Why do so many people think they are middle class, even 1 per centers, even poor people? Why do both parties claim to appeal to the (vast) Middle Class, as opposed to any other class. One could divide the world into three classes (lower, middle, upper) of equal sizes. Americans divide the world into one class.
People typically buy into the most expensive neighborhood they can afford, as this will have better services, schools, etc.. Thus, they are in neighborhoods where they have about median income. Half the people in their neighborhood have more money, half have less money, the within-neighborhood disparity is not too wide. They more or less correctly perceive themselves as median for their neighborhood, half the people they know are wealthier. Every day they are in the middle, struggling to keep us with the Joneses.
Most people do not take the broader perspective of considering the wealth of the neighborhoods they cannot afford, nor the poverty of neighborhoods they avoid. If they do think about, they discount that significantly, compared with the people they see on a daily basis. This is a proximity/perception bias. They assume their perceptions are median perceptions.
Keeping up with the Joneses is a struggle (even if you are Mitt Romney and have to keep up with the Huntsmans, for all but one person on the planet, someone is wealthier). The number of things one could buy exceeds available funds. Capitalism is excellent at creating unfulfilled desire, and everyone is a relativist in economics and happiness. And once you have $75,000 year, money doesn't make you happier.