The definition of a middle class lifestyle has been consistent for over 50 years. Yet, for some reason, there is still debate on what consists of being middle class. Being middle class isn’t about how much money you make. Being middle class is about what type of lifestyle your money can afford.
Whenever I publish posts with six figure household incomes and detailed expenses my comments section and social media light up with displeasure.
Instead of accepting the fact that higher income leads to higher taxes and that living in large metropolitan areas result in higher expenses than in less densely populated parts of the country, there is denial.
There’s also a segment of people who display hatred for high income earners, as if living in a three bedroom house and wanting to eat healthier in order to be around to see their children grow up is an affront to their way of life.
Pushback Against Middle Class Definitions
Based on my observations, here are the types of people most outraged by others paying a lot of taxes while also trying to raise kids and save for retirement in an expensive city:
- People who don’t live in an expensive coastal city.
- People who don’t have kids.
- Students who haven’t even gotten a job yet.
- People who see a $1.5M house price tag and scoff, but don’t understand that if the median house price is $1.5M, then the house is quite average.
- People who work 40 hours a week or less and think they should be far ahead of the game compared to their peers who work 60 hours a week or more.
- People who are too afraid to make a change in their career or are too afraid to move for an opportunity.
- People who don’t tell the full story of how they make ends meet e.g. a reader claims to save $200K on a 300K income without explaining his taxes and housing situation.
- People who have a tendency to discriminate against others, otherwise, they would be more accepting of other people’s situations.
- People who feel their reality is the only reality that counts.
What the heck is going on folks?! It’s OK to be skeptical and disagree, but to hate is unbecoming.
If you are easily triggered in a personal finance context, I’ve got a solution for you. Focus on achieving equality instead of being mesmerized by the numbers.
A Middle Class LIFESTYLE Is All We Want
People who see others making $200,000, $300,000, and $500,000 a year are too caught up in the numbers. Instead, focus on the lifestyle.
If a household making $300,000 in New York City is living the same lifestyle as a household making $80,000 living in Des Moines, Iowa, why are the two any different?
There is no hate against the $80,000 household living in the Midwest. So why is there hate directed at the $300,000 household who is stuck living in New York City due to their jobs?
We’ve been fighting discrimination in America since the Civil War folks. Is there any wonder why Stealth Wealth is alive and well? Let’s be more accepting of others.
We all know what a middle class INCOME is. That’s easy to find out from the government. The median household income is roughly $62,000 in 2019 compared to the median home price of ~$270,000. The below chart defines five social classes by 2014 incomes from the Urban Institute. Thanks to inflation, you should add 10% to every income figure.
Notice how the Urban Institute says a family of three who earns up to $349,999 + 10% are still considered middle class?
It’s nice to know a Washington D.C. based think tank founded in 1968 agrees with my $300,000 middle class lifestyle assessment.
Definition Of A Middle Class Lifestyle
* Having a job that can comfortably, not extravagantly, support a family.
* Being able to afford a safe car to commute to work and reduce injury and fatality from accidents.
* Being able to take 2 – 4 weeks of vacation a year with the family.
* Being able to retire when Social Security kicks in at 62, at the earliest.
* Being able to save enough in your pre-tax retirement accounts in order for Social Security to be enough.
* Being able to send your child to college, since college is fast becoming a minimum educational requirement to get many different types of jobs.
* Being able to go out on dates and see friends once a week without feeling immense financial strain.
* Being able to care for aging parents when they need assistance.
* Being able to eat healthy foods to avoid being one of the 45 percent who are obese in America.
* Being able to pay no more than 4.3X – 6.3X your household income for a two bedroom house given the national median multiple is 5.3X.
If you’d like to argue why one of the bullet points shouldn’t be part of a middle class lifestyle, please feel free to elaborate. I firmly believe that every decent human being who works hard deserves a middle class lifestyle. Do not accept the pitiful deflationary state of the average American with $5,000 in retirement savings.
Confused About What You Don’t Know
Here’s Frank a renter, who cannot see the $19,200 in property taxes and $3,600 in property maintenance expenses when he pokes at Catcoder for rounding up $24K in taxes.
I can promise you that if you are a homeowner who has to pay $24,000 a year in property taxes and maintenance expenses every year, you will know! I’m other words, judging people without being in their shoes isn’t productive.
Since we obviously don’t all live in the same part of the country, it’s logical to assume that different levels of income are required to provide for a middle class lifestyle. Yet for some reason, people don’t accept this logic.
If you define yourself based on an income or a net worth amount, then you either have low self-esteem or have a completely backward view about money. A middle class lifestyle is about living.
