Barack and Michelle are very cautious with their newfound wealth.

Barack Obama. Click image to expand.
Barack Obama

It’s not as if the Obamas are some modern-day version of the Clampetts, but compared with the competition, they’re at best nouveau riche. As recently as 2004, the Obamas’ adjusted gross income was $207,647, according to their federal tax returns. That’s much higher than the national median household income of $48,201, but for a family of four living in high-cost Chicago, $200K isn’t exactly rolling in it.

Which makes all the hubbub about Barack Obama’s elitism seem pretty hollow. “The irony is,” Obama said last week, “I think it is fair to say that both Michelle and I grew up in much less privileged circumstances than either of my two potential opponents.” Indeed, if Obama is the nominee and wins in November, he would have one of the most modest backgrounds of any president in recent memory; he has noted, for example, that his mother “had to go on food stamps at one point.” Both Bushes came from family wealth, and Bill Clinton married Hillary Rodham, who would ultimately rake in more than $200K annually (in 1992 in Arkansas) while she was a partner at the Rose Law Firm. Ronald Reagan made money in movies before becoming president; we’d probably have to go back to submariner/peanut farmer Jimmy Carter or career soldier/college president Dwight Eisenhower to find another elected president whose financial picture was as comparatively humble.

But the increase in the Obamas’ wealth has been swift and strong. Their glory days started in 2005, when the couple earned $1.7 million. In 2006, they earned $983,000. Last year, they pulled down an impressive $4.1 million. And no, Tony Rezko had nothing to do with this: Obama’s newfound wealth comes from the success of his two books: Dreams From My Father and The Audacity of Hope have sold more than 2.25 million copies since publication, according to Bookscan. Obama has not donated the proceeds from his books to charity, as John McCain has, but then Obama did not marry an heiress with $40 million in assets.

How do the Obamas invest their money? Very, very safely—like a couple who wants no risk of ever being middle-class again. There are no hedge funds, trusts, or other fancy alternative investments to speak of—just, for the most part, a collection of run-of-the-mill mutual funds. Unlike the average American, however, Sen. Obama had the wherewithal to save the maximum allowable amount ($45,000) in his retirement plan last year. The Obamas also had two sizable joint checking accounts at JPMorgan Chase ($100,001 to $250,000) and Northern Trust ($50,001 to $100,000) at year-end 2006, according to his Senate financial disclosure report (PDF). Perhaps they wanted to have enough cash readily available while they’re on the campaign trail?

For a couple in their mid-40s, the Obamas’ investment holdings are arguably too conservative. One of the single largest chunks of their money (between $150,000 and $350,000 as of year-end 2006) was invested in the Vanguard Wellington Fund, which has about 65 percent in stocks, 33 percent in bonds, and 2 percent in cash. Obama reportedly sold this fund after learning it was invested in Schlumberger Ltd., a French oil-field-services company that does business in Sudan. He put that $180,000 in proceeds into the Vanguard FTSE Social Index Fund, a socially responsible fund that invests in large- and midcap stocks. The Obamas had another $100,000 to $250,000 in Vanguard’s Wellesley Fund, which allocates 60 percent of its money in high-quality bonds. Considering the Obamas have more than 20 years to go before retirement, many financial advisers would tell them to be more aggressive and increase their stock exposure to 80 percent of their portfolio.

The rest of their money—as much as $75,000—is invested across five other mutual funds. This appears to be part of Michelle Obama’s 403(b) retirement plan from her tenure as an administrator at the University of Chicago Hospitals, where she earned around $275,000 over the past two years. Michelle Obama also has three batches of unexercised options to purchase shares of Tree House Foods—a Westchester, Ill.-based food supplier that counts Wal-Mart as a big customer—on whose board she served for two years (a paid position that netted her roughly $50,000 a year). She resigned last May after her husband criticized some of Wal-Mart’s policies. The options’ value is tenuous; currently, shares of Tree House are trading below the options’ strike price of $29.65. Sen. Obama also listed his State of Illinois General Assembly Pension Plan, which is valued somewhere between $50,001 and $100,000.

In 2005 the Obamas did make some seemingly speculative—and ultimately controversial—stock bets (PDF) that made headlines last year. They bought shares of AVI Biopharma and SkyTerra Communications (for a reported total up to $100,000) in February of 2005, before selling later that fall. The sales resulted in a net loss of $13,000. The purchases caused quite a hubbub after the media learned that the two companies were backed by some of Obama’s top donors. Obama has said his UBS broker bought the shares without his knowledge in a quasi-blind trust.

The Obamas have significantly increased their charitable contributions since declaring his candidacy. Last year, they gave $240,370, or about 5 percent of their income, to charity, with their largest contributions going to the United Negro College Fund ($50,000); CARE, the global poverty charity ($35,000); and Trinity United Church of Christ ($26,270), home of the Obamas’ infamous former pastor the Rev. Jeremiah Wright Jr. Contrast that amount with the couple’s charitable giving in 2004, when only 1.2 percent of their income went to worthy causes.

Compared with John McCain and his $270,000 in expenditures on household help, the Obamas lead a much more middle-class lifestyle. Between 2000 and 2007, they spent anywhere between $6,000 and $24,000 annually on household expenses, which appears to include child care for their two daughters, Malia, 9, and Natasha, 6, according to their tax returns. That said, their house is pretty plush: The Obamas purchased their $1.65 million Chicago home three years ago and took out a mortgage of $1.32 million through Northern Trust.

It’s unclear whether the Obamas have invested in a 529 college-savings plan for the girls. (Contributions to their home state’s 529 would show up on their Illinois state return, which wasn’t made public) If they haven’t, they probably should: The Illinois Bright Start College Savings Program recently made it onto Morningstar’s list of best college-savings plans. By investing in Illinois’ plan, those funds would grow tax-deferred, and they’d receive a state income-tax deduction.

Obama is familiar with the costs of higher education—he paid off his loans only recently (reportedly after his book money came in). The first bill he introduced in the U.S. Senate would have increased the Pell Grant maximum (that’s college money you don’t have to pay back). If elected, he said he would eliminate the Federal Family Education Loan program, in which private lenders provide loans that are guaranteed by the government to borrowers. He said this program is more costly than the federal government’s direct-loan program, in which students borrow from the government through their schools, eliminating private lending middlemen. He would direct the savings toward student aid. You can argue about whether that’s good policy, but it’s a treat to have a presidential candidate discussing student aid with recent, firsthand knowledge of the subject.