Saving America’s Middle Class – The Return of Frugality

The following guest post is from M.W Larsson, co-founder of, an excellent source for middle class survival news and information.

There was a time – and it wasn’t all that long ago – when a Middle Class lifestyle wasn’t just obtainable; it was downright easy to be a member. Really, all you needed was an “average” job, and you were in – a home, a nice car, occasional dinner out, color TV, an annual vacation, and a pension for when you got older.

Obviously, those days are gone, so I don’t want to wax poetically about nostalgia and why can’t we bring them back, etc. But I do want to point out the two reasons those days have left us, and I’d like to expand on one of those reasons:

  • The most obvious reason for the end of the “one average job’s paycheck can raise a family” is that the economy changed. Expenses outpaced wages, and many of those jobs (manufacturing, etc) are gone. And they won’t come back. Forget relying on the government and waiting for “good times” to come back – they aren’t.
  • The second reason, however, is one that doesn’t get as much play, because it’s personal, and it “hurts” a little. And that reason is simply this: WE’VE changed, and we want more, because there is more. Many families cannot “make it” on their salary not because food and shelter cost too much – it’s because of all the other stuff.

I’d like to expand on this last point somewhat, and discuss how a return to frugality can help.

To start, what really changed in terms of what we buy and what’s available? Well, the answer is, everything changed. There’s so much more available to us now, and more importantly, many “more” things that are an almost expected part of everyday life (cellphones for the entire family, anyone? There’s something a 1970’s era family never had to pay for.)

We want the food and shelter and automobiles that people used to have, but we also want a flatscreen TV in every room, cellphones for all, birthday parties for kids that run into the hundreds and even thousands, satellite radio, DVD’s (every child I know has a personal DVD collection of Disney and Pixar films), and more. Plus, we want more space – the average house is far bigger than one just thirty years ago. The “great room” is now part of our vocabulary.

We’ve added and added to our lives, at a pace that far exceeds salaries. This is why “the credit card bill” is a monthly staple. We want more life than we can afford. And it’s why many people find themselves in trouble.

I mentioned earlier that this “hurts”, and it’s why this reason doesn’t get much press. Nobody wants their kid to be the only one without a cellphone. Or without Toy Story 1, 2, and soon even 3 on DVD. Or without cable TV (on a flatscreen). I’ve personally known parents who stressed about paying the heating bill turn around and buy their son a new Xbox that same week! This sort of thing happens more than you think. And it’s insane.

Here are a few stats:

  • One in nine families can’t make the minimum payment on their credit cards.
  • One in eight mortgages is in default or foreclosure.
  • One in eight Americans is on food stamps.
  • More than 120,000 families are filing for bankruptcy every month.

*(source: Elizabeth Warren’s, “America Without a Middle Class.”)

OK, how do we fix this?

I co-founded and run a website called The Daily Middle (, where we explore the global economy and how it specifically relates to the middle class (typically individuals or couples making between $40,000 and $120,000 per year) here in the U.S.

The Daily Middle relies on those experts who saw this “Greater Depression” scenario starting to play itself out years ago – experts like Peter Schiff, Jim Rogers, Dr. Marc Faber, Gerald Celente, Ron Paul, David Walker and Nouriel Roubini.

In my research, I run across articles, videos, stats and quotes all day long. And my advice in this case can be summed up with following two quotes I find particularly meaningful:

“One does not accumulate, but eliminate.  It is not daily increase but daily decrease.  The height of cultivation always runs towards simplicity.” – Bruce Lee

“It was hardly an exaggeration to say that the American standard of living was bought on the installment plan.” – Historian Daniel Boorstin

You see where I am going here, right? For many families, fixing their economic situation can be as simple as saying “no”. Right now, the average American family’s net worth (adjusted for real inflation) is at 1970 levels. Take a look at a family in 1970 and see what their expenses were – it may sound drastic, but that’s kind of where you need to be if you want the same economic lifestyle. Ok, pay the internet bill, but does everyone in the family really need a cellphone? Or cable TV? Do gifts have to be charged? These are all places to start – and yes, living frugally means sacrifice and a change of mindset.

