so it looks like 55% of Americans believe that they are in the middle class but here's the truth according to Federal Reserve data more than half of these people are wrong about where they stand so today I'm going to break down exactly which income level puts you into each class from lower to upper and more importantly these specific strategies that can help you level up because knowing your true starting point is going to be your first step to building wealth what's up everybody i'm Rashidita and I'm your guide to smart money moves i began my wealth buildinging journey at the age of 17 i've grown that portfolio to seven figures and I did that all on a police officer salary so I'm on a mission to show you how you can do it too so let's go today we're going to get crystal clear on something that most people get completely wrong exactly where you stand financially in America and what you need to do to level up i thought I knew exactly where I stood on the scale based on my lifestyle and the people around me but the data told me a completely different story and that little reality check changed everything about how I approached building wealth and here is why this matters so much when you know exactly where you stand you can use the right strategies for your situation not just this general advice for people in a completely different financial situation from you so the Federal Reserve actually breaks down the US population into five different income brackets from the bottom 20% to the top 20% and so today I'm going to show you exactly where you fall and the specific moves you need to make based on your starting point so let's get into it starting with the lower income class but before we do please take a second see if you have subscribed to the channel and if you have not please consider hitting that subscribe button hit the bell notification so you don't have to miss out on any of my future content i come here every week with my tips and strategies to help you turn your income into real wealth all right so let's get to it you are in the lower income class if your household brings in less than $35,000 per year and for single individuals that threshold drops to about $24,000 and so let's take a quick look at what life typically looks like in this bracket as expensive as everything is today the reality is that you have very little financial cushion if any at all most people here are going to be living very much hand-to-mouth or even worse an unexpected $500 expense could mean serious financial hardship for you and research shows that this describes nearly 40% of Americans that can't come up with that money in an emergency now typically people in this bracket are going to be in service industries like retail personal care or jobs that offer little to no benefits and almost no job security but I want to be crystal clear about something it does not define your worth your intelligence or your future potential but what it does mean is that you need a specific strategy designed for your situation not just general advice that you tend to hear about cutting out lattes and investing in your 401k because if you're in this boat you are probably not spending money on $7 lattes in the first place and your employer likely doesn't even offer 401k so what good is that advice to you so let's look at what you can do now here are the three most powerful moves that you can make if you're in this income bracket first you need to build an emergency fund even if it is small and I know this probably sounds nearly impossible if every dollar is spoken for but even if you start with just $5 or $10 a week that is skipping just one fast food meal you can build $500 in one year and that small cushion could mean the difference between handling a minor emergency and spiraling into highinterest debt second you want to aggressively negotiate every single bill that you have most people assume that their bills are these fixed costs but that is not necessarily true a recent study shows that 90% of people who ask to get their medical bills reduced were granted that request so things like your phone bill your auto insurance your credit card interest rates all of these things are negotiable so what you want to do is call these companies and simply ask them hey I am trying to lower my monthly expenses what options do you have available for somebody like me now the third thing you may want to do and this is crucial is to truly focus on skill development that leads to a higher income because when you're in this tier there's only so much money that you can save or cut back on you don't have a lot to begin with so you want to focus on increasing your income and so when I say increase your skill set let me be clear that does not mean to take on some massive student loan debt and one of my friends Gemma her story demonstrates this perfectly back in the day she was bringing in just $750 every two weeks as a cashier now she did try college but she could not balance the work and the class load and so what she did instead she entered an electrician apprentice program all right and so today she is making 70K plus benefits and so I share that story because look college is not going to be for everybody even though that's what you've been told and as a country I feel like we've swung way too far away from the trade and industrial training that we used to offer when in reality many of these careers pay well they have high demand and they have low barriers to entry now moving up you are in the lower middle class if your household brings in between $35 and $60,000 annually and for individuals that's going to be between $24,000 and $40,000 annually now the key difference at this level is that you're going to have a little bit more breathing room now at this level you are very likely to still be living paycheck to paycheck but you can occasionally afford some small luxuries like maybe a weekend getaway once a year or dinner out once or twice a month now jobs in this bracket typically offer more stability so it may include positions like administrative jobs or retail management or something like entry- level roles into fields that require some specialized training now for a lot of people out there this is where progress can really stall out without the right strategies and so here's something that you can focus on if you want to break through to that next level first thing you want to do is to implement a realistic budget system that you can stick to without much effort i would recommend starting with the 50 3020 rule okay if you don't know what that is 50% of your paycheck is going to go to your needs so things like housing transportation food 30% is going to go to your wants so that's going to be things like going to hang out with your friends every once in a while your entertainment subscriptions things of that nature and 20% is going to be set aside for paying off any consumer debt that you have or putting it into a savings account the key here is going to be establishing that habit and then you can gradually increase your savings rate over time now the second thing you want to do is to shift your mindset from price tag shopping to cost per use thinking and so let me explain what I mean a $20 pair of shoes that fall apart in two or three months is actually costing you $10 per month now if you went out and bought a $100 pair of shoes that will