Author Topic: What is the middle class?  (Read 31897 times)

Murse

  • Pencil Stache
  • ****
  • Posts: 542
What is the middle class?
« on: February 06, 2015, 08:18:22 AM »
This question popped in my head this morning. The reason it is interesting to me is because I have always been told (and believed) my family is a typical middle class family. Now that I am older, and know that my family makes close to 200k/year, I just don't understand this thinking. I assume everyone has a different definition of middle class. I decided to google it to see if there was a solid definition and couldn't find one. I did find financial samuria's post on it and he simply said + or -50% of the median household income in your region. Well, that led to another Google search and I found that in the US (yes I understand this is not a specific region) I found that the median HOUSEHOLD income is somewhere between 50-60k/year. That means by his definition any household making over 90k is upper class or I guess you could argue upper middle class. That then leads me to the conclusion (based on my assumption that the majority of households are double income) that if an individual makes > 45k/year that they are also upper-middle/upper class.

This is a complete paradigm shift for me. I always believed that I grew up in a middle class family. I always thought that my family struggled with money because their income was just like everyone else. Really they have just been irresponsible. Also, this completely makes me rethink my career choice. As some may remember I posted awhile back about going to school for a masters to increase my earning potential. After some soul searching I discovered I wanted the masters for my ego and income more then the job role itself. Looking at these numbers I can see that my chosen profession in my region of the country puts me above median household incomes as an individual.

This also makes me question the MM community. I was under the impression MMM was supposed to help the middle class but my perception is the community that posts here is mostly upper class. My questions are:
What is the line between middle/upper-middle/ and upper class in your mind (based on income.)
Why can our population go through life believing they are middle class when they have an income 4x the median?

nanu

  • Bristles
  • ***
  • Posts: 345
  • Age: 31
  • Location: Cambridge, MA
Re: What is the middle class?
« Reply #1 on: February 06, 2015, 08:30:12 AM »
First, I don't think $200K/year can be considered middle class - this is in the top 10% of the population.
I would say that middle class should be between the 30th and 70th percentile of the population, give or take.
However, there is no strict definition on "middle class" and therefore constant arguments about this.
Another issue is that middle/upper class can be thought of both in terms of actual wealth (net worth) as well as income. This can really change what you consider each person to be.

I would say that you can have a really high income ($200K/year) and still feel middle class because of several things:
1. You spend all your money on stuff, and there is always more stuff to buy
2. You live paycheck to paycheck, because of spending so much money
3. A lot of your money goes to debt repayment (credit cards, auto loans, etc') which is pretty much money down the drain.
4. You know people that have much nicer stuff, so by comparison, you don't think of yourself as high class
5. Similar to #4, you think of upper-class as truly wealthy people that you see on TV (movie stars, singers, CEOs of large companies) and don't realize they are the top 1% (or less) and instead think you need at least as much to be considered upper-class.

Murse

  • Pencil Stache
  • ****
  • Posts: 542
Re: What is the middle class?
« Reply #2 on: February 06, 2015, 09:00:27 AM »
First, I don't think $200K/year can be considered middle class - this is in the top 10% of the population.
I would say that middle class should be between the 30th and 70th percentile of the population, give or take.
However, there is no strict definition on "middle class" and therefore constant arguments about this.
Another issue is that middle/upper class can be thought of both in terms of actual wealth (net worth) as well as income. This can really change what you consider each person to be.

I would say that you can have a really high income ($200K/year) and still feel middle class because of several things:
1. You spend all your money on stuff, and there is always more stuff to buy
2. You live paycheck to paycheck, because of spending so much money
3. A lot of your money goes to debt repayment (credit cards, auto loans, etc') which is pretty much money down the drain.
4. You know people that have much nicer stuff, so by comparison, you don't think of yourself as high class
5. Similar to #4, you think of upper-class as truly wealthy people that you see on TV (movie stars, singers, CEOs of large companies) and don't realize they are the top 1% (or less) and instead think you need at least as much to be considered upper-class.
Thanks for the response, I mostly did this to stir up conversation. I would like people's opinions. I want to know what others think and why they think it.

 I would love to see my families expenses but my dad is... Embarrassed. There problem is definitely "stuff." Clothes, coffee makers, computers, iPads, desks (yes for realzies,) I can only imagine the food expenses is astronomical, subscriptions, every channel you could possibly imagine, wifi TV's ect... I can see you all thinking now "how did he think he grew up normal?" Well up until 8 years ago it was a single income household probably around 100k at the time with 6 kids and 12k/year in child support. Looking back I can see how when the second income began to come in it was all eaten up in lifestyle inflation.

dantownehall

  • Stubble
  • **
  • Posts: 152
Re: What is the middle class?
« Reply #3 on: February 06, 2015, 09:04:15 AM »
Virtually everyone in America believes they belong to the middle class, which makes it an absolutely useless category (which in turn makes it a very popular term with politicians who can make it mean anything that suits their purposes).

neophyte

  • Pencil Stache
  • ****
  • Posts: 560
  • Location: A wretched hive of scum and villainy
Re: What is the middle class?
« Reply #4 on: February 06, 2015, 09:09:11 AM »
Middle class is a state of mind.

Don't think you're dirt poor?  You're middle class.  Don't think you are filthy rich? You are middle class.

