Author Topic: $250K Middle Class?  (Read 12918 times)

dude

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$250K Middle Class?
« on: February 20, 2015, 07:51:17 AM »
This woman is apparently getting pilloried for claiming she's middle class in a $250K family with a $2million house (in Palo Alto).

http://finance.yahoo.com/news/university-michigan-student-insists-earning-183000778.html


MgoSam

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Re: $250K Middle Class?
« Reply #1 on: February 20, 2015, 08:37:02 AM »
Regional differences can account for much of this, but beyond that, her point is ignorant. Yes a $2M house is likely very nice, but it isn't the same as having a $2 M house in Minnesota where I live.

I've been in a $3 M house in Silicon Valley and yes it was nice, but it didn't look anything like a million dollar house. Had this been in Minnesota, it would be way under it, so looking at just the cost isn't the ideal way to go.

That said, no you are not part of the middle class. The problem, my guess is, is that you are surrounded by wealth and thus you think you aren't doing as well as you truly are, and likely are nearly all of your income, enough that you aren't saving and thus are always feeling pinched.

Middlesbrough

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Re: $250K Middle Class?
« Reply #2 on: February 20, 2015, 08:44:19 AM »
HCOL will kill you if you let it.

Numbers Man

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Re: $250K Middle Class?
« Reply #3 on: February 20, 2015, 08:56:55 AM »
I guess the middle class of Palo Alto still cry middle class when their $2 million homes appreciate by ridiculous amounts and pads the net worth well beyond the traditional definition of what is middle class.

vivophoenix

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Re: $250K Middle Class?
« Reply #4 on: February 20, 2015, 09:03:55 AM »
it seems that as the ability to obtain credit become wide spread,  the definition of class is changing.

Previously the lifestyle someone lived was a direct correlation to the amount of money they made,  because you could only spend what you had and thus saving was necessary to obtain homes, cars and other more expensive goods.

also there was a larger distinction between luxury goods and needs. im not referring to the difference between generational values, im referring to what was available to spend your money on. there were fewer 'cheap' luxury goods(i am defining  a cheap luxury good as something you could buy with out really having to save for. )  and few options for staples as well. (there was no organic vs regular. ) so there was literally less to spend your money on. so once your needs where met there was money left over to spend on other things with out feeling stretched too thin. frivolous things cost more in relation to what the average person made. People  literally didn't have the ability  to waste money in as many ways as today.  you could define middle class as having enough money to meet your needs, money to purchase a home, and money left over for a certain level of comfort.


now,  as people are able to flaunt  the image of wealth, without possessing actual wealth ie credit, combined with the availability of more things to spend your money on, one might make an argument that there are more items needed to differentiate yourself as middle class.


also you might point to the rising buying power of the lower classes,  100 years ago poverty meant starving and freezing to death in the streets.

class is no longer defined only by your job, or how much you make. it is the appearance of what you make ie what you have.  because even those in the bottom 10% have a color tv, and a cell phone.  now to differentiate your class from the others you 'need'  the more expensive color tv and cell phone. now you need internet, and usually need a car to work. and you need child care because there are more two working parent households.

so the argument is not about whether she is middle class, but how you define middle class.

is it how much money you make?

is it owning a home?

or is  it the ability to live with out fear of depending on a pay check ?


CommonCents

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Re: $250K Middle Class?
« Reply #5 on: February 20, 2015, 09:13:27 AM »
Regional differences can account for much of this, but beyond that, her point is ignorant. Yes a $2M house is likely very nice, but it isn't the same as having a $2 M house in Minnesota where I live.

I've been in a $3 M house in Silicon Valley and yes it was nice, but it didn't look anything like a million dollar house. Had this been in Minnesota, it would be way under it, so looking at just the cost isn't the ideal way to go.

That said, no you are not part of the middle class. The problem, my guess is, is that you are surrounded by wealth and thus you think you aren't doing as well as you truly are, and likely are nearly all of your income, enough that you aren't saving and thus are always feeling pinched.

Sadly, this is pretty common.

