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Defining the Upper Limits of Middle Class

Since the beginning of this blog I have often presented ourselves as higher income. Compared to most people we are. But as we have ventured into the world of financial blogging I have encountered others who make our income look like peanuts. I have encountered more than one blogger where income is nearer 7 figures then 5. This raised a question in my mind, what really defines a upper class? How does that related to middle class?

I broached this topic at a high level a while back with my post correlating income to expenses. At the time I promised to write a post in the future defining the middle class. Well today is the day.

Standard Income Definition of Middle Class

That post first brought to the forefront the concept that financial status as relatable to where you live. CNN Money has a great calculator on their site to define middle class by location. This is the purely mathematical definition of middle class, or 2/3 to 2x the median income in the county. By this measure there are wide swaths of difference around the country. In silicon valley the tool lists the top of the median at 183K. For my county in Delaware the median stops at $126,000. The county in which Detroit lies is only $81K.

Income Dispersion and the Middle Class

The thing is there is a mathematical flaw in this methodology. 2 times median income or 2/3 median income states nothing about income dispersion. With more dispersion of income in the area the definition of upper class would potentially start higher than 2 times median income. With less dispersion of income in the area the definition of upper class would be lower. Simply with the increase in dispersion the amount of income between the median and upper class must grow.  There needs to be at least a significant concentration of people defined as middle class in order for such a number to be meaningful.   You could take this further and attempt to mathematically define the upper 1/3 of the income curve in each area as upper class to solve the mathematical flaw, but would that be sufficient?

Lifestyle, Expenses, and the Middle Class

The thing is my prior post also showed that just because income is high in an area does not mean that expenses are equally as high. This means fundamentally the lifestyle of someone in the upper class in two places with equal dispersions of income is still not necessarily equal. I have talked at length in the past about money being fungible and merely being a unit of measurement. As we’ve discussed money has no value on its own except for what it can provide in exchange. So if expenses are not always related to income geographically that means the amount you can exchange that money for is also not equal. This means income levels are probably not a good comparison for middle class lifestyle across regions. If middle class is primarily a statement of lifestyle it is probably not sufficient to mathematically determine middle class based on income dispersion.

Middle Class: Low Income and High Net Worth

Even if we considered income as a determinant of middle class, how then can we account for someone with low income and high net worth. This is especially a question if you had a high salary and then early retired. For example take a doctor who made 300K a year. Imagine that doctor retired at 1.5M dollars in net worth. Did they go from upper class to middle class because they chose to retire? Is this true even if their lifestyle does not change? I would postulate no, if someone can afford to retire from their career they do not suddenly drop in financial class either in lifestyle or view of society. So income itself might not even be a good measurement of middle class.

Consumption as a measure of Middle Class

In a paper in 2011 Professor James X Sullivan of Notre Dame and Bruce D Meyer of Chicago postulated that consumption would be a better determinant of middle class.  This in theory does account for the differences in the relationship in income to costs regionally. It also better captures the impact of net worth in the equation. The trust fund baby who spends like a drunken sailor would be just as much considered upper class as the doctor, lawyer, or corporate executive. Furthermore, it removes issues with the fungibility of money and geographical relativeness from the equation. At least for the average portion of society it solves many of the main problems with income determination. If you buy a new Ferrari or a Mansion odds are good you are not middle class.

Debt does not fake Upper Class

But, there is still another gap here. Not everyone’s consumption is sustainable. At the extremes I indicated buying a Ferrari or a mansion ensure you are not middle class, but the problem is there are many less expensive items where the question is more debatable. I assume with something truly expensive you won’t be able to use credit to fake it. The problem is the closer you get to the line the more you can use debt to simulate wealth, at least for a time. If you buy the McMansion you cannot really afford are you middle or upper class? Before or after they foreclose? If you run up massive car loans buying a $120K Mercedes are you upper class? How about when they repossess your car?

Sustainability and the Definition of Upper Class

Well you could add in something here about sustainability. Say someone who can do this over a ten year period. It puts a wrench in the concept of measuring the change in classes over moderate amount of times, but at least it would eliminate the risk of miscatagorization due to debt. This eliminates those punching beyond their means by going into massive debt. At a demographic level I suspect this is the best we can do. Below this level we get into the personal aspect of finance. At the personal level there is still has an issue,

What about those of us who choose to live below our means?

