The Income Threshold Where Families Finally Start Building Real Wealth
Putting money in the bank can be a challenge. If your budget is already stretched thin, building real wealth might feel impossible.
In 2024 — the most recent available data from the Bureau of Labor Statistics — the average U.S. household income before taxes was $104,207 per year. Not much less, the average annual household expenditures were $78,535.
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Thankfully, there’s no magic number that equates to building real wealth, said Hardik Patel, founder and financial advisor at Trusted Path Wealth Management.
“What matters far more is structure and discipline,” he said. “High earners who spend everything they earn despite six-figure incomes and middle-income households who have built substantial wealth share a common trait — intentional decisions made early.” Keep reading to learn how to accumulate real wealth at any income level. Invest Surplus Income
“Wealth builds when income exceeds expenses enough to invest consistently,” Patel said. “That breakeven point varies wildly by location, family size and lifestyle.”
When you have surplus income, he said the decision to spend it or invest it determines everything. If you opt to spend it, lifestyle creep can become a barrier to building wealth.
Safeguard Against Lifestyle Creep
Lifestyle creep happens when raises and bonuses are spent on an elevated lifestyle, instead of future investments.
“Five years and three income increases later, someone earning $200K feels no richer than they did at $100K,” Patel said.
If you struggle with this, he advised automating your investments, so the money never hits your checking account.
“If it's not visible, it's harder to spend,” he said. “For naturally disciplined savers, this may be unnecessary, but for others, it removes the willpower burden.”
Practice Discipline
Numbers don’t lie. A household earning $100,000 per year and saving 20% builds more wealth by age 45 than a household earning $150,000 per year but saving only 5%, Patel said.
“Discipline and consistency over decades beat higher income more often than not,” Patel said. “The compounding effect of staying invested through market cycles, avoiding emotional decisions and maintaining a savings rate matters more than chasing higher income.”
Be Consistent
“Whether through automatic transfers, manual discipline or a structured investment plan, the households that build wealth share one thing — they consistently direct surplus income toward investments,” Patel said.
Some people need automatic investments to stay on track, while others are disciplined enough to handle contributions manually, he said. No matter what your path, monthly consistency is key.
Create an Effective Tax Strategy
“High-earners especially feel this — every additional dollar of income gets taxed more heavily at the federal and state level,” Patel said. “Tax-aware investing and strategic account positioning — which accounts to use for which investments — can add meaningful returns annually.”
The amount you’re able to save can compound over decades, he said.
Start Investing Now
More than half — 54% — of Americans are investors, according to a Charles Schwab survey. Generally speaking, people believe you need around $1,000 to start investing, but that isn’t the case.
If you’re just getting started in the workforce, try to invest 15% of your total income, including any employer matches or contributions, said Kirk Reagan, certified financial planner and owner of High Flight Financial. If you’re already in the workforce and not saving, start now with a low number — i.e., 2%.
When you get a raise, calculate the specific percentage increase, then put half toward your withholding, he said.
“Usually in less than five years you will be at 15% combined,” he said. The 15% will likely get you to retirement at your current standard of living at age 65.”
However, if you want to retire early or increase your current standard of living in retirement, he advised saving up to 25% of your total income combined.
Ultimately, he said acting now is the trick to building wealth through investing.
“A $50 contribution today is worth as much as a $4,000 contribution in 40 years,” he said.
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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