A new survey from the National True Cost of Living Coalition reveals that 65% of Americans who fall into the “middle class” category — those earning more than 200% of the federal poverty level — are facing financial difficulties and don’t see their circumstances improving for the rest of their lives.
Fortunately, mindset has a lot to do with whether you overcome your financial challenges and build a nest egg that you can count on in retirement.
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Here are some options for building wealth when you’re middle class.
Earning passive income doesn’t need to be difficult. You can start this week.
Create a Budget
Whether you’re middle class or not, it’s essential to create a budget so you know where your income is going.
Dayten Rynsburger, chief revenue officer of Niche Capital, said that monitoring your income and expenses helps keep track of your finances, so you can determine the amount of money you have available to put toward savings.
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Build an Emergency Fund
Your emergency fund is a financial safety net, and it’s important to separate this fund from the savings you put aside to build wealth.
“Having anywhere between three to six months’ worth of living expenses saved up in a high-yield savings account can protect against financial crises that have no warning signals before they arrive, thus preventing possible raids into long-term accounts,” Rynsburger explained.
Consistently Invest In the Stock Market
Dennis Shirshikov, economics professor at the City University of New York and head of growth at Summer, said that one of the most reliable ways for middle-class families to build wealth is through consistent, long-term investing in the stock market. He recommended focusing on low-cost index funds or exchange-traded funds (ETFs).
“These investment vehicles offer broad market exposure, diversification and lower fees, which can significantly enhance returns over time,” he explained. “By regularly contributing to these funds — ideally through automatic deposits into retirement accounts like a 401(k) or an IRA — families can take advantage of compound interest, which allows their money to grow exponentially over the years.”
Buy a Home
Shirshikov said that another critical strategy is homeownership.
“Purchasing a home and diligently paying down the mortgage can act as both a forced savings plan and a way to build equity,” he explained. “Over time, as property values appreciate, homeowners can accumulate substantial wealth. Additionally, real estate can serve as a hedge against inflation, providing a stable and appreciating asset that contributes to a family’s net worth.”
Manage Your Debt
Debt management is also essential if you want to build wealth when you’re middle class, according to Shirshikov.
“Prioritizing the reduction of high-interest debt, like credit cards, allows families to avoid the wealth-eroding effects of compound interest working against them,” he said. “By freeing up cash flow from debt payments, families can redirect those funds into savings and investments.”
Create Micro Income Streams
Josh Katz, CPA, founder of Universal Tax Professionals, said that another good way for middle-class families to build wealth is by creating “micro income streams” alongside their primary jobs.
Katz explained that instead of focusing solely on long-term investments, families should consider stacking several smaller, consistent sources of income that require minimal time once they set them up.
“This could include renting out unused spaces (like storage in their garage), investing in niche content creation (like a profitable YouTube channel or blog focused on hyper-specific topics) or even participating in platforms like peer-to-peer lending, where your money is actively working even in small increments,” he suggested.
Leverage Community-Based Investing
“Families can pool resources with trusted neighbors, friends or community members to invest in real estate, co-own small businesses or even support local entrepreneurs in exchange for a share of profits,” Katz said. “This cooperative method spreads the risk and builds financial strength within your immediate circle. For example, co-investing in a rental property with other families allows for shared responsibility and equity growth over time.”
Invest In Alternative Assets
Katz said that middle-class families who want to build wealth should consider diversifying into appreciating alternative assets, like collectibles and rare items. They can even consider fractional ownership in luxury assets, such as high-end watches or nonfungible tokens.
“When researched carefully, these types of investments can offer returns that outpace inflation while adding a creative touch to your portfolio,” he explained.
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This article originally appeared on GOBankingRates.com: 8 Ways To Build Wealth When You’re Middle Class
