(MONEY Magazine) – "Are you better off now than you were four years ago?"

Politicians have been asking questions like that for years--and so has this magazine. For more than a decade, we've tracked how you're feeling about your finances and the larger economy. Are you splurging on luxuries? Is your home what you want it to be? Are you optimistic about the future? Are you living the good life?

Those questions aren't as easy to answer as they seem. Keeping tabs on your stock portfolio is a fairly straightforward task; assessing how you feel about your income and lifestyle is more complicated. But take a look at the stories, survey results and tables on the pages that follow. For the most part, they convey a steadfast optimism about prosperity in the face of a jittery market. What's more, they explore the various ways in which the past few years have been unusually good to many Americans. For some of us--people like Zan Ng, the Chinese emigre profiled on page 114--the boom has translated into dazzling financial opportunities. For others, like Rich Kay, the Iowa farmer featured on page 126, a strong economy has allowed for freedom and job mobility. What we've all experienced is a consumer marketplace that's grown larger and more varied in response to the rising tide of wealth. That combination of greater affluence and more material goods has let more Americans choose, and build, the dream of their liking.

Last year, for the first time ever, median income in the U.S. topped $40,000. And what's just as telling is the explosion at the top. According to the U.S. Census Bureau, households with income of at least $100,000 are now far and away the fastest-growing income division in the U.S. In inflation-adjusted figures (to 1999 dollars), one out of eight American households found themselves in this select group last year, compared with one out of 12 in 1990. In real terms, these numbers reflect the 4.8 million new households that have joined the uppermost income ranks over the past decade. The Census Bureau number for families, meanwhile, which excludes single people and unrelated adults who live together, is even higher: One out of seven earned at least $100,000. You may not have made that leap into $100,000 terrain--most Americans, after all, have not. But seeing as 40% of U.S. households now have income of at least $50,000, you may be closer than ever before.

Of course, all this may seem slight compared with the fortunes amassed by the Gateses, Ellisons and Buffetts of the world. But these billionaires make up the foam on an elite category of earners. In truth, the vast majority of the newly affluent merely daydream about million-dollar incomes; most make well under $200,000. And while we might consider these households statistically rich, they don't necessarily fit our customary definitions of the term. Many came up the income rungs slowly, the same boomers and Generation X-ers who struggled with a sluggish economy and lousy job market in the early 1990s, when they were repeatedly warned that they wouldn't live as well as their parents.

Today they're members of the new class of wealth in America--most between the ages of 35 and 55, most living in major metro areas, most with a bachelor's degree or higher. What they also have in common is the bull market in good jobs and a high standard of living. As advertising entrepreneur John Bonney, who lives with his wife Diane in Aurora, Ill., puts it: "Ten years ago, I was earning $75,000. Now we have much more disposable income, and there's been a big difference in our lifestyle." The Bonneys have just finished putting their kids through college; John is 56 and Diane, who works for the local visitors' bureau, is 54. Their combined household income is presently in the range of $170,000--not enough to buy whatever they desire, but more than enough to allow them to save for retirement and indulge their taste for golf and travel. They work hard but frequently visit their vacation condo down in Florida. They drive a Lexus and an Audi and can also afford a boat and two snowmobiles.

So do we call people like the Bonneys "affluents" or "affluentials"? Or do we call them, as some cultural observers have suggested, the new overclass--or the bobos of David Brooks' new book, Bobos in Paradise? Maybe it's more suitable to try something else, something with a whiff of luxury that still corresponds to their values and identity. Something that likewise indicates that they're neither truly rich (they still have to make choices when they spend) nor members of the core middle class (they have some pretty nice choices). "I wouldn't call myself affluent," says Bonney, noting that to him "$5 million a year is rich." So why not ultra middle class?