2Birds1Stone

  • Walrus Stache
  • *******
  • Posts: 5616
  • Age: 1
  • Location: Earth
  • K Thnx Bye
Re: What is the middle class?
« Reply #5 on: February 06, 2015, 09:14:43 AM »
$200k/yr puts your family in the 92nd percentile for income. Definitely not middle class. $110k/yr puts someone in the 70th percentile. (This is for a family not individual incomes)

Fodder

  • Stubble
  • **
  • Posts: 217
  • Location: Ottawa, ON
Re: What is the middle class?
« Reply #6 on: February 06, 2015, 09:17:15 AM »
There has been a lot of discussion of the term "middle class" in Canadian media lately.  I always would have considered myself middle class (as do most Canadians) but according to the definitions, I guess I am not.

http://www.cbc.ca/news/politics/middle-class-politics-who-belongs-to-this-vote-rich-group-1.2939750

morning owl

  • Stubble
  • **
  • Posts: 231
  • Location: Canada
Re: What is the middle class?
« Reply #7 on: February 06, 2015, 09:19:48 AM »
There is definitely a difference between a $200k income in HCOL area vs $200k in a LCOL area. $200k in a HCOL area does not get you very far, unless you are entirely aware of your purchases in a Mustachian kind of way. I'd say it's very easy to feel middle class on that income if your basic expenses (housing, food) are high. There are many, many people with this kind of income where I live who feel broke. I do not think they would think of themselves as 'upper class.'

It's the Mustachians who can see this income for what it is -- i.e., a ton of cash, and an opportunity not to be squandered.

dad_of_four

  • 5 O'Clock Shadow
  • *
  • Posts: 10
Re: What is the middle class?
« Reply #8 on: February 06, 2015, 09:25:09 AM »
Quote
This also makes me question the MM community. I was under the impression MMM was supposed to help the middle class but my perception is the community that posts here is mostly upper class.

This is a good point. I really enjoy this blog, and the mission of it. But I feel like it does tend to skew towards people who are making very good incomes to start with, who just need motivation to drastically cut expenses.

This blog wouldn't have been that helpful to me, for example, when I was making about $40K many years ago after being divorced, paying a big chunk of salary towards child support, and barely scraping by every week. I didn't spend much, saved everywhere I thought I could, but still racked up a little debt.  But now, with a much higher household income, MMM's approach is very useful.




netskyblue

  • Pencil Stache
  • ****
  • Posts: 630
  • Location: Midwest USA
Re: What is the middle class?
« Reply #9 on: February 06, 2015, 09:25:28 AM »
If I were going to define "middle class" arbitrarily, I'd say the middle 50% of household income. 

25% working class/poor, 50% middle class, 25% upper class.

You could probably break down the lower 25% into "abject poverty," "poor," and "working class."   And the upper 25% into "upper class," "rich," and "filthy rich."

Edit: but like others have said, I don't think you can count all of the United States in the same boat.  You have to look at a geographic area.  The middle 50% living in Manhattan probably make more than the middle 50% living in Alabama.
« Last Edit: February 06, 2015, 09:27:53 AM by netskyblue »

neo von retorch

  • Magnum Stache
  • ******
  • Posts: 3362
  • Location: SE PA
    • Fi@retorch - personal finance tracking
Re: What is the middle class?
« Reply #10 on: February 06, 2015, 09:28:05 AM »
I like this Wikipedia graphic for income (from 2012) - if we define middle class as household incomes between 25% and 75% then roughly the group earning $25k-85k


JLee

  • Walrus Stache
  • *******
  • Posts: 5630
Re: What is the middle class?
« Reply #11 on: February 06, 2015, 09:29:59 AM »
Quote
This also makes me question the MM community. I was under the impression MMM was supposed to help the middle class but my perception is the community that posts here is mostly upper class.

This is a good point. I really enjoy this blog, and the mission of it. But I feel like it does tend to skew towards people who are making very good incomes to start with, who just need motivation to drastically cut expenses.

This blog wouldn't have been that helpful to me, for example, when I was making about $40K many years ago after being divorced, paying a big chunk of salary towards child support, and barely scraping by every week. I didn't spend much, saved everywhere I thought I could, but still racked up a little debt.  But now, with a much higher household income, MMM's approach is very useful.
Absolutely. It's a lot easier to save $50k/yr when you are making $100k than it is to save $10k/yr when you're making $20k. IMO anyway.

There is definitely a difference between a $200k income in HCOL area vs $200k in a LCOL area. $200k in a HCOL area does not get you very far, unless you are entirely aware of your purchases in a Mustachian kind of way. I'd say it's very easy to feel middle class on that income if your basic expenses (housing, food) are high. There are many, many people with this kind of income where I live who feel broke. I do not think they would think of themselves as 'upper class.'

It's the Mustachians who can see this income for what it is -- i.e., a ton of cash, and an opportunity not to be squandered.

I grew up in a five-kid one-income household. We went through a period of governmental assistance, had no TV, game consoles, had clothing repaired instead of replaced, etc.  I cannot fathom a 200k income being considered "middle class" anywhere. 

ioseftavi

  • Bristles
  • ***
  • Posts: 401
  • Location: NYC
Re: What is the middle class?
« Reply #12 on: February 06, 2015, 09:31:22 AM »
I always thought that my family struggled with money because their income was just like everyone else. Really they have just been irresponsible....

I wouldn't be so hard on your family.  For some people, the plain truth is "they were irresponsible".  But for a lot of other people, the answer might be "they were OK with money, but they chose to live in a crazy expensive area for the sake of their job and kids, because they didn't know better." 

I know a lot of families where I grew up (New England) who likely made  $100k or more per year, but managed to be on the poorer side of the spectrum in the towns they lived in.  This wasn't because they were "poor".  It was because they were "relatively poor"; they reached for the most expensive neighborhood they could afford, because they thought it would bring them happiness and a better life.  Then they found themselves spending quite a large part of their income, just to try and keep up with the cost of living and expectations / spending of people around them.