Geo-Arbitrage Is A No Brainer
Despite clearly stating that $300,000 is equal to $100,000 – $150,000 in non-coastal cities, some folks still cannot accept the equation. The national ideal income is around $125,000 based on the student loan forgiveness income threshold.
Here’s one viewpoint from a reader who also believes living in a lower cost area of the country makes sense.
“I lived in Singapore for 5 years (consistently ranked no 1 in total cost of living worldwide). I came away from that (pricey) experience telling myself I will never live in a high COL area again if given the choice.
It’s incredible how many people in other countries have no choice but to live in their country’s high cost of living areas due to various factors outside their control. Geo-arbitrage is truly one of the mightiest tools in the US that many people elsewhere simply do not have, or not to the same degree.
Some people are forced to go where the work is, but is the quality of life in the expensive coastal cities so great to offset the total life cost? I’ve seen that lifestyle and for me it’s simply not worth it. The number of life options given to me in a lower cost of living area far outweigh the downsides, in my view. If I reach financial independence far faster living in flyover country for a few years, I can then spend my time visiting expensive areas and enjoying their amenities.”
Earn your fortune in a city that pays you more and move, because you can. If you cannot, enjoy your low cost lifestyle and be happy with what you have.
Take Action To Improve Your Life
Please do something about your life if you are not happy with it. Hating on people who make and spend more than you is a waste of time. Your feelings will only make you more miserable.
Save aggressively, invest aggressively, take more calculated risks, and get neutral inflation by owning your own home. The animosity renters have towards homeowners and the real estate market will simply grow.
If you are easily offended by anybody for any reason, ask yourself the following questions:
- Do I hate them because I hate myself?
- Do I hate their achievements because I’m unwilling to work as hard as them?
- Do I hate them because I’m prejudice against certain types of races, sexes, and cultures?
- Do I hate them because I wish I had what they have?
- What actions should I take to change my life?
Once you get down to the real reason for not being able to understand the difference between middle class income and middle class lifestyle, you can take purposeful steps to improve your situation. The only people who fail are those who take no initiative to change.
Long live the middle class, lifestyle!
For good measure, here’s the updated spreadsheet for a $300,000 a year household of three after listening to everybody’s feedback. Major changes include swapping out a Volvo for a Toyota Highlander, reducing the food budget from $2,100/month to $1,650/month, including a mobile phone family plan, and increasing charitable givings and 529 contributions.
Surely after making the changes, no one can argue that this is now a “more true” middle class lifestyle.
Recommendation To Build Wealth
Sign up for Personal Capital, the web’s #1 free wealth management tool to get a better handle on your finances. In addition to better money oversight, run your investments through their award-winning Investment Checkup tool to see exactly how much you are paying in fees. I was paying $1,700 a year in fees I had no idea I was paying.
After you link all your accounts, use their Retirement Planning calculator. It pulls your real data to give you as pure an estimation of your financial future as possible.
I’ve been using Personal Capital since 2012. Since then, I have seen my net worth skyrocket during this time thanks to better money management. Personal Capital has definitely helped our family live a solid middle class lifestyle.
Build A Middle Class Lifestyle Through Real Estate
Real estate is a core asset class that has proven to build long-term wealth for Americans. Real estate is a tangible asset that provides utility and a steady stream of income if you own rental properties. If you want a middle class lifestyle, own your primary residence and invest in real estate.
Given interest rates have come way down, the value of rental income has gone way up. The reason why is because it now takes a lot more capital to generate the same amount of risk-adjusted income. Yet, real estate prices have not reflected this reality yet, hence the opportunity.
By owning your own home, you will have covered one of the foundations of living a middle class lifestyle. To get to upper-middle class, you must build a solid investment portfolio that produces passive income.
To do so, take a look at my two favorite two real estate crowdfunding platforms are:
Fundrise: A way for accredited and non-accredited investors to diversify into real estate through private eFunds. Fundrise has been around since 2012 and has consistently generated steady returns, no matter what the stock market is doing.
CrowdStreet: A way for accredited investors to invest in individual real estate opportunities mostly in 18-hour cities. 18-hour cities are secondary cities with lower valuations and higher rental yields. Further, 18-hour cities potentially have higher growth due to job growth and demographic trends.
Both platforms are free to sign up and explore.
I’ve personally invested $810,000 in real estate crowdfunding across 18 projects. My goal is to take advantage of lower valuations in the heartland of America.
My real estate investments account for roughly 50% of my current passive income. As a result, my family of four can comfortably live a middle class lifestyle without much difficulty.