Economic Classes As Measured By Net Worth, Not Income

One of the things that baffles me most is why economic classes (i.e. middle class) are always defined by how much you make and not how much your net worth is. Assets can produce income. Income doesn’t necessarily produce assets. The reality that two people could both earn $1,000,000 annually and one be poor and one be middle class economically speaking typically baffles people. I see it a lot in the African American community where once a certain salary is earned they believe they are indeed middle class. I’ve even some who consider themselves rich. Yet, if you ask them their net worth they always tell you what their income is. Now what happens if those two people earning $1,000,000 a year both lose their jobs? The one who is middle class by  net worth probably has assets that they would either be able to sell or can generate passive income for them. The other who is poor likely has a bunch of depreciating material items and confusing a primary home as an asset and not a liability.

Take a moment at the ranges below as measured by net worth not income to see exactly which economic class you would fall into.