“The other people that live on this lake aren’t uber-wealthy are they? No, they’re middle-class, right?….Like us!” …said one of our friends that earns over $200,000 a year….
I literally had to bite my lip to keep from entering the conversation.
Middle-class like you? You really think you’re middle class? In what fairy-tale world do you live where $200,000 a year is considered middle-class?
Instead of blurting out my brash comments, I decided to suppress them, do some research, and then plaster my findings passively all over this website! Lol.
Which Income Class Are You In?
While I was delving into the details of the income classes, I naturally grew curious around where Liz and I landed on the income spectrum, and then where we might land in the future with our growing rental empire (which at this moment is an “empire” of one… ;)). So of course if I’m curious, I figured that all you readers would be curious as well! So let’s dig in!
What Are the Income Classes?
So what are the names of the different income classes? And what are the ranges of earnings within each class?
According to Investopedia.com, there are five main income classes:
1) The Upper class
The “upper class” basically means the upper 1% of America. To gain a place in this income class, you need to earn at least $389,436 a year. On average, the upper 1% earns $1.2 million each year.
2) The Upper-Middle class
According to the Census Bureau, 6.1% of households earn $200,000 or more and 14.1% bring in $100,000 to $200,000 a year. This is the upper middle class.
3) The Middle-Middle class
The great majority of people land here, with an income of between $35,000 to $100,000. Of everyone in the United States, 41.5% can honestly say that they are part of the middle-class.
4) The Lower-Middle class
This class earns between $18,871 and $47,100. They straddle the lower-line of poverty and the upper edge of the middle middle class. They’re not technically poor, but they’re dang close…
5) The Poverty Level
The lowest income class is comprised of those that don’t earn enough to meet their basic needs (food, shelter, and clothing). Earning less than $18,871 is an unbelievable 14% of the U.S.
What Does the Top 1% Do?
In 2012, The New York Times came out with an amazing heat-map that showed what people did to earn their way into the Top 1% earners in America. Check it out (and click on it if you want to see more detail).
According to this amazing piece of research, the majority of people that earn more than $389,436 simply call themselves “managers”, but they’re not just any run-of-the mill manager (don’t let them fool you). They’ve worked their way through the ranks of high-earning professions – like brokers and investment professionals – and now manage a team of high-earners, which is why they earn so much money themselves.
The other top earners are just what you would expect:
- Chief Executives
- and Financial Specialists
For the most part, these 1%ers have worked their butts off. They’ve spent 8+ years of their adult lives going through school and have paid out hundreds of thousands of dollars to gain the knowledge and earn the right to their high income.
It definitely isn’t for everyone, and for those that make it, more power to them.
Our Friends…and Us
Our friends…the ones that bank $200,000…are in the upper echelons of the upper-middle class and are nowhere near the stats of the true middle class. I’m not mad at them. I think it’s awesome that they earn such a great income. I just wish they understood how rare their income actually is, and to stop relating themselves to people that earn $150,000 less than they do. Put it into perspective, people!!
Liz and I – we’re true middle-middle classers. We earn more than $35,000, but less than $100,000. We don’t make a ton, but we manage our money extremely well, and we’re growing wealthy because of it.
Our motto has been simple:
- Get out of debt,
- live on less,
- and invest for the future.
How to Jump Up to a Higher Class….and Should You?
Will Liz and I always be part of the middle-middle class?
I doubt it.
Even though Liz stays at home with our daughter and technically doesn’t earn an income, we still have plans to earn more in our future. I’ll probably earn some advancements at work, we plan to continue buying rental properties with cash, and we’re continuing to invest heavily into my company 401k.
In the next five years, I wouldn’t be surprised if we worked out way out of the middle-middle class and into the upper-middle class.
“So how the heck do you do that? How can you jump into a higher income class? I thought it was impossible for the little man to get ahead?”
Well that’s absolute B.S.
We live in the United States – the land of opportunity. Every single individual has the ability to do more, earn more, and become as wealthy as they can imagine. And actually, I already shared the secret with you, but here it is again in case you missed it:
- Get out of debt,
- live on less,
- and invest heavily for your future
It’s basic, simple, and it isn’t sexy at all, but it flat.out.works!
If you want to move up an income class, do everything you can to ditch your debts, live on far less than you earn, and then do everything you can in raise your income – via your job and through any investments that you make.
My favorite investments that will propel you into a higher income are:
- investing in real estate (with cash)
- starting your own business (mowing lawns, tutoring, fixing cars, it doesn’t matter)
- investing in yourself (to earn a degree that will increase your earning potential)
Should You Work Toward a Higher Income?
Back in 2012, Princeton found that the perfect household income for happiness was $75,000. So logic says that if you earn less, then yes, you should work toward a higher income. If you earn more, then don’t worry about it. But life isn’t quite that simple….is it?
Here’s what I go by:
- If you have a constant want for more stuff and more money, then no. You’re selfish and more money will never make you happy no matter if it’s an extra $500 or $500,000. Instead of working toward a higher income, you should work toward a contentment of self.
- If you love your life and are interested in helping others, then yes, you should work toward a higher income. The more you earn, the more consideration you’ll put into how you should spend it. It’s people like you that should earn more money because you’ll do the most good in the world by having it.
Income Classes and Your Earnings – What’s Next?
You earn a certain income. You land in a certain income class. Be honest, are you in the appropriate income class for you? If not, work your butt off to get out of debt, live on little, and then invest heavily to propel your future income upward.
What income class are you in? And where will you be in the future?
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.