Not so long ago, most people viewed the hallmarks of success as something along the lines of a house, a white picket fence, two weeks vacation, two children, and the ability to send those kids to college.
Today, the middle class is a vanishing breed, according to nearly every survey and statistic on the topic. Despite all of the attention to the subject, defining "middle class" remains a challenge, as everyone wants to be in the middle regardless of their income. Instead of focusing on the dollars, let's take a look at the six lifestyle benchmarks that define middle-class status.
There is no official financial standard that defines the middle class, but there are certain benchmarks that seem to attest to that classification.
Owning a home and car, as well as being able to pay for your children to go to college are among the milestones.
Being able to tuck away enough money for your retirement is significant, as is the ability to obtain healthcare for yourself and your family.
Having enough disposable income to take your family on vacation is another benchmark.
6 Signs That You’ve Made It To Middle Class
Do You Consider Yourself Middle Class?
A wide variety of numbers have been thrown around in an effort to define the middle class. Add to this that how Americans view middle class, in terms of income, varies widely.
According to Northwestern Mutual’s 2018 Planning and Progress Study, 68% of Americans identify themselves as middle class. A majority (78%) believe that annual incomes under $100,000 qualify as middle class, 52% believe the range is between $50,000 to $99,999, and 26% less than $50,000.1
While the middle class losing ground has been widely reported, the economic impact of the economic crisis and lockdown has, of course, made everything worse for all kinds of households with differing income levels and lifestyles.
6 Signs You Are Middle Class
While there is no official financial standard, the middle class as defined by the the Middle Class Task Force formed under the Obama Administration characterized this segment of the U.S. population in terms of six financial aspirations that still hold true. We can view them as benchmarks. If you can check off each of these six points, you are likely at least a member of the middle class:2
1. Home Ownership
Owning a home remains the American dream. The step up from renting to owning signifies prosperity and achievement. With median home price ranges differing by so much in different cities across the United States, the ability to achieve this goal varies significantly by geographical location.
2. Owning a Car
Owning a car provides freedom of movement and the luxury of avoiding the limited schedules and cramped quarters offered by mass transportation options, such as buses and subways. Here again, the cost of cars varies widely, as does the kind of automobile required. For one driver, a used Hyundai will do the trick. For another, a new BMW signifies the achievement of this goal.
3. A College Education for the Kids
Helping children get ahead in life is a primary goal for middle-class families. Paying for a college education for children can cost anywhere from the low tens of thousands of dollars to hundreds of thousands. The university or college those children attend has a significant impact on the price tag.
4. Retirement Security
Retirement is a goal nearly everyone wants to achieve. It demonstrates success and provides a reward for decades of hard work. Once again, definitions make a difference. The amount of savings required to support your later years will vary significantly depending on whether you contemplate a staff of 10 at your villa in the South of France or a townhouse in Peoria, Ill.
5. Healthcare Coverage
The ability to obtain healthcare is an important goal for middle-class wage earners and their families. The high and rising cost of medical care and prescription drugs make healthcare coverage an ever-increasing need; going without it can have serious negative financial implications in the event of a severe illness or injury.
6. Family Vacation
The family vacation is a middle-class staple. Vacations demonstrate that a family has disposable income and has been successful enough to take time away from work to focus on leisure.
Karl Marx referred to the middle class as part of the bourgeoisie when he described capitalism.
What Happened to the Dream?
About half (52%) of the U.S. population is part of the middle class, according to a report published by the Pew Research Center in September 2018. However, even that slim majority reflects a longer-term trend of a shrinking middle class compared to previous decades.3
Globalization and technological advances began to reverse the growth of the middle class. The manufacturing base in the United States changed, as good-paying jobs in factories and heavy industries went overseas to lower-paying markets and labor unions lost much of their ability to bargain for high wages and good benefits.3
Later, white-collar jobs from accounting and data entry to reading medical images and answering telephones in call centers were also sent offshore. Many jobs that remained in the U.S. were eliminated by computers and other technological advancements that increased productivity.
To achieve or maintain a middle-class lifestyle, many households became two-income families. Achieving middle-class goals became more difficult as employers eliminated their defined-benefit plans, the cost of college education continued to rise, and the cost of healthcare jumped.4
How to Get There
Although there are significant challenges to obtaining middle-class status, there are some proactive steps that can help make the dream a reality. Budgeting is one of the most obvious. Understanding where your money goes each month can help you determine the exact makeup of the benchmarks you are trying to match. It can also help you control spending: Will a Hyundai. not a BMW, be sufficient?
Planning is another crucial step. Are the kids going to a state university or a private college? Are scholarships an option? Some savvy families find the money for college by participating in programs that can aid families with the costs related to sending a child to university.
Working is another one of the requirements. A second job or a side business might be what it takes to boost your income and achieve some of your goals. Putting your money to work is also an important consideration. Investing has helped build wealth for generations.
Even if you don't have the means to invest for current income, you can take a few dollars from each paycheck and save for your retirement.
The Bottom Line
There is no official financial standard for what constitutes middle class. For most it's more about a standard of living—including owning a home, being able to afford to pay for a college education for your kids, and having enough disposable income to take a family vacation.
While numerous studies have outlined the decline of the middle class, for now (at least), this demographic still includes about half of the households in the U.S.