11 December 2015

Middle Income v. Middle Class


So, I've been thinking about this contradistinction quite a bit as of late, that is to say, what is middle class in America? Indeed, are we "middle class" if we're not uber wealthy?  When I started LuxeMont (justluxe.com) just out of law school ten years back or so, it was about an aspirational/lifestyle "eyeballs" play where we'd drive millions of readers each month to our various web properties with the hope of engaging demographics along the likes/lines of those whose incomes were well within the "very wealthy" and "wealthy" and the "wannabe wealthy" silos. And, of course, we'd load up 3 ads per page and publish a boatload of pages filled with loverly, luxe and lasting content.

Original landing page JustLuxe.com
Middle-income for a family of 3 in the U.S. (according to Pew/Bloomberg) is $53k approximately. As an entrepreneur post grad school I've emptied my pockets three times to start businesses, and have known a few lean years at this level; and as an exec consultant in the legal space (when I needed a day job to pay the bills), I've known much better years ... and not once have I ever felt that I wasn't "middle class." Okay, maybe upper-middle class during those good years? But still, in the big city, with loads of expenses, lower six-figures ain't goin' far. (see additional belly aching below.)

But, income is soooo overrated. It's not the end-all, be-all, say in Kansas City or Lynchburg or Waco or Detroit.  In these cities, the middle-income level will buy a quaint home quite nicely with the right debt ratios and reserves and stable job and decent income.  You're golden as they say, and quality of life seems to be infinitely better.  Perhaps that's for another discussion another day.

In Los Angeles or New York or San Francisco, a triple-salary of $150k will most likely not be adequate to the task of buying you a nice home, most likely in the $1M to $2M range (without an extraordinarily large down to adjust for the borrower's ratios).  Which, btdubs Dear Reader, in some trendy neighborhoods in these major DMAs, a million-dollar home will only get you a smallish apartment or constrictive townhouse.

No, we are definitely in some sort of real estate bubble, IMHO. And, there will be downstream corrections in various regions of this great country of ours. Here in L.A., we just got our first $500Million home listing (or soonish). Check out this Bloomberg report.

But, if this marks uber-wealth, does middle-income necessarily mean "middle class"? If one buys into the notion of eating out several times a week at trendy restaurants, traveling several times a year, and driving two leased German cars, then one could be living an upper-income lifestyle, but with a poorhouse destination.  It's more than income, it's a mindset, n'est pas?  The above Pew/Bloomberg report and survey was quite interesting and highly dispositive regarding our discussion.  I'd take a nice, safe, quaint mid-city (say 250,000 residents or less) way of life in a southern clime any day over an expensive, sketchy, big-city (over a few million population) stressed out life where both parents have to work and life is all hustle and bustle and kids have to be in private school, and there's no end in sight ... whew! Sorry, got carried away there for a second.  I may have to check in with Dave Ramsey.

What do you think?  As always, would love to hear your thoughts.