What does it mean to be middle class? Over the years, it has become more and more difficult to specifically define this group of people. Some experts define the middle class by income while others define it based on lifestyle.
While the debate will ultimately continue, here are a few ways to measure and characterize what it means to be a part of the middle class.
The most common factor in determining if you’re considered middle class depends on your income. Because experts differ on how much you should earn to fall into this category, it’s hard to distinctly specify an amount. A very wide definition includes everyone but the poorest 20 percent and the wealthiest 20 percent.1
According to the Pew Research Center, the middle class can be categorized as two-thirds to two times the national median income for your household size. This may range from roughly $40,000 to $140,000 in annual income for a four-person household.2
Another possible way to define the middle class is by understanding how much you spend or consume. Taking into consideration spending on items such as food, transportation, entertainment but not health care expenses and education is the best way to look at this. According to Notre Dame Professor James, the middle class is categorized as the middle fifth of spending, anywhere from roughly $38,200 to $49,900 for a four-person household.1
What do your aspirations consist of? President Obama aimed to raise the living standards of the middle class during his time in office but prior to doing so, assigned a task force to define what that meant. They did so by putting forth their ambitions, hopes and dreams.
To many, the American dream consists of life’s simple pleasures: a car, homeownership, family vacations, as well as college education and retirement savings. By having these goals in mind and more importantly, working to successfully achieve them, you may be defined as being middle class.
Combining sociology with economics is another way to define the middle class. The St. Louis Federal Reserve Bank has done just this because using annual income is something that can alternatively change so drastically over time.
By considering one’s age, education and race, the Bank believes income and wealth accumulation can be somewhat accurately determined. They go on to state that children inherit intangible assets that may affect their ability to access various communication outlets,3 which often help with obtaining jobs and taking advantage of wealth accumulating opportunities.
The Bottom Line
While not necessary, there are some great aspects of understanding if you are in the middle class. These include determining your overall state of happiness and well-being. Are you where you want to be? Do your goals align with the success you hope to achieve? If not, there is no better time than the present to meet with the appropriate advisors and build a plan to live the life you want.
This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.