I don't know that I'd label those people "wildly irresponsible" - most people just don't think about cost of living adjustments / hedonic adaptation when they choose their home.  It's such a small thing, but it will probably play a big role in determining your savings rate and how "rich" or "poor" you feel until you leave the area.

What is the line between middle/upper-middle/ and upper class in your mind (based on income.)

The line is around 50k per year - as you said, the median household income.  If you make more than that, you should consider yourself fortunate.  If you make multiples of that, you should realize you are extremely fortunate when compared to the rest of the country - no matter what your area's COL is, or what your neighbors make. 

Why can our population go through life believing they are middle class when they have an income 4x the median?

Because middle class sounds approachable, modest, and reasonable.  I don't think people like to think of themselves as making an unreasonable amount of money, or being unapproachable. 

The fact is, if you're making $100k or $200k, you are not the norm.  This doesn't mean your life is necessarily easier or that you're a smarter, better person, but it does mean that you should acknowledge that you make a hell of a lot more money.  Most people don't have it so good, and to think of yourself as "middle class" is to grossly understate how good you have it.  It also is an insult to the people getting by on $40-$50k for their families.

If you don't like the words "upper class" (which I don't - it sounds like it refers to aristocracy), that's ok.  You can just think of yourself as "very fortunate".  But please, let's not pretend that households making $150k+ are "middle class", no matter where they live.

Full disclosure: My wife and I make what we consider "Stupid Oprah Holiday Spectaular Money", living in the highest cost region of the U.S. (NYC).  We try to be extremely cognizant of our fortune, and - to quote Morning Owl:

...Mustachians who can see this income for what it is -- i.e., a ton of cash, and an opportunity not to be squandered.

...we try to practice gratitude and not squander the money we're fortunate enough to earn.

benjenn

  • Bristles
  • ***
  • Posts: 284
  • Age: 55
  • Location: Gulf Shores, AL
Re: What is the middle class?
« Reply #13 on: February 06, 2015, 09:37:39 AM »
We have a very high income (>$240K) in a very low COL area but I've always considered us to be middle class.  I've never really wanted to be considered upper class... is that weird?

hunniebun

  • Bristles
  • ***
  • Posts: 491
Re: What is the middle class?
« Reply #14 on: February 06, 2015, 09:40:07 AM »
Middle class is a state of mind.

Don't think you're dirt poor?  You're middle class.  Don't think you are filthy rich? You are middle class.

This is what I was thinking as well. There are really only 3 classes...low income/poor - Middle Class - filthy rich.  I think most people consider themselves middle class if they don't have a private jet an don't own multiple luxury properties.  Our household income is about 160K and I would say we are 'middle class', but I suppose we are upper-middle? 

benjenn

  • Bristles
  • ***
  • Posts: 284
  • Age: 55
  • Location: Gulf Shores, AL
Re: What is the middle class?
« Reply #15 on: February 06, 2015, 09:46:39 AM »

If you don't like the words "upper class" (which I don't - it sounds like it refers to aristocracy), that's ok.  You can just think of yourself as "very fortunate".  But please, let's not pretend that households making $150k+ are "middle class", no matter where they live.
.

We DEFINITELY know how fortunate we are... there's no doubt about that.  We feel incredibly blessed to have such high incomes and are so thankful for that, too.  Maybe we just don't feel like we have an upper class attitude... we have no debt, we drive a 2001 car, we live modestly.  But we definitely know how fortunate we are not to struggle financially.

morning owl

  • Stubble
  • **
  • Posts: 231
  • Location: Canada
Re: What is the middle class?
« Reply #16 on: February 06, 2015, 09:47:18 AM »

If you don't like the words "upper class" (which I don't - it sounds like it refers to aristocracy), that's ok.  You can just think of yourself as "very fortunate".  But please, let's not pretend that households making $150k+ are "middle class", no matter where they live.


This reminds me of an embarrassing, house-of-shame-worthy article featured in Toronto Life a few years ago, about people earning around 200k and feeling broke. The article is cringe-inducing, but unfortunately there are a lot of people out there who believe their high incomes DO entitle them to a sort of upper class, almost nouveau-riche lifestyle, independent of whether or not they can actually afford it. That entitlement when combined with high housing costs = zero savings for many people.

http://www.torontolife.com/informer/features/2012/02/15/almost-rich/

I see MMM's writing as geared towards people like this. People with high earnings who need to wake up and quit falling into this trap. It's very prevalent in HCOL cities, unfortunately. But the expectations of higher salaries in places like this do offer an opportunity for a huge turnaround. This requires gratitude and appreciation for this unique situation.

iris lily

  • Magnum Stache
  • ******
  • Posts: 3331
Re: What is the middle class?
« Reply #17 on: February 06, 2015, 09:52:10 AM »
First, I have trouble defining "class" solely by income. Real sociological studies about "class" take in more factors than income and how that income is generated. But that said, and if we are agreeing to look only at income-generated-by-working-for-the Man:

Yes, I think the $200,000 income is middle class. The middle class covers a wide range of income. It's comfortable (if you are outside of the high $$$ coastal cities) and it can fund all of the latest toys with bells and whistles and a few luxury items, but it ain't rich.

And I'll be radical to say that anyone who has to work for a living is pretty much middle class, even those mega income giants of industry.

« Last Edit: February 06, 2015, 09:58:41 AM by iris lily »

ioseftavi

  • Bristles
  • ***
  • Posts: 401
  • Location: NYC
Re: What is the middle class?
« Reply #18 on: February 06, 2015, 09:54:03 AM »
You're spot-on, morningowl.  And BenJenn, it sounds like we have similar thoughts on the words "upper class".  I don't like the term because it brings to mind "good breeding", elitism, people who only associate with other high earners, etc.  I don't want to be that person, even if our household makes enough to qualify.

