Yahoo Finance 5 Ways Blue-Collar Workers Can Become Rich in 2024
If you’re a blue-collar worker, there’s no better time to build your wealth than in 2024. Some reports say it’s a year of stronger hiring, more plentiful job opportunities and faster pay growth for you compared to some of your white-collar counterparts. All to say: With the right strategies in hand, you’re in a good position to become rich.
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Here are some expert-recommended ways to get you there.
Ensure Your Spending Aligns With Your Goals
The first step in growing your wealth, according to Tyler Weerden, financial planner and founder of Layered Financial, is cash flow awareness.
“What’s your take-home pay and what are your required living expenses?” he asked. “I recommend people think of required living expenses in terms of: health and safety, income and legal.”
For health and safety expenses, he says to think of the bare necessities; shelter, food, electricity, medicine, etc. “For the income category, consider expenses that are required for you to earn income,” he said; the most common being transportation (car payment, bus tickets, insurance, gas, tolls) and communication (cell phone and internet).
“Finally, legal considerations,” he added. “There are certain expenses that if not paid, could land you in hot water. Think taxes, child support, court-ordered restitution, fines and alimony.”
“Cash flow awareness is all about priorities and alignment,” Weerden explained. “Our spending should be aligned with goals and values.”
Once you figure out your true required living expenses, he says you can scrutinize your discretionary spending. “Ensure your spending aligns with your goals, and in the process find extra cash to save and invest.”
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Prioritize Your Retirement
Most employers who offer a retirement plan such as a 401(k) offer some type of matching contribution you should take advantage of.
“This is free money! If you make $30,000 and your employer matches 100% of the first 5% you contribute, you put in $1,500 and they put in $1,500,” Weerden explained. “There is no other investment that immediately earns a 100% rate of return. If you did this for 10 years and earned an annualized return of 8%, you’d end up with $45,320; without the employer match you’d have $22,660.”
Over a long period of time, this matching contribution can grow into a very healthy retirement income.
“Your employer match is ultimately about time. Let’s say that you make $30,000 annually, earning roughly $1,154 gross per pay period,” Weerden said. “We’ll keep it simple and assume you never get a pay raise from age 25-55. You work for 30 years for various employers who fortunately provide a 5% match as long as you contribute 5%. If you get this 5% match for 30 years, and that money has an annualized return of 8%, $177,000 in your final nest egg of $354,000 came from your employer match.
“That is amazing, but what’s even better is the fact that your employer match equals 5.9 years of pay in retirement — $177,000 [as compared to your] $30,000 [working salary],” he said. “That’s almost six years of pay that you get to be with your family instead of sitting at a desk. Simply contribute 5% to your future self and get 5.9 years’ worth of time with your family. Not a bad deal.”
Make the Most of Your Skills On the Side
“Lots of people find extra work online or start their own small business, like fixing things for others or renting out equipment they own,” said Andrei Vasilescu, co-founder and CEO of DontPayFull. “It’s a smart way to make more money using what you already know how to do.”
Rhett Stubbendeck, finance and insurance expert at Leverage Planning, similarly recommends leveraging your skills to increase your wealth.
“If you have the time and energy, a side hustle can be a great way to boost your income. I’ve seen clients start successful side businesses, freelance gigs or even monetize their hobbies,” Stubbendeck said. “One client I worked with started offering graphic design services on the side and was able to save up for a down payment on a house.”
Investing Is Your Friend
“I would […] recommend investing for blue-collar workers looking to increase their wealth in 2024,” said David Kemmerer, CEO, CoinLedger. “In my experience, many blue-collar workers don’t take advantage of investments as an addition to their financial strategies, either due to not being confident in this area or not having enough money to devote to building a portfolio.”
He continued, “However, I think this is something that’s worth building a bit of room into your budget for. Working with a portfolio manager or other investing professional can be a good way to gain some confidence in this arena as well.”
Automate Your Investing
According to Weerden, the traditional budget formula of Income – Expenses = Savings is broken.
“Parkinson’s Law tells us that the duration of something expands to fill the time allotted; money follows the same law,” he explained. “If someone has $200 left at the end of the month after paying their expenses, they tend to categorize it as ‘extra’ and spend it.”
Instead, he says to think of your budget formula as Income – Saving and Investing = Expenses.
“This ‘profit first’ method where you automate saving and investing directly from your paycheck will boost your portfolio without you even realizing it,” he said. “Human behavior plays a huge part in our financial success, which is why automation is the key.”
He also observed that automation via payroll deduction is the best tool employees have at their disposal.
“It’s so powerful that the U.S. government mandated that any federal employee hired after October 2020 has to be automatically enrolled in the Thrift Savings Plan, the federal government’s version of a 401(k), with a 5% contribution rate. Making employees complete an opt-out process is a positive behavioral barrier that keeps employees invested,” Weerden stated.
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This article originally appeared on GOBankingRates.com: 5 Ways Blue-Collar Workers Can Become Rich in 2024
