Which Income Class Are You

[wageslave23]

This shows me how easy it is to be in the "upper class". I'm an accountant and my wife is a nurse who works part-time.  The American ladder isn't broken, all it takes to be upper class is a little effort and discipline.

Funny - I came away with the thought that it is harder to break into the upper tier than I expected. 

So I was born middle class (my dad is a CPA, mom a teacher). I've done everything "right" (other than not becoming a software engineer or finance person): have worked since I was 13, valedictorian, college, grad school, etc.  Not to be snarky - but "great work ethic" and "disciplined" are words used to  describe me on the regular.

I'm still middle class.

If we didn't have kids we'd be closer to upper class though (per the calculator). That rings true for lifestyle as well.

Networth wise we are in the top 20% - but I honestly still feel like I'm hustlin' every day. I've been pulling a paycheck for 27 years this year.

I guess the number of kids you have can change the equation but I don't think it should. Class should be determined by income per household.  What you choose to spend that income on should be irrelevant.  Whether it's vacations, children, movies, etc.

Elon Musk had $0 of taxable income in 2020, so if we're only using incomes to determine this silly measuring then I'm way higher class than the wealthiest man on the planet! Take that Musk!

I guess it depends on why you are trying to determine classes anyway. Usually it's in the context of taxation. If LeBron James blows all of his $50 million salary and has $0 networth, he should still be in the highest tax bracket and I would still consider him part of the upper class.

[Morning Glory]

Aren't we all here because we're trying not to be in any income class?

[Paper Chaser]

This shows me how easy it is to be in the "upper class". I'm an accountant and my wife is a nurse who works part-time.  The American ladder isn't broken, all it takes to be upper class is a little effort and discipline.

Funny - I came away with the thought that it is harder to break into the upper tier than I expected. 

So I was born middle class (my dad is a CPA, mom a teacher). I've done everything "right" (other than not becoming a software engineer or finance person): have worked since I was 13, valedictorian, college, grad school, etc.  Not to be snarky - but "great work ethic" and "disciplined" are words used to  describe me on the regular.

I'm still middle class.

If we didn't have kids we'd be closer to upper class though (per the calculator). That rings true for lifestyle as well.

Networth wise we are in the top 20% - but I honestly still feel like I'm hustlin' every day. I've been pulling a paycheck for 27 years this year.

I guess the number of kids you have can change the equation but I don't think it should. Class should be determined by income per household.  What you choose to spend that income on should be irrelevant.  Whether it's vacations, children, movies, etc.

Elon Musk had $0 of taxable income in 2020, so if we're only using incomes to determine this silly measuring then I'm way higher class than the wealthiest man on the planet! Take that Musk!

I guess it depends on why you are trying to determine classes anyway.

Exactly. Why are we trying to determine this stuff? It's not like some achievement is suddenly unlocked if you go from one arbitrary "class" to another. Incomes don't matter. Net worth does. Or more specifically, the value of income generating assets.

It's fine to use some of these calculators to get a rough idea if you're headed in the right direction or not, but an increasing net worth should tell you the same thing. I think a lot of this is just trying to pat ourselves on the back or make ourselves feel superior.

[wageslave23]

This shows me how easy it is to be in the "upper class". I'm an accountant and my wife is a nurse who works part-time.  The American ladder isn't broken, all it takes to be upper class is a little effort and discipline.

Funny - I came away with the thought that it is harder to break into the upper tier than I expected. 

So I was born middle class (my dad is a CPA, mom a teacher). I've done everything "right" (other than not becoming a software engineer or finance person): have worked since I was 13, valedictorian, college, grad school, etc.  Not to be snarky - but "great work ethic" and "disciplined" are words used to  describe me on the regular.

I'm still middle class.

If we didn't have kids we'd be closer to upper class though (per the calculator). That rings true for lifestyle as well.

Networth wise we are in the top 20% - but I honestly still feel like I'm hustlin' every day. I've been pulling a paycheck for 27 years this year.

I guess the number of kids you have can change the equation but I don't think it should. Class should be determined by income per household.  What you choose to spend that income on should be irrelevant.  Whether it's vacations, children, movies, etc.

Elon Musk had $0 of taxable income in 2020, so if we're only using incomes to determine this silly measuring then I'm way higher class than the wealthiest man on the planet! Take that Musk!

I guess it depends on why you are trying to determine classes anyway.

Exactly. Why are we trying to determine this stuff? It's not like some achievement is suddenly unlocked if you go from one arbitrary "class" to another. Incomes don't matter. Net worth does. Or more specifically, the value of income generating assets.

It's fine to use some of these calculators to get a rough idea if you're headed in the right direction or not, but an increasing net worth should tell you the same thing. I think a lot of this is just trying to pat ourselves on the back or make ourselves feel superior.

Like I said, I find that it usually revolves around income tax rates and a way to vilify the "upper class".  But I'm a CPA, so my perception may be skewed.  No one wants to think of themselves as part of the evil upper class.

[Sanitary Stache]

I guess if you want to determine your net worth class you could use the net worth calculator and if you want to determine your income class you can use the income calculator.

As mustachians and aspiring mustachians we are probably most interested in our spending class. Or really our savings class. And we already know where we want to be in that class.

[Arbitrage]

Like I said, I find that it usually revolves around income tax rates and a way to vilify the "upper class".  But I'm a CPA, so my perception may be skewed.  No one wants to think of themselves as part of the evil upper class.

