Yahoo Finance Is the Middle-Class ‘American Dream’ of the 1950s Still Possible Today?
Financial stability, homeownership and a comfortable lifestyle capped by a solid retirement defined the “American Dream” after World War II.
Discover: How Much Does the Average Middle-Class Person Have in Savings?
Compare: 4 Genius Things All Wealthy People Do With Their Money
However, shaky financial markets in the early 2000s, culminating in a financial crisis in 2008 and COVID-19, are among the many factors making the American Dream increasingly out of reach for the middle class.
GOBankingRates asked financial experts how to reclaim the middle-class dreams of the 1950s.
Wealthy people know the best money secrets. Learn how to copy them.
Realizing the Dream
Money management through budgeting, saving, investment and planning are essential to reclaiming the American Dream.
Earn money by generating multiple income sources. Creating a budget and saving for a down payment can help make this dream a reality.
“The amount we need to save depends on individual circumstances such as income level, desired lifestyle, and current expenses,” said Michael Collins, a CFA and Founder and CEO of WinCap Financial, a wealth management firm.
Collins recommended saving at least 20% of your income for long-term goals such as homeownership and retirement.
“However, it is generally recommended to have enough savings to replace 70 to 80% of your pre-retirement income annually in order to maintain the same standard of living during retirement, which could mean having anywhere from $1 million to $2 million in savings.”
Buy Better, Consume Less
Today’s consumer culture encourages people to live above their means and use credit cards to finance their lifestyle.
Choose an affordable car, house and other items rather than putting them on a credit card or using monthly payment plans to purchase “must-have” items.
You can use the $100 or $200 you would have spent on dinners purchased with a credit card to live below your means and increase your savings with compound interest over time, advised Craig Kirsner, a nationally recognized speaker, author and retirement planner.
Simplify Your Life
Downsizing your home or renting a second home could help you simplify your life, save money, or earn additional revenue through rental income.
Kirsner also recommended getting rid of the second car if you don’t need it. Use your cell phone and cancel your home phone service. Consider internet-based alternatives to cable TV. And rent an RV for less than the cost of flying if you like the call of the open road.
Make Smart Investments
The money you save by simplifying your life could help you maintain a disciplined budget, enabling you to save 10% to 20% of your income.
“You need to invest your savings as early and for as long as possible,” said Thomas Brock, an investment, corporate finance, and accounting professional. “This will enable you to capitalize on the power of compound interest and outpace the wealth-eroding impact of inflation.”
Consider investing in Roth accounts, where qualified withdrawals will not be taxed. Ensure that you have money in regular taxable brokerage accounts that might be able to take advantage of capital gains tax, said Chris Urban, a “life-centered financial planning practitioner.”
Educate the Next Generation
Many people spend their waking lives striving for the American Dream because they want their children to have a better lifestyle than they did as children.
Teaching your kids the fundamentals of money management, saving, and budgeting is a practically free way to improve their lives.
“It’s important for parents to educate themselves on wise money decisions first, so that they can then model it for their children,” said Christina Hsu, a real estate investor.
Talk about your family’s financial goals and explain how saving money now can lead to rewards later, like a fun family vacation or a new home. Give your children age-appropriate allowances to teach them how to save, spend wisely, or give back to the community.
Involve them in low-risk financial activities like planning a grocery list within a set budget to empower and include them in family financial decision-making.
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This article originally appeared on GOBankingRates.com: Is the Middle-Class ‘American Dream’ of the 1950s Still Possible Today?