So yeah, our household earns a lot.  But we try really hard to live only slightly better than average, bank the rest, and never forget or squander the fortune we've been given.  I think a lot of people quickly spend 90-110% of what they make and don't ever stop and realize how good they have it - as MorningOwl's article shows.

dios.del.sol

  • Stubble
  • **
  • Posts: 150
  • Location: Los Angeles
Re: What is the middle class?
« Reply #19 on: February 06, 2015, 09:54:16 AM »
If somebody makes $200k per year, but has to earn wage income to eat next month, they are in a totally different class than somebody who makes $50k per year completely from passive income. The former is a high paid wage slave, the latter is a modest capitalist. Wealth, not income, should be the main determinant of class.

iris lily

  • Magnum Stache
  • ******
  • Posts: 3331
Re: What is the middle class?
« Reply #20 on: February 06, 2015, 09:56:42 AM »
If somebody makes $200k per year, but has to earn wage income to eat next month, they are in a totally different class than somebody who makes $50k per year completely from passive income. The former is a high paid wage slave, the latter is a modest capitalist. Wealth, not income, should be the main determinant of class.

a-ha, you said it better than I did.

I'm a red panda

  • Walrus Stache
  • *******
  • Posts: 8011
  • Location: United States
Re: What is the middle class?
« Reply #21 on: February 06, 2015, 10:03:24 AM »

I grew up in a five-kid one-income household. We went through a period of governmental assistance, had no TV, game consoles, had clothing repaired instead of replaced, etc.  I cannot fathom a 200k income being considered "middle class" anywhere.

I would put 200k in middle class before I'd say someone on government assistance is middle class.

My view of the middle class is people who have enough to get by maybe with some luxuries, but still have to watch their spending. Below that needs help to get by, or at least a serious shift in standard of living if they do it without help, above that basically flits about however they want.

Zikoris

  • Magnum Stache
  • ******
  • Posts: 3486
  • Age: 33
  • Location: Vancouver, BC
  • Vancouverstachian
Re: What is the middle class?
« Reply #22 on: February 06, 2015, 10:03:31 AM »
I consider it the average household income in an area, plus or minus about 20K. So for Vancouver that would be from 50K to 90K household income. I totally made that up though, it just "feels" right.

Murse

  • Pencil Stache
  • ****
  • Posts: 542
Re: What is the middle class?
« Reply #23 on: February 06, 2015, 10:03:47 AM »
If somebody makes $200k per year, but has to earn wage income to eat next month, they are in a totally different class than somebody who makes $50k per year completely from passive income. The former is a high paid wage slave, the latter is a modest capitalist. Wealth, not income, should be the main determinant of class.

The reason I said income is because I don't know of a way to compare passive vs wages in a apples to apples comparison. For example, is 50k passive > 100k in wages? 300k in wages? 500k? does income simply never determine class? Let's say a portfolio of 1250k to give the 50k/year passive, would an income of 1m/year still be considered "lower class" then the passive simply because it is earned?

dios.del.sol

  • Stubble
  • **
  • Posts: 150
  • Location: Los Angeles
Re: What is the middle class?
« Reply #24 on: February 06, 2015, 10:25:48 AM »
If somebody makes $200k per year, but has to earn wage income to eat next month, they are in a totally different class than somebody who makes $50k per year completely from passive income. The former is a high paid wage slave, the latter is a modest capitalist. Wealth, not income, should be the main determinant of class.

The reason I said income is because I don't know of a way to compare passive vs wages in a apples to apples comparison. For example, is 50k passive > 100k in wages? 300k in wages? 500k? does income simply never determine class? Let's say a portfolio of 1250k to give the 50k/year passive, would an income of 1m/year still be considered "lower class" then the passive simply because it is earned?

Understood, and good point. I'll explain my point of view without claiming that it's anything more than that: the way I see the world for myself.

I think iris lily said it well: "anyone who has to work for a living". This makes class more an issue of power than of lifestyle. If you have to work for a living, then others (your employer, the system, call it what you will) have a different type of power over you than if you can choose to forego wage income.

I totally agree that someone who earns $200k is in a much more comfortable boat than someone who earns $20k. They are by not comparable at all. I would however say that even earning $1m per year if the person is not FI, would put that person in the "very comfortable but still working-class" category. Gold-plated handcuffs with diamonds are still handcuffs.

There are three things at play: income, wealth, and outward displays of affluence. They all interact in complicated ways, but for my taste, the binary distinction of whether or not you need to sell your time for wages is the crucial one.

Does this ring true, or do you think I'm off my rocker?

(I'm interested in the reply but I'll have to tune out of the conversation till the evening since, well, I am not FI. Duty calls.)

Murse

  • Pencil Stache
  • ****
  • Posts: 542
Re: What is the middle class?
« Reply #25 on: February 06, 2015, 10:51:26 AM »
If somebody makes $200k per year, but has to earn wage income to eat next month, they are in a totally different class than somebody who makes $50k per year completely from passive income. The former is a high paid wage slave, the latter is a modest capitalist. Wealth, not income, should be the main determinant of class.

The reason I said income is because I don't know of a way to compare passive vs wages in a apples to apples comparison. For example, is 50k passive > 100k in wages? 300k in wages? 500k? does income simply never determine class? Let's say a portfolio of 1250k to give the 50k/year passive, would an income of 1m/year still be considered "lower class" then the passive simply because it is earned?

Understood, and good point. I'll explain my point of view without claiming that it's anything more than that: the way I see the world for myself.

I think iris lily said it well: "anyone who has to work for a living". This makes class more an issue of power than of lifestyle. If you have to work for a living, then others (your employer, the system, call it what you will) have a different type of power over you than if you can choose to forego wage income.