Indeed.  Very rich people still like to call themselves "upper middle class."  Some of my rich friends (~$2M/year income) have only very begrudgingly admitted that they're rich, but still point to some richer co-workers as the ones who have truly "made it."  Not sure if they would cop to being upper class.

We made the voluntary jump from the 10% to the 20% recently by cutting our hours and pay in half.  In spending terms, we're closer to the median, as we're still saving about 40% of our income. 

[KarefulKactus15]

The more wealthy people I know act and describe themselves as modest.

I think it's a bit of imposter syndrome.  As long as they know of people with more they aren't there yet.

All this talk of inequality in mobility is interesting.

My personal belief:
 it's never been easier to climb the success ladder *IF* a multitude of things beyond your control align in your favor.

I'm often frustrated by people who say work harder, work smarter....etc etc.   Assuming all socia-economic factors were equalized there's still a huge variation in ability at a biological level. Simple things like self discipline, intelligence etc etc.  I don't have a long term solution. I realize shits not fair but appreciate that it's working out for me. 

[mizzourah2006]

I think people will always look up for comparison. I have a friend who's HH income is over $600k/yr and he will tell me with a straight face that they aren't upper class. They are in the 99th percentile in HH income basically any way you slice it, but because he still can't literally buy anything he wants when he wants it he considers himself middle class.

[Morning Glory]

I think people will always look up for comparison. I have a friend who's HH income is over $600k/yr and he will tell me with a straight face that they aren't upper class. They are in the 99th percentile in HH income basically any way you slice it, but because he still can't literally buy anything he wants when he wants it he considers himself middle class.

His problem is wanting too many things. In that case those of us who are content with enough are quite wealthy.

[mizzourah2006]

I think people will always look up for comparison. I have a friend who's HH income is over $600k/yr and he will tell me with a straight face that they aren't upper class. They are in the 99th percentile in HH income basically any way you slice it, but because he still can't literally buy anything he wants when he wants it he considers himself middle class.

His problem is wanting too many things. In that case those of us who are content with enough are quite wealthy.

I don't think he even really "wants" many of these things. I think it's more seeing people with "nicer" things than him and realizing that if he wanted to for example, go buy a Tesla Model S tomorrow it would become a budget line item he couldn't just ignore.

I think the problem most people have is comparing across. It gets back to the age old adage that you can afford anything you want, but you can't afford everything you want. If I see friend A buy a $600k house, then friend B buys a Tesla Model S, then friend C spends a month in Europe, then friend D puts in a $100k pool. The natural comparison isn't to any one of those, it's to all of them. I have friends that are buying $600k houses, brand new Teslas, vacationing for a month in Europe and putting in new pools...I can't afford to do all of that...so clearly I'm middle class.

I also think this is part of the problem with social media. You see all of your friends "best lives". It makes it seem like everyone is living a better life than you, but in reality if you go to any one person's timeline they are pretty normal. You just only see them post the 4-5x a year that they are doing really cool shit. Multiply that by 200 friends and almost every day it seems like a couple of your friends are living way cooler lives than you. You couldn't afford to do everything all of them are doing, so your life is dull in comparison.

[iris lily]

Aren't we all here because we're trying not to be in any income class?

Haha. Yeah.

[Just Joe]

I also think this is part of the problem with social media. You see all of your friends "best lives". It makes it seem like everyone is living a better life than you, but in reality if you go to any one person's timeline they are pretty normal. You just only see them post the 4-5x a year that they are doing really cool shit. Multiply that by 200 friends and almost every day it seems like a couple of your friends are living way cooler lives than you. You couldn't afford to do everything all of them are doing, so your life is dull in comparison.

I belong to several DIY hobby groups.

It is refreshing to see people start with basic materials or some worn out thing and finish with something of utility or resale value. Good for the brain. Can be good for the environment when the final result delivers good utility.

Also can be - not always though - a good side hustle. Build two or three and keep one at reduced cost or free.

For me this can help mentally counteract the conspicuous consumption seen everywhere these days.

[partgypsy]

I was curious so I'm middle class, and net worth better than 74% people my age, but ob a huge long tail for those w millions in net worth. think I understand my friends w benefits guy better. He is is looking up at the long tail and wants to be there, doesn't feel like he's where he wants to be despite making many times what he needs. I realize, I don't really know what these calculators are meant to do really.  If anything it makes me feel a little bad I and my siblings were never the go getters our Dad wanted us to be. However if I did make more money, or come into money my interests are not to make more money but do other things w my time.

[Morning Glory]

I also think this is part of the problem with social media. You see all of your friends "best lives". It makes it seem like everyone is living a better life than you, but in reality if you go to any one person's timeline they are pretty normal. You just only see them post the 4-5x a year that they are doing really cool shit. Multiply that by 200 friends and almost every day it seems like a couple of your friends are living way cooler lives than you. You couldn't afford to do everything all of them are doing, so your life is dull in comparison.

I belong to several DIY hobby groups.

It is refreshing to see people start with basic materials or some worn out thing and finish with something of utility or resale value. Good for the brain. Can be good for the environment when the final result delivers good utility.

Also can be - not always though - a good side hustle. Build two or three and keep one at reduced cost or free.

For me this can help mentally counteract the conspicuous consumption seen everywhere these days.

