The Expert Podcast

So here's the question: does it really take two hundred thousand dollars of income now to be considered middle class or have a middle-class lifestyle? Let's take a look at the numbers. Because 200,000 sounds like a lot to some people, but that might be what it needs to have a middle-class, kind of comfortable lifestyle.

Let's look at the numbers. If you are purchasing a home right now, you're going to probably want to buy a house in most markets that's maybe around 550 or 600,000. In most markets, in order to get a decent house—a nice house, something that's a little bit above average—you're going to spend five or six, sometimes close to seven hundred thousand dollars for a house. In most markets, two or three hundred doesn't get you much. You can get an okay house, right? You can get a decent house, probably 10 to 15 years old, maybe a little bit smaller, and maybe less land. And in some areas, obviously, you can still get a three or four hundred thousand dollar house that's decent. But in most areas, 550, 600, 650 maybe for an above average house. It's not a million dollar house, it's not a millionaire’s type house, not a mansion, but an above average house.

Put in the comments—let us know what you think about that in your area. But here's the thing: if you buy a house, let's say that 600 or 610, put down let’s say 10 percent—most people put down 10 percent—you’re going to be financing about 540 or 550. Well, that’s going to put you at a mortgage payment with the current rates of four thousand dollars. Right, hold that thought.

A house like that will probably have taxes and insurance—property tax and insurance—of maybe another thousand bucks a month, twelve thousand a year depending on the tax rate and insurance premiums in your state. So add another thousand. Now you're at five thousand dollars just for your house.

Now if you buy a relatively nice new car—most new cars now that are halfway decent are about 40 grand, 45—you could spend easily 50,000 to get a decent average car. You’re not going to get a luxury car in most cases for 50,000. But even cars like Jeep Gladiators, minivans, SUVs—they’re all going to be in the 40 to 50,000 range. So let's say you buy one that's 45,000, right? Can you find cars that are 30 or 40? Sure you can. Can you find some cars that are in the mid-20s? Not so much anymore for a new car.

Well, if you take a 45,000 car, you're going to have a car payment of about a thousand dollars a month at the current interest rates. So now, add on a thousand—now you're at six thousand dollars for payments for one car and one house. One nice car and one nice house.

Let's assume you have a second car, but maybe you own that cash, maybe that's a cheaper car—we'll throw that away tonight. Six grand. Well, what is your insurance for your cars gonna be, right? So you might have maybe, if you're lucky, 300–400 a month for insurance for your car. And you're going to spend probably three or four hundred dollars a month for gas for your car.

You're also probably going to have on your house some utilities depending on where you live. You could have electric, water, you're going to have internet, you're going to have probably sewer in most places. You add all that up, that could be a thousand bucks. So add that with your insurance, that’s 1600–1700. Well, now you're at seventy-five hundred dollars a month just for your base payments before anything discretionary.

You’ve got to buy food. What's your food budget? Food budget could be a couple hundred dollars a week—250 a week. That’s another thousand. Now you’re at 8,500 a month for basic necessities. That’s not any entertainment, going out, clothes, other things.

So let’s start adding that up. If you have a couple kids, you’re going to have fees for school activities, sports activities, lessons, books—that could be two or three hundred bucks a month. You're gonna have to buy at least somebody a birthday present every month. You know 12 people that you need to buy a birthday present for, and if it averages out one a month, that could be 100–a couple hundred dollars a month. All of a sudden now you have another five or six hundred.

So let's take that 8,500, make it nine grand—you’re keeping a running total—and now you have nine thousand dollars. And you're also going to find that you're going to want to buy stuff. You're going to want to buy clothes, maybe some things for the house, you know, things in the house. You want to get new furniture. Look, those kind of expenses—you don’t necessarily see them on your monthly budget, but they add up. You know, you're at the store, you see a flower arrangement you want to buy, or you see a lamp, or you see something for your yard or whatever it is. You're going to see that that's a couple hundred dollars a month. That adds up quick.

Also, you're going to need to fix things that break. You're gonna have maintenance on your house. You're going to have to repair your lawnmower, get a new lawnmower—there's a few hundred dollars. You're also gonna have a cell phone bill. If you've got three or four people on a cell phone bill, that could easily be three, four hundred dollars a month.

In addition to that, you're probably going to have some entertainment subscriptions. You might have streaming, you might have some like Disney or Hulu. Add those three things up—now you got another thousand. Now you're at ten-five a month in expenses.

You probably could get away without having domestic staff—like somebody to cut your grass, maybe somebody to do maintenance on your house—a lot of that you can do yourself, so we’ll leave that off. But some people want to pay for those things.

So remember—you haven't gone on any vacations, you haven't gone out to eat significantly, you haven't purchased any luxury items. So whatever your budget you think for that’s going to be overall throughout the year may not be the same every month. What do you think that's going to be?

So if you say what's your eating out budget, what's your vacation budget, what's your luxury item budget… So eating out—we have a family of four—goes out to eat, it’s probably going to cost a couple hundred bucks. And you can do that once a week, or you can do that twice a month, you can do that two or three times a week.

Let’s say if you do it once a week—and that’s pretty conservative, most people go out to eat more than that—so you're going to have an expense. Adding all that up—that’s going to be extremely variable from one family to another.

And then what about vacations? You may go on a vacation in the summer, you may go for a three-day weekend, you may go for holidays around Christmas, or you may go for two or three. And if you average that out—if it costs you a few thousand bucks every time you go, between gas and hotels or flights or whatever it is—and you go two or three times, that could be another four or five hundred dollars a month on average. It could be five or six thousand a year.

So now you're adding—you’re taking that 10-5—and you're adding probably a couple grand for discretionary type activities: eating out and vacations. And then you have your luxury purchases.

But let’s stop right there—let’s not even add that on. Already we’re at 12, almost thirteen thousand dollars for a monthly budget on average.

Well, what does that turn out to for an annual salary? Well, thirteen thousand dollars a month times 12 months puts you at 150-some thousand dollars for expenses. But you gotta remember—that’s after taxes. Take-home.

What does it take for a gross pay to take home 156,000? It takes about two hundred and eight thousand. So if you have that kind of a budget structure for your household, for your family—where you have a nice car, a nice house, you go out to eat once in a while, you buy a few things—you’re going to need to have a 200,000-dollar-a-year annual income, household income.

And as a household income, you may have two people earning income—you might have spouses each earning an income—to add up to 200,000. But either way, it’s going to take 200,000 dollars to fund that kind of lifestyle.

That’s not even including—do you want to put money away for retirement? Do you have to pay for your own health insurance? Do you have health expenses outside of insurance? That’s just for your daily, monthly, yearly life. It’s not for your saving for the future. It’s not investments.

So 200,000 at one point seemed like a lot of money. In 2022 or 23, that's roughly middle class—or just kind of maybe slightly above middle class.

Tell us what your thoughts are in the comments. And do you see these same kind of expenses in your household?