The Top 5 Reasons Why You’re Broke

In the event of a financial catastrophe such as a job loss, would you be able to cover your bills and expenses for three months? What about six months? If you answered “no” to either of these questions, you fall into the same category as around half of Americans. According to a Bankrate survey, 55 percent of women and 45 percent of men do not have at least three months’ worth of emergency savings.

The official poverty rate in the U.S. is 15 percent. That’s 46.5 million people earning less than $11,670 per year ($972.50 per month) for single-person households. Families of four in this category are earning $23,850 or less annually.

Although many of the lower-income earners are among those who have no emergency savings and are in essence broke, they are not the only ones. Most Americans – 76 percent, in fact – live paycheck to paycheck. This category includes those across many income levels, particularly middle-income earners. Why is this? Why is the average consumer who is earning a middle-class income broke? Here are five reasons why.

1. Employment and earnings

In all likelihood, you’re earning less than the middle-class members of some of the previous generations. A family that earns a median household income of $51,017 today is a fairly accurate representation of a middle class household in the United States. In 1969, a middle-class household earned $54,817 in today’s money. In 1979, that number went up to $54,993 in today’s money. By 1999, middle-class households were earning $59,758 in today’s dollars — more than $8,700 per year more than they are making today.

In addition to the middle class earning less than it did in the past, the recent economic downturn caused a spike in unemployment in 2009, where rates reached 10 percent in October and then remained at 9 percent or above for the next 23 months. When there are that many people unable to find a job who are actively looking, many of them end up obtaining low-paying positions for which they are overqualified.