My husband insists we are middle class, despite having a combined income over $200k per year, and a net worth of over a million when including the paid off value of our house.  I can't get him to see that we are not middle class and we are actually quite privileged, because he 1) has a sky is falling view, and thinks the amount we need for retirement is *at least* 3x what anyone here would think, and 2) he compares how we are doing to others such as his brother (Harvard MBA who works a lot) or a well-off friend (VP of a major company who does very well in trading).  He very much has a woe is us attitude and pessimistic take on life.  It drives me bonkers.

As Vivo notes, the definition of middle class is unclear and the perception is not always the reality.  Because we don't spend like we have $200k+ with fancy vacations 2-3x a year, a new car (ours is a 2002 Honda Civic) and tons of "stuff", he feels we aren't as well off as others - even though he understands that show is not always reality and for example, we have more than my sister who does all of the above.  He feels like "life is hard and getting harder".  (Can I shake him like dogs do with misbehaving puppies?)

austin

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Re: $250K Middle Class?
« Reply #6 on: February 20, 2015, 09:22:54 AM »
I wouldn't be surprised if 99% of Americans considered themselves middle class.

Retire-Canada

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Re: $250K Middle Class?
« Reply #7 on: February 20, 2015, 09:37:30 AM »
I wouldn't be surprised if 99% of Americans considered themselves middle class.

I feel like I am in the middle class. My life looks middle class if you tally up everything other than my investment accounts.

In reality I've jumped around between top 3% - top 10% of Canadians for income.

I think almost anyone who does have someone wipe their ass in the morning and drive them around feels middle class.

-- Vik

MgoSam

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Re: $250K Middle Class?
« Reply #8 on: February 20, 2015, 11:08:44 AM »
Another thing that I think about when someone talks about being 'middle class,' is that they may have a different view of what it means than I do. I don't really have a set view, and don't care to, I make money and I spend money, my goal is to maximize the former and minimize the latter, knowing that I will be investing the difference. Eventually my return will be greater than what I am spending, and once I hit this, I will have achieved FIRE.

For someone making $250,000 in southern California, I can imagine that they aren't saving very much. So for them, they may feel a lot more pressure than I do, even though they make significantly more. Should I be laid off and have no additional money coming in, I have 14 years worth of living expenses (not counting investment returns) saved up. They may not. 

Travis

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Re: $250K Middle Class?
« Reply #9 on: February 20, 2015, 11:22:16 AM »
Regardless of cost of living, isn't there an IRS or some formal definition of a middle-class income?  Every time I hear about changes to tax policy, $250k household income seems to be the talking point.  Whether that's middle class or upper class I'm not sure.  I'm not comfortable with pinning "class" on lifestyle or expenses since we in this community buck the trend as hard as possible.  There are plenty of us with income below $100k, but due to our lifestyle choices we have investment portfolios that put mid 6-figure earners to shame.

vivophoenix

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Re: $250K Middle Class?
« Reply #10 on: February 20, 2015, 11:35:11 AM »
Regardless of cost of living, isn't there an IRS or some formal definition of a middle-class income?  Every time I hear about changes to tax policy, $250k household income seems to be the talking point.  Whether that's middle class or upper class I'm not sure.  I'm not comfortable with pinning "class" on lifestyle or expenses since we in this community buck the trend as hard as possible.  There are plenty of us with income below $100k, but due to our lifestyle choices we have investment portfolios that put mid 6-figure earners to shame.

no ,  there is not a standard definition of middle class.

 this community isn't that special, it hasnt  foregone certain purchases, ie  computers, houses, and stocks..... ( things that mark a certain class distinction)
regardless of whether you purchasing stock in lieu of starbucks you are still maintaining a certain type  lifestyle.  this community can afford to live and place a large amount of their earnings into savings.

also i dont think using $100k as some arbitrary bench mark proves the point i think you are trying to make.


as i stated before middle class no longer just a  function of your earnings,  but also of your spending.

