You’ve heard the terms “upper class,” “middle class,” and “lower class” thrown around in conversations about money and society. But what does the label mean? And, more importantly, where do you fit in?
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While there is no perfect way to determine economy class, one common approach is to look at net worth. Your net worth isn’t just about how much cash you have in the bank – it’s the total value of everything you own minus your debts. Think of it as a financial report card that shows your overall wealth.
According to the latest data from the Federal Reserve, here are the stacking numbers:
If you are in upper class, you are sitting pretty. The top 10% of earners have an average net worth of $2.65 million. Even if you’re squeaking into the upper class (80-90% range), you’re looking at about $793,000.
Go down to it middle classthings become a bit more diverse. Upper middle class people have an average net worth of around $300,800. Your typical middle class family earns $169,420. And if you’re in the lower middle class, you’ll find it’s about $58,550.
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Now, for lower classnumbers take a sharp dive. The average net worth is only $16,900. It’s a very dramatic contrast to the million above.
But this – this is just an average. Your situation may look very different. Maybe you’re a college graduate with a mountain of student debt but a high salary. Or perhaps you’re retired with little income but a paid-off house and plenty of savings. Life is complicated, and so are finances.
It is also worth noting that net worth is not everything. Day-to-day life may be more influenced by income and living expenses. A teacher in a small town may be worth less than a struggling actor in New York City, but who’s better?
See also: Can you guess how many Americans have successfully retired with $1,000,000 in savings? The percentage may surprise you.
So what can you do with this information? First, don’t panic if your net worth isn’t where you want it to be. Remember, building wealth takes time. If you are young, you have many years to grow your nest egg.
If you want to increase your net worth, here are some tips:
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Pay off high interest debt. It’s hard to build wealth when you’re spending money on interest payments.
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Save and invest regularly. Even small amounts add up over time.
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Try buying a house. Home equity is a large part of many people’s net worth.
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Invest in yourself. Learning new skills can lead to higher paying jobs.
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Live below. The less you spend, the more you can save and invest.
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If you’re nearing retirement or already enjoying your golden years, there are a few steps you can take to increase your financial comfort:
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Think about downsizing your home as well. This can unlock some equity and lower your living expenses. Plus, if you’re still in the workforce, maxing out your retirement account with matching contributions is a smart way to save for your retirement.
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Don’t forget about Health Savings Accounts (HSAs). They offer triple tax advantages and are the best way to spend funds for the inevitable medical expenses that tend to arise as you age.
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Remember, your experience is invaluable. Many professionals with years of experience thrive in consulting or mentoring, turning decades into side jobs or new careers.
Your value exceeds your bank balance! Remember, being ‘upper class’ or ‘lower class’ is only one way to slice it. What matters most is how you move towards your own financial goals. Everyone’s journey is different, and talking to a financial advisor can be a great step if you aim for some tailored advice to help you reach your goals. They can help you map out a plan that fits your needs.
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