Sounds like a fun group!
I just skimmed my Facebook feed and other than memes it's babies, baked goods, and wordle.

[Tempname23]

I see a major flaw in this for us FIRE seekers. I would think we want to where we stand over our life time income. (I thought I addressed this I but don't see my name in this thread). Several years ago, I wanted to know what my average income was over our married life. Using the $18k we earned in 1982 didn't seem right, so I found government inflation data and used that to inflate the $18k up to today's dollars. I used a speadsheet and did this for every year forward. (I did this in 2018)
  I then added all this inflation adjusted yearly incomes and divided by how many years that was for. I ended up with $71k, This was much more than I expected. I though we would have come in well below the US median income, I think it was 11% above the US median income at the time.

[stoaX]

Aren't we all here because we're trying not to be in any income class?

Haha. Yeah.

Thanks, this made me smile!

[NorthernFire]

Apparently we are in the upper. Feels like middle at best. Probably because I get more enjoyment from saving than spending so we do not have the possessions of an upper middle class family. But at the end of the day we are happy. :)

[clarkfan1979]

We are presently in the lower income tier.  Income is one measurement, but far from the whole picture.  Even if you don't have a high net worth, being debt free vs. highly in debt makes a HUGE difference when it comes to utilizing the same amount of income.   

We currently have around 65K in W-2 income, 36K in rental income and 1.1 million in debt.

[Missy B]

I think people will always look up for comparison. I have a friend who's HH income is over $600k/yr and he will tell me with a straight face that they aren't upper class. They are in the 99th percentile in HH income basically any way you slice it, but because he still can't literally buy anything he wants when he wants it he considers himself middle class.

As a Canadian informed by the English definition of classes, this whole discussion is strange.
Middle class status can be earned or lost, but you can't enter the upper class just by making a lot of money. There's a cultural difference, a social difference.
The guy that makes 600K a year who can buy anything he wants *is* middle class. That's where he came from, that's who he is. There are some quite well-off lower class London East-siders who made their money running their own businesses. They are proud of their work and success, but would never dream of claiming that they have changed classes, as they are fiercely proud of who they are and where they came from.

By the way, any study that claims to divide class status based on yearly income, which is a middle-class focus, is revealing the sad ignorance and bias of the study author. Wealthy people and upper class people (I'm making a distinction here between them even though they overlap) talk about net worth, not about salary. If they talk about it at all. In upper class circles historically it's considered very bad taste.

[2Birds1Stone]

@Missy B, I think that's why the thread is titled "which income class are you" and not "which social class are you".

Two very distinct things for sure. Just head over to the "Race from $2  to $4 Million and Beyond" thread for examples.

[mizzourah2006]

So is the argument then that only people with historical names are part of the upper class? I guess that would put, what like a couple thousand people in the US that are truly upper class and everyone else is middle or lower class?

I'd argue that a person from a couple from well to do NYC families with a law degree from a top 10 law school working at a top firm in the world with a spouse that works at a big 4 consulting firm making $600k+ a year is not middle class, whether that's from a social or income perspective. If that type of person is middle class only the truly elite rich are "upper class".

My main point was if he only looks in his close social circle it's easy to see yourself as middle class regardless of how you compare to the rest of the people in the US.

[Missy B]

So is the argument then that only people with historical names are part of the upper class? I guess that would put, what like a couple thousand people in the US that are truly upper class and everyone else is middle or lower class?

I'd argue that a person from a couple from well to do NYC families with a law degree from a top 10 law school working at a top firm in the world with a spouse that works at a big 4 consulting firm making $600k+ a year is not middle class, whether that's from a social or income perspective. If that type of person is middle class only the truly elite rich are "upper class".

My main point was if he only looks in his close social circle it's easy to see yourself as middle class regardless of how you compare to the rest of the people in the US.

I don't think the term 'upper class' is the correct term to use. It has an inseparable association with a particular social class. Better to refer to people who are making high six figures and or high net worth as part of the 'wealth class'.
There's a lot more than 2000 people in the US that are part of the traditionally defined upper class. I often get the impression that Americans particularly focus on the money aspect of being upper class and don't understand the rest of the cultural and social stuff that comes with that. What I'm seeing in your response and generally in the thread is a belief that current income can make you upper class, which isn't true.

[EvenSteven]

So is the argument then that only people with historical names are part of the upper class? I guess that would put, what like a couple thousand people in the US that are truly upper class and everyone else is middle or lower class?

I'd argue that a person from a couple from well to do NYC families with a law degree from a top 10 law school working at a top firm in the world with a spouse that works at a big 4 consulting firm making $600k+ a year is not middle class, whether that's from a social or income perspective. If that type of person is middle class only the truly elite rich are "upper class".

My main point was if he only looks in his close social circle it's easy to see yourself as middle class regardless of how you compare to the rest of the people in the US.

I don't think the term 'upper class' is the correct term to use. It has an inseparable association with a particular social class. Better to refer to people who are making high six figures and or high net worth as part of the 'wealth class'.
There's a lot more than 2000 people in the US that are part of the traditionally defined upper class. I often get the impression that Americans particularly focus on the money aspect of being upper class and don't understand the rest of the cultural and social stuff that comes with that. What I'm seeing in your response and generally in the thread is a belief that current income can make you upper class, which isn't true.

