What does it take to be middle class in America today? Living on $50,000 per year in America.

Is it possible to live a middle class lifestyle in America with a household income of $50,000?  The recent Census survey puts the median household income at $50,000 for American households.  So technically speaking, this is the middle class.  Yet what we think of a middle class lifestyle including affordable public colleges, accessible healthcare, and affordable housing keeps getting further out of reach for most Americans.  Part of this has to do with the slow systematic destruction of the U.S. dollar.  Most in the public did not notice this shift since it has occurred in very slow methodical stages.  We can find the first roots of this reversal of fortune in the 1970s but the latest credit bubble has really highlighted the struggle for most middle class Americans.  Owning a home with no equity is renting with a massive debt liability.  Most articles don’t make the attempt to run the budget for a household at this level.  With new Census data I wanted to run the household numbers for a hypothetical family living in California.

43 percent of all California families live on $50,000 or less compared to 50 percent nationwide.  Let us take a look at what $50,000 buys a family over one year in the Golden State:

50000 a year annual household budget

Source:  Census data, average costs via BLS

Right off the top 21 percent goes to various forms of taxes including Social Security, Federal taxes, and state taxes.  The monthly gross income of $4,167 is lowered to $3,287 once the check arrives in the family’s bank account.  In California with a median home price of $318,000 according to the California Association of Realtors, there is no way this family can even think about buying a home.  We are using market rents for apartments in many areas.  $1,350 will get you a two bedroom apartment which is sufficient for a married couple with no kids.  Before we examine the expenses here, it is important to note that the reason $50,000 doesn’t go so far anymore is because the U.S. Treasury and Federal Reserve have embarked on a trajectory to push the value of the dollar lower:

dollar chart

The dollar has lost nearly 30 percent of its value in the last decade (it gets worse if we go even further back).  This is a hidden tax to most American families here.  Let us now explore the expenses by area.


In terms of utilities, most apartments run fairly lean here (temperatures don’t fluctuate much here).  Gas shouldn’t cost you more than $25 per month (we’re looking at an apartment under 1,000 square feet here).  For electric, $50 a month should be sufficient to power your typical modern day gadgetry.  For phones, I’m using pre-paid phones from Virgin Mobile which can save you a tremendous amounts of money.  You’ll be surprised how cheap these are.  I know a handful of friends who don’t even make $50,000 a year yet spend $99 or more a month just to have a Smart Phone.  Many people with these phones spend a bulk of their time updating Facebook and Twitter.  Maybe I’m old fashioned here but I just see it more bottom line.  You can save $1,000 a year just in this area.

The next important saving item is getting Naked DSL with no phone or cable service.  Many times these things come bundled and run up to $100 per month.  With Naked DSL, you can get a solid internet connection for $38.99 a month.  Plus, many of your cable shows are now available on the web via Hulu or directly from their sites.

Automobile Coverage

For auto insurance we are going purely with liability coverage here.  We are assuming you have a paid off car here.  Ideally an efficient car and no gas guzzlers.  We are assuming that you have a car that gets you at least 25 miles per gallon.  We’ll allocate $150 per month for gas here.  That should get you:

$150 / $3 per gallon = 50 gallons x 25 = 1,250 miles per month you can drive

This fits right in line with federal data that shows the average mileage driven per year is 15,000 miles.  This is an area where I see many young people messing up on.  They get their first job and all of a sudden they have a 5 to 6 year monthly payment of $350 to $400.  Of course, your insurance has to be comprehensive and this adds a bill of $200 or more a month.  So run the numbers here; you go from spending $75 a month on insurance with a paid off car (maybe not the nicest thing on the road) to spending $200 on insurance and a $400 car payment.  This can be a monthly savings of $500 (or $6,000 per year) here.


We’re allocating $500 per month for a couple here.  If you shop at local regional markets you will find great deals.  Heck, if you wanted to go on the extreme cheap Costco is now selling a survival package of food for one year for $800 (for each person so $1,600 for two people).

costco 1 year supply

“Full package includes:

The THRIVE 1 Year Food Supply comes complete with 84 #10 (gallon size) cans of grains, fruits, veggies, protein & beans, dairy, and baking essentials. With over 5,000 servings and many foods with a shelf life of up to 25 years, this package will give you variety, nutrition, and peace of mind.

* 12 month food supply for 1 Person

* 6 month food supply for 2 People

* 3 month food supply for 4 People

* Shipment arrives in 14 separate boxes

* Grains and rice have a shelf life of up to 30 years

* Freeze-dried foods have a shelf life of up to 25 years

* Dehydrated foods have a shelf life of up to 15 years

* Simple rehydration instructions, recipes, and helpful tips are included on each can

* 5,011 total servings

* 84 gallon-sized cans”

But we’ll assume that you still shop at the store.  $500 should be enough for a couple if they cook and manage their provisions correctly.  We’re also throwing in $20 a month for the occasional fast food run just in case that occurs.


We’re throwing in $100 per month for entertainment.  With this, you can find a membership at a local park gym and use Netflix for movies.  Thankfully, this should keep you covered and overall the best healthcare prevention is taking care of your body.  Consider the gym membership as part of your healthcare budget (you need it because the $300 coverage you have is barebones).  For haircuts, sorry folks, you need to go on the cheap here.  I realize that many women spend a lot more here but that will have to come from somewhere else in the budget.


For healthcare coverage, a healthy couple in their 30s will be paying $300 a month.  This is basic coverage with relatively high deductibles.  You can go cheaper but then you are likely to have nothing backing you up for catastrophes and many hidden clauses.

Emergency Fund

Ideally you should have 6 months of expenses saved up here.  But as you can see with this, monthly expenses are getting over $3,000 already so this would mean a total fund of $36,000.  At savings of $250 per month it will take 120 months (10 years) to even get to this point.  We are only setting aside $125 into a retirement account since the stock market is incredibly volatile right now with no actual reform so it is still operating like a casino.  So it may just be best to plow money away into your retirement account first.

