The way we think about economic class in America doesn’t make any sense.
In the past, there was the “poor,” the “middle class,” and the “rich.”
But there’s just one problem:
EVERYONE THINKS THEY’RE MIDDLE CLASS!
Look at this comment from an investment forum:
“We’re 62 and 59, Semi-Retired…at around $4.5M… (Note: We most definitely don’t consider ourselves wealthy, but just moderately affluent, and we still live the same as we did when we had $10K)…”
Allow me to translate: “We have 4.5 MILLION FUCKING DOLLARS but we ‘definitely’ don’t consider ourselves wealthy.”
I know, I know. “Ramit! That sounds like a lot of money…but when you live in San Francisco with 2 kids, and private scho—” Ugh, you already know the rest of this. I’m not even going to get into Mr. and Mrs. 4.5M Who Think They’re Middle Class.
Then you have the opposite side. My friend gave a eulogy for one of his relatives, who grew up poor (“I’m talking we-moved-13-times-as-kids poor”). Within hours, he was getting Facebook messages from his family, criticizing him for calling them poor. “We weren’t poor. Our neighbors — they were poor.”
Do you see how ridiculous this is? A multimillionaire couple refuses to believe they’re rich…and a family who had their electricity repeatedly shut off refuses to believe they’re poor.
IWT Philosophy on Economic Class
In America, the almighty dollar rules, but don’t you dare talk about class.
Buy a Tesla, walk around with your LV bag, renovate your kitchen, take lots of vacations…and post it on Instagram, please. But don’t ever say you’re rich. You’re just “moderately affluent.”
I see it myself. I get lots of people who teasingly ask me, “So are YOU rich?” Even though I’ve spent 15+ years talking about how money is just one part of a Rich Life, most people wink and nod and smile, like deep down they know I’m just playing a trick and they’re in on it.
“Yeah yeah, I know…life isn’t just about money. [Now that we got that out of the way…] So are you rich?”
Once, just to see what would happen, I replied, “Yes.” No caveats, no clarification, just yes.
Try to imagine the pin drop silence you’d hear in outer space. That was their response — an awkward, stunned silence. They were completely unsure how to respond. Would you? Have you ever heard someone openly acknowledge they were rich?
Not in this country. Because we worship the almighty dollar, but you can’t talk about it.
I now soften my answer to say, “Well, I was rich before I had money and I live a Rich Life now.”
A Rich Life is about more than money. Especially when everyone lies about it.
A Rich Life is about FREEDOM and FLEXIBILITY. You can be rich on $50K/year if you’ve created a life where you can do the things you love — whether it’s traveling, eating sushi every week, or teaching drawing. You can also live that Rich Life on $500,000 or $5 million. And of course, more money makes it easier.
You can also have a lot of money and be drowning. For example, over the weekend, I had coffee with a friend who used to work in investment banking. He and his coworkers would get together and compare notes about their boss, who’d randomly share tiny bits of his life. One person overheard him talking about his lake house. Another heard him say his 3 kids go to private school.
For a bunch of young bankers stuck at the office for 14+ hours/day, they built a model incorporating all the “clues” they heard from his expenses. At a certain point, they looked at each other and realized that this guy — who was making $2.5 million/year — might actually be LOSING money.
That’s why I think we need a new framework to use.
A new framework for class in America
The old framework — poor, middle class, and rich — is reductive. It’s incomplete.
How many of us know someone who’s technically rich…but when they factor in the costs of housing, student loan debt, day care, and basic expenses, they don’t “feel” rich? You can have someone making $500K who feels trapped (or our banker friend who obviously is living beyond his means)…but someone making $40K who feels free.
That’s why a new framework should focus less on net worth and more on lifestyle, which you can intentionally design for yourself.
(Note: These classes don’t justify massive inequality and systemic problems, which are genuine problems. They simply provide a “lens” through which to view your financial state.)
Read below and see if you can spot yourself.
1. The “Trapped” Class
In The Trapped Class, you’re stuck working paycheck to paycheck, one accident away from financial disaster. There is no “buffer,” no time to think ahead and plan for the long term.
Key phrases used by people in The Trapped Class:
“I’ll never be able to afford that”
“Once I do XYZ, I’ll be rich”
“I need money now so I can buy XYZ”
“I’ll be working for the rest of my life, so I might as well buy X”
“Don’t raise my taxes!!!”
“Things will never change”
“It just doesn’t matter what I do”
“That’s not for people like you and me”
“Money is the root of all evil”
Remember, you can be trapped at $30,000/year or $300,000/year depending on your lifestyle!
If you’re living in The Trapped Class, you have very few options and fewer resources or free time to improve your situation. This is a scary place to be and a very hard cycle to break out of.
2. The “Treadmill” Class
People on the treadmill have a decent job and a small bit of savings. If you live in America, the treadmill is a relatively good quality of life — The Treadmill Class has a roof, a car, internet, pizza delivery any time they want, and they can take a vacation once a year.
But they’re stuck — and getting off the treadmill is more of a dream, not a plan. They usually have some credit card debt. They aren’t saving enough for retirement. They’re likely to spend most of their lives working their job just to stay afloat.
Key phrases used by people in The Treadmill Class:
“If I just keep going, one day I’ll be able to do that…one day I’ll be able to afford that…one day I’ll be happy”
“I’ve got some $ saved but I’ll never be rich enough to actually quit my job to do what I want”
“That’s for rich people”
“I wish I could do X, but I need to keep saving money in case I lose my job”
“I really want X but I can’t afford it right now”
“Don’t raise my taxes!!”
“I feel stuck”
“Everyone thinks I should be happy making this much…but they don’t understand my expenses”
“My job pays the bills”
“I work hard. I deserve this”
I remember my first time in NYC as an adult, when I met a friend for lunch near Grand Central. I loved seeing all the people casually eating $30 salads in their beautiful suits — it was like I was sitting in a glamorous TV show. Only later did I understand that the fancy suit and salad belied the 2-hour commute, the multiple mortgages, the $50,000+/year private school tuition (per kid), and the thankless jobs with a capricious boss.
Day to day, the treadmill can be “fine,” even nice. But 30+ years of running will drain you.
3. The “Freedom” Class
These are the people who have the ability to do what they want, when they want. Money is no longer a major constraint in their lives. In fact, cost is rarely the first thing they consider. More often, it’s time, quality, experience, relationships, or simply “I want it.”
I’m not just talking about billionaires and trust fund babies, even though they get all the spotlight. There’s actually a growing wave of people who are living this life by building small, automated businesses that support their lives.
The key insight here: It’s not simply about how much money you have. It’s how much FLEXIBILITY and FREEDOM you have.
Key phrases used by people in The Freedom Class:
“My money works for me. I don’t work for it”
“So what if I pay a little more? It makes my life easier”
“I can afford to be generous”
“I can afford to make investments for the future”
“I want something created especially for me, not cookie-cutter for everyone else”
“I work hard and I want the best”
“Yes, I can do that”
“I trust the people around me”
“If I invest now, think how much I’ll gain later”
“My business operates without me day to day”
We almost always fixate on the money required to be in The Freedom Class. Sure, more money helps. But I recently spoke to a retired couple and asked them, “What would you tell yourselves back in your 20s?” They looked at each other and said, “Save more.” I pressed them: “Why? You’re retired and you have good money now. What would you have used the extra money for?”
They just stared at me. They had no answer. In America, we believe that “more” is the answer — but in reality, you can reach The Freedom Class by creating a life of flexibility and purpose.
Which one of these classes do you fit into? What are your thoughts on my framework?