Over the past year, people in the middle class have made some significant changes to the way they manage their money. Some common money trends include an increased focus on taking on side gigs and building passive income to secure their financial situation. Others include purchasing low-risk, sustainable, or even alternative investments to diversify their portfolio and build their wealth.
Whether you’re considered middle class and you want to know what your peers are doing with their money, or you’re still building up to that point, here are some of the biggest money-related changes the middle class made in 2023 — according to financial experts.
Taking on Side Gigs
The side gig economy is strong, especially in recent years. Many people in the middle class have also gotten on board with this trend and started relying on side hustles to boost their regular income.
“One trend I’ve seen is the shift towards gig and side jobs to supplement income,” said Jeff Rose, CFP, founder of Good Financial Cents. “With the rise of platforms like Uber, Etsy, and freelance job sites, middle-class folks are finding creative ways to make extra cash outside their 9-to-5 jobs.”
Building More Passive Income
Building passive income streams is another way the middle class — as well as others — have started supplementing their regular income. This includes investing in dividend-yielding assets, starting a business, and more.
“People are getting into things like dividend stocks, rental properties, or even creating online content that can earn money over time without active work every day,” said Rose.
Many people in the middle class have also started hoarding their money more. This isn’t necessarily a brand new habit, though it could be more prominent given the unpredictability of the economy in recent years. It could also be due to the “work hard” mentality many people in the middle class have.
“I grew up lower-middle class and my clients are all middle class. The one big trend I see in my middle class clients is hoarding their money,” said Greg Vojtanek, CFP, owner of Fade In Financial. “It’s not quite stuff-it-under-the-mattress level, but it’s pretty close. Much of their portfolio will be in CDs, High Yield Savings, and Treasury Bills…The thought of their hard-earned money losing value is almost too much to bear so they seek the safety of CDs and Treasury bills.”
Eliminating Unnecessary Expenses
Many middle class individuals have started focusing more on reducing their expenses so as to free up money for other things. This is another possible result of the economic instability and higher interest rates of late.
“With the cost of living going up, many are trimming the fat where they can — dining out less, cutting the cable subscription, or switching to more cost-effective brands and stores,” said Rose.
Focusing on Emergency Funds
The concept of having an emergency fund isn’t a new one, but people in the middle class have started prioritizing having one more than ever.
“Nearly 70% of middle-class clients have made significant efforts to bolster their emergency savings, aiming to have at least 6-9 months’ worth of living expenses saved up,” said Nikita, founder and CEO of Aiscreen. “This increased emphasis on financial security is a direct response to the economic uncertainties brought about by the pandemic.”
Focusing on Sustainable Investments
Recently, more people have pivoted to more sustainable investments — sometimes called ethical or social investments. This is essentially an investment strategy that focuses on the investment’s impact on the environment as well as the returns.
“Many [people] are aligning their investment choices with their values, seeking opportunities that not only yield returns but also contribute positively to society and the environment,” said Casey Jones, founder and head of finance at CJ&CO.
Investing in Fractional Real Estate
Investing in fractional real estate is another popular trend that entails investing in an asset alongside several other people to mitigate risk while seeing financial returns.
“Some middle-class individuals are exploring fractional ownership of real estate properties through platforms like RealT or Slice. This allows them to invest in high-value properties without the burden of a full mortgage,” said John Browning, founder of Guardian Rock Wealth.
“It’s a unique way to diversify their investment portfolio into real estate,” continued Browning. “This trend is driven by a desire for real estate investment, which was traditionally less accessible to the middle class, and it offers a level of diversification previously reserved for the wealthy.”
Using Online Financial Management Tools
Digital financial management tools have been around for a while now, but they don’t seem to be losing popularity. In fact, some middle class individuals have started using them more than before, especially compared to traditional money management methods.
“There’s also been a noticeable pivot to online financial management tools. With apps like Robinhood and Acorns, middle-class individuals are investing small amounts regularly,” said Rose. “Budgeting apps, online investment platforms, and digital banks are becoming the go-to over traditional banking and financial services.”
Switching to Alternative Healthcare Financing
Healthcare is expensive, and rising costs don’t help matters. As people in the middle class haven’t quite achieved true wealth yet, this is something that impacts them and has helped shape their money habits. That’s why many individuals have started using alternative healthcare financing solutions to combat costs.
“Amid rising healthcare costs, some middle-class families are turning to healthcare cost-sharing ministries, like Medi-Share or Samaritan Ministries, instead of traditional health insurance,” said Browning. “These programs involve members pooling money to cover medical expenses and have gained popularity for their lower monthly costs.”
Increasing Charitable Giving
It’s not all about saving money or reducing risk, though. Some middle class individuals have started adjusting their money habits to include charitable giving in the form of tax-efficient donor-advised funds (DAFs).
“These funds allow donors to contribute appreciated assets, like stocks, and receive tax benefits, while retaining flexibility in deciding when and where to distribute the funds to their chosen charitable causes,” said Browning. “The middle class is becoming more strategic in their charitable giving to make the most of their resources, both for philanthropic purposes and tax efficiency.”
Diversifying With Alternative Investments
Alternative investments, like cryptocurrency, have also seen a rise in popularity amidst the middle class. A big reason for this is that they can help hedge against rising inflation rates.
“Middle-class investors are increasingly considering cryptocurrencies like Bitcoin as a hedge against inflation,” said Browning. “They view digital assets as a store of value that can protect their wealth from eroding due to rising consumer Prices. This trend is driven by concerns about the devaluation of fiat currencies and a desire to explore alternative assets.”
Purchasing Secondhand or Used Goods
In another effort to cut costs and save money, some people in the middle class have adjusted their spending habits to focus more on purchasing used goods rather than new ones.
“Approximately 30-40% of my clients have shifted their shopping preferences, opting for secondhand or sustainable products, particularly in fashion and electronics,” said Nikita. “This move aligns with their commitment to reducing environmental impact.”
Relying More on 529 Plans
Another newer middle class money trend is the increased emphasis on investing in college savings plans for their kids — like the 529 plan.
“Middle-class parents are expanding the use of 529 college savings plans to include K-12 education,” said Browning. “This lesser-known option allows them to use these funds for private school tuition, offering more flexibility in financing their children’s education.”
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