Inflation is scrambling Americans’ perceptions of middle-class life

• Many Americans have come to feel that a middle-class lifestyle is out of reach.
• Blame inflation for bringing down the mood and making the economy seem much worse than it is.
• Money experts say people feeling downbeat can create a financial plan to alleviate stress.

Vincent, a 29-year-old medical-sales rep, makes $130,000 a year.

It was a dream when he was younger — once he was making six figures, he assumed he’d be in financial nirvana, worry-free, off on vacation somewhere at least once a year, perhaps able to buy a home in the not-too-distant future.

“I was like, if I could make six figures, I’d have a nice life. I can save up the down payment on a home and start to begin my life,” said Vincent, who requested to use only his first name to protect his privacy but whose identity is known to Business Insider.

He was surprised to find out that in Santa Barbara, a coastal California city where the cost of living is 65% higher than the national average, he’s barely able to save for anything, let alone buy a house, plan for kids, or hit other milestones of middle-class life.

“Bigger-ticket items that our parents could have bought, like a home or car, that is, just to me, out of reach,” Vincent said, though he acknowledged his budget could go further in a city with a lower cost of living.

“I would have to save 10K for six or seven years straight and really sacrifice to put down on maybe the dumpiest thing I could find here,” he added

Vincent’s experience is emblematic of what has become of the middle-class American dream, with many earning six figures but feeling like they’re way behind the curve or that the economic chips are stacked against them.

Some of these concerns are real — see the wildly expensive US housing market — while others, experts say, may be a matter of perception versus reality, as the economy feels tough even as earnings are growing and employment is strong.

Vincent is among a growing group of middle-class Americans — defined in 2022 by the Pew Research Center as households earning between $48,500 and $145,500 — who don’t feel they can’t afford to live a traditional middle-class life, replete with a home and a comfortable retirement.

Eoin Sheehan, a senior research analyst at Redfield & Wilton, says inflation has caused many Americans to ignore the overall strength of the US economy.

Growth, hiring, and financial markets are strong, and wage growth has started to exceed the pace of inflation.

While higher costs pose challenges to retiring or homebuying, those goals aren’t out of reach with careful planning, Chris Collins, a wealth advisor at Northwestern Mutual’s Collins Financial, says.

Collins suspects that most middle-class Americans feel anxious about their financial situations because of financial-shock fatigue — the exhaustion of navigating one big economic shock after another — as well as a lack of planning.

His clients typically start to calm down once they crunch the numbers and figure out how much they need to save for retirement or to meet their other financial goals. Before that, many falsely assume they need to work forever, he said.

“I’m not telling people, ‘You are going to die broken and alone.’ It’s, ‘Hey, with a little bit of work here, you’re going to be all right,'” Collins said. “They don’t feel like they can relax until somebody runs the financial plan, runs the modeling and says, ‘You’re going to be fine.'”