Monday, July 9, 2012

Financial Separation of the Social Classes

Apartment of Wealthy White Russian Family About to Be Evacuated

Throughout the ages, there have always been different "classes" in society. We have the wealthy, the middle class, the lower class, and those in complete poverty.   In our current day, we have an illusion which masks our social status.   Obviously this is because we are able to carry debts to live at a higher standard of living. 

What I want to do today, is briefly examine the different classes. My hope is that once we see which class we are in, we can either be content and live accordingly, or we can work hard and responsibly to move to a higher financial class over a reasonable period of time.

The Wealthy

These are the financially independent. They have passive incomes. Passive - meaning without any effort. No labor required.  This income could be from a trust, an inheritance that was invested giving them continual payouts, stock income, or other investment income. Another possibility - generally for the young -  they receive an income from family as long as they do as they are told. (You've heard the threats of the ultra rich saying they will "cut off" all support if they don't do as they are asked?)

 Most commonly, the ultra - rich have wealth that has been carefully accumulated and passed down from generation to generation.

Characteristics -  They tend to own multiple homes, vacation properties, have a full staff of servants, own multiple businesses, own yachts, travel the world, have expensive cars and spend their time at charitable events, visiting, and carefully overseeing the family fortune.

If you have plenty of money to do whatever you wish, without any need to work whatsoever, you are in the wealthy class.  Very Few will ever move up to this rank.

 (Just in case you were wondering, I don't personally know anyone who is in this class. Also, if it wasn't obvious - I am not in this group :)

The Middle Class

Generally, this is the professional class. These tend to be college educated, white-collar workers.  This class has to labor to earn their income.   Many have been brought up in similar homes, by college educated parents and come from some sort of privileged background.  Privileged - meaning by white collar parents who have financially subsidized their children's growing up years and have helped them get established as adults.  

The key to surviving in this group, it seems to me, is the education.  These people are highly educated.

Characteristics - They own at least one very nice home in a beautiful neighborhood.   They may or may not have dual income couples. Many have only one parent working. The other parent tends to the affairs of the home, their social obligations, and community events.  This group has at least one domestic staff member. Either one full time maid, or a weekly maid service. Some have nannies and cooks.  This group goes on vacations and has a generously budgeted amount of spending money.  Their children tend to get an allowance, have plenty of new clothes, and can shop as needed.  This group has medical and dental insurance, and other benefits from work - like stock options, pensions and retirement plans.   This group has no financial  trouble getting on a plane when necessary.

This group is not wealthy since they have limited resources, which are dependent on working and getting paid in order to maintain their status.  

This group can, over generations of careful investments and a savings plan, move up to a budgeted state of financial independence. (This would be from passive income, built up and invested over time).  They would remain on a budget to make the money last, but they would be comfortable.

It is very difficult to  move up to this class, but can happen with help, encouragement, and possibly a generation or two of very hard study and work.   ( I personally know several people in this group. Some are even related to me.)

Can this group drop to a lower class? Are they in danger of this? Most definitely.   Two possible problems could come up - a lifetime of financial mistakes, or a collapsed economy.

The Lower Class

This is the blue-collar group who labor for their money. They may or may not live from paycheck-to paycheck.  Generally speaking, this group is NOT college educated. Or, at least does not have a college degree.  In my observation, there are two types of the lower class:

1. The Strugglers
[Those who struggle constantly to get to a higher class, and who are often in debt and have constant financial trials.]

Characteristics - This group may own or rent a home. They might finance a car. They might finance all manner of things and begin to require consumer debt just to survive. This group is often trying out the latest "get rich quick" program, hoping it will make their lives better. They are on a quest for money, but don't understand the concept of money. This group tends to have very little financial education. They may bounce checks at the bank, cannot balance their books and argue with bankers about overdrawn accounts. They have trouble paying their bills and misspend much of their earnings. They blame others and the economy for their woes.

This group cannot move to a higher class and will not even more to the class of "the content" [below] in their level because they cannot slow down long enough to change the way they live. In most cases, their children will repeat the same patterns.

