3 Proven Strategies To Turn Middle-Class Earnings Into Lasting Family Wealth

Every day, you wake up thinking about ways to make your family’s lives better. You work hard to earn a comfortable income and save strategically, all to give the people you love security in their daily lives. But you want even more than security. You want to build a legacy — for your loved ones, even the ones in the future whom you haven’t met yet, so they can enjoy the financial fruits of your labor well into your retirement years, or even after you’re gone.

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Turning middle-class earnings into generational wealth requires discipline, foresight and expert advice. With the right strategies, you can start the process of turning today’s income into tomorrow’s lasting wealth. Here are three tried-and-true ways to build that legacy.

Naturally, creating a workable budget and savings plan is the first step for anyone looking to manage their finances. But for middle-class families aiming to build long-term wealth, having a budget in place that trims the fat off their expenses while maximizing savings is essential.

To start, divide your expenses into two categories: fixed and variable. Fixed expenses include static monthly obligations like rent or mortgage payments, car payments and student loans. Variable expenses, like utilities, groceries and entertainment, can fluctuate from month to month,  making them good targets for cost-cutting.

As you look for ways to cut unnecessary spending, identify your short- and long-term financial goals. In the short term, focus on building an emergency fund in a high-yield savings account or paying down credit card debt. Long-term goals might include purchasing a home that can be passed down through generations.

Many people are only peripherally aware of their 401(k). Maybe they know they have one, but they don’t actively manage it. To build serious wealth, that has to change.

Ideally, you’ll max out your contributions to your 401(k) every year and consider opening both traditional and Roth IRAs. The tax advantages of these accounts make them excellent wealth-builders.

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With your 401(k) and traditional IRA, you contribute before taxes, reducing your current tax burden, and your investments grow tax-deferred until withdrawal during retirement. This means you don’t pay taxes on either the contributions or the growth until you withdraw those funds from the account, when they’re taxed as ordinary income.