I totally agree that someone who earns $200k is in a much more comfortable boat than someone who earns $20k. They are by not comparable at all. I would however say that even earning $1m per year if the person is not FI, would put that person in the "very comfortable but still working-class" category. Gold-plated handcuffs with diamonds are still handcuffs.

There are three things at play: income, wealth, and outward displays of affluence. They all interact in complicated ways, but for my taste, the binary distinction of whether or not you need to sell your time for wages is the crucial one.

Does this ring true, or do you think I'm off my rocker?

(I'm interested in the reply but I'll have to tune out of the conversation till the evening since, well, I am not FI. Duty calls.)
Seems to me you are saying you can't put a price on freedom/FI and I will agree with you. You are saying you would rather have the option of selling your time and have a less extravagant lifestyle, then not have an option of selling your time even if it was able to afford you a more extravagant lifestyle. I can sum it up as FI>forced wages. I can agree with that.

I'm a red panda

  • Walrus Stache
  • *******
  • Posts: 8011
  • Location: United States
Re: What is the middle class?
« Reply #26 on: February 06, 2015, 10:58:53 AM »
Quote
I would however say that even earning $1m per year if the person is not FI, would put that person in the "very comfortable but still working-class" category. Gold-plated handcuffs with diamonds are still handcuffs.

I disagree that a person earning $1m per year isn't FI.  Unless they have debts that aren't part of the story here- they are FI, but are choosing to work; they likely don't have to. By your logic, someone like Mark Cuban isn't FI because he has to do a lot of work.  He could just stop if he wanted to.

Just because what you've chosen to do with your FI is stop working doesn't mean that is a choice  everyone has to make.


neo von retorch

  • Magnum Stache
  • ******
  • Posts: 3362
  • Location: SE PA
    • Fi@retorch - personal finance tracking
Re: What is the middle class?
« Reply #27 on: February 06, 2015, 11:07:30 AM »
I disagree that a person earning $1m per year isn't FI.

Just because what you've chosen to do with your FI is stop working doesn't mean that is a choice  everyone has to make.

Well, technically they are not FI at any moment they make a choice - they still have to work and continue earning money while refraining from spending it all. At this exact moment, they only have $8000 in the bank and a lot of subscriptions to cancel and habits to change, and maybe a lease to break and some cars to sell. And then they need to work another year to actually put enough investable assets away to truly become FI.

But debt is, of course, a big part of the picture. Middle class should be "comfortable" even if they are only earning $30,000 - but the comfort many choose is temporary "pleasure" rather than long-term enjoyment.

ioseftavi

  • Bristles
  • ***
  • Posts: 401
  • Location: NYC
Re: What is the middle class?
« Reply #28 on: February 06, 2015, 11:25:55 AM »
There are three things at play: income, wealth, and outward displays of affluence. They all interact in complicated ways, but for my taste, the binary distinction of whether or not you need to sell your time for wages is the crucial one.

Does this ring true, or do you think I'm off my rocker?

(I'm interested in the reply but I'll have to tune out of the conversation till the evening since, well, I am not FI. Duty calls.)

I don't know about "off your rocker", but yes, I will disagree. 

I think that putting qualifications around your high income ("oh, but it's all EARNED income, I'm not FI" or "oh, I live in such a high cost of living area!" or "oh, but I have 3 kids!") is something that people do to make themselves feel less "other".

I don't think it's healthy for people who make $100k or $150k to slice and dice and qualify and re-jigger that number until they feel that they can safely put themselves back in the 'middle class.  That - to me - is the first step towards pretending that your $200k is less of a bonanza than another person's $200k, because of your chosen mitigating factors.

Bullshit.  If you make $120k, you're extremely fortunate compared to the average American (let alone the average person on the planet).  Be aware of your windfall, and try not to live in such a way that you feel middle class.  If you choose to live in Manhattan in a luxury apartment where your neighbors make and spend $300k per year, or in a gated suburb where the average house is $600k, don't be surprised when you feel kinda worse off.  You may feel worse off than people you know, but it doesn't mean that you don't still make significantly more that the average household. 

Please, don't take this to mean that I think like my household (or any high-earning household) should be wallowing around feeling guilty.  I don't mean that, and I certainly don't feel that way.  I simply mean that how you feel about your high income, how much wealth you have saved from your high income, or how your high income stacks up to the people you live near is irrelevant.  You make an objectively large amount of money.  Don't sit around and qualify it until you feel comfortable with it.  That's the first step towards taking it for granted.

seattlecyclone

  • Magnum Stache
  • ******
  • Posts: 4979
  • Age: 34
  • Location: Seattle, WA
    • My blog
Re: What is the middle class?
« Reply #29 on: February 06, 2015, 11:52:17 AM »
One definition I saw that made sense to me was to break people into five equal sized groups by income:

80th percentile and above: upper
60th-80th percentile: upper middle
40th-60th percentile: middle
20th-40th percentile: lower middle
below 20th percentile: lower

There's a stigma in America against labeling yourself anything other than "middle class," and this definition lets 60% of the people still use that label. I think it makes sense to apply it on a more local basis than the whole US, because the distribution in Iowa is way different than the distribution in New York City. People with similar skills can earn wildly different amounts between those two places, and similar amounts of income/wealth will produce wildly different levels of material comfort. But you can't apply it on too local of a level either, otherwise you could say someone earning $1 million in the richest neighborhood counts as "middle class" while someone earning $50k in a nearby poor neighborhood counts as "upper class."

gecko10x

  • Bristles
  • ***
  • Posts: 420
    • SawyerPF
Re: What is the middle class?
« Reply #30 on: February 06, 2015, 11:58:47 AM »
So, not to derail the thread, but what type of lifestyle would you consider "upper" or "upper-middle" class?

