Back in 1971, about 61% of U.S. households were considered middle class. Today, that number is closer to half. Households have been pushed toward both ends of the income spectrum — both lower and higher — and the middle class has been shrinking for 50 years.
But no matter what side of that K-shaped economy you fall on, most of us still think of ourselves as just regular people, a regular job, maybe a couple of kids or a dog or a cat, just trying to get by and retire comfortably.
On a recent episode of the HerMoney podcast, Jean Chatzky sat down with Joel Larsgaard, co-host of the How To Money podcast, to talk about what building wealth as a normal, middle-class person actually looks like right now.
Here’s what he had to say.
Yes, The Middle Class Can Still Get Ahead
Even people who are technically middle class by the numbers say they don’t feel that way anymore. So what does building wealth as a normal, middle-class person look like against that backdrop?
He doesn’t sugarcoat the state of things. “There are economic headwinds. There always are, and some of them are more severe than they’ve been in the past,” he said, pointing to housing prices as the clearest example for people who don’t yet own a home. “That feels like something you can point to and say, ‘The system is broken, and it’s not working in the way I want it to.’ And I sympathize with those people because it’s really difficult.”
Despite the real challenges, Larsgaard remains optimistic about the middle class’s ability to build wealth: “There was recent data from CBS News that found that over the last seven years, we’ve seen a 38% rise in income across the board on average, and a 30% rise in prices. And if you look at a lot of the headlines, you would assume inflation would’ve outpaced wages, but it hasn’t.”
His conclusion for those looking to build wealth: “I do think it’s possible. I really think it’s possible.”
Find Your “Craft Beer Equivalent”
Larsgaard’s approach to spending centers on identifying a handful of things worth paying up for, something he and his co-host call the “craft beer equivalent.”
“There are certain things in life that are worth spending lots of money on,” he explained. “If you pick just a handful of things that you say, ‘No matter what’s going on, this is going in my budget, and I’m super stoked to spend money on it’… that actually provides a lot of satisfaction for people and more of an ability to cut back in other places where they’ve identified that’s not as big of a priority.”
For Larsgaard, that list has evolved. And increasingly, what he’s really buying is time: “I’m coaching my daughter’s middle school cross country team right now, because I’ve created this lifestyle where I can focus on that more than on buying more things or a bigger house or a nicer, newer car.”
The Bottom Line: Building Wealth As A Middle Class Person
When Chatzky asked what Larsgaard would tell listeners who still feel solidly middle class about building wealth from here, he offered two pieces of advice.
First: lower your expectations of what everyone else’s life actually looks like. “Realize that real life is much different than what you see on the screen, and even what your neighbor is doing,” he said. “It might be financed, and they might be fighting all the time about money, and you just don’t know it. You don’t have a peek into what’s going on behind the scenes of their lives. All you see is the flashy stuff.”
Second: don’t discount small, consistent contributions. “I look back at those micro deposits I was making, and 20 years down the road from the day I started investing, and the little things do add up,” he said. “If you can funnel that money into investments like clockwork, you will notice in 10, 12, 15 years later that you got a lot more money than you thought you would.”
MORE ON HERMONEY:
- Is Financial Independence Still Possible? What Two FIRE Experts Want Late Starters to Know
- The Conversations About Money Women Weren’t Raised to Have – And Why We Need to Start Having Them Now
- Protected vs. Growing: The Split Your Portfolio Actually Needs