2.   The Content
[Those who tend to avoid debt, and manage to generally be content with their lot.]

Characteristics - This group may rent a home, or own an inexpensive house. Very few of them ever finance a car, furniture or anything else that would cause debt. Not because they are necessarily averse to it (they are) but because they do not want to put other things in danger by promising over future money that they aren't sure they can consistently keep up with.  These people tend to be content with inherited furniture (or things bought at second-hand stores), and few possessions.   Once this group has enough chairs, and other furniture, they rarely ever buy more (or new) their entire lives.

They are very diligent at saving and careful spending. Their home expenses are kept to a minimum by very frugal endeavors.  This group will have to work their entire lives in order to keep to their standard of living.  They have no funds for a domestic staff. They generally do all their own home repairs, housework and car repairs. Or they trade out with friends, by helping each other.  In some cases, they do hire help for emergency situations but these expenses put a tremendous burden on their finances and could put them in danger of going hungry or having an electric bill shut off, or lose their winter heat, until they can get their bills caught up.  Some will find odd jobs (if they are lucky) and work a horrific amount of hours just to keep food on the table during this time. But these people have great characters, and a tremendous work ethic. 

It is possible, however, that their children can move to a higher class. Through sacrifice and hard work, their children can become educated in high paying trades, and carefully taught skills (both hands-on skills and book learning) to be able to earn a high and steady paycheck.  In must be noted here that the children themselves have to be hard working in order for this to work.

This group is highly educated in frugality and thrift. This is what helps them survive. They are also fully aware of the stock market, investments and money management, but are not able to use those skills with their limited earning potential.

Those In Poverty

This group can include those who are homeless, or those who are completely dependent on others for basic needs.  Anyone from any class can fall into this category, and it is devastating.   This group is not necessarily a "class" but a part of society where help is greatly needed, and always will be.  Those in the upper classes must find a way to be charitable, through organizations or their local food pantries, etc. to help on a regular basis.


They key to surviving in each class is financial education.  We need to constantly learn and understand the latest developments in our modern world - relating to money.   Even the ultra rich could possibly lose their wealth if a generation of their offspring spent away their money and made poor investment decisions. 

My recommendations to financially survive:

To Get Out of Debt

- Anything Dave Ramsey (He is the only one I recommend for debt elimination because he understands the difficulty of the "now," when one is struggling financially. He is also realistic and an incredible motivator.)

To Learn to Live on Very Little and Be Content

- Anything from The Good Old Days publications (with Ken Tate). Looking back in history to the Great Depression, will help us understand how they got by through incredibly rough times.  There are also a treasure trove of ideas for fun, happiness and inspiration that doesn't require any money.

To Learn To Live on Very Little

 - "Your Money or Your Life" will help put this all in perspective.  This book may also help you get off the crazy "Money Quest" that is ravaging our culture.

To Learn to Invest and Build Wealth

You will get many ideas and inspiration from "Rich Dad Poor Dad".  

Learn how to Budget and Handle money wisely

Anything from Crown Financial Ministries, and the late Larry Burkett is amazing for this!

Being Content in your Class

Now that we've talked about the characteristics of each class, have you figured out where you stand?  I  know exactly which spot our family belongs in. But now the question is, are you content there? Or would you rather work your way up to the ultra rich?

The most important thing about the distinction of the classes, is learning to live as that class must live.  This includes studying money, staying within a budget and finding ways to build the education and skills of your family.  There are only 3 ways of moving up in a class:  1. An inheritance.  2. Winning the lottery. or 3. Hard work, tremendous study and patience!

One of the greatest books written for the lower class (which is the group a great many Americans are in) is "The American Frugal Housewife." Her introductory pages in the beginning are inspiring and sobering. She is also very clear that one should not "dress above their station in life," (which is a beneficial thought relating to the classes. We can't spend more money to live, than we can realistically afford.)

