What does it take to be middle class in America today? Living on $50,000 per year in America.


Is it possible to live a middle class lifestyle in America with a household income of $50,000?  The recent Census survey puts the median household income at $50,000 for American households.  So technically speaking, this is the middle class.  Yet what we think of a middle class lifestyle including affordable public colleges, accessible healthcare, and affordable housing keeps getting further out of reach for most Americans.  Part of this has to do with the slow systematic destruction of the U.S. dollar.  Most in the public did not notice this shift since it has occurred in very slow methodical stages.  We can find the first roots of this reversal of fortune in the 1970s but the latest credit bubble has really highlighted the struggle for most middle class Americans.  Owning a home with no equity is renting with a massive debt liability.  Most articles don’t make the attempt to run the budget for a household at this level.  With new Census data I wanted to run the household numbers for a hypothetical family living in California.

43 percent of all California families live on $50,000 or less compared to 50 percent nationwide.  Let us take a look at what $50,000 buys a family over one year in the Golden State:

50000 a year annual household budget

Source:  Census data, average costs via BLS

Right off the top 21 percent goes to various forms of taxes including Social Security, Federal taxes, and state taxes.  The monthly gross income of $4,167 is lowered to $3,287 once the check arrives in the family’s bank account.  In California with a median home price of $318,000 according to the California Association of Realtors, there is no way this family can even think about buying a home.  We are using market rents for apartments in many areas.  $1,350 will get you a two bedroom apartment which is sufficient for a married couple with no kids.  Before we examine the expenses here, it is important to note that the reason $50,000 doesn’t go so far anymore is because the U.S. Treasury and Federal Reserve have embarked on a trajectory to push the value of the dollar lower:

dollar chart

The dollar has lost nearly 30 percent of its value in the last decade (it gets worse if we go even further back).  This is a hidden tax to most American families here.  Let us now explore the expenses by area.


In terms of utilities, most apartments run fairly lean here (temperatures don’t fluctuate much here).  Gas shouldn’t cost you more than $25 per month (we’re looking at an apartment under 1,000 square feet here).  For electric, $50 a month should be sufficient to power your typical modern day gadgetry.  For phones, I’m using pre-paid phones from Virgin Mobile which can save you a tremendous amounts of money.  You’ll be surprised how cheap these are.  I know a handful of friends who don’t even make $50,000 a year yet spend $99 or more a month just to have a Smart Phone.  Many people with these phones spend a bulk of their time updating Facebook and Twitter.  Maybe I’m old fashioned here but I just see it more bottom line.  You can save $1,000 a year just in this area.

The next important saving item is getting Naked DSL with no phone or cable service.  Many times these things come bundled and run up to $100 per month.  With Naked DSL, you can get a solid internet connection for $38.99 a month.  Plus, many of your cable shows are now available on the web via Hulu or directly from their sites.

Automobile Coverage

For auto insurance we are going purely with liability coverage here.  We are assuming you have a paid off car here.  Ideally an efficient car and no gas guzzlers.  We are assuming that you have a car that gets you at least 25 miles per gallon.  We’ll allocate $150 per month for gas here.  That should get you:

$150 / $3 per gallon = 50 gallons x 25 = 1,250 miles per month you can drive

This fits right in line with federal data that shows the average mileage driven per year is 15,000 miles.  This is an area where I see many young people messing up on.  They get their first job and all of a sudden they have a 5 to 6 year monthly payment of $350 to $400.  Of course, your insurance has to be comprehensive and this adds a bill of $200 or more a month.  So run the numbers here; you go from spending $75 a month on insurance with a paid off car (maybe not the nicest thing on the road) to spending $200 on insurance and a $400 car payment.  This can be a monthly savings of $500 (or $6,000 per year) here.


We’re allocating $500 per month for a couple here.  If you shop at local regional markets you will find great deals.  Heck, if you wanted to go on the extreme cheap Costco is now selling a survival package of food for one year for $800 (for each person so $1,600 for two people).

costco 1 year supply

“Full package includes:

The THRIVE 1 Year Food Supply comes complete with 84 #10 (gallon size) cans of grains, fruits, veggies, protein & beans, dairy, and baking essentials. With over 5,000 servings and many foods with a shelf life of up to 25 years, this package will give you variety, nutrition, and peace of mind.

* 12 month food supply for 1 Person

* 6 month food supply for 2 People

* 3 month food supply for 4 People

* Shipment arrives in 14 separate boxes

* Grains and rice have a shelf life of up to 30 years

* Freeze-dried foods have a shelf life of up to 25 years

* Dehydrated foods have a shelf life of up to 15 years

* Simple rehydration instructions, recipes, and helpful tips are included on each can

* 5,011 total servings

* 84 gallon-sized cans”

But we’ll assume that you still shop at the store.  $500 should be enough for a couple if they cook and manage their provisions correctly.  We’re also throwing in $20 a month for the occasional fast food run just in case that occurs.


We’re throwing in $100 per month for entertainment.  With this, you can find a membership at a local park gym and use Netflix for movies.  Thankfully, this should keep you covered and overall the best healthcare prevention is taking care of your body.  Consider the gym membership as part of your healthcare budget (you need it because the $300 coverage you have is barebones).  For haircuts, sorry folks, you need to go on the cheap here.  I realize that many women spend a lot more here but that will have to come from somewhere else in the budget.


For healthcare coverage, a healthy couple in their 30s will be paying $300 a month.  This is basic coverage with relatively high deductibles.  You can go cheaper but then you are likely to have nothing backing you up for catastrophes and many hidden clauses.

Emergency Fund

Ideally you should have 6 months of expenses saved up here.  But as you can see with this, monthly expenses are getting over $3,000 already so this would mean a total fund of $36,000.  At savings of $250 per month it will take 120 months (10 years) to even get to this point.  We are only setting aside $125 into a retirement account since the stock market is incredibly volatile right now with no actual reform so it is still operating like a casino.  So it may just be best to plow money away into your retirement account first.

Now I know many will have opinions and ideas about the budget above.  But I think when many throw out the word middle class lifestyle the above is not thing they envision in their mind.  Where are the funds for a college education?  What about a major health illness?  There is no way someone will buy a home with the above in California (possibly in another state but this will stretch the budget).  Keep in mind the median $50,000 household income includes the highest percentage of two income households in history as well.  So you have more workers working for less in dollar terms.  The stress many are feeling is the weakness of the dollar brought on by poor banking policies over the decades.

I hope the above budget provides a general idea of where the $50,000 a year is going.

My Budget360