8 Signs You’ve Moved Past Middle Class
Say you’ve been working hard to get your finances in order — making wise investments, saving money, doing the work. But you’re still pinching pennies and don’t feel like you’ve reached a new economic threshold.
Explore More: What the Upper Middle Class Make in Different US Cities
Read Next: 6 Subtly Genius Moves All Wealthy People Make With Their Money
It can be difficult gauging when things are actually going right in terms of money, especially when you’re still low on cash. But as finance expert and CEO of Champion Leadership Group, Jeff Mains, explained, you should consider other factors, like stability, when determining if you’ve entered the upper middle class.
Below are some key indicators that show you’ve reached a new financial bracket.
Earning passive income doesn't need to be difficult. You can start this week.
You Boast a Higher Income
“Upper middle class people usually have a regular, above-average income that covers basic needs without worrying about money,” said Mains.
As of 2022, the U.S. median household income ranged from approximately $56,600-$169,800, according to the Pew Research Center.
When determining your status, you should keep an eye on the bigger picture. Having a higher income means you get to enjoy a higher quality of life. This means you can afford better housing, education, healthcare and leisure activities in your downtime. You’ll also have the resources to invest in your well-being and for your family, which is a hallmark of the upper middle class.
You should have more money for savings, investments and discretionary expenses as well, Mains added. If you’re still low on cash despite a good paycheck, he explained that your spending and budgeting may need to change.
“If you’re squeezing pennies despite a decent income,” Mains said, “it may be time to examine your financial plans, seek help and make adjustments to maximize your newfound socioeconomic standing.”
For You: How I Went From Middle Class to Upper Middle Class
You’ve Built Up Decent Savings
Having good savings means you’re not living paycheck to paycheck and can weather unexpected financial storms without it disrupting your lifestyle.
A key sign of the upper middle class is having a substantial emergency fund, which provides a safety net for unexpected expenses like medical bills, car repairs or home maintenance costs. This financial cushion is a huge sign of financial stability.
For reference, the average American has $65,100 in personal savings, according to Northwestern Mutual’s 2023 Planning and Progress Study.
Homeownership
Owning a home is a major sign of financial stability. Instead of paying rent to someone else, you’re building equity with your monthly mortgage payments.
This is a long-term investment with a potentially hefty payoff. For example, in the third quarter of 2021, a homeowner who purchased a single-family existing home would have gained $225,000 in home equity if the home was sold at the median sales price of $363,100, according to the National Association of Realtors.
It seems many Americans have already caught onto this. As of the second quarter of 2024, Census Bureau data shows the U.S. homeownership rate was 65.6%.
You Invest in Other Real Estate
Aside from owning your own home, being part of the upper middle class often involves leveraging other real estate investments.
“This could mean owning rental properties or participating in Real Estate Investment Trusts (REITs), which generate passive income,” said Alan Beard, the managing director and CEO at Interlink Capital Strategies.
“Your ability to navigate these options and understand the tax implications of real estate investments is a distinct marker of financial knowledge,” he added.
You Take Entrepreneurial Initiatives
Maybe you’ve established a side hustle, invested in companies or looked at entrepreneurial prospects. If you’re investing in different business ventures, you’re also generating other sources of income and accumulating assets, which can boost your wealth over time — even if you’re low on cash today.
One of the primary benchmarks of the upper middle class is achieving financial independence or early retirement, so owning profitable businesses can provide a source of passive income that leads to that goal. One good sign you’re among this group is that you’re bypassing frivolous spending and keeping a longer-term view of your finances.
It’s worth noting that Wealth-X reports that 60.2% of all billionaires are self-made.
You’re Savvy With Taxes
Another key indicator of being in the upper middle class, according to experts, is your ability to leverage tax-efficient strategies. Beard said this includes taking advantage of tax-advantaged accounts like health savings accounts (HSAs) and flexible spending accounts (FSAs) to maximize healthcare savings.
A healthcare FSA can allow you to save up to 30% on eligible healthcare expenses. Plus, when you re-enroll, you can carry up to $640 from one plan year to the next.
Understanding the intricacies of tax credits and deductions like the Lifetime Learning Credit for adult education, for example, “can be a telltale sign of financial sophistication within this class.”
You’ll know you’ve moved past the middle class if you’ve learned to optimize your taxes by seeking out financial advisors, accountants or tax experts. You’re also more likely to regularly use resources like tax planning software, books (deleted serial comma here) or attend seminars that help you better manage your taxes.
You Leverage Your Networks
Whether it’s for finding job opportunities, getting referrals or career advice, those in the upper middle class know how to use their networks to get ahead. If you often have friends or connections who help you access resources like real estate, financial services, legal advice or healthcare services, all of this is a competitive advantage that means you’ve moved up the social class ladder.
“Members of the upper middle class often engage in the sharing economy in unique ways,” Beard explained. They might share resources with friends and neighbors like co-owning expensive tools or equipment.
He added, “This not only indicates a level of trust and community involvement, but also showcases a financial acumen that extends beyond traditional ownership.”
You’re Active in Your Community
If you have time to do things like volunteer in your community and participate in local events, this could mean you’re no longer middle class. Simply having free time to give is a luxury, as many less fortunate people are forced to work long hours — often at multiple jobs — just to make ends meet.
In 2022, 85% of affluent households gave to charity, according to reporting by Bank of America. Additionally, affluent volunteers donated an average of 135 hours of their time to an average of two different organizations.
Jennifer Taylor contributed to the reporting for this article.
More From GOBankingRates
10 Costco Fall 2024 Items To Stock Up On Before They Sell Out
Here's How To Become a Real Estate Investor for Just $1K Using This Bezos-Backed Startup
This article originally appeared on GOBankingRates.com: 8 Signs You’ve Moved Past Middle Class