SF Semi-Mustache

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Re: $250K Middle Class?
« Reply #11 on: February 20, 2015, 11:42:58 AM »
My coworkers do this.  Every associate at my firm makes between $160k-280k per year plus bonus ($10k-$100k).  And sure, the junior folks are often heavily indebted, and sure, we live in San Francisco.  But people whine about how their friends at various tech companies are selling their stock and buying $1.5 million condos, etc., and how they feel middle class here.  Even when I was spendier (my first year), I saw how ridiculous this was. 

austin

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Re: $250K Middle Class?
« Reply #12 on: February 20, 2015, 11:45:44 AM »
Can it at least be agreed that the upper 20% and lower 20% or earners in a region or city are not "middle", or would that be too damaging to some folks' self-image?

vivophoenix

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Re: $250K Middle Class?
« Reply #13 on: February 20, 2015, 11:52:49 AM »
Can it at least be agreed that the upper 20% and lower 20% or earners in a region or city are not "middle", or would that be too damaging to some folks' self-image?

 id be curious to see if income actually fits a bell curve.....

Mike

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Re: $250K Middle Class?
« Reply #14 on: February 20, 2015, 12:01:07 PM »
Even after taxes and housing-related costs, that family would still have at least $80,000.  If we assume they invest the maximum pretax for 401k's, that number is still a bit north of $50,000 per year. 

In other words, their left over money after taxes, housing, and the maximum 401k investment for a married couple still equals the median household income in the US.  Yes, Palo Alto is an expensive area, but the vast majority of that is due to housing costs.  The other categories are only a bit more costly than the national average.

If I'm a family of four (or three or whatever hers is) and have $50,000 per year to handle non-housing expenses, I'm feeling pretty damn good...and definitely not middle class.

Lkxe

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Re: $250K Middle Class?
« Reply #15 on: February 20, 2015, 12:15:00 PM »
Can it at least be agreed that the upper 20% and lower 20% or earners in a region or city are not "middle", or would that be too damaging to some folks' self-image?

 id be curious to see if income actually fits a bell curve.....

There is a bell but mostly L http://en.wikipedia.org/wiki/File:Distribution_of_Annual_Household_Income_in_the_United_States.png

phillyvalue

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Re: $250K Middle Class?
« Reply #16 on: February 20, 2015, 12:16:10 PM »
It really just depends on how you frame a person's choice to live in a particular area. If you interpret the decision to live in a HCOL area as a consumption choice, then a lot of the arguments fade away. For someone living in Manhattan making $200K, this interpretation would imply "He is solidly upper middle class, and decides to spend a ton of his money to live on an exclusive island with other upper middle class and rich people." Or, you can take the other approach and interpret it as, "He has to live in NYC to have that job, therefore despite making $200K, he is only middle class."

« Last Edit: February 20, 2015, 12:17:50 PM by phillyvalue »

mak1277

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Re: $250K Middle Class?
« Reply #17 on: February 20, 2015, 12:16:58 PM »
I think it's a matter of degrees, and I think that someone making $250k/year has more in common with someone making $50k per year than they do with someone making $1.25M per year.

vivophoenix

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Re: $250K Middle Class?
« Reply #18 on: February 20, 2015, 12:24:38 PM »
Can it at least be agreed that the upper 20% and lower 20% or earners in a region or city are not "middle", or would that be too damaging to some folks' self-image?

 id be curious to see if income actually fits a bell curve.....

There is a bell but mostly L http://en.wikipedia.org/wiki/File:Distribution_of_Annual_Household_Income_in_the_United_States.png

thanks so much for that

 if you try and go 20% on either end that leaves alot of wiggle room . so,  once again, it depends on your definitions of middle class. i suspected the curve would look like this, but i didnt want to feel that much introspection on a Friday afternoon.

this reinforces my idea that middle class isnt income its assets and spending.

mlipps

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Re: $250K Middle Class?
« Reply #19 on: February 20, 2015, 12:31:41 PM »
I think a distinction can be made between those who ARE middle class and those who live a middle class lifestyle. This woman, and most of us, probably fall into the second category even if we don't fit into the first.

Commoncents, I totally understand. My husband and I have been arguing because we want to buy a house and he's upset that we can't buy one yet. However, we are only 25 and made over $100k last year. I think it's ridiculous to feel sorry for ourselves in this situation.

thd7t

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Re: $250K Middle Class?
« Reply #20 on: February 20, 2015, 12:43:48 PM »
With a median family income of $163,661, Palo Alto's median was just a few thousand dollars shy of Bethesda, Maryland and Greenwich, Connecticut, which were the top two high earning towns in the country.Oct 12, 2012

This was a quick google result on the average income Palo Alto.

