This just in!
According to this article from the Associated Press, 20% of all adults are rich at some point in their lives. Unfortunately, the article posed more questions than answers, and to me, it proved that you can’t trust everything you read.
Let’s break the article down, shall we?
1 in 5 Adults are Rich? 1 of 8
Not Just the 1%. 2 of 8
These income earners are older professionals and working married couples. They're the fastest growing population by income, and they're spread out across the country (compared with "old money" rich people, who are concentrated in the Northeast).
Image by hotblack
What is Rich? 3 of 8
The article defines rich as "having a combined household income of $250,000" but this demographic doesn't see itself as rich. Money comes in, fast and furious, but it goes out equally quickly, and it's divided between personal services such as housecleaning, daycare, piano lessons, activities, and saving for kids' college educations.
Image by Penywise
What About Net Worth? 4 of 8
Though the article doesn't mention it, my guess is these high earners are not saving enough of their money. If a raise at work doesn't correspond with a similar raise in your net worth, you're doing it wrong. Saving is at least as important as earning (if not more!) and if you spend more than you earn, your paychecks hardly matter because you're not buying your family any time.
Image by Alvimann
Why is it Temporary? 5 of 8
The article said that 1 in 5 adults are rich "at some point in their lives" — what does that mean? Why, if your income becomes $250,000, would that be a temporary state? And further, what does it mean when your household income drops to say, $240,000? Are you then not rich anymore?
Image by Alvimann
Growing Income Gap 6 of 8
As more and more people achieve "rich person" status, the income gap grows, and they become more out of touch with what's going on in other socioeconomic classes. This demographic votes with its dollars and votes people into office, so it'll be interesting to see the implications of social programs that primarily benefit the working poor.
Many are Self-Made 7 of 8
They worked hard to get where they are. They see hard work as one of the basic American necessities. Again, this does not bode well for social programs if those programs are seen as enabling poverty. The new rich will use their "grew up in humble circumstances" stories as fodder for the new American Dream. "Work hard like I did (and don't forget those three lucky breaks) and you too will get yourself to a higher earning potential. Maybe you too can buy a boat one day."
Implications for the Middle Class 8 of 8
The Joneses just got richer. Seriously. If one in five is rich, then one in five will be buying designer things. What will that mean for the other four?
I think it means the other four will be more tempted to buy a designer handbag because their friend has one. But they end up spending a higher percentage of their take-home pay on said handbag just to keep up appearances.