Are you curious about how your income compares to others? According to the U.S. Census Bureau, anyone who earns between $30,001 and $153,000 is considered middle class, albeit in different subclasses.
Here, we'll break down what that means and how where you live and how you spend your money may be more important factors than the dollar amount you earn.
Lower, middle, upper
If you find it interesting that the middle-class designation is assigned to such a wide range of incomes, it may help to understand that the Census Bureau breaks the middle class down into three subclasses: lower, middle, and upper. Here's how they shake out.
- Lower middle class: Between $30,001 and $58,020 annually
- Middle class: Between $58,021 and $94,000 annually
- Upper middle class: Between $94,000 and $153,000 annually
Your mileage may vary
Say you earn $75,000 annually. That income is enough to land you in the middle-class camp. However, $75,000 goes much further in some parts of the country than others. What feels like middle class in one region may feel like poverty in another. Cost of living is the deciding factor.
Cost of living refers to the amount of money needed to cover expenses such as housing, transportation, groceries, and healthcare. The cost of living varies dramatically by region, and those who move to a new area may need to reconfigure their household budgets.
To compare the average cost of living by state, a baseline of 100 is used. Think of the number 100 as "average." Anything lower than 100 indicates a lower cost of living, and anything higher than 100 indicates a higher cost of living. Here's a look at two states and how they differ.
Mississippi
Mississippi residents enjoy the lowest cost of living in the U.S., with an index of 83.3. Importantly, Mississippi's housing index comes in at 66, the lowest in the U.S. The median income for a family of four in the Magnolia State is $70,656.
Despite the low cost of living, nearly 20% of Mississippi residents live in poverty. If you're earning $75,000 a year in Mississippi, it's possible to feel solidly middle class.
Hawaii
Hawaii may provide residents with miles and miles of natural beauty, but it's also the most expensive state to live in. With a cost of living index of 193.3 and a housing index of 315, it can be staggeringly expensive to live in the Aloha State. Interestingly, Hawaii has one of the country's lowest poverty rates despite the high cost of living, with a median income for a family of four coming in at $118,223.
The same $75,000 that might feel middle class in Mississippi is more likely to strain your personal financial situation in Hawaii.
Signs you may be middle class
No matter how much you earn, it's what you can do with the money that matters, particularly how much you can put away in savings for a rainy day and save for retirement. Take a look through the following list to see how many of these middle-class benefits you're able to enjoy. They probably won't all apply to you, but they offer a peek into what the "ideal" middle-class life includes.
- Retirement savings: You may not have hundreds of thousands of dollars put away just yet, but you've been able to tuck money into a retirement account with each paycheck.
- Healthcare coverage: Admittedly, the cost of health insurance premiums skyrocketed dramatically between 1962 and 2022, but the ideal middle-class budget includes the ability to cover premiums.
- Potential vacations: Nothing says a middle-class family must take a fancy vacation each year, but the ability to plan a vacation is often associated with earning a middle-class income.
- Car ownership: If you live in a region that requires you to own a vehicle, being middle class makes it a somewhat easier goal to achieve.
- Multiple streams of income: Whether your second source of income is provided by a spouse, you have a rental property, or you've invested in an annuity, creating multiple sources of income is another hallmark of the middle class.
- Priority on education: Despite debates regarding the price of education in the U.S., middle-class households are more likely to pay for private schools for their children and put money away for higher education than poor households.
Of course, these signs are no more than generalizations. Which income classification you fall into does not define where your priorities lie or your potential. As households begin to earn more money, it simply becomes easier to cover the costs associated with extras, like vacations and private schooling.
When you think about it, it's odd that we're all so fascinated by which income class we belong to. A person earning $50,000 a year who lives in a low-cost-of-living area and manages their money well has a very good chance of building a greater net worth than a person in a high-cost-of-living area who never learns to harness the power of their earnings.
