09/06/2012 11:21 am ET Updated Nov 06, 2012

What Is the Middle Class Nowadays?

The middle class should be on Full Alert -- DEFCON 3. Those that are not yet rich, but are interested in creating a comfortable financial security for themselves and their family must confront new realities and be prepared to take a new level of actions. Almost all would agree that the middle class is under attack and that its very existence is being threatened like no other time in our history. If any of this rings true to you and you are no longer interested in who is to blame but rather what you need to do to solve the situation, read on.

1) Give up the political debate. It is clear to me that the more politicians (from either party) suggest they are fighting for the middle class, the worse conditions for the working class become. We have shipped our jobs, manufacturing, and even our debt overseas. Median wages in this country have been flat for decades and slipped by almost $4000 a household just in the last three years. Where the middle class once created most of their wealth through the equity in their home, today we have a record number of people underwater (negative equity) in their homes. We have almost 26 million people unemployed or underemployed and half of all college grads can't get a job in the field they studied. We have the highest number of people in poverty since the '60s. I am not suggesting you give up on politicians but I would say that you need to give up on them coming up with solutions that will secure your financial life.

2) Rethink the middle class. Today's middle class is not what our parents, grandparents or great grandparents successfully created over the last 100 years. Remember how the middle class was created by hardworking, enterprising, ambitious, hungry immigrants? These people were coming from poverty and seeking a better life and willing to do almost anything for it. The middle class of the past was a place of inspiration, financial safety and security, but today it's a place of threat and emergency. Maybe the very thing we hear the media trying to protect everyday is the very thing that you want to give up on. Can you find one person in the middle of the middle class that is feeling secure, safe, and encouraged by their financial future? No, what you find in today's middle class is uncertainty, insecurity, fear, and attempts at holding on with very little results. Maybe it is finally time that the middle class woke up and rather than trying to figure out how to hold on to what they have, figure out how to GET OUT!

Today's middle class is becoming the underclass and no one wants to talk about it. A guy making $40,000 a year is barely getting by in almost any city in the U.S. A married couple is making $75,000 and they are having the very same struggles -- not enough money left over after essentials to save, and when they do, the banks pay them 0.25 percent on their money -- way different than how your parents and grandparents operated. They abhorred debt, cut corners and did everything possible to save money and when they were successful at doing so, they were earning 40 times what you are earning on your money today. They were able to depend on Medicare and social security to take care of them into retirement, which no one trusts will even be there tomorrow.

The middle class of the past was clearly something amazing and what made America the most admired financial example in the world. It was a time when every part of an automobile was built in this country, televisions were made by RCA or Sylvania, furniture was still built in America and we lent money to other countries, we didn't borrow from them. This middle class was created at a time when the country was growing up, combined with millions of ambitious, hard working Americans who through discipline to save and invest, formed what we know today as the middle class. These people stayed in the same job possibly their entire life, paid cash for their cars, financed their homes for 10-15 years and then spent a lifetime saving money.

When you hear that we have the highest poverty level since the '60s where do you think those people are coming from? Legions of good hardworking Americans that have been trying to do as earlier generations have, now find themselves caught in a tide that is going out and on a field where the goal posts have been moved. In addition to those that are falling off the fringes of the middle class into poverty, there is also a majority considered to be middle class, those occupying the income range of $50,000-100,000 dollars in annual income, that are actually slipping into a financial underclass. This is because of stagnant wages, zero savings, too much debt, being underwater in their homes, having 401(k) plans they don't control and barely getting by paycheck to paycheck.

Is it possible that the concept of the middle class is not what it once was and should no longer be something to strive for? Is it possible that we now have basically two classes of people in this country -- the well-off and the not well-off? Rather than trying to make things look all pretty, why don't we just face the facts. We are becoming a two-class financial society. And if you don't want to be in the underclass then figure out how to get in the class of the well-off. However you skin it or whatever you want to call it, the facts suggest that the middle class just no longer works. It can no longer provide the financial security it once promised because the economics and industry required for its survivability are no longer available.

I know thousands upon thousands of people through my consulting business that have played by the rules of the middle class and still find themselves trapped financially. Here are my suggestions to those people:

  1. You must get out of the middle class in order to create financial security.
  2. The only way out is to engage a new set of rules and thinking and activity.
  3. Just being thrifty is not the way out. It only worked for the earlier generations because the investment scene was different.
  4. The most important piece of the puzzle is you must create more income, there is no way around this reality. Those that are becoming financially secure today do not do it through savings, they do it through increased incomes first. Whether you need to get into sales, multi-level marketing, take on a side business or a second or even a third job, you MUST produce more income.
  5. Get rid of all debt that is not being paid by someone else. If you have to borrow money to buy something do NOT do it.
  6. Only buy homes that you can rent to others. If the place you live in doesn't make you money go live with someone else.
  7. Cut your spending by 20 percent using my 1-5 rating system. Write to me at to find out how.
  8. Invest only in those things that you control and understand and that will increase with inflation.
  9. Get everyone in your family on the same page. My wife and I meet once a week just to huddle up on what the plan is.
  10. Prepare to work at 10x the levels you ever imagined. Work the way your great-grandparents did when they got off the boats.

For 25 years I have been studying the people that are creating security for themselves and their families. They are not slipping backwards at this time because they never bought into the media's storybook pitch to the masses of the middle class -- promises that clearly are not working out.