It may seem contradictory to be rich and still identify with the middle class, but even billionaires don't consider themselves upper class.
According to research from Ameriprise Financial, 31% of Americans with investable assets of $1 million or more consider themselves middle class, and 60% consider themselves upper middle class. However, the median household income in the United States is approximately $75,000.
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James Osborn, founder and partner at Envest Asset Management LLC, said that the truly wealthy, such as those in the top 10% of household incomes, still feel that they are middle class. I noticed this phenomenon.
“I think this is incredibly common,” he says.
Part of what is driving this identification may be an association with the past.
“It is reported that a significant proportion of wealthy people have accumulated their wealth over their lifetime. In other words, they have never experienced wealth. You’re more likely to be seen as closer to the middle class than someone who has made money,” Osborne said.
These associations can also be tied to lifestyle choices, such as how some billionaires live more frugally than you might imagine.
“Having grown up in a different socio-economic culture, many people who have built wealth during their lifetime may not feel comfortable expressing their wealth through material possessions,” Osborne said. To tell. “As a result, they develop their beliefs about money long before they become wealthy. Psychologically, they feel more connected to their original upbringing than to their current financial situation, and they are more likely to become wealthy.” You may feel uncomfortable with the associated perceptions.”
Let's dig into some of the reasons why wealthy people feel middle class.
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Some wealthy people perceive the middle class as a lifestyle nexus, while others, despite high household incomes, remain in relatively difficult economic conditions. This may be because you are spending too much money without even realizing it.
“Certainly, lifestyle modulation can be a factor in middle-class identity. This is a form of 'keeping up with the Joneses,' so to speak,” Osborne said.
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Others face high expenses, such as those living in expensive cities. For example, San Francisco's middle class income range reaches nearly $250,000 at the highest end.
So even if you have a high income, being in the middle class reflects that you don't have the financial wherewithal that you would think you could with an annual income of hundreds of thousands of dollars (if not more). There may be.
Mr Osborne said: “Throw in high housing and childcare costs, throw in a second car, and pack in the kind of inflation we've seen, and you'll see a solid salary erode.” .
make a plan
Although many wealthy people identify as middle class, there are ways to change this perception in ways that ultimately help high-income people live.
“Both mindset and tactics help the wealthy identify with the middle class. When it comes to mindset, those who are new to wealth may feel uncomfortable talking about it to others and may find it difficult to talk to a financial advisor. You might want to ask for advice,” Osborne says.
This thinking can have implications in areas such as the transmission of wealth to families.
“In many cases, they're stuck in a middle-class mindset, not just because of their upbringing, but also because they're worried about what to do with their children, grandchildren and other successors,” Osborne said. “They are so ingrained in a hard-working middle-class work ethic that they may feel the need for their successors to follow in their footsteps, rather than inheriting their wealth.”
For those who want to break through this mindset and put their finances in place to enjoy wealth at will, wealthy individuals and families may form a team of support staff.
“Working with a financial advisor, as well as an attorney and accountant, can help develop a holistic financial plan that includes estate and tax strategies. Understand their financial needs today and understand their mindset. It prepares you for change,” Osborn said. “Having a team knowledgeable in personal finance, law and taxes can help you create a roadmap that outlines your financial goals, including spending, saving and inheritance,” he added.
With more comprehensive planning in place, wealthy people would be better able to manage their money, rather than feeling trapped in the same paycheck-to-paycheck cycle that many middle-class families face. You'll feel more confident in how you use it.
“Seeing their thoughtful financial strategies will bring peace of mind and go a long way in helping them change their mindset so they can enjoy wealth not only now but in the future,” Osborne said. .
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This article originally appeared on GOBankingRates.com: I'm a financial advisor: Here's why my wealthy clients identify with the middle class
