Americans are not optimistic about their financial situation. Last year, 16% of Americans believed their financial status would worsen in a year. Now, 28% of Americans say their financial situation will be worse by 2026 than it is today. Forty-three percent of U.S. households struggle to meet basic living needs. If you can barely cover essential expenses, retirement savings are probably the last thing on your mind. The median U.S. household income is $81,604, meaning half of all households earn less than this figure. If your income is average, near, or below the median, how can you build wealth?
Reduce Large Unexpected Expenses
Before discussing how and where to invest for retirement, the primary and biggest challenge is freeing up enough room in your budget to save. People with modest incomes and tight budgets often cut expenses that others consider essential to make ends meet. This means reducing spending on preventive healthcare, regular car maintenance, pet medical care, home upkeep, and more. Cutting these expenses may save money in the short term, but for those with average incomes, they can lead to significant costs in the long run.
Avoiding unforeseen large expenses can greatly reduce outlays for people with modest incomes. You can only control so much, but spending a little more today can drastically lower expected future costs.
Purchase Good Health Insurance
Healthcare costs are high. If you have a modest income, it’s easy to delay medical care or necessary services until the issue becomes unavoidable. Therefore, be sure to prioritize preventive healthcare in your budget. Get a physical at least once a year and seek medical attention promptly if other health problems arise. This not only benefits your health but also saves you money.
High-quality subsidized health insurance is a valuable benefit offered by potential employers. All other things being equal, look for employers that provide generous benefits. A good company understands it needs to care for employees by offering affordable, high-quality medical services.
Buy Pet Insurance
If you own a pet, set aside funds in your budget for pet insurance to cover unexpected veterinary costs. No one wants to choose between paying next month’s rent and covering their pet’s life-saving treatment, but most people will choose their pet (78% of Americans are willing to go into debt for their pet’s medical expenses). As long as you allocate money for your pet’s insurance, it can completely eliminate this dilemma. Pet insurance is much cheaper than human insurance—for cats, it costs around $20 per cat per month.
Our cats have always had health issues. This year alone, they were hospitalized for blood clots, suffered from an unknown illness that caused loss of appetite, and even contracted a rare coronavirus complication (I didn’t know cats could get coronaviruses before). We’ve received over $10,000 in reimbursements from our pet insurance this year. We hope your pets never get sick, but if you don’t want to pay for unexpected medical costs out of pocket and prefer insurance coverage, pet insurance is an excellent choice.
Drive a Reliable and Affordable Car
Vehicle ownership costs can be very low or very high, depending on the type of car you have and how well you maintain it. Consumer Reports ranks the reliability of major automakers every year, so you can refer to their rankings or similar surveys to help you choose which brand to buy. We recently purchased several cars, all Mazdas—Mazda has high reliability rankings and is not as expensive as comparable Toyotas or Hondas.
Regardless of the type of car you drive, complete all maintenance on time to avoid future problems. If you don’t mind getting your hands dirty, many car maintenance tasks can be done at home for greater savings. Change the oil as recommended by the manufacturer, rotate the tires regularly, check tire pressure and wear periodically, and don’t ignore any flashing warning lights on the dashboard.
Maintain Your Home
Home repairs can be very expensive, but regular maintenance helps you prevent problems before they occur. We have our HVAC system serviced regularly, hire a pest control company quarterly, and address other issues promptly when they arise. If you’re new to the area, talk to neighbors to learn which service providers they use and trust. Unfortunately, it’s not uncommon for some unscrupulous companies to exaggerate home problems and make you spend a lot of unnecessary money. For example, there’s a local HVAC company in town that almost always says you need to replace your equipment, no matter what the actual issue is.
Take time to ask questions and learn more each time a service technician visits—this way, you may be able to diagnose and fix some minor problems yourself in the future. I don’t consider myself an HVAC expert, but I know how to fix a frozen air conditioner and prevent it from happening again.
If you’re considering renting vs. buying a home, renting is a great way to save on maintenance costs. I love our current house, but I miss the days when we lived in an apartment and someone fixed all the problems for free.
Cut Other Large Expenses as Much as Possible
For those with modest incomes, daily expenses have a significant impact on the budget. How much you spend on groceries, childcare, dining out, entertainment, and vacations determines how much you can invest for retirement. We certainly advocate paying yourself first—investing for retirement before considering other budget items—but the reality is that groceries and childcare costs often take priority over retirement savings.
For average-income households, groceries, dining out, and daily necessities usually account for a large portion of the budget. There’s a limit to how much you can cut here, and we certainly wouldn’t advise skimping on food or basic needs for retirement. However, there are ways to save money on groceries and daily essentials. Warehouse clubs like Costco are ideal for buying necessities, especially for large families. If you have enough space at home and can finish the items before they expire, consider buying in bulk (I often buy too much at Costco and can’t finish it). Supermarkets like Aldi, Lidl, and Kroger are cheaper than upscale options like Whole Foods, Publix, and Harris Teeter.