THE AFFLUENCE LINE

Looking for a term that fits people like the Bonneys is admittedly a tricky business. Since the 1960s, the government has recognized an official poverty line--currently set at an annual household income of $16,895 for a family of four with two children. When it comes to drawing boundaries around the middle class, though, things tend to get a little hazy. Most economists think of the middle class as the middle fifth of the income distribution--"between the 40th and the 60th percentile," says Jared Bernstein, an economist in Washington, D.C. with the Economic Policy Institute. Above that stratum, Bernstein explains, is the upper middle; below it is the lower middle. (The median income of $40,816 is at the 50th.) The irony, Bernstein adds, is that most Americans consider themselves middle class, regardless of whether they fall into the 25th or the 90th percentile.

And when it comes to rich Americans, things get even more vague. No "affluence line" divides the upper middle class from the rich. What we have instead is census data, such as that cited previously, which lists households with income of $100,000 and above--the top 12.3%. It's a reasonable starting point, perhaps, in an effort to figure out who is, and is not, an affluent American. But there is a second, considerably higher benchmark--and it is there, it seems, that a true change in lifestyle occurs. That number: 3.5 times the median income, or roughly $150,000. "Earning $150,000 will put you in the top 5% [of U.S. households]," explains Edward Wolff, a professor of economics at New York University who has written several books on income and wealth distribution. "You need about $250,000 to put you in the top 1%."

Making $150K may sound like a lot--it certainly is a lot to most Americans. And that is where we would argue that the ultra middle class begins. (Since incomes and cost of living differ by region, you can consult the map on page 97 for a state-by-state assessment of ultra-middle-class thresholds).

As a rule, this group has a substantial amount of discretionary income and is willing to spend it--though, as we shall see, not always on the same things. Marketing pros have been among the first to recognize their growing clout. "It would appear that $150,000 is the dividing line of confidence and the real psychology of affluence," says Madelyn Hochstein, president of DYG, a market research firm that specializes in analyzing social and consumer trends. "What we seem to see is that in households over $150,000, there's a high level of confidence in the financial future." What about those in the tier just below--the successful households with income between $75,000 and $150,000? Hochstein says that they can't shake a certain market anxiety and fear of being "left behind" in terms of income and skills. Gregory Acs, a senior research associate with the Urban Institute in Washington, D.C., suggests that in real-life terms, the extra income--the boost that puts a household into the confidence zone--means that you're probably able to afford a mortgage on a house that's in the top 10% in market value, as well as the cost of sending two kids to college at a private school without qualifying for financial aid. You can also afford the cost of a high-end car. Another attribute that might make a crucial difference? Says Acs: "If you choose to, you can save."

It helps to put a face on these numbers and concepts, of course, which is why we recently spoke with dozens of ultra-middle-class families about their spending habits, priorities and outlook. To get a sense of the difference between the rich and the ultras, you could learn a few lessons from Bruce and Julie Gibbs, who now live in the St. Louis suburb of Town and Country, Mo. A year and a half ago, the Gibbses had arrived at a place that appeared to be their destination: Bruce, now 35, had a high-level executive job with Ikon Office Solutions in Chicago that paid about half a million dollars a year. They lived in an 8,000-square-foot house in Naperville, Ill. where they frequently hosted gatherings for Bruce's colleagues. They enjoyed season tickets to the Bulls and White Sox and were becoming a fixture on the city's black-tie circuit. "We were," says Bruce, "living in Disneyland." Then one night in March 1999, at four o'clock in the morning, Bruce shook Julie awake to talk. He'd been unhappy in his job; he told her he wanted to find work that was less stressful and more entrepreneurial. He said, "Can you give up this big house? Can you give up this lifestyle? Can you give up all the perks that go with working for this big corporation?" recalls Julie, who is now 33. "I said, 'I'll give it up. It's only fun if you're having fun.'"

