What Income Level Is Considered Rich?

Boat on Lake TahoePresident Obama considers single people making over $200,000 to be rich. He has specifically called for raising taxes on singles making over $200,000 and couples making $250,000 every year he’s been office. Yet, he’s been unable to pass any tax increases because I don’t believe most people agree with him that $200,000 for singles and $250,000 for couples is rich. Thank goodness there was at least a compromise with Congress at the end of 2012 for raising income taxes for those making $400,000/$450,000 and above.

There are two aspects of monetary wealth we can focus on: Income and Capital. Some make a lot of income, but have only a little amount of capital since they are either starting off in their careers, or haven’t saved and invested an appropriate amount. That’s not going to happen to you because you read Financial Samurai and will follow my savings guide to ensure capital accumulation.

Meanwhile, there are those with a tremendous amount of Capital, with little income given they may have inherited their wealth but have no income generating skills. Capital heavy people may have invested skillfully over the years, built great companies, or were incredibly disciplined in their savings. There are many different types of folks in the Capital heavy category. It’s not a bad place to be at all.

Ideally, it’s best to have both high income and a large capital base. This is my goal, and therefore my goal for all of you as well.  In this post, we’ll focus on the income side of the equation and what to strive for just in case we don’t have a trust fund from mom and dad.

HOW MUCH INCOME DO YOU NEED TO BE CONSIDERED RICH?

Instead of just saying what I think, I’m going to share my thoughts on various income levels per person for populations living in coastal cities such as San Francisco, New York City, Los Angeles, Boston, and Washington DC and work out the answer. The idea is to focus on the more expensive parts of America, which can therefore translate into living in other expensive countries in the world such as Paris, Hong Kong, London, Tokyo.  Of course, if you move to much cheaper places, you’ll be considered that much wealthier.

Various Income Levels

$50,000: Not rich, but lower middle class. After contributing $22,000 to your tax-exempt 401K and IRA, you are left with $28,000 in gross income to live. With an effective tax rate of about 15%, you have about $24,000 left after taxes. $24,000 or $2,000 a month is enough to live a frugal lifestyle, however, you’ll probably want to find a partner who makes at least $20,000 a year to be comfortable with a family.

$100,000: Not rich, but middle class. After contributing $17,000 to your tax-exempt 401k, you are left with $83,000 a year in gross income, and ~$62,000 net income based on a 25% total effective tax rate.  Notice there is no more $5,000 tax-exempt IRA contribution because you make over $68,000. That’s right, the government doesn’t want you to save money if you make over $68,000. Hopefully, you are following my savings guide and saving another 20% of your after tax income, equaling roughly $12,400 a year. You’ve got around $40,000 to spend on whatever you want and you’re breathing pretty good now.

$200,000: Upper middle class. After retirement contributions, you are left with $178,000 in gross income, leaving you with roughly $125,000 in after tax income. You boost your after tax savings rate to roughly 30%, leaving you with about $87,500 left.  By the time you are making $200,000 in your career, you’re probably in your 30s or older and have a mortgage and kids to consider. Kindergarten/daycare may run $15,000-$20,000 a year, followed by $30,000-$40,000 in shelter costs for a reasonable home. You’re left with $20,000-$40,000 to spend on food, travel, groceries, gifts, lessons, and so forth. Not bad.

$350,000: Still upper middle class. After retirement contributions, you’re left with $333,000 in gross income, or roughly $250,000 in after tax income. With a 30% after-tax savings rate, you have $175,000 left to spend. Your family has grown to 4, and you seek a bigger home. An average 3 bedroom, 2.5 bath home in a good area in San Francisco will run you about $1,300,000 to $2,000,000. We’re not talking anything super fancy at 1,800-2,800 square feet. Your mortgage at 3.5% on $1.1 million will therefore cost around $60,000 a year + $15,000 a year in property taxes. I choose $1.1 million because that is the maximum level for mortgage interest deductibility. As a result, you’re left with about $100,000, or $8,333 a month in after tax income for school for two, travel, food and so forth. You’re doing well, and if you are frugal, you can certainly save more than $75,000 a year in after tax money along with the $17,000 401K contribution.

$500,000+: You are rich! With $483,000 in gross income after maxing out your retirement contributions, you have about $300,000 in after tax income (effective at 35%, which includes 10% state). That’s right, you are paying around $183,000 in taxes alone, yet the government still wants to take more from you! Undeterred, you crank up your savings to 35%, and put away another $105,000, leaving you with $195,000. Subtract $70,000 for annual mortgage/property tax leaves you with $125,00. Then subtract another $40,000 in tuition for two. With around $7,000 a month in money available for travel, food, entertainment, goods, gifts, you are sitting pretty, especially since you are putting away away $122,000 a year in savings.

