Determining whether you’re rich or part of the middle class can be tricky. So many factors can eat into your paycheck, such as the cost of living, grocery bills and how many people you have in your care. Also, it’s not all about how much you earn in a given month or year; it’s more about your net worth and the way you use the money you have.
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Here are seven signs that indicate you’re rich vs. middle class.
You Earn Well Above the Median
According to the Pew Research Center, you’re in the middle class if you earn between two-thirds and double the national median household income in the United States. To put this in perspective, and keep in mind that this can vary widely based on your location, the middle-class income range is roughly $56,600 to $169,800.
However, the actual median household income is around $80,000 in America, so you can use that as a benchmark for your personal wealth.
Your Paycheck Is High Relative to Your Peers
In both cases — middle class and rich — your paycheck might be higher than your peers. You’re likely rich, though, if you earn significantly more money for your area and can handle far more than your basic needs.
In this pseudo version of keeping up with the Joneses, the definition of rich by comparison will depend on your specific location, lifestyle and circumstances. There is a huge gap between what is considered rich and what is not, and that’s not even including your own personal perception.
You may feel like you’re middle class if you have enough to cover your basic needs and utilities and can put money aside for the future. However, this might be considered rich to someone who is living paycheck to paycheck. So you may, in fact, be rich if you can spend money on luxury vehicles, higher-end vacations and other experiences without any financial issues.
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It’s More About Net Worth Than Salary
Perhaps a more accurate indicator of whether you’re rich or middle class depends on your net worth. This doesn’t mean you have to be at Elon Musk, Jeff Bezos or Warren Buffett levels of wealth, but the rich typically have a high net worth via significant assets in the form of investment portfolios, real estate, businesses and more.
In contrast, a middle class person may have a low but positive net worth and simply own a bit more than they owe. Here are some general figures to use as a guide when determining where your net worth puts you:
- High-net-worth individuals have liquid assets between $1 million and $5 million.
- Very-high-net-worth individuals have liquid assets between $5 million and $30 million.
- Ultra-high-net-worth individuals own $30+ million in liquid assets.
Your Reliance on Debt Is Minimal
When you’re in the middle class, you’re more likely to rely on some forms of debt to fund your lifestyle. This could be an auto loan or a mortgage, for example. Or it could be student loans for your kids. You might also use credit cards to cover certain expenses, like a family vacation.
An absence of these debts, along with a robust emergency fund and a diverse portfolio of investments, could be a tell-tale sign that you are more financially comfortable.
Your Choices Aren’t Based on Cost
How you allocate your paycheck each month is another major indicator of whether you’re rich or middle class. Where rich people tend to lead a more extravagant life filled with designer goods, luxury travel and high-end experiences, the middle class is often more frugal in their choices, seeking financial stability through careful expenditures.
You’ve Got Financial Emergencies Covered
Both middle-class and rich individuals can generally cover minor financial emergencies, but if you earn enough — or have enough set aside — to cover anything that comes your way, you’ve likely crossed the threshold into wealthiness. Only the affluent don’t live in fear that an unexpected financial setback or an emergency will alter their standard of living.
Your Family Is Financially Set
While middle-class individuals tend to have extra money for impulse buys and unexpected expenses, they typically aren’t “set for life.” They also may not have much to pass on to their family in terms of generational wealth.
To be considered rich, you should have a growing nest egg that, by the time you retire, will easily cover your family’s financial needs for at least the rest of your lives.
Angela Mae contributed to the reporting for this article.
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This article originally appeared on GOBankingRates.com: 7 Ways To Tell If You’re Rich or Middle Class — It’s More Than Your Paycheck