So they began the process of dropping down a notch. Within a week, Bruce quit his job and began setting up a franchise for Sharp copiers in Missouri--the state where he and Julie had grown up. The house they bought, while still large, was about half the size of their old one. Since then, they've made other adjustments: Bruce's salary this year will be in the neighborhood of $150,000, and he and Julie have left the season tickets and the lavish business vacations and the bespoke suits behind. They have no regrets. "I spend more time with my family now--I'm home at 5:30," says Bruce. And if the kids go to public school instead of private school, that's fine with him. At this point, they say, they're not only living well but having the time of their lives. They'd like a big boat and the chance to buy a farm in the country, Julie explains, but there's no rush. "We do want things for our kids and for us," she says. "But they're not going to be ostentatious."

LUXURY AND VALUES

It might be convenient if we could divide the ultra middle class into those who opt for spending their newfound wealth on products and toys, and those who opt for frugality and simplicity. If we put names on the two factions, it would pit the exultant materialists against the virtuous spiritualists. But Bruce and Julie Gibbs are a good example of how inaccurate that would be. Like a lot of households in this income bracket, they need to make choices when it comes to spending, and a fondness for pricey indulgences necessarily coexists with a sense of restraint. (As the MONEY poll on page 107 shows, there are few ironclad rules about which things should fall into the luxury category and which into the necessity category.) One common thread is that the ultra families we spoke with put their children's concerns and education before anything else. Otherwise, they have different ways of stacking their priorities. Some families told us that they might splurge on a house, a luxury car, or even a boat, but not private education. Others, by contrast, said they might give priority to private school while considering a luxury car out of keeping with their lifestyle.

What seems clear is that the ultras have gotten to the point where they've built their American dream; now it's time to make it more meaningful. "I think the things I want now are more intangible," explains Daryle Jordan, a 41-year-old Washington lawyer who lives with his wife Paula and three daughters in suburban Virginia. "I'd like peace of mind, the absence of worry about financial matters, and the ability to assist our children if and when they need it."

The Jordans, whose household income is between $150,000 and $200,000--Paula currently works as a manager at a call center--spend a good part of their income on child care and a good part of their free time on their kids' athletic, church and school activities. When it comes to summer vacations, they make a habit of going to the Virginia beaches one year and heading out-of-state the next. Their big-ticket item is their home: They've just moved into a 4,500-square-foot house they spent a year building. But the luxuries pretty much end there. Would Daryle buy a $500 wristwatch? "I've got a $39 Casio that works fine," he says, laughing.

Just north of where the Jordans live, in the section of Chevy Chase that's in D.C., Jennifer Brown Simon and Neal Simon, both 32, are raising their two children on a similar household salary. Neal currently works as the CEO of USLaw.com, a new online legal service; Jennifer just left a position at the D.C. mayor's office for a job with a new local charitable organization that models itself on a venture-capital firm. Like the Jordans, the Simons live in a roomy, expensive house, make their children their first priority and look at the world with a certain sense of sophistication. Yet while they're betting their future on the New Economy, their financial outlook is decidedly old school. "I think we understand that statistically we're not middle class, and we understand the reality of what an average income is in America," says Neal. "At the same time, we're not people who live extravagant lives, and don't consider ourselves upper class in any way."

The Simons drive old cars, pour money into their retirement and savings accounts and make sure to give part of their income to charity every year. Apart from their home, says Jennifer, they like to spend their money on trips to see their parents in New York and Florida or on dinners out with friends--people generally in the same social and financial sphere. Their one indulgence? An annual adventure vacation. "We try once a year to do something really fun," Neal says. "We went to a wedding in India, and then went trekking in Nepal for 15 days. Last year we went to Ecuador and did some hiking." Next spring they're planning a tour in France. Says Neal: "Our vision is to go from chateau to chateau, biking during the day and spoiling ourselves at night."

Clearly, the Jordans, Simons, Bonneys and Gibbses have given a fair amount of consideration to their increasing wealth. "The first flush of affluence is very thrilling, and suddenly you can afford things that you never could before," says Dinesh D'Souza, the conservative writer whose new book, The Virtue of Prosperity, takes on the question of finding values in an age of great material wealth. The challenge for the newly affluent, D'Souza explains, comes in trying to gauge their priorities amid all the new options. "Ordinary people," he says, "now have access to avenues of personal fulfillment and debauchery previously available only to the elite." The trouble with that, he maintains, "is that our portfolios are up and our values are down."

