We do not like to talk about class in America. We do not like to talk about economic disparities, either. But at least in our own families and faith communities, we need to realize that the issue matters. Our times are changing rapidly, and especially for older people it is difficult to keep up with the cost of living. And I do not just mean in terms of money – the mental shift is probably greater than the changing of our economy.
Some of us are old enough to remember the days of candy bought for a penny or a nickel. Or perhaps you remember phone booth calls for a dime or a quarter? Those days are long gone. The dollar’s purchasing power is significantly reduced, and declining so quickly that official statistics are unable to keep up with it. What does it mean to be wealthy? What does it mean to be poor? What income do you need to survive? The answer might shock you.
I have looked at data from the US Census Bureau, and also some other sources such as privately conducted surveys and polls. The numbers differ. There is also disagreement among sociologists and economists about the various class levels in the USA. Here is a summary, with my own interpretation, of average results for the whole USA, from a couple of years ago. First, net worth, which is a combination of the assets an individual holds, with liabilities subtracted:
99.9th percentile: ultra-high-net-worth (50 million and up)
99th percentile: ownership class (5 million to 50 million)
90th percentile: management class (1.5 million to 5 million)
75th percentile: middle class – professional ($500,000)
50th percentile: middle class – trades ($150,000)
25th percentile: working poor ($20,000)
10th percentile: ultra-low-net-worth ($1)
In many areas, it is difficult to purchase decent housing for less than $200,000. Land costs more. From the percentiles, we can conclude that more than half of the nation is likely unable to afford their own housing, let alone productive land. Many no longer aspire to the American Dream of home ownership, because they realize it is impossible. Now, take a look at whole-household annual salaries:
99.9th percentile: ultra-high ($20 million and up)
99th percentile: ownership ($2 million)
90th percentile: management ($200,000)
75th percentile: middle class – professional ($90,000)
50th percentile: middle class – trades ($70,000)
25th percentile: working poor ($35,000)
10th percentile: ultra-low ($16,000 and under)
Compare salary level to net worth, and you can see a ballpark-picture of the average income it takes to own your home and your life. To me, that amount is shocking. In my area, for example, a teacher can make between $40,000 and $55,000. Unless that teacher’s income is supplemented by a working spouse, is home ownership really possible? What about renting? How much money is left over to pay for food and other expenses?
I admit, there are some caveats to using the numbers. For example, these data are taken from across the whole nation. Income and expenses are higher on the coasts and in the cities. Salaries are lower in the South and rural areas, as well as cost of living. So your local experience is likely to vary. So why look at these numbers at all? They are useful for reflection, for assessing your family’s income and needs, and determining if you need to make lifestyle and career changes. They also give us a kind of baseline from which we can predict our needs over the next few years, and the weaknesses of our financial positions.
Looking at the net worth list, where do you fit? For example, if you have a net worth of $500,000, you are doing better than 75% of the people in the nation. Ask yourself, what form does that net worth take? Is it in your home and land? What about the stock market? If real estate value drops or your investments evaporate, how much of your net worth disappears? We are facing a time in which real estate values may fluctuate, or drop precipitously. We are also facing a time in which the stock market may lose the majority of its value in the near future, due to planned capital gains tax changes. Add to that the chaos of inflation. Depending on which statistics you look at, actual inflation rates are running over 10% per year, or as high as 15%.
If your money is in the bank, what amount of interest are you making? I would suggest that any stock market investments you have are at risk. Also, any retirement plans or pensions you have are at risk. Real estate is a risk, unless you bought at a low price years ago. Now is not the time to purchase real estate! Holding fiat currency in a bank account is surely a risk, even at current inflation rates. It will experience utterly disastrous loss during a hyper-inflation crisis, and if your bank is unstable your savings might be completely lost. FDIC may cover your accounts up to $250,000 but this only works if a few banks are affected. If the disaster is system-wide, it is unlikely that you will receive more than one penny on the dollar, if anything at all. Transfer your savings into a more tangible form now, while there is still time.