Now, for those of you who are waiting for some Government magic, let me dispel that right now:

  • The official National Debt has just surpassed $13 Trillion (not including the massive debts of Freddie Mac and Fannie Mae which are backed up by the Federal Government, estimated at $6.3 Trillion.)
  • Our Unfunded Liabilities (Social Security/Medicaid/Medicare) are approximately $60 Trillion
  • Our National Debt is now growing 3 ½ times faster than decades ago
  • We are the world’s largest debtor nation with a National Debt that is 14 times larger and 89% of GDP (not including Fannie/Freddie debts and unfunded liabilities.)

We are in deep, deep trouble, and if you think “things are going to turn around,” you are mistaken.

To me, there’s really only one solution, and that’s to live below your means and return to frugality. If it requires giving up a few things that others are paying on credit for, so be it. If it requires cutting coupons, buying off-brand merchandise, well, that’s what it takes. If it requires a combination of both, fine. But being frugal and living below your means does not just help you today – it will allow you to weather almost any economic storm.

But being frugal isn’t always easy. It takes a good, objective look at “everything” you are spending money on, and it requires hard choices to be made. It’s not just cutting out a latte every day. It might mean your child doesn’t text his or her friends, because the “pay as you go” cell phone is for emergencies only. And that’s OK.

We hope you will join us at The Daily Middle for our “daily dose of reality” to keep your feet firmly planted on the road back to frugality.


  1. Elizabeth Warren has a nice article ” The Middle Class on the Precipice:
    Rising financial risks for American families” ( comparing household expenses and income today with a generation ago.

    From the article:

    “The same offsetting phenomena appear in other areas as well. The average family spends more on airline travel than it did a generation ago, but less on dry cleaning; more on telephone services, but less on tobacco; more on pets, but less on carpets. When we add it all up, increases in one category are offset by decreases in another.

    So where did their money go? It went to the basics. The real increases in family spending are for the items that make a family middle class and keep them safe (housing, health insurance), that educate their children (pre-school and college), and that let them earn a living (transportation, childcare, and taxes).”

  2. Love this post and I agree with you 100%. Going to check out the site right now…..

  3. I was wondering why you haven’t been posting as often. Will definitely check it out.

    I also think part of what’s going on is that almost every family starts out as a two income household. Thanks to the women’s movement, we can make as much or more than our male counterparts (at least entry level stuff).

    Then, when people start families, many households go down to 1 income and at the same time you’ve got more mouths to feed. You’re used to spending and making a lot more and where do you turn? Credit.

    Credit availabilty was also an issue back then. I remember my husband telling me the only card he could qualify in college was a sears card. And just a few years later, when I was in school, I’d get dozens of credit card offers every week.

    I’m proud to say my family of 4 live in a house that’s 1700 sq feet and it feels plenty big.

    • Sandy — “I was wondering why you haven’t been posting as often.”

      I think it is the guest poster (M.W. Larsson) who co-founded thedailymiddle blog, not FD.

      FD — Correct me if I’m wrong.

  4. Although i-phones and text messaging are luxuries for most, I understand parents wanting their kids to carry cell phones for safety and sanity. That doesn’t mean they need unlimited minutes or bells and whistles. Just a basic phone that’s pre-paid or part of the cheapest family package available. (An even cheaper option is not to have children, but I can understand wanting to keep the ones you have off of milk cartons.)

  5. I tend to not be so pessimistic. My father believed this stuff under the Kennedy administration and we had a bunker in our back yard. He did again under Carter- we had stacks of silver coin every where. How about the stockpiling for the end of the world in 2000?
    There is no way to prepare for “the worst”. We have tornados here every year and ice storms every winter…guess what- we are still alive.
    Gain skills, love your family and move forward.
    I find this to be an ironic article after the one yesterday about “not scaring the children with not being able to afford things”.
    And yes, I know about china- I lived there for two years. If there is anything to be afraid of it would be them cutting us off at the consumer level. It will take us 5-10 years to recover from that!