David Brooks, an editor at the Weekly Standard and author of Bobos in Paradise, describes one faction of the ultra middle class as the bobos--the newly affluent, educated elite with both bourgeois and bohemian sensibilities. This group, says Brooks--though not exclusively in the $150,000-and-up category--has generally found a way to fuse arty, creative values with the traditional mores of professional ambition and success. Brooks puts himself squarely in the bobo category, but his book is nonetheless savagely funny; he points out that while bobos might take elaborate vacations and spend outrageous sums on restaurant-grade kitchens, their ethos leads them toward a "financial code of correctness." That might give them license to spend lavishly on anything that fits under a "need" but to eschew spending money on a "want." A $400 pair of hiking boots--in theory, a utilitarian item--is fine; a $400 pair of showy designer shoes is not. "Affluence is the great goal and the great moral problem," says Brooks. "They're desperate to show they're not corrupted by their money, so they're eager to spend it in ways that prove that they reject materialism and grubby greed." As Brooks sees it, "a bobo can have a big house and be an environmentalist." Hypocrisy, he quips, "would be the ugly word for it."

Concerns about how wealth challenges our values has been a subject for cultural commentators on the other side of the ideological aisle as well. The title of Cornell economist Robert Frank's book Luxury Fever has pretty much entered the lexicon to define Americans' scramble for increasingly sumptuous amenities. (Americans may not be unique: This year, Frank is living in Paris, where he says he has noticed some similar upscale spending patterns.) Harvard lecturer Juliet Schor, who wrote The Overworked American in 1992 and The Overspent American in 1998, says she has watched Americans become even more overworked--and overspent--in the time since those books were published. "In the last few years the boom in luxury consumption has been intense," says Schor. "We're seeing a trickling down to the middle class because there's been such good income growth. That's afforded a fair amount of emulation--the middle class can be more like the rich." To restore some kind of balance, Frank favors a progressive consumption tax: The more you spend, he proposes, the more you would pay. Among other things, Schor urges us to recognize that busy workweeks are taking a toll on our personal lives and that rampant consumerism is harming the environment and miring many of us in debt.

Regardless of their politics, the ultras clearly wrestle with these concerns. But what's striking is that those we spoke with seem less fixated on consumption than the truly wealthy are--the ultra middle class are more in line with (though probably less in debt than) the middle-class cohort whose incomes they've surpassed. They may not all be saving enough to become the millionaires next door. But it's arguable they care less about riches and luxury than about comfort. For a family like the Simons, that means feeling confident about their savings and investments, feeling secure in their home and neighborhood, and enjoying each day as it comes. "Neal and I both think of life as a process and not an end point," says Jennifer Brown Simon.

Out in San Francisco, Maria Murnane, 31, hews to a similar set of principles. Her salary as a public relations executive puts her comfortably within the ultra category, but in the Bay area, Maria says, the legions of stock-option millionaires all have more. While the housing market has spiraled out of reach over the past few years, her cheap rental apartment--she splits the $1,500 total with a roommate--allows her to invest upwards of $3,000 a month and occasionally splurge on big trips or a weekend in the Napa Valley. Her big priority? Actually, soccer is right up there with family, friends and work. She plays in three soccer leagues and often mixes vacations with league play. Next summer that means a tournament in Hawaii; a few years back, it meant a vacation in France and Spain with excursions to World Cup games. "My parents always valued experiencing life over material things, so I guess that's sort of how I am too," she says. "They never spent extravagantly, and they still don't. I want them to be able to enjoy their golden years without worrying about leaving anything to me or my siblings."

