Understanding the Upper-Middle Class
There is 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 more financial security—though not quite on the same level as the truly wealthy.
As you work to increase your income and build your net worth, you may find yourself transitioning from the middle to the upper-middle class. While there isn’t a single definition for this group, there are several indicators that can help you determine if you’ve made the leap.
Defining the Upper-Middle Class
People in both the middle and upper-middle classes benefit from a better standard of living, less financial stress, and greater financial freedom. However, there are key differences between the two groups.
Nicole Nicolet, owner of Let’s Make Life Great, explains: “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 adds that the upper-middle class can enjoy a little more than the standard of living, with more vacation opportunities, minimal debt, and the ability to retire comfortably.
Jeff Rose, a certified financial planner and founder of Good Financial Cents, adds that the middle class typically has a stable income and some savings, with incomes ranging between $50,000 and $125,000. The upper-middle class, on the other hand, might earn 15-50% above the median with a comfortable financial cushion. Others define the upper-middle class as those who make a lot of money but haven’t crossed into true wealth, often with 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 other signs that you’ve made it to the upper-middle class:
1. You Have Extra Money After Investments and Expenses
Those in the middle class often have disposable income, while those in the upper-middle class have money left over even after maxing out retirement contributions and handling other major investments and expenses. They are less stressed about using this money since they feel financially secure.
2. You Own a Mix of Assets
The upper-middle class typically has a diversified portfolio, including stocks, rental properties, and other assets that generate income. Even if your net worth is spread across multiple assets, it still adds up to a significant amount. You may also have paid off your mortgage early without affecting your lifestyle.
3. You Live in a More Expensive Neighborhood
If your home is in a ZIP code where people want to live, it could be a sign that you’re in the upper-middle class. Unlike the middle class, who might try to keep up with their neighbors, those in the upper-middle class don’t need to worry about whether their house or car is luxurious enough.
4. You Have Minimal Financial Stress
One of the biggest indicators that you’ve reached the upper-middle class is having little to no stress when facing unexpected bills or expenses. If a financial emergency arises, you can cover it without panicking.
5. You’ve Experienced Positive Lifestyle Changes
With more disposable income and a higher net worth, you may now afford things that were once considered luxuries, such as travel, medical expenses, and expensive hobbies. This doesn’t mean you’re overspending—it means you can enjoy more without financial strain.
6. You 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 send their children to college or pursue further education without taking on debt.
7. You Can Retire Early
Retiring early is a dream for many, but it can be difficult if you’re struggling with debt or daily expenses. For the upper-middle class, early retirement is more achievable due to factors like diversified investments and passive income.
8. You Have Multiple Income Streams
While those in the lower and middle classes may rely on one source of income, the upper-middle class often has two or more streams, such as a high-paying job, a business, or passive income from dividends or rental properties.
Final Thoughts
It’s important to note that these signs aren’t definitive, as everyone’s situation is different. What one person considers the upper-middle class might be a different tier for another. What matters most is understanding your current financial status and where you want to be. If you’re living comfortably and enjoying the lifestyle you desire, you may already be in the upper-middle class.
