hurdles to overcome, many of which are, from a big-picture economic perspective, beyond our control. And every year ushers in new hurdles. So far, 2024 is shaping up to be another tough one for the middle class.
Let’s examine eight financial challenges the middle class could face in 2024 — and how to mitigate them.
Stagnant Wages Amid Inflation
Despite rising inflation, wage growth in the U.S. has been widely stagnant, with most workers saying their income isn’t enough to keep up with rising costs. It looks like this problem will persist in 2024.
“Although some economies experience recoveries after a spell of recession, wage growth — in cases such as the U.S. — is rarely able to keep up with spikes in inflation, wiping out prior purchasing power and any possibility of savings,” said Erika Kullberg, a personal finance expert and the founder of Erika.com.
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To help face this challenge head-on, you should do a bit of a career reboot.
“Developing new, updated skills or acquiring a new competency can make one a better candidate in the hiring pool, possibly for a better-paying job,” said Kullberg.
Job Market Volatility
Not only might you want to beef up your resume, but you may also want to add a side hustle due to the volatility of the job market, which is yet another challenge looming over the middle class in 2024.
“Technological advancements and outsourcing have made it more insecure than ever to rely on one job for a lifetime,” said Kullberg. “To gain security in case of job loss, one can develop different sources of income.”
Rising Healthcare Costs
Healthcare costs are steep in the U.S. — and only getting steeper as health insurance costs soar.
“Healthcare costs grow faster than inflation and often faster than the increase in wages, straining the budgets of the middle class,” said Kullberg. “If possible, contributing to an HSA is a tax-advantaged way to save on medical costs.”
Rising Education Costs
And then, of course, you’ve got the hefty price tag of higher education, which keeps getting heftier as time goes on.
“The cost of education, particularly higher education, continues to rise, making it difficult for middle-class families to afford without taking on debt,” said Kullberg. “Actively seeking out scholarships and grants can significantly reduce the strain of tuition fees.”
Retirement Savings Shortfall
Millions of middle-class Americans are in a crisis when it comes to saving for retirement, and increased longevity, though a blessing, is also a curse here.
“Rising life expectancy means that most middle-class workers aren’t saving
enough for their golden years,” Kullberg said. “Take full advantage of your employer retirement plan, especially if it matches your contributions.”
High Debt Levels
Debt in the U.S. is record-breaking — and bank-breaking for middle class Americans.
“High levels of consumer debt, ranging from credit card balances to auto loans and mortgages can put significant stress on your financial health,” said Kullberg. “Explore options for consolidating your debts so that you can reduce interest rates and monthly payments.”
Unaffordable Housing
Once a pillar in middle-class life, owning a home has become increasingly difficult. And times aren’t getting easier.
“The housing market has seen significant price increases in many areas, making homeownership more challenging for the middle class,” said Amanda Webster, COO at Fund and Grow. “Additionally, renters may face higher lease rates, further compounding affordability issues.
To mitigate or lessen the impact of this challenge, Webster recommends exploring different neighborhoods or considering a slightly longer commute that could lead to more affordable housing options.
“For homeowners, refinancing mortgages while rates are favorable could reduce monthly payments,” said Webster.
Climate Change-Related Costs”
From increased insurance premiums to disaster recovery costs, climate change is becoming an economic factor,” said Kullberg. “Making homes more energy-efficient and choosing sustainable options can reduce long-term costs.”
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This article originally appeared on GOBankingRates.com: 8 Biggest Financial Challenges the Middle Class Could Face in 2024
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