MIDDLE MEANS LOWER

Class in $queeze

The middle is not holding, based on the latest economic numbers coming from Uncle Sam. In fact, the middle class is becoming the minority.

Middleclass America is poorer today than a few years ago, and the average middleclass person has made some financial mistakes while trying to hold on to his way of life.

These are some of the findings of a new study that relied on the latest federal data. The study found that middle class homes need an annual household income of between $35,600 and $94,600 — which means the group is now a minority, because only about 40 percent of US homes qualify.

“Today middleclass households earn less than they did a decade ago, and little more than they earned two decades ago,” according to the study issued by the Consumer Federation of America (CFA) and Primerica.

The report, which analyzed data from 2007 to 2010 and includes a current survey of all income groups, relies on the Federal Reserve’s 2010 Survey of Consumer Finances and is inflationadjusted.

It says the typical American family earned $49,445 in 2010 dollars. Over the past years those earnings have declined: In 2000, that figure stood at $53,164.

That earnings drop is reflected in networth numbers: The average middleclass household now has a net worth (all assets, such as home value, minus liabilities, such as a mortgage) of $94,700, a decline of some 35 percent from 2007, when it was $145, 600.

“The American middle class,” the CFAPrimerica study said, “has . . . grown weaker as a result of several trends, particularly the stagnation of their incomes and decrease in their job security.”

The survey, CFA said, was based on the responses of about 2,000 people polled this summer.

In the study, 67 percent of respondents said they had made at least one really bad financial decision, and some had made more than one. The cost averaged $23,000.

The use of credit seems to be the noose around the neck when it comes to the financial follies of the middle class.

“Mortgages and credit cards were two primary areas where we found errors,” said Stephen Brobeck, executive director of the CFA. These mistakes, he added, included people obtaining mortgages that were too much for their budgets, and poor creditcard payment practices.

“Some people were just paying the minimum, and that caused some to get far behind,” he says. Brobeck, who has studied banking practices going back decades, said the card delinquencies dramatically increased over the last decade.

He believes that cardpayment minimums were kept low until the market meltdown and the recession. Brobeck adds that, if creditcard issuers required higher minimum payments each month, fewer people would fall into the depths of creditcard hell.

The CFA report says debt levels have stayed about the same since 2007. It adds, however, that the middle class has been selling off assets to pay down debt, since the average middleclass household has smaller financial assets. The average family had assets of only $27,300, a 28 percent drop from 2007, when they were $37,800.

“Most middleclass Americans are not financially desperate,” the report concluded, but they are “poorer than at the outset of the recession.”