Beyond obvious and unethical methods (yes, you could eat less or skip tipping servers), there are ways to save money on dining out. If you usually order drinks when eating out, try drinking only water with dinner and having drinks at home afterward. Every time we order drinks, the bill increases by $30 or more, not including tips. Many restaurants offer promotions on slower days, so take advantage of specials and try to go on weekdays instead of weekends. Our favorite local Mexican restaurant has “Taco Tuesday” for just $1.99—such a great deal.
Childcare costs vary widely for U.S. households, ranging from zero to tens of thousands of dollars per year (or more). If you’re a single parent or both you and your spouse work, you’ll definitely need some form of childcare. Grandparents who love children can be excellent free childcare resources. Daycare programs vary in price, and while it may not be advisable to choose the cheapest option, there are steps you can take to reduce the burden. Some employers offer free childcare services for employees, which is a huge benefit for parents. If you can find a way to reduce daycare from five days a week to three, you can significantly lower costs.
Increase Your Income if Possible
In some cases, increasing your income is easier than cutting expenses. If you struggle to reduce spending but need to save more for retirement, you may need to boost your income (easy, right?). The good news is that earning extra income outside of your regular job is easier than ever before.
If there’s room for growth in your current position, investing extra time and effort to pursue a promotion or raise is worth it. If you feel your career advancement opportunities are limited, consider going back to school for further education or obtaining certifications in a new field. Skilled tradespeople (such as electricians, plumbers, mechanics, construction workers, etc.) are in high demand in many areas, and starting salaries are quite good.
Obviously, increasing your income is easier said than done. You can’t double your income overnight, but if you’re willing to put in more work—whether through a side hustle, improving your regular job, or exploring new career opportunities—you can boost your earnings.
Know Where to Save
If you don’t know how to save effectively, freeing up more room in your budget for retirement investments is meaningless. In short, first take advantage of employer matching contributions, maximize your Roth IRA and Health Savings Account (HSA) contributions if possible, then increase contributions to your employer-sponsored plan if you have one. If you have remaining funds to invest after completing all these steps, consider a taxable brokerage account.
There’s no denying that the higher your income, the easier it is to build wealth. If you have a modest income and want to accumulate wealth, you must do your best to avoid large unexpected expenses, cut other major budget items as much as possible, and increase your income whenever you can. It’s completely possible to get rich even with an average income, and with the power of compound growth, your savings can multiply exponentially. Live within your means, save a little today, and you can build a bright future.
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How To Build Wealth With an Average Income
2025-11-06T17:28:04
Americans are not optimistic about their financial situation. Last year, 16% of Americans believed their financial status would worsen in a year. Now, 28% of Americans say their financial situation will be worse by 2026 than it is today. Forty-three percent of U.S. households struggle to meet basic living needs. If you can barely cover essential expenses, retirement savings are probably the last thing on your mind. The median U.S. household income is $81,604, meaning half of all households earn less than this figure. If your income is average, near, or below the median, how can you build wealth?
Reduce Large Unexpected Expenses
Before discussing how and where to invest for retirement, the primary and biggest challenge is freeing up enough room in your budget to save. People with modest incomes and tight budgets often cut expenses that others consider essential to make ends meet. This means reducing spending on preventive healthcare, regular car maintenance, pet medical care, home upkeep, and more. Cutting these expenses may save money in the short term, but for those with average incomes, they can lead to significant costs in the long run.
Avoiding unforeseen large expenses can greatly reduce outlays for people with modest incomes. You can only control so much, but spending a little more today can drastically lower expected future costs.
Purchase Good Health Insurance
Healthcare costs are high. If you have a modest income, it’s easy to delay medical care or necessary services until the issue becomes unavoidable. Therefore, be sure to prioritize preventive healthcare in your budget. Get a physical at least once a year and seek medical attention promptly if other health problems arise. This not only benefits your health but also saves you money.
High-quality subsidized health insurance is a valuable benefit offered by potential employers. All other things being equal, look for employers that provide generous benefits. A good company understands it needs to care for employees by offering affordable, high-quality medical services.
Buy Pet Insurance
If you own a pet, set aside funds in your budget for pet insurance to cover unexpected veterinary costs. No one wants to choose between paying next month’s rent and covering their pet’s life-saving treatment, but most people will choose their pet (78% of Americans are willing to go into debt for their pet’s medical expenses). As long as you allocate money for your pet’s insurance, it can completely eliminate this dilemma. Pet insurance is much cheaper than human insurance—for cats, it costs around $20 per cat per month.
Our cats have always had health issues. This year alone, they were hospitalized for blood clots, suffered from an unknown illness that caused loss of appetite, and even contracted a rare coronavirus complication (I didn’t know cats could get coronaviruses before). We’ve received over $10,000 in reimbursements from our pet insurance this year. We hope your pets never get sick, but if you don’t want to pay for unexpected medical costs out of pocket and prefer insurance coverage, pet insurance is an excellent choice.
