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Why You Are Poorer Than Your Parents

It is a known fact. Life today is more difficult than it was 40 years ago. But why? Why is it that our parents were able to get by on mediocre incomes and still have a sizable nest egg saved up for retirement? And now we, who have followed in their footsteps, are barely making it in this world? Are we spending more excessively? Were they just smarter than us? Or is it the general economy that’s holding us back? What is the answer?

Well, as you may have guessed, there is no single one answer as to why financial success is more difficult today, but there are a few large reasons that I have discovered recently.

Why You Are Poorer Than Your Parents

As Robert Reich explains in his recent documentary, “Inequality For All“, there are two major reasons why you are poorer than your parents.

  1. Globalization
  2. Technology

As the world has become more flat (in other words, more accessible), the opportunity to employ cheaper labor has grown. Instead of paying a U.S. citizen $15 an hour to assemble a product, these services have been shipped to China or India at a cost of only $4 per hour. If a company wants to keep their operations local and still maintain a competitive edge in the market, then they will be forced to reduce their hourly wages. This is ultimately hurting the middle class in our economy today.

Secondly, technology has grown tremendously over the past 40 years. Through constant invention and ingenuity, a computer has gone from the size of a large room into the palm of your hand, and has actually become much more powerful in the process. While this is an amazing benefit to us as consumers, it most definitely isn’t helping our labor force. Conveyors and robotic arms are replacing employees each and every day. Either that or those that are working are forced into wage reductions.

Globalization and technology are the major factors in the faltering middle class, but there are certainly other factors that have an impact as well:

  • Rising cost of housing
  • Rising cost of healthcare
  • The need for childcare
  • Rising cost of education

Rising Household Expenses

After accounting for inflation, housing, healthcare, childcare, and college are still much more expensive today than they were in the 1970’s, allowing for a much smaller amount of disposable income that quickly gets eaten up by your vehicle expenses, food costs, clothing, and many other expenses that are vital to your survival. In the 1970’s, there was still money left over for savings and investing. Today, it just simply isn’t that easy. In order to live today like your parents did 40 years ago, you must do more. Much more.

How We Can Live the Middle Class Lifestyle

If all of these expenses are increasing but wages are not, how is it that there are still so many people living the middle class lifestyle? To answer this question you would need at least three guesses, because people are battling the high costs not with one, not two, but in three different ways.

  1. Wives began entering the workforce
  2. Earned more by working longer hours or multiple jobs
  3. Used home equity and credit

To battle the rising costs of living, women started entering the workforce to add a second income to the home. The only problem is, by entering the workforce they have instantly increased their expenses with the need for childcare. Often times though, the difference between what is earned and what is owned to the childcare facilities is minimal, which does very little to improve the finances, but severely increases stress in the home.

Then, instead of working the simple 9 to 5 job many employees started working longer hours to earn more. And, at times, they even worked second jobs or had an at-home business that provided them with more income.

And finally, as you may have guessed, more and more people are living larger by using credit. In a booming housing market, many pull money out of the value of their homes in order to buy nicer cars, bigger boats, or go on expensive trips. Beyond this, still others simply use available credit through bank loans and credit cards to inflate their lifestyles to that of their parents.

So while it may seem like many of us are living a middle-class lifestyle, it is often done with overwork and credit.

How Can We Live Well Like Our Parents?

Given that it’s so difficult to live the middle class lifestyle these days, how can we accomplish the good life without working 80 hours a week and buying everything on credit? As I mentioned in my recent article, “How to Make a Million Dollars in 10 Years,” you must first get out of debt so that you can actually have some cash at the end of each month. Then, you must simply learn to live on less so that you have the opportunity to earn more later in life. Third, you need to learn how to earn through passive income and not via earned income.

These three steps may sound simple, but they certainly are not. It can take much energy and quite a lot of time to accomplish these three steps, but once you begin earning money through passive income and then continue to reinvest the earnings into further forms of passive incomes, you might even be able to move past the status of ‘middle-class’ and into the class of wealthy!

Have you noticed how difficult it is to get ahead these days? Do you have a plan to earn more and live comfortably?



My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.


  1. My family never shared its financial situation with me, hence I can’t really compare. Recently however my dad offered to buy a website that someone was looking to sell if I could help him monetize it and develop it further. I audited it and it had great rankings for core keywords, and a solid number of visitors. This is our first joint venture into passive income and I hope it will be a good start.

    I’ve also noticed that my dad, who is self-employed, has taken steps in recent years to spend less and earn more in other ways. This in part caused me to re-evaluate my situation. I already lived quite frugal and had no debts so I’ve not had these big wins that some folks seem to get. That can be a bit demotivating. I’m going to take your advice though and keep working on more passive income. It does feel a lot like compounding interest, at first it is chump change but then it really starts to add up.

    • Times are tough for many. If you have the ability to get ahead financially without working yourself to death, then I would say definitely focus on that! Many will continue to live paycheck to paycheck for life and will die with nothing. You need to refuse to live like these people.

  2. Interesting topic Derek! It is alarming to see the effect of inflation and if you project that to future years, it does not bode well for the american dream. Another factor that effects the amount of disposable income is money management skills, or the lack thereof. It is possible to live comfortably by learning to better manage your money and make smart purchasing decisions.

    • It is possible to live comfortably still, but we must make much more conscious decisions today. If we do not actively put money away for retirement, we will not only continue to live paycheck to paycheck, but we will have nothing saved for our retirement.

  3. This paragraph of yours troubles me:

    “To battle the rising costs of living, women started entering the workforce to add a second income to the home. The only problem is, by entering the workforce they have instantly increased their expenses with the need for childcare. Often times though, the difference between what is earned and what is owned to the childcare facilities is minimal, which does very little to improve the finances, but severely increases stress in the home.”

    Many working women earn significantly more that their childcare costs. Many married women also earn more than their husbands. In those situations, perhaps we should consider the difference between husband’s income and the childcare expenses to be “minimal, which does very little to improve the finances, but severely increases stress in the home.”

    I’m sure you didn’t intend for the comment to sound sexist or demeaning towards working women, but I felt I should let you know that it came across that way, at least to one of your readers.

    • I understand your troubles Kellie, and I certainly didn’t mean to offend, but this is merely what I have seen in the middle class environment in which I grew up. My friend and his wife did the math and discovered that if she went to work she would only earn $3 an hour over the cost of daycare, and this was a job at a corporate headquarters! Many others I have talked with have encountered the same scenario. Their typical job would pay $15 an hour (which is much more than the minimum wage),but with multiple kids, the earnings is minimal.

      Sure, the roles could be reversed. I know a few women that earn more than their husbands, but I was just speaking to the majority of the situations I see. Thanks for the comment Kellie. It’s always good to hear from my readers!

  4. I’m not poorer than my parents…BUT they were able to do a lot more for their money than I could ever have imagined. They are much more frugal than I am…I think it’s partially the mindset of “gotta have it now,” along with just flat out more things to blow your money on. 🙂

    • And more advertisements talking to us each day! It certainly is far easier to spend money today, and that doesn’t bode well when we have less disposable income to begin with!

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