Anyone here NOT middle class?

In My Humble Opinion
101

[QUOTE=Malthus]
Heh, those figures are quite interesting. Shocking how low the median net worth figures are.

Equally shocking, as in unrealistic, the savings goals of formulas generated by the linked site.

This assumes you save 10% of your current pretax income for each and every year of your life - a nonsense goal, especially for younger professionals earning a high wage … as they haven’t been earning it very long.
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Net worth includes more then just savings though. Using their example of a 30 year old making 50K. I assume you are making 50K six years out of school and you started out a $30K a year with $5K increases after a couple years to get you quickly to that $50K in six years. More likely you were making scenario would be making 43.5k at age 25 with 3% cost of living increases. But make the assumption you start out at $30k for now.

I also made the assumption of an 8% return–likely this would be higher for a 30 year old as they can afford to be more aggressive in the market. But a 8% return is not unreasonable over the long term in my experience.

So assume you made the following:

age 25—$30,000—$3000 saved and return of .08 = $3240
age 26—$30,000—$3000 saved and return of .08 = $3240+3000 x.08=$6739
age 27—$35,000—$3500 saved and return of .08 = $6739+3500 x.08=$11,058
age 28—$40,000—$4000 saved and return of .08 = $11058+4000 x.08=$16,262
age 29—$45,000—$4500 saved and return of .08 = $16262+4500 x.08=$22,424
age 30—$50,000—$5000 saved and return of .08 = $22424+5000 x.08=$29,618
So at age 30 you have $30K plus you have a house (hopefully) which has some equity in it–so lets say you bought it for $100K and it is now worth $110K and you still owe $90K on it, thus you have $20K equity. You own a car which has a value which is part of your net worth. Money in your checking and savings is part of your net worth, etc.

So just with the $30K you have saved and the $20K in your house you have $50K net worth. If I used the starting salary of $43.5K in my sample above I get this person having $36,395 at age 30. So the value of the rest of the assets only needs to be $14K to get to the magical $50k. And there is nothing magical about the 10%, you can save even more then that. It all depends on how frugal you choose to be. You can put away $5K in an IRA and 15% of your pretax earnings in a 401k – so our 30 year old can save $12500 each year (if he can do it!).

Also remember–it is a ‘rule of thumb’ and any individual won’t fit into it. But it is is I believe solidly based by using the power of compounding and actually putting away large amounts (i.e 15% of your gross pay) away. I do that now-wish I had earlier! But even with that, I am very far ahead of the net worth in that chart for my age group, but both my wife and I save a large amount of our income every year for retirement.

ps-hope I didn’t make any math errors above as I did it pretty quickly!

102

[QUOTE=Malthus]

The better definition nowadays concerning working people is about choices. Do you command enough resources, whether money, reputation, professional qualifications, work experience or entreprenureal skills that you meet most or all of the following criteria:

  1. You can more or less choose where you want to live - if you want to live in a detached house in a good neighbourhood, you can;

  2. You do not fear being laid off, because you know that you have resources to draw on and a skill or qualifications that will ensure another job;

  3. You have crossed the line inbetween “people are doing you a favour by giving you work” and “you are doing people a favour by agreeing to look into their problems for them”;

  4. You can pretty well buy whatever clothes, jewelry, electronics, cars, vacations, and other toys and games that you want - what is stopping you is financial prudence or the desire to increase investments, not lack of money;

  5. Childcare. Can you afford whatever childcare set up you want (such as a live-in nanny, a paid for preschool);

… then you are a “have”.
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Interesting list. Definitely makes me feel like a have-not. We live in a decent neighborhood, but the thought of getting laid off scares the shit out of me. We’re damn sure not splashing out on a European vacation or a kitchen re-design anytime soon. I don’t have kids yet, but my childcare options would definitely be constrained by finances.

103

[QUOTE=Malthus]
Heh, those figures are quite interesting. Shocking how low the median net worth figures are.

Equally shocking, as in unrealistic, the savings goals of formulas generated by the linked site.

This assumes you save 10% of your current pretax income for each and every year of your life - a nonsense goal, especially for younger professionals earning a high wage … as they haven’t been earning it very long.
[/QUOTE]

I feel that calculation overestimates those less than 5 years out of school and severly underestimates those 20-30 years out. It seems to me it’s only roughly applicable for those late 20s to early 30s. For me (single earner- family of 4) it calculates that I should have a net-worth 2.5 times lower than I do and I thought I was average maybe a little above.

To directly answer the OP, I always thought I was firmly middle-middle after growing up working-poor but after reading through this thread I guess I’m actually upper-middle, still middle though.

104

[QUOTE=burundi]
Interesting list. Definitely makes me feel like a have-not. We live in a decent neighborhood, but the thought of getting laid off scares the shit out of me. We’re damn sure not splashing out on a European vacation or a kitchen re-design anytime soon. I don’t have kids yet, but my childcare options would definitely be constrained by finances.
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It is I think largely those anxieties and contraints which seperate the haves from have-nots.