Her family earns 56% more than the average in the third highest income community in the nation.  I realize that her argument is that her lifestyle is not extravagant, but in the MMM community, I think that we can see that many people live extravagant lives without noticing.

CommonCents

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Re: $250K Middle Class?
« Reply #21 on: February 20, 2015, 12:44:16 PM »
I think it's a matter of degrees, and I think that someone making $250k/year has more in common with someone making $50k per year than they do with someone making $1.25M per year.

The person making $50k might disagree.

It's said that Eskimos have 50 words for snow.  I think the issue here is that to most people, there are only three categories: poor, middle class, and rich.  If you add more categories, such as "ultra-rich" to the above example, I think it becomes more obvious that the $250k person is not middle class...even if the $1.25M person is even wealthier than they are and might be "ultra-rich" or some other term.  For all but one person, there is a *always* going to be someone richer than you...

dude

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Re: $250K Middle Class?
« Reply #22 on: February 20, 2015, 12:54:44 PM »
Yeah, it's weird, because I grew up solidly lower middle class.  Blue collar parents, 4 kids (+ child support for 2 more my stepdad was paying), in rented apartments for most of my adolescence. And I guess I've never been able to really escape feeling middle class, even though DW and I are now firmly ensconced in the top 5%.  It still boggles my mind, really, that we're in the 95th percentile.  And yeah, most of my friends (law school grads) have higher household incomes so that probably has something to do with me still feeling middle class. Besides frequent vacations (budget ones at that), I'm not a conspicuous consumer -- my clothes are almost all Old Navy, my car is a nearly 8 year old Subaru Outback, I don't dine at the finest restaurants (though I do frequent some good ones), etc.

Bottom line is that though I may feel middle class, by virtue of being in the top 5% of income earners we're probably not, though I suppose one might call us "upper middle class" (isn't that what the professional class - doctors, lawyers, engineers, etc -- used to be called?).

vivophoenix

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Re: $250K Middle Class?
« Reply #23 on: February 20, 2015, 01:26:07 PM »
sounds like everyone should stop hanging out in tiny socio-economic bubbles of lawyers and white collar workers.

then they wouldn't feel "poor"

neil

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Re: $250K Middle Class?
« Reply #24 on: February 20, 2015, 01:41:25 PM »
I think what people believe "rich" should feel is not how they feel, and that feeling is what they would need to have to consider themselves upper class.  A typical family, outside of housing costs which are too variable to compare, is basically in the $30K range, but increasing this even to $100K doesn't really mean you can do whatever you want and relieve yourself of mundane tasks.  Plus, the money is usually used to buy things that don't really improve lifestyle and they get in the rut of working hard to obtain those new things you are now buying.

There's also a vast range of things you can do that would put you in the upper 20%:

- Run your own business making $100K/year for 10 years
- Work as an employee on $200K salary for 10 years

I would imagine even if both these people were MMM frugal, the business owner likely feels "rich" compared to the employee.  The employee has long been FI and probably wants to retire, but is not used to running his life without the support of a corporation.  The business owner is probably more happy to continue the path even while realizing FI is imminent.  I would not be surprised if the business owner FIREs first even if they love their business because they understand and value the independence and more easily recognize they have the option.

RFAAOATB

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Re: $250K Middle Class?
« Reply #25 on: February 20, 2015, 01:53:13 PM »
sounds like everyone should stop hanging out in tiny socio-economic bubbles of lawyers and white collar workers.

then they wouldn't feel "poor"

The best way to look thin is to hang out with fat friends.  I may be tempted to make my next move in the poor part of town as long as I'm not worried about tweakers breaking in to my car or crib.  That and car noises, bass, and domestic disturbances will edge me closer to a nicely gentrifying area.  I'm surprised home invasion isn't becoming a bigger concern.  I hope shoplifting stays a better risk/reward criminal proposition for a long time. 