The remaining issue is what about all those that choose to live significantly below their means. So for example consider the early retiree aspirant. This person could live on just 1/3 of their income, yet their income could be more in line with the first few paragraphs income definition of upper class. Instead of buying material goods they have chosen to spend their money on retiring early. So does that mean they are middle class or upper class? If they spend 30K a year but have a million dollars does that make them upper class? I would argue if you are a millionaire you are still upper class, regardless of what you spend. Still I would not define middle class by income or net worth. For better or worse these exceptions are in the minority. This is why I find it ok to not account for this factor in demographics, but I do find this a concern for the individual.

My Definition of Individual Middle/Upper Class

First full disclosure, I meet most of the above definitions of upper class. But I still define middle class and upper class differently. In my mind middle and upper class are as much a state of mind or demographic situation as a financial one. If you have a sustainable financial position, are not massively worried about finances, and can afford what you value in life without worrying about it’s impact on your finances, then in my mind you are upper class. Note the wording here. You have to both not worry about finances, but at the same time that lack of worry has to be legitimate. You can not just bury your head in the sand and not worry about your purchases. Note also the second qualification, purchase what you value. This indicates that we’re really talking about a relative measure, something personal and individual. This doesn’t help those doing demographics but it does help to capture the reality at the individual level. The definition also allows somewhat for the interplay between net worth or high income. Either high net worth or high income can define the situation depending on where you are in your career and how safe your job is.

I Fit My Own Definition

Ultimately we fit this definition of upper class as well. I manage our budgets and our money but I do not worry about our expenditures related to our values. None of them will break us financially. That puts us as an exception at least in US society today where half of Americans report not being able to come up with $400 if disaster struck.  In other words, we’re beyond the middle.

How do you define middle class? Do you consider yourself middle or upper class?


  1. Dan
    Dan December 11, 2017

    “If you have a sustainable financial position, are not massively worried about finances, and can afford what you value in life without worrying about it’s impact on your finances, then in my mind you are upper class.”

    By this definition, people with certain neuroses will be middle class even if their net worth is 8 digits or 9 digits or 10 digits. There are people who obsess over every penny spent because they are convinced a financial crisis is looming and the 27 cents they save on gas today will be the difference between life & death tomorrow. I know that people like this exist because my parents were like this.

    Middle & upper class must be objectively defined. Otherwise, a subjective definition has little value. Besides, who walks around thinking about themselves as middle class or upper class? It’s like walking around thinking “I’m blonde haired” or “I’m a male.”

    According to some net worth calculator I recently used, my net worth is in the 95th or 96th percentile. It’s hard to argue I’m middle class based on that statistic but I don’t feel upper class. Ultimately, what difference does it make? I used to think a little like you. If you can spend to your heart’s content without it significantly impacting your net worth, you are upper class. As I thought about it, my parents had conditioned themselves to want less so they were upper class by that definition even though you provide an alternative definition where they are middle class.

    • FullTimeFinance
      FullTimeFinance December 12, 2017

      I believe it matters to the individual for only three reasons:
      1) understanding your privilege in the context of discussion with others.
      2) potentially avoiding the cheapness disease you reference.
      3). Understanding how your culture relates to society both politically and economically. This can have ramifications on what you are exposed too.

      I actually might argue your parents are middle class since at least culturally they are living as those who are hand to mouth.

  2. Chris
    Chris December 15, 2017

    As you alluded to early on, it’s all relative. I have friends at both ends of the spectrum. I feel like I’m 6 years away from upper class. These next 6 years my younger 2 children, will be in college. We have saved money for both of their college, but the reality is, it always costs more. I can’t justify having them pay for something (besides a small amount of skin in the game) when we are fortunate and young enough to work.

    Once those bills are gone, and the mortgage may be gone or close to it, it may be harder to get me to come to work if they don’t give me the type of work I enjoy.

  3. Troy @ Bull Markets
    Troy @ Bull Markets December 16, 2017

    I’d say middle class is not having enough money to do whatever you want, whenever you want. So a networth of <$10 million. These days, everyone's a millionaire due to real estate bubbles in Toronto. Even a tiny 1 bedroom apartment goes for half a million.

    • FullTimeFinance
      FullTimeFinance December 16, 2017

      Ahh, The relative perspective of location. Here 1 million would buy you a 5000 square foot house and at least 10 acres.

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