DESIGNER BRANDS FOR EVERYONE

If the middle class from the 1940s or 1950s sat down for dinner with the middle class of today, they'd be in for a shock, explains Daniel Horowitz, a cultural historian at Smith College. Says Horowitz: "The first group would be stunned by how the second group is living--by the size of their houses, by their cosmopolitanism, by the role of women, by their [racial and religious] diversity and by the informality in their styles and their dress."

Horowitz's point is a good one, and it punctuates the idea that our sensibilities are influenced more by technological progress and society's changing conventions than by gradations of wealth. In other words, it is hard to believe that today's core middle class would be stunned in any way by the ultra middle class--or even by those making a cool million. Regardless of their income differences, they all would probably own personal computers or cellular phones; they all would probably live in air-conditioned homes; they all would probably have at least two cars; and they all would probably own stock in a Fortune 500 company or shares in a mutual fund. Whether it's a matter of emulation, as Juliet Schor maintains, or of this country's broadening wealth and consumerism, we're in a big boat--a Caribbean cruise liner, actually--together. Over 32 million Americans still live below the poverty line. But for many of the rest of us, the trappings of affluence have become familiar territory indeed.

Still, it isn't a given that the more you have, the more materialistic your aspirations. "People's values just come out in so many different ways," says Michael J. Weiss, author of The Clustering of America and The Clustered World. Weiss' books show how marketers and some demographers "cluster" Americans into groups with kindred sensibilities and tastes. Several of these clusters might suit the ultra middle class--some would be living in city centers (the "urban gold coasters"), some in chic suburbs with the requisite center-hall colonials ("the winners-circle" crowd). But values and spending patterns might diverge dramatically between cluster types. "Money is only one factor in how people look at the world," says Weiss. "There's age, education, family, life cycle, urbanization, ethnicity. All these demographic forces also influence how we look at the consumer process."

Moreover, adds Weiss, any ultra-middle-class group would be subject to our increasingly splintered lifestyles: Families are more fragmented by divorce nowadays; boomers are aging and retiring; this country's middle and upper classes are becoming more ethnically diverse. Above all, says Weiss, we can choose to spend our salaries on many more things--many more different things--than ever before.

James Twitchell, a professor of English at the University of Florida who has written several books about advertising and American consumerism, thinks an awful lot about those choices. He knows exactly what links the Bonneys, the Simons, the Gibbses, the Jordans and Maria Murnane. It's the marketplace--the incredible consumer bonanza of the past few years--and as he sees it, it's a wondrous and democratizing force. But the options aren't limited to the rich or the ultra middle class. The only thing that the truly rich have that the rest of us don't, Twitchell says, is free time and a great deal of money for philanthropy. "The middle class is now buying the same exact things the rich are buying," he explains. "We're not all affluent, but we can certainly behave as if we are--at least for a little while."

Asked if a recession would put an end to the Fendi handbags and steak frites, he says that "the sensible answer is, 'Well, only until the first market crash will this hold up.' But my suspicion is that it will hold up longer. [Our culture] might have profoundly shifted, thanks to the upmarketing of desire and the downmarketing of objects."

Our world, in other words, has become a place where more of us covet elite designer brands than ever before--and more of us can afford to pay for them, especially now that so many offer either accessories or lower-priced lines.

Then it's time to ask Twitchell the million-dollar question: whether this change has made us substantially happier, and whether those who've now moved up the income and wealth ladder are enjoying an increased sense of satisfaction. "Forget it," he says instantly--almost angrily. "It's a red herring. The question is not 'Does this make us happy?' We have to turn it around. The question is, 'Does not having access to this stuff make us unhappy?' And the answer to that is yes."

It's hard to argue with that. In these complicated times, in fact, it makes for a fairly simple equation. Wealth, though it can arrive with some strings attached, means access. And access, whether to the consumer marketplace or the investing marketplace, is something we have more of than ever before.

REPORTER ASSOCIATES: GRACE JIDOUN, PATRICE D. JOHNSON, KATHERINE ZAMIRA JOSEPHS AND STEPHANIE D. SMITH