By some estimates, the middle class in America is shrinking. A Time Magazine article from 2001 said that the proportion of families in the middle class (defined at the time as having a household income between $15,000 and $49,999) shrank from 65.1% in 1970 down to 58.2%.
The article did say that more families moved up than down. However, it also stated that the number of families with incomes below $15,000 grew as well.
A more recent estimate from Pew Research says that middle-income households had incomes ranging from $48,500 to $145,500 in 2018. The precise middle-class income level can vary widely based on where you live and the size of your household, so check your state to find out whether you are considered middle class.
If so, these tips are for you. Here are experts’ best money tips to help middle-class families thrive.
Automate Bill Pay
Paying your bills automatically is a good idea. And if your income is firmly seated in the middle-class range for your state, you can probably at least cover the basics every month without too much trouble. If so, automating your bill pay is a good idea for two reasons, says Taylor J Kovar, CEO, CFP at The Millionaire Marriage Podcast.
“This not only ensures that your credit report doesn’t take a hit by being late on a bill but it also saves you so much time every single month.” Translation: you’ll save not only time by paying automatically, but potentially money, too, since it will help you avoid late fees.
We’re all busy, which can make it easy to forget to transfer money into our savings accounts. That is, unless we automate that, too.
“This is probably my No. 1 tip for families looking to grow their investment accounts,” says Kovar. “Set it up with your bank to automatically transfer [money] into your investment account the same day you get a paycheck and you’ll instinctively begin to live on the lesser amount while building your wealth!”
Automating savings is simple, too, if you use one of the best savings accounts. They allow you to link your bank account and set up recurring transfers every month. You can do the same with any of the best brokerage accounts, but the key is to make it automatic.
Use Credit Moderately and Consistently
Using a credit card properly can be a challenge, particularly if you don’t see it as something you are required to pay back. Thus, using credit cards is best if you have a healthy relationship with them.
Assuming you have a healthy relationship with credit cards, using them regularly has its benefits — and not just because you can earn fancy rewards. “Don’t shy away from using credit as a good credit score comes from proving over time that you can borrow money and pay it back,” says Richard Barrington, financial analyst for Credit Sesame.
Prefer Savings Over Credit
Credit cards undoubtedly have their benefits, such as the ability to prove to creditors you can borrow money responsibly. But borrowing money has its limits, says Barrington. “If you want to splurge it’s better to dip into savings to fund it rather than running up your credit card balance,” he says. “Even if this means missing your savings goal for month, that will cost less in the long run than using borrowed money you’d have to pay back with interest.”
Of course, this tip assumes you will have to pay interest on your credit card balances. If you can avoid paying interest, then using a credit card isn’t any worse than using your savings. In that sense, it’s important to know your finances and whether you are capable of avoiding credit card interest.
Become a Lifelong Learner
While this tip is a bit less tangible than the others, it can certainly still have its benefits. There is always something new to learn, and you don’t want to wall yourself out from learning new information.
“By reading books and watching videos about potential things you can invest in, you will not only be able to recognize opportunities that come up but also be prepared mentally to make them a success,” Kovar says.
It may not provide an immediate benefit, but continuing to learn is a good idea nevertheless. Much like mental health, personal finance isn’t something you learn about once and then forget about it. Instead, it is something that you continually work to improve, making small adjustments every week, month and year.
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