last you for 2 years that is only going to cost you $4 per month so the $100 pair of shoes is actually less stringent on your budget than the $20 pair of shoes that you thought you were saving money on don't want to buy cheap crap that's going to continue to tear up quickly go ahead and invest in a quality pair of whatever you're buying and hopefully it lasts you a lot longer it's going to save you money in the long run and this same principle is going to apply to clothing appliances to vehicles pretty much everything that you consume now the third thing you're going to want to do is to automate your finances to eliminate any decision fatigue there is a lot of research out there nowadays that shows we make worse financial decisions when we are mentally tired which is exactly the state we're in when that paycheck arrives so what I recommend is that you set up automatic transfers to your savings and to your bill payments on payday before you can have a chance to go out and spend that money elsewhere and the fourth thing you really want to focus on doing is improve your credit score because a better credit score is going to drastically reduce the borrowing costs that you pay over time and if you have no idea where your credit stands you can check your score for free at annualcreditreport.com you can actually go and pull your credit report two times every year free of charge that way you know exactly what your score is and you know where you stand this also is going to give you an opportunity to see if there's anything inaccurate on your report removing any inaccuracies is going to boost your credit score so take the time to do this twice a year and so for example a better score could save you $50 $100,000 in interest on a mortgage alone this is not just a number on a screen guys this is real money that you will need for your future self and so it is very very important now moving on according to the Federal Reserve you are in the middle class if your household income falls between 60 and $92,000 per year and for individuals that's roughly $40,000 to $61,000 per year so if you're in there you are squarely in the middle class and so at this level you should definitely be experiencing some sort of financial stability you will likely have some savings at this point and you probably have some investments even if it's through your workplace retirement plan you may own a modest home you have a reliable car and you're likely to be taking vacations at this point on a regular basis but still very budget conscious now at this level you're not constantly worried about money but if you get any unexpected expenses it can really set you back now professionally people in this bracket often hold some sort of mid-level positions jobs that require specialized skills or education so it's going to be professions like teachers nurses skilled trades midlevel managers or anything along those lines now here are the three most important moves that you can make at this level now the first thing you want to do is maximize your retirement accounts at a minimum you should be contributing enough to get the full employer match because that is literally free money now ideally you should be saving 15 to 20% of your income toward retirement at this stage and if you're in this bracket and that feels impossible right now start with whatever you can and increase it by 1% every 6 months until you reach that goal and why do I say that is because according to Vanguard the average 401k balance for Americans nearing retirement is only about $255,000 and that is nowhere near enough for most people to maintain their lifestyle you are going to take a substantial lifestyle reduction if you only have $255,000 to last you for the rest of your life and so don't let that be you in a few decades if you are watching this video now you know what step you need to take to secure your financial future now the second thing you want to do is to start investing beyond your retirement accounts and the data on this is crystal clear households that build wealth invest significantly more in stocks real estate and business opportunities now if you are completely new to investing outside of the workplace you need to start with lowcost index funds through platforms like Fidelity Vanguard or Charles Schwab because they have very low fees associated with their investments even 250 bucks a month invested consistently can grow to over $330,000 over a 25 year span and that's just based on average market returns now the third thing that you want to do at this stage and this is often overlooked is you want to intentionally build your financial and professional network now a lot of people don't know this but your income tends to reflect the five people that you spend the most time with so the people that you are surrounding yourself with actually has a direct impact on your potential income and wealth buildinging capabilities and this isn't about abandoning relationships this is a strategic move that is going to help you expand your circle to include people who can help you grow and so by doing this what you're actually doing is connecting with people who've already walked the path that you're going down and so these are people that are naturally going to be able to share their advice they can become mentors and they can open doors for you and so if you have no idea how to begin this you can do things like join professional organizations industry meetups or even online communities can be invaluable resources for building these connections don't sleep on this guys i'm telling you because people with wealth they operate in the same way and there is no doubt about that all right now moving on up the ladder we are looking at the upper middle class and this is going to include households that earn between 92,000 and [Music] $153,000 per year or if you're an individual that earns between 61,000 and $12,000 per year you're considered upper middle class life at this level typically brings substantial financial security you likely own a home in a good neighborhood you drive newer vehicles and you typically are going to be taking regular vacations at this phase you should be able to handle most financial emergencies without significant stress and career-wise people in this bracket are often established professionals okay so mid to senior level managers successful small business owners or specialized experts in their field and at this level your focus is naturally going to shift from basic financial stability because you pretty much mastered that to true wealth building now here are three strategies for the upper middle class first you want to optimize for tax efficiency okay because at this income level taxes become one of your largest expenses now at this stage you want to be focused on maxing out all tax advantaged accounts okay so that's going to be your 401k your IRA your HSA if you qualify and if you have children you definitely want to be looking at a 529 plan that is going to give you tax benefits for saving for the college education and so let's put this into perspective with an example if you're contributing the max to your 401k which is $23,000 in 2024 you could be saving over $5,000 in taxes okay each year to help you with your wealth building and so that is like giving yourself an immediate 20 to 30% return on your investment before it even hits the