Are you middle class?
Whether you鈥檙e middle class depends on who鈥檚 asking the question and how.
- Half of Americans聽聽they weren鈥檛. A survey in April 2015 found 51% of Americans identified as middle or upper middle class, down from an average 61% in 2000聽through聽2008. The rest said they were working or lower class.
- But most people said they were middle class under a broader definition. Given five categories 鈥� upper class, upper middle class, middle class, lower middle class and lower class 鈥� a聽聽taken in May 2015 found 88% placed themselves in one of the three middle tiers. Forty-three percent placed themselves smack in the middle class, 33% called themselves lower middle class, and 12% said upper middle class.
- Based on income, fewer people are middle class than a few decades ago. A聽聽defined middle class as households living on two-thirds to twice the median income adjusted by household size, or $42,000 to $126,000 for a household of three people in 2014. The researchers found the share of adults living in middle-income households fell聽from 61% in 1971 to 50% today. Many moved up: The share living in the upper tier rose from 14% to 21%, while those in the lower share rose from 25% to 29%.
Pew actually used a few different definitions of middle class. Researchers divided households up five ways, like the HuffPo poll, and also tracked what happens with a wider definition of middle class that stretched from half of median income to three times the median. It doesn鈥檛 change the trend, says Rakesh Kochhar, Pew鈥檚 associate director of research.
鈥淲hat we find is that the growth is either at the very lowest end or the very highest end,鈥� Kochhar says. 鈥淭he middle is shrinking.鈥�
It鈥檚 not about money 鈥� it鈥檚 about stability and hope
Using income alone to define your class is tricky business, obviously, since living costs 鈥� and expectations 鈥� vary so widely.
A six-figure income that feels bountiful in a small Midwestern city can feel stretched in New York or San Francisco. (See how much聽.) At the same time, I know frugal hackers who say they live quite comfortably with incomes not that far above the official poverty line.
A few years ago I came up with a definition that avoided thinking in terms of income altogether. I wrote that middle class means having two things:
- The resources to afford everything you need and some of the things you want.
- The ability to save for the future.
That definition missed one key factor, however: the role of financial stability. Being middle class should include having a cushion against financial shocks.聽And it should include the expectation that your financial situation can improve over time.
That doesn鈥檛 mean you鈥檙e immune to setbacks or emergencies聽鈥斅爋r even catastrophes. With enough bad luck, bad decisions or both, you can still tumble into poverty.
But you鈥檙e not one paycheck away. You鈥檙e not so vulnerable that a single unexpected expense or a short stint of unemployment could drain your savings and shove you over the line.
Yet many people are just that vulnerable.
Paying the bills is only the beginning
Some of us don鈥檛 have any cushion at all, and most don鈥檛 have enough:
- Nearly half of the households聽聽by The Pew Charitable Trusts said they were just breaking even or spending more than they made.
- A third said they had no savings, including 10% of those with incomes over $100,000. The typical U.S. household can鈥檛 replace even one month of income, the researchers found. (The average household聽聽of its disposable income 鈥斅燼nd it should be doing much more than that.)
- Most households don鈥檛 have steady incomes and consistent expenses, making it harder to save and plan for the future.
- Speaking of the future, only 1 in 4 households expect to have a traditional retirement聽during聽which they鈥檙e able to voluntarily stop working.
Given their precarious state, it鈥檚 no wonder that the vast majority of Americans 鈥� 9 out of 10 鈥� told Pew researchers that financial security is more important than financial mobility, or the ability to move up the income ladder.
Being middle class should mean both: having at least some financial security now and a decent shot at growing that security over time. An emergency fund, manageable expenses and a comfortable retirement shouldn鈥檛 feel unattainable for most Americans.
What makes you middle class? It starts with you.
Some of what determines the size of our middle class isn鈥檛 in my power or yours to change. We can鈥檛 fix politics, the employment outlook or the economy, except to vote for those who best represent our economic interests.
Yet many of the decisions that improve your odds of a good financial life are yours alone, and they are independent of the next election or the price of gasoline.
No one will step in to prevent you from taking actions that ultimately sabotage your financial security.
No one can make you buy the house you can afford rather than the house you want. No one can force you to contribute to your 401(k) or tuck $20 out of every paycheck into a savings account. No one can require that you shop around for car insurance or that you pay off the balance on your credit card every month.
But if you want to move up to, or stay in, the middle class, those are the kinds of decisions you鈥檒l need to make. Every dime you put away is an act of faith that you can change your financial destiny. (A good example: 鈥�.鈥�)
Liz Weston is a columnist at NerdWallet, a personal finance website, and author of 鈥淵our Credit Score.鈥� Email:聽lweston@nerdwallet.com. Twitter:聽.
This article first appeared at .