May I just say this? Don't be ashamed of the class you are in. Be grateful. Take pride in your lot in life.  It is amazing that we have so much freedom in this country that we can work our way up if we choose to.  We have the Immigrants as examples. Their hard work and determination helped build the wealth that generations of children now enjoy today.  Take pride in your class, just as the Immigrants took pride in theirs.

Mrs. White

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Anonymous said...

a great article. thank you. we are in the content lot. My husband is a slow and steady man, save little, by little. I love the book "American frugal housewife" i just re read it for the hundreth time and "We had Everything but Money" is another favorite.

Angela said...

I am someone who worked very hard to move from the lower class to the upper middle class. I waitress-ed my way through college sometimes working 2 jobs. My DIL and I had an interesting conversation not long ago. She and my son are lower middle class, but our lives look very similar. We both garden, hang our clothes on the line, don't have TV, cook from scratch, etc. We do not have domestic help and choose to live below our means so that my husband can retire (hopefully) one day. He is 55. I think if people are living responsibly and giving to others their lives will not look very different. Just my 2 cents! : ) Angela

Mrs. V. said...

I have to say that my family defies the stereotypes just a little bit. We have characteristice from both the middle and lower classes. But we do not live in a manner that creates debt and (Lord willing) in a year and a half's time, we will be totally debt free. Regardless of which station we may fall into more closely at any given time though, we are content. We don't give much thought to classes or which one we may find ourselves in. It seems to me that people who are constantly striving for "more" and "better" completely lose out on contentment. And contentment is such a very great treasure to have.

Sarah said...

Did you realize that right now the kindle version of The American Frugal Housewife is free? Just thought I would let you all know!

April's Homemaking said...

I enjoyed reading this post, it is so important to learn contentedness, I wasted a lot of time and money in my early adulthood trying to "keep up with the Jones" and still struggle from time to time. We now teach our children to avoid credit like the plague (by example).

Thanks Sarah who posted about The American Frugal Housewife kindle version being free, I have the free kindle cloud reader on my computer, and just downloaded it. What a great deal. :) I look forward to reading this book.

Thanks :)

Anonymous said...

I've spent alot of time mentally analyzing how the different classes live. I grew up middle class and never thought about it, but now that we are lower class (due to disabilities). I have given alot of thought on how to raise my children to have more of a middle class mind set, while living within our (low income) means. I've came up with two ways to raise your standard of living without needing more money.

#1- Cleanliness. I've been in the most humble of homes that were so comfortable and lovely to be in (and I realized it was because they were clean and well cared for and not overly cluttered). On the other hand, my mom had a friend/aquintance years ago that lived in an upper class house (her husband was a lawyer) and they had an expensive home. My mom had never been in such a grossly kept home. My mom said this ladies lack of house keeping skills completely ruined a gorgeous home. It was not just messy, but filthy dirty (like dog poop all over the basement). You can live your very best in whatever financial circumstance/class you are in by keeping your home, your yard, your car, yourself and your children neat and clean.

#2- Increase your standard of second hand purchases. I've seen people who do all their shopping at thrift stores look poor and gruby and other people look like a million bucks. Having a mindset to only look for quality, namebrand things (that are in excellent condition-not worn out) is one way to increase your standard of living, but not increase your expense. I can buy my kids cute namebrand clothes for a $1 or $2 or I buy them worn out, not in style clothes for the same price. If I need used furniture, I can buy worn out things or nice quality things for not too much more. For example, if I have a $100 or $200 to spend on a used couch- I will often look at couches on craigslist for $250-$300 price range (cause those will tend to be the nicest and barely used vs. the $100 couches that are usually pretty worn out), and then not be afraid to offer $200 (which is what I can afford). People are usually happy to sell things for a little less, cause they just want to get rid of them. I always look for the nicest quality I can afford used. It increases our standard of living without increasing our expenses.

Just some ideas! Of course, contentment for our lot in life and thankfulness for our blessings is the most important! =)

Katrinka said...