market these are the things that you're going to have to pay attention to if you are serious about building wealth for your future second you need to be thinking about diversifying your income streams the data on this is very clear households that move from upper middle to upper class typically are going to have between three to five income streams and so this might include things like a primary career an investment income real estate properties side businesses or consulting work and so really this isn't just about making more money necessarily this is actually helping you to create financial stability that isn't dependent on a single employer or industry okay this is going to give you broad diversification in your income now the third thing at this level is to try to focus on building your network at even higher levels because at this income level your network is actually going to be one of your most valuable assets so you are definitely going to be joining industry organizations you're going to consider executive coaching and you're going to be building relationships with those who are already where you want to be finding mentors who have already successfully navigated similar paths can provide invaluable guidance on overcoming some of the barriers that often exist at the higher income levels now finally let's take a look at the upper class all right this is where everyone hopefully aspires to be so let's take a look at how they're living now upper income households are earning over $170,000 annually with the top 5% earning around $250,000 to start okay now your top 1% of earners are going to be earning about $700,000 or more per year and if you're in the top 1% I doubt you're listening to this video all right so let's focus on the 250 club okay now this level of financial freedom is really going to become a reality for you as long as you are playing your cards right you're financially responsible and you're not living beyond your means money decisions should be based more on preference rather than necessity at this stage you very likely own substantial real estate you have significant investment portfolios and you are enjoying premium experiences when it comes to travel dining and entertainment now career-wise those in this bracket are typically senior executives they're successful business owners at this point or they're highlevel professionals with very very specialized skills like being a physician or an attorney or people with very substantial investment income now at this level your financial focus should be shifting from building to more optimizing and preserving wealth while definitely thinking about creating a legacy here okay because you're going to be passing wealth down to the next generation and so here are three key strategies for those in the upper class first you're going to create a comprehensive wealth management plan when you're at this level you should be seeking the advice of a professional because your financial life is pretty complex at this point okay and now typically professional guidance at this level is going to help you figure out things like tax optimization very important estate planning strategic philanthropy at this point you're going to have more advanced investment strategies because things are going to get a lot more complex when you have substantial wealth and finding an advisor who understands your specific background your goals is going to be particularly valuable okay and the single most important thing when hiring a financial advisor is to make sure that they are not charging you a percentage of your portfolio every year you need to be looking for someone that is feebased which means they take a flat fee or an hourly fee based on their worth and they are not charging you one or 2% of your overall wealth every year year in year out because while that percentage may seem small over a long period of time they are going to end up siphoning off 25 to 30% of your wealth and that is way too much money to be forking over to any advisor period now the second thing you want to be doing in this position is to be focusing on generational wealth transfer this includes not just estate planning but intentional financial education for the next generation because if you did not know wealth is typically wiped completely out within three generations so financial education should be a crucial part of generational wealth survival because if Johnny inherits $2 million and he has no idea about financial literacy financial education how to build or preserve wealth he will blow the money there is no doubt about it so you want to avoid that you've worked too hard and you don't want your heirs to just go below it before they even pass away and the third thing you may want to consider doing if you have attained this amount of wealth is to consider impact investing and that's going to be just investing with something that's really really aligned with your values because at this income level your investment decisions can actually drive meaningful change in communities and so this might include things like investing in historically underserved communities or supporting diverse entrepreneurs or funding educational opportunities the sky is the limit so now that you know this where do you stand and more importantly what should you do next first you need to be honest with yourself about your current income bracket because remember this is not about your worth as a person this is all about having clarity on your starting point so that you can implement the right strategies second you're going to focus on those specific moves for your income level so remember for the lower income bracket build your emergency fund negotiate your bills and focus on skill development for the lower middle class you're going to be optimizing your budget you're going to be shifting to cost per use thinking and you're going to automate your finances and for the middle class you are going to be focused on maximizing those retirement accounts begin broader investing and building your network for the upper middle class remember you're going to be focused on tax efficiency diversifying your income streams and strategic networking and for the upper class again you're going to be creating a comprehensive wealth plan you're going to be focused on that generational wealth transfer and you're going to consider impact investing and remember that these brackets are just checkpoints they are not limitations on you now these strategies that I've shared today are specifically designed to help you move from one level to the next now the reality is that in America income mobility is more challenging than most people actually realize but understanding exactly where you are and the specific strategies that work at your level is the first step to beating the odds so there you have it folks now if you are still here at this point in the video please do me a favor drop a ladder emoji in the comment section and let me know which strategy that you plan to implement first and if you found this breakdown helpful please share this video with three friends you never know who you can help with information like this until next time remember guys that your current income it is just your starting point it is not your destination thank you guys so much for being here i will see you guys in the next one again I'm Rashida and I'm out