It Is Based On Income and Certain Other Factors
Updated: January 22, 2021 by Financial
Samurai
We’ve got the poor, the middle class,
the upper class, and the rich. This article looks at the definition of upper
class based on income and several other factors.
When you think of the words “upper
class,” what do you imagine? I often conjure some passengers sitting on a
British Airways flight. They are literally sitting in a section of the plane
called Upper Class. Weird.
Let’s be frank. Upper class has a
somewhat arrogant tone to it. I don’t know anybody in America who uses the term
upper class when speaking. I don’t know any socially normal person who calls
himself upper class either. Perhaps it’s a European thing.
In America, we use the term “mass affluent”
or “aspirational class” instead of upper class. Nobody in America would ever
publicly say they are upper class unless they want to get beat over the head.
Instead, people would much prefer to say they are middle class.
Middle Class Is The Best Class, Not
Upper Class
The best class is the middle class
because you can blend in.
Nobody attacks the middle class for making too much money or being a burden on
society. The majority is the middle class, which also provides comfort in
numbers.
As a middle class citizen, you also
don’t get taxed as much. You generally also get more government support. The
middle class earns somewhere between +/- 25% of the median household income in
your city. Nationwide, the median household income is roughly $65,000.
Therefore, the middle class earns somewhere between $48,000 – $81,000 a year.
Now that we’ve defined poor and middle class, let’s look at the definition of upper class.
Definition Of Upper Class Based On
Income
In a 2018 report, the Pew Research Center found that upper class Americans grew their income faster between 2010 and 2016 ($172,152 to $187,872) versus middle-income Americans ($74,015 to $78,442).
The report states, “the wealth gaps
between upper-income families and lower- and middle-income families in 2016
were at the highest levels recorded.”
This is obviously true since we’ve had a
massive bull market since 2009. It is especially true the upper class has
gotten even wealthier post pandemic. Upper-income families likely worked at
faster-growing, more profitable companies that pay higher salaries.
Further, people who have been regularly
investing since 2009 have seen their wealth soar. The S&P 500 and real
estate are both up tremendously.
Those who hoarded cash or simply spent
all their money did not see their wealth grow nearly as much. Only recently,
has median household income reached
new highs. It went nowhere between 2000 – 2016. In 2021, the median household
income is roughly $68,000.
An upper class income is usually
considered at least 50% higher than the median household income. Therefore, an
upper class income in America is $100,000 and higher.
Income By Household Needed To Be Upper
Class
According to the Pew Research Center,
below is the income by household necessary to be upper class. The greater your
household size, the greater the income needed.
- $78,281
for a household of one
- $110,706
for a household of two
- $135,586
for a household of three
- $156,561
for a household of four
- $175,041
for a household of five
In other words, to be upper class, you
need to make at least $75,000, the threshold where researchers have discovered
making more does not necessarily increase happiness.
To play it safe, to be considered upper
class, your household should make at least a six-figure household income.
Inflation really has a sneaky way of catching up to all of us. I believe most
Americans can make a six-figure income at almost any age.
Of course, making six-figures in Des
Moines is going to go a lot farther than making six figures in New York City.
I’ve written extensively about how households may need to make $300,000 to
live a middle-class lifestyle in
big cities today.
Therefore, it’s up to you to adjust your
household income figure accordingly. If you can make a similar amount of income
and relocate to a lower cost area of the country, then this is something to
consider as well.
Upper Class Is Relative To The Median
Everything is relative when it comes to
finances. Pew defines the upper class as adults whose annual household income
is more than double the national median.
In 2021, the national median household income is around $68,000.
Therefore, as a whole, the typical
upper-class household in the new decade has a median household income of over
$130,000. $130,000 is a good household income amount. However, it’s not a high
enough income to be considered rich.
To be rich, a household will likely have
to make multiple six-figures a year. After all, the next level above Upper
Class on a British Airways flight is Rich Class! No, I’m just kidding. British
Airways also calls First Class, First Class.
Other Definitions Of Upper Class
It would be a shame to only define upper
class based on income. We can also define upper class based on behavior,
background, and status. However, people who view upper class mostly based on status are
likely just snooty people just looking to protect their own status.
Besides defining upper class by income,
we can also define upper class by:
- Net
Worth
- Education
- Occupation
- Culture
- Travel
- Language
- Fitness
If you have a master’s degree or higher,
you may be considered upper class. Around 13% of Americans have master’s
degrees and only around 2% of Americans have doctorate degrees. In comparison,
roughly 35% of Americans have undergraduate college degrees. All societies tend
to respect scholars.
If you have a net worth 50% higher than the average
American, you can be considered upper class.
After all, it’s not so much how much you earn but how much you keep.
If you know two or more languages
fluently and have traveled to at least five countries, you may be considered
upper class. Roughly 60% of Americans do not own a passport.
If you are in good shape, perhaps you
can be considered upper class since 60%+ of Americans are overweight. Living
longer is generally an attribute of the upper class. Although, extremely
wealthy people die young as well e.g. Steve Jobs at age 56.
Finally, if you are a very thoughtful
person who is always looking out for others, I say you should be considered
upper class. The average person is too selfish or too busy to help other
people. Being a kind person who also stands up against injustices is my
favorite definition of being upper class.
Upper Class Is A State Of Mind
The definition of upper class can,
therefore, be a combination of income, net worth, occupation, education,
behavior and a variety of other factors. Everything is relative to the average
or median.
I believe a big part of being upper
class is having more freedom and happiness than the average person. At the end
of the day, your goal is to have enough money to be happy. If you have enough
money that’s generating some passive income to
allow you to take weekday siestas or do as you please, you are probably upper
class.
But if you proceed to combine your
elevated happiness and freedom and mistreat other people, you immediately get
downgraded to low class.
I’d love to retire the definition of
upper class from now on and just use the term “mass affluent.” Mass affluent
sounds so much better in this uncertain world. To say or think you are upper
class is a surefire way to a demotion.
Readers, what is your definition of
upper class / mass affluent? Is upper class more of a European term than an
American term? Do you consider yourself upper class? Would you ever describe
yourself as upper class in public?
Suggestions For Getting To Upper Class
Start Your Own Business.
To build great wealth, you should build equity. Recessions are a perfect time
to try and start a business and do something new. Here is my step-by-step guide to
starting an online business. It takes less than $3/month and 45 minutes to set
up. Not a day goes by where I’m not thankful for starting this sit in 2009.
Invest In Real Estate.
Every affluent I know has invested in real estate in some form or another. With
the migration to lower cost areas of the country thanks to the rise of work
from home, real estate in the heartland looks attractive. Check out Fundrise and CrowdStreet,
two of my favorite real estate crowdfunding platforms that enable you to invest
in real estate across the country. Both are free to sign up and explore.
Stay On Top Of Your Money. Sign
up for Personal
Capital, the web’s #1 free wealth management
tool to get a better handle on your finances. Remember, it’s not so much how
much you make, but how much you keep. Run your investments through their
award-winning Investment Checkup tool to see exactly how much you are paying in
fees.
Then make sure you run your financials
through its Retirement Planner to make sure your financial future is on track.
There’s no rewind button on the road to financial freedom. Best get it right
the first time!
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newsletter here.
The upper class love to educate themselves as much as possible about life and
their finances.
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