I've found that it's easier for me to be frugal and to even put more money away into savings if I am NOT desperate about our finances. This doesn't seem to make sense, but if we are in dire straits, pinching pennies seems so sacrificial. But when I can CHOOSE to not spend the money, it's a very empowering feeling.

Lisa said...

We have characteristics of both middle and lower class. My H's father went to college with the help of the military.

He refused to help his children go to college, so none of the four have gone. My Mom's parent's were both college educated, but neither of their children were.

My father's parents were not college educated, but my grandfather was very hardworking and frugal and advanced to a management position with a company that continues to pay a pension (30+ years of retirement!). My father, his brother and sister did not go to college either.

Neither my H or myself are college educated. I've been a housewife and mother since the early 90's. My H has made as much as $100k and right now makes $80k by using his unsusual skills of salesmanship. He has worked for two large corporations in the last 10 years. Prior to that he worked for smaller one owner businesses that did very well. The industry is heating and air conditioning.

My grandmother had money in investments and decided to gift us a downpayment for a home a few years ago (we'd owned one previously by getting in on a low down payment plan for first time buyers in 1996). We sold that house back in 2003. This time we were able to buy a house at a higher value and better neighborhood thanks to the down payment, good credit score and my H's income.

The economy crashed shortly thereafter ... my H was laid off .. but immediately took another job with a small company he'd done business with in his old position.

He was able to float us along (just barely) for about 9 months on a much reduced income, until he got another job at another big corporation making as much as he had been before. We do have debt, and have had debt and then paid it all off again and again over the last 22 years. This last time is harder, because we had to use credit to do things like fill our propane tank and fix the car.

We have one car that's completely paid off (as of about 4 years ago, that we bought used to begin with) and another that's a 2010 that my H uses to travel for his job. The company pays 90% of that cost.

Our son is a volunteer fire fighter who is trying to get a paid position somewhere, another city or for the state. He's working two restaurant jobs now and drives a beat up old truck, and lives at home with us (he's 20). Our daughter is 18, and is starting community college this fall and taking some business classes.

We paid for our son to go to Fire Academy. And we're paying for our daughter's courses. We're not big pushers of 4 year university degrees because 1) they're outrageously expensive, and 2) they're often a waste of time and money .. there are plenty of jobs that don't require that type of education.

My primary goal at this point is to get in the habit of saving money no matter how much we make. We don't take vacations, buy very many clothes, go out to eat, or do much in the way of entertainment.

Because we bought the house at the peak of the housing bubble, our mortgage is pretty large, and we can't sell. But we're getting by. I have money to put aside and I know that that is more than many people have. So I have a lot to do and a lot to accomplish.

Keowdie said...

I worked hard to go from the lower-lower class I grew up in to the lower-middle class in which my family now lives. Both of my parents are blue-collar workers, and I was the first in my family - ever - to graduate from college. I sometimes worked 2 jobs to pay my bills in college, and ended up taking some loans.
Unfortunately, my husband & I did not live well within our means in the first several years of our marriage, and we ran up some debt. Now we've decided that I need to quit my job & homeschool our children, but we have to pay off most of that debt first.We've looked at selling our house to downsize, but the current economy won't allow that.
Currently, we are trying to learn to be content living below our means, but coming from the other extreme, that is proving to be really difficult! It's hard to put on the breaks & get creative/resourceful when the knee jerk reaction is always just to "buy a new/another/better one." Thank you for this post!

Anonymous said...

I guess we have been in The Content group. Yet we have always had savings and in retirement actually make more $ than we were living on before. This is due to investments made over the year frugally and good retirement for hubby. We do not so far have to pay taxes on our retirement income and that makes a lot of difference. We are therefore able to help our grandchildren with things like braces for their teeth. We have always lived simply and actually prefer this way of life being as self sustaining as we can. I have read and followed all the books you have mentioned. I have always greatly appreciated your blog which is full of good advice with Biblical understanding. I want to thank you for taking the time to keep this blog and helping so many through it. Helen