Understanding the Upper-Middle Class
There’s a clear distinction between the lower, middle, and upper classes, but there’s also a category that sits between them known as the upper-middle class. While the middle class is often seen as financially stable, the upper-middle class typically has a higher net worth and greater financial security—though not quite at the level of the truly wealthy.
As you increase your income and build your net worth, you may find yourself transitioning from the middle to the upper-middle class. Although there isn’t a one-size-fits-all definition, there are several signs that indicate you’ve made this move.
Defining the Upper-Middle Class
The middle and upper-middle classes both enjoy a higher standard of living, less financial stress, and more financial freedom. However, there are notable differences between the two groups.
Nicole Nicolet, owner of Let’s Make Life Great, explained the difference: “The middle class can afford a reasonable standard of living, including owning a home, going on yearly or bi-yearly vacations, and being able to support future investments like part of a college education for their children.” She added that the upper-middle class can afford a little above the standard of living of the middle class.
Jeff Rose, a certified financial planner and founder of Good Financial Cents, further clarified the distinction. He noted that the middle class usually has stable income and some savings, with incomes ranging between $50,000 and $125,000. The upper-middle class might earn 15-50% above the median with a comfortable financial cushion, while the upper class refers to the top 1-3% earners with substantial wealth and investment-derived income.
Other sources define the upper-middle class as those who make a lot of money but haven’t reached the threshold of true wealth. These individuals often have a net worth of at least $500,000 to $2 million.
Key Signs You’re in the Upper-Middle Class
In addition to having a high income and net worth, here are eight key signs that you’ve made it to the upper-middle class:
1. Extra Money After Investments and Expenses
People in the middle class often have disposable income, while those in the upper-middle class have money left over even after maxing out retirement account contributions and taking care of other major investments and expenses. They’re less concerned about using this money because they’re more financially secure.
2. Own a Mix of Assets
Those in the upper-middle class have more than just cash. They have a diversified portfolio with assets such as stocks and rental properties that can boost income and enhance financial security. Even if their total net worth is spread across multiple assets, it still adds up to a significant amount.
3. Live in a More Expensive Neighborhood
Another indicator is where you live. If your home is in a ZIP code where people want to live, that’s a good sign. People in the upper-middle class don’t need to worry about whether their house is big enough or their car is luxurious enough—they can afford these things without stretching their financial means.
4. Minimal Financial Stress
One of the biggest indicators is having little to no stress when faced with an unexpected bill or expense. If a financial emergency comes up, you can cover it without a problem.
5. Experienced Positive Lifestyle Changes
Significantly more disposable income and a higher net worth often come with lifestyle changes. This doesn’t mean you’re living above your means, but rather that you can afford more than before, including goods and services once considered luxuries.
6. Can Afford Higher Education
The cost of higher education is high, and many people end up with student loan debt. Those in the upper-middle class can afford to attend college or send their children to college without taking on this debt.
7. Can Retire Early
Retiring early is a dream for many, but it’s often difficult due to debt or everyday expenses. For the upper-middle class, this isn’t as much of an issue due to factors like diversified investments and passive income.
8. Have Multiple Income Streams
While those in the lower and middle classes may only have one source of income, the upper-middle class typically has two or more. These could include a high-paying job, owning a business, or having passive income from dividends or rental property.
Final Thoughts
It’s important to remember that this list isn’t comprehensive, and definitions of class vary widely. What one person considers upper-middle class might be different from another’s definition. What matters most is understanding your current financial situation and where you want to be. If you’re living comfortably and enjoying the lifestyle you desire, you may already be where you want to be.