* As you can tell from the examples above, the tax bill gets quite onerous the more you make. Can you imagine paying roughly $180,000 in taxes every year and be asked to pay more?  I’ve allowed for a larger house for family and some lifestyle inflation.  However, I’ve stuck to my savings guidelines for every single income level to ensure a strong capital base come retirement. 

* As of 1/2/2013, the US Government has finally realized that $200,000 per individual and $250,000 is not rich. They have raised the income threshold where taxes go up to $400,000 for individuals and $450,000 for couples. Apparently, a number of Congressmen have read this article and agree with the people!

SO HOW DO WE GET THERE?

* Depend on yourself. Earning a high level of income is a choice, no matter what the naysayers tell you.  It is up to each of us to further our education to develop a skill-set that enables us to earn more.  It is up to us to work longer than our peers, so that after 2 more hours of work a day, we’ll have made over 600 more hours of progress a year.  Don’t you think you could develop something amazing with 600 hours of time? You know you can.

* Get a mentor. If you want to learn how to become wealthy, learn from someone who is already wealthy, not someone who tells you how to get wealthy without being wealthy. Those folks are charlatans, and some do it very well, which is why they are wealthy.  Instead, seek out a mentor and do everything possible to ingratiate yourself into their circle.  Successful people want to give back.  It’s the way they are hardwired.

* Remove disabling beliefs from your mind. Wherever you go, there you are. You mind is either like a power plant of positivity, or a cesspool of negativity.  You must believe in yourself, otherwise nobody else will.  I am so internet/computer illiterate that I thought there was no way I could start a website, until one day in 2009 I said ,”fuck it” and got it done.  I’m only slightly more literate than a doorknob now, but at least things are running and I can just do this full-time if so desired.

* Go the traditional route. Earning six figures and saving millions of dollars is straightforward. It just takes time. When you are incredibly rash, you do stupid things and screw up your financial goals. Save and invest even 10% of your income over 30 years and you will likely have more money than you will ever need.

* Go the berserk route. Crazy people do crazy things, and sometimes those crazy things turn out to be miracles.  Time and time again, you stumble across stupid shit that turn out to be big hits. Twitter, for example, was one cockamamie idea that has revolutionized the way we communicate. AirBnB.com is another idea that has helped lower costs in the hospitality industry. Deep in your heart, you know whether you’re putting in good work or not.

EQUALIZATION FACTOR

Some of you who live in other parts of the country can live on much less than the amounts above. Meanwhile, public school systems are good enough where you are, so you’re willing to send the kids without fear of long-term failure. Hence, if it pleases you, take a 30%-50% discount to the above numbers. The great thing about these income levels is that we’re only considering one individual. If you have a partner who earns even just $30,000 more a year, it goes a long way to helping out the family.

The other conclusion from this post is that if Democrats want to raise income taxes on “the wealthy”, then perhaps they should raise the income target from $200,000 per person to $500,000+. And if they really want a shot at passing legislation, they should raise the income target to $1,000,000 since nobody can ever complain, at least not publicly, that living off $1 million a year is hard.

I’m of the mindset that we should maximize our income, so we can maximize our capital base, so that we can sooner do what we really want and never have to worry about money again!

Recommendations For Building Wealth:

Manage Your Finances In One Place: The best way to increase your wealth is to get a handle on your finances by signing up with Personal Capital. They are a free online platform which aggregates all your financial accounts in one place so you can see where you can optimize. Before Personal Capital, I had to log into eight different systems to track 28 different accounts (brokerage, multiple banks, 401K, etc) to manage my finances. Now, I can just log into Personal Capital to see how my stock accounts are doing, how my net worth is progressing, and where I’m spending my money. The best feature is their 401K Fee Analyzer which has saved me more than $1,000 dollars in annual fees I had no idea I was paying. There is no better tool I’ve found online that has helped me growth my wealth. It only takes a minute to sign up.

Check Your Credit Score: Everybody needs to check their credit score at least once a year given the risk of identity theft as well as the importance of having a good credit score when borrowing money, apply for a mortgage, and applying for a job. 30% of all credit reports are wrong! For over a year, I thought I had a 790ish credit score until my mortgage refinance bank on day 80 told me they could not proceed due to a $8 late payment by my tenants from two years ago! Thanks to the late payment, my credit score was hit by 110 points to 680 and I could not get the lowest rate! Check your credit score for free here at GoFreeCredit.com and protect yourself. A credit score is important for potential job opportunities and getting the best rates on mortgage loans, car loans, and credit card loans. The industry average credit score for rejected mortgage applicants is 729! Where do you stand?