My other idea is buying a 250k 3 tenant building in the city, raising the rent until the tenants move out, and having the whole thing to myself.  I'll renovate it to make it a multi generational family dwelling, and encourage others to do the same so I can get in on the ground floor and start my own gentrifying neighborhood.

vivophoenix

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Re: $250K Middle Class?
« Reply #26 on: February 20, 2015, 02:02:12 PM »
sounds like everyone should stop hanging out in tiny socio-economic bubbles of lawyers and white collar workers.

then they wouldn't feel "poor"

The best way to look thin is to hang out with fat friends.  I may be tempted to make my next move in the poor part of town as long as I'm not worried about tweakers breaking in to my car or crib.  That and car noises, bass, and domestic disturbances will edge me closer to a nicely gentrifying area.  I'm surprised home invasion isn't becoming a bigger concern.  I hope shoplifting stays a better risk/reward criminal proposition for a long time. 

My other idea is buying a 250k 3 tenant building in the city, raising the rent until the tenants move out, and having the whole thing to myself.  I'll renovate it to make it a multi generational family dwelling, and encourage others to do the same so I can get in on the ground floor and start my own gentrifying neighborhood.


according to you,  if you can't live with white collar  workers or  lawyers, its a poor neighborhood full of thieves,  tweakers, domestic abuse and loud disturbances ?

i was making a point that if you only hang out with the top  25% earners,   its easy to think you are average.


so the you think your other option is to slowly move the 'violent, criminal'  low income people out via gentrification?

wow that's an extremely ignorant and arrogant response.

Middlesbrough

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Re: $250K Middle Class?
« Reply #27 on: February 20, 2015, 02:03:06 PM »
sounds like everyone should stop hanging out in tiny socio-economic bubbles of lawyers and white collar workers.

then they wouldn't feel "poor"

The best way to look thin is to hang out with fat friends.  I may be tempted to make my next move in the poor part of town as long as I'm not worried about tweakers breaking in to my car or crib.  That and car noises, bass, and domestic disturbances will edge me closer to a nicely gentrifying area.  I'm surprised home invasion isn't becoming a bigger concern.  I hope shoplifting stays a better risk/reward criminal proposition for a long time. 

My other idea is buying a 250k 3 tenant building in the city, raising the rent until the tenants move out, and having the whole thing to myself.  I'll renovate it to make it a multi generational family dwelling, and encourage others to do the same so I can get in on the ground floor and start my own gentrifying neighborhood.
But if you begin living there, how will you not be killed the first day you walk out of your apartment by all the scary people?

RunHappy

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Re: $250K Middle Class?
« Reply #28 on: February 20, 2015, 02:03:32 PM »
Technically speaking I would say the majority of Americans are middle class.    If we are going by strict (google) definition the middle class is "the social group between the upper and working classes, including professional and business workers and their families".  I read this definition as, if you're not in poverty and not in the 1% then you are middle class.  However it is one of those terms that no one can agree on the definition. 


CanuckExpat

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Re: $250K Middle Class?
« Reply #29 on: February 20, 2015, 02:30:41 PM »
However it is one of those terms that no one can agree on the definition.
According to Wikipedia at least, modern sociologists agree, even if no one else does:
Quote
The American middle class .. concept is typically ambiguous in popular opinion and common language use, contemporary social scientists have put forward several more or less congruent theories on the American middle class. Depending on the class model used, the middle class constitutes anywhere from 25% to 66% of households.

According to the same article, our friend in Palo Alto would fall into the "upper middle class" by these definitions (in both 1984 and 2014) if I am reading this right:


For what it's worth.

thd7t

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Re: $250K Middle Class?
« Reply #30 on: February 20, 2015, 02:44:26 PM »
However it is one of those terms that no one can agree on the definition.
According to Wikipedia at least, modern sociologists agree, even if no one else does:
Quote
The American middle class .. concept is typically ambiguous in popular opinion and common language use, contemporary social scientists have put forward several more or less congruent theories on the American middle class. Depending on the class model used, the middle class constitutes anywhere from 25% to 66% of households.

According to the same article, our friend in Palo Alto would fall into the "upper middle class" by these definitions (in both 1984 and 2014) if I am reading this right:


For what it's worth.
I like your chart, but I'm dubious of it.  The taxable income for upper middle class there starts at the 76% range of income.