Basically, few now working at any sort of job in our society are really subject to destitution - all can afford food and shelter and the like.

But increasingly, the sorts of stable, secure middle-class type jobs which used to exist - exist no longer. This is putting the squeeze on society, as those with really marketable skill sets get increasingly rewarded and those without increasingly marginalized - thus I see society as bifrucating into haves and have-nots (again, excluding the underclass and the truly wealthy, for whom this distinction is irrelevant).

105

[QUOTE=Ice Machine]
I feel that calculation overestimates those less than 5 years out of school and severly underestimates those 20-30 years out. It seems to me it’s only roughly applicable for those late 20s to early 30s. For me (single earner- family of 4) it calculates that I should have a net-worth 2.5 times lower than I do and I thought I was average maybe a little above.

To directly answer the OP, I always thought I was firmly middle-middle after growing up working-poor but after reading through this thread I guess I’m actually upper-middle, still middle though.
[/QUOTE]

My apologies to Malthus–I underfigured my numbers up above. I only figured out $50K and they were saying a 30 year old needed to have $150K net worth. I think that is probably unrealistic. I think Ice Machine hit it here.

I would place my wife and I as middle to upper middle class originally–but after seeing the numbers on some of these sites I would have to say we likely would be considered rich by our income. But I think those numbers are very misleading. If you saw our current lifestyle we live in a very modest home, live a pretty simple lifestyle, etc. But we have very little debt, put a VERY large amount of our annual pay away for our retirement and our daughters education. But if we want to take a vacation, or buy something, we do. By the definition by **Malthus ** we are a ‘have’.

106

[QUOTE=Hakuna Matata]
My apologies to Malthus–I underfigured my numbers up above. I only figured out $50K and they were saying a 30 year old needed to have $150K net worth. I think that is probably unrealistic. I think Ice Machine hit it here.

I would place my wife and I as middle to upper middle class originally–but after seeing the numbers on some of these sites I would have to say we likely would be considered rich by our income. But I think those numbers are very misleading. If you saw our current lifestyle we live in a very modest home, live a pretty simple lifestyle, etc. But we have very little debt, put a VERY large amount of our annual pay away for our retirement and our daughters education. But if we want to take a vacation, or buy something, we do. By the definition by **Malthus ** we are a ‘have’.
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Yup, I agree with both of you, but with this caveat - that for high-earning professional types, the problems you have identified with this rule of thumb are exacerbated exactly because they tend to have a much longer period in some sort of non- or low-earning education, eventually rewarded by an extremely rapid rise in salary.

Thus, a 35 year old lawyer may have spent 3 years in law school, a year articling, maybe a couple of years kicking around looking for a good position - and so start work at 25, kick around again as an associate, before eventually hitting say $275K; according to the “rule” he ought to have saved $962,500, but that assumes an effective savings of $96,250 after tax for each and every year he’s been working.

And yes, I’d agree that the ability to tuck away a large percentage of one’s earnings into savings is a good hallmark of a “have”. Many “haves” live relatively modesty, exactly because they wish to remain “haves” in the future … my distinction between a “have” and someone truly rich is as follows:

  1. A truly rich person could remain so by managing their assets alone, does not need to work to earn (though many do, of course)

  2. For a truly rich person, living modestly would be an affectation, not a financially prudent measure.

  3. A truly rich person often sees money as useful to obtain influence, rather than security.

For “haves”, security is often the paramount use for money (retirement funds, education funds for kids, various types of savings and insurance); for “have nots”, it is material possessions.

Each in effect is precluded from attempting the goals of the class above them and merely assumes as a matter of course the goals of the classes below – “have nots” do not have sufficient funds to effectively purchase security and struggle to purchase material goods like houses and cars; “haves” do not have funds to purchase influence (but can easily purchase most material goods) and struggle to purchase security; the truly rich can easily purchase material goods and security, but struggle to obtain influence.

107

I think Malthus has it right- economically, the difference between “rich” and “middle class” is whether or not a person or family has enough capital to live off of without working. Personally, I’d peg that amount of capital at 10 million or so- enough to have 100k+ a year without working.

My wife and I are somewhere just inside the top quintile, but hardly “rich”. We don’t own anything other than our house, cars, etc…

Around here, “Rich” generally means you’re a named partner in a big law firm, etc… where you make/have made enough money to get into that category I listed above. Attorneys and other professionals making 200k a year aren’t “rich”, unless they’ve saved like crazy.

I guess in Malthus’s system, we’re “haves”, but not “rich”.

108

[QUOTE=bump]
I think Malthus has it right- economically, the difference between “rich” and “middle class” is whether or not a person or family has enough capital to live off of without working. Personally, I’d peg that amount of capital at 10 million or so- enough to have 100k+ a year without working.