Drive a Reliable and Affordable Car
Vehicle ownership costs can be very low or very high, depending on the type of car you have and how well you maintain it. Consumer Reports ranks the reliability of major automakers every year, so you can refer to their rankings or similar surveys to help you choose which brand to buy. We recently purchased several cars, all Mazdas—Mazda has high reliability rankings and is not as expensive as comparable Toyotas or Hondas.
Regardless of the type of car you drive, complete all maintenance on time to avoid future problems. If you don’t mind getting your hands dirty, many car maintenance tasks can be done at home for greater savings. Change the oil as recommended by the manufacturer, rotate the tires regularly, check tire pressure and wear periodically, and don’t ignore any flashing warning lights on the dashboard.
Maintain Your Home
Home repairs can be very expensive, but regular maintenance helps you prevent problems before they occur. We have our HVAC system serviced regularly, hire a pest control company quarterly, and address other issues promptly when they arise. If you’re new to the area, talk to neighbors to learn which service providers they use and trust. Unfortunately, it’s not uncommon for some unscrupulous companies to exaggerate home problems and make you spend a lot of unnecessary money. For example, there’s a local HVAC company in town that almost always says you need to replace your equipment, no matter what the actual issue is.
Take time to ask questions and learn more each time a service technician visits—this way, you may be able to diagnose and fix some minor problems yourself in the future. I don’t consider myself an HVAC expert, but I know how to fix a frozen air conditioner and prevent it from happening again.
If you’re considering renting vs. buying a home, renting is a great way to save on maintenance costs. I love our current house, but I miss the days when we lived in an apartment and someone fixed all the problems for free.
Cut Other Large Expenses as Much as Possible
For those with modest incomes, daily expenses have a significant impact on the budget. How much you spend on groceries, childcare, dining out, entertainment, and vacations determines how much you can invest for retirement. We certainly advocate paying yourself first—investing for retirement before considering other budget items—but the reality is that groceries and childcare costs often take priority over retirement savings.
For average-income households, groceries, dining out, and daily necessities usually account for a large portion of the budget. There’s a limit to how much you can cut here, and we certainly wouldn’t advise skimping on food or basic needs for retirement. However, there are ways to save money on groceries and daily essentials. Warehouse clubs like Costco are ideal for buying necessities, especially for large families. If you have enough space at home and can finish the items before they expire, consider buying in bulk (I often buy too much at Costco and can’t finish it). Supermarkets like Aldi, Lidl, and Kroger are cheaper than upscale options like Whole Foods, Publix, and Harris Teeter.
Beyond obvious and unethical methods (yes, you could eat less or skip tipping servers), there are ways to save money on dining out. If you usually order drinks when eating out, try drinking only water with dinner and having drinks at home afterward. Every time we order drinks, the bill increases by $30 or more, not including tips. Many restaurants offer promotions on slower days, so take advantage of specials and try to go on weekdays instead of weekends. Our favorite local Mexican restaurant has “Taco Tuesday” for just $1.99—such a great deal.
Childcare costs vary widely for U.S. households, ranging from zero to tens of thousands of dollars per year (or more). If you’re a single parent or both you and your spouse work, you’ll definitely need some form of childcare. Grandparents who love children can be excellent free childcare resources. Daycare programs vary in price, and while it may not be advisable to choose the cheapest option, there are steps you can take to reduce the burden. Some employers offer free childcare services for employees, which is a huge benefit for parents. If you can find a way to reduce daycare from five days a week to three, you can significantly lower costs.
Increase Your Income if Possible
In some cases, increasing your income is easier than cutting expenses. If you struggle to reduce spending but need to save more for retirement, you may need to boost your income (easy, right?). The good news is that earning extra income outside of your regular job is easier than ever before.
If there’s room for growth in your current position, investing extra time and effort to pursue a promotion or raise is worth it. If you feel your career advancement opportunities are limited, consider going back to school for further education or obtaining certifications in a new field. Skilled tradespeople (such as electricians, plumbers, mechanics, construction workers, etc.) are in high demand in many areas, and starting salaries are quite good.
Obviously, increasing your income is easier said than done. You can’t double your income overnight, but if you’re willing to put in more work—whether through a side hustle, improving your regular job, or exploring new career opportunities—you can boost your earnings.
Know Where to Save
If you don’t know how to save effectively, freeing up more room in your budget for retirement investments is meaningless. In short, first take advantage of employer matching contributions, maximize your Roth IRA and Health Savings Account (HSA) contributions if possible, then increase contributions to your employer-sponsored plan if you have one. If you have remaining funds to invest after completing all these steps, consider a taxable brokerage account.
There’s no denying that the higher your income, the easier it is to build wealth. If you have a modest income and want to accumulate wealth, you must do your best to avoid large unexpected expenses, cut other major budget items as much as possible, and increase your income whenever you can. It’s completely possible to get rich even with an average income, and with the power of compound growth, your savings can multiply exponentially. Live within your means, save a little today, and you can build a bright future.