For income distribution I usually talk about quintiles. Lowest 20% corresponds to working class income (because "lower" class is pejorative), middle 60% corresponds to middle class income, and top 20% corresponds to upper class income.

[poetdereves]

Our current income puts us in the upper category. The linked personalfinancedata website says we are currently 90.8% with our base salaries currently with the likely chance to be in the 94.8% category if we hit project completion bonuses and keep our rental houses filled for the year.

Our wealth total is a different story because we were only making ~$50k combined up until three years ago and were paying for school for DW and myself. If you include the equity in our homes based off of swordguy's net worth calculator that he linked we are at 60%.

Honestly, I am excited for the day that we are in the highest percentile on the net worth calculator and the the lower income on the pew study. We are probably less than ten years away from that scenario and it will mean we would have hit FIRE at that point.

[clarkfan1979]

So is the argument then that only people with historical names are part of the upper class? I guess that would put, what like a couple thousand people in the US that are truly upper class and everyone else is middle or lower class?

I'd argue that a person from a couple from well to do NYC families with a law degree from a top 10 law school working at a top firm in the world with a spouse that works at a big 4 consulting firm making $600k+ a year is not middle class, whether that's from a social or income perspective. If that type of person is middle class only the truly elite rich are "upper class".

My main point was if he only looks in his close social circle it's easy to see yourself as middle class regardless of how you compare to the rest of the people in the US.

I don't think the term 'upper class' is the correct term to use. It has an inseparable association with a particular social class. Better to refer to people who are making high six figures and or high net worth as part of the 'wealth class'.
There's a lot more than 2000 people in the US that are part of the traditionally defined upper class. I often get the impression that Americans particularly focus on the money aspect of being upper class and don't understand the rest of the cultural and social stuff that comes with that. What I'm seeing in your response and generally in the thread is a belief that current income can make you upper class, which isn't true.

The OP was mainly asking about income class not social class. Two very different things. I think maybe the right term for income would be "level" rather then class so as to separate the 2. I'm at a low income level (but higher wealth level). My social class (which I would define by lifestyle, background, family, peers, maybe job and education, etc  rather then money - although having wealth would be a huge part of it) would probably be lower middle class. I'm not exactly hanging out at tractor pulls but then I'm not dining in the Hamptons with the Vanderbuilts.

My dad was a union construction worker in the Chicagoland area until he retired in 2011 at the age of 62. His income was relatively high toward the end of his career because he was offered opportunities to work overtime, in which he was paid a 50% higher hourly wage. However, he had to abuse his body at an old age to get the high income. No paid time off. If he didn't work, he didn't get paid. I'm guessing his average income was 80K from 2001 to 2011 and that was based on 50 hours/week. His spouse was a hair stylist and made 40K/year working 40 hours/week. They owned a house, but lived paycheck to paycheck. They are currently retired and live on my dad's pension and social security. Not a bad retirement.

My wife and I make less than they did 10-20 years ago, but we work less and don't live paycheck to paycheck and take more vacation. My salary is 54K and it's based on 1,000 hours/year. My wife made 11K last year at her part-time job and it's based on 500 hours/year. We also have 36K/year in rental income and my time on the rentals averages out to be 200-400 hours/year.

Our total working hours are 1,700-1,900 hours/year and my parents were 4500 hours/year. Yes, they had a higher income, but their quality of life was much less. Because my dad didn't get paid if he didn't work, he rarely took a vacation. He would maybe do 3 hunting/fishing trips/year in which he took Friday off. 

I'm personally more concerned with quality of life, not income. Very excited for 2022 because we are getting a boost in income without sacrificing quality of life. In August 2022, rental cash flow is going up $1,000/month and I'm getting a 5-6% raise at my job. My wife is on pace to make an extra 5-6K in 2022. These raises are not huge, but we didn't have to work any additional hours to achieve them.

   

[clarkfan1979]

So is the argument then that only people with historical names are part of the upper class? I guess that would put, what like a couple thousand people in the US that are truly upper class and everyone else is middle or lower class?

I'd argue that a person from a couple from well to do NYC families with a law degree from a top 10 law school working at a top firm in the world with a spouse that works at a big 4 consulting firm making $600k+ a year is not middle class, whether that's from a social or income perspective. If that type of person is middle class only the truly elite rich are "upper class".

My main point was if he only looks in his close social circle it's easy to see yourself as middle class regardless of how you compare to the rest of the people in the US.

I don't think the term 'upper class' is the correct term to use. It has an inseparable association with a particular social class. Better to refer to people who are making high six figures and or high net worth as part of the 'wealth class'.
There's a lot more than 2000 people in the US that are part of the traditionally defined upper class. I often get the impression that Americans particularly focus on the money aspect of being upper class and don't understand the rest of the cultural and social stuff that comes with that. What I'm seeing in your response and generally in the thread is a belief that current income can make you upper class, which isn't true.

The OP was mainly asking about income class not social class. Two very different things. I think maybe the right term for income would be "level" rather then class so as to separate the 2. I'm at a low income level (but higher wealth level). My social class (which I would define by lifestyle, background, family, peers, maybe job and education, etc  rather then money - although having wealth would be a huge part of it) would probably be lower middle class. I'm not exactly hanging out at tractor pulls but then I'm not dining in the Hamptons with the Vanderbuilts.

