The $35 Trillion US Debt Crisis Could Hit the Middle Class Hard: How to Prepare

Many of us go about our daily lives—and manage our personal finances—without thinking about the national debt, which will top $35 trillion as of September 15, 2024. It’s a number so astronomical that it’s hard to imagine, let alone truly understand.

Watch: Harris vs. Trump: Here’s Who’s Better for the National Debt, Experts Say

Read more: 9 Simple Ways to Grow Your Wealth in 2024

While we may not think much about this national debt, perhaps we should start, as it could soon impact our personal finances.

The national debt crisis could hurt the lower and middle classes

Last February, Joao Gomes, a finance professor at Wharton Business School, posted the following on X, formerly known as Twitter:

“I’m probably more concerned about the U.S. debt than most of my professional colleagues. But in this election year, I think voters need to ask much harder questions of politicians who don’t take this threat seriously.”

In the same post, Gomes referenced an X-post from Tens Frontier, which highlighted a February 2024 Fortune article in which JP Morgan Chase CEO Jamie Dimon called attention to experts who warned that the sovereign debt crisis could cost Americans their homes, purchasing power, and national security.

Some financial experts — such as Paul Daneshrad, founder and CEO of StarPoint Properties and author of “Money & Morons: How To Build Wealth And Protect Yourself From The Great Conflux” — have been sounding the alarm about the national debt for years. Daneshrad has stressed that the middle class will bear the brunt of the debt crisis, and emphasized that average Americans are ill-prepared for what lies ahead.

“This is going to hit the middle and lower classes the hardest,” he told GOBankingRates. “When a debt crisis happens, and it will happen, if we don’t correct and manage our debt, the crisis is going to be significant.”

Sean Casterline, president of Delta Private Wealth, LLC, told GOBankingRates that a high government debt can lead to inflation if the government decides to print more money to pay off the debt, thereby increasing the money supply.

“This is something the U.S. government has gotten very good at,” Casterline said. “Printing money can devalue the currency, which in turn drives prices up even higher.”

What can lower and middle class people do to prepare if the $35 trillion national debt crisis hits them hard?

For You: I’m a Bank Clerk: 4 Reasons You Should Withdraw Your Savings Right Now

Reduce debt

The first step Americans can take to protect themselves from the potential blowback from their national debt is to reduce their personal debt.

“Prioritizing debt reduction and living within your means is paramount,” said Cliff Ambrose, FRC, founder and wealth manager at Apex Wealth. “Creating a budget and actively managing your spending can help free up money for savings and emergency reserves.”

Diversify income streams

Another important financial move Americans can make is to create more income streams.

“Diversifying income streams through side jobs, freelancing or passive investments can provide additional financial stability and provide a buffer against economic uncertainty,” Ambrose said.

Invest in inflation-proof assets

Investing in assets that help protect against inflation — one of the potential side effects of a sovereign debt crisis — is another smart financial move.

“Investing in assets that traditionally provide protection against inflation, such as real estate, precious metals or inflation-indexed bonds, can protect wealth from the erosive effects of rising prices,” Ambrose said.

Embrace tax-advantaged retirement accounts

Ambrose says embracing tax-advantaged retirement accounts and employer-sponsored savings plans can boost long-term wealth accumulation and provide a safety net for retirement.

You should also aim to maximize your pension contributions.

“Maximizing your retirement contributions helps build a solid financial foundation for your future,” says Melissa Murphy Pavone, CFP, CDFA, director of investments at Oppenheimer & Co. Inc. “Once you’re over 50, individuals should take advantage of catch-up contributions. Not only will this boost their retirement savings, but (it) can also be tax-efficient.”

Make sure you have a large emergency fund

Virtually every financial expert advocates for an emergency fund. Ambrose is one of them — and he’s on the ultra-vigilant side.

“Building a robust emergency fund equal to six to 12 months of living expenses is essential to absorb unexpected financial shocks,” Ambrose said.

All these measures can help you prepare in case the sovereign debt crisis affects your personal finances.

“By implementing these proactive measures, middle-class people can strengthen their financial resilience and face the challenges of the U.S. debt crisis with greater confidence and preparation,” Ambrose said.

Furthermore, these are all smart financial moves to make, regardless of whether the national debt crisis is knocking on your door. You should take all of these steps, regardless of your income level and no matter what happens.

More from GOBankingRates

This article originally appeared on GOBankingRates.com: America’s $35 Trillion Debt Crisis Could Hit the Middle Class: How Can You Prepare?