When it comes to where people rank on an economic level, the vast majority of people think that they are middle class, but they are not. The single mother with two children and an income of $25,000 thinks that she is middle class. The CEO of a small business who earns over $400,000 thinks that he is middle class. While most people are working hard, everybody cannot be middle class.
I think that everybody thinks they are middle-class because they want to fit in. They do not want to accept that they are less than or feel superior to their peers. They also do not know the exact income parameters. According to The Pew Research Center, to be considered middle class, you have to have to have an annual household income between $35,000 and $106,000. According to the 2010 census, that is about half of the population in the United States. The Census Bureau also reported that the median household income was $59,000.
After looking at those numbers, the two examples that I gave are not members of the middle-class. The single mother does not meet this threshold. The CEO is actually closer to being a one-percenter than a member of the middle-class.
Location is also a key factor. Where you live also makes a difference. In South Carolina, the median income is $47,000. In New Jersey, the median income is $70,000. Even though the median salary in New Jersey is higher than in South Carolina, so is the cost of living. Taxes, real-estate, and insurance are much more expensive in the Northeast compared to the South.
Many people associate being a member of the middle class with home ownership. Homeownership has long been associated with being middle-class. The location has to be considered when evaluating homeownership being a strong characteristic of the middle-class. In South Carolina, it is easy to find a new three-bedroom house under the $200,000 price tag that Zillow classifies as the median price. Prices are much higher in San Francisco, New York City, and Boston. In those markets, a two-bedroom flat can easily cost more than $1,000,000. Based on the difference in cost, homeownership is even a challenge for high-earners in those major markets.
What about a college degree? Having a bachelor’s degree once allowed for easy entry into a middle-class existence. Today, it depends more on what the degree is in and how much debt you had to take on to earn the degree. While people with a bachelor’s degree still earn much more than those who do not have one, there are more variables to consider.
Some people judge their class status by how they act. They do not focus on income, homeownership, or education. They judge it on their lifestyle. While this might be the worst possible way to measure what class you are a member of, some simply think they fit into a particular class if the just act the part. Pretending to be in an economic class that you do not belong to will just lead to economic woes in the form of debt. It is better if you are honest with your lot in life. If you want to improve your situation, it will take sacrifice and hard work.
Making personal progress
I do enjoy reading about the different classes. Sociology is an interesting subject. It is fascinating to study how people act and try to fit in with different groups.
When it comes to financial independence, knowing about what class you fit into does not make much difference. It is not something that you should stress over.
What matters is that you are earning a living and always trying to improve your skills to earn more money. Instead of focusing on how the middle-class spends their money, focus on how you can save more of your own money. Once you get your savings in order, invest your money wisely.
I have never put too much thought into if I belonged to the middle-class or not. I break it down to a much simpler classification. I do not focus on earnings, but rather assets.
There are those who are working class and those who are financially independent. If you have to work for a living, you are working class. If you have more than enough money to cover twenty-five years of expenses or beyond without having to earn a paycheck, you are financially independent.
When you have enough money to pay your bills for twenty-five years, it is up to you if you want to work or not. If you do not have that kind of financial cushion, you have to work for a living. After your savings have reached that level, you can keep your current job or find something that might be more meaningful. It is up to you to decide. That is the type of freedom that being financially independent provides.
If you are new to this blog or to the financial independence community, you might think that saving that much is an impossibility. It is not impossible. It is hard though. It takes many years of living below your means, saving a large part of your salary, and investing it wisely.
Do not compare
Instead of trying to figure out if you can move to a nicer neighborhood or if you are in the same class with your neighbors, change how you think about the classes. Boil it down to being financially independent or working class. Focus on your own financial situation and do not try to compare where you fit in with anyone else.
By focusing on where you stack up to the middle, your measuring stick will never exceed mediocracy. The middle is being squeezed from so many different directions. Rise above that situation and mindset.
Play by your own rules and set your own financial goals. Why do you have to be placed into some outdated economic pigeonhole? The Industrial Revolution is dead. Break free from the way society has taught you to think about how your earnings define you. Don’t compare yourself to your peers unless you want to give away your joy.
No, I am not trying to become the Gore Vidal of the financial independence movement. All I am stating is to use your money to build a life of freedom. Don’t pay attention to class warfare. That is a losing battle. Make the most of what you have and always try to improve your situation. Focus on what you truly want and go get it.
Be grateful for what you have instead of envious or others. Help someone every day who is less fortunate than you instead of feeling self-pity. Work smarter not harder, spend less, save until it hurts, and invest wisely. Follow those principles and you will not have to worry about what class you are part of because you will be too busy working for your freedom.
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