Regards,

Sam

Sam started Financial Samurai in 2009 during the depths of the financial crisis as a way to make sense of chaos. After 13 years working on Wall Street, Sam decided to retire in 2012 to utilize everything he learned in business school to focus on online entrepreneurship.

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Comments

    • Financial Samurai says

      It’s all good Jenn! The great thing if you are young is that you can always find a way to get richer if you wish! And if you are happy with your current income, then does it really matter if you are poor?

  1. Lloyd says

    Hey man good article.
    I made just enough to be considered rich on your list,good thing is that i do not have to pay that much tax,since tax rate in hong kong for me is roughly overall 15%.
    Just found out your blog and am fully intrigued.will follow.

  2. Jean says

    Finally – someone who got it right! There are so many articles out there trying to define “rich” and I have to constantly say that my annual HH income of $200k is certainly not “rich” even if I live in the state free tax of Texas. No debt and live in a modest 3700 sq ft home, by Texas standards that’s an average size home. Spouse and I left California for a better cost of living.

    No kids, although we wanted some. It just hasnt happened for us yet. We contribute the max to 401k and still qualify to contribute to Roth IRAs and we max out our pre-tax FSA accounts as well so that strips us down a quick $54,000. We invest about $10,000 on top of that every year and the rest goes to daily living expenses. Surely we live well but we have to keep working to keep building that retirement account. Plus if that family ever happens for us, we’ll need a nice cushion of savings because I’m going to take a few years off. If it doesn’t happen, then I’ll start looking for a different job that is something “fun” instead of staying on the hamster wheel making the big bucks. Money isn’t everything although it is sure nice to not worry about who’s making the mortgage and electric bill payment!

  3. Drgnflykween says

    And here I was getting excited over my husband and I combined making over $100,000 a year LoL..and we are not even out of college yet.i feel screwed lol. Being a clinical child and adolescent psychologist (average $70000 a year) and husband civil engineering ($100,000 a year) we will obviously not make enough..yikes! Any suggestions on how to make more off what we earn? As you can see I am money dumb lol. by the way we live in Tulsa, Ok.

  4. paul says

    i think you are all on drugs and a bunch of cry baby’s. only 17% of this country make over 100 k.
    they say 52k is the medium income but this figure is distorted due to the outrageous amount of money the 17% make. in this country 58% make less than 27k and 17% make less than 57k. that equals 75% of this country under 57k. fs states that someone making 50k could save 22k. i strongly disagree. i make 50k and 12%goes to my 401k, 4%goes to savings. that leaves a whopping 2000 per month take home. the total of just my rent and utilities is 1400 a month. this leaves 600 to pay for any debt inured medical food gas. that’s is 150 a week to live on.
    you people should feel fortunate you are in the upper income level. i know people that have 1-3 children making 25k per year working 2 jobs about 50+hours per week. how do you suppose they survive after all their expense’s. you people need to stop wining.

  5. Jennifer says

    @paul
    I must agree Paul. I am a mother of two living on 22k a year, it is about 18k after taxes… Meaning I have about 1500 a month to pay all my bills and support my 4 year old and 5 year old. I live in pa. I have a garden to supplement my groceries, I am not not complaining but am saying that the only way I am getting through is by instinct, self sustainability. When it gets over whelming I just think it could be worse. I get quite upset when this rich topic comes up, because I feel if you can cover your basic needs, you are good, if you can afford multiple cars and vacations in exotic places, multiple homes, etc… You need to be so grateful, you are rich. I know first hand life can be gone in a second, the money is worth nothing to you then. Live a rich life on what you have. Sorry to carry on I hope I have contributed something to the discussion. I guess the point is, it really is all relative.

  6. The One says

    well… ugh… i feel sick. It’s time you clows to a walk on “reality” street. It’s clear that most of you have never been poor. It takes almost nothing to survive.

    Comparing your “money” to the country’s averages? Compare it to the world. Think, india, china and south america for instance, forget about africa because you already have forgotten about it.

    You eat once a day? Clean water? a roof over your head? You’re rich. FU.

