When I think of the upper class I think of somebody that belongs to a country club, perhaps they drive a luxury car, they go on these crazy ski vacations, or maybe they just have five therapists. But the truth is that with net worth you actually don’t need as much net worth as you think you might need to become what’s called upper class. In this article, we’re going to break down all the classes and their net worth and characteristics based on U.S census data and a couple of research studies.
The U.S census actually gives us data on the quintiles of net worth. What that basically means is quintiles are separated into every 20% of the population so we have data on the bottom 20th, 40th to 60th percentiles and so on.
Lower Class
Let’s start with the lowest 20%. The media Lower Class net worth in this category is $6,030 as of the most recent data in 2020 and that would put you in the poverty class. Now, six thousand and thirty dollars in net worth doesn’t mean that you just have six thousand and thirty dollars in your checking account.
Net worth is actually the calculation of your total assets, everything that you to own minus everything that you owe or your total liabilities. For example, if you had ten thousand dollars in your checking account, perhaps forty thousand dollars in your retirement accounts and you owned a house that was worth five hundred thousand dollars, your total assets in this case would be 550 000.
Assume you have two big liabilities so you owe 300K on your mortgage, as well as 100k in student loans, total liabilities in this case are four hundred thousand dollars so your total net worth in this case would be 550k in assets minus 400k in liabilities, so your total net worth is 150k.
Net worth is a pretty good indicator of wealth in my opinion because while you can have a large income, if you do spend a lot of that income then you really don’t have anything to show for it. So in a way net worth kind of accounts for spending Behavior, as well as discipline, and financial habits. And I think it’s a really good indicator of how wealthy somebody is.
Characteristics Of The Lowest Quantile
Now back to the lowest quintile the characteristics of this bucket, in particular, is that the average household income is between $25,000 to $27,000 per year.
The census defines the poverty line in 2022 at $35,801 per year so if you make below that then you’re considered what’s called in poverty. It’s highly likely that people in this group live paycheck to paycheck, they have a really hard time making ends meet as well as the fact that if they’re in a vicious cycle of debt they’re gonna have trouble climbing out of it.
People in this class might be working minimum wage jobs or they might be earning slightly above that, and few of them have even finished high school. Also, the bottom 20% might include people that just turned 18 so they’re not making that amount of money yet, yet they’re still bucketed in this group.
Now if you find yourself in this class there’s nothing to be ashamed of and in fact throughout this article, I’m going to be sharing some frameworks and tips on how to break through the different class barriers.
Lower Middle Class
For those in Lower Middle Class the 20th to 40th percentiles their median net worth is 43 760. this is the beginning of the middle class and this cohort is sometimes known as What’s called the lower middle class.
The average income of a household in the lower middle class is right at $48,500 (forty-eight thousand five hundred dollars) per year, and that’s going to be slightly lower than the U.S median income of 70,784 per year. The lower middle class is typically made up of new graduates blue-collar workers such as Factory workers and Farmers as well as newer immigrants that are still trying to find a footing.
Characteristics Of The Lower Middle Class
In terms of defining characteristics of the middle class, there are six signs that you might be in the middle class by the middle-class task force, which is a government initiative founded in 2009. They define the middle class as having six financial aspirations. Number one would be home ownership, number two is owning a car, college education, retirement, security, healthcare coverage, and number six is the ability to take a family vacation. I find this really fascinating which is the family vacation for the middle class has become a staple.
It’s the true embodiment of the fact that the middle class are no longer just focused on covering their necessities, it shows that the middle class is starting to have more discretionary income under their belt, and they’re choosing how to spend that money.
Wants and Needs
It’s also here where people are starting to make decisions around spending based on their wants and not necessarily just their needs. This is also where stereotypes come in, maybe you know somebody that’s spending a ton of money on their transportation like their car payment, perhaps their shopping habit, or maybe they just go and buy those squash Malo type thingies all the time.
You know that these people make a decent income but it’s nothing lavish and they’re spending a lot of it, this could be a sign that they are in the lower middle class. These are some of the characteristics of this cohort which is that they spend a little bit too much of their discretionary income instead of investing it for their future in order to ascend past this level.
Having good financial habits as well as increasing their income when they can, and then saving that difference is going to be a really big key. One of the principles of wealth building is that you should always be aiming to save more of your take-home pay so that you can invest it and grow it even more later on.
Middle Class
The next quintile is what I just like to call the straight up, the Middle Class, you are literally smack dab in the middle of the entire distribution of the population. The media net worth to be in this class is $104,700 (one hundred and four thousand seven hundred dollars) and the income of someone in the straight-up middle class is very close to the U.S. median household income of $70,000 to $71 000 a year.
Usually, this class is a mix of specialized blue-collar workers or they’re in the beginning stages of a white-collar job they might have jobs like being a nurse, truck drivers, massage therapists, office managers, sales reps so on and so forth.
Now 100K in net worth or more is nothing to sniff at, and a large reason as to why these people have over a hundred thousand dollars in net worth is either that they’ve become really good at saving a portion of their income and investing it. Or sometimes, it’s just due to the fact that they are older most of the people that get to this level are already in their late 30s to early 40s by the time they cross the hundred thousand dollar mark.
If You’re Younger
If you happen to be someone that is younger and you’re making a really great income of over $70,00 a year. And you’re wondering “Man why am I not at a hundred thousand dollars in net worth?” Well, sometimes the answer is just you haven’t been in the game long enough.
What is really cool here is that if you have a modest income of say $70 or $75,000 a year that would typically put you in the straight-up middle class, but you can actually become a lot wealthier than that if you just have a long enough time horizon and you invest regularly.