  6. I have to agree with Macke on this one – frugality is essential to survive in our current economy, but it’s not even on the Top 100 list of things that are making middle class status unattainable for so many Americans.

    Rising costs of health care, housing, education and food are to blame for the situation that we’re in now. Yes, families are turning to credit for their expenses but that is because they have nowhere left to go, particularly if they face even one major edical emergency in their lifetime.

    • Housing for a similar size house, adjusted for inflation, isn’t much different from the 1970s, or ever, if you disregard large bubbles (such as the one that just popped). Houses today are larger, which is why it is more expensive to purchase and then to maintain, and then are filled with more stuff than before (microwaves and automatic garage door openers and stainless steel appliances).

      Healthcare is more expensive because it is much better than it was in the past, thanks to advances in surgery, medicine, and treatments. So, this is a quality of life issue, we want modern medicine, but want to either make more money to pay for it, or pay the same price as we did for 1950s medicine—neither of which is happening. One medical emergency can destroy a family financially, but it is worth it to save a life/extend a life/improve a life.

      College costs are outpacing inflation though, with no apparent increase in quality! I wonder if that will be a bubble that bursts one day, as student loans become larger than salaries are able to pay back.

  7. A lot of people that are considered lower class, making under the $40k you mentioned, HAVE “a home, a nice car, occasional dinner out, color TV, an annual vacation.” Owning your home, having a car, going out to eat, a color TV, and a vacation are all normal—the “middle class” wants to have the bigger house, a luxury car, dinner at steakhouses, a HD flat panel that takes up half the wall, and a vacation that is more than just a drive to the nearest beach/national park. The standards for middle class have changed greatly, to keep up with having “more” than what the lower class has. Really, we are bumping everything up, people who were lower class before didn’t have these things 50 years ago, now even people on welfare have televisions and cars and it is perfectly normal.

  8. Warren is a little disingenuous – in the 1970s, one car per household and small basic houses (poorly insulated, under 2500 sqft, no central A/C) were the norm, which is certainly not the case today.

    But she is right that one has to focus on the large fixed expenses – housing & transportation.

  9. I’m a huge proponent for spending less than you earn and investing the rest as a lifestyle choice. I don’t think people have to be scared to achieve it.

    Whether or not the economy rebounds, I live the same. Absolutely nothing changed for us during the last 3 years except we’ve invested even more into our retirement accounts, which have bounced back. We even own a flat screen tv. The “trick” is to budget for your savings goals, expenses, and fun. 🙂

    Live below your means and understand what “extra” expenses could be cut if your financial situation changes…

  10. Nice article MW, but you’re wrong. The Middle class lifestyle is easy to obtain and alive and kicking.

    It’s so easy to say these people are suffering and those people can’t pay their debt, but you are those people, and I’m sure you’re doing fine.

    Hence, if you wonder why there might not be much demand, it’s simply bc like you, everybody is doing OK!

    • Samurai, you seem to have a very rosy outlook on the economy. In yesterday’s post you indicated my recent posts were “dark” and you wondered if what I was seeing around me was indicative of the rest of the country.

      Well, anecdotal evidence would support my theory that it really is as bad out there as people say it is. I suppose in your neck of the woods (San Francisco, wasn’t it?) things might be better, but for the majority of America we are either hurting, or afraid we will be soon.

      The manufacturing belt jobs are drying up and we’re told by the current administration they aren’t coming back. The residential construction business is in the toilet. The auto industry hasn’t recovered from the artificial stimulus (aka Cash for Clunkers). The Gulf fishing and tourism industries have been left in shambles by an inept government and their co-conspirators, BP. Small businesses everywhere are struggling to balance increased costs of health care, the threat of increased taxes in 2011, and a reluctance from big banks to lend them money to fuel expansion.

      I think the economy basically stinks, and I suspect most people would agree. Are some better off than others? Sure. Were some more prepared than others? Of course (hopefully those who’ve been reading Frugal Dad are weathering this storm better than others).