But, what does life look like for you if you are not at the 75th percentile or greater? What if you are a member of the “working poor?” Sadly, the old adage “it takes money to make money” remains true. While the middle class and wealthy must find a safe place to put their money, the working poor are faced with reduced purchasing power while simultaneously experiencing reduced employment opportunity as hiring diminishes. It becomes tougher to make money, and tougher to save it. Across the nation, there has been a movement towards increasing minimum wages in recent years. While that may seem like a good thing for the working poor, it has the negative effect of increasing the price of goods and services and reducing hiring due to the cost of labor. If there are few good answers for people who have money already, there are even fewer for those who do not.
Seize what opportunities you can find NOW to increase your earning power. Make sure that your employment will be stable in a short-term or moderate crisis. If you work for a company that makes widgets, will those widgets sell if the middle class do not have the money to buy? Perhaps it is better to work in food production or in medicine, as people will need those things no matter what shape the economy is in. It might be worth changing employers even if your salary is not increased. Find ways to reduce your expenses. Spend less on luxury items, eating out, and entertainment services. Cut the cord on cable and landline phone services if you have not already done so.
For people of all income and net worth levels, precious metals are an answer to inflation and reduced purchasing power. For the middle class and wealthy, investing in gold right now can preserve any savings or retirement funds you have. You can buy gold physically in person at a local coin dealer, or you can order online and have it shipped to your home or business. You can also hold physical wealth at an off-site location, via a gold or silver IRA. You will need to do your research, because there are tax liabilities and multiple components to the process. There is also a risk that in the future, the US government could make gold bullion or silver bullion illegal to possess privately. This was done in 1933, during the Great Depression, so it is possible that it could happen again.
Gold held at an off-site location by a third party is most at risk, because the government could prevent your ability to acquire it physically, and force the sale at a rate that is advantageous to them and disastrous for you. Gold in your possession can always be kept secret, but in that case it may only be useful for preservation of your wealth for a future generation. Some sources suggest that you might avoid future bullion restrictions by buying coins that are deemed “collectible” such as pre-1933 US gold coins, or pre-1948 coins from other nations, especially Britain. Maybe this exemption will exist under future rules, maybe it will not. However, you will need to educate yourself about the value of these coins, so that you are not paying more for historic or collector value than you would simply for the value of the metal.
Do your homework!
For the working poor, physical possession of small quantities of precious metals can at least preserve some of your purchasing power. Silver is most likely to be affordable at current prices. For example, buying rolls of pre-1965 silver dimes or quarters. Unfortunately, in the event of an emergency, it can be difficult to turn physical silver into ready cash without losing a portion of it to dealer fees/profit. However, as barter becomes more common and the gray and black markets expand, you may find that you are able to use silver directly as currency in exchange for rent, car repairs, or even food if you get these things from small businesses or individual providers. It will be difficult for the working poor to acquire enough precious metals to preserve purchasing power for the future, while simultaneously keeping enough fiat currency to pay for daily expenses. The squeeze is real. But, do not give up. At least do something, slowly, in amounts that you can afford.
Patience and wisdom are key. Benjamin Franklin advised that “a penny saved is a penny earned,” but in this case think that every five dollars per month that you save is a silver quarter or a pair of silver dimes that you can add to your emergency inflation fund. Even just saving $18 per month will add a whole roll of 90% silver quarters to your preps in a year. Even if you feel like you can never own land, then you can still buy yourself time to survive in a crisis. All effort, no matter how small, is worth it.
Realistic choices available to you will vary greatly, depending on your income, net worth, and the opportunities you have had in life. No matter who you are, your background, or current living situation, there is a truth for all of us: Times are getting worse, and you need to reflect and make tough choices right now. That starts with realizing what your current position is, in net worth and income compared to others. Acting today is better than acting tomorrow. Doing something tomorrow is better than waiting until next week. Pray, then act.