MoneyCat

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Re: $250K Middle Class?
« Reply #31 on: February 20, 2015, 02:49:37 PM »
Here in NJ, people cry poverty all the time when they have incomes of $250,000.  It's ridiculous.  It's their choice to live in Short Hills in multimillion dollar homes and pay $40,000 a year in property taxes.  Nobody put a gun to their heads and forced them to do it.

RFAAOATB

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Re: $250K Middle Class?
« Reply #32 on: February 20, 2015, 03:17:52 PM »
Here in NJ, people cry poverty all the time when they have incomes of $250,000.  It's ridiculous.  It's their choice to live in Short Hills in multimillion dollar homes and pay $40,000 a year in property taxes.  Nobody put a gun to their heads and forced them to do it.

They may be scared of the guns in the non multimillionaire dollar home areas.

But if you begin living there, how will you not be killed the first day you walk out of your apartment by all the scary people?
Perhaps I need to open carry everywhere.  That'll show 'em I'm not to be messed with.  I'm more worried about car and home break ins.  And the bass...

Despite the sensational news reports I keep hearing crime is trending down, and it is quite acceptable to live in an up and coming area.  I'm pretty much living in a condo complex with bass, crazies, and domestic disturbances across the street in hearing distance.  There's also been car break ins from malicious teenagers.  We also have homeless hiding under a utility access area or the laundry room to sleep until we boarded that up.  The elderly, military, and veteran residents have enough stabilizing influence that it isn't too chaotic and problems are rare.  I just realize the problem with living in real estate cheaper than you can afford is living next to people who can only afford to live there.  I lucked out now relatively. but I'm not sure if I want to do the same on my next move.   

MoneyCat

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Re: $250K Middle Class?
« Reply #33 on: February 20, 2015, 03:52:48 PM »
Here in NJ, people cry poverty all the time when they have incomes of $250,000.  It's ridiculous.  It's their choice to live in Short Hills in multimillion dollar homes and pay $40,000 a year in property taxes.  Nobody put a gun to their heads and forced them to do it.

They may be scared of the guns in the non multimillionaire dollar home areas.


Ooh, I bet people are really scary in NYC too.  Are you from Arkansas or something?

Middlesbrough

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Re: $250K Middle Class?
« Reply #34 on: February 20, 2015, 04:17:52 PM »
I just realize the problem with living in real estate cheaper than you can afford is living next to people who can only afford to live there.
I guess I have lived in two of these neighborhoods now for the last three years. People are people and everyone wants the best for themselves. A smile and the right attitude go a long way. I have never felt threatened in my neighborhood, but I also don't appear different than anyone else around me.

RFAAOATB

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Re: $250K Middle Class?
« Reply #35 on: February 20, 2015, 04:33:33 PM »
I just realize the problem with living in real estate cheaper than you can afford is living next to people who can only afford to live there.
I guess I have lived in two of these neighborhoods now for the last three years. People are people and everyone wants the best for themselves. A smile and the right attitude go a long way. I have never felt threatened in my neighborhood, but I also don't appear different than anyone else around me.

As has been my experience.  I'm just waiting for my net worth and income to get to the level where I can get the big house on the big side of town without stretching. 

Capsu78

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Re: $250K Middle Class?
« Reply #36 on: February 20, 2015, 04:52:05 PM »
The only thing I can add to this pot luck is that if you drive east to west from any freeway exit in Palo Alto, from the SF Bay to the hills, you will see all levels of socio economic America compressed into a very tight area.
Perhaps the $250,000 income early in your career, without the benefit of long term home ownership in that zip code, merely places you in the "middle" of the classes... enough to get you to the edge of the "edginess" but not nearly enough to get you up the hill.

Jack

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Re: $250K Middle Class?
« Reply #37 on: February 20, 2015, 05:19:54 PM »
I think what people believe "rich" should feel is not how they feel, and that feeling is what they would need to have to consider themselves upper class.  A typical family, outside of housing costs which are too variable to compare, is basically in the $30K range, but increasing this even to $100K doesn't really mean you can do whatever you want and relieve yourself of mundane tasks.

The Hell it doesn't! Increasing from $30k to $100k means you could pay somebody else the "typical" $30k (twice over!) to do your mundane tasks for you. That's rich.

gimp

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Re: $250K Middle Class?
« Reply #38 on: February 20, 2015, 07:02:46 PM »
Everyone thinks they're middle class. I define it as the median 60%. If you ask people about their incomes and where they think they lie, it'd be more like the middle 98% or so. Especially when someone in SV earning $250k as a family looks at their neighbors earning $500k as a family, with a house twice as big and cars twice as expensive...