      • I think you’ve hit the nail on the head with your statement on preparedness – and frugality…. Those who are debt free and prepared and frugal are not hurting (at all, or as much) as those who are not in that boat.
        But… I think there is another aspect to this also – actually – 2 more aspects. One is attitude – and looking for the positive.
        The other is rural-ness (if debt free) and do-it-yourself, ie, those closer to the earth and more able to do for themselves are feeling less pain, or no pain at all. Or maybe we are just far removed from the problems and so far behind the times that the changing times just don’t affect us. (We are the county with the 2nd lowest per capita income in our state – and the #1 worst roads in our state also….)

        Those three sections – if they all converged on a line graph, would show that the more frugal/debt free you are, the more self-sufficient and rural, and the more positive your attitude, the less you think there is a major problem.
        (and maybe cuz we don’t watch tv either…)

        And if you are debt free, prepared, frugal, with a sunny positive attitude, and rural, close to the earth, and self-sufficient, the world can basically go down the toilet and you would barely even notice it…..because your own life style (simple, frugal and behind the times) doesn’t change one iota.

        So…. I don’t know about others – my economy is same as ever – status quo. The garden is growing good now, and there’s fish to be caught 🙂

        I think this is a good wake up call for attitudes to change, for that sense of entitlement and greed and gotta-have to go away, for a return to a simpler time with basic needs met, but not so much wasteful luxury. A time to get back to reality and not living in la-la (debt) land….

        Actually – I think I mostly feel this way because here in Moo-town USA our economy has NEVER been consistently good – ups and downs every year, and lay-offs are an every winter occurrence….We plan for it, stock the cupboards, and we get thru it just fine every year…. Therein lies that difference again- plan, prepare, pay cash, etc….

        Not meant to step on anyone’s toes here (I realize people are hurting) – just saying, living simple and being debt free is stress-free, and enables you to weather most any economic storm.

      • Perhaps I’m just a realist and an optimist Jason.

        I bet everybody commenting on here is doing great. Don’t tell me you’re doing poorly now, are you?

        Look at Apple’s earnings. Everybody and their mother is buying their products and the stock is going to a new high. I guess all that money is flowing to the SF Bay Area, so thanks for all the support.

        Things aren’t “rosy”. Things are recovering. I do believe you though that things must be tougher in the Mid West.

        Best to all those who live there! Come out to the coasts, it’s nice out here!

        • Perhaps, but check out this video produced by Dateline which portrays the growing food lines throughout the manufacturing belt. These people certainly aren’t buying iPads when they are concerned about where to find their next meal.

          Our discussion here makes me wonder if we have two Americas. It seems the east and west coast is fairing pretty well, overall, while everything in between is going to hell. Unfortunately, since most of our media are stationed on the east and west coasts, they rarely highlight the plight of those in the south, or the midwest.

  11. I think it is all about choices. Achieving a middle class lifestyles is not difficult, but it starts with an education, living below your means and hard work. Stop whining about how expensive college is and start with one class at a time at the community college/on-line or better yet take an AP class in high school for free. A college degree comes one class at a time.
    Cut up the credit cards and avoid keeping up with the Joneses. If you are on public assistance you don’t need those fake fingernails with the $40/month upkeep or the designer purse to tell the work how rich you are. Most of us see those $1000 handbags and realize how stupid and broke you really are.

  12. 100% right in that people think they NEED so much – when in reality,
    what the grandparents had in the house should be enough 🙂 Anything more is a luxury – not a NEED. Heck, as I’ve said before, electricity is not a Need, altho most people seem to think it is.

    On under $20,000/year, I managed to get the house, car, truck, tv’s, cell phones, computer, laptop, freezer, vacations, etc…. ALL PAID FOR….
    It’s a matter of saving up and paying cash…. simple as that.
    It’s much easier to be frugal than to spend money (I hate spending money needlessly) Others could have done it – but they chose NOT to…. IT’s a choice – a choice of where your money goes…. Remember that. There is almost always a less expensive way to do something – or to do it yourself for little or no money. (Like scratch cooking instead of convenience foods) But geez, they say, that takes up time, and they’d rather goof off or watch TV or just be lazy – again choice – choice on spending time elsewhere. A choice on spending money. It’s all about choices….

