If you read my “Definitions Of A Middle Class Income” article, you’ll come across my theory that almost all of us identify as middle class, no matter how much we make. We do this because of the following reasons:
1) We want to blend in. Just like in high school, if you are the only jackass who drives a sports car to school that your parents bought you, you will likely get beaten to a pulp. You might get a lot of hot dates in the short-term, but that’s all the more reason for other kids to beat you up. As we grow older, we tend to have loved ones to provide for. Things get really real as adults because you don’t want to cross people with actual means who could destroy you.
Your career could get crushed if your boss, who has an inferiority complex about not having a graduate school degree, hears you bragging about your time at Harvard Business School. You could get stabbed walking home in the middle of the night by the bartender who is sick and tired of you talking about your amazing conquests, one of which could have been her ex-boyfriend. Envy lives strongly within us all! Please practice Stealth Wealth, unless you’re really insecure about yourself.
2) We don’t want to be perceived as inferior. Part of the reason why I’m writing this article at 6am before I have to drive 40 minutes south to a consulting job is because I don’t want to fail on Financial Samurai. As a result, I tend to get up early every morning to write and produce before making some shekels. I don’t want this site to scrape the bottom of the barrel after almost six years of hard mental labor. No ma’am. It feels like the world is watching in my little head.
Even if we are making below the median individual income of ~$28,500 or the median household income of ~$53,000, we will still believe we are middle class citizens. Even if we know we didn’t try hard in high school or ended up going to an unknown university that cost us a fortune, we will be hard-pressed to admit our mistakes as adults. The reality is, we all fail ALL THE TIME! In order to cope with our failure, we tell ourselves we’re part of the middle, or we try harder to make up for our deficiencies as adults when we finally realize that it’s now or never to get our crap together!
3) We never want to lose hope. President Obama initially campaigned on the word “Hope” and won. Who doesn’t love hope? Hope allows us to keep going when life starts breaking our toes and pokes our eyes out while we’re already feeling nauseous after eating some bad chicken curry. But when we’re soaking in our beds with curry sweat, we keep hope alive that one day we’ll feel like a million bucks again.
Every time I make an investment, or do something crazy like leave a lucrative job to make little money as a blogger, I hold onto the hope that everything will be OK. I know bad things happen all the time, and they always tend to happen to us when we least expect it. But my hope is that the good times will outweigh the bad, and we’ll die satisfied knowing that everything turned out alright in the end.
MIDDLE CLASS ECONOMICS
Although the chart below says that people who identify with the middle class has shrunk from 53% in 2008 to 44% today, the fact of the matter is that 99% of everyone surveyed in the chart still consider themselves middle class! Middle Class 44% + Lower Middle Class 40% + Upper Middle Class 15% = 99%. We are all the same shades of grey.
Nobody is going to say they are “rich” because nobody wants to get shot. Nobody will say they are “poor” either because researchers will get labeled as elitists and nobody will admit they are poor. Manipulation of data and semantics comes from these social scientists with their PhDs who are looking for nuggets of interesting information. So many are beholden to the financiers who support them. Others may be the puppets of unknown or very well known puppet masters.
The real mathematical definition of middle class is if you earn plus or minus 25% of what the median earns in your area of residence. If we take the nation as a whole, then a middle class household earns anywhere between roughly $40,000 and $67,000. But as we all know, the cost of living is drastically different between places like dreary New York City to paradise San Francisco to frigid North Dakota. The good thing is that you can easily search online for what the median income earner makes in your respective town. The other good thing is that if you feel stuck in hell, you can easily get on a bus and go to economic heaven if you have the courage.
THE REAL WAY TO MORE WEALTH
There’s one thing I’ve noticed from the more than 10 million visitors who’ve come to Financial Samurai since inception is that most people erroneously focus on income growth and not net worth growth. The reality is that people who get rich are the ones who focus on building permanent wealth through asset accumulation. The rich are the ones who make more money through the appreciation of their stocks, bonds, private investments, and real estate than from their income. This is called accumulating a financial nut that works hard for you so you don’t have to!
Trying to learn about investing in various asset classes is not particularly easy – especially not compared to buying the latest pair of shoes or luxury automobile. But the most amazing thing that has happened over the past 20 years is the democratized of knowledge thanks to the internet. So if you know of someone who is mortgaging their future on some fancy private school they can’t afford, slap them upside the head. If you’ve found a site that helps you save money, make more money, and grow your net worth, let others know.
Focus on building wealth through various types of investments. Just make sure you spend time reading advice written by someone who has actually done what she or he is writing about. The easiest way to learn is to learn from other people’s mistakes. You’ve just got to be willing to listen.
RECOMMENDATION TO BUILD WEALTH
Track Your Net Worth Easily For Free: In order to optimize your finances, you’ve first got to track your finances. I recommend signing up for Personal Capital’s free financial tools so you can track your net worth, analyze your investment portfolios for excessive fees, and run your financials through their amazing Retirement Planning Calculator. Those who come up with a financial plan build much greater wealth over the longer term than those who don’t!
Updated for 2017 and beyond.