    • lloyd says

      stop patronize china for god sakes..geez
      china is richer than you think ,in fact, in cities like wen zhou ,or any one that near sea or port,
      ppl makes more than 30k USD on average and living cost is much much lower.
      so stop worrying about us and be more concerned about your government with their debt.(number will stun you,hahaha) .this is also to sam.

      my entirely earning are from foreign so i am not quiet familiar with your tax system even though i live here. i been follow this blog for a fairly long time and i notice a huge lot of saving that sam promoted is depend on this 401k.is that like pension?

      anyway i have read an article on forbes or somewhere else that US government are missing 20 trillions in their pension and that problem is gonna blast soon.but worst of worst is this one interesting fact, that your government ,who is in debt of 547 trillions ,has a tax earning that can’t even pay off the interests that those huge debt generates.

      thats hilarious,right? let’s think of this goverment as a person.so it will be like this.
      that he borrowed say 100k from the bank to buy a car with no down payment. he plans to pay it off in next five years.lets consume the interests rate is mere 2 percent yearly ,so roughly he ought to pay the bank interests for about 2k every year for the next five years.and now guess what? he founds out that after all the spending he can’t even pay off the 2k due every year. not to mention the 100k itself.

      interesting right? because in the scenario china is the bank. you americans really need to work on your illusions and grow some brian.not to listen to the first thing your media and government promoted is the first step to facing the reality.

      but really ,this whole you own us thing is less of our concern as we don’t need the money urgently anyway. in the economic crysis china has huge shares of all the investment bank that survived in united states and our government is nice enough not to pulled out their investment.and if we did, there will probably be no wall street now.

      so really ,think about this ,what if when you are old ,you thought you have everything planed only to founds out that your government has no money to pay off your pension?
      and yea, definitely not vote for obama. he taxed your butt off and still the government is in new debt? with all the taxes obama s getting, the chinese government can probably build ark that can survives 2012 for everybody on the earth and still have plenty left.

      • JM Here says

        Yea, but we bail out entire countries, die for other countries, hunt terrorist for the worlds protection, search for missing people and planes, buy Chinese crap for the Chinese people, give the Chinese and multiple other countries our jobs. Feed the hungry all over the world, actually we’d rather take more care of other countries than the our own. Teach & train other countries. So guess what – I don’t care whose money it is. It’s not lining my pockets in any way shape or form.

    • g says

      Seriously…..your comments are flat out insulting ! You have ZERO IDEA what people have done in their life to end up where they are after lots of years of busting ass, saving pennies – then dollars, scraping buy, working 80-100 hours a week, losing jobs, being laid off with a newborn baby, etc. Yes…..now ( Im 60 ) ive got a really nice nest egg saved and have no debt that will allow my wife and I to retire next year. Ive worked ETHICALLY for every nickel I have made and saved and for you to say FU and act like we are a bunch of criminals…..your a total ignorant dick. Have a great day !

  7. Janet says

    My husband and I made a combined income of $77,000 last year we have cut corners on everything we live in a tiny tiny home 350sqft. We use free firewood in winter we moved to the back areas of east tn to afford to keep living we eat not more than 3ounces of meat three times per week and beans and rice the rest of the week. We have cut healthcare and everything possible to cut last year we came out even and we can not seem to find one dollar to save. We never leave home we work from home so transportation cost is next to nothing. We really have cut every corner we can so in my humble opinion this article is on the money about it depends on where you live how much you earn but the numbers are all off because this past year groceries alone ran us almost $10K and we do not have special diets or anything and we do not buy alcohol or anything expensive all beans and rice so short of going hungry and never leaving home and only buying what you truly need in a cheap are cost $77K for two people then to me it takes at least $150K to be happy and able to save a bit for retirement and have some for travel and some to have folks over for a meal etc… None of which we have been able to do. Not certain where the numbers above come from but life is expensive period.

    • night says

      i don’t understand your predicament being the way it is in Tennessee.. i just got out of college and i can live off of 200$ of groceries a month and i live in Charleston SC.. my friend lives with her bf in outside of chapel hill and make way less than y’all do… somethings wrong there.

    • Dustin says

      Are you serious 10k in groceries? I live in Denver and support 3 people and we spend maybe 400 tops per month on food. We eat good meals all the time on that budget. Where are you shopping????

  8. zeek says

    The wife and I pull in a little over $300k/yr and with taxes (NY residents BTW) and child support, gas, mortgage, camps, piano lessons, lacrosse, soccer, food….I am just scrapeing by. We live in a modest ranch house have 2 crappy cars and play muni golf. We dont go to fancy restaurants or live an extravagant lifestyle. On what planet am I considered wealthy? And they want to raise my taxes? Are they @#$# nuts?

  9. Justine says

    Wow. Your article, although interesting, feels depressing and out of touch.

    $350,000 is not rich? How far does the middle class stretch??

    $200,000 per person (I’m not talking per household) is at the very least upper middle class.
    As far as I am concerned, anyone making $200,000 or more is rich, unless they have a money management problem.

