How to Build Wealth Based on your Income

It is possible to build wealth and do things you want for your family and for yourself later in life based on your income at the moment. In order to do this though, you need to understand where you are financially at the moment – are you tracking expenses and living below your means? 

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In order to get this first step done, you can evaluate your current situation using the Wealth Builder Tool, a tool that gives you a raw picture of your current financial situation. No matter what income category you’re in, if you’re not taking the time to track your expenses and building a budget, you’re not going to build wealth, it's going to dwindle away. 

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Let’s break down the income categories and how you can use where you are right now to build wealth for yourself, your family, and your loved ones.

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$30,000 Income Bracket

These are the three big things you need to focus on if you’re in the $30,000 income bracket to increase to the $50,000 income bracket. 

Gain education 

Expanding your knowledge is the best thing you can do to build wealth no matter what category you’re in, and a great way to gain education is through programs like Bethel Tech which has a micro-credential program to help you learn the skills and get the knowledge to build wealth through tech. You can also expand your knowledge through consciously consuming articles, podcasts, and other media that aligns with your financial goals and increasing your financial literacy. 

Increase your income 

You can do this by taking up a side hustle, freelance work, or seeking higher paying job opportunities in your field. Whether you have something you do in your current job that is valuable and can be offered as a side hustle service, or you take on freelance jobs in a skill you’re experienced with, striving for an increase in your income is going to be one of the best ways to build wealth within this income bracket.  

Automated savings 

You need to set up transfers from your checking account to a high yield savings account or investment account to ensure you’re consistently saving. The reason it needs to be automated is so you don’t have to think about it, and you can’t choose to not add to your savings for a paycheck or two. With the automatic transfer from your checking into a high yield savings account or investment account, you’re going to be putting money aside without having to think about it. 

$50,000 Income Bracket

For those in the $50,000 income bracket, your focus is still going to be on saving and increasing your income, but in a slightly different way, a way that’s more aligned to your current income. 

Allocating more towards savings and investments

As you’re seeing the increase in your income, it’s time to allocate more of that income into your high yield savings and investment accounts. Just because you have more income than the $30,000 income bracket, doesn’t mean you’re spending it – you’re going to put that back into the accounts that are going to grow that money and build your wealth. 

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Negotiate a higher pay raise 

One big way you can increase your income is by negotiating a higher pay raise at your current job, and while that seems intimidating at first, I have a guide to help you set yourself up for getting a raise by your next year review, The Guide to Getting a Pay Raise in Any Field. It covers understanding the questions you should be asking, the things you need to be doing, the questions you don’t need to be asking and the things you don’t need to be doing. 

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As a business owner and a previous employee, I see both sides of the negotiation. While to you as the employee it seems like you’re just asking for a $500 or $1,000 pay raise, to the company it’s more like a $6,000 pay raise with the taxes they pay on that raise and the increase in 401k and health benefits. When you’re negotiating your pay raise, you need to show them your $6,000 value, not just the $500 or $1,000 value. 

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Continue to invest in education 

You need to consider investing into further education or professional development to grow and evolve your mind and grow yourself in a personal development area. As someone who’s been on both sides, and I was guilty of this, we get comfortable in our current positions. 

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How are you growing, what are you reading, and what conferences are you attending that will grow your mind? What are you bringing to the table at your job that wasn’t asked of you and how are you creating and adding value to what you do for the company? This is something that will not only help you grow as a professional, but will also help you when it comes time to negotiate that higher pay raise, because you’re bringing in and adding value. 

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Invest wisely

Diversify your investment portfolio to manage risk and maximize your returns. Now is the time to start investing at least 15% of your household income, and if you can’t do 15% then you have to be at a point where you’re eliminating your debt and able to invest that 15%. 

$75,000 Income Bracket 

Exploring more advanced investing: real estate and stocks 

Start researching real estate opportunities such as rental properties or real estate investments to help you diversify your investment portfolio. However, let’s say you’re not really ready to purchase a home yet, but there are investment apps that allow you to buy a certain percentage of a home, apartment or rental property. 

Take advantage of tax optimization and long-term financial planning 

You should be sitting down with a financial advisor at least two times a year and determine where you are at with your goals financially. Seeking professional help in this income bracket is something you should be focusing on, and they can help you ensure you’re on track by tailoring a strategy to your financial goals. 

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Talk to them about your risk tolerance when it comes to investing, and how you can get to where you want to be financially. They can help you make sure you’re investing in the right areas and making the most of your income to build wealth. 

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You should be contributing the maximum allowable amount to your employer sponsored retirement accounts. Plus, there’s an after-tax 401k , which you can take advantage of to contribute to a retirement account after your income has been taxed. 

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$100,000+ Income Bracket 

Nearly 40% of people who make over $250,000 a year are living paycheck to paycheck, and nearly 50% of the people who are making $100,000 or more a year are living paycheck to paycheck. But there are ways that you can use that income and leverage the higher income. 

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Pursue advanced investment opportunities

With this level of income, you should be leveraging the higher income and investing in things like entrepreneurship, investing into other companies and the importance of giving back and using your wealth to make a positive impact. 

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Practice discipline and focus on long-term financial goals

The problem with this level of income is there is often a lack of discipline and focus on long-term financial goals because of the distraction with the amount of money that’s coming in and what can be purchased now. But your future self is crying out at you saying you should be investing, opening a business to generate more income, and just be more disciplined and focused on long-term financial gains. 

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The bridge between where you are right now and the future, is discipline. If you’re not focused on going that way and being disciplined and focused on your long-term financial goals, you won’t hit them. You need to be focused on the goal in front of you and ahead of you. 

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Build multiple income streams

Diversify your income sources using passive income streams like rental properties, stock marketing, or starting an online business. Where can you put your money that will in turn generate more money for you? When you are generating multiple income streams, you also need to look at the tax advantages you can take and create a tax optimization strategy for your income. 

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Review and rebalance 

You need to regularly review your investment portfolio and rebalance as needed to ensure alignment with your financial goals and your risk tolerance. You shouldn’t let your financial advisors or partners do this for you - it’s your life and you need to go in and review the numbers and rebalance where needed. You want to make sure your advisors and planners are doing what you need them to do, and your money is doing what you need it to do. You cannot manage what you’re not tracking. 

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Common pitfalls to avoid for any income bracket 

1. Not having an emergency fund that's equal to at least 3-6 month to what you bring home
2. Not continuing to learn and educate yourself about personal finances topics 
3. Not being disciplined - you need to stay disciplined with your financial habits 

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Let’s Recap 

No matter what income bracket you’re in, there are things you can actively be doing to build wealth. No matter what income bracket you’re in you should be continuing to learn and grow your knowledge of personal finance and either generating more income or diversifying your income if you’re in one of the bigger income brackets. 

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It is so important for you to take charge of your finances and ensure you’re looking to the future, have your eyes on the vision, and stay disciplined and focused. You should be stewarding your own money to make it work for you and use whatever income you have to build a solid foundation on which to build wealth.

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