Tuesday, July 17, 2012

The Keys to the Upper Middle Class

I remember reading an article somewhere where the person wrote something to the effect of: if you told upper middle class parents that their children had a 10% chance of becoming poor, they would immediately hire extra tutors and enroll their kids in more college application friendly extracurricular activities.

Like it or not, the people who are in the upper middle class know the best way to make sure their children stay in the upper middle class. There's no official description of upper middle class (henceforth known as "UMC"), but you can be sure that they're located, more or less, in the top quintile of American households by income. For individuals in the work force, the entry level to the UMC is about $55000.

If you are a member of the UMC, chances are you went to college and got at least a Bachelor's degree. You also happen to have a job with a career track and most likely your parents went to college as well. Your first "real" job out of college started you out at a salary above the median working American and your earning power will vastly outpace inflation for the next 15 years of your working life and then plateau for the next 20.

It's good to be in that position, isn't it? Parents in the UMC know that, and they also know how to make sure their kids stay in there. It really boils down to 3 points:

1. Finish your college degree in 4 years. The percentage of people who hold at least a Bachelor's degree was 30.4% at last count. Only half of them actually finished their 4 year degree in 4 years, though. That means if you're 22 with a bachelor's degree, you're "on schedule", compared to the ~84.8% of the population who currently aren't. And don't bother switching majors, even if you hate the one you're in. That just wastes time and money. Chances are your future career won't even be tangentially related to your major (unless you're in an applied STEM field) anyways.

2. Go to a "tier 1" public school. Graduates from "directional schools" (ie: University of Central Michigan or University of South Florida) can make it into the UMC just fine, but your chances are greatest with a degree in hand from the best public university in your state (if you live in a state worth living in, unlike say...Wyoming).

As a side note, where you got your bachelor's degree means a lot in your first job but becomes progressively less important as you build your career up. To have a shot at going from the UMC to the upper class, though, where you went to school and your very first job out of college makes all the difference. Goldman Sachs won't take graduates from directional schools but they will take a person who graduated from Berkeley, Georgia Tech, Virginia, etc, to say nothing of the elite private schools.

3. Get people skills, and learn how to talk with a mix of discretion, brevity, and intelligence. Your college degree got your foot in the door for an interview at that awesome company, but your communication skills and situational awareness will determine whether you are a "good fit" for the company. Many firms will turn away applicants who are capable of performing the job's actual duties, but if they don't get along with others or they show signs of extreme personality faults, employers just won't bother.

If you read this list and you decided you have all of them, chances are you're in the UMC. Congratulations, life is much more awesome for you compared to 99% of the world.

For the rest of you, sorry, guys. But those after school specials were right. Knowledge is power and education (plus enough intelligence to put that education to use) is the key to getting into and staying in the upper middle class.

The only real problem is if you're not "on schedule", then it becomes increasingly hard to break into the upper ranks. A lot of people think young people can afford the most risks, but it's actually the exact opposite. Once you're a proven commodity, you're afforded much more latitude compared to when you're younger. You've also built up a large capital base, your career and the fruits of your career, to take careful, calculated risks without jeopardizing your future.

That's not true when you're young. When you're young, you have to stay in the rat race because if you fall out of it (or are kicked out of it), not only does it become harder to get back in, but you'll also be dealing with the up and comers without the ability to rely on experience and your professional network like the old pros can.

Don't listen to those bloggers who say "follow your heart" and "take a semester off and backpack across Europe". You have plenty of time to do that once you're rich and retired. Staying in the UMC should be your biggest concern. And if you aren't in the UMC, either resign yourself to that fate or try your hardest to break in.

I've said a ton of politically incorrect things in these past 800 words or so, but you'll be hard pressed to find a person, in their heart of hearts, who will say I'm wrong.

1 comment:

  1. You are right, for the most part. In my case, you're wrong, but I don't totally disagree with you. I don’t meet any of the criteria for number one or two. I do have a Bachelor’s degree (obtained in 5 ½ years) and I went to a public school (tier 1, it ain’t). I do consider myself having people skills though.
    I did college the hard way. I worked part and full time so I didn’t have to take out loans. I also consider myself lucky. While having no student loans, I’m a leg up on my friends that have $200k+ to pay back. Many of them have graduate degrees and I make more money than they do, especially when you take into account the massive sum of money they have to pay back every month.
    I am UMC (slightly higher), but when I look at the those who would be considered UMC with a freaking home mortgage of a student loan to pay off, I wonder if it’s worth it. Sure it’s worth it down the line, but if you’re 25 years old and you have $200k in student loans to pay off, how soon will you be able to reap the benefits of your secondary education? $55,000 a year isn’t what it used to be.
    Let’s say you make $60k a year. That’s $5k a month. Count 25% of that gone for taxes. So your take home pay is $3,750. If you’re like my friends , decided to go to law school and tacked on a considerable amount to your loan, you’re somewhere around the $200k mark for student loans. At a 6% interest rate and a $1200/month payment, that would put you at paying off the loan in 30 years. It would also put your net income at $2,550/month. That puts you pretty close to someone making $35k a year in the 15% tax bracket.
    Granted, lawyers make more than $60k/year unless you’re a public defender or an ADA. I would hope that the salary for someone with a post graduate degree would go up exponentially versus someone with no degree. But it seems like the student that just gets out of college isn’t that much better off than someone who’s been in the workforce since they were 18.
    The field that I’m in takes experience over education any day of the week and twice on Sundays. But since I have a college degree (you’re right, the field doesn’t matter), I have a huge leg up on someone without one.
    While your points aren’t always true, especially in my case, they are valid. Those who do fit your criteria have a way better chance of becoming UMC.