  10. Michael says

    My wife and I have a combined gross of ~$184K (net ~$135K) and I have to say that I feel anything but rich. I live just outside of Cleveland Ohio, and we are likely in the top 2-3% of households in Northeast Ohio in terms of income, but I feel like the government (at all levels) takes from me far in excess of the value that it provides. The effective tax rate for my household is around 28% factoring in all levels of government.

    I am fed up with people telling me I’m rich… I am not rich!

      • Michael says

        I work in IT (contracting as a software engineer which leads to better hourly rates than I could achieve as a salaried worker) and my wife is a bench scientist (medical testing). We are both highly educated (masters plus) and we have both been high achievers since our school days.

        I don’t know if it would quite equate out to a million in SF, but it is rather comfortable. I’d like to think that though we have made both good and bad decisions that we’re on a rather solid path. For example, I purchased a home a few years back when I was single, and making less, that was only 2.25X my gross rather than the nearly 6X the bank said I could “afford” but on the flip side of that coin we managed to accumulate nearly $100K in student loan debt between the two of us. I’m not super worried since most of the student loan debt is at bargain basement rates right now thanks to Mr. Bernanke, and I’m in no hurry to repay loans that have negative “inflation-adjusted” interest rates.

        Last time I did the calculations we’ve got a savings rate of about 35% of net across all of the vehicles available to us. We’re a bit behind the guidelines for savings based on our ages (I turn 30 in 5 days, and my wife is about 6 months younger than I), but I blame that on a later start due to graduate school. Either way, I’m working on a solid dividend performers portfolio that’s already replacing around 8% of our yearly expenses, and compounding rather quickly due to reinvested dividends and monthly contributions.

        Modern finance is truly a beautiful thing if you’re willing to devote a little bit of brain power to crack open Excel and run the numbers.

        • Financial Samurai says

          I think you don’t feel rich b/c you are only 29 years old. Give yourself a full 10 years of working, saving, and investing and I’m sure you will start feeling very rich, especially if you stay in your state!

    • Vinay Singh says

      You’re complaining because you don’t think you’re rich, but people keep telling you that you are? Wow, that is a sad story. I would have the blues too. It’s almost as bad as having chapped lips!

  11. andy says

    what i do is pay every expense with my company so i spend 50k a year in food and gas alone.. through the company.. in my area you can be rich with 250k.. of course saving more thank 100k a year.. right now i am saving around 180K.. my car is paid and only owe 180k for the morgage

  12. Abe says

    OK so here I am and know what it is to work 2-3 jobs at a time. Have never been wealthy, in fact my best years I got 16,000 and that was working 3 Jobs. In all my years of working, SO FAR I have yet to see a poor or real middle income person Employ anyone. Was working at a Machine shop, they got their taxes raised again, besides all the other increases to take in consideration for expense, I got my hours cut and another one also. SO now why do we want to increase the taxes on the rich (225,000 or more) for? Am lost with the question, Someone show me the math, Poor people Do not create or maintain employees….Rich people do! AND they need some sort of incentive!!

    • Financial Samurai says

      Abe, great perspective given your income.

      I’ve never met a poor person employ anybody either.

      But, it’s easier to vote on raising taxes on others so we can benefit rather than work harder ourselves! Go USA!

      • Brett says

        Abe the hard work you did working three jobs is the equivalent of 1/15 of the hard work that a rich person is doing. That means you need to work 15 years to be worth what this one person is able to do. When a CEO cuts himself a check for 10,000,000 dollars after working for two years for a company and the company loses value during their term imagine how long it would take you to make that much money. 500 years at 20,000 a year. I definitely need to educate myself through this website about taxes but thinking about compensation like that for a person who seemingly works hard vs. a higher up can be difficult to swallow.

  13. toronto says

    woww most of you act like money is falling from the sky please explain to me how the fuck making 200000 grand a year is middle class both in canada and the usa sure the cost of living eats up alot of income 85 percent of the american population makes 100000 or less thats 95 percent in canada gross income the top 1 percent control about 43 percent of financial wealth in the us lets be real people anything over 150000 ur balling compared to ur country

    • Financial Samurai says

      Angry much?

      Obama and Romney say $250,000 and under is middle class, so who are we to argue?

      Money is raining from the sky. Look at Apple’s earnings and the number of people spending $500-$1000 for an iphone5 they don’t need.

  14. toronto says

    deleted repost 85 percent percent of americans make 100000 or less 95 percent of canadians make 100000or less stop feeding the innocent lies

  15. Helene Leclerc says

    I think that $200,000.00 after income tax and social security tax is a good figure to use to be considered “well off.” What one chooses to invest in or contribute to is their choice. The average American should not have to make up for what someone who makes 200,000. chooses to use for tax deductions. I’m not talking about businesses, I am talking about the working taxpayer, not a business. Businesses should pay taxes based on the balance of income after deductible expenses. We live on approximately $45,000.- per year. We have no health insurance except for Medicare. We do not envy those who have more than us but we do expect those who have more to pay their share.

