02/28/2012 02:28 pm ET Updated Apr 28, 2012

Middle Class Is Failing

The middle class concept is failing millions of people because it is based on myths and formulas that worked for our parents but will no longer prove successful today. President Obama suggested, "the middle class is at a make or break point." What he should be telling you is that it no longer works. The middle class has been failing its members for decades, this is not a new thing.

The supposed culprits blamed for the middle class 'squeeze' have been everything from jobs shipped overseas, the financial crisis of 2008, the housing bubble, income disparity and even an alleged conspiracy of the "top 1%."

Is it possible that the middle class formula just does not work in the 21st century. For most, the middle class is something defined by another era: a time when people were trying to get into the middle class was an achievement and the goal. During the 50's people had the same job and lived in the same home most of their life. America was manufacturing everything from automobiles to furniture and employment. The GDP was expanding not contracting. Anyone notice that isn't happening today?

The middle class is not just an income level, it is a way of life based on fantasy; like get an education, a good job, average salary, health benefits, a retirement plan, nice house (we call the American dream), two cars and two weeks off a year and everything is going to be fine!

But it hasn't been fine! Some facts from
  1. There are 8.5 million people receiving unemployment.
  2. At current pace of job creation, U.S. won't return to full employment until 2018
  3. Middle class jobs have fallen from 52% in 1980 to 42% in 2010
  4. 17 million Americans with college degrees get jobs lower than bachelor's degree
  5. Nominal wages grew only 1.7% while consumer prices went up 2.7%.

The middle class is based on myths, fantasy and fairy tale formulas that don't take into consideration trends, inflation, changing economics, the global economic pressures on jobs and wages, housing bubbles, technological advancements nor unpredictable possible world events that no one plans. The idea that you will have one 'good' job and keep it for life, buy a home and pay it off after living in it for 30 years, operate with barely 3 months of savings, and then live on that for 25 years into retirement is just a failing formua.

First myth -- The Job. Millions of people had assumed the job market would never change. What were we thinking? All things change, even jobs. It is not just the fact that jobs are being shipped overseas,, but that millions of people seeing technology replace earlier positions. A job is like a product; its shelf life is not infinite and it will undergo change. Millions of people are depending and planning on 'yesterdays' jobs for tomorrow's security.

Second Myth -- Savings. The middle class that has a savings rate of under 5% has been told to keep 3 months of savings for emergencies. The Great Recession starting in 2008 has been the cause of millions of people being out of work for an average of 40 months. That is millions of middle class people that have been out of work 37 months longer than the savings lasted.

Third myth -- Homes. Calculating homes into any formula for wealth, equity creation or retirement planning was ridiculous. Your home nor the equity in it should ever be considered in wealth calculations or for retirement purposes. Homes are expensive, ties up lots of capital, require lots of maintenance and if you ever get equity you still need a place to live.

The middle class is failing because the basic philosophies upon which it is based no longer work. The only solution for the middle class is to get above middle class wages, savings and investment. Getting above the middle class requires:

1) Make yourself so valuable that the marketplace will pay you over $120,000 a year.
2) Save as much as 30% of your gross income for investing with 30 months for emergencies.
3) Make long term dividend based investments in companies or income producing real estate.
4) Never consider a home as part of your wealth calculation or retirement planning.

The bottom line: The middle class is failing because it didn't save enough, didn't make enough, and didn't invest enough, instead, it did just enough to get by. Just enough is the failing formula. I want to be comfortable, I want to be happy, money isn't everything, I just want to enjoy life are the mantras of the middle class. The middle class is associated with some socially acceptable 'middle' thing, not rich and not poor, but what is it really? The wealthy don't seek comfort they seek wealth, solvency and survival without economic pressure. While the top earners have become supposed pariahs of our society it is the only wealth class that appears to be protected.

I told Adam Corolla on his podcast two nights ago, "fifty years ago the middle class was a desirable group to aspire to, today, it is just a risky, painful, economic condition failing millions of people." The middle class is not at some make break or point that the president suggests, the Middle Class just does NOT work!