The Millionaire Janitor
We’ve seen time and time again through news, stories, that oftentimes it’s not how much you make but how much you’re able to invest. There’s even a famous story back a few years ago in which a janitor amassed over eight million dollars in net worth by the time he was 92 years old. He lived frugally, spent money only when he had to, and he even famously just cut his own firewood.
Still, when he was in his 90s he would take his savings from his janitor job and invest that into Blue Chip stocks and just kind of let the power of compounding take over. While this is an extreme example, it shows that if you’re able to be smart with your money you can still amass quite a large Fortune.
Even if you’re able to just save a hundred dollars a month from the time that you’re age 25 to 65, you’re going to have a net worth of over $335k (three hundred and thirty-five thousand dollars) by the time you’re 65, which will actually put you well into the upper middle class.
Upper Middle Class
Speaking of the upper middle class, the median net worth of this class is $201,800 (Two hundred and one thousand eight hundred). This net worth will put you in the top 40% of households in America and the income at this level is typically between $100,000 to $150,000 in household income per year.
The data even suggests that even if you don’t make between 100K to 150K per year, you can still become what’s considered upper middle class, especially by the time you’re the age of 55 or the median net worth of someone at the age of 55 is 230,900.
However, if we’re talking about older folks, what does the upper middle class actually look like in terms of their jobs? The class is typically defined by white-collar professionals that typically have advanced degrees, or have certain specializations in the fields that they’re in.
Characteristics Of The Upper Middle Class
Think about jobs like Accountants, Engineers, Architects, and Psychologists, they all fit into this upper-middle-class bracket. While income is a massive defining characteristic of the upper middle class, they also have a bunch of different values compared to the lower middle class.
For example, there’s an emphasis on strong education for their children, they all love to do foreign travel, and they all want to be what’s called culture. The majority of people in this class still work a nine-to-five corporate job, they’re probably homeowners and they probably have different types of assets they invest in such as real estate.
Even though they have this upper-middle-class status, it’s not necessarily the case that they’re all financially free. In fact, more than 48% of people earning over one hundred thousand dollars per year still reported living paycheck to paycheck.
This just kind of goes to show you that just because you make a higher income it doesn’t mean you know how to manage it.
Now, this concludes the middle class which 60% of Americans belong to.
Global Wealth Perspective
If you are reading this article and you’re in a different country, and you’re in a Western country such as Canada, Australia, or any part of Europe we should really take a look at the global wealth perspective in terms of global stats.
I want you guys to look at this table, if you make less than two dollars per day that’s considered bottom 20% in the world. If you make between two and ten dollars per day that puts you in the next category of lower to Middle-income. middle income is between $10 and $20 per day, and upper-middle income is between$25 and $50 a day.
High income would just be considered anybody that makes over$50 per day, and if you’re somebody that does that then you are in the top 20% of the globe. I often think that sometimes Americans forget how good what they have.
By earning more, that’s always really nice, but if you take a look at what it looks like globally, you should realize that “Hey you already have quite a lot”.
Naval Ravacant’s Take
Now, as a whole, we as a human species are actually getting wealthier as the years go by. Naval Ravacant has a really powerful take on this “But the reality is everyone can be rich and we can see that by seeing that in the first world, everyone is basically richer than almost anyone who was alive. Antibiotics, nobody had cards, nobody had electricity, nobody had the iPhone, so all of these things are inventions that have made us wealthier as a species today”.
“I would rather be a poor person in a first-world country than be a rich person in Louis XIV France. I’d rather be a poor person today than Aristocrat back then…” And that’s just because of wealth creation.
Upper Class
If you’re in the top Upper Class (Top 20%) quintile or the top 20 percent of the United States, the median net worth here is $608,900. If you have that net worth then you are considered upper class. The median household income of this group some seven years ago was $187,000 according to a Pew research study but adjusted for inflation these days that number is probably closer to $237,000 dollars a year according to that same study.
A large share of upper-class individuals they usually live on the east coast, for example, in places like Boston, New York, in Cambridge where there’s a lot of Financial and Tech around. As well as the West Coast in California and high-tech areas.
The area with the highest share of upper-class people in the entire United States was actually the Santa Clara, San Jose County area which is where Silicon Valley is and I assume that’s just because of so many people that work in Tech, and all the salaries in Tech are quite high.
But the upper class can also include some non-tech workers, there are plenty of high-paying jobs that aren’t in tech. For example, if you’re a cardiologist a psychiatrist a dentist maybe you’re a senior level in the finance field or perhaps a marketing manager.
Increased Savings And Investing Habits
What’s really cool is that most people can actually get into the upper savings habits as well as investing aggressively. If we just save $200 a month from the age of 25 to 65 that’s double what we had to save before for example.
But $200 a month is quite attainable, you’re able to get this net worth pretty easily. People in this quintile mostly have their needs and their wants covered, they’re mostly focused on things like passive income, a good retirement for their entire life, as well as their education for their kids. Now while higher income is usually correlated to net worth, it’s not always the sole driver of net worth.
Oftentimes what we see with the upper class is that there is a high amount of money saved in their retirement accounts, the equity that they own in their home as well as different types of stock and mutual fund Investments.
You can see from the table above that the composition of wealth by asset type in 2020 largely follows this exact pattern. This is for wealth across the United States but it still illustrates that the path to wealth is rarely just with income but other Financial activities as well.
Recommended: How Much You Need To Save – By Age
I hope that this article helps shed some light on the different classes in the United States. If you feel comfortable sharing, please let me know what class you belong in the comments. Peace and Happy Hustling!