  16. Miguel says

    My business grossed 510k last year (I own 4 Fedex routes), after paying the other drivers I still made 340k. I’m 25 with no kids or wife, I own a 1996 Altima (First car and only car I ever bought) and live in apartment owned by my dad.
    I have no expenses what so ever, not one… besides utilities.
    After the accountant is done, I only paid taxes on 117k of the overall amount of 340k income.

    It all varies per case, I have a business and a LLC so I can deduct practically anything from my income… is different when you have a set salary… you’re screwed.

    I consider myself rich, point and simple.

    With that being said, I inhered all of this from my dad.

    • Financial Samurai says

      Miguel,

      I was just going to ask how you were able to get 4 FedEx routes at the age of 25 and make an operating profit of $340,000 before taxes until you said you inherited this all from your dad.

      Does this mean your dad is no longer with us? Or, does he have other businesses to run?

      What are your thoughts about being rich through inheritance vs. through your own work? I love understanding the psychology of wealth.

      Thx, Sam

  17. omar says

    been 25 doesnt mean anything of how much you can make… my wife and i operate cellphone stores. i am 25 also.. like the person above you pay whatever you want..take whatever cash you want and use credit card on anything including vacation and everything will come from the business… so, if i made over 300+ last year which will be more than 350 this coming year i can put that i only made 80k a year and pay little tax.. still spend around 50k year coming form business expense and save 60k from check and save another 180k cash for a rainy day.. i have a morgage of 1500 but make payments of 2500, plus add a bonus extra each year… i just bought the house and plan to pay it all in 3 years

  18. BD Wolfe says

    @ Jai Catalano
    After reading your, and many others, definition of rich I feel it’s gotta be based on net worth. A person or couple making 500k a year with very little savings can become lower middle class very fast with poor financial decision making, or say for example the loss of a job. If the “rich”couple haven’t saved, get caught up in lifestyle additions and are carrying debt, to me they aren’t rich at all. I net 650k after tax, have 728k liquid, own a shopping plaza and 7 rental homes, 16 businesses etc…and not to sound whiny, but I DO NOT feel rich at all. I read in one of the comments that the more you make your definition of rich changes…almost, well exactly like a sliding scale. I am what most consider to be a high net worth(6.4 million) individual, but I am a small fish compared with a few people I associate with. I live in a military town, so to 99.9 percent of those around me I am “rich”, and while I do feel upper middle class, I do not feel rich. You would never know I make and have what I do. My closest friend and mentor has a 60million net worth, and he is like me..not a “flasher”…the people that flaunt money and want people to believe they are rich usually are not. If you feel rich, well who can argue with that. If you don’t,same thing…I am self made, started my businesses with a 500 dollar loan. I feel successful but not rich….yet

    • nbsdmp says

      So BD wolf, interesting post because I’m somewhat similar to you, maybe a little bit farther down the path but still think the same way as you sometimes. I’ve been blessed to have some very weathly mentors that have guided me and collectively the group I hang with probably averages in the $50~$70M net worth…next to them I don’t feel rich. I do live my life though 100% debt free and save a ton each year, so I do actually feel “rich”, because rich to me equates to being able to do what I want to do when I want to do it. I’m not flying private all the time, but that’s not important to me…what is important is not having the stress of life wear on you. It is probalby good not to feel rich so it keeps you grounded, some of what I stuggle with though is getting to the end and having the huge pile of money that I probably didn’t deploy to maximize life enjoyment…it is a tough balance!

  19. Mark says

    Interesting thoughts….. Living in NY and making 430k is far from middle class for my family. After the mortgage, taxes, bills, daycare etc I am left with 1700 a month to spend as I please. No big holidays or fancy cars on my horizon.

    My 2 cents.

    • Financial Samurai says

      Wow…. only $1,700/month left making $430,000 a year is pretty tight. Hopefully you’ve put away at least $50,000 in savings on top of maxing out the 401K and then have $1,700/month left? Tell me $1,700/month isn’t all that’s left for savings.

  20. CloudHeights says

    Great read! I completely agree with your assessment of the levels of income and it varies by locale. Just turning thirty and my wife and I gross approx. 470k. We were making 200k annually a couple years ago, and did not feel rich by any means especially considering kids in near future. I must say though, 470k in Austin, TX is very comfortable. No state income tax, although high property tax but the housing is not like California or NYC. We were able to get a great place on the lake for 700k, so shelter costs are relatively low. The area where we are lost is retirement planning and this was very helpful!

