On a popular Reddit community dedicated to middle-class finances, the question “Am I middle class?” pops up frequently. It is followed, inevitably, by a debate about what income level places a person in the middle class, whether a person needs a certain value of assets by some age to count as middle class, and whether you can truly consider yourself a member of this class if your debts exceed the value of your assets.
“They are always fighting over what is middle [class] and what is upper class,” Robert Menjivar, a 34-year-old resident of California’s East Bay who follows the subreddit, told MarketWatch.
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Earlier this year, Menjivar was laid off from his job as a financial-planning and analysis manager at a biotech startup, where he earned more than $200,000. It was his second layoff; the first was in 2020. His father, an immigrant from El Salvador, had taught him to save and to never assume “that the good times are always going to keep on going,” he said. In 2023, he said he and his wife saved or invested about 40% of their post-tax income, putting them in a position where her $100,000 salary can now cover 85% of their expenses, and they can manage any remaining expenses with savings and pay from any contract work he picks up.
Before Menjivar lost his job this year, he and his wife earned $300,000 together, nearly four times the median U.S. household income of $80,600. Yet he still considered them to be middle class — and not just because they lived modestly and below their means.
“My job still defines my ability to survive,” he said. Most Americans would object to seeing a household with their earnings as anything but upper class, he acknowledged, but in his mind, class isn’t purely a product of income. Instead, he said, it’s a question of “How well off are you in the event you’re not able to work anymore?”
It is, on some level, perplexing that people with more financial resources than most Americans still do not consider themselves to be upper class. “We’re definitely not doing what you would think somebody with our income could do with the money. We just can’t,” one man in Chesapeake, Va., previously told MarketWatch. He and his wife earn more than $200,000 combined, but have little left at the end of each month due to housing and child-care expenses.
Though inflation has fallen from its four-decade high in June 2022, stubbornly high prices have surely contributed to this perceived lack of class mobility. Still, interviews and survey findings point to a more deep-seated sentiment that no matter how much a person earns or where they work, they are still not financially secure unless they can reach a coveted status available to few: financial freedom.
The ‘trapped class,’ ‘treadmill class’ and ‘freedom class’
Even high earners are learning their jobs don’t promise security. Gloria Russell, a parent of two in Jacksonville, Fla., was laid off this past spring from her position as a senior instructional designer at Amazon Web Services, where she earned $220,000. Because she worked on large government contracts, “it felt like a very secure role,” she told MarketWatch. “I had great reviews. I had awards in the last six months, and I was just on the wrong side of a balance sheet.” While she and her husband are getting by on the income from his job as an attorney at a small firm, the family can no longer afford health insurance.
To many workers who have endured the fallout from economic recessions and volatile business cycles, it is financial security — more than income level — that characterizes the upper class. For middle-income workers, who today are more likely to have student-loan debt than lower-income workers and more likely to have credit-card debt than both lower- and higher-income workers, this security is hard to come by when life resembles a series of debt payments chipping away at the future they had envisioned for themselves.
Financial stress is disproportionately felt by low-income workers, yet survey after survey shows that an increasing share of middle- and upper-income Americans are feeling financially precarious. In a survey this year by Pymnts, a market-research provider, 48% of people earning more than $100,000 annually reported living paycheck to paycheck, including 36% of those earning more than $200,000. A survey by the Federal Reserve Bank of Philadelphia this year found that the highest earners were the most likely to be worried about getting laid off.
These high earners, Menjivar said, are in the same class as many others who earn far less. “If you are in this lifestyle where you can’t afford to stop working or else the lifestyle will stop, then that’s not really being upper class,” he said. Whether you earn $200,000 or $40,000, if you spend it all, “you’re in the same boat in certain terms of essentially being trapped working in order to afford the things you want and need,” he said.
In other words: Rich people can be part of the middle class, too. Gen Z-ers and millennials on social media have rekindled discussions over the difference between being rich and being wealthy, noting that a high income does not necessarily equate to longevity and financial security, as MarketWatch has previously reported.
There is an important distinction between someone who barely earns enough to pay their bills and someone who must tap into their index funds when they are down, Alissa Quart, the author of “Bootstrapped: Liberating Ourselves from the American Dream,” told MarketWatch. Yet many households trying to enjoy what they perceive to be middle-class pleasures — like occasional meals out or summer camp for their kids — are living paycheck to paycheck in order to do so, she added.
“You can be insecure at a lot of different levels on the [income] gradient,” Quart said.
Because income alone does not always determine a person’s sense of security, Americans’ conventional wisdom about economic class — lower, middle and upper — is no longer relevant, argues Ramit Sethi, a podcast host and author of the book “I Will Teach You To Be Rich.” There are high earners with large debts who still feel broke, and people who earn less than average and feel “happy and free,” Sethi wrote in a recent newsletter. “I’d like to propose a new framework for thinking about class. One built on lifestyle.”