It's almost as if being middle class is virtuous. "You're normal americans." It's not virtuous any more than being rich or poor implies anything about your quality as a person. "Well, poor people are lazy and rich people are thieves. I don't want to be either of those."

I love listening to some private-college-educated kid, from a family of reasonable means, talking about straight up wealth redistribution and railing against "the ruling class" as if he's not one of them. He'll turn into middle management soon enough...

I'll sit here and count my money, and my blessings.

CCCA

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Re: $250K Middle Class?
« Reply #39 on: February 20, 2015, 08:04:25 PM »
We live in the Bay Area as well though out prices about 1/3 to 1/2 of Palo Alto. But we acknowledge that by most measures we have a lot of income relative to the rest of the country about $160k/yr.

However one can make the argument that one is living a middle class lifestyle if you spend a similar amount of money besides housing expenses. For example we spend about $36k for a family of four outside of housing and childcare. Not exactly mustachian but certainly is in the range of many Americans who are solidly in the middle class. So we have all we need and lots of things we don't exactly need but we aren't living like we're 'rich'. 

That said we are saving lots and don't have to worry about money.  So we are rich. But I guess the question is can you be middle class and rich at the same time?  I think many mustachians could fall into that category.

TheNewNormal2015

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Re: $250K Middle Class?
« Reply #40 on: February 20, 2015, 08:34:35 PM »
I will play devil's advocate.

First of all, the roughly $50k median household income estimate is for all households, including Millenials just starting their careers and retirees.  The median for households with college age children is undoubtedly higher, as that puts the parents in what should be their peak earning years.

The national $50k median also does not include government transfers, including disability, unemployment assistance, welfare, food stamps or social security.

Lastly, taxes are extremely burdensome in CA.  State income tax rate maxes out at 12.3%, Palo Alto sales tax is 8.75%, and property taxes are almost $8 per $10k assessed value.  The median house costs $1.8mm, making the median property tax bill over $10k a year.

So allowing for the above, the editorial writer could be considered to be in the middle class of that particular area in the world.

mm1970

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Re: $250K Middle Class?
« Reply #41 on: February 20, 2015, 09:42:24 PM »
However it is one of those terms that no one can agree on the definition.
According to Wikipedia at least, modern sociologists agree, even if no one else does:
Quote
The American middle class .. concept is typically ambiguous in popular opinion and common language use, contemporary social scientists have put forward several more or less congruent theories on the American middle class. Depending on the class model used, the middle class constitutes anywhere from 25% to 66% of households.

According to the same article, our friend in Palo Alto would fall into the "upper middle class" by these definitions (in both 1984 and 2014) if I am reading this right:


For what it's worth.
Very interesting.

In 1984, my family was somewhere between lower middle and "upper lower".  They were "upper lower" on income but were homeowners.

Now my spouse and I are upper middle

Mike

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Re: $250K Middle Class?
« Reply #42 on: February 20, 2015, 09:49:27 PM »
Lastly, taxes are extremely burdensome in CA.  State income tax rate maxes out at 12.3%, Palo Alto sales tax is 8.75%, and property taxes are almost $8 per $10k assessed value.  The median house costs $1.8mm, making the median property tax bill over $10k a year.
I already addressed this.  Even allowing for their state income tax and property tax hit, the family in question would have somewhere between $50k and $80k per year after housing costs and taxes are taken into account(range depends on how much they are investing pre-tax).  That's a substantial amount of disposable income.

mak1277

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Re: $250K Middle Class?
« Reply #43 on: February 21, 2015, 11:33:28 AM »
Lastly, taxes are extremely burdensome in CA.  State income tax rate maxes out at 12.3%, Palo Alto sales tax is 8.75%, and property taxes are almost $8 per $10k assessed value.  The median house costs $1.8mm, making the median property tax bill over $10k a year.
I already addressed this.  Even allowing for their state income tax and property tax hit, the family in question would have somewhere between $50k and $80k per year after housing costs and taxes are taken into account(range depends on how much they are investing pre-tax).  That's a substantial amount of disposable income.