    • Financial Samurai says

      Hi Mate, 470K in Austin must be incredible! If you like Texas, then you’ve got it made given the costs and no state income taxes. 470K would be like $1 million here in SF I’d have to imagine. I’d consider signing up with Personal Capital with that type of income to track your finances. It’s free and it’s helped me manage my wealth better now that I’m retired. Welcome to my site! Best, Sam

  21. Ted Hu says

    This is quite a clique – when most of the country is living with median incomes just shy of 50k, here we are complaining about how really not rich we are. What a bubble. Since I know people in the real world that are not like myself, top 4% and all, let me just say Obama is right. 200k is rich, with opportunity, if you make the most of it. That taxation is an incentive for everyone to do so. We got a good deal, and frankly squandered the two tax cuts that W put on credit card, which just went to a big red debt mound. Reversing that will compel people to put their capital to better work and yields. It has singularly put a number of states including Calif back in surplus for the first time in decades as capitalist sell off their gains now to avoid higher gains taxes later. That is the way it’s suppose to work.

  22. ap999 says

    I like how you break it down very well. But there seems to be more to it than just the numbers alone to me.

    For example, I feel that I am in a better situation making 160k a year than my friends who make 250k+ a year. I happen to save more money than they do when all said and done. This all depends on how much you spend and what your expenses are. To me if you can make 150k but you can live a lifestyle of about 50k your doing great! But if you make 250k but your lifestyle is maxed out that your spending 200k of it. Who is in a better situation in the long run?

    Sorry if my points and questions are off topic. I tend to do that a lot.

  23. Beau says

    I find it interesting that you say the following:

    “$350,000: Still upper middle class. ” – And apparently not rich…

    Very interesting. Especially considering your own blog points out that the upper 1% of Americans make greater than $350,000. So what exactly are these people at $350,000 being the “upper middle” part of?

    The best definition I have seen for middle class is 3-12 times the level of poverty.
    3-6x or $51,000-101,000
    6-9x or $101-151,000
    9-12x or $151-204,000

    Still that isn’t quite right considering 50% make less than $34,000.

    Everyone wants to think they are middle class but even the above numbers show that those in the 3-12x the level of poverty group make up only about 20% of Americans.

    • Financial Samurai says

      Hmm, never heard of a multiple based off poverty. Is this not somewhat of a defeatist attitude? Saying you have 5x more income than poverty just sounds weird.

      I’m basing the numbers in my article off housing and living costs in the most expensive parts of the US and the world.

      Median home price is $600,000-$700,000 in SF and that buys you junk. I don’t call having an income half the value of your house rich.

      Best to use high comparables to be conservative.

  24. resumes says

    I like this article. I was curious about the various income levels and what people would consider rich or well off. Out of all of the sites I read it seems everyone has their own perception of what rich is. I guess that the term rich is subjective. It seems to depend upon a persons point of reference. A person with lower income would probably feel being rich begins at a lower threshold than someone who has a high level income. That’s just my two cents.

  25. Michael says

    I made 235k last year on logistics, I own no debt, my housed is paid (nice 35k rathole), still single (engage) and owned my first car still (2005 Saab).
    Not much of a spender, don’t really buy fancy crap or have the use for fancy gadgets besides smartphones

    All and all, I’m projecting to be making 500k a year by the time I’m 35, I’m crossing my fingers for now, I’m currently making my incredible income based on a handshake and good relations, I could loose it all tomorrow if they choose it to be, which is the reason I started investing outside my field, I bought a 150k bread route that is netting me 950/wk after all cost including driver. I’m thinking on buying 1-2 every yearon separate companies (Pepsi, Fedex, Tastycake) and keep myself diversified. I think when I’m making about 10k a week I will relax and call it a day.

    I at my age, 27, I consider myself very lucky and successful, at least compare to the rest of my family. It was more luck than investment, and or prudent planning to be honest, but you know what they say: Better to be lucky than good.

  26. DenverDude says

    So much ignorance here. Income and net worth are two different things. The are people with low incomes who are multi-millionaires, and there are people who make 300K and are broke.

  27. Larry Reardon says

    It seems that we are using an economic model, whose language is outdated; to describe wealth and the lack of any financial resources. Take the myth of the “1%”. If for simplicty’s sake, we make believe we are talking about a 1% comprised of single adults, then we are talking about apx. 3 million Americans. At the center of this vast hoarding of wealth are 447 billionaires. Which leaves me wondering if the $500,000 marker represents the lowest rung(the poor) of the wealthy?

