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.


Barbara said...

Been hearing/reading a lot about this recently. Didn't I read someplace that more middle class moved up than down? Years ago I used to think of our family as upper middle class. Now, not so much.
But you are so right, mind set is the right description. And comparing income re where one lives is like oranges and apples.
Someone said to my Michigan son a few years back: you are the poorest rich person I know."
My daughter in NYC has to make a LOAD of money to live there...it would seem a small fortune in small town USA. (In fact, small galleries like hers are being driven out of NYC...to start with, the rents are impossible. And the big spenders are buying big important work, while small galleries are being eaten up or driven out. Frankly, I think she will have to come up with another plan in 2016. She's thinking about it already.)
Even here in (what used to be in 1970) small town Boca Raton Florida, the housing prices are ridiculously high...I certainly can't afford one anymore. I decided to sell what I had and rent. I could go on and on, but I would just be repeating what you already know.
So...putting deep thoughts away, I send you, my constant friend, wishes for a happy holiday season and yes, we all need a successful and healthy New Year!

Jg. for FatScribe said...

Barbara -- each time I receive a notice for one of your incredibly insightful/charming/pithy comments is like a gift, even an early Christmas present considering the date/time of year, my friend.

Love and appreciate the comments about your kids and their own middle-income upper middle-class scenarios. So true. Can't imagine NYC for the redoubtable gallery-daughter. Just wow.

Your comment about moving into the condo for some "right-sizing" living space is spot-on as well. Regardless of where you find yourself laying your head upon your pillow set these days, I'm sure of this: the food will be amazing; the family visits regular; and the house will be filled with erudite, book-reading beautiful people.

Jg. ;)

Shelley said...

I don't know who said it originally but I'm sure I read it in the Tightwad Gazette: wealth isn't about how much you earn, it's about how much you keep.

I'm thinking one of those out of the way places you mention has a lower cost of living not only because of housing but because it isn't on the cutting edge. Thorstein Veblen (the American economist who gave us the phrase 'conspicuous consumption') wrote in Theory of the Leisure Class that the rural dweller can be 'less modish in their dress' and 'less urbane in their manner'.

It would appear that being 'cool' costs dearly.