Millionaires as Middle Class?

Recently, I came across a great article at CNBC entitled “Most millionaires say they’re middle class.” The article describes a recent survey that paints an interesting picture of people who have accumulated a lot of wealth:

A majority of millionaires polled describe themselves as middle class or upper middle class despite being among the wealthiest 10 percent of Americans, according to the results of the third CNBC Millionaire Survey.

Fully 44 percent described themselves as middle class, and 40 percent said they were upper middle class. Only 4 percent described themselves as wealthy or rich, and 5 percent described themselves as upper class.

That’s right. Less than 10% of millionaires described themselves as wealthy, rich, or upper class. 84% of millionaires defined themselves as middle class.

Maybe just having $1 million in net worth isn’t enough to get people to change their mindset. The survey tackled that, too.

Even those Americans worth $5 million or more — among the wealthiest 5 percent — still think of themselves as more middle class than wealthy. According to the survey, 49 percent of those worth $5 million or more define themselves as upper middle class, while 23 percent define themselves as middle class. Only 11 percent of the $5-million-plus millionaires define themselves as rich or wealthy.

In other words, 72% of people with a net worth of $5 million or more view themselves as middle class.

Now, let’s put that in perspective for a minute. If I had a net worth of $5 million, I would already be beyond my financial goal. As I’ve stated before, I view a 4% annual withdrawal rate of one’s investments to be an appropriate amount to live in perpetuity. I’d probably stick closer to 3% just to be on the safe side. 3% of $5 million is $150,000 per year.

It’s worth noting that all of that money would be in the form of long-term capital gains, either as qualified dividends or stock sales, so it would be $150,000 per year with a really low tax rate. If I chose the 4% route, it’d be $200,000 a year.

Even in my craziest spending years in 2003 through 2005, we didn’t spend half of $200,000 in a single year. Lately, our spending is a pretty small fraction of that.

To put it simply, people with wealth far beyond my biggest goals right now don’t view themselves as rich, they view themselves as middle class.

Many of you are probably wondering how they could possibly come to that conclusion. The article hints at three reasons, each of which actually make a great deal of sense to me, and they’re also indications of why I will probably perceive of myself as middle class until the day I die.

Reason #1: Upwardly Mobile from the Middle Class

The reality is that most millionaires today are self-made millionaires. They came from working class or lower middle class backgrounds and plied their skills, focus, and determination to make more of themselves. From the article:

Studies show that more than three-quarters of today’s millionaires made their money themselves and started out in the middle class or lower. Wealth experts say these self-made millionaires may still see themselves as having middle-class values of hard work, humility and family despite their increased wealth.

This describes my own story to a tee. My family was decidedly blue-collar when I was growing up. My father was a factory worker who was often laid off and made up for the gaps through entrepreneurial side gigs while my mother was a stay-at-home mom. They usually had enough money to make ends meet and I never went without anything that I needed, but we weren’t rich, either.

Because of that, I feel middle class, and I don’t think any amount of wealth would probably change that. My desires, plans, and dreams are pretty low key in the big scheme of things. My parents are middle class, my closest friends are middle class, my siblings are middle class, and my extended family is middle class. That’s how I grew up and that’s where my roots are. It’s hard to change that.

Reason #2: Still Aspirational

No matter how wealthy you are, there are always going to be people more wealthy than you are. If you use the people above you on the ladder as your source of comparison for what “rich” is, you will never really look rich. From the article:

Today’s wealthy, like many Americans, also look up the economic ladder when comparing themselves to others rather than down. And the super rich are far outpacing millionaires when it comes to wealth creation, making the mere millionaires feel like the middle class by comparison.

Right now, when I think of someone that’s rich, I think of someone that has a net worth that’s 10 times as much or more than I am. From the conversations I’ve had with other people, almost everyone has a similar definition. They rarely view themselves as rich, but put the idea of “rich” in proportion to their own financial state.

There are some people who may view me as rich, which I find really strange given how I view myself, how I grew up, how I live my life today, and the financial dumpster fire that was my life several years ago. I feel like people who are genuinely rich have far more money in the bank than I’ve ever had.

Reason #3: Avoiding the ‘Rich’ Label

Being “rich” today isn’t necessarily a positive thing. Many political and social groups view the “rich’ as the enemy, regardless of how they earned that money and what their political beliefs might be. It’s a group that some people may want to avoid. From the article:

George Walper, president of Spectrem Group, which conducted the survey for CNBC in March, said today’s wealthy also want to avoid being labeled as wealthy because of the cultural hostility toward the rich.

“The majority of wealthy Americans are those that really don’t want you to know how wealthy they are,” Walper said. “It’s a very small percentage of people who want to be out front in the media. Most of them say, ‘I’m just a Main Street American.'”

Even if I perceived myself to be “rich,” I certainly wouldn’t want to be known to others as being “rich.” That, in my eyes, would make me a target for a number of things that I wouldn’t want to attract, such as thieves and people wanting my money. I have no interest in those things, so I would never want the public label of “rich.”

‘Rich’ Is a Matter of Perspective

The real message is that the idea of “rich” is relative. The vast majority of people in America do not view themselves as rich and instead view someone wealthier than themselves as being “rich” while they themselves are middle class. So, the collective definition of “rich” is someone with much more money than ourselves, even though that means the person you see as “rich” probably doesn’t see themselves as “rich” at all.

So, how is that useful?

For starters, it’s more clear than ever that you shouldn’t worry about what other people think of you. The idea of “rich” is definitely in the eye of the beholder. I think that most labels that we give to ourselves follow that trend – most people don’t even think about it and those that do are often operating based on relative definitions that have nothing to do with us. So why worry about it? Why chase something that you have no control over? Stop worrying what other people think.

Another reason is that Americans tend to be aspirational by default. It’s part of the traditional American mindset to look upwards to ever-larger goals, and part of doing that is using your current state as a comparison and seeing it as being less than what your goal is. We dream big, and when your dreams are big, your life can sometimes seem small in comparison.

That’s a good thing, but it does mean that many of us tend to compare ourselves upward and not downward. We do this with money, but we tend to do it with a lot of other aspects of ourselves as well.

I think that the wider availability of various forms of media in the past century has contributed in a negative way to our own self-images, as we tend to see not only shiny images of celebrities, but in the age of social media, we also see shiny images of our friends that we can’t possibly live up to. We want to live up to impossible standards, so we try to show off the best possible side of ourselves… and then others only see those inflated images and thus the impossible standards perpetuate.

In the end, trust only in yourself and in the numbers that provide unbiased information about yourself. Don’t let relative ideas like “rich” and “poor” sway your decisions. Instead, stick with what you want for yourself and make that the focus. Let what you want be defined clearly, not with vague words like “rich” and “poor.”

As for everyone else? Don’t worry about what they’re thinking.

Trent Hamm

Founder & Columnist

Trent Hamm founded The Simple Dollar in 2006 and still writes a daily column on personal finance. He’s the author of three books published by Simon & Schuster and Financial Times Press, has contributed to Business Insider, US News & World Report, Yahoo Finance, and Lifehacker, and his financial advice has been featured in The New York Times, TIME, Forbes, The Guardian, and elsewhere.