Yes it is a lot. But it's not enogh to do literally anything you could ever want, with no regard for money. And (right or wrong) I think that's hoe many people would describe being "rich".

TheNewNormal2015

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Re: $250K Middle Class?
« Reply #44 on: February 21, 2015, 12:23:48 PM »
Lastly, taxes are extremely burdensome in CA.  State income tax rate maxes out at 12.3%, Palo Alto sales tax is 8.75%, and property taxes are almost $8 per $10k assessed value.  The median house costs $1.8mm, making the median property tax bill over $10k a year.
I already addressed this.  Even allowing for their state income tax and property tax hit, the family in question would have somewhere between $50k and $80k per year after housing costs and taxes are taken into account(range depends on how much they are investing pre-tax).  That's a substantial amount of disposable income.

I think it would also be fair to point out that given the family's high income that they would not qualify for any grants or significant financial aid, so they would be paying full freight tuition at U of M.  This differs from someone who lived in a very LCOL area and had the same $50-80k disposable income (which would obviously need to be discounted based on COL) who would receive a significant discount to the sticker price.

MilwaukeeStubble

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Re: $250K Middle Class?
« Reply #45 on: February 23, 2015, 10:00:25 AM »

Lastly, taxes are extremely burdensome in CA.  State income tax rate maxes out at 12.3%, Palo Alto sales tax is 8.75%, and property taxes are almost $8 per $10k assessed value.

I'm confused.  What do you mean by $8 per $10k?  My property taxes are considered quite high locally, but even they work out to about $270 / $10k.  If $8 is considered burdensome I might need to move.

Do you mean $8/mo (I don't think I've heard property taxes referred to that way) or $80/$10k?  Either of those would get a $1.8MM house over $10k/yr.

*Disclaimer: It's entirely possible that my math just sucks

zephyr911

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Re: $250K Middle Class?
« Reply #46 on: February 23, 2015, 02:46:26 PM »
Having read through all the comments, my most interesting takeaway:

Most of the nation doesn't feel the need to distinguish between middle-class income and middle-class lifestyle, because they spend most or all of what they make. MMM readers and other frugal types, FI seekers et al, actually make the distinction meaningful by often earning high-percentile income but squeezing a good lifestyle out of lower-class amounts.

So, for those with a high SR, what's middle class? I would vote that spending level is more likely to define it, as long as the appropriate caveats are included. My wife and I are fortunate to gross about 140k with LCOL, and avoiding lifestyle creep is pushing our SR past 50%. Are we middle-class? Our income is probably at least "upper" for our area, but our street is blue-collar (I couldn't fucking stand the snobfest gated community where our 180k townhome was a hut compared to the lakefront mansions, which is half of why we rented it out). Our house is half the size and a third the price of my typical co-worker's McMansion. But I'm rambling.

You know what I think matters the most? Being happy and not fixating on labels. I think it's sad that our society is so status-obsessed that this girl feels the need to justify her choice of label. Who cares?

MrsPete

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Re: $250K Middle Class?
« Reply #47 on: February 27, 2015, 07:14:15 AM »
I wouldn't be surprised if 99% of Americans considered themselves middle class.
I read something -- it's been a while, couldn't say where -- that reinforces this idea.  Apparently MOST Americans think of themselves as middle class, even if their income says they're not.  I'm guilty of this double-think myself:

- Our income says that we're lower upper class (not according to the above chart, which seems unrealistic for my low cost of living area); that is, we're well above average in terms of salary and definitely in terms of savings. 
- But our lifestyle looks more like upper lower class; we live in a modest house in an older neighborhood, drive economy cars, wear our clothes 'til they're genuinely worn, carry our lunch to work. 
- Yet I tend to think of our financial earnings as middle-middle America. 
« Last Edit: February 27, 2015, 07:16:11 AM by MrsPete »

RexualChocolate

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Re: $250K Middle Class?
« Reply #48 on: February 27, 2015, 07:35:18 AM »
I like how she starts with that ridiculous assumption, and then goes on to preach about how evolved Silicon Valley is and how anti consumerist California is. Versus the Midwest.

Right.