3 Financial Risks Worth Taking If You Want To Move to the Upper Middle Class
While the American middle class continues to dwindle, CBS News reported that a subset of that income bracket is currently the largest income group in the country: the upper middle class. Currently, 31% of American households fall within the $150,000 to $200,000 average income range that defines the upper middle class. That income level is a realistic money goal for many, but are the risks it requires worth taking?
Spending Money To Make Money
“Being upper middle class involves taking a financial risk that most people consider unreasonably extreme,” Ali Zane, CEO of IMAX Credit Repair Firm, told MoneyLion. “It is investing in education, training and skills certification. It is a risk that leaves the individual with little to no financial resources for some time.”
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For example, a formal return to education and vocational training could cost several thousand dollars, and could also require unpaid leave.
“In the last two decades in the financial sector, I have noticed that people achieving upper middle class status have, nearly unanimously, taken educational gambles that their peers have, in almost all cases, completely avoided,” said Zane.
Then Moving From Spending to Saving
Andrew Izyumov, CEO of 8Figures, said the first risk involved on the ladder to the upper middle class involves “shifting from a saving mindset to an investing mindset. The most significant calculated risk is moving beyond cash and allocating part of your capital [to] growth-oriented asset classes such as diversified equities, instead of leaving it idle.”
In short, breaking into the upper middle class requires risking spending a portion of your income not just on daily necessities like rent or groceries, but in investing in stocks, 401(k)s, retirement savings and overall building a portfolio that can grow your wealth and carry you to a higher income bracket.
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Changing Your Geography
“The third and final of the big three risks concerns prioritizing employment prospects in high cost-of-living areas, where the potential salary is 40% to 70% higher than in one’s hometown,” said Zane.
This fact often requires that those aiming for a higher income bracket be willing to trade in their social connections, more affordable housing, and proximity to family for the higher-paying opportunities that come with living in a large metropolitan area.
“I have guided many clients through this process, and those who took the risk of relocating to the big cities – New York, San Francisco, Chicago, Boston – typically reached upper middle class income levels 8 to 12 years faster than those who stayed in the low-cost of living regions.”
The Bottom Line
“The reason many do not move out of the middle class is not a lack of potential, but rather the avoidance of the necessary risks to do so,” Zane said.
Financial growth almost always requires assuming some level of risk, and that includes joining America’s largest income group and leaping from the middle class to the upper middle class. One shouldn’t risk financial ruin, but moving up the income ladder will require a measured and planned willingness to risk money loss to ultimately attain a gain in wealth.
“The people who go to the upper-middle-class echelon all describe in unison the same pattern of behavior,” Zane said. “Initiating deliberate, calibrated risks … with the viewpoint that a short-term sacrifice will lead to a significant rise in wealth in the long term.”
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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