Some of these definitions would put us at the top or out of "middle" class, but I certainly don't feel it.

coppertop

  • Bristles
  • ***
  • Posts: 326
Re: What is the middle class?
« Reply #31 on: February 06, 2015, 12:04:52 PM »
Among other aspects of my job, I prepare payroll for highly-paid professionals.  Certain of these professionals are constantly complaining that they don't make/have enough money, while their secretaries are getting by on $50,000 or less.  It's really kind of shocking to hear them talk.  One of them complained when I gave out W-2's because his 2014 income was 'only' $170,000.  I said to him that it was all relative.  It makes me wonder how they think the secretaries get by. 

MrMoogle

  • Handlebar Stache
  • *****
  • Posts: 1116
  • Age: 34
  • Location: Huntsville, AL
Re: What is the middle class?
« Reply #32 on: February 06, 2015, 12:26:50 PM »
I think it has more to do with wealth than income.

Joshua Kennon put out a good article about being rich:
http://www.joshuakennon.com/the-hierarchy-of-the-rich-in-the-united-states/

There's basically 5 levels of "rich":
1.The Millionaires Next Door
2.The Capitalist Class
3.The Glittering Rich
4.The Ruling 15,000 Families of the United States
5.The Forbes 400 List

This is about wealth, not income.  I'd say the Millionaires Next Door are still middle class.  Anything higher than that is upper class IMO.  So if you make $1m a year and waste it every year, you're still middle class, but could easily make it to the Capitalist Class and be considered upper class.

I do think MMM is more geared to people above the 50% line.  Yes people under this line can make it work, but there's so much waste in people's lives who make more.  But hitting 50% of Americans, Canadians, and generally other "first world" countries hits a lot of people and can change the world :)

Norioch

  • Stubble
  • **
  • Posts: 240
Re: What is the middle class?
« Reply #33 on: February 06, 2015, 12:42:14 PM »
If you make $200,000, you're not middle class. You're rich. And that's okay.

I always considered our family middle class while I was growing up. I felt average, because I was about comparable to all of my peers. I slowly realized as I grew that I lived in a wealthy neighborhood, and I and all of my peers were rich. I didn't fully appreciate how rich we were until I started living on my own. It struck home for me when, as an adult, I first found out that my retired (pension) parents had a net worth of well over a million dollars. I had grown up in a family of millionaires and had never even known. Now my individual income is higher than my parents' combined income ever was, and I'm on my way to quickly surpass them in net worth. I no longer consider myself middle class. I consider myself rich, and incredibly lucky.

Maybe one of the purposes of MMM is to help rich people like myself recognize that they are rich, and change their outlook to be grateful instead of complainy-pants. I can't afford a McMansion on Lake Washington or a Ferrari Enzo or a private trip to the International Space Station, but I can still afford to live a very comfortable life.
« Last Edit: February 06, 2015, 12:44:44 PM by Norioch »

Gone Fishing

  • Magnum Stache
  • ******
  • Posts: 2754
  • So Close went fishing on April 1, 2016
    • Journal
Re: What is the middle class?
« Reply #34 on: February 06, 2015, 12:48:22 PM »
Rather than focusing purely on income, the following terms break classes down by source, perhaps a little clearer picture of how money flows through a household:

Underclass/Poverty (Dependent on aid for survival)
Working Class (Dependent on labor for income -covers a wide range of incomes/wealth)
Investment Class (Dependent on investments for income-covers a wide range of incomes/wealth)

seattlecyclone

  • Magnum Stache
  • ******
  • Posts: 4979
  • Age: 34
  • Location: Seattle, WA
    • My blog
Re: What is the middle class?
« Reply #35 on: February 06, 2015, 12:48:43 PM »
If you make $200,000, you're not middle class. You're rich. And that's okay.

I always considered our family middle class while I was growing up. I felt average, because I was about comparable to all of my peers. I slowly realized as I grew that I lived in a wealthy neighborhood, and I and all of my peers were rich. I didn't fully appreciate how rich we were until I started living on my own. It struck home for me when, as an adult, I first found out that my retired (pension) parents had a net worth of well over a million dollars. I had grown up in a family of millionaires and had never even known. Now my individual income is higher than my parents' combined income ever was, and I'm on my way to quickly surpass them in net worth. I no longer consider myself middle class. I consider myself rich, and incredibly lucky.

Maybe one of the purposes of MMM is to help rich people like myself recognize that they are rich, and change their outlook to be grateful instead of complainy-pants. I can't afford a McMansion on Lake Washington or a Ferrari Enzo or a private trip to the International Space Station, but I can still afford to live a very comfortable life.

Well said. Someone who earns $1 million but lives paycheck to paycheck isn't middle class. Period. They're just amazingly bad with money.

Gone Fishing

  • Magnum Stache
  • ******
  • Posts: 2754
  • So Close went fishing on April 1, 2016
    • Journal
Re: What is the middle class?
« Reply #36 on: February 06, 2015, 12:56:33 PM »
If you ever admit to being upper class, it makes it harder to beg for tax breaks, subsidies, public projects, employees trained by public institutions, etc. 

mak1277

  • Pencil Stache
  • ****
  • Posts: 788
Re: What is the middle class?
« Reply #37 on: February 06, 2015, 01:07:40 PM »
I think it has more to do with wealth than income.

Joshua Kennon put out a good article about being rich:
http://www.joshuakennon.com/the-hierarchy-of-the-rich-in-the-united-states/

There's basically 5 levels of "rich":
1.The Millionaires Next Door
2.The Capitalist Class
3.The Glittering Rich
4.The Ruling 15,000 Families of the United States
5.The Forbes 400 List

This is about wealth, not income.  I'd say the Millionaires Next Door are still middle class.  Anything higher than that is upper class IMO.  So if you make $1m a year and waste it every year, you're still middle class, but could easily make it to the Capitalist Class and be considered upper class.

