How To Make It to the Middle Class on a Single Income
Making it to the middle class is a dream for many people, but it can seem especially challenging if you rely on a single income. Still, that shouldn’t deter you from making it your goal.
Research shows that among Middle Americans — households with income between $45,000 and $145,000 — only 43% of Millennials and 50% of Boomers file jointly. This is good news for those wishing to climb the socioeconomic ladder.
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“One of the biggest obstacles is living on a single income, especially if you have dependents such as children or elderly parents,” said Linda Chavez, founder and CEO of Seniors Life Insurance Finder. But she says the first step is to understand your situation. “As someone who has grown up in poverty and successfully made it to the middle class, I understand the challenges and struggles that come with trying to improve one’s financial situation,” she explained.
Here are expert-backed tips for reaching this important milestone.
Create a Budget
When living on a single income, it’s important to allocate your funds wisely and cut out unnecessary expenses. The key is to be strategic and disciplined about your finances, said Jon Morgan, business expert and CEO of Venture Smarter. “First off, create a budget and stick to it. Know exactly where your money is going each month.” He said this helps you identify areas where you can cut back and save.
Chavez noted that there are many tools available to help with creating and managing a budget. Some popular options include budgeting apps, like Mint or You Need a Budget, or using spreadsheets to track your income and expenses. What matters is that you find a method that works for you.
Chavez said that when living on a single income, it’s important to prioritize your expenses based on what is essential versus what is nice to have. This may mean cutting out luxury items or finding more affordable options for necessities.
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Set Up an Emergency Fund
Experts agree that you should aim to build an emergency fund that can cover at least three to six months of living expenses. “This provides a financial safety net in case of unexpected expenses or loss of income,” said Sherman Standberry, licensed CPA and managing partner at My CPA Coach.
Make sure to cut down on unnecessary spending, Standberry explained. “Identify areas where you can save money. This could be anything from dining out less frequently to cutting cable or other subscriptions you rarely use.”
Invest in Your Skills
“If you are living on a single income and wanting to make it to the middle class, education is key,” said Paige Robinson, real estate investor and owner of House Buyers. “If you don’t already have a degree, consider taking courses at a local college or university. Obtaining a degree or certification can open the door to higher-paying jobs, giving you more financial stability.”
Other experts agree. “Look for affordable education or training programs that can boost your earning potential,” Morgan highlighted. “It could be a short course or certification related to your field or something entirely new that’s in demand.”
Jeff Mains, finance expert at Champion Leadership Group LLC, said investing in education, whether through formal schooling or acquiring specialized skills, significantly enhances earning potential. “Continuous learning broadens opportunities for higher-paying jobs or career advancements.”
Take Advantage of Financial Products
According to Robinson, looking into different types of savings accounts, such as a Roth IRA, can help you build your wealth over time. “Consider getting a credit card to help you build your credit score,” she added, “so you can qualify for better rates when it comes time to buy a car or a house.”
Look Into Real Estate
Owning a home is a great way to build wealth over time, said Robinson. “Consider investing in rental properties or looking into real estate crowdfunding opportunities,” she noted. “Making it to the middle class from a single-income situation is possible. With a little bit of hard work and dedication, you can make your dream a reality.”
Push for Promotion
To make it in the middle class on a single income, you may need to earn a higher income, observed Melanie Musson, personal finance expert with Clearsurance. “Always apply for a promotion,” she urged. “You might not get it, but every time you apply and go through the process of interviewing for a position, you can learn something to increase your chances the next time.”
Take Advantage of Tax Credits and Deductions
Depending on your situation, Standberry said you may qualify for certain tax credits and deductions. “This could significantly reduce your tax liability and increase your take-home income.”
Whether you’re saving for a home, education or retirement, the additional funds from tax savings can be directed toward achieving your financial goals faster. This can be crucial for building wealth and securing a comfortable lifestyle.
Invest Wisely
Investing can be a powerful tool for wealth generation, said Standberry.
“Start small if necessary, but the key is to start,” he said. “Consider low-cost index funds or ETFs. Remember, investing always comes with risks, so do your research or consult with a financial advisor.”
Focus on Retirement Savings
Standberry recommends maximizing contributions to your retirement accounts like a 401(k) or IRA. “If your employer offers a match, ensure you’re contributing enough to get the full match — it’s essentially free money.”
Knowing that you have a well-funded retirement savings account can provide peace of mind when you rely on only one income. It reduces financial stress and allows you to focus on other aspects of your life, knowing that your future is financially secure.
Consult a Financial Advisor
“A financial advisor can provide personalized advice based on your specific circumstances,” said Stanberry. “They can help you plan for the future, make smart investment decisions and navigate complex financial matters.”
They can also assist you in optimizing your career and income potential. Financial advisors can offer insights into career development, negotiating salary increases or exploring opportunities for additional income streams, ultimately helping you enhance your overall financial situation.
Networking Is a Game-Changer
Attend local events, join online communities and connect with people in your industry, Morgan advised. “You never know when an opportunity might come knocking.”
“Lastly, be patient and persistent,” he said. “Building a better financial future takes time, so celebrate small wins along the way. Stay focused on your goals, and remember, it’s okay to ask for advice or help when you need it.”
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This article originally appeared on GOBankingRates.com: How To Make It to the Middle Class on a Single Income