  13. I wonder how much of this living beyond our means comes from the explosion of advertising and the television age. I think that does a big part to leave people with a distorted impression of normal.

    I also think that people have much more access to credit cards and debt (i.e. student loans) and get in deep trouble without understanding the full implications of their actions. If anyone saw Maxed Out, Elizabeth Warren was in it and it was shocking how predatory some of the creditors were. One scene where an obviously low IQ man was essentially tricked into trading in his low-interest government loan for a very high interest rate private loan comes to mind.

    • Emily, I imagine the boom in advertising, in all its forms, has contributed significantly to the lifestyle inflation we’ve experienced over the last 30-40 years. People want their house to look like the ones in MTV Cribs, and their jewelry and clothes to have the same bling as the Orange County Housewives. And they want to work even less than those in soap operas appear to do. It’s just not reality.

  14. Wow you make some excellent points. What really hit home for me was the stat about our net worth now being at 1970s levels. That is just scary considering how much more we spend, how many more things we cannot “live without”.

    You deliver a great message, unfortunately I feel that American’s are the last society that will actually hear you. We are the most materialistic society, and trying to get us to cut back is like trying to pull teeth. I’ve had many discussions with a guy from work about how I think our current path is leading us into a very dark future, much quicker than during previous decades….

  15. The “death of the middle class” is a bigger myth than the one about women getting beaten up on Super Bowl Sunday. Count the names in your phone’s contact list who are idly rich, then count the destitute ones. Now subtract them from the total names in the contact list.

    90+% of the people you know probably fit your definition of “middle class”.

    Frugal Dad, you write, “for the majority of America we are…hurting”? Really? I live in the state with the worst unemployment in the nation, and 86% of the people in my state have jobs. Every person posting on here (presumably) owns a computer, something I only dreamed about owning in my mid-20s. No one here is starving, or even hungry. A “poor” 2010 American lives a life an average 1944 American couldn’t comprehend the lavishness of.
    Yes, the economy is weaker than it was a couple of years ago. Government has far too big a hand in the economy, and routinely makes bad bets in its attempts to please particular classes of voters. But BP isn’t “conspiring” to pour oil into the Gulf of Mexico- they want it cleaned up a lot worse than you do.

    “One in nine families can’t make the minimum payment on their credit cards.” Can’t, or won’t? How many of those same families buy cigarettes by the carton, or celebrated the good times by buying a timeshare?

    Yes, we need to be frugal from Washington on down (especially in Washington). But pretending that we’re a nation of barefoot hoboes who wear barrels while eating possum stew paints an inaccurate picture.

    • Well said Greg! It’s so funny how so many people like to say others are suffering, and yet they say they are fine.

      I guess it’s human nature to highlight other’s misfortune to make ourselves feel better. But, that’s just wrong.

  16. Completely agree. But my perspective:
    I have a safe place to sleep every night, yummy food to eat every day, a happy family, and clean water. I’m not just “middle class” – I’m RICH! 😀

  17. Thanks for sharing these statistics – it’s such bummer that people can get themselves into such a deep hole without even realizing it. Frugal living is definitely a great way to avoid this.

  18. I once heard a comedian say that there is not such thing as middle class, there are only those with credit and those without.

  19. Great blog! In this generation, people have so many more material things that can tempt them into debt, and their salaries just can’t keep up to their wish lists. Many people have a hard time saying “no” whether it is to a salesperson, a friend, or even themselves. Now, don’t get me wrong, I’m not saying that generosity is a bad thing, but we need to be honest with ourselves and find other ways to be generous when we dealing with a tight financial situation. In one of my recent blogs, 7 Tips for Financial Success, , I suggest that people write personal notes, volunteer, and hold potlucks, rather than buying gifts and hosting expensive dinners. I also suggest that people to use cash whenever possible, and only pay for things on credit card if they know they can pay it off in full. Thanks for sharing this important topic!

