Many of us identify as middle class. It provides us with an identity that is respectable, and implies that we are “normal.”
After all, if you are middle class, you aren’t stuck with some of the stigmas that can come with being poor, and you are painted with the elitist brush for being rich. Middle class is a comfortable place to be for many of us.
It also helps, too, that middle class identity is probably deeply ingrained in your psyche. Many of the children of Baby Boomers (I’m one) grew up in the middle class, espousing “middle class values.” My experience was one of being poor until I was about 12, since my parents got married relatively young and started having kids.
Then, once my dad finished school and began making more money, we moved into a middle class neighborhood, able to afford the necessities of life, and some of the luxuries. The middle class mentality, for many in my generation, is based on similar experiences: Remembering the poor life as our parents initially struggled, but enjoying greater comfort as they began earning more.
But middle class is more than just your own mindset. It also includes numbers. Many of those who have a middle class mentality might not actually be considered middle class when it gets right down to income.
How is a Middle Class Income Defined?
It’s actually harder to define a middle class income that you might expect. Here are four different ways (and there are probably more points of view) to look at your income in terms of whether or not it’s middle class:
- Economic Percentile: Rather than just looking at arbitrary cutoffs, some economists consider middle class according to percentile. If you are in the top 20% of income earners, you are considered to have an upper class income, or be rich. Those whose incomes fall in the bottom 20% are considered poor. Everyone else (the middle 60%) is middle class.
- Income Range: There are some economists who say that anyone who makes between $25,000 and $100,000 a year is middle class. That might be surprising to some, though.
- Median Income: Others take a look at the median annual income, and then go $20,000 to either side. In 2010, the Census Bureau reports that the median income in the United States was $49,445, so if you go a little lower or higher, you get a middle class range of between about $30,000 and $70,000 a year.
- Tax Policies: Of course, if you look at tax policies, the middle class grows substantially. For many tax policies, the cutoff often discussed is $250,000 (even though the fiscal cliff deal used $400,000 as the point for higher taxes), suggesting that some think that you can be considered to have a middle class income as long as you make less than $250,000 a year. For other taxes like the Alternative Minimum Tax the original income cutoff was never indexed to inflation and is now hitting families in the middle class.
Others sub-divide what’s considered middle class to provide a more nuanced picture. Many of those who make less than $75,000 a year consider someone who makes more than $100,000 a year “rich” — and definitely outside the middle class. However, if you make $150,000 a year, you might not feel “rich.” Instead, you might still feel part of the average American middle class. As a result, the term “upper middle class” is often used to describe those who make between $100,000 and $250,000 a year.
Pinpointing what constitutes a middle class income is further complicated by the fact that location plays a role in your spending power.
With my income, I’m considered fairly well-off in my relatively small semi-rural community. There’s a low cost of living, and my money goes further. However, if I were to move to a larger city, like Seattle, my money wouldn’t go as far. And if I moved to a place like New York City, I’d almost be poor.
In many ways, “rich,” “poor,” and “middle class” are relative. Additionally, there is a strong psychological element. Pinpointing whether or not you actually have a middle class income involves the complex interaction between what you actually make, and how you feel about what you make.
Get the Money Dominating Toolkit
- 6 Tools to Get Your Money Back on Track
- The Ultimate Goal Achiever Workbook
- 2 Free Chapters to my Best Selling Book
- 21 Days to Destroy Your Bad Habits Worksheet