Sethi, who declined to be interviewed for this story, described in the newsletter what he sees as the “trapped class,” whose members live paycheck to paycheck with no buffer for an emergency. Members of the “treadmill class,” he added, have decent jobs along with some savings and debt, but feel stuck and are “likely to spend most of their lives working their job just to stay afloat.” And the “freedom class,” or “people who have the ability to do what they want, when they want,” lives free of financial constraints.
The bottom line, according to Sethi: People don’t just want to move up a three-tier income ladder, hoping that not being at the bottom means they’ll manage to get by. They want freedom and flexibility.
Of course, freedom and flexibility usually require money — and lots of it.
The impact of financial stressors such as housing and childcare on the so-called treadmill class is a general decline in the sense of agency people feel they have over their lives. Men’s wages in middle-class families have stagnated since the late 1970s, and “the only reason the middle class has not completely treaded water or fallen behind is because women have entered the workforce in such large numbers,” Isabel Sawhill, an economist and senior fellow emeritus at the Brookings Institution, told MarketWatch. As economic inequality widened in the U.S. over the next five decades, many families required two incomes to sustain a middle-class lifestyle.
That is why being in the middle often feels, to Sethi’s point, like a treadmill, Sawhill said. “The downside of this growth in two-earner families — which has been so critical in the middle class — is that it is producing a time squeeze,” she said. Middle-class married couples with children on average now work a combined 3,446 hours annually, an increase of more than 600 hours since 1975, according to a report Sawhill co-authored. “The time squeeze is a big piece of why I think the middle class feels pressed,” she said.
Reclaimed time and lifestyle creep
One parent working in the tech industry, who asked not to be named to protect her privacy, told MarketWatch that while she would like to stay home with her children for a few years and get by on her husband’s income, the couple is expecting their second child. Given “the speed at which emerging technology is disrupting our industry, we believe it to be too risky for me to take a break in these formative earning years.” They are high earners and try to save aggressively, but “the options available to us seem markedly different than we’d envisioned,” she said. “Ultimately, we feel tethered to the path that continues to provide us with maximum financial security in a country that offers very little, if any, structural support for families.”
The real currency in today’s society — which is largely defined by the need to spend most of your life working — is not just having enough money, but also having control over your time. There is a growing sense that a life of work should amount to something more than survival sprinkled with the occasional vacation and some toys; more than getting to the next paycheck. That could explain, at least in part, why seven in 10 workers in a survey this year said they prefer either remote or hybrid work, and more than four in 10 workers reported feeling burned out.
The urge to reclaim time aligns with the perspective touted by the financial independence, retire early movement, known as FIRE, which encourages people, typically high-income earners, to save and invest large portions of their income during their working years so that they have the financial freedom to step away from the rat race — or completely retire — well before the typical retirement age of 67.
People who reach FIRE enjoy freedom, or at least have some level of financial security. Personal-finance experts, including popular podcast hosts like Sethi, Dave Ramsey and Brian Preston and Bo Hanson of the Money Guy Show, and influencers like Tori Dunlap and Vivian Tu, all endorse some form of financial freedom to their followers, whether it is freedom from debt or the freedom to stop working for a paycheck. The tenets of traditional personal-finance advice — maintaining a sizable emergency fund, living below your means, aggressively saving and investing — are all ultimately in service of becoming financially independent.
From the archives (May 2024): Money advice needed a makeover. Inside the rise of the female ‘finfluencer.’
Low economic mobility in the U.S. and what many experts say is a weak social safety net can pose systemic challenges for people trying to break free. Workers who don’t earn a living wage may have few options. Yet for those who earn more, how grueling the pace of their treadmill is, to some extent, determined by their choices, experts told MarketWatch.
“This, to me, is very much a lifestyle thing,” said Scott Murray, head of analytics at Pymnts and a co-author of the report about six-figure earners who say they live paycheck to paycheck. “When people start getting more money and getting bigger checks, they start buying bigger houses and nicer cars,” he told MarketWatch. “A lot of people do this. It’s not just poor people and it’s not just rich people.”
While members of the treadmill class may feel trapped, “they actually have choices” about how to spend their money, said Chistopher Wong Michaelson, a professor at the University of St. Thomas and co-author of the book “Is Your Work Worth It? How to Think About Meaningful Work.” This does not excuse vast economic inequality in the U.S., Michaelson said, but on some level, “in the treadmill class, we choose our own misery by the material wants that we have.”
Many Americans have been pushing back on the pressure to spend. Young consumers are trying no-spend challenges, and “underconsumption core” has become a social-media trend.
Menjivar, who still has a $3,250 monthly mortgage and tax payment and wants to have children someday, hopes careful spending and disciplined investing can one day get him and his wife off the treadmill. “We’re not struggling-struggling right now,” he said, but they also aren’t truly free yet.
See also: Want to be ‘wealthy’ in America? You’ll need a lot more than $1 million.
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