Now I know many will have opinions and ideas about the budget above.  But I think when many throw out the word middle class lifestyle the above is not thing they envision in their mind.  Where are the funds for a college education?  What about a major health illness?  There is no way someone will buy a home with the above in California (possibly in another state but this will stretch the budget).  Keep in mind the median $50,000 household income includes the highest percentage of two income households in history as well.  So you have more workers working for less in dollar terms.  The stress many are feeling is the weakness of the dollar brought on by poor banking policies over the decades.

I hope the above budget provides a general idea of where the $50,000 a year is going.

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10 Comments on this post


  1. Laura Wilkerson said:

    If a married couple have a combined income of $50,000.00 it probably means these “upper earners” like myself and my husband, who gross a combined $54,000.00 a year, have college degrees and onerous student loan debt. Combined my spouse and I owe over $60,000.00 in student loan debt, more than we owe on our mortgage. Average student loan debt repayment should also be considered when calculating the average budget of the average “middle class” American.

    October 6th, 2010 at 7:57 am
  2. BadDog-NoCookie said:

    $50,000 dollars per year in California is doggie-doo. After taxes and expenses, you’re talking poverty level income. Housing is still priced sky high in many parts of California. Housing needs to fall further to match income levels in California and other states.

    Again, $50,000 per year in California is doggie-doo – insufficient income for a family.

    October 6th, 2010 at 1:51 pm
  3. tmgbooks.com said:

    Got here from a link at life after the oil crash.

    Average income and average expenses make for an interesting realm of possibility thinking but then it helps to discuss specifics.

    My expenses total $2,200 a month; $2,500 if you include taxes. I could live on less if I had to, say, $2,000. Of course, I live in a small town in southern AZ and my mortgage all inclusive (PITI) is $500 a month for a 1,600 sqft 3/2 house on a large lot with a detached 2 car garage.

    So, to answer the question posed in your title: Yes. And my family includes my wife, our daughter, and I. Not everyone lives in CA or NY or other more expensive metro areas; out here $50,000 is still lots of money!

    October 7th, 2010 at 8:02 pm
  4. Larry Livingston said:

    Agree with BadDog. The property value is way too high still and needs to come down to make it more affordable. But alas, government won’t let it happen. I can see why, my county assessor promptly bumped up my property tax bill this year when housing price stablized, reversing the reduction I enjoyed last year.

    I guess even after paying off one’s house, you are still free from shackles yet, you have to rent it from government for the rest of your life, with the “rent” being calculated at the mercy of count assessors, paying for their nice retirement, I am sure.

    October 7th, 2010 at 11:50 pm
  5. droubal said:

    Solution: Don’t live in a state like California that takes so much in taxes and has expensive housing.

    October 8th, 2010 at 8:50 pm
  6. Loll said:

    Five hundred dollars per month for groceries a couple is not remotely frugal. What are they eating?

    I live in Southern California and I’ve never spent that kind of money for my family of four and I’ve been lazy and buying convenience foods.

    The food budget could easily be cut in half and you don’t even have to use coupons or necessarily stick to a diet of rice and beans.

    Learn to cook!
    Buy generic brands where possible
    Avoid pre-packaged convenience foods (see tip #1)
    Re-evaluate whether that Costco membership saves you money
    PLAN A WEEKLY MENU. It’s just as important as creating a monthly budget.
    Buy in season
    Buy what’s on sale especially meat
    Cut down on meat consumption

    October 13th, 2010 at 8:38 am
  7. Rob said:

    $1215 house payment-4br 2700 sq ft.(200,000 mortgage @6.125%)
    78 house phone & DSL connection ATT
    242 payment on Toyota Camry Lease, 3 yr 45m miles
    200 Electric and Gas Utilities
    130 Auto insurance 2 cars
    49 home owner ins.
    600 property taxes
    45 water sewer tax
    700 food
    900 misc spending
    $4159 total in anytown or city in the midwest

    Come to the good life

    October 25th, 2010 at 10:05 pm
  8. Wilbur Nether said:

    As commented above, the $500 for food seems very high. $300 for this couple when we’re spending, and barely $200 when we’re feeling moderately tight.

    Now, I’m not looking up California tax rates (for my own sanity), but a couple earning $50,000, taking standard Federal deductions/exemptions, has all their taxable in the 10% bracket federally. $3130/year or $261/month. Quite a bit less than your listed withholding. Less than that if their health care costs are pre-tax with an employer plan. I don’t doubt your withholding is what you say it is, but you should claim more exemptions if so (or count in the substantial windfall tax return amount).

    But, yeah. Out in mid-nowhere where a decent house is $850/month, including taxes and insurance, $50k goes a lot further. And there are plenty of places in the US where you can get a good house for under $500 a month.

    November 4th, 2010 at 5:00 pm
  9. Somnolence said:

    I’ve never made more than $37,000 a year in my life. My wife and I own our own home outright, and each of us has six figures in the bank with retirement soon down the road. Thank God I left California for good in 1977. I’m sure our small $50,000 home is probably worth $90,000 out there, but I don’t want to live in any state where $50,000 is “doggy-do.”

    December 22nd, 2010 at 8:17 am
  10. Phone Bill Cut said:

    Great article. One thing that is true about the middle class today is that they aren’t likely trying to be as frugal as your budget calls for. For example, they probably aren’t getting the $15 virgin mobile plan; they’re probably signing up for the $100 verizon plan at the shopping mall, etc. Frugality could fix a lot of the problems in these budgets, yes, maybe even buying “food for a year” 🙂

    August 31st, 2012 at 7:44 pm


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