I do think MMM is more geared to people above the 50% line.  Yes people under this line can make it work, but there's so much waste in people's lives who make more.  But hitting 50% of Americans, Canadians, and generally other "first world" countries hits a lot of people and can change the world :)

I think this is pretty right on...and I do consider Millionaires Next Door and people making "only" $200k per year to be middle class (although the highest rung of it).  The reason is that the %'ile rankings aren't at all linear and once you get up to the top the differences are stark.  So someone who makes $200k can identify much more easily with someone that makes $50k than they can with someone who makes over $1 million.

I'm a red panda

  • Walrus Stache
  • *******
  • Posts: 8011
  • Location: United States
Re: What is the middle class?
« Reply #38 on: February 06, 2015, 01:10:24 PM »
If you're wondering how people who make $200k can consider themselves middle class, go check out the Princess Bedroom thread. That is what rich is to most people.  Someone on 200k, probably couldn't even consider those bedrooms.

Eric

  • Magnum Stache
  • ******
  • Posts: 4061
  • Location: On my bike
Re: What is the middle class?
« Reply #39 on: February 06, 2015, 01:18:07 PM »
$200k is in the top 3% of incomes.  That's a large middle!


Also, discussion here:

http://forum.mrmoneymustache.com/welcome-to-the-forum/middle-class-tax-trap/

boarder42

  • Walrus Stache
  • *******
  • Posts: 7849
Re: What is the middle class?
« Reply #40 on: February 06, 2015, 01:27:14 PM »
Dang so if worked til 55 by my current calcs i could become capitalist class.  b/c thats necessary.  i'll stick with millionaire next door and be a member of the upper middle class

dios.del.sol

  • Stubble
  • **
  • Posts: 150
  • Location: Los Angeles
Re: What is the middle class?
« Reply #41 on: February 06, 2015, 01:28:47 PM »
Rather than focusing purely on income, the following terms break classes down by source, perhaps a little clearer picture of how money flows through a household:

Underclass/Poverty (Dependent on aid for survival)
Working Class (Dependent on labor for income -covers a wide range of incomes/wealth)
Investment Class (Dependent on investments for income-covers a wide range of incomes/wealth)

This is a good way of rephrasing what I was going for, as was MrMoogle's link with the five different levels of rich.

I was interested to see that several posters read into my arguments a different conclusion than I intended. I fully agree that if you make six figures as an individual you have no justification to complain. I don't make as much and I feel very fortunate. Perhaps the $1m/year and not-FI example unintentionally made a point: as income increases it becomes harder and harder to avoid ending up in the "investment class".

I'll propose the following:
  • The concept of middle-class exists only within the "Working Class" as defined above.
  • People in the "Working Class" can live more lavish lifestyles than people in the "Investment Class, e.g., millionaires next door"
  • For people in the "Working Class" income is the most important determinant of lifestyle.
All of which kind of leads me back to defining middle class as falling near the median income-wise (after excluding those who are FI).

I still think that now that we established that, there is still something to the idea that there is a meaningful difference between those who would end up on the street if they lost their income and those who wouldn't. By this I mean to say that even those who are well above middle class should bear in mind their economic fragility if they don't plan accordingly.

morning owl

  • Stubble
  • **
  • Posts: 231
  • Location: Canada
Re: What is the middle class?
« Reply #42 on: February 06, 2015, 01:39:39 PM »
I agree with ioseftavi that when people in households earning >$200k self-identify as middle class, they aren't really seeing themselves in light of a broader picture. It really is a lack of appreciation for how good they have it. (I say "they," but I am/was one of them.) It gives them an excuse to keep up with the status quo of others in their neighbourhoods, or at their workplace, who may have similar lifestyles. They catch glimpses of people living with more modest means, but can't really comprehend their lives at all or relate their situation to their own lives, so they ignore this. They can only see their own spectrum of consumption levels and the requirements of their social stratosphere.

I am learning to gradually opt out. This means saying no to invites to expensive restaurants and entertainment outings, and to unnecessary purchases. I definitely have used the "HCOL" excuse in the past to feel more middle class, as an excuse for our lack of savings. But the interpretation of the struggles of the true middle class, i.e. having to pay a mortgage and buy necessities and not having anything left over, was only a struggle because of choices we had made. There's no reason to live at the top of one's means at this level of income, no matter how expensive the environment is. One can always opt out. It's very difficult to see this option, but it's there. I read Jacob's ERE book ages ago, but I know he had a parable for this -- the shadow people? I forget... Anyway, it's true of many of those in high-paying, high cost cities, where people don't recognize their consumption habits for what they are (wasteful) or their income for what it is (an amazing opportunity.) I have empathy for these people because I know how easy it is to just get sucked in. You have to be really self-aware and consciously try to opt out at every turn. I am afraid to post a Case Study on this site because I know our budget will get torn apart and my default reaction is, "But it's a HCOL city..." And I'm not sure how to deal with these beliefs yet. Baby steps.

lostamonkey

  • Bristles
  • ***
  • Posts: 454
  • Location: Canada
Re: What is the middle class?
« Reply #43 on: February 06, 2015, 02:07:27 PM »
Recently the head of the Canadian Liberal Party said anyone who works for their money can be considered middle class and anyone who lives off their assets is upper class.