My dad was a union construction worker in the Chicagoland area until he retired in 2011 at the age of 62. His income was relatively high toward the end of his career because he was offered opportunities to work overtime, in which he was paid a 50% higher hourly wage. However, he had to abuse his body at an old age to get the high income. No paid time off. If he didn't work, he didn't get paid. I'm guessing his average income was 80K from 2001 to 2011 and that was based on 50 hours/week. His spouse was a hair stylist and made 40K/year working 40 hours/week. They owned a house, but lived paycheck to paycheck. They are currently retired and live on my dad's pension and social security. Not a bad retirement.

My wife and I make less than they did 10-20 years ago, but we work less and don't live paycheck to paycheck and take more vacation. My salary is 54K and it's based on 1,000 hours/year. My wife made 11K last year at her part-time job and it's based on 500 hours/year. We also have 36K/year in rental income and my time on the rentals averages out to be 200-400 hours/year.

Our total working hours are 1,700-1,900 hours/year and my parents were 4500 hours/year. Yes, they had a higher income, but their quality of life was much less. Because my dad didn't get paid if he didn't work, he rarely took a vacation. He would maybe do 3 hunting/fishing trips/year in which he took Friday off. 

I'm personally more concerned with quality of life, not income. Very excited for 2022 because we are getting a boost in income without sacrificing quality of life. In August 2022, rental cash flow is going up $1,000/month and I'm getting a 5-6% raise at my job. My wife is on pace to make an extra 5-6K in 2022. These raises are not huge, but we didn't have to work any additional hours to achieve them.

 

I'm surprised they couldn't save more as those are relatively high-ish salaries combined in the early to mid 2000s.  Heck even today!  I also had a blue collar physical job but made half or less of what your Dad did and managed to save quite a bit - enough to lean FIRE in my 30s - despite a divorce. But I wasn't raising kids so had fewer expenses and able to get roommates and work extra hours to pay off mortgage and save more then people with kids.

I think my dad was OK with a 0% savings rate because I think his plan was to live on his pension and SS in retirement. He definitely had the ability to save if he valued it. However, he didn't really value saving because he didn't know how to invest. He would rather spend it now than later. He was financially responsible in the sense that he would never spend money that he didn't have.

[Tempname23]

Back in 2018 (when we retired) I used my SS statement of income, used government inflation numbers to make income adjustments from 1981 to 2018 and used a Google Sheets to do the calculations. Then I added them all up and divided by the number of years. Our average inflation adjusted income came out to $71k. This puts us about $4k below the middle income average.
 This was actually higher than what I thought about our life long income. There were many years below $20k and many below $30k. But then adjusted for inflation even our $18k income in 1981 adjusted to over $50k in 2018. The highest we ever earned was $98k. If you are interested in seeing your adjusted income, I made this google sheet back then, it should still work, in the sheet there is a link to the inflation numbers, it needs 4 more years of inflation data added, as I did it in 2018.
https://docs.google.com/spreadsheets/d/1SsaRfRx_DBF38MssIvYVP2WrAIwgNhPyZ8B7xaBqXfs/edit#gid=0

[Tempname23]

It may be a housing bubble, but it's certainly different than the last one.  During the last bubble, house prices and rents became wildly decoupled due to various factors.  This time around, rents are skyrocketing as well - if not in tandem, at least alongside price increases.  Note that house prices are not included (directly) in CPI, but rents are, and are a big contributor to the headline inflation numbers we're seeing.

https://www.npr.org/2022/02/14/1080145270/its-not-just-home-prices-rents-rise-sharply-across-the-u-s

  Here's a rather depressing graph of Home Price to Income Ratio. It is now worse than the 2006 housing bubble.
https://www.longtermtrends.net/home-price-median-annual-income-ratio/

[Much Fishing to Do]

Seems like so much of it in the US is really based on the family/personal/health situation.  A couple that works for the minimum wage at Target in my area is making $15/hr which works out to $60k/year between the two of them.  If there are no health issues or kids involved (both either preventing work or costing money) that seems like a fairly solid income for around here.

[Simpli-Fi]

According to the calculator I am in the middle tier along with 58% in the Bellingham Metropolitan area.

funny it said the same about me and my family...and I just doubled my income, and it says the exact same thing; now what does that say?

[clarkfan1979]

It may be a housing bubble, but it's certainly different than the last one.  During the last bubble, house prices and rents became wildly decoupled due to various factors.  This time around, rents are skyrocketing as well - if not in tandem, at least alongside price increases.  Note that house prices are not included (directly) in CPI, but rents are, and are a big contributor to the headline inflation numbers we're seeing.

https://www.npr.org/2022/02/14/1080145270/its-not-just-home-prices-rents-rise-sharply-across-the-u-s

  Here's a rather depressing graph of Home Price to Income Ratio. It is now worse than the 2006 housing bubble.
https://www.longtermtrends.net/home-price-median-annual-income-ratio/

The graph isn't considering interest rates. Now that interest rates in June 2022 are comparable to 2006, an updated graph would be more depressing.

[sixwings]

So is the argument then that only people with historical names are part of the upper class? I guess that would put, what like a couple thousand people in the US that are truly upper class and everyone else is middle or lower class?

I'd argue that a person from a couple from well to do NYC families with a law degree from a top 10 law school working at a top firm in the world with a spouse that works at a big 4 consulting firm making $600k+ a year is not middle class, whether that's from a social or income perspective. If that type of person is middle class only the truly elite rich are "upper class".

