On a popular Reddit community about middle-class finances, people often ask, “Am I middle class?” This question leads to debates about what income level defines the middle class. Some wonder if you need a certain amount of assets by a certain age to be considered middle class. Others question whether you can be in the middle class if your debts exceed your assets.
Robert Menjivar, a 34-year-old from California’s East Bay, follows this subreddit. He noticed that people often argue about what it means to be middle or upper class. Earlier this year, Menjivar lost his job as a financial-planning manager at a biotech startup, where he earned over $200,000. It was his second layoff; the first was in 2020. His father, an immigrant from El Salvador, taught him to save and not assume “the good times will always keep going.”
In 2023, he and his wife saved or invested about 40% of their post-tax income. Now, her $100,000 salary covers 85% of their expenses. They manage any remaining costs with savings and contract work he picks up.
Before losing his job, Menjivar and his wife earned $300,000 together. This is nearly four times the median U.S. household income of $80,600. Yet, he still considers them middle class. He does not think class is just about income. Instead, it’s about “how well off are you if you’re not able to work anymore?”
Many people find it confusing that those with more money than most Americans do not see themselves as upper class. A man from Chesapeake, Va., previously told MarketWatch he and his wife earn more than $200,000. However, they have little left at the end of each month due to housing and childcare costs.
Even though inflation has fallen since June 2022, prices remain high. This has affected how people view class mobility. Interviews and surveys show that no matter how much a person earns, many still feel financially insecure. They are striving for a status that few reach: financial freedom.
The ‘Trapped Class,’ ‘Treadmill Class,’ and ‘Freedom Class’
Even high earners find their jobs don’t promise security. Gloria Russell is a parent of two from Jacksonville, Fla. She was laid off this spring from her job as a senior instructional designer at Amazon Web Services, where she earned $220,000. She felt secure in her role because she worked on large government contracts. “I had great reviews and awards,” she said, “but I was just on the wrong side of a balance sheet.” Now, her family can no longer afford health insurance.
To many workers who have faced economic downturns, financial security is what defines the upper class. Middle-income workers often have more student loan debt than lower-income workers. They also have more credit card debt than both lower and higher-income workers. This makes it hard for them to feel secure when life is just a series of debt payments that chip away at their future.
Surveys show that financial stress is felt by low-income workers. However, a growing number of middle- and upper-income Americans also feel financially unstable. In a recent survey by Pymnts, 48% of people earning over $100,000 annually reported living paycheck to paycheck. This includes 36% of those earning more than $200,000. A survey by the Federal Reserve Bank of Philadelphia found that the highest earners were most worried about losing their jobs.
“I’d like to propose a new framework for thinking about class. One built on lifestyle.” — Ramit Sethi, podcast host and author of I Will Teach You To Be Rich.
High earners, like Menjivar, are in the same boat as those who earn less. “If you can’t afford to stop working, then you’re not really upper class,” he said. It doesn’t matter if you earn $200,000 or $40,000; if you spend it all, “you’re in the same boat.”
In other words, rich people can also be part of the middle class. Young consumers on social media have been talking about the difference between being rich and being wealthy. They note that a high income does not mean long-term financial security.
There is a difference between someone who barely earns enough to pay bills and someone who must take money from their investments. Alissa Quart, the author of Bootstrapped: Liberating Ourselves from the American Dream, explained this to MarketWatch. Many households trying to enjoy middle-class pleasures — like dining out occasionally or sending their kids to summer camp — live paycheck to paycheck to do so.
“You can be insecure at a lot of different levels on the income gradient,” Quart said.
Because income alone does not always determine a person’s sense of security, Ramit Sethi argues that America’s view of economic class is outdated. There are high earners with large debts who feel broke, and people who earn less than average and feel happy and free. “I’d like to propose a new framework for thinking about class. One built on lifestyle.”
Sethi described what he calls the “trapped class.” Members of this class live paycheck to paycheck with no emergency savings. He also describes the “treadmill class.” This group has decent jobs, some savings, and debt, but feels stuck. They likely spend their lives working just to stay afloat. Lastly, there is the “freedom class.” These are people who can do what they want, when they want, without financial constraints.
According to Sethi, people do not just want to move up a three-tier income ladder. They want freedom and flexibility.
However, freedom and flexibility usually require money — and lots of it.
Financial stressors like housing and childcare impact the treadmill class. This leads to a decline in the feeling of control people have over their lives. Men’s wages in middle-class families have not increased since the late 1970s. The only reason the middle class has not completely fallen behind is that women have joined the workforce in large numbers. Isabel Sawhill, an economist and senior fellow emeritus at the Brookings Institution, explained this to MarketWatch.
As economic inequality grew in the U.S. over the past five decades, many families needed two incomes to maintain a middle-class lifestyle. This is why being in the middle often feels like a treadmill.
“The downside of this growth in two-earner families is that it is creating a time squeeze,” Sawhill said. Middle-class married couples with children now work a combined 3,446 hours a year. This is an increase of over 600 hours since 1975. “The time squeeze is a big piece of why I think the middle class feels pressed,” she said.
Reclaimed Time and Lifestyle Creep
One parent in the tech industry, who wishes to remain anonymous, told MarketWatch she would like to stay home with her kids for a few years. They could live on her husband’s income, but they are expecting their second child. “Given the speed at which emerging technology is disrupting our industry, we believe it is too risky for me to take a break in these important earning years.” She and her husband are high earners and try to save aggressively. However, she said, “the options available to us seem different than we’d envisioned.” Ultimately, they feel tied to the path that provides maximum financial security in a country with little structural support for families.
In today’s society, the real currency is not just having enough money. It is also about controlling your time. More people feel that a life of work should be about more than just survival, with a few vacations and toys. It is about more than just waiting for the next paycheck. This may explain why 70% of workers in a survey this year said they prefer remote or hybrid work. More than 40% of workers reported feeling burned out.
The urge to reclaim time aligns with the financial independence, retire early (FIRE) movement. This movement encourages people, especially high-income earners, to save and invest large portions of their income during their working years. This way, they can gain the financial freedom to leave the rat race or retire well before the typical retirement age of 67.
Those who reach FIRE enjoy freedom or at least some financial security. Personal finance experts like Sethi, Dave Ramsey, and influencers like Tori Dunlap and Vivian Tu promote financial freedom. This can mean freedom from debt or the ability to stop working for a paycheck. Traditional personal finance advice — keeping a good emergency fund, living below your means, saving, and investing — aims for financial independence.
Low Economic Mobility and Lifestyle Choices
Low economic mobility in the U.S. and what many experts call a weak social safety net can create challenges for people trying to break free. Workers who do not earn a living wage may have few options. For those who earn more, how tough their treadmill is often depends on their choices, experts told MarketWatch.
Scott Murray, head of analytics at Pymnts, co-authored a report about six-figure earners living paycheck to paycheck. He said, “This is very much a lifestyle thing.” When people earn more, they often buy bigger houses and nicer cars. “A lot of people do this. It’s not just poor people, and it’s not just rich people.”
While members of the treadmill class may feel trapped, “they actually have choices” about how to spend their money, said Michaelson. This does not excuse the vast economic inequality in the U.S., but “in the treadmill class, we choose our own misery by