9 Biggest Differences Between the Spending Habits of the Middle Class and the Poor
How we spend our money says a lot about who we are — particularly when it comes to our socioeconomic class.
According to Linda Schroder, real estate investor and owner of Cash for Houses, the fundamental difference between middle-class and poor households lies in their ability to allocate funds beyond basic necessities.
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“Middle-class families have more leeway to spend on discretionary items,” she said, “while poor households are constantly juggling to cover essential expenses.”
Let’s take a look at the different spending habits of the middle class and poor.
Middle-Class Households
Schroder offered the following scenario: “Imagine Sarah, a middle-class accountant living in a modest suburban home with her husband and two children. Their combined income allows them to comfortably cover their essential expenses, such as housing, food, utilities and transportation.”
Sarah and her husband also are able to set aside some money each month for savings and investments, hoping to secure a comfortable retirement and provide their children with educational opportunities.
“Sarah’s family enjoys a certain level of financial flexibility, allowing them to indulge in occasional discretionary spending,” Schroder continued. “They take their kids to the movies or out for dinner, enjoy weekend getaways, and participate in hobbies like golfing and pottery.”
In Schroder’s above example, the family doesn’t live extravagantly, but they appreciate the ability to have some fun and pursue their interests
Good Question: How Big Is the Average Social Security Check of a Middle-Class Retiree?
Poor Households
In contrast, Schroder considered a different household: David, a single father working multiple low-wage jobs to support his two young children.
“Every penny he earns is carefully allocated to cover their basic needs, leaving little room for anything else,” she said. “Housing costs consume a significant portion of his income, and he often struggles to afford nutritious food and reliable transportation.”
In this example, David’s primary financial focus is survival. He prioritizes keeping a roof over their heads, putting food on the table and ensuring they have access to essential utilities.
“The thought of saving money or indulging in leisure activities feels like a distant dream,” Schroder said of this hypothetical family. “David’s financial situation is constantly precarious, and any unexpected expense can throw his carefully balanced budget into chaos.”
While the above examples highlight the stark differences between the middle class and the poor, below are some of the biggest differences between their spending habits, according to experts.
Necessity-Driven vs. Subsistence Spending
Middle-class households prioritize essential expenses such as housing, food, utilities and transportation. On the other hand, poor households are often in survival mode, dedicating a larger proportion of their income to basic necessities like food and shelter.
Discretionary Spending
Middle-class households can afford to enjoy entertainment, dining out, vacations and hobbies.
“For poor households, these activities are often luxuries they cannot afford,” Schroder said. “For families with limited financial resources, these seemingly simple pleasures become unattainable luxuries.”
Investment-Oriented vs. Survival-Focused
Middle-class households prioritize investing for the future, like retirement plans, education funds and real estate. Poor households, on the other hand, are primarily focused on meeting their immediate needs and ensuring they have enough to cover essentials.
“The middle class tends to focus more on investments that can be used to build wealth for the future, such as 401(k) accounts, stock purchases and more,” said Paige Robinson, real estate investor and owner of House Buyers.
She said those in poverty often focus more on immediate needs and may prioritize spending on day-to-day items such as food, rent and utilities.
Debt Management
Jeff Mains, finance expert and CEO of Champion Leadership Group, said the middle class often tends to leverage debt as a means of investing in assets like homes or education, viewing it as a tool for advancement.
Contrastingly, the lower-income demographic may accrue debt for basic necessities or emergencies, often resorting to high-interest loans due to limited access to traditional banking systems.
Similarly, Robinson said those in poverty may engage in more high-risk practices such as payday loans and using credit cards with high-interest rates.
“In order to build financial inclusion among those in poverty,” she said, “it’s important that communities provide education and resources to help them budget, save and invest. Only then can they build a more secure financial future.”
Savings
According to experts, middle-class folks are more likely to allocate funds toward savings, whereas those with lower incomes may find it more challenging to save due to immediate financial pressures.
Lower-income families typically have smaller amounts of disposable income after covering their basic expenses. This limited disposable income makes it challenging for them to set aside money for savings.
Education and Health
The middle class often invests more in education, including college savings for their children, and they also might have better access to healthcare. Meanwhile, lower-income groups will more likely prioritize immediate expenses over long-term educational investments and may often have limited healthcare options.
Quality vs. Price
The middle class often will opt for quality and brand reputation in their purchases, while those with lower incomes often focus on price and immediate affordability.
Poor families focus on meeting basic needs at the lowest possible cost; they don’t have the luxury of considering long-term durability or brand reputation. Durable products, for example, are seen as more practical, as they can withstand everyday use and contribute to their family’s well-being without constant worry about breakdowns or replacements.
Long-Term Planning
Middle-class spending is often guided by long-term financial planning and budgeting, whereas lower-income groups might be more focused on managing day-to-day expenses.
At the same time, middle-class families will place greater importance on planning for major life events and milestones, making sure to allocate funds strategically to achieve these objectives. This approach involves creating — and sticking to — a budget that considers both short-term and long-term financial needs.
Technology and Connectivity
The middle class tends to spend more on technology, including smartphones, computers and high-speed internet, which they see as essential for their work and education. They view technology as an investment in future earning potential.
Those who are poor, on the other hand, may have more limited access to the latest technology and might see high-end devices as expensive luxuries. They also often have limited access to credit or face higher interest rates, making it more challenging to finance large purchases such as smartphones or computers through loans or credit cards.
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