Middle class: feelings vs. finance

Gallup has a poll that asks Americans what income brackets they belong to.

The results are relatively stable over the past 20+ years:

Most people say they are middle class, while very few people think they are upper class.

The Pew Research Center has a new tool that lets you enter your income and see where you fit in both nationally and locally.

Their numbers show that the Gallup poll is right on the money about the middle class, but not even close to the percentage of people in the upper class:

Only 2% of people feel that they are part of the upper class, but almost 20% actually live there.

There used to be a higher proportion of people in the middle class.

In 1971, 61% of Americans were middle class, while only 11% were considered upper class. The lower income cohort was 27% of the total then, so we’ve seen a healthy shift from middle to upper class over the last 50 years or so.

Lowering the share of lower income households would be good, but this is progress.

These are Pew’s revenue breakpoints:

• Lower income = less than $56,600
• Median Income = $56,600 to $169,800
• Top Income = More than $169,800

Like all averages, these numbers could use some context. It depends on where you live, cost of living, job opportunities, etc.

For example, using the Pew Middle Class Calculator, I entered my West Michigan metro area to see where we stack up against national averages:

There are more people in the middle class and fewer in the lower and upper classes. This is verified based on my experience.

Now look at the New York City metropolitan area:

Fewer people in the middle class and a higher than average share of the upper class.

Obviously, New York City has a much higher standard of living than Grand Rapids. Everything is more expensive.

I suspect that many people who are technically upper class in New York City would identify as middle class because of how expensive it is to live there. I don’t blame them.

The same idea applies to the real estate market.

The Apartment List published a chart showing ownership by generation at different ages:

Millennials are more or less on track with previous generations, even if we’ve been playing catch-up.

That’s the good news.

But the ownership rate is not evenly distributed across the country:

Millennials are much more likely to own a home in the Midwest than on the coast. Grand Rapids is near the top of the list for home ownership rates. Check out how much lower rates are for all major California cities at the bottom of the list.

Homeownership rates for young (and, well, middle-aged) people are much higher in non-metro areas than in big cities. This makes sense from a cost perspective, but it also changes how you view your finances depending on where you live.

There are definitely people living in New York and Los Angeles who make upper-class incomes but feel like they can’t afford to buy a house.

On the other hand, there are middle-class households that live like they have upper-class incomes, buying $80,000 SUVs and taking summer vacations to Europe.

This is why finance is more than numbers.

Your relationship with money is shaped not only by where you live, but also by your peers, your parents, how you were raised, your history with money, how much you earn, how much you spend, and your emotional makeup.

Income is one thing.

What you do with that income is what really matters.

Further reading:
Rich vs rich