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As the new year approaches, building wealth is a top priority for "hardworking" middle-class Americans, according to a new survey from investing app Stash.
Despite political and social issues, money was the No. 1 concern for most respondents, who were polled during the first two weeks in October amid House leadership uncertainty in Congress and the start of the Israel-Hamas war.
What's more, nearly two-thirds of respondents said they thought about how wealthier people make money either "sometimes" or "all the time."
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Money is "such a primary source of anxiety" and everyday Americans want to know how higher earners "achieved that financial security," said Stash CEO Liza Landsman.
The survey polled 2,000 Americans who work at least 30 hours per week and have an annual income between $50,000 and $150,000.
Those polled meet Pew Research Center's definition of "middle class," which is Americans making between two-thirds and twice the median American household income, or $74,580 in 2022, according to the U.S. Census Bureau.
How America's top earners make money
The bottom 80% of U.S. households receive more than 93% of their adjusted gross income from wages and retirement income, according to a Brookings Institution analysis of the latest IRS data.
By comparison, the top 0.1% of households get less than 25% of their earnings from wages or retirement income. These top earners receive most of their income from investments — such as interest, dividends and capital gains — and businesses, which often provide better tax treatment, experts say.
The tax code "incentivizes you to invest in yourself," said Sheneya Wilson, a certified public accountant and founder of Fola Financial in New York. She encourages her salary and wage-earning clients to "diversify income."
While most Americans pay regular income taxes on wages from each paycheck, with the top rate at 37% for 2023, long-term capital gains, applying to assets owned for more than one year, have more favorable rates, she said. Those top out at 20% for 2023.
"The more diversification you have in income, the more favorable the tax code becomes for you," Wilson said.
Investing is a 'game of inches'
Stash's Landsman says that with a large chunk of investment income for top earners, "there's an important unlock there for low- and middle-income consumers."
"Access to the equity markets is the single greatest wealth creation engine the country has known for the last several decades," she said.
Regardless of income, wage earners can leverage the power of investing by starting early. Still, Landsman warns that there's no "fast pass" to lasting economic security.
"It's really a game of inches where very small, very tiny behavioral changes can make a huge positive impact in your life," she said.
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FAQs
“The key to going from middle class to wealthy is threefold: get your debt under control, curb your spending habits and build passive income,” said Jake Hill, finance expert and CEO of DebtHammer.
What is the middle class based on wealth? ›
The Pew Research Center defines the middle class as households that earn between two-thirds and double the median U.S. household income, which was $65,000 in 2021, according to the U.S. Census Bureau.
How do the wealthy make their money? ›
The ultra-wealthy may gain a lot of their initial wealth from private businesses, often through business ownership or as an angel investor in private equity. Additionally, top endowments at universities use private equity investments to generate high returns and add to the funds' diversification.
When the poor and the middle class work for money the rich have? ›
The poor and the middle class work for money. The rich have money work for them.” “Life pushes all of us around. Some people give up and others fight. A few learn the lesson and move on.
How can the middle class build wealth? ›
Invest Your Savings
But money in a basic savings account isn't earning much interest and may not outpace inflation. Instead, consider investing your additional savings so it can grow. Money that you invest allows you to generate wealth so you can have a prosperous future.
What class is considered rich? ›
Based on that figure, an annual income of $500,000 or more would make you rich. The Economic Policy Institute uses a different baseline to determine who constitutes the top 1% and the top 5%. For 2021, you're in the top 1% if you earn $819,324 or more each year. The top 5% of income earners make $335,891 per year.
Who owns most of the wealth? ›
Federal Reserve data indicates that as of Q4 2021, the top 1% of households in the United States held 30.9% of the country's wealth, while the bottom 50% held 2.6%.
How do 90% of millionaires make their money? ›
90% of millionaires made their money in Real Estate. I became a millionaire without owning a single property. But I own 6 small businesses that make me $725k/year.
What are the three things millionaires do not do? ›
Millionaires prioritize avoiding consumer debt, making wise financial decisions, and aligning spending with long-term goals.
Who is happier between the rich and poor? ›
The happiness scale
Low-income people earning about $30,000 or less gave their lives an average rating of about 4, while people earning about $500,000 rated their lives above 5. But multimillionaires gave their life satisfaction an average rating closer to 6.
Rich people live beyond their means, the middle class lives above theirs. Living within your means is a dignity and independence unlike any other.” -Calvin Coolidge. Millionaires often prioritize financial wisdom over ostentatious displays of wealth.
How do poor people view money? ›
These folks might also lean into hoarding tendencies, because they tend to have a common root belief that money is scarce and fleeting, she said. “They see money through a zero-sum lens. They tend to be very risk-averse and unable to stay committed to investing when the market has a downturn.
How to go from upper middle class to rich? ›
7 Ways the Upper Middle Class Can Become Rich in 2024
- Focus on Smart Investing. ...
- Get a Second Income Source. ...
- Consider Real Estate. ...
- Invest in Education. ...
- Prioritize Financial Planning and Wealth Management. ...
- Ask for a Raise or Get a New Job. ...
- Increase Your 401(k) Contributions. ...
- The Bottom Line.
Invest In the Stock Market
Religiously saving and investing 10% to 20% of your income is a tried-and-true wealth-building strategy. Investing money in stocks and bonds can grow wealth through compound interest over decades.
Who has the richest middle class? ›
For decades, the United States boasted the honor of having the richest middle-class. However, since 2019, Canada has the wealthiest middle class of any country in the world.
How much money is high middle class? ›
The upper middle class is often defined as the top 15% to 20% of earners. According to the Social Security Administration's 2022 wage data, the average upper-middle-class income was roughly between $80,000 and $100,000.
