How Much Money Do You Need to Be Part of the Middle Class

Most people want to be rich, and if they aren’t, most call themselves Middle Class.

The headlines and reports seem all over the place lately. “Average American household has a net worth of $1.06M,” had people in an uproar for a day. However, according to Pew Research, fifty-two percent of Americans say they are living in middle-income households. How is that possible, with the majority of Americans claiming that they are living paycheck to paycheck? Households are making tougher choices with their earnings just to stay afloat lately.

“Many households are seeing their finances stretched thinly by the combination of high prices for goods and services as well as high-interest rates,” said Brett House, economics professor at Columbia Business School.

Two of these ideas aren’t adding up. Are people rich but claiming to be poorer or poor people claiming to be richer? It’s getting confusing. Have you ever wondered how much income you need to be really Middle-Class? Is it $50,000, $100,000, or maybe $75,000? Is it a range?

Let’s tackle this once and for all.

Table of Contents

Socioeconomics 101 and the Title of Middle Class

We hear it all the time, “the middle class is shrinking.”

I grew up with a simple definition of middle class. Well, the TV definition of it. All you needed was a home, 2 cars, 2 kids, and a dog. By high school, I added college and marriage to the barometer (due to a Different World). Nowadays everyone that I know has pandemic kids or a pet.

When did it get more complicated than that? By the way, are we really shrinking? Wages went up based on the 2022 Federal Reserve survey of consumer finances. So what’s really going on?

For one, the moniker of Middle Class is a socioeconomic construct. It’s made up. Socioeconomic status is defined as the social standing or class of an individual or group.

It is often measured as a combination of education, income, and occupation. By defining the Lower, Middle, and Upper classes; we are also painting a picture of who that person is and what they have access to.

The problem is that the picture changes. The idea is subjective. In some areas, people don’t drive so they don’t need two cars. It’s unthinkable to be car-less in the South. In other areas, the bar for success is based on pedigree and prestige. While in other spots that might make you bougie.

It depends.

Financially though?

Recent reports are finding that all social classes improved over the Pandemic era (2019-2022).

The economy is mixed and the market is all over the place. Inflation has shown some signs of cooling. However, spending is still strong, savings are down and credit is fizzling. The core personal consumption expenditures price index, which the Fed uses as a key measure, increased 0.3 percent in September.

Prices on common goods are up nearly 20 percent since 2019.

Based on the 2022 Fed Reserve Survey, the median income and wealth were $70,300 and $192,900 respectively. However, that median income can change drastically per location and the size of your household. As of today, that accepted middle-class income range was $47,189-$141,568.

We can generally agree that a firm midpoint is $70,500 in 2022. Even with a burn rate of 77 percent, the average home would still take home $15,510 which could be applied toward capital investments. That’s not a bad sum to play with.

Middle-Class Takeaways:

It’s no surprise that the Bay Area in California, particularly Fremont and San Jose, has some of the highest middle-class incomes in the US.
In previous years California cities have made up 70 percent of America’s richest zip codes.
Fremont, CA, is the only city whose middle-class household income limit starts above $100,000 and reaches potential highs of above $300,000.
There are 11 big American cities — Cleveland (OH), Detroit (MI), Buffalo (NY), Cincinnati (OH), Newark (NJ), Toledo (OH), Memphis (TN), Milwaukee (WI), New Orleans (LA), Miami (FL) and St. Louis (MO) — where the higher end of the middle-class household income limit is yet to surpass $100,000.

Ok So, How Much Wealth do you Need to Qualify?

As of June, the middle class owned only 26.6 percent of the national wealth, while the top 1 percent controlled 27 percent. To be middle class, you would need a median net worth of at least $104,700. That’s a combination of Assets minus Liabilities. This is by far the bare minimum. The median is sitting nearly +84 percent higher.

Although unfair, to get to this level, it comes down the Educational meritocracy. Income and wealth are closely tied to degrees, certifications, and in-demand skills. Communication is a big component of modern wealth. The ability to communicate or use language in research or through persuasion can set you apart from your peers. These key soft skills can further bolster lucrative technical skills such as sales and marketing. It’s not enough to be productive. You have to move and scale exponentially.

While cash flow management can go a long way. However, if you want to retain and efficiently use money, you need enough capital outlay and credit to shift socio-classes. If you want to level up, how you use your remaining $15,510 matters.

Getting There is One Thing, Staying There Requires You to Invest

Now that you’ve obtained middle-class status through education, job classification, and marriage, the next part is to invest it for the long term. Even if we narrow it down to $12,000 per year, that’s 17 percent. That’s double what current households are doing. While it is short of the 25 percent to make you wealthy, it’s still far above the norm.

Investing $1,000 per month at an 8 percent rate of return, at year 10, you would have $180,124. By year 20, your interest would account for 58 percent of your investments. You would have over $500,000. When you decide to retire north of 30 years, you would have over $1 million to play with.

Middle class to me is not just a glamor position in the suburbs. It’s about structuring your money to retain your position financially. Your goal should be wealth-based. And that goal should come with a financial plan that gets you there.

It’s not a game of comparison in the end. It’s all bout reaching your true outcome. You really don’t want to be a financially poor person struggling in an upper-class neighborhood. Avoid the messy middle and redefine your finish line for yourself.