  28. Peter Daveloose says

    I’m sorry but this article just plain sucks sucks. The author should try googling “social class in the usa” because there is no way in hell that 100k income is middle class. In fact, earning 100k a year means you make more money than 93.4% of people in America. Source: Wikipedia.

    The median wage in USA is about 32k a year. At 250k a year you are in the 1%. Consider yourself educated.

    • Dutch says

      He is only talking about high cost living areas. 100k may be upper class in a low cost area but in Arlington va where the median home prices are ~600k, you are middle class making 100k. To me, it’s a matter of what the median household income is in the area. Arlington’s is around 100k, so how does being at the average for an area make you rich? My personal definition of rich would be the top 10% income wise for any given area, which is probably close to what Sam lists.

    • Adam B says

      Half the country is also on government aid, that don’t earn enough to even pay a positive in net taxes.

      Rich isn’t a comparison to how much you make compared to a group of poor people. Rich is a lifestyle regardless of how much others make, and if you think 100k is enough for a rich lifestyle you’re off your rocker. Especially if you live in high cost areas, where 100k is literally near poverty and Especially if you’re married with kids in a high cost area. My friend just got a lower management job at 115k salary in SF, and is married with 3 kids. Not long ago he commented on how he felt more wealthy as a poor single college student, living off small student loans, than he feels now. No house, drives an older civic, and not much debt. Life is expensive and little things add up!! His rent alone is ridiculous for how small his apartment is.

      100k as a single person in Texas or Indiana may pass off as a wealthy lifestyle, but that’s severely pushing it. The dollar isn’t worth what it used to be. Especially not in SF or NY.

  29. Adam B says

    I think your levels are actually a bit conservative. I don’t consider anything below 7 figures a year anywhere close to being rich. The truth is, the majority of the individuals that think “200k” is rich have never experienced that level of income. They’re not speaking from experience. I know a lot of people that make between 200-300k per year and not one considers themeselves rich. The very interesting twist is that they had always considered that level of income rich BEFORE they were actually earning it.

    I am in the same boat. I actually grew up very very poor. Up until recently I’ve stayed poor. I just turned 33, and had my first 7 figure year last year….and worked extremely hard to get to that point. Prior to success, I had always envisioned the point I would hit 100k, I’d be rich. Once I hit that level it was very underwhelming once I realized how much I had to give back to the government, as well as how expensive it is to live well in this country. People don’t understand all the intricacies of expenses, taxes, etc of a 6 figure income until they actually hit that point. My 7 figure year last year resulted in over 50% federal/state tax alone. And it doesn’t stop there, believe it or not.

    The point: those without actual first hand experience earning a specific amount of income have no solid ground to base their opinions on about that income level. Zilch. Nada. First hand experience trumps second hand opinions.

    I have a unique perspective on living both extremes on the wealth spectrum and can honestly say that anyone that thinks 200k is rich is either extremely frugal or they have simply never hit that income level. I’m sure the latter makes us 99% of the scenarios.

      • Adam B says

        Oh, I wasn’t referring to you. I’m sure you’ve experienced the income levels first hand. I was referring to the commentors that think we’re crazy to believe 200k is not rich. However, how can they have any opinion on it until they’ve actually experienced it? It’s not the ’60s anymore, 200k doesn’t get you as far as some may think. It’s crazy how expensive life can be, even if you have a humble house, cars, toys, etc. 200k is well off and comfortable-ish. But rich? No way. Talk to my buddies that pull in 7-8 figures per MONTH. They live a rich lifestyle. 200k is not rich by any stretch, unless you live in Thailand or something. If you live in SF, 200k is barely middle class. I know, because I’ve live there making a little over 200k not too long ago at ancestry.com branch. First hand experience.

        BTW – I’m 33. Net worth is low 8 figures, but soon to be less as we’re buying a new home. I’ve worked very hard for what I have, but there’s always an aspect of luck and chance involved. I’ve had my share of lucky breaks and not-so lucky breaks.

  30. Alex says

    Your article is accurate considering you specifically stated that your only referring to high COL areas when you are talking about income levels. However, overall the limits are much lower in the USA for being defined as “rich” and “upper middle” class. For example:

    An income of 100K puts you in the
    -Top 20th percentile of all households in the USA. Based on the economic definition of upper middle class, that certainly qualifies as upper middle class income.

    -Top 7th percentile in terms of individual income. Your still upper middle class in terms of income but probably towards the top of the range when considering individual income.

    Now defining what income in general would qualify as “rich” in general is subjective upon what percentile would be considered “rich.” Do we go by the top 5%? 2%? 1%? .5%? Off the top of my head I believe 400K puts you at the 1% of households if we use that as a benchmark of rich.

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