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Is it still possible to build wealth?
What Does This Mean For The Rest?
The other 95% of the U.S. population is earning less than $240k, but in actuality, far less: The average American worker makes closer to $51,480, based on 2021 U.S. Bureau of Labor Statistics data, and about 30.7% of households earned over $100,000 in 2020, according to Policy Advice, an insurance insights company.
If you have two people earning $51,480, then you’re pulling in 6 figures, which can significantly increase your financial agility, but if your expenses are high and you’re living too fabulous a lifestyle for what you can afford, pulling two figures doesn’t mean jack sh*t.
You Don’t Need To Earn 6 Figures To Be Wealthy, But It Can Make It Easier.
Source: The Motley FoolAs you can visualize from this chart, if you have 35 years to invest, you can save your first million off of $483.60/month. However, this number is not possible for many due to other expenses (e.g., childcare, food, clothing, housing, taxes, transportation, and debt) they’re juggling.
If you continue increasing the number of years available to invest, that $483.60 figure drops. But who is likely to have more than 40 years to invest? Not many.
According to The Motley Fool, most people start taking investing seriously in their 30s and 40s.
If You’re Not Going To Increase Your Income, Decrease Your Expenses.
Whether we want to believe this is entirely up to us, but we all have a choice.
We can choose to increase our incomes, or we can choose to maintain the same income; this includes people from different socioeconomic statuses that have everything stacked against them (e.g., low-income minority households).
If you don’t know how to increase your income, can’t seem to find opportunities to increase your income, or don’t want to increase your income, there is only one option left if you want to build wealth:
Decrease your expenses – significantly.
For some people, their expenses are already so low there is nothing left to cut. On the other side, some still have more outlays to eliminate.
The Millionaire Next Door…
According to Thomas J. Stanley, the millionaire next door lives in a modest home or apartment, drives an economical car, and invests their money in the stock market long-term.
According to “Why The Rich, Keep Getting Richer” by Robert T. Kiyosaki, this millionaire-next-door lifestyle is now a pipe dream. Investing all of your money in the stock market could be a lose-lose situation. You need diversification (e.g., disrupting tech stocks, real estate, and private equity).
If you’re going to stay in the low-income bracket:
Educate yourself on finance (and you’ll probably find yourself entering a new income bracket by default).
Decrease your expenses significantly.
Diversify your investments. It doesn’t take much to save that first million if you have 35+ years, but you’ll need more aggressive investment options, a higher income, or little-to-no expenses if you have less time.
This content is for informational purposes only — not professional advice. Consult a qualified professional before making any major decisions.