My main point was if he only looks in his close social circle it's easy to see yourself as middle class regardless of how you compare to the rest of the people in the US.

I don't think the term 'upper class' is the correct term to use. It has an inseparable association with a particular social class. Better to refer to people who are making high six figures and or high net worth as part of the 'wealth class'.
There's a lot more than 2000 people in the US that are part of the traditionally defined upper class. I often get the impression that Americans particularly focus on the money aspect of being upper class and don't understand the rest of the cultural and social stuff that comes with that. What I'm seeing in your response and generally in the thread is a belief that current income can make you upper class, which isn't true.

The OP was mainly asking about income class not social class. Two very different things. I think maybe the right term for income would be "level" rather then class so as to separate the 2. I'm at a low income level (but higher wealth level). My social class (which I would define by lifestyle, background, family, peers, maybe job and education, etc  rather then money - although having wealth would be a huge part of it) would probably be lower middle class. I'm not exactly hanging out at tractor pulls but then I'm not dining in the Hamptons with the Vanderbuilts.

My dad was a union construction worker in the Chicagoland area until he retired in 2011 at the age of 62. His income was relatively high toward the end of his career because he was offered opportunities to work overtime, in which he was paid a 50% higher hourly wage. However, he had to abuse his body at an old age to get the high income. No paid time off. If he didn't work, he didn't get paid. I'm guessing his average income was 80K from 2001 to 2011 and that was based on 50 hours/week. His spouse was a hair stylist and made 40K/year working 40 hours/week. They owned a house, but lived paycheck to paycheck. They are currently retired and live on my dad's pension and social security. Not a bad retirement.

My wife and I make less than they did 10-20 years ago, but we work less and don't live paycheck to paycheck and take more vacation. My salary is 54K and it's based on 1,000 hours/year. My wife made 11K last year at her part-time job and it's based on 500 hours/year. We also have 36K/year in rental income and my time on the rentals averages out to be 200-400 hours/year.

Our total working hours are 1,700-1,900 hours/year and my parents were 4500 hours/year. Yes, they had a higher income, but their quality of life was much less. Because my dad didn't get paid if he didn't work, he rarely took a vacation. He would maybe do 3 hunting/fishing trips/year in which he took Friday off. 

I'm personally more concerned with quality of life, not income. Very excited for 2022 because we are getting a boost in income without sacrificing quality of life. In August 2022, rental cash flow is going up $1,000/month and I'm getting a 5-6% raise at my job. My wife is on pace to make an extra 5-6K in 2022. These raises are not huge, but we didn't have to work any additional hours to achieve them.

 

I'm surprised they couldn't save more as those are relatively high-ish salaries combined in the early to mid 2000s.  Heck even today!  I also had a blue collar physical job but made half or less of what your Dad did and managed to save quite a bit - enough to lean FIRE in my 30s - despite a divorce. But I wasn't raising kids so had fewer expenses and able to get roommates and work extra hours to pay off mortgage and save more then people with kids.

I think my dad was OK with a 0% savings rate because I think his plan was to live on his pension and SS in retirement. He definitely had the ability to save if he valued it. However, he didn't really value saving because he didn't know how to invest. He would rather spend it now than later. He was financially responsible in the sense that he would never spend money that he didn't have.

Pension contributions should be considered part of a savings rate, it is retirement savings, so his savings rate wasn't 0, it was probably like 5-10%, which isn't awful.

[Arbitrage]

It may be a housing bubble, but it's certainly different than the last one.  During the last bubble, house prices and rents became wildly decoupled due to various factors.  This time around, rents are skyrocketing as well - if not in tandem, at least alongside price increases.  Note that house prices are not included (directly) in CPI, but rents are, and are a big contributor to the headline inflation numbers we're seeing.

https://www.npr.org/2022/02/14/1080145270/its-not-just-home-prices-rents-rise-sharply-across-the-u-s

  Here's a rather depressing graph of Home Price to Income Ratio. It is now worse than the 2006 housing bubble.
https://www.longtermtrends.net/home-price-median-annual-income-ratio/

The graph isn't considering interest rates. Now that interest rates in June 2022 are comparable to 2006, an updated graph would be more depressing.

Agreed, and a big reason I'm expecting my house value to dip at least a bit.  In one year since we bought, the price spiked over 20% (after 20% increases each of the previous two years) and mortgage rates literally doubled.  Far less affordability, and with almost all other asset classes down as well people aren't flush with cash.  My town is not a high-income town, either, so people who aren't bringing money from elsewhere (remote work, long commutes, retirement funds, etc.) are going to have real trouble at these levels.

[happychineseboy]

This shows me how easy it is to be in the "upper class". I'm an accountant and my wife is a nurse who works part-time.  The American ladder isn't broken, all it takes to be upper class is a little effort and discipline.

Easy? A little effort? You mean there are enough good paying jobs for everyone who works hard?  Opportunities are the exact same for everyone? Who knew!

If it were easy  tens of millions more people would be better off. Your comments make you sound pretty naive. Just saying, dont take offense.

I am in agreement with wageslave23

There are plenty of high paying jobs out there for qualified candidates. Of course the playing field is not even but hard workers do not go unnoticed and rise to the top quickly. The inverse can be said for the lazy and unmotivated, they sink to the bottom and flail and complain instead of working hard and doing something productive about it.

