Life was different 20 years ago. YouTube, Google Maps, the iPod Nano and the Xbox 360 all made their debuts that year. The upper-middle class also looked quite different. The prices of goods and services weren’t as high, but paychecks weren’t as high either.
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Per the most up-to-date Pew Research, your income has to exceed $169,800 per year to be considered upper-middle class. If you wanted to be in the upper-middle class in 2005, you had to earn $117,408.34 per year in 2005. This calculation comes from the U.S. Labor of Bureau Statistics’ CPI Calculator.
Below is a glimpse into how the dollar’s purchasing power has dwindled over the years and what this looks like for the upper-middle class moving forward.
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Navigating Higher Costs
Some people who were in the upper-middle class in 2005 still enjoy that status to this day. However, it also means this group had to go from earning at least $117,408.34 in 2005 to surpassing $194,149.55 this year.
That’s an average inflation growth rate of 2.55% throughout those 20 years. However, it featured elevated inflation shortly after the pandemic, with 2022 producing the highest inflation in more than 40 years.
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Wages may not keep up with inflation and if that’s the case for you, it may be time to job hop. Switching from one company to another can result in a higher salary. Staying with the same company risks settling for low raises or not getting a raise at all unless you ask for it.
You may also have to pick up a side hustle to get closer to an upper-middle class lifestyle. While cutting expenses can help, there is a limit to how much you can cut. Focusing on income growth is a better long-term solution than cutting costs, but it’s still good to track your expenses and see how much you can save.
Investing Can Lead To Long-Term Wealth
Although inflation has steadily climbed over several years, it hasn’t kept up with many assets. For instance, the S&P 500 has delivered an annualized 8.4% return over the past 20 years, according to SoFi. That’s a 5.7% annualized return if you adjust it for inflation.
Corporate earnings usually go up alongside inflation unless inflation spikes suddenly. This trend gives investors the opportunity to outpace inflation and build wealth faster. While a high income is the starting point to joining the upper-middle class, it’s more important to build your nest egg with regular investments so you can retire with less financial stress.
Be Patient
The biggest financial milestones take several years to achieve. You will have to contribute to your portfolio and make good investments for many years before achieving a seven-figure net worth.
While patience is usually directed toward investing, it’s also important to be patient with your career. The amount you earn right now doesn’t have to be the same amount that you earn a decade from now. Developing new skills, negotiating raises and job hopping can help you climb the corporate ladder faster. You may even use your skills to start a side hustle that becomes a vibrant business.
Thinking in years instead of days and weeks about your investments and income can help you reach the upper-middle class. This type of thinking can also help you achieve major financial milestones sooner than your peers.
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This article originally appeared on GOBankingRates.com: This Was the Salary Required To Be Upper-Middle Class in 2005