  20. “Living within our means” is something many people have difficulty with, you are right; what changed? We did. Our priorities changed, cell phones and Xboxes are more important than heating. The real dilemma is in our minds, we do not like to look average, as human beings we are vain, that is what changed. We need to go back to the era when we covered our basic needs first, saving for the future, investing a part of our earnings, and last but not least of all enjoying a good family Sunday drive. What changed? We did!!!

  21. I have a paycheck of $32k/year and have other income of $5k. I own my own home (1960sq ft), a low-mileage car, have plenty of nice “things” in my house, and have a 1 year emergency fund. My only debt is $80k on the house (4.4%) and $1.7k on a student loan (2.5%). I’m able to max my employer retirement account (10% from me, 3% from them), and max my Roth IRA contribution. My expenses are less than $15k/yr, and I still have enough left over to indulge in 2 yearly vacations – an annual one to Las Vegas with friends (I don’t gamble), and one of my choice (Alaska, D.C., Glacier National Park, Italy thus far). I even am getting ready to start a culinary arts degree purely for my personal enjoyment. By most definitions I shouldn’t even be middle class, yet I feel I live better than most middle class people I know, although it helps that I’m single and have no children (also hurts in some ways). I’m just very frugal and prioritize – I like to not buy on credit (although I use credit for cash back/etc), but when I’m spending, I’m a generous tipper and didn’t blink at dropping $1k for a local community center’s capital campaign. It’s all about living smart and figuring out what is really important to you.

  22. My take is that it’s important to define what matters most to you and prioritize your expenses accordingly. To me, being frugal doesn’t mean you have to deny yourself all the things that make you happy or live like your on the brink of financial collapse. FD posted an article about this recently, and I think a good way to put it is: you can have anything, but you can’t have everything!

  23. The middle class is still regarded as the engine room of the economy. It seems, without this class, most societies can’t function. Respect the class, but seek to move higher-intelligently

  24. Whether in good times or in bad, putting aside some cash to save and invest is always going to trump going into debt simply to consume more. In the long run, the growth of your nest egg will allow you to consume much more off your own savings than you could have by going into debt.

  25. The problem is that many wants in our lives have turned into “must-haves” even though they aren’t necessities. Can we get through out daily lives without smart phones, GPS devices, laptop computers, ereaders or cappucino machines? Probably, but it would involve giving up some personal comfort and freedom.

  26. Sure we can get thru our lives without that stuff 🙂
    No smart phone, GPS, ereader or cappucino machine here…
    and yes, I could pay cash if I wanted one, which I don’t.

    Have to say yes I have the laptop tho – it’s a big space saver over the “big” computer is why 🙂

  27. Being frugal is not always popular. It requires discipline, but it doesn’t always have to suck. I had an fun time trying to be a frugal as possible and save as much money as I can. I like you references to a 1970’s family. There are so many more things that a family is “required” to spend money on. These necessities are not really necessities. I think it scares some people when they realize they have to downsize. It may be the smartest decision to downsize and cut back spending but social pressures stop many people. They would rather rack up more debt and charge that credit card to the max than to have to admit “debt defeat”. They live the life of the illusion buying stuff they don’t even need in an effort to keep an illusion going that everything is alright. This is the illusion. This is “TI”.

  28. I’d agree that the expected essentials have changed…. I’m a single Mom w/ no family. I resist all the extras… to me it’s one more thing to fix/maintain.

    I have no cell because the only person who would need to reach me, my son, is young enough that’s he’s usually with me. It’s getting to the point that people think something is wrong with me – I had to explain to someone the other night why I don’t have a cell. And the explanation part has been increasing in the last year, more & more often I get looked at like a freak when I say “that’s my home phone, I have no cell”.

    $40-$60+ a month is a lot of money for me to blow on a toy that allows people to interrupt me with their drama where ever I’m at. I like my privacy & I like to be able to sit down on my couch in peace & quiet to speak with someone and give them my full attention.