The middle class is screwed.

Why the Middle Class is Screwed

Rising healthcare costs, lower incomes, and the old rules of money

In a Wall Street Journal article entitled, "Burden of Health-Care Costs Moves to the Middle Class," Harvard healthcare economist David Cutler talks about "a story of three Americas."

These three groups are:

  1. The rich who can easily afford healthcare
  2. The poor who can access public programs to cover healthcare costs
  3. And the middle class who are screwed

As the article states: "A June Brookings Institution study found middle-income households now devote the largest share of their spending to health care, 8.9%, a rise of more than three percentage points from 1984 to 2014. Brookings defined 'middle income' as those households with incomes between the 40th and 60th percentile of the income distribution."

Everything is great, right?

Of course it's rising costs like these that are eroding the middle class in the first place. I wrote about this a few weeks ago in my post, "The 4 Wealth-Stealing Forces that Make You Poorer... and Others Richer".

While the powers that be are trying to paint a rosy picture of the economy, and saying things like, "…the president's optimism about the economy is shared pretty broadly by the American people," real people dealing with real big financial problems are suffering. Take a look at this alarming chart from The Wall Street Journal article.

Graph showing the differences in spending within the middle class on household expenses, health care being the largest at 24.8% of household expense.
The middle class is spending an insane amount of it's income on health care costs.

As I wrote in May, "The Real Reason You Feel (and Are) Poorer," the middle class not only feels poorer but also actually is poorer. The economic recovery, if we can call it that, has not helped average folks.

People are not spending less on basic needs to be frugal. They're spending less because they have less.

The great moral crisis of our time

This is why though I don't agree with Bernie Sanders about much of anything, I do agree with his statement that, "The issue of wealth and income inequality is the great moral issue of our time…".

This is also why anti-establishment politicians like Bernie Sanders and Donald Trump have gained so much prominence. They understand that the status quo is not working and they appeal to large groups of people who don't share the optimism about the economy.

What can you do?

Last week when I was live on Facebook with MarketWatch, the first question I received was about why I wrote Rich Dad, Poor Dad. I answered that it was because I saw the financial crisis of today coming and I wanted to help as many people as possible to get out of the rat race. Bernie Sanders and I agree that inequality is a crisis, but we greatly disagree on how to fix it.

I also was asked what the economy will look like after the election. I mentioned my friend Donald Trump, saying that even though I have great respect for Donald, I don't think it matters who is in the White House. It is the banks and Wall Street that control our money.

Now, more than ever, it is imperative to stop playing by the old rules of money. The middle class is dying, and the government won't save it. The rules have changed and the cards are stacked.

If you want to not only survive but also thrive financially, it's time to take matters into your own hands, to educate yourself financially, and to play by the new rules of money.

Original publish date: August 30, 2016

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