Personally I think a $200,000 income can be considered "upper middle class."

dios.del.sol

  • Stubble
  • **
  • Posts: 150
  • Location: Los Angeles
Re: What is the middle class?
« Reply #44 on: February 06, 2015, 02:14:37 PM »
Let's throw another consideration into the discussion. Since we're talking about keeping things in perspective, how about we all think of how we stand in the world. I found this calculator after a quick search. I think there would be many folks around the world that would scoff at a median US income being considered middle class. According to the calculator, a US family of 4 earning $50k per year for the household is in the richest 8.5% of the world's population.

highcountry

  • Guest
Re: What is the middle class?
« Reply #45 on: February 06, 2015, 02:21:05 PM »
Another perspective, and possibly one that gives an idea of why the middle class is such a popular political catagory:

"What is the working class, fellow workers?  The working class is anyone who has a boss and works for wages.  Always remember, class is not defined by income level but by your relationship to the means of production.  If you donít own the tools of your production, if you donít own your workplace, if all youíre doing is selling your labor energy to get a paycheck, it doesnít matter if youíre a college professor or a ditch digger - youíre in the working class and better be proud of it.  Why, the middle class is just a joke made up by the bosses to keep us fighting against each other."- Utah Phillips

Personally, I find it helpful to think of the middle class in the terms of Elizabethan England.  The vast majority of people were peasants.  People who had non agrarian jobs, and low likelihood of starvation (modern day equivalent: firefighter, union manufacturer, school teacher, college professor) were classified as the lower middle class  These jobs paid worse in the 1500's.  One must remember that the vast majority of the population lived in the first category, and true peasant conditions are rare in the first world now.  Upper middle class was your poorer knights and rural landed gentry.  This category would include many mustachians, medium sized business owners, landlords with multiple rentals.  Financial independence is a real possibility in this category (both in the Renaissance and now).  Upper class were the power brokers and the old inherited money (see Utah's quote above).

Edited to add:  I suspect there are many people who read this forum who are not in the higher income brackets, but that this group is less prone to posting income information.

Another edit:  using the Elizabethan model, the median would not be representative of middle class.  Instead, it would fall into the lower class.    Now I'm just playing with ideas.  Middle class may very well be such a vague concept as to be useless..
« Last Edit: February 06, 2015, 02:38:51 PM by learning »

Gin1984

  • Magnum Stache
  • ******
  • Posts: 4753
Re: What is the middle class?
« Reply #46 on: February 06, 2015, 02:35:12 PM »
There is definitely a difference between a $200k income in HCOL area vs $200k in a LCOL area. $200k in a HCOL area does not get you very far, unless you are entirely aware of your purchases in a Mustachian kind of way. I'd say it's very easy to feel middle class on that income if your basic expenses (housing, food) are high. There are many, many people with this kind of income where I live who feel broke. I do not think they would think of themselves as 'upper class.'

It's the Mustachians who can see this income for what it is -- i.e., a ton of cash, and an opportunity not to be squandered.
My mom is in no way mustachian, lived/worked in a HCOL area and earned a little more than 1/2 of $200K a year.  Are you crazy?  Yes, you can spend money like it is water and feel poor at any income level but no $200K is not middle class, at least not in Silicon Valley.
« Last Edit: February 06, 2015, 02:40:47 PM by Gin1984 »

beltim

  • Magnum Stache
  • ******
  • Posts: 2841
Re: What is the middle class?
« Reply #47 on: February 06, 2015, 02:44:07 PM »
First, I have trouble defining "class" solely by income. Real sociological studies about "class" take in more factors than income and how that income is generated. But that said, and if we are agreeing to look only at income-generated-by-working-for-the Man:

Yes, I think the $200,000 income is middle class. The middle class covers a wide range of income. It's comfortable (if you are outside of the high $$$ coastal cities) and it can fund all of the latest toys with bells and whistles and a few luxury items, but it ain't rich.

And I'll be radical to say that anyone who has to work for a living is pretty much middle class, even those mega income giants of industry.

This is spot on.  Any discussion of class that only talks about income is missing the forest for the trees.  There are many different theories and working definitions of class, and a good introduction can be found on Wikipedia: http://en.wikipedia.org/wiki/Social_class

morning owl

  • Stubble
  • **
  • Posts: 231
  • Location: Canada
Re: What is the middle class?
« Reply #48 on: February 06, 2015, 02:54:04 PM »
There is definitely a difference between a $200k income in HCOL area vs $200k in a LCOL area. $200k in a HCOL area does not get you very far, unless you are entirely aware of your purchases in a Mustachian kind of way. I'd say it's very easy to feel middle class on that income if your basic expenses (housing, food) are high. There are many, many people with this kind of income where I live who feel broke. I do not think they would think of themselves as 'upper class.'

It's the Mustachians who can see this income for what it is -- i.e., a ton of cash, and an opportunity not to be squandered.
My mom is in no way mustachian, lived/worked in a HCOL area and earned a little more than 1/2 of $200K a year.  Are you crazy?  Yes, you can spend money like it is water and feel poor at any income level but no $200K is not middle class, at least not in Silicon Valley.

That was my point... it's very easy to just feel like you are 'getting by' here where I live on this kind of income. By 'getting by,' I mean paying the mortgage, paying taxes, living it up like everyone else does, and saving very little. Unless you are aware of this and make an effort to do your own thing in such a culture, people tend to define themselves as middle class (i.e. not being wealthy) just because they're going along what everyone else is doing. I'm not saying this kind of income /= wealth. I'm saying it can be easily squandered. I'm not condoning this attitude, BTW...

RapmasterD

  • Pencil Stache
  • ****
  • Posts: 589
  • Location: SF Peninsula
Re: What is the middle class?
« Reply #49 on: February 06, 2015, 02:55:39 PM »
Q: What is the middle class?

A: An unnecessary subjective label.