5 Money Moves That Will Bump You From Lower Middle Class to Upper Middle Class, According to Finance Experts

Laura Beck

January 28, 2024 at 7:10 AM·8 min read

Middle class woman saving money

The middle class, once the dominant financial demographic in America, has been steadily shrinking over the past 50 years. According to Pew Research, the share of U.S. adults living in middle-income households fell from 61% in 1971 to 50% in 2021. And the gap between the rich and poor continues to widen. In 2020, upper-income households had a median income 7.3 times higher than lower-income households, up from 6.3 in 1970.

As financial inequality rises, making strategic money moves is key for lower middle class households seeking to gain economic stability and entry into the upper middle class. Here are 5 impactful financial steps you can take to set yourself up for long-term wealth-building success, based on advice from financial experts.

What Is Considered Middle Class?

According to the Pew Research Center's analysis in 2021, “Middle-income” adults are currently "those with an annual household income that was two-thirds to double the national median income in 2020, after incomes have been adjusted for household size, or about $52,000 to $156,000 annually in 2020 dollars for a household of three.

They continued, sharing, “'Lower-income' adults have household incomes less than $52,000 and 'upper-income' adults have household incomes greater than $156,000."

However, there's more to what's considered middle class than a simple monetary range.

"Being middle class isn't just about how much you earn or have in the bank. It's about a lifestyle," says financial expert Jeff Rose of GoodFinancialCents. At its essence, enjoying middle class status is having the economic means to afford life's necessities and modest luxuries without constant financial stress. This typically includes reliable transportation, comfortable housing, healthcare coverage, retirement savings contributions, and regular vacation and entertainment budgets.

As Rose puts it, "Typically, you've got enough to cover your basics comfortably—housing, food, transportation—and you can throw in a vacation or a new car now and then." The hallmark of a middle class lifestyle is having confidence you can pay monthly bills and weather financial emergencies with a reasonable cash buffer.

Yet middle class living generally doesn't extend to the true extravagances reserved for the ultra wealthy. As Rose notes, those in the middle class aren't "flying private jets or dropping cash on luxury yachts." Rather, being middle class is defined by attaining financial stability and comfort without excess.

At its core, middle class status is a state of mind rooted in economic security, lifestyle comfort and confidence more so than a prescribed income or net worth figure. Or as Rose summarizes it, "It's about a lifestyle." It's about enjoying hard-won financial diligence and reaping the rewards in balance.

It’s also worth noting that what counts as middle class can look pretty different depending on where in America you live. A 2023 report by Consumer Affairs revealed how much incomes vary by state. They found that for a California family of four to be considered middle class in 2023, they'd need to earn at least $69,064 a year. But in more affordable states like Alabama and Arkansas, that figure drops to $51,798.

What Net Worth Is Considered Lower Middle Class?

"Lower middle class usually means your net worth is enough to get by without too much stress, but you're not swimming in spare cash," shares Rose. As he explains further, lower middle class households can generally pay monthly bills and save a bit without going into debt. However, they tend to live paycheck-to-paycheck without much wiggle room. As Rose puts it, they "might struggle with larger emergencies."

While there's no definitive threshold, Rose cites $50,000 as a rough net worth cutoff for lower middle class status. As he notes, "There's no strict number, but typically, a net worth below $50,000 could be considered lower middle class in many parts of the U.S." Essentially, lower middle class households have some economic security, but not much financial flexibility.

What Net Worth Is Considered Upper Middle Class?

In contrast, Bryan M. Kuderna, and author of What Should I Do with My Money? pins upper middle class status to having more substantial assets and economic freedom. As Kuderna shares, upper middle class households generally have over $200,000 in net worth up to over $1 million when factoring for debt obligations and local costs of living.

With net worths in this range, upper middle class families enjoy financial flexibility for both short and long term goals whether that's vision vacations, private school tuition or ample retirement savings. While still middle class based on lifestyle and sensibilities, crossing this net worth threshold provides welcome breathing room.

5 Money Moves That Will Bump You From Lower Middle Class to Upper Middle Class

1. Skill Up for Bigger Paychecks

"Increasing your earnings could involve acquiring additional education, gaining new skills or seeking career advancement opportunities," explains Anthony H. Williams, a Certified Wealth Management Advisor at Northwestern Mutual. Pursuing higher education, specialized training and certifications demonstrably boosts earning power over the long run.

Whether it's night classes, online courses or full-degree programs, dedicating time to enhance your skill set and qualifications pays dividends through improved career prospects and negotiating leverage with employers. Bigger paychecks then provide more income to invest and build wealth.

2. Budget Hard, Cut Costs

"Work to create a budget and savings plan to effectively manage your income and expenses, allowing you to increase your net worth over time," Rose recommends. Carefully tracking your spending not only helps you eliminate excess expenditures, but also identifies opportunities to improve efficiency.

For example, scrutinizing recurring costs like cell phone plans, cable packages and insurance policies could reveal cheaper alternatives. Diverting those extra savings into paying off debts and investments multiplies your money faster.

3. Obliterate High Interest Debt

"Target debts with high interest rates, like credit card balances, first," Rose advises.

High interest credit card, personal loan and auto loan debts act like lead weights sinking your net worth. The debt avalanche method involves listing out all your debts from highest interest rate to lowest and then putting any extra money towards paying off the debt with the highest interest rate first. This strategy allows you to pay off debts faster by tackling the most costly debt aggressively. Once the most expensive debt is paid off, you move down the list to the next highest interest rate debt. This strategic approach allows you to minimize interest charges over time, saving money compared to other payment methods.

Quitting cold turkey could save you thousands in interest payments over time. Accelerating pay-off timelines by utilizing the debt avalanche allows you to roll surplus income freed up from paid-off debts into wealth building instead of interest payments. Targeting debts using the debt avalanche method, highest interest rates first, allows for optimal cost efficiency in getting out of debt quickly.

4. Invest Early and Often

Low cost, diversified index funds are a smart play for hands-off investors seeking balanced risk and return over time. By harnessing the long-term gains of the stock market over decades, these funds allow your money to work for you. Starting early with regular contributions unlocks the full money-making magic of compound interest. But hey, don't stress if you're just getting started now. It's never too late to get that snowball rolling.

And automating the process makes it easier than ever. "Set up automatic monthly transfers into your investment accounts," Kuderna advises. Making consistent, automated investments is the real key to long-term portfolio growth. Take the hassle out of it by setting up those automatic contributions. Then you can kick back and let time work its compound interest wonders.

5. Lean on Pros for Tailored Tips

"Seek advice from financial professionals," Williams suggests. Qualified financial advisors and planners bring specialized expertise, resources and guidance to customize a financial growth blueprint tailored to your unique situation. They help you avoid risky decisions and optimize smarter money moves aligned with your wealth building goals. As your income, assets and financial knowledge grows, a dedicated money pro can provide invaluable perspective.

Next: Is It Better To Save Up for Retirement or Pay Off Debt? Financial Pros Weigh In

Sources

Jeff Rose, financial expert of GoodFinancialCents
Bryan M. Kuderna, author of What Should I Do with My Money?
Anthony H. Williams, a Certified Wealth Management Advisor at Northwestern Mutual

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