Signed - 31 years old, "hardworking" family of 3, $390k household income. Firmly outside of the middle class bounds.

[Omy]

I assume you weren't born to two drug addicted parents and  always had plenty to eat and a safe, warm home to live in.

It's not a level playing field. I'm EXTREMELY fortunate to have been born into a middle class family that valued education and hard work. People who didn't have these advantages can still be successful...but the deck is definitely stacked against them.

[ixtap]

Walked passed someone this morning who was saying "He is closer to retirement than working class." So obviously, no one knows anything.

[Tempname23]

The income Range for the middle in my area is $37k to $109,700, with the middle being $73,350. Our inflation adjusted income from marriage to retirement was $71,000 in 2018. So, Just under the middle*, but we are now retired living on about $60k. The 4% rule would say we can live on $100,000. In 2 yrs 8 months, we will get $55K in SS. We may being "movin on up" to the upperclass (per the site), however, we haven't learned to BTD, so we will be taxed that way, but we won't spend that way! :-)

 *I always write, we were, "Middle, Middle Class Earners". The Pew site confirms it.

[Tempname23]

The more wealthy people I know act and describe themselves as modest.

I think it's a bit of imposter syndrome.

 Yes, funny how they put themselves below where they really are.

I'm often frustrated by people who say work harder, work smarter....etc etc.   

I'm pretty sure the only reason I made it to the top 5% on a middle, middle class income was because I married an immigrant that was very frugal with a dollar, neither of us went to college, but our savings started the day we got married. The other luck I had was, I took a big interest in a radio talk show host that focused on investing in no-load mutual funds. I started listening in the very late 80s, and structured my work around Sat. and Sun. between 3PM and 6PM, just to be alone in the shop to listen to Bob Brinker, he was a big factor in me investing our savings.

Assuming all socia-economic factors were equalized there's still a huge variation in ability at a biological level. Simple things like self discipline, intelligence etc etc. 

Yes, 1/2 of the population is below average!

[Bateaux]

The more wealthy people I know act and describe themselves as modest.

I think it's a bit of imposter syndrome.

 Yes, funny how they put themselves below where they really are.

I'm often frustrated by people who say work harder, work smarter....etc etc.   

I'm pretty sure the only reason I made it to the top 5% on a middle, middle class income was because I married an immigrant that was very frugal with a dollar, neither of us went to college, but our savings started the day we got married. The other luck I had was, I took a big interest in a radio talk show host that focused on investing in no-load mutual funds. I started listening in the very late 80s, and structured my work around Sat. and Sun. between 3PM and 6PM, just to be alone in the shop to listen to Bob Brinker, he was a big factor in me investing our savings.

Assuming all socia-economic factors were equalized there's still a huge variation in ability at a biological level. Simple things like self discipline, intelligence etc etc. 

Yes, 1/2 of the population is below average!

Yes Bob Brinker.  Loved his show.  The land of critical mass.  We've pretty much reached that now.   2023 we're done.

[iris lily]

The more wealthy people I know act and describe themselves as modest.

I think it's a bit of imposter syndrome.

 Yes, funny how they put themselves below where they really are.

I'm often frustrated by people who say work harder, work smarter....etc etc.   

I'm pretty sure the only reason I made it to the top 5% on a middle, middle class income was because I married an immigrant that was very frugal with a dollar, neither of us went to college, but our savings started the day we got married. The other luck I had was, I took a big interest in a radio talk show host that focused on investing in no-load mutual funds. I started listening in the very late 80s, and structured my work around Sat. and Sun. between 3PM and 6PM, just to be alone in the shop to listen to Bob Brinker, he was a big factor in me investing our savings.

Assuming all socia-economic factors were equalized there's still a huge variation in ability at a biological level. Simple things like self discipline, intelligence etc etc. 

Yes, 1/2 of the population is below average!

I listened to Brinker back in the day. Can’t say that I ran out and invested in no load mutual funds though. But I did like his message. And as I think back, it was pure: invest in mutual funds, grow critical mass to FIRE.

A critical mass is fine though so we did OK and then we didn’t invest smartly early in those days, we did save a lot.

[lifeisshort123]

If I am lucky I will make it to top 7 percent in my field.

However, it amazes me how many spendthrifts I work with - many of whom who earn far less money than me.  Nearly everyone in my office’s plan is to work until they die and never retire.  Some are better than others about pretending it is their passion, but when you get them alone, many admit that it is because they have essentially nothing stashed for retirement.

I understood early on the importance of stashing away “something”.  I can’t say I have only made good financial decisions, there have been so many bad ones.  But I have to say, ALWAYS putting away “something”, no matter how rough things were, has really been a life raft more times than I can count.

I think Kyosaki calls it “paying yourself first”.  I don’t entirely subscribe to his theories though, as I’m not a big real estate guy, and he is much more open to debt and risk than I can stomach.  I get impatient paying things off at 0% interest even when I have the money to cover the expenses and am making money off the interest.

[LightStache]

Aren't we all here because we're trying not to be in any income class?

Channeling Piketty, I'd say trying to replace labor income with capital income.

[TomTX]

Require businesses to pay a decent living for all full time jobs and pro-rate part-time jobs.   Woo hoo!  Suddenly every person with a job can make ends meet and afford books for the kiddos.

