Lower, Middle, and Upper

In 2023, financial challenges continue to grip the lives of millions of Americans due to persistent economic factors from the previous year, including inflation, rising interest rates, and supply chain disruptions. Understanding the nuances of income distribution in America is crucial, but it’s important to note that the cost of living varies significantly across regions, making it a complex issue to grasp. The U.S. Census Bureau reported a median annual income of $70,784 for Americans in 2021. To delve deeper into this topic, it’s essential to break down this income into lower, middle, and upper class strata.

Defining Income Classes

The Pew Research Center has meticulously analyzed census data to provide valuable insights into class-income breakdowns. According to their April 2022 report, the median income for middle-class households in 2020 was $90,131, a significant increase from $59,934 in 1970 (adjusted for 2020 dollars). To understand where you fall within these classes, Pew’s 2018 data, tailored for three-person households living in metropolitan areas, can serve as a valuable reference point.

• Lower-Income Households: These are households with incomes less than $48,500. People in this class often face financial challenges and may struggle to meet their basic needs.
• Upper-Income Households: These are households with incomes exceeding $145,500. Individuals in this category enjoy financial security and often have more discretionary income for investments and savings.
• Middle-Income Households: Falling within the range between lower and upper income, these households represent the middle-class segment. They typically have more financial stability than lower-income households but less discretionary income than upper-income households.

Tips to Improve Your Financial Standing

Reaching a higher income class requires proactive financial management. Here are three key tips to help you progress up the income ladder:

1. Build a Budget

Creating a comprehensive budget is a fundamental step in understanding your financial situation. While it may seem daunting initially, the benefits are substantial. Start by outlining your short- and long-term goals, including creating an emergency fund or saving for a vacation.

Review your bank statements from the previous month and categorize your expenses into two columns: needs and wants. Needs encompass essential expenses like groceries and rent, while wants include discretionary spending like streaming services and dining out. Make sure to prioritize your goals as needs in the budget.

After categorizing your expenses, compare your total expenses to your monthly net income. Adjust your spending by prioritizing needs over wants. Any surplus from your wants column can be redirected towards your needs and goals.

To further enhance your financial standing, consider opening a high-yield savings account. Your money can increase faster thanks to the competitive interest rates offered by these accounts. Additionally, using apps like Acorns can automate your savings by rounding up your everyday purchases to the nearest dollar and investing the spare change.

2. Deal with Debt

Carrying debt can hinder your financial progress. Consolidating your debts with a lower interest rate through services like Credible can help you pay off what you owe more efficiently and save on interest.

Moreover, consider consulting a financial adviser to create a personalized debt repayment plan and set financial goals. To save time in finding the right adviser, you can use platforms like WiserAdvisor, which match you with vetted financial advisers based on your specific needs.

3. Diversify Your Investments

Diversifying your investment portfolio is essential for long-term financial growth. While it’s tempting to chase after hot stocks, it’s often wiser to maintain a diversified approach to minimize risk.

Commercial real estate has historically been a stable investment choice. First National Realty Partners offers opportunities for accredited investors of all levels to invest in grocery-anchored commercial real estate properties, providing quarterly income. Their team of experts manages the investment process, ensuring a hassle-free experience.

For those interested in alternative assets, fine art and fine wine are emerging options. Masterworks allows you to invest in iconic artworks by buying shares, with investments starting as low as $20. Vinovest, on the other hand, enables you to invest in fine wine shares.

In summary, improving your financial status requires meticulous planning and proactive steps. By building a budget, managing debt effectively, and diversifying your investments, you can progress through the income classes and secure a brighter financial future.

Please note: The information provided in this article is for reference purposes only and should not be considered financial advice. It is essential to conduct thorough research and consider consulting a financial professional before making any financial decisions.