My wife and I are somewhere just inside the top quintile, but hardly “rich”. We don’t own anything other than our house, cars, etc…

Around here, “Rich” generally means you’re a named partner in a big law firm, etc… where you make/have made enough money to get into that category I listed above. Attorneys and other professionals making 200k a year aren’t “rich”, unless they’ve saved like crazy.

I guess in Malthus’s system, we’re “haves”, but not “rich”.
[/QUOTE]

Heh, to my mind even named partners in big law firms are usually not truly rich - the ones I work with at any rate cannot simply quit and live off of assets, at least in any sort of style to which they have become accustomed. They gotta keep working. The exception down in the US are class action lawyers hitting the big-time contingency fee jackpot.

There is no way to become “rich” earning 200K, no matter how much you save. If you need $10 million say, you simply can’t save that much earning $200k - even if you paid no tax at all and saved every penny, it would too long to earn that much.

Edit: obviously discounting the effects of compound interest, investments and the like. :smack: I suppose someone more skilled than I at the math can work out how long it would take with some reasonable assumptions about investing.

109

[QUOTE=Belrix]
I guess I’d classify myself as upper middle class. According to 2007 numbers, my family income is a bit more than twice the average for this county. Still, we drive two used vehicles and my need to spend $120 for a new tie-rod end on the van has to be considered and scheduled among our other expenses. I can’t just write a check for anything I feel like.

I have a 27" TV, used furniture, and don’t in any way, feel upper class. Certainly I have very little in common with those Denver citizens on the society page.

I do feel I have some culture… at least a bit more than a common cup of yogurt.
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I bet I don’t even make half of what Belrix makes, but my name has appeared in the Denver society page. More than once. Not lately, though.

(This is in consequence of a lot of volunteer work and some rich friends. Who don’t think they’re rich. But who also don’t think they’re ordinary.)

PS–I am rich; I have everything I need, in fact more than I need, LOTS more, and this has not always been the case.

110

I’m something of an unusual case. Both my parents started with very little, but spent nearly their entire careers in federal work, which pays very well over time. So neither I nor my sister were lacking for much growing up. However, I went to a community college before moving on to a very small local 4-year college (about $150-$500 per semester…not including books, of course), partly out of choice, partly because my sister went to MIT and no way in hell could my folks afford two top-dollar college educations. (I ended up spending far, far longer in college than her, so it worked out. :slight_smile: )

I had a ton of trouble getting a job out of college; the first job I had that lasted more than two weeks was some $7.50/hr. bottom-of-the-barrel data entry position (that took place during ungodly hours, and the really horrible clerical job I got with the city afterward wasn’t much better . I was on unemployment twice. I considered myself very lucky to get my first two accounting jobs (one in an absolutely horrendous working environment, the other a great, well-paying federal position…my first non-sucky job ever) before ending up in the State public housing department, where I am to this day.

I’ve never owned a new car in my life, and the first three cars I ever had were…to put it charitably…clunkers. However, I recently lucked out and got an '06 Corolla for a mere $9,300, and it’s a great vehicle in every way I can imagine.

I’m pulling in a shade over $23,000 a year gross, which puts me at the upper end of the low income tier. I’ve been spending a fair amount lately, so my checking account has been holding even for some time. However, I don’t have any children, I’m not saddled with big rents, and (most importantly) I don’t have any debt whatsoever. No bad investments, no gambling losses, and my car was paid for one-shot straight from my savings account. And I have a number of sound investments that are going to pay off big over the long run.

So I suppose you could consider me a middle class “free upgrade”. But I don’t have a whole lot of discretionary cash, and I absolutely cannot afford a big loss right now. I suppose the best description would be “upper working class with a little good fortune”. When my salary goes up, then I can probably join the mainstream.

111

I’m lower class. Bounce from temp job to temp job. Get food stamps when between jobs.
Avoid luxuries like new clothing and furniture and small appliances - strictly thrift shop.

112

I grew up in a household whose income was in highest fifth quintile, as the U.S. Census Bureau calls it. Probably in the top tenth. Does that mean we were upper class? Didn’t feel like it.

113

I just realized I’m eligible for food stamps. So I guess I’m lower class.
But, hey. It’s not so bad here. Got my kids, got food, got a few tomatoes growing in the yard. I’m good at finding a bargain and can make a meal out of whatever’s in the cabinets on a given day. My kids are happy and healthy and are as thrilled with a box of sidewalk chalk as some kids are with a new flatscreen tv.
Sometimes I drive through the very expensive neighborhoods (I take care of elderly rich people) and look at all the huge houses and expensive cars and find myself thinking…I am so lucky! Don’t ask me why–but it’s still a nice feeling to have.
On the other hand, I just had to spend $200 on new tires and it will mean completely refiguring my budget for the next month. On the other other hand, at least I could buy tires by refiguring my budget, so I can’t complain too much.