Except that just feeds into inflation and increases the cost of everything while the government can collect more taxes.  I think the onerous demands on business are bad enough as it is with the current minimum wage requirements, or with needing to pay more to people that don't want to work while they live off the government dole.

Then drop CEO and manager and other highly paid people's wages to compensate for the extra costs.   Or pay lower dividends.   Or make lower profits.

No business that depends on its workers living in poverty deserves to exist -- ESPECIALLY if there's plenty of profits to hand to others who don't even work there.

Some types of businesses will fail because they are predicated on predatory labor treatment.   Good.    If people don't want to pay for the cost of goods that includes people not living in poverty to make them, then we are better off without those goods.

Other types of businesses will prosper.  And that's as it should be.

++ If your business can't afford to pay employees a decent wage, your business plan and/or execution is poor and you should do something else.

[TomTX]

For income distribution I usually talk about quintiles. Lowest 20% corresponds to working class income (because "lower" class is pejorative), middle 60% corresponds to middle class income, and top 20% corresponds to upper class income.

IMO, if you're not FI, you're working class. You have to work.

[TomTX]

Elon Musk had $0 of taxable income in 2020, so if we're only using incomes to determine this silly measuring then I'm way higher class than the wealthiest man on the planet! Take that Musk!

IIRC that was because he had overpaid the prior year's taxes.

I believe estimates of his 2021 taxes are around $12B.

[Michael in ABQ]

Based on the PEW calculator our household income would have to be $225,000 to be considered upper income tier in Albuquerque. However, that's with our family of 8. If I drop that down to the more typical family of 4 our income would only have to be $160,000. I think their calculator overestimates the marginal cost of additional kids - though I suppose if they build in the expectation of paying full college costs for every kid it would certainly add a significant amount.

[Money Saver 1]

My family is generally middle class.  My mother made poor choices that led to a bump into a lower rung of the ladder, disadvantaging my siblings and I,  and then some more unfortunate events led to my expulsion to the lower classes but I'm almost completely out of that hole now and back into the middle class.  I'm much better than that.

According to this
https://forum.mrmoneymustache.com/welcome-to-the-forum/upper-middle-class-definition/
Roughly half to 3/4 of my family is upper middle class.  No doctors or pilots or lawyers.

[GilesMM]

It's really more a lifestyle. 

If you are chronically unemployed or paid hourly, homeless or rent month-to-month, under-educated you may be lower class.
If you have live-in servants, multiple homes, inherited exclusive private club memberships, and multi-generational land and wealth, sit on various profit and non-profit Boards, you may be upper class.

Everyone else is middle class.

[Metalcat]

It's really more a lifestyle. 

If you are chronically unemployed or paid hourly, homeless or rent month-to-month, under-educated you may be lower class.
If you have live-in servants, multiple homes, inherited exclusive private club memberships, and multi-generational land and wealth, sit on various profit and non-profit Boards, you may be upper class.

Everyone else is middle class.

This has always kind of been MMM's whole point.

That you can spend A LOT of money and still be living a life that looks remarkably similar to someone who spends, say, only mid 5 figures each year.

I'm friends with a lot of very wealthy people, and everything they do is expensive, but yeah, for the most part it's still just crazy expensive versions of the same lifestyle that middle class folks live.

Without context cues as to *why* something costs 10-100 TIMES as much, it's actually kind of hard to distinguish from the outside why one person's ultra expensive lifestyle might actually cost that much more than a typical middle class lifestyle.

Like sure, anyone can tell that a pretty car is prettier than an ugly car, but unless you know cars, you wouldn't be able to tell just by looking at them why a certain pretty car costs as much as a house.

For example, my aunt and I both own summer homes. Hers is larger and more modern, mine is smaller, but an exquisitely maintained heritage home. Both have beautiful water views. Mine has more houses in the way, but the actual water view is much nicer, and the houses in the village add charm to the view, IMO.

Without knowing the reasons why real estate is so different in the two regions, no one from the outside would predict that my home is 86K and hers is 3-5M.

That said, there's no way I'm calling her "middle class" not when she's well into the 1% of wealth. Also, in my experience living among the ultra wealthy, a lot of those live-in-help, generational land types are actually a lot *less* wealthy than their newer wealth counterparts because many of the old wealth estates erode with every generation.

There are some families that have billions with chateaus next to families that *used to* have billions and living very similar lifestyles despite radically different levels of wealth.

And because their wealth is usually so frickin' hidden, it's hard to even say which family is which, especially with their penchant for making their kids financially fend for themselves until they inherit.

I've even seen multiple cases where the wealth is hidden from the kids. So they have no idea if they're going to inherit an enormous fortune or if they'll inherit an albatross of family land drowning in debt. It's like inheritance Russian roulette.

It can actually be very difficult to assess just how wealthy someone is based on their lifestyle, even when you know the context cues.

What you *can* reasonably decipher, if you know the cues, is what type of wealth the person wants you to perceive.

[SESW Tech]

Like many I struggle with the definition of Upper Class. We’re in the top 1% for both income and NW. Some years even the top 0.1% for income, our NW is probably there for our age. We own some kuxury goods (beach house, international vacations) but not others (fly coach, no luxury cars, public schools).  I certainly would nevercall ourselves upper class, but I wonder if that